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, 1999
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
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
1518 SW 12th Avenue, Ocala, Florida 34474
-----------------------------------------
(Address of principal executive offices)
(352) 867-7860
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(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___ No X
Number of common shares outstanding as of January 31, 1999 - 4,308,550.
Transitional Small Business Disclosure Format:
Yes _____ No X
<PAGE>
Part 1
Item 1. Financial Statements
The financial statements for the 9 month period ending February 28, 1999
follow as pages A1 through A3.
Item 2. Management Discussion and Analysis
The Company continued to experience difficulties in the third quarter in
returning to profitability. This has been due to the Company being unable to
achieve a production level that will insure profitability. As a result the
Company has continued to turn down business because of production constraints.
To overcome this problem the Company has entered into a 15 year lease on a
55,000 sq. ft. production facility that will allow the Company to more than
double its production capacity. To achieve that increased volume this space
allows the Company to currently enter into a lease for three additional print
production lines and high speed materials preparation equipment and new material
handling equipment. Management expects these changes will position the Company
to be profitable starting in fiscal 2000.
The Company in April of 1999 entered into an agreement with Edge MIS to
develop for the Company a total software package that will tie together all of
the Company's functions. This system will give the Company the ability to
schedule and control its production and inventory. Further, it will coordinate
with accounting for the ultimate in financial control. This system is Y2K
sensitive and should serve the Company well into the next millennium.
On April 15, 1999 the Company received a loan of $300,000.00 from Kevin
Howell. The terms and conditions of that loan follow as pages N1 through N3.
This loan will finance the renovations of the Company's new production facility
and provide the down payment on the lease of new equipment. The Company
anticipates that in conjunction with obtaining this loan it will file an SB
registration sometime in the first quarter of fiscal 2000.
On April 16, 1999 the Company entered into a lease on its new production
facility. The lease follows as pages L1 through L28.
Part II
Item 1. Legal Proceedings
In December of 1998 the Company resolved the litigation with the Company's
landlord concerning past due rent. The resolution calls for the Company to over
the 9 months that remained on the lease pay all sums due and unpaid from
<PAGE>
September 1997 to the date of settlement. This will amount to an additional
$2,733.13 of rent for each of the nine months. At the same time a settlement was
arrived on a note with the Company's landlord calling for the Company to pay
$1,000.00 per month for the nine months as full payment for this note.
The Company's trademark was challenged by Imagica Corporation, a unit of
the Sony Corporation. After negotiation the parties arrived at a settlement
which allows the Company to continue to use the trademark in a non motion
picture application.
The lawsuit by the Company's former President's ex-wife, Donna Wormser,
against the Company for notes entered into by Robert Wormser continues with a
trial date probably in the second quarter of fiscal 2000. The Company believes
the notes to be invalid, fraudulent, ultra virus and without merit. The notes
were unknown to the Company until the suit and were not authorized by the Board
of Directors. Further, the condition precedent for the activation of payment of
the note namely the Company receiving $4,000,000.00 in a stock offering never
occurred. The Company believes this matter will be adjudicated in the Company's
favor.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
None
Item 5. Other Information
Under rule 14a-4(c)(1) any shareholder wishing to bring a matter before the
annual meeting of shareholders must notify the Company 45 days in advance of the
mailing of the proxies so the matter can be included in the proxy for the annual
meeting. The proxy for the previous annual meeting was mailed on February 12,
1999. It is anticipated the proxy for the next annual meeting will be mailed on
December 1, 1999.
Item 6. Exhibits and Reports on Form 8K
The Company on February 6, 1999 filed on an 8K the audited financials for
the year end 1997 and 1998 and the first and second quarter unaudited financial
statements for the 1999 fiscal year.
<PAGE>
Imagica Entertainment, Inc.
Balance Sheet
February 28, 1999
(Unaudited)
Assets
Current:
Accounts receivable, less allowance
for possible losses of $9,239 $ 402,681
Inventories 272,799
Prepaid expenses 31,854
Miscellaneous receivables 16,047
-----------
Total current assets 723,381
Property and equipment, net 176,966
Other assets 5,390
-----------
Total assets $ 905,737
===========
A1
<PAGE>
Liabilities and Capital Deficit
Current liabilities:
Bank overdraft $ 11,867
Accounts payable 133,704
Advances from related parties 28,831
Debenture payable 25,000
Customer deposits 40,871
Accrued expenses 107,306
Current maturities of longterm debt 127,209
Current portion of obligations under capital leases 20,817
-----------
Total current liabilities 495,605
Note payable to related party 322,786
Longterm debt, less current maturities 221,311
-----------
Total liabilities 1,039,702
Commitments and contingencies --
Redeemable common stock 100,000
Capital deficit
Common stock, $.001 par value, shares
authorized 50,000,000 4,231
Additional paidin capital 8,838,534
Accumulated deficit (8,973,290)
-----------
(130,525)
Less: Treasury stock, at cost 103,440
-----------
Total capital deficit (233,965)
-----------
Total liabilities and capital deficit $ 905,737
===========
A2
<PAGE>
Imagica Entertainment, Inc.
Statement of Operations
(Unaudited)
Nine Months Ended
February 28, February 28,
1999 1998
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Sales $ 2,350,469 1,989,786
Cost of sales 1,533,321 1,467,613
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Gross profit 817,148 522,173
Operation expenses 912,747 640,623
----------- -----------
Loss from operations (95,599) (118,450)
Other income (expenses):
Interest (25,186) (6,735)
Interest stock differential (989,154) --
Other 13,164 --
----------- -----------
Total other income (1,001,176) (6,735)
Net loss $(1,096,775) (125,185)
=========== ===========
A3
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1999
<PERIOD-END> FEB-28-1999
<CASH> (11,895)
<SECURITIES> 0
<RECEIVABLES> 411,920
<ALLOWANCES> 9,239
<INVENTORY> 272,799
<CURRENT-ASSETS> 670,226
<PP&E> 1,175,840
<DEPRECIATION> 998,874
<TOTAL-ASSETS> 893,870
<CURRENT-LIABILITIES> 458,738
<BONDS> 0
0
0
<COMMON> 4,231
<OTHER-SE> (138,196)
<TOTAL-LIABILITY-AND-EQUITY> 893,870
<SALES> 2,350,469
<TOTAL-REVENUES> 2,350,469
<CGS> 1,533,321
<TOTAL-COSTS> 1,533,321
<OTHER-EXPENSES> 912,747
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,014,340
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,096,775)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,096,775)
<EPS-BASIC> (.288)
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