<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB/A
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________TO_______________
COMMISSION FILE NUMBER: 0-17001
CHOICES ENTERTAINMENT CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 52-1529536
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10770 WILES ROAD
CORAL SPRINGS, FLORIDA 33076-2009
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(954) 752-4289
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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]
As of May 19, 1999, 22,004,395 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
CHOICES ENTERTAINMENT CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 9,377 $ 197,117
Accounts receivable 15,000 1,123
------------- -------------
Total Current Assets $ 24,377 198,240
Equipment, net 3,147 3,631
Other assets $ 125 125
------------- -------------
TOTAL ASSETS $ 27,649 $ 201,996
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 11,461 $ 33,104
Accrued merger and acquisition expense 353,799 353,799
Accrued professional fees 48,094 129,758
Accrued salaries 2,859
Other accrued expenses 5,415 5,419
------------- -------------
Total Current Liabilities 418,772 524,938
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Stockholders' Deficit:
Preferred Stock, par value $.01 per share:,
Authorized 5,000 shares: 109 shares issued
and outstanding in 1998 and 1997
Common Stock, par value $.01 per share:
Authorized 50,000,000 shares:
22,004,395 shares issued and
outstanding in 1998 and 1997 220,044 220,044
Additional paid-in-capital 21,236,035 21,236,035
Accumulated deficit (21,847,204) (21,779,022)
------------- -------------
Total Stockholders' Deficit (391,123) (322,941)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,649 $ 201,996
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------------- -------------
</TABLE>
2
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CHOICES ENTERTAINMENT CORPORATION
STATEMENTS OF LOSS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating costs and expenses:
Selling and administrative expenses $ 23,153 $ 43,598 $ 59,331 $ 72,117
Professional/consulting expenses 18,740 61,210 49,401 126,441
Depreciation and amortization 403 9,792 484 19,584
---------- ---------- ---------- ----------
42,296 114,600 109,216 218,142
Other expenses:
Settlement 10,000 40,000
Interest expense(income), 84 17,429 1,034 34,490
---------- ---------- ---------- ----------
(10,084) 17,429 41,034 34,490
Loss from continuing operations (32,212) (132,029) (68,182) (252,632)
Discontinued operations--Note 4
Loss from discontinued operations (256,161) (303,785)
Gain on sale of discontinued
Operations net of tax of $13,092 1,312,045 1,312,045
Gain (loss)from discontinued operations 1,055,884 1,008,260
---------- ---------- ---------- ----------
Net income (loss) $ (32,212) $ 923,855 $ (68,182) $ 755,628
Net income (loss) per share of common stock--Note 2:
Primary income (loss) per share
Continuing operations $ -- $ (0.01) $ - $ (0.01)
Discontinued operations $ -- $ 0.05 $ - $ 0.05
Fully diluted income (loss) per share:
Continuing operations $ -- $ (0.01) $ - $ (0.01)
Discontinued operations $ -- $ 0.04 $ - $ 0.04
</TABLE>
CHOICES ENTERTAINMENT CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional paid-in Accumulated Deficit
(Shares) (Shares) (Amount) Capital
<S> <C> <C> <C> <C>
Balance at December 31, 1997:
109.0 22,004,395 $ 220,044 $21,236,035 $(21,847,204)
Net income for the 6 months ended June 30, 1998 $(68,182)
</TABLE>
3
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1998 1997
--------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (68,182) $ 755,628
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 484 480,015
Gain on sale of assets, net of tax (Note 4) (1,312,045)
Cost of rental films sold 121,342
Loss on disposal of rental films 82,125
Videocassette and inventory reserves 7,667
Change in assets and liabilities:
Increase in cash held in escrow (243,000)
(Increase) decrease in accounts receivable (13,877) 4,126
(Increase) decrease in merchandise inventories 62,584
(Increase) decrