U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[ ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended FEBRUARY 28, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE EXCHANGE ACT OF
1934
FOR THE PERIOD FROM December 1, 1997 thru February 28, 1998
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 or (I.R.S. Employer Identification
incorporation or organization) Number)
1518 SW 12th Avenue, Ocala, Florida 34474
(Address of principal executive offices)
( 352 ) 867-7861
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 February 28, 1998 (including the 100,000
shares of redeemable common stock) - 889,708.
Transitional Small Business Disclosure Format:
Yes ( X ) No ( )
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION Page Number
-----------
Item 1. Financial Statements (Unaudited):
Balance Sheets 3
Statement of Operations 5
Statement of Cash Flows 6
Notes to Financial Statements 7
Managements Discussion and Analysis 8
of Financial Condition and Results
of Operations
SIGNATURE 9
<PAGE>
IMAGICA ENTERTAINMENT, INC.
BALANCE SHEETS
February 28, May 31,
ASSETS 1998 1997
(Unaudited) (Unaudited)
----------- -----------
CURRENT ASSETS:
Cash and equivalents $ 2,435.84 $ 55,849.79
Accounts receivable, less allowance for 394,389.60
possible losses of $9,926 and $13,189 317,081.91
Inventories (less obsolete of $39,000) 186,221.91 188,210.24
Prepaid expenses 102,253.19 1,264,665.82
-------------- ----------------
Total Current Assets 685,300.54 1,825,807.76
-------------- ----------------
Property and equipment, net 224,718.89 328,658.55
Other Assets:
Land held for future development -- --
Equipment not yet placed in service -- 37,500.00
Deposits on equipment -- 206,632.00
Other 14,777.90 6,277.90
-------------- ----------------
Total Other Assets 14,777.90 250,409.90
TOTAL ASSETS $ 924,797.33 $ 2,404,876.21
-------------- ----------------
3
<PAGE>
<TABLE>
<CAPTION>
IMAGICA ENTERTAINMENT, INC.
BALANCE SHEETS
February 28, May 31,
1998 1997
(Unaudited) (Unaudited)
----------- -----------
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Notes Payable 229,053.61 324,196.22
Accounts Payable - Trade 392,224.59 365,465.96
Accrued Liabilities 305,975.97 295,968.54
Current Portion of Stockholder Note Payable -- --
Current Maturities of Long-Term Debt 215,837.66 293,820.33
Current Portion of Obligations Under Capital 48,776.75 24,859.25
Leases
---------------- ----------------
Total Current Liabilities 1,191,868.58 1,304,310.30
Stockholder Note Payable, less current portion -- 304,654.96
Long-Term Debt, Less Current Maturities 28,591.08 31,648.84
Obligations Under Capital Leases, Less 11,681.18 14,910.91
Current Maturities
---------------- ----------------
Total Liabilities 1,232,140.84 1,655,525.01
Redeemable Common Stock 100,000.00 100,000.00
Stockholder's Equity
Common Stock, $.001 Par Value, 3,021.67 7,021.67
shares authorized 50,000,000;
issued 8,441,944
Additional Paid-in-Capital 4,417,255.32 4,504,730.51
Accumulated Deficit (3,399,199.89) (3,766,121.20)
---------------- ----------------
1,021,077.10 745,630.98
Less: Treasury Stock, at cost, 680,000 shares (96,279.77) (96,279.77)
Notes Receivable arising from the
Exercise of Stock Options
Total Stockholders' Equity 924,797.33 649,351.21
---------------- ----------------
TOTAL LIABILITIES
and STOCKHOLDERS' EQUITY $ 2,256,938.17 $ 2,404,876.22
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMAGICA ENTERTAINMENT, INC.
STATEMENT OF OPERATIONS
Three Months ended February 28, Nine Months ended February 28,
------------------------------- ------------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
SALES $ 627,990 $ 674,975 $ 1,989,786 $ 2,509,409
COST OF SALES $ 430,832 $ 569,452 $ 1,322,363 $ 1,988,073
GROSS PROFIT $ 197,158 $ 105,523 $ 667,423 $ 521,336
OPERATING EXPENSES $ 291,896 $ 1,111,518 $ 785,874 $ 2,934,596
INCOME (LOSS) FROM OPERATIONS $ (94,738) $(1,005,995) $ (118,450) $(2,413,260)
OTHER INCOME (EXPENSES):
INTEREST $ 1,645 $ (107,588) $ (6,735) $ (333,430)
NET INCOME (LOSS) $ (93,093) $(1,113,583) $ (125,185) $(2,746,690)
Earnings (loss) per Share $ (0.10) $ (0.21) $ (0.14) $ (0.53)
Weighted average common shares outstanding 889,708 5,162,764 889,708 5,162,764
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMAGICA ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOW
Three Months ended February 28, Nine Months ended February 28,
------------------------------- ------------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash Flows from operating activities:
<S> <C> <C> <C> <C>
Net Income (loss) $ (94,093) $(1,113,583) $ (125,185) $(2,746,690)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciations and Amortization $ 17,875 $ 272,539 $ 83,940 $ 449,534
Cash provided by (used for):
Accounts Receivable $ (83,901) $ (107,248) $ (87,234) $ 95,800
Inventories $ 1,476 $ 28,933 $ (31,012) $ 126,737
Prepaid Expenses $ (56,460) $ 660,058 $ 1,162,413 $ 1,557,364
Stockholders' Advance $ -- $ --
Accounts Payable - Trade $ (11,420) $ (298,556) $ (26,759) $ 328,755
Notes Payable $ 308,250 $ 82,465 $(1,670,320) $ (502,538)
Customer Deposits $ -- $ -- $ --
Accrued Liabilities $ (122,638) $ (170,154) $ (10,007) $ (32,788)
Net Cash Provided by Operating Activities $ (40,911) $ (645,546) $ (704,164) $ (723,826)
Cash Flows from investing activities:
Purchase of Property and Equipment
Decrease in other Assets $ 3,000 $ 217,947 $ 235,632 $ 364,054
Net Cash Provided by (used for) $ 3,000 $ 217,947 $ 235,632 $ 364,054
investing activities:
Cash Flows from financing activities:
Decrease in Note Payable $ 20,067 $ 426,221 $ 95,143 $ 26,109
Proceeds from issuance of Convertible N-Pyble $ -- $ --
Proceeds from issuance of Stock $ -- $ --
Additional Paid-in-Capital $ -- $ --
Net Decrease in Stockholder Note Payable $ -- $ 19,025 $ 304,655 $ 401,593
Principal Payments of Long-Term Debt and $ (10,818) $ 10 $ 71,170 $ 28,947
Capital Lease Obligations
Debt Issuance Costs
Net Cash used for financing activities $ 9,249 $ 445,256 $ 470,968 $ 456,649
Net Increase (decrease) in cash and $ (28,662) $ 17,657 $ 2,436 $ 96,877
cash equivalents
Cash and Cash Equivalents, beginning $ 31,098 $ 58,451 0 $ (20,769)
of Period
Cash and Cash Equivalents, $ 2,436 $ 76,108 $ 2,436 $ 76,108
end of Period
6
</TABLE>
<PAGE>
IMAGICA ENTERTAINMENT, INC.
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 ( year ended May 31, 1997 Form 10-KSB no completed to date).
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 or
operations for the interim periods shown in this report are not necessarily
indicative of results to be expected for the fiscal year.
The results for fiscal 1997 have been restated from previous 10-QSB reports to
reflect the elimination of transactions subsequently determined to be improper
and for the removal of Imagica, Inc. (a Subsidiary) from the results of Imagica
Entertainment, Inc. This was done due to determination that the minutes
authorizing the transaction only authorized the acquisition of stock not a
pooling of interests.
