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, 1999
----------------------------------
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)
6404 Wilshire Blvd., Suite 550, Los Angeles, CA 90048
- -----------------------------------------------------------------
(Address of principal executive offices)
(323) 782-0090
- -----------------------------------------------------------------
(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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The registrant had 2,321,793 shares of its $.04 par value
common stock outstanding as of July 26, 1999.
<PAGE>
PART I
ITEM I
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated Balance Sheets
June 30, 1999 and September 30, 1998 3
Consolidated Statement of Operations
for the three months ended June 30, 1999
and 1998 4
Consolidated Statements of Operations
for the nine months ended June 30, 1999
and 1998 5
Consolidated Statements of Cash Flows for the
nine months ended June 30, 1999 and 1998 6 to 7
Notes to Condensed Financial Statements 8 to 17
2
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
------------ -------------
<S> <C> <C>
ASSETS:
Cash $30,922 $61,931
Accounts receivable-trade 0 12,600
Film inventory (Note 1) 0 0
Furniture and fixtures (Note 1) 0 0
Security deposit and other assets 4,500 4,500
------------ -------------
$35,422 $79,031
============ =============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable and accrued expenses $75,207 $44,695
Accrued Payroll 735,259 589,786
Deferred income 143,000 180,000
8% Convertible Debenture 566,859 530,000
------------ -------------
Total liabilities $1,520,325 $1,344,481
------------ -------------
Commitments (Note 6)
Shareholders' deficit:
Preferred stock, $.01 par value;
10,000,000 shares authorized;
none outstanding
Common stock, $.04 par value;
25,000,000 shares authorized;
2,321,793 shares issued and
outstanding at June 30, 1999 and
September 30, 1998 (Note 1) $92,872 $92,872
Additional paid-in capital (Note 1) 3,434,273 3,434,273
Accumulated deficit (5,012,048) (4,792,595)
------------ -------------
Total shareholders' deficit ($1,484,903) ($1,265,450)
------------ -------------
$35,422 $79,031
============ =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Film revenue $53,952 $198,620
----------- -----------
Costs and expenses:
Operating costs 15,559 21,457
Selling, general and administration 142,691 211,289
----------- -----------
Operating loss ($104,298) ($34,126)
----------- -----------
Interest expense ($11,000) ($13,293)
----------- -----------
Net loss ($115,298) ($46,419)
=========== ===========
Net loss per share (Note 3) ($0.05) ($0.03)
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Film revenue $199,371 $398,614
----------- -----------
Costs and expenses:
Operating costs 23,201 58,770
Selling, general and administration 356,042 461,705
Bad debt expense (Note 1) 0 100,000
----------- -----------
Operating loss ($179,872) ($221,861)
----------- -----------
Interest expense ($39,581) ($39,481)
----------- -----------
Net loss ($219,453) ($261,342)
=========== ===========
Net loss per share (Note 3) ($0.09) ($0.14)
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $58,991 $86,000
Cash paid to suppliers and employees (27,982) (62,293)
----------- -----------
Net cash provided (used) by
operating activities ($31,009) $23,707
----------- -----------
Cash flows from investing activities:
Note receivable loan 0 ($100,000)
----------- -----------
Net cash used in investing activities 0 ($100,000)
----------- -----------
Cash flows from financing activities
Payment of note payable (10,000)
Issuance of 8% Convertible Debenture-M.P. 0 $135,000
----------- -----------
Net cash used by financing activities 0 $125,000
----------- -----------
Net increase (decrease) in cash ($31,009) $48,707
Cash at the beginning of the year 61,931 23,826
----------- -----------
Cash at end of period $30,922 $72,533
=========== ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
Reconciliation of net loss to net cash used by operating activities
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) ($219,453) ($261,342)
----------- -----------
Adjustments to reconcile net profit
(loss) to net cash provided (used) by
operating activities:
Note receivable-OSM deemed a bad debt
and not included in operating loss $0 $100,000
Issuance cost of Convertible Debenture-MP 0 15,000
Decrease (increase) in other assets 0 19,721
Decrease(Increase) in accounts
receivable-trade 12,600 (42,571)
Increase (decrease) in accounts payable
and accrued expenses 30,512 (10,866)
Increase (decrease) in accrued payroll 145,473 172,804
Increase (decrease) in deferred income (37,000) 12,252
Increase in 8% convertible debenture 36,859 18,709
----------- -----------
Total adjustments $188,444 $285,409
----------- -----------
Net cash provided (used) by
operating activities ($31,009) $23,707
=========== ===========
</TABLE>
Supplemental disclosures of cash flow information:
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers
any highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
During the three months ended June 30, 1998, $150,000 in debt and
$6,000 in related interest was converted to 923,077 shares of
common stock.
