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 NOVEMBER 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE EXCHANGE ACT OF
1934
FOR THE PERIOD FROM July 1, 1997 thru November 30, 1997
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 wether 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 ( ) No ( X )
Number of common shares outstanding as November 30, 1997 (including the 100,000
shares of redeemable common stock) - 589,683
Transitional Small Business Disclosure Format:
Yes ( ) No ( X )
<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
2
<PAGE>
IMAGICA ENTERTAINMENT, INC.
BALANCE SHEETS
November 30, May 31,
ASSETS 1997 1997
- ------ (Unaudited) (Unaudited)
----------- -----------
CURRENT ASSETS:
Cash and equivalents $ 31,098.63 $ 55,849.79
Accounts receivable, less allowance for
possible losses of $13,189 and
$13,189 320,414.24 317,081.91
Inventories (less obsolete of $39,000) 187,698.26 188,210.24
Prepaid expenses 45,793.13 1,264,665.82
-------------- ----------------
Total Current Assets 585,004.26 1,825,807.76
-------------- ----------------
Property and equipment, net 262,593.38 328,658.55
Other Assets:
Land held for future development -- --
Equipment not yet placed in service -- 37,500.00
Deposits on equipment -- 206,632.00
Other 11,777.90 6,277.90
-------------- ----------------
Total Other Assets 11,777.90 250,409.90
TOTAL ASSETS $ 859,375.54 $ 2,404,876.21
-------------- ----------------
3
<PAGE>
<TABLE>
<CAPTION>
IMAGICA ENTERTAINMENT, INC.
BALANCE SHEETS
November 30, May 31,
1997 1997
(Unaudited) (Unaudited)
----------- -----------
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Notes Payable 249,140.29 324,196.22
Accounts Payable - Trade 380,804.35 365,465.96
Accrued Liabilities 184,338.24 295,968.54
Current Portion of Stockholder Note Payable --
Current Maturities of Long-Term Debt 229,652.81 293,820.33
Current Portion of Obligations Under Capital 22,765.24 24,859.25
Leases
-------------------------------------
Total Current Liabilities 1,066,700.93 1,304,310.30
Stockholder Note Payable, less current portion 304,654.96
Long-Term Debt, Less Current Maturities 29,969.76 31,648.84
Obligations Under Capital Leases, Less 11,681.18 14,910.91
Current Maturities
-------------------------------------
Total Liabilities 1,108,351.87 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 4,581,230.51 4,504,730.51
Accumulated Deficit (4,836,948.64) (3,766,121.20)
--------------------------------------
(252,696.46) 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 (348,976.23) 649,351.21
---------------- ----------------
TOTAL LIABILITIES
and STOCKHOLDERS' EQUITY $ 859,375.64 $ 2,404,876.22
4
</TABLE>
<PAGE>
<TABLE>
IMAGICA ENTERTAINMENT, INC.
STATEMENT OF OPERATIONS
Three Months ended November 30, Nine Months ended November 30,
------------------------------- ------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
SALES $ 624,946 $ 869,099 $ 1,361,797 $ 1,832,935
COST OF SALES $ 405,589 $ 721,105 $ 885,523 $ 1,414,506
GROSS PROFIT $ 219,357 $ 147,994 $ 476,274 $ 418,429
OPERATING EXPENSES $ 249,477 $ 1,330,761 $ 498,986 $ 1,939,735
INCOME (LOSS) FROM OPERATIONS $ (30,120) $(1,182,767) $ (22,712) $(1,521,306)
OTHER INCOME (EXPENSES):
INTEREST $ (7,763) $ (46,046) $ (8,380) $ (65,856)
NET INCOME (LOSS)
$ (37,883) $(1,228,813) $ (31,092) $(1,587,162)
Earnings (loss) per Share $ (0.06) $ (0.39) (0.05) (0.50)
Weighted average common shares outstanding 589,683 3,165,593 589,683 3,165,593
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMAGICA ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOW
Three Months ended November 30, Six Months ended November 30,
------------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash Flows from operating activities:
<S> <C> <C> <C> <C>
Net Income (loss) $ (37,883) $(1,085,228) (31,092) $(1,443,576)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciations and Amortization $ 47,053 $ 61,083 66,065 $ 122,668