7
<PAGE>
IMAGICA ENTERTAINMENT, INC.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales for the three months ended February 1998 were $627,990 reflecting a
decline of $46,985 or 7% from the comparable period in fiscal 1997. the Company
believes this was due to working capital constraints and a reduction in worker
moral and efficiency due to the Companies having filed for protection under
Chapter 11 of the Federal Bankruptcy Code.
Gross profit for the three months ended February 28, 1998 increased by 87% to
$197,158 from $105,523 for the comparable period in fiscal 1997. This was due to
the Company being able to close unprofitable production facilities and eliminate
certain contractual obligations due to the Chapter Eleven filing.
Selling and general administrative expenses (reflected as operating expenses in
the accompanying statements of operations). These expenses were significantly
changed from the same period in fiscal '1997 due to decreased consulting fees
accrued.
Interest Expense decreased from $107,588 in fiscal 1997 to $(1645) in the
comparable quarter ended February 1998 due to the Chapter 11 filing.
Gross profit (loss) in the quarter ended February 1998 was $(93,093) compared to
a loss of (1,113,583) in the fiscal 1997 period. This was due to a reduction in
accrued liabilities for consulting fees.
Liquidity and Capital Resources
The Company has experienced serious cash flow difficulties over several years.
In April 1997 a group of dissident stockholders called a special meeting of the
shareholders with the intent of taking control and thru management and capital
input returning the Company to profitability. The existing management blocked
that move by placing the Company in Chapter 11 bankruptcy. Petition was made by
the dissident stockholders to the bankruptcy court to dismiss the dismiss the
bankruptcy filing as unauthorized and turn over control to the dissident group
which had received the majority vote at the special stockholders meeting.
Instead the bankruptcy court remanded the matter to the Marion County, State of
Florida for determination.
The Companies Board of Directors requested that the Bankruptcy Court allow the
Company to dismiss it's Bankruptcy Council, Ronald Bergwerk, and retain now
council, the firm of Smith-Busey. The Court granted this request on December 16,
1997. The Board directed it's new Council to petition the Court to have the
Bankruptcy dismissed. The Court granted the Motion to dismiss and the Bankruptcy
was dismissed on February 2, 1998.
The Companies Auditors ( BDO Seidman) will prepare the audited financial for the
May 31, 1997 year end. It is anticipated that they will make significant
adjustments to the Companies accounts. Those changes will affect the numbers
reported in the Company's subsequent 10-QSB's in a material way. Therefore the
accuracy of numbers reported here in should be questioned.
8
<PAGE>
SIGNATURE
---------
In accordance with the requirements of the Exchange Act, the registrant
caused this to be signed on its behalf by the undersigned, thereunto duly
authorized.
IMAGICA ENTERTAINMENT, INC.
(registrant)
By: /s/ Braxton P. Jones
-----------------------------------
Braxton P. Jones, President
Date:
9
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
EXHIBITS TO
10-QSB REPORT
FOR
QUARTER ENDED
FEBRUARY 28, 1998
---------------------------------------------
IMAGICA ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1998
<PERIOD-END> FEB-28-1998
<CASH> 2,436
<SECURITIES> 0
<RECEIVABLES> 404,316
<ALLOWANCES> 9,926
<INVENTORY> 186,222
<CURRENT-ASSETS> 685,301
<PP&E> 2,215,418
<DEPRECIATION> 1,990,700
<TOTAL-ASSETS> 924,797
<CURRENT-LIABILITIES> 1,191,869
<BONDS> 40,272
0
100,000
<COMMON> 3,022
<OTHER-SE> (410,366)
<TOTAL-LIABILITY-AND-EQUITY> 924,797
<SALES> 1,989,786
<TOTAL-REVENUES> 1,989,786
<CGS> 1,322,363
<TOTAL-COSTS> 785,874
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,734)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (125,185)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125,185)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