See notes to consolidated financial statements.
7
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED 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 the Form
10K for the year ended September 30, 1998.
The results of operations for the nine month period ended June 30,
1999 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.
Going Concern:
The Company's Board of Directors and management continue to have
discussions with investment bankers. These discussions relate to
establishing acquisition or merger criteria that would benefit all
parties involved. The essential element is to add revenue
generating assets to the Company and to strengthen the balance
sheet. Currently, and management believes that over the next
twelve months, the Company's film library will continue to generate
the cash necessary to pay the Company's overhead excluding the full
salaries of the President and Chairman.
During the year ended September 30, 1998, the Company's Board of
Directors (the "Board") and management continued the mandate of
investigating for strategic companies for potential acquisition or
merger that would add asset value and revenue to the Company, i.e.,
Of Sound Mind. A term of the purchase agreement required the
Company to advance OSM the sum of $100,000, that was done in
October 1997 and was set forth on the December 31, 1997 balance
sheet as a note receivable. Subsequent to December 31, 1997, on
January 30, 1998, the Company unilaterally terminated and rescinded
the acquisition of Of Sound Mind, Inc. As a result of the
rescission, the Company canceled the 700,000 shares of the
Company's common stock that were to be issued to the shareholders
of OSM and recognized a $100,000 bad debt expense as of March 31,
1998.
8
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - cont...
On October 21, 1997, the Company also closed an offering of
$150,000 principal amount convertible subordinated debentures (the
"Debenture") and 150,000 Common Stock Purchase Warrants exercisable
at $.50 (the "Warrants"). Each Debenture bears interest at the
rate of 8% per annum and matures on November 1, 1998. The
Debenture was converted to 923,077 shares of common stock in May
1998. Each Warrant is exercisable into the Registrant's common
stock at a price of $.50 per share at any time on or after October
31, 1997 and expiring on October 31, 1999.
As of June 30, 1999 the Company had $30,922 available to meet
operating requirements. 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. If the Chairman and President change
their position and demand full payment, the Company will be unable
to satisfy these liabilities.
Management believes that with maintaining reductions in operational
costs, and increased sales activity from the current library and
new acquired motion pictures, the Company may be able to continue
as a going concern. However, at this time, there is substantial
doubt that the Company will be able to continue as a going concern.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of Marquee Entertainment, Inc. and its wholly owned
subsidiary Delta-Gamma Film Distribution. All material
intercompany accounts and transactions have been eliminated in
consolidation and no adjustments with respect to the uncertainty
regarding going concern basis have been made.
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 at the date of the financial statement and the reported
amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
9
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - cont...
Statement of Financial Accounting Standards Nos. 123, that became
effective January 1, 1997, "Accounting for Stock-Based
Compensation" (SFAS 123) establishes financial accounting and
reporting standards for stock-based employee compensation plans as
well as transactions in which an entity issues its equity
instruments to acquire goods or services from non-employees.
However, it also allows an entity to continue to measure
compensation cost based on APB Opinion No. 25, "Accounting for
Stock Issued to Employees." The Company has determined that the
fair value of stock transactions is similar to the issue price at
the time of granting and, accordingly, the adoption of this
statement has no impact on reported earnings.
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 in respective
territory. Funds received prior to revenue recognition are
recognized as deferred income.
In addition to television license agreements, the Company receives
royalty revenue and other revenue participation in its films. This
revenue is reported quarterly, biannually and in some cases
annually by outside third parties. The Company is not able to
project, estimate, define, or determine revenue from these sources
until a report from these third parties is received indicating the
amount of revenue they have calculated is owed, if any, to the
Company and it is accompanied with a check for a like amount.
Accordingly, since revenue is not determinable or definable in a
future context, it cannot be accrued and is recorded on a cash
basis when received.
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.
10
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - cont...
