SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K - AMENDMENT ONE
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-15413
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Marquee Entertainment, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 95-3480640
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State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
6404 Wilshire Blvd., #550, Los Angeles, CA 90048
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(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (323) 782-0090
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $0.04 per share par value
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(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K [X]
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
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The number of shares outstanding of the Registrant's common stock
as of December 15, 1998 was 2,321,793 shares. The aggregate market
value of the voting stock held by non-affiliates of the Registrant
as of December 15, 1998 was approximately $232,000.
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ITEM 6. SELECTED FINANCIAL DATA
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The following information has been derived from the Company's
consolidated financial statements. The selected consolidated
financial data should be read in conjunction with the Consolidated
Financial Statements and the notes thereto and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" elsewhere in this report.
<TABLE>
<CAPTION>
Years Ended September 30,
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Total Assets $ 79,031 $ 94,097 $ 157,409 $228,941 $334,601
Total
Liabilities 1,344,481 1,174,257 1,023,646 608,628 494,659
Stockholders
Equity (Deficit) (1,265,450) (1,080,160) (866,237) (379,687) (160,058)
Revenues
Film Lic. Fee 416,492 469,115 239,857 498,476 595,030
Income (Loss) (341,290) (213,923) (947,309) (219,629) (258,310)
Income (Loss)
Per Share* ($0.15) ($0.15) ($0.70) ($0.16) ($0.19)
Cash Dividends
Per Share --- --- ---
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*Income (Loss) Per Share was retroactively adjusted to reflect the reverse
stock split of 1 to 40 effective March 22, 1996.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
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Results of Operations
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Fiscal Year Ended September 30, 1998 versus Fiscal Year Ended
September 30, 1997
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The Company experienced a loss of $341,290 for the fiscal year
ended September 30, 1998 resulting in an increased accumulated
deficit to $1,265,450. The loss reflects the Company's films
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continuing diminishing revenue generating capacity. Fiscal 1998
also includes a bad debt write-off of $100,000 and a $36,000
increase in professional fees relative to financing activities.
The cash position of the Company at September 30, 1998 was $61.931,
an increase of $38,105 as compared to September 30, 1997. The
increase cash position relates to the fact that the Company
received payment on certain outstanding contracts and accounts
receivable during the year ended September 30, 1998. Accounts
receivable at September 30, 1998 were $12,600, a decrease of
$25,000 as compared to September 30, 1997.
Liabilities increased by $170,000 as of September 30, 1998
principally due to additional accruals for payroll and convertible
debenture interest due the Company's officers.
For the year ended September 30, 1998, film revenue was $416,492,
a decrease of $53,000 (11%) as compared to September 30, 1997. The
operating loss of $307,048 at September 30, 1998 is due to a
continuing lack of sales to cover the Company's overhead. The
Company is continuing to negotiate licensing of certain major
territories that are or will be available during fiscal year 1999.
However, there can be no assurances that these sales will be made
or that they will be adequate to cover the total cost of operations
(for further comments see "Capital Resources and Liquidity" in this
report).
Fiscal Year Ended September 30, 1997 versus Fiscal Year Ended
September 30, 1996
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Film revenue for fiscal year ended September 30, 1997 was $469,115
representing an increase of $229,257 as compared to September 30,
1996. This increase was primarily due to one major territory,
United Kingdom, film license of $243,750, whereas during fiscal
1996 no major territories were sold.
Operating cost decreased by $13,974, or 27%, during fiscal year
ended September 30, 1997 as compared to fiscal year 1996. There
are certain offsetting factors: print cost increased by $2,000 due
to prints provided to licensees on loan at the Company's expense;
freight cost increased by $2,000 due to the higher volume of sales;
depreciation expense decreased by $7,200 due to all fixed assets
becoming fully depreciated; and development cost decreased by
$10,000 in 1997 as one abandoned project was written off in 1996
and none in 1997.
Selling, general and administration costs decreased by $67,508 for
fiscal year ended September 30, 1997 as compared to fiscal year
ended 1996. The primary reason for the decrease was that in 1996
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the Company attempted a private placement that turned out to be
unsuccessful. However, the Company still incurred the related
legal and public relations costs associated with this private
placement.
