<PAGE>
<TABLE>
<S><C>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1999
[ ] Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from _____________ to _____________
Commission file number 0-17001
Choices Entertainment Corporation
-----------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 52-1529536
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
10770 Wiles Road Coral Springs, Florida 33076-2009
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip code)
Issuer's Telephone Number, Including Area Code
(954) 752-4289
------------
--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or15 (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[ ]
State the number of shares outstanding of the issuer's Common Stock, as of June 15, 1999:
22,004,395
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Index to Financial Statements Page Number
- ----------------------------- -----------
<S> <C>
Consolidated Condensed Balance Sheet at June 30, 1999
And December 31, 1998 (Unaudited)............................................... 1
Consolidated Condensed Statements of Loss for the
Three and Six Months Ended June 30, 1999 and 1998 (Unaudited)................... 2
Consolidated Condensed Statements of Stockholders' Deficit for the
Six Months Ended June 30, 1999 (Unaudited)...................................... 3
Consolidated Condensed Statements of Cash flows for the
Three and Six Months Ended June 30, 1999 and 1998 (Unaudited)................... 4
Notes to the Unaudited Consolidated Condensed Financial Statements.............. 5
Item 2. Management Discussion and Analysis............................ 7
Part II - OTHER INFORMATION
Item 1. Legal Proceedings............................................. 8
Item 6. Exhibits Index................................................ E-1
</TABLE>
-i-
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
CHOICES ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999 December 31,1998
------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,988 $ 2,074
------------ ------------
Total current assets 3,988 2,074
Other assets 146 146
------------ ------------
Total assets $ 4,134 $ 2,220
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 5,851 $ 11,851
Accrued merger and acquisition expenses -0- 50,000
Accrued professional fees 93,345 30,403
------------ ------------
Total current liabilities 99,196 92,254
------------ ------------
Long-term liabilities
Notes payable - noncurrent 125,000 -0-
Other long-term liabilities 3,163 -0-
------------ ------------
Total long-term liabilities 128,163 -0-
------------ ------------
Total liabilities 227,359 92,254
Stockholders' deficit:
Preferred stock, par value $.01 per share:
Authorized 5,000 shares: 109 shares issued
and outstanding in 1999 and 1998 1 1
Common stock, par value $.01 per share:
Authorized 50,000,000 shares: issued and
outstanding 22,004,395 shares in 1999 and 1998 220,044 220,044
Additional paid-in-capital 21,236,035 21,236,035
Accumulated deficit (21,679,305) (21,546,114)
------------ ------------
Total stockholders' deficit (223,225) (90,034)
------------ ------------
$ 4,134 $ 2,220
============ ============
</TABLE>
See accompanying notes to financial statements.
-1-
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF LOSS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------- --------------------------
1999 1998 1999 1998
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Operating costs and expenses:
Selling and administrative expenses $ 7,977 $ 23,153 $ 16,129 $ 59,331
Professional and consulting expenses 76,112 18,740 113,899 49,401
Depreciation and amortization -0- 403 -0- 484
--------- --------- --------- ---------
Total operating costs and expenses 84,089 114,600 130,028 109,216
--------- --------- --------- ---------
Other expenses:
Gain on settlement of lawsuit -0- 10,000 -0- 40,000
Interest income (expense), net (2,958) 84 (3,163) 1,034
-------- --------- -------- ---------
Total other expenses (2,958) 10,084 (3,163) 41,034
-------- --------- -------- ---------
Loss from continuing operations $(87,047) (32,212) (133,191) (68,182)
-------- --------- -------- ---------
Discontinued operations:
Loss from discontinued operations
-------- --------- -------- ---------
Net loss (87,047) $ (32,212) (133,191) (68,182)
======== ========= ======== =========
Net loss per share of common stock:
Basic loss per share:
Continuing operations $ -0- $ -0- $ (0.01) $ -0-
========= ========= ========= =========
Discontinued operations $ -0- $ -0- $ -0- $ -0-
========= ========= ========= =========
Diluted loss per share:
Continuing operations $ -0- $ -0- $ (0.01) $ -0-
========= ========= ========= =========
Discontinued operations $ -0- $ -0- $ -0- $ -0-
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
For the Three Months Ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
-------------------- ----------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
-------- ---------- ---------- ---------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998:
109 $1 22,004,395 $220,044 $21,236,035 $(21,546,114) $ (90,034)
Net loss for the six months
ended June 30, 1999:
(133,191) (133,191)
--- --- ---------- -------- ----------- ------------ ---------
109 $1 22,004,395 $220,044 $21,236,035 $(21,679,305) $(223,225)
=== === ========== ======== =========== ============ =========
</TABLE>
See accompanying notes to financial statements.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
-------------------------------
1999 1998
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (133,191) $ (35,970)
---------- ---------
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation and amortization -0- 81
Change in assets and liabilities:
Increase in accounts receivable -0- (28,877)
Decrease in other assets
Increase (decrease) in accounts payable (6,000) (23,381)
Decrease in accrued merger and acquisition
Expenses (50,000)
Decrease in accrued professional fees 62,942 (78,528)
Increase (decrease) in accrued salaries -0- (2,859)
Decrease in other accrued expenses -0- (420)
---------- ----------
Total adjustments 6,942 (133,985)
---------- ----------
Net cash provided by (used in) operating activities (126,249) (169,955)
---------- ----------
Cash flows from investing activities:
Proceeds from sale of fixed asset 164
----------- ----------
Net cash provided by (used in) investing activities 164
----------- ----------
Cash flows from financing activities:
Proceeds from notes payable 125,000
Other long-term liabilities 3,163
----------- ----------
Net cash used in financing activities 128,163
----------- ----------
Net increase (decrease) in cash 1,914 (169,791)
Cash at beginning of period 2,074 197,117
----------- ----------
Cash at end of period $ 3,988 $ 27,326
=========== ==========
Supplementary disclosure of cash flow information:
Cash paid during the year for interest $ -0- $ -0-
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Financial Statements
Quarterly Financial Statements:
The accompanying unaudited financial statements for
the three-month and six-month periods ended March 31, and June
30, 1999 and 1998 have been prepared in accordance with the
instructions for Form 10QSB and do not include all of the
information and footnotes required by generally accepted
accounting principles for completed financial statements.