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:
Amortization is based on the income forecast method utilizing the
relationship revenue realized in the period bears to estimated
future revenue. As of September 30, 1994 the Company's film
inventory was fully amortized.
Note 2 - Acquisition:
On March 12, 1991 the Company concluded an Acquisition Agreement
with Peregrine Entertainment, Ltd. (PEL) and its subsidiaries
resulting in the acquisition of certain assets, including 29 made-
for-television motion pictures. The purchase price for these
assets consisted of $475,000 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. This note was fully settled in August
1998.
Note 3 - Net Loss Per Share:
Net loss per share is not computed using common stock equivalents
for the three- and nine-month periods ended June 30, 1999 and 1998
because they would be antidilutive. Net loss per share is computed
using the weighted average number of shares for the three- and
nine-month periods ended June 30, 1999 and 1998 at 2,321,793
shares.
Note 4 - 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, 1997 and the expiration dates of each net loss
carryforward:
11
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - cont...
<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
1995 < 250,182> 2010
1996 < 493,082> 2011
1997 < 309,000> 2012
- --------------------------------------------------------------------
Total NOL $<4,127,970>
============
</TABLE>
<TABLE>
<CAPTION>
STATE
Tax Year Amount of Expiration
Ended Net Loss Date
December 31, Carryforward December 31,
- --------------------------------------------------------------------
<S> <C> <C>
1992 < 78,715> 1997
1993 < 399,695> 1998
1994 < 83,559> 1999
1995 < 124,312> 2000
1996 < 240,463> 2001
1997 < 151,025> 2002
- --------------------------------------------------------------------
$<1,077,769>
============
</TABLE>
If the net loss carryforward were to be realized, a deferred tax
asset of approximately $2,000,000 would be set forth. However, due
to the unlikely realization of such an asset, a valuation reserve
of $2,000,000 would be required and no benefit would be recorded
until the loss carryforward is realized.
12
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - 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,
1998 1997
--------- ---------
<S> <C> <C>
Incentive and nonqualified stock option plans:
Outstanding 57,500 47,500
Available for grant 1,187,500 1,202,500
--------- ---------
Totals 1,245,000 1,250,000
========= =========
</TABLE>
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
13
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - cont...
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.
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
14
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - cont...
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
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:
15
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - cont...
<TABLE>
<CAPTION>
Non- Per Share
Incentive qualified Exercise Price
--------- --------- --------------
<S> <C> <C> <C>
Outstanding at September 30, 1995 55,000 10,000 $.80 to $.88
Automatic grant to Directors 5,000 5,000 $.44
Exercised --- --- ---
Canceled <50,000> --- ---
------- ------- --------------
Outstanding at September 30, 1996 15,000 20,000 $.44 to $.88
Automatic grant to Directors 6,250 6,250 $.44 to $.48
Exercised --- --- ---
Canceled --- --- ---
Outstanding at September 30, 1997 21,250 26,250 $.44 to $.88
Automatic grant to Directors 7,500 7,500
Canceled <5,000>
------- ------- --------------
Outstanding at September 30, 1998 23,750 33,750 $.44
====== ====== ===============
</TABLE>
<TABLE>
<CAPTION>
Other Options:
Other options granted during fiscal year ended September 30, 1996 are as
follows:
Other Per Share
Options Exercise Price
--------- --------------
<S> <C> <C>
Directors 50,000 $0.50
Consultants 235,000 $1.00 to $1.50
---------
285,000
=========
</TABLE>
Note 6 - Compensation:
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. Mr.
Smith's agreement terminated at his death on July 29, 1998. The
term of the agreements is one year. See footnote 7.
16
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Acquisition
On June 7, 1999, the Company agreed to acquire all the outstanding
stock of Progressive Telecommunications Corporation ("Progressive")
in exchange for 45,000,000 newly authorized shares of the Company.
Such transaction will be treated as a reverse merger for accounting
purposes. The Company will also change its name to Progressive,
authorize a 1 for 5 reverse split, and decrease its par value of
common stock from $.04 per share to $.001.
In addition, the following transactions are contemplated upon
closing of this acquisition:
1. The Company's CEO will forgive his unpaid salary
(approximately $435,000 as of June 30, 1999) in
exchange for the Company's film rights (valued at $0
as of June 30, 1999).