Professional fees for public relations decreased for fiscal year
1997 by $19,500 as compared to 1996 due to the private placement
costs in 1996; legal fees for fiscal year 1997 decreased by $38,000
as compared to fiscal year 1996 also due to private placement costs
in 1996; shareholder related expenses decreased by $2,500 during
fiscal year 1997 as compare to 1996 due to a need in 1996 to obtain
several shareholders lists deemed necessary during our private
placement efforts; auto lease expense decreased for fiscal year
1997 by $9,000 as compared to 1996 as a result of leases of lesser
valued automobiles; advertising and promotion expense in fiscal
year 1997 decreased by $1,700 as compared to fiscal year 1996 due
to less print and art material needed for marketing efforts; travel
and entertainment during 1997 decreased by $2,100 as compared to
1996 due to less travel; insurance expense in fiscal year 1997
decreased by $2,100 as compared to fiscal year 1996 due to lesser
premium cost on auto insurance, lesser valued cars, and reduction
in the cost of errors and omissions insurance on the Company's
films due to their age; and a decrease in bad debt expense in
fiscal year 1997 of $10,600 as compared to fiscal year 1996 due to
a write off of a note in 1996 of $25,000 offset in 1997 of a write
off of one license of $14,400 as a result of the licensee not
taking delivery of its films and non-payment. The grand total of
decrease costs in fiscal year 1997 as compared to fiscal year 1996
was $85,500. These decreases were offset by certain increases in
costs in fiscal year 1997 over 1996 as follows: salary expense
increased by $1,900 in fiscal year 1997 as compared to 1996 due to
a bonus and salary increase to one employee; accounting expense in
fiscal year 1997 increased by $5,500 over fiscal year 1996 due to
the Company refiling and restating its 1996 Form 10-K, December 31,
1996 Form 10-Q and March 31, 1997 Form 10-Q as a result of
accounting adjustments and additional financial disclosures deemed
necessary for proper reporting and to be in compliance with the
Security and Exchange Acts of 1933 and 1934 as amended; auto
expense in fiscal year 1997 increased by $3,900 over fiscal year
1996 due to one older auto needing to replace its cooling system
and a new set of tires; payroll tax increased by $1,300 in fiscal
year 1997 over 1996 due to salary increases and a higher social
security base in 1997; postage expense increased by $1,600 during
fiscal year 1997 over fiscal year 1996 as a result of higher sales
activity; telephone expenses increased by $1,500 in fiscal year
1997 over fiscal year 1996 due to increased sales and film delivery
activity; tax expense increased by $600 due to a redevelopment tax
imposed by the city; dues and subscriptions increased by $800 due
to Internet services new in 1997; and other expenses increased by
$900 during fiscal year 1997 over fiscal year 1996.
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Fiscal Year Ended September 30, 1996 versus Fiscal Year Ended
September 30, 1995
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Film revenue for fiscal year ended September 30, 1996 was $239,857
representing a decrease of $210,050, or 42%, as compared to
September 30, 1995. The decline in film sales is the result of no
new product to augment the Company's aging film library.
Operating costs and film amortization decreased by $48,569, or 48%,
in fiscal year 1996 as compared to fiscal year 1995. This decrease
was due to a decrease in print cost of $21,000, a result of less
digital remastering in fiscal 1996 of the Company's films; a
decrease in depreciation expense of $7,000 in fiscal 1996 as assets
became fully depreciated; commission expense decrease by $11,000 in
fiscal 1996 as the Company only had nominal outside sales help
during the period; development cost decrease by $9,500 in fiscal
1996 as three abandoned projects were written off in fiscal 1995
and only one in fiscal 1996.
