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
August 31, 1998
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____ 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 I
Item 1 Financial Statements
Financial statements for the first quarter of fiscal 1999 are included as pages
F-1 through F-4.
Item 2 Management Discussion and Analysis
The first quarter of fiscal 1999 saw the Company moving forward with increased
sales and profits. The Company booked $989,154.00 as non cash interest expense
in the period. This was the difference between the price the Company's common
shares were issued at and the market price at the date of the transaction. This
was a non cash amount. Further discussion of this will be found in the Company's
10K for the period of fiscal 1998. The Company's actual operating profit for the
period was $65,869.64. The Company ended the period with equity of $39,525.74.
The Company during the first quarter experienced considerable difficulty in
producing the orders received on a timely basis. In order to not cause
difficulties with customers the Company was forced to advise of production
schedules as far out as 45 days. In most cases customers could not wait that
long and placed their business with other screen printers. It became obvious to
the Company's management and board that to meet it's sales and profit goals
investment in a larger facility and the addition of considerable production
equipment was mandatory. Management believes that based on the level of quotes
and potential orders that were placed with other manufacturers that with
additional space and equipment that the Company can achieve a sales level of six
million dollars annually in only a few months after operations are fully
functional in the new facility. Based on that premise the Company's management
and board began the process of locating a suitable facility and determining what
equipment was necessary to meet it's goals.
The Company's board is determined to see the Company move forward in the screen
print industry and in addition to a new facility will seek to acquire
approximately $500,000 in new production equipment.
Since the board has elected to not purchase or continue the lease on it's
current facility the new building and equipment must be in and fully operational
by the end of it's current building lease which is September 30, 1999.
Part II
Item 1 Legal Proceedings
There were no new lawsuits filed against the Company in the first quarter of
fiscal 1999. The Company believes that based on the opinion of counsel that what
minor suits exist will have no material effect on the Company's balance sheet.
<PAGE>
Item 2 Changes in Securities
During the first quarter of fiscal 1999 the following shares were issued without
registration. They were issued pursuant to Item 701 of Regulation S-B to
accredited investors under Rule 501(a) and rule 144. These shares are voting
common stock with a par value of .001.
Shares sold at $.25 per share.
Date Shares Recipient
July 12, 1998 81,999 William Diamond
July 12, 1998 82,353 Lawrence Dimino
July 12, 1998 82,061 Kim Fiorletta
July 12, 1998 81,332 Ron & Dorothy Gray
July 12, 1998 82,436 Rudy Lesso Jr.
July 12, 1998 82,291 Rudy Lesso III
July 12, 1998 82,269 David Moriarty
July 12, 1998 81,228 Todd Rincon
July 12, 1998 81,999 Herman S. Udasin
July 12, 1998 81,562 David Wild
July 12, 1998 80,000 Ron or Lois Baute
Shares sold at $.20 per share
July 28, 1998 767,630 SE Investments, Inc.
July 28, 1998 400,000 Jeffrey Sedacca
On June 23, 1998 employee Sandra Stewart received 250 shares for 5 years of
service.
The money received in these transactions went to fund the Company's general
operations.
Item 3 Default upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
On July 10, 1998 a Special Shareholders meeting was held. The meeting was called
by Shareholders Jeffrey Sedacca, Howard Essenfeld, and Braxton Jones who
represented more than 51% of the outstanding shares of the Company. These
shareholders voted to increase the size of the Board of Directors from two to
seven and voted to remove Mark Tishman as a Director. The Shareholders then
voted to elect to the Board of Directors, Jeffrey Sedacca, Howard Essenfeld,
William Klein, and Jeffrey Reed to fill the vacant positions. There were no
dissenting votes.
<PAGE>
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
1. Lease agreement between FRL Enterprises, Inc. and the Company
2. Reports on Form 8-K
On June 3, 1998 the Company reported on Form 8-K the following:
Entering into the lease with FRL Enterprises, Inc.
Issuance of 20,000 shares of stock to former board member Mark Tishman
Issuance of shares of stock to certain key employees
Return of stock from some employees which was held by Robert Wormser, the
Company's former President in a voting trust
Issuance of 250 shares of the Company's common stock to employees with 5
years of service or more
<PAGE>
Imagica Entertainment, Inc.
Balance Sheet
As of August 31, 1998
Unaudited
Assets
Current Assets
Cash 21,808
Accounts receivable 499,911
Allowance for bad debts (9,321)
Inventory 252,194
Other receivables 9,281
Prepaid expenses 40,512
----------
Total Current Assets 814,384
Fixed Assets
Property, plant & equipment 1,122,137
Accumulated depreciation (959,287)
----------
Total Fixed Assets 162,850
Other Assets
Miscellaneous deposits 18,135
Patents 3,646
Trademarks 745
----------
Total Other Assets 22,526
----------
Total Assets 999,760
==========
Liabilities & Equity
Liabilities
Current Liabilities
Accounts payable 197,345
Accrued expenses 103,860
Notes payable 83,941
Debentures - G. Parker 25,000
Other payables 239,159
----------
Total Current Liabilities 649,305
Long Term Liabilities
Note payable - SunTrust 93,973
Note payable to related party 216,957
----------
Total Long Term Liabilities 310,930
----------
Total Liabilities 960,234
----------
Redeemable common stock 100,000
Capital Deficit
Common stock, .001 par value, shares 4,231
authorized 50,000,000; issued 4,228,517
Additional paid-in capital 8,838,534
Accumulated deficit (8,799,800)
Less: Treasury stock, at cost 27,250 (103,440)
----------
Total capital deficit (60,474)
----------
Total Liabilities & Capital Deficit 999,760
==========
<PAGE>
Imagica Entertainment, Inc.
Profit and Loss
June through August 1998
Unaudited
Jun - Aug '98
----------
Ordinary Income/Expense
Income
Sales 906,760
----------
Total Income 906,760
Cost of Sales
Contract labor - plant 4,409
Equipment - leasing & rental 1,055
Materials 263,586
Outside services 50,248
Wages - plant 218,792
----------
Total Cost of Sales 538,091
----------
Gross Profit 368,669
Expense
General & administrative 121,394
Other manufacturing costs 42,319
Selling & marketing 119,303
----------
Total Expense 283,016
----------
Net Ordinary Income 85,653
Other Income/Expense
Other Income
Miscellaneous income 5,824
----------
Total Other Income 5,824
Other Expense
Depreciation 18,088
Financing costs 7,520
Interest (Stock differential) 989,154
----------
Total Other Expense 1,014,761
----------
Net Other Income/Expense (1,008,938)
----------
Net Loss (923,284)
==========
- --------------------------------------------------------------------------------
Basic loss per share $ (0.30)
- --------------------------------------------------------------------------------
Weighted average common shares outstanding 2,986,957
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Statement of Capital Deficit
Common Stock Additional Treasury Stock
----------------------- Paid-In ----------------------- Notes Accumulated
Shares Amount Capital Shares Amount Receivable Deficit
------ ------ ------- ------ ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1998 2,161,357 2,162 7,566,484 27,250 $ (103,440) 0 (7,876,514)
Beneficial conversion feature on common
stock issued for reduction in amounts
due related party 1,247,630 1,248 1,067,987
Beneficial conversion feature on issuance
of convertible notes payable 819,530 820 204,062
Net Loss (923,284)
Balance, August 31, 1998 4,228,517 4,230 8,838,534 27,250 $ (103,440) 0 (8,799,799)
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
SIGNATURES
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.
-----------------------------
(Registrant)
Date: March 16, 1999 /s/ Braxton Jones
-----------------------------
(Signature)
Braxton Jones
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 21,808
<SECURITIES> 0
<RECEIVABLES> 499,911
<ALLOWANCES> (9,321)
<INVENTORY> 252,194
<CURRENT-ASSETS> 72,318
<PP&E> 1,222,137
<DEPRECIATION> (959,287)
<TOTAL-ASSETS> 999,760
<CURRENT-LIABILITIES> 624,305
<BONDS> 335,930
0
0
<COMMON> 4,231
<OTHER-SE> 35,294
<TOTAL-LIABILITY-AND-EQUITY> 999,760
<SALES> 906,760
<TOTAL-REVENUES> 906,760
<CGS> 538,091
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 295,280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 996,673
<INCOME-PRETAX> 0
<INCOME-TAX> (923,284)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
</TABLE>