2. The Company's CEO will convert his 8% Convertible
Debenture (approximately $307,000 as of June 30,
1999) into 1,206,552 shares of the Company's pre-
split common stock.
3. The estate of Ralph Smith will exchange all
obligations as of June 30, 1999 (approximately
$560,000) for cash settlement by Progressive.
17
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
For the nine months ended June 30, 1999, the Company had a loss
of $219,453. The Company's cash position decreased by $30,119
since September 30, 1998. The loss for the three months ended
June 30, 1999 was $115,298.
Results of Operations
- ---------------------
Revenue for the three- and nine-month periods ended June 30, 1999
was $53,952 and $199,371, respectively. This represents a
decrease of approximately $144,000 as compared to the three-month
period ended June 30, 1998 due to less titles licensed in 1999 by
the Company.
Costs and Expenses for the three- and nine-month periods ended
June 30, 1999 were $158,000 and $379,000, respectively, a
decrease of approximately $74,000 as compared to the three-month
period ended June 30, 1998 and $142,000 as compared to the nine
months ended June 30, 1998.
The primary cause for this 1999 decrease was the officers
salaries ($70,000) and bad debt expense ($100,000) together with
reduced fiscal 1999 rent expenses.
Year 2000 Issue
- ---------------
The Company's business does not utilize equipment or systems that
depend on computer software. The Company's accounting systems
are personal computer based and presently utilize off-the-shelf
accounting software which is Year 2000 compliant. The Company
plans to purchase software upgrades or download software patches
from software vendors where necessary. These purchases are not
expected to have a material impact on the Company's results of
operations.
Capital Resources and Liquidity
- -------------------------------
As of June 30, 1999, the Company had $30,922 available to meet
operating requirements. This cash position may not be adequate
to meet the Company's operational needs.
The Company has no significant immediate liabilities that it is
unable to satisfy unless the Chairman changes his position and
demands full payment of his salary obligation.
18
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
ITEM 2. (Continued)
The Company's Board of Directors and management continue to have
discussions with investment bankers. These discussions relate to
establishing acquisition or merger criteria that would benefit
all parties involved. The essential element is to add revenue
generating assets to the Company and to strengthen the balance
sheet. Currently, and management believes that over the next
twelve months, the Company's film library will continue to
generate the cash necessary to pay the Company's overhead
excluding the full salary of the Chairman.
Based on information currently available, the Company does not
expect to incur any significant operating expenses or incur
material costs to be Year 2000 compliant.
On January 30, 1998, the Company unilaterally terminated and
rescinded the acquisition of Of Sound Mind, Inc. As of the date
of the rescission, OSM was indebted to the Company in the amount
of $100,000.00. During 1998, the loan was written off.
On October 21, 1997, the Company also closed an offering of
$150,000 principal amount convertible subordinated debenture (the
"Debenture") and 150,000 Common Stock Purchase Warrants
exercisable at $.50 (the "Warrants"). The debenture was
converted in May 1998. Each Warrant is exercisable into the
Registrant's common stock at a price of $.50 per share at any
time on or after October 31, 1997 and expiring on October 31,
1999.
The revenues from the library of films currently owned by the
Company were not adequate in fiscal 1998 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. AND SUBSIDIARY
PART II - OTHER INFORMATION
Items 1 through 5 are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 is included in this report. A report on Form 8-K
dated June 7, 1999 was filed by the Company during the quarter
covered by this report and reflected in footnote 7.
20
<PAGE>
MARQUEE ENTERTAINMENT, INC. AND SUBSIDIARY
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 July 26, 1999 By /s/ Harold Brown
---------------------- ------------------------------
Harold Brown, Chairman, Chief
Executive Officer and
Principal Accounting Officer
21
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000806277
<NAME> MARQUEE ENTERTAINMENT, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 30,922
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
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<TOTAL-ASSETS> 35,422
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<BONDS> 0
0
0
<COMMON> 92,872
<OTHER-SE> (1,577,775)
<TOTAL-LIABILITY-AND-EQUITY> 35,422
<SALES> 0
<TOTAL-REVENUES> 199,371
<CGS> 23,201
<TOTAL-COSTS> 379,243
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (39,581)
<INCOME-PRETAX> (219,453)
<INCOME-TAX> 0
<INCOME-CONTINUING> (219,453)
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<EXTRAORDINARY> 0
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</TABLE>