In the opinion of management, all adjustments,
consisting of normal recurring adjustments, which are
necessary for a fair presentation of the results for the
interim period have been made. The results of operations for
the three-month and six-month periods ended June 30, 1999, are
not necessarily indicative of the results to be expected for
the full year.
Note 2. Summary of Significant Accounting Policies
Net Income (Loss) Per Common Share
Primary income per share for the three-month periods
ended June 30, 1999 and June 30, 1998 was computed by dividing
the net income by the weighted average number of common shares
outstanding during the periods.
Fully diluted income per share for the six-month
period ended June 30, 1999, was computed by dividing the net
income by the weighted average number of common shares
outstanding during the periods, as well as the number of
common shares that would be outstanding as a results of the
conversion of the Company's preferred stock.
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
----------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Number of shares used in calculation
Basic 22,004,000 22,004,000
Diluted 26,364,395 26,364,395
</TABLE>
Cash and Cash Equivalents
For cash flow purposes the Company considers all
certificates of deposit and highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
-5-
<PAGE>
Revenue Recognition
Revenue is recognized using the accrual method of
accounting.
Note 3. Liquidity
As previously reported, on June 16, 1997, the Company
sold substantially all of its assets and business to West
Coast Entertainment Corporation, ("West Coast").
Notwithstanding the sale of its operating business, the
Company's financial statements included herein have been
presented on the basis that the Company is a going concern,
which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company's viability for the foreseeable future is
and will continue to be dependent upon its ability to find
other business opportunities, to secure needed capital and to
successfully conclude existing litigation. No assurance can be
given that the Company will be successful in that regard. In
the event the Company is not successful, it is unlikely that
there would be any amounts available for distribution to the
Company's stockholders.
Note 4. West Coast Transaction and Discontinued Operations
As previously reported, the Company consummated the
previously announced sale of substantially all of its assets
to West Coast on June 16, 1997. The consideration for the
assets sold consisted entirely of cash in the amount of
$2,430,000. A substantial portion of the proceeds was used to
reduce a portion of the Company's liabilities at closing. In
addition, $243,000 of the proceeds was escrowed with West
Coast pursuant to the terms of the Asset Purchase Agreement
between the Company and West Coast. The escrowed funds have
been released to the Company and expended.
Note 5. Long Term Notes Payable
The Company has been dependent on borrowing for
operating capital. The Company has borrowed $125,000 as of
quarter ending June 30, 1999. The notes are for a two- (2)
year term and accrued interest at 10% per annum compounded
annually payable at maturity.
Note 6. Borrowing, Related Party Transactions
The Company has entered into a consulting agreement
(the "Consulting Agreement") with a director memorializing an
agreement for the director to provide certain financial and
analytical services to the Company in exchange for an accruing
payment of $10,000 per month payable when, as and if the
Company has cash not required for other important corporate
purposes. The Consulting Agreement is effective as of June
1998 and expires by its terms December 1999.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's discussion of certain
significant factors that have affected the Company's financial
condition changes in financial condition, and results of
operations. The discussion also includes the Company's
liquidity and capital resources at June 30, 1999 and later
dated information, where practicable. The following discussion
should be read in conjunction with the Financial Statements
and notes included in this Form 10-QSB.
The Company generated no revenues during the
three-months ended June 30, 1999 and 1998. Management of the
Company anticipates that the Company will not generate any
significant revenues until the Company accomplishes it
business objective of merging or acquiring revenue producing
assets from a nonaffiliated entity. The Company presently has
no liquid financial resources to offer such a candidate and
must rely upon an exchange of its stock to complete such a
merger or acquisition. Between December 31, 1998 and June 30,
1999 the Company incurred a net loss of $133,191 resulting in
a net working capital deficiency of approximately $95,000 at
June 30, 1999. The Company currently is relying on borrowing
to provide the minimum cash resources necessary primarily to
maintain the Company's public company status.
The Company's viability for the foreseeable future is
and will continue to be dependent upon its ability to find
other business opportunity, to secure needed capital and to
successfully conclude existing litigation. No assurance can be
given that the Company will be successful in that regard. In
the event the Company is not successful, it is unlikely that
there would be any amounts available for distribution to the
Company's stockholders.
On June 16, 1997, the Company sold substantially all
of its assets and business to West Coast Entertainment
Corporation, ("West Coast"). Notwithstanding the sale of its
operating business, the Company's financial statements
included herein have been presented on the basis that the
Company is a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal
course of business. The Company has no operations at the
present, however, and has engaged in no business since at
least June 16, 1998.
Current officers and Directors of the Company
estimate that outstanding liabilities of the Company are
approximately $227,000 and cash in the bank is approximately
$2,000.
This Quarterly Report on Form 10-QSB contains forward
looking information with respect to, among other things, plans
future events or future performance of the Company, the
occurrence of which involve certain risks and uncertainties
that could cause actual results or future events to differ
materially from those expressed in any forward looking
statements. These risks and uncertainties include, but are not
limited to, the risk and uncertainties associated with adverse
litigation, the ability to identify and conclude alternative
business
-7-
<PAGE>
opportunities, and those risks and uncertainties detailed in
the Company's filings with the Securities and Exchange
Commission. Where any forward looking statement includes a
statement of the assumption or bases believed to be reasonable
and are made in good faith, assumed facts or bases almost
always vary from actual result, and the differences between
assumed facts or bases and actual results can be material,
depending upon the circumstances. Where, in any forward
looking statement, the Company expresses and expectation or
belief as to plans or future results or events, such
expectation or belief is expressed in good faith and believed
to have a reasonable basis, but there can be no assurance that
the statement of expectation or belief will result or be
achieved or accomplished. The words "believe". "expect" and
"anticipate" and similar expressions identify forward-looking
statements.
The Company is aware of the issues associated with
Year 2000 ("Y2K") software compliance and the need to upgrade
existing programming code in any computer system that it may
use or purchase as the year 2000 approaches. The year 2000
issue relates to whether a computer system will properly
recognize dates after 1999. If it cannot adequately process
beyond the year 1999 and is not corrected, significant
difficulties may be encountered in using the computer system.
The Company currently uses computer time on a system that is
available on an as needed basis provided for by an affiliate
of the Company. It is not anticipated that the Company will
incur any negative impact as a result of this potential
problem. However, it is possible that this issue may have an
impact on the Company if the Company successfully consummates
a merger or acquisition. Management intends to address this
potential problem with any prospective merger or acquisition
candidate. There can be no assurances that new management of
the Company will be able to avoid a problem in this regard
after a merger or acquisition is so consummated.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not aware of any pending legal
proceedings to which the company is party or of which any of
its property is the subject that has not been previously
reported.
-8-
<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.
Choices Entertainment Corporation
(Registrant)
Date: July 19, 1999 By:
/s/ George D. Pursglove
---------------------------------
George D. Pursglove, Director and
Interim Chief Financial Officer
-9-
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- -------- --------------------------
<S> <C>
3(a) Certificate of Incorporation, as amended (1)
(b) Certificate of Designations of Series C Preferred Stock, as amended (2)
(c) By-Laws, as amended (3)
4(a) Form of Certificate Evidencing Shares of Common Stock (4)
(b) Form of 5% Promissory Note (5)
10.99 Consulting Agreement between Registrant and Thomas Renna (7)
27 Financial Data Schedule (8)
</TABLE>
- ------------------------------------------------------------------------------
(1) Filed as an Exhibit to Registrant's Registration Statement on Form S-8
(File No. 33-87016) and incorporated herein by reference.
(2) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB, for
the year ended December 31,1996 and incorporated herein by reference.
(3) Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992 and incorporated herein by reference.
(4) Filed as an Exhibit to Registrant's Registration Statement on Form S-1,
inclusive of Post-Effective Amendment No.1 thereto (File No.:
33-198983) and incorporated herein by reference.
(5) Filed as an Exhibit to Registrant's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1995 and incorporated herein by
reference.
(6) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for
the year ended December 31, 1997
(7) Filed as an Exhibit to Registrant's Quarterly Report on Form 10-QSB for
the quarter ended March 31, 1999 and incorporated herein by reference.
(8) Filed herewith.
E-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JAN-01-1999 APR-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 3988 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3988 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 4134 0
<CURRENT-LIABILITIES> 99196 0
<BONDS> 128163 0
0 0
1 0
<COMMON> 220044 0
<OTHER-SE> 21236035 0
<TOTAL-LIABILITY-AND-EQUITY> 4134 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 130028 84089
<OTHER-EXPENSES> 3163 2958
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (133191) (87047)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (133191) (87047)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (133191) (87047)
<EPS-BASIC> (.01) 0
<EPS-DILUTED> (.01) 0
</TABLE>