Selling, general and administration costs increased by $60,103 in
fiscal 1996 as compared to fiscal 1995. There were offsetting
factors that caused this increase in fiscal 1996; salary expense
decreased by $3,700 due to having two administrative assistants
during part of fiscal 1995 and an adjustment to payroll taxes as a
result of an over accrual of tax on Mr. Brown and Mr. Smith's gross
beyond social security wage base; professional fees increased
by$48,539 due to the legal and public relations fees incurred in
association with an attempted private placement and a Form S-8
filing; auto expense decreased by $5,000 due to fewer repairs;
copier expense decreased by $3,200 as the Company purchased the
copier after the lease ended in June of 1995; car lease expense
decreased by $2,200 due to the expiration of the old leases and the
new leases are for lesser amounts; advertising and promotion
expense decreased by $2,470 due to less sales activity; temporary
help cost decreased by $1,750 due to the Company not hiring any
additional part-time help; travel and entertainment expense
increased by $3,000 due to an increase in business lunches
associated with the Company's efforts to raise capital for
acquisitions; insurance expense increased by $5,400 due to the cost
of an errors and omission policy; foreign remittance tax expense
decreased by $3,500 due to no sales being made subject to
remittance tax; bad debt expense increased by $25,000 due to the
Company entering into a note receivable that matured on June 20,
1996 that was not paid.
In regard to the $25,000 note receivable, it was entered into with
Four Pals Community Broadcasters, Inc. and its President,
individually, on March 20, 1996, due no later than June 20, 1996.
It was unsecured and bore interest at 10 percent. Four Pals
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Community Broadcasters, Inc. owns KPAL-TV, (see Capital Resources
and Liquidity for further discussion regarding KPAL-TV) and the
loan was made based on a potential future relationship that did not
materialize. Since there has been no effort on the part of Four
Pals Community Broadcasters, Inc. and its President to satisfy this
obligation, the matter has been turned over the Company attorney
for evaluation and the Company wrote off the $25,000 as bad debt
expense.
Year 2000 Issue
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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
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As of September 30, 1998 the Company had $61,931 available to meet
operating requirements. In addition, it had net accounts
receivable of $12,600. This cash position is not adequate to meet
the Company's operational needs of approximately $300,000 per year.
The Company has no significant immediate liabilities that it is
unable to satisfy, because at the present time the Company's
Chairman and President continues to accrue his full salary and to
receive cash compensation only based on his determination that
there are adequate funds available. If the Chairman and President
changes his position and demands full payment, the Company will be
unable to satisfy this liability. As of September 30, 1998, the
Company is indebted approximately $600,000 to its Chairman and
President.
During the year ended September 30, 1997, 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. In
July and August of 1997 discussions were held with a company Of
Sound Mind, Inc. ("OSM"). On October 21, 1997, subsequent to the
Company's September 30, 1997 year end, the Company and OSM signed
a more definitive purchase agreement that was outlined in a Form 8-
K filed by the Company on October 31, 1997. The transaction was
aborted in early 1998 and the Company wrote off a $100,000 advance
made to OSM.
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On October 21, 1997, the Company also closed an offering of
$150,000 principal amount convertible subordinated debentures (the
"Debentures") 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. 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 debentures were
converted in May 1998 to 923,077 shares of common stock.
The capital raised, through the convertible debenture, of $150,000
is not adequate for the overall needs of the Company. The
Company's Board and management continue to have discussions with
investment bankers to raise funds for expansion of the Company and
additional possible acquisitions. 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 President and Chairman.
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.
On July 29, 1998, Mr. Ralph Smith, the Company's Chief Financial
Officer, died. The death of Mr. Smith has had no material effect
on the operations of the Company. At the time of his death, the
Company was indebted to Mr. Smith in the amount of approximately
$500,000. The Company has been negotiating with the executor of
Mr. Smith's estate regarding settling the indebtedness as well as
canceling any and all other rights Mr. Smith had at the time of his
death.
Management believes that with maintaining reductions in operational
costs, and continuing sales activity from the current library and
newly 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.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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The financial statements required by this item are set forth as
indicated in Item 14 (a) 1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
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There are no changes in, or disagreements with, the Company's
accountant.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MARQUEE ENTERTAINMENT
Date: February 18, 1999 By: /s/ Harold Brown
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Harold Brown, Chief Executive
Officer, Acting Chief Financial
Officer and Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
/s/ Harold Brown February 18, 1999
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Harold Brown Chairman of the Board Date
/s/ Harvey Seslowsky February 18, 1999
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Harvey Seslowsky Director Date
/s/ David DeShay February 18, 1999
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David DeShay Director Date
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