U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________TO ______________
Commission File No. 33-37968-A
IMAGICA ENTERTAINMENT, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-2762999
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1518 SW 12th Avenue, Ocala, FLorida 34474
(Address of principal executive offices)
(352) 867-7860
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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 ( )
Number of common shares outstanding as of August 31, 1996 (including the
100,000 shares of redeemable common stock) - 2,403,013.
Transitional Small Business Disclosure Format:
Yes ( ) No ( X )
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION Page Number
Item 1. Financial Statements (Unaudited):
Balance Sheets 3
Statements of Operations 6
Statements of Cash Flows 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
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<PAGE>
<TABLE>
IMAGICA ENTERTAINMENT, INC. and SUBSIDARY
BALANCE SHEETS
<CAPTION>
August 31, May 31,
1996 1996
(Unaudited) _______
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 58,450 $ ---
Accounts receivable, less
allowance for possible losses
of $18,611 and $30,611 514,737 528,048
Advances to stockholders 14,308 13,938
Inventories 254,269 258,625
Prepaid expenses 1,008,021 68,823
Total current assets 1,849,785 869,434
Property and equipment, net 810,518 871,480
Other assets:
Loan acquisition 5,263 ---
Deferred financing costs, less
accumulated amorization of $6,159 --- 5,886
Equipment not yet placed in service 37,500 37,500
Deposits on equipment 214,035 206,632
Other 7,680 15,307
264,478 265,325
$2,924,782 $2,006,239
</TABLE>
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<PAGE>
<TABLE>
IMAGICA ENTERTAINMENT, INC. and SUBSIDARY
BALANCE SHEET
<CAPTION>
AUGUST 31, May 31,
1996 1996
(Unaudited)
<S> <C> <C>
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks issued against future deposits $ --- $ ---
Notes Payable 143,289 105,000
Accounts payable - trade 722,333 652,204
Notes payable to stockholders 398,301 302,225
Accrued liabilites 551,906 520,005
Current maturities of long-term debt 310,247 354,317
Current portion of obligations under
capital leases 148,616 232,329
Total current liabilities $2,274,692 $2,166,080
Long-term debt, less current
maturities 350,873 420,294
Obligations under capiral leases,
less current maturities 265,617 153,665
______________________________________________________________________
Total liabilities $2,891,182 $2,740,039
Commitments and contingencies --- ---
Redeemable common stock 100,000 100,000
Stockholders' equity
Common stock, $.001 par value,
shares authorized 50,000,000;
issued 2,403,013 14,856 1,820
Additional paid-in-capital 2,900,497 1,787,784
Accumulated deficit (2,640,513) (2,282,164)
274,840 ( 492,560)
</TABLE>
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<PAGE>
<TABLE>
IMAGICA ENTERTAINMENT, INC. and SUBSIDARY
BALANCE SHEETS - Continued
<CAPTION>
Liabilities and Stockholders' Equity - continued
<S> <C> <C>
Less: Treasury stock,at cost,
97,500 shares 91,240 91,240
Notes receivable arising from
the exercise of stock options 250,000 250,000
Total stockholders' equity ( 66,400) (833,800)
$2,924,782 $2,006,239
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
IMAGICA ENTERTAINEMNT, INC. and SUBSIDARY
STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended August 31
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
SALES $963,836 $1,377,260
COST OF SALES 693,401 1,009,089
GROSS PROFIT 270,435 368,171
OPERATING EXPENSES 608,974 417,250
INCOME (LOSS) FROM OPERATIONS (338,539) ( 49,079)
OTHER INCOME (EXPENSES):
INTEREST ( 19,810) ( 34,413)
NET INCOME (loss) (358,349) ( 83,492)
Earnings (loss) per share ($.15) ($.01)
Weighted Average Common Shares
Outstanding 2,403,013 8,441,944
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
IMAGICA ENTERTAINMENT INC. and SUBSIDARY
STATEMENTS OF CASH FLOWS
<CAPTION>
Three months ended August 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(358,348) $ (83,491)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amorization 61,585 74,772
Cash provoded by (used for):
Accounts receivable 13,312 (14,431)
Stockholders' Advances ( 370) ---
Inventories 4,356 (40,534)
Prepaid expenses (938,125) (27,359)
Checks issued against future deposits ( 23,035) ( 1,194)
Accounts payable - trade 77,858 54,867
Intra company payable 15,304 ---
Accrued liabilities 119,777 76,282
Net Cash Provided by operating activities: (1,028,759) 38,912
Cash Flows from investing activities:
Decrease in other assets 224 19,380
Net Cash provided by (used for)
investing activities: 224 19,380
Cash Flow from financing activities:
Decrease in note payable --- ---
Net decrease in stockholder note payable 41,100 15,705
Principal payments of long-term debt and
capital lease obligations (79,864) (67,968)
Proceeds from issuance of stock 475 ---
Additional paid-in-capital 1,125,275 ---
Net Cash used for financing activities: 1,086,986 (52,263)
Net Increase (decrease) in cash and
cash equivalents: 58,451 6,028
Cash and Cash Equivalents,
beginning of period: --- 8,464
Cash and Cash Equivalents, end of period: 58,451 (37,771)
</TABLE>
See accompaning notes to financial statements.
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<PAGE>
IMAGICA ENTERTAINMENT, INC. and SUBSIDARY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-QSB, and do not include all of the
information and disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-KSB for the
year ended May 31, 1996. The accompanying financial statements have not been
examined by an independent accountant in accordance with generally accepted
auditing standards, but in the opinion of management, such financial
statements include all adjustments, consisting only of normal recurring
adjustments and accruals, to fairly report the Company's financial position
and results of operations. The results of operations for the interim periods
shown in this report are not necessarily indicative of results to be expected
for the fiscal year.
NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended August 31, 1996, the Company
issued 475,000 shares of common stock as payment for current
and future independent consulting services amounting to
$1,125,750. This amount will be amortized through June 1997.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales for the three months ended August 31, 1996 were $1,377,260
reflecting a decline of $413,424 or 30% from the comparable
period in fiscal 1996. The Company believes this was primarily
the result of working capital constraints brought on by the
April 1996 settlement of case number 94-4342-CA-E in the Circuit
Court of Marion County, Florida. Cash that would have been used
to purchase materials, labor and finance a higher sales volume,
went to satisfy the law suit and pay legal fees. The subsequent
revenue stream was reduced. With the Company having a very
limited ability to secure outside capital, financing of sales
have been restricted.
Gross profit for the three months ended August 31, 1996
decreased by 26.5% to $270,435 from $368,171 for the comparable
period in fiscal 1996. Despite the 30% reduction in the sales
volume, improved cost control resulted in the gross profit
improving to 28.1% from 26.7% during the comparable period in
fiscal 1996.
Selling, general and administrative expenses (reflected as
operating expenses in the accompanying statements of operations)
took a dramatic jump to $608,974 for the three months ended
August 31, 1996 from the $417,250 for the same period in 1995.
The accrual for an executive pay increase, consulting fees, and
the amortization of consulting fees for the 7/10/96 S-8,
accounted for $280,692 of the $608,974 first quarter operating
expenses. Declining sales and increased operating expenses as a
percentage of sales, operating expenses increased to 63.2% for
the first quarter of fiscal 1997 as compared to 30.3% for the
same period in fiscal 1996.
Interest expense decreased 42.4% to $19,810 during the three
months ended August 31, 1996 as compared to the same period in
fiscal 1996. This was attributable to a decrease in interest
paid on the SunTrust note.
The net loss increased to ($358,349) for the three months
ended August 31, 1996 as compared to a net loss of ($82,492).
When the $280,692, accrued for consulting fees and an executive
pay increase, is factored out , the net loss for the quarter
ended August 31, 1996 is only ($77,657).
Liquidity and Capital Resources
The Company has experienced significant cash flow difficulties
in recent years. As of August 31, 1996, the Company has certain
obligations which are currently due or due within one year
including debenture notes payable of $105,000, various notes
payable to stockholders amounting to $398,301, current
maturities of long-term debt of $310,247, and the current
portion of obligations under capital leases of $148,616. The
Company currently does not have sufficient funds to repay such
obligations. The Company has engaged Gulf Atlantic Capital
Corporation to develop an operating plan that will maximize
profitability and cash flow, contact vendors and secured
creditors, negotiate a repayment plan, and provide plan
monitoring and future assistance in acquiring working capital.
During June 1996 the Company entered into three agreements with
various consultants to arrange the acquisition of funds from
investors. The Company anticipates that the funds generated from
raising additional capital coupled with the implementation of
the Gulf Atlantic plan will be sufficient to enable the Company
to: (1) pay current maturities on debts; (2) acquire new
printing equipment; and (3) provide working capital for current
operations and future growth. There can be no assurance
however, that any additional funds can be obtained, nor that net
income generated, if any, will be sufficient to enable the
Company to meet its obligations or continue operations as a
going concern.
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<PAGE>
The Company intends to acquire various equipment in the near
future, most notably a printing machine having a cost of
approximately $460,000. Of this amount $206,632 has been paid
to date and is included in the "deposit on equipment" in the
accompanying balance sheet. The Company anticipates that the
remaining funding will come from financing as described above.
The Company believes the machine will enable it to produce
banners at a much faster pace and at a much lower cost.
In 1992 the company purchased land for future development with
cash ($150,000, of which $125,000 was borrowed from the bank)
and 12,500 shares of common stock. In connection with this
transaction, the Seller had the option to require the Company to
repurchase the common stock for $10.46 per share. The seller
elected to require the Company to repurchase the stock for
$10.64 per share. A current liability of $133,250 was recognized
as of May 31, 1994. The Seller filed a complaint for breach of
contract in October 1994. During 1996, settlement was reached
between the Company and the Seller. The Company was released of
the $133,250 liability, and the Seller was required to repay the
remaining balance owed the bank of $100,000 in exchange for the
return of the land and 12,500 shares of common stock.
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<PAGE>
<PAGE>
PART II: Other Information
Item 6. Exhibits and Reports on Form 8-K
None.
(a) Exhibits
Exhibit Description Page
(a) Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession. None
(3) Restated Articles of Incorporation and By-Laws
previously filed as an Exhibit to Form S-18 filed
January 7, 1991, incorporated herein by reference.
(4) Instruments defining the rights of holders,
including indentures. None
(9) Voting Trust Agreement None
(10) Material Contracts
(a) Facility Lease between the Company and GWW
Partnership, dated September 27, 1989,
previously filed as an Exhibit to Form S-18
filed on January 7, 1991, incorporated herein
by reference.
(b) Facility Lease between the Company and CYNWD
dated June 16, 1990, previously filed as an Exhibit
to Form S-18 filed January 7, 1991, incorporated
herein by reference.
(c) Contract for Sale and Purchase (including Addendum
and Subscription Agreement) between the Company
and C.L. Dinkins, Jr. Trustee, dated May 15, 1992,
previously filed as an Exhibit to Form 10-K filed
on April 26, 1993, incorporated herein by reference.
(d) Irrevocable Voting Proxy between Richard D. Brown
and the Company, dated June 30, 1988, previously filed
as an Exhibit to Form 10-K filed on April 26, 1993,
incorporated herein by reference.
(e) Irrevocable Voting Proxy between Robert W. Burnham
and the Company dated June 30, 1988, previously filed
as an Exhibit to Form 10-K filed on April 26, 1993,
incorporated herein by reference.
(f) Irrevocable Voting Proxy between Mark S. Heller and
the Company, dated June 30, 1988, previously filed
as an Exhibit to Form 10-K filed on April 26, 1993,
incorporated herein by reference.
(g) Irrevocable Voting Proxy between John Leard and
the Company, dated October 31, 1989, previously filed
as an Exhibit to Form 10-K filed on April 26, 1993,
incorporated herein by reference.
(h) Irrevocable Voting Proxy between William J. White and
the Company, dated June 30, 1988, previously filed
as an Exhibit to Form 10-K filed on April 26, 1993,
incorporated herein by reference.
(i) Irrevocable Voting Proxy between Tracie Dawson and
the Company, dated June 30, 1988, previously filed
as an Exhibit to Form 10-K filed on April 26, 1993,
incorporated herein by reference.
(j) Commitment for Equipment between Climax, Inc. and
the Company, dated February 13, 1992, previously filed
as an Exhibit to Form 10-K filed on April 26, 1993,
incorporated herein by reference.
(k) Stock Repurchase Agreement between J. R. Gunter,
Robert Wormser, Mark Wormser and the Company
dated April 27, 1989.
(l) Employment Agreement between the Company and
Robert Wormser dated June 1, 1993, previously filed
as an Exhibit to Form 10-KSB filed on or about
December 20, 1993, incorporated herein by reference.
(m) Agreement between the Company and Florida Gulf
Capital & Equity Corp., Inc. previously filed as an
Exhibit to Form 10-QSB filed on or about May 13,
1994, incorporated herein by reference.
(n) Irrevocable Voting Proxy between Donna Wormser
and the Company, dated March 3, 1993, previously
filed as an Exhibit to Form 10-KSB filed October 26,
1994, incorporated herein by reference.
(o) Irrevocable Voting Proxy between Pruitt Hall
and the Company, dated July 22, 1994, previously
filed as an Exhibit to Form 10-KSB filed October 26,
1994, incorporated herein by reference.
(p) Irrevocable Voting Proxy between William J. White
and the Company, dated July 22, 1994, previously
filed as an Exhibit to Form 10-KSB filed October 26,
1994, incorporated herein by reference.
(q) Irrevocable Voting Proxy between Tracie Dawson
and the Company, dated July 22, 1994, previously
filed as an Exhibit to Form 10-KSB filed October 26,
1994, incorporated herein by reference.
(r) Irrevocable Voting Proxy between Carol Monroe
and the Company, dated July 29, 1994, previously
filed as an Exhibit to Form 10-KSB filed October 26,
1994, incorporated herein by reference.
(s) Irrevocable Voting Proxy between Sharon Rava
and the Company, dated July 22, 1994, previously
filed as an Exhibit to Form 10-KSB filed October 26,
1994, incorporated herein by reference.
(t) Irrevocable Voting Proxy between Ricky Brown
and the Company, dated July 22, 1994, previously
filed as an Exhibit to Form 10-KSB filed October 26,
1994, incorporated herein by reference.
(u) Irrevocable Voting Proxy between Mark Slaughter
and the Company, dated July 22, 1994, previously
filed as an Exhibit to Form 10-KSB filed October 26,
1994, incorporated herein by reference.
(v) Irrevocable Voting Proxy between John Fernung
and the Company, dated July 22, 1994, previously
filed as an Exhibit to Form 10-KSB filed
October 26, 1994, incorporated herein by
reference.
(w) Consulting Agreement Tod Lotz
and the Company, dated June 12, 1996,
previously filed as an Exhibit to Form S-8
filed July 10, 1996, incorporated herein
by reference.
(x) Consulting Agreement Mark Schultz
and the Company, dated July 10, 1996,
previously filed as an Exhibit to Form S-8
filed July 10, 1996, incorporated herein
by reference.
(y) Consulting Agreement Tod Lotz
and the Company, dated August 12, 1996,
previously filed as an Exhibit to Form S-8
filed September 4, 1996, incorporated herein
by reference.
(z) Consulting Agreement between Tim Murray
and the Company, dated August 12, 1996,
previously filed as an Exhibit to Form S-8
filed September 4, 1996, incorporated herein
by reference.
(11) Statement re: computation of per share earnings None
(18) Letter on change in accounting principles None
(21) Subsidiaries of the Registrant None
(22) Published report re: matters submitted to vote of
security holders None
(24) Power of Attorney None
(27) Financial Data Schedule
(28) Information from reports furnished to state
insurance regulatory authorities None
(99) Additional Exhibits None
(b) Form 8-K
There were no reports on Form 8-K filed during the last quarter
in the period covered by this report.
SIGNATURE
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.
IMAGICA ENTERTAINMENT, INC and SUBSIDARY
(Registrant)
Date: October 31, 1996 By: _____________________________
Robert S. Wormser, President
(President, Chief Executive
Officer and Chief Financial
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from Financial Statements for the three (3) months ended August 31, 1996, and is
qualified in its entirety by reference to such form 10QSB for quarterly period
ended August 31, 1996.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> May-31-1996
<PERIOD-END> Aug-31-1996
<CASH> 58,450
<SECURITIES> 0
<RECEIVABLES> 533,348
<ALLOWANCES> 18,611
<INVENTORY> 254,269
<CURRENT-ASSETS> 1,849,785
<PP&E> 2,679,188
<DEPRECIATION> 1,781,103
<TOTAL-ASSETS> 2,924,782
<CURRENT-LIABILITIES> 2,274,692
<BONDS> 616,490
<COMMON> 14,356
0
0
<OTHER-SE> 18,749
<TOTAL-LIABILITY-AND-EQUITY> 2,924,732
<SALES> 963,836
<TOTAL-REVENUES> 963,836
<CGS> 693,401
<TOTAL-COSTS> 608,974
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,810
<INCOME-PRETAX> (358,349)
<INCOME-TAX> 0
<INCOME-CONTINUING> (358,349)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (358,349)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.14)
</TABLE>