Cash provided by (used for):
Accounts Receivable $ 20,265 $ 189,487 (3,332) $ 202,799
Inventories $ (9,564) $ 110,298 512 $ 114,654
Prepaid Expenses $ 17,558 $ (976,700) 17,558 $(1,915,898)
Stockholders' Advance $ -- $ (372) -- $ (742)
Accounts Payable - Trade $ 760 $ (380,716) (15,338) $ (302,858)
Notes Payable $ (304,655) $ 189,554 (181,695) $ 189,554
Customer Deposits $ -- $ -- -- $ --
Accrued Liabilities $ 192,347 $ (61,609) 111,630 $ 58,168
Net Cash Provided by Operating Activities $ (74,120) $(1,954,203) $ (35,692) $(2,975,231)
Cash Flows from investing activities:
Purchase of Property and Equipment $ -- $ -- $ -- $ --
Decrease in other Assets $ 55,797 $ -- $ 56,021
Net Cash Provided by (used for) $ -- $ 55,797 $ (5,000) $ 56,021
investing activities:
Cash Flows from financing activities:
Decrease in Note Payable $ -- $ -- $ --
Proceeds from issuance of Convertible N-Pyble $ -- $ 281,867 $ 281,867
Proceeds from issuance of Stock $ -- $ 620 $ 1,095
Additional Paid-in-Capital $ -- $ 1,742,747 $ 2,868,022
Net Decrease in Stockholder Note Payable $ -- $ -- $ 41,100
Principal Payments of Long-Term Debt and $ 37,006 $ (109,171) 71,790 $ (196,766)
Capital Lease Obligations
Debt Issuance Costs $ -- $ --
Net Cash used for financing activities $ 37,006 $ 1,916,063 $ 71,790 $ 2,995,318
Net Increase (decrease) in cash and $ (37,114) $ 17,657 $ 31,098 $ 76,108
cash equivalents
Cash and Cash Equivalents, beginning $ 68,212 $ 58,451 0 $ 0
of Period
Cash and Cash Equivalents, $ 31,098 $ 76,108 $ 31,098 $ 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 not 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 six months ended November 1997 were $ 624,946 reflecting a decline
of $ 244,153 or 29% 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 six months ended November 30, 1997 increased by 14% to
$476,274 from $418,429 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 largely
unchanged from the same period in fiscal 1997 except for non-recurring items.
Interest Expense decreased from $65,856 in fiscal 1997 to $8,380 in the
comparable quarter ended November 1997 due to the Chapter 11 filing.
Gross profit in the quarter ended November 1997 was a loss of ($37,883) compared
to a loss of ($1,228,813) in the fiscal 1997 period. This was due to a reduction
in the interest expense and non-recurring items in the prior period.
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 Count, State of
Florida for determination. Until such time as this matter is resolved and until
significant sources of outside capital have been obtained the future of survival
of the Company is in extreme doubt.
On September 18, 1997 in Marion County Circuit Court, State of Florida, Judge
Swiggart ruled that the Stockholder Meeting held on September 3, 1997 electing
Braxton P. Jones and Mark Tishman directors was valid. The Board having elected
Braxton Jones as Chairman and President directed him to take physical control of
the Company on September 19, 1997.
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)
Date: May 1, 1998 By: /s/ Braxton P. Jones
-------------------------------
Braxton P. Jones, President
9
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
EXHIBITS TO
10-QSB REPORT
FOR
QUARTER ENDED
NOVEMBER 30, 1997
---------------------------------------------
IMAGICA ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 31,099
<SECURITIES> 0
<RECEIVABLES> 333,603
<ALLOWANCES> 13,189
<INVENTORY> 187,698
<CURRENT-ASSETS> 585,004
<PP&E> 2,215,418
<DEPRECIATION> 1,952,824
<TOTAL-ASSETS> 859,376
<CURRENT-LIABILITIES> 1,066,701
<BONDS> 41,651
0
100,000
<COMMON> 3,022
<OTHER-SE> (351,998)
<TOTAL-LIABILITY-AND-EQUITY> 859,376
<SALES> 1,361,797
<TOTAL-REVENUES> 1,361,797
<CGS> 885,523
<TOTAL-COSTS> 498,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,380)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,092)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
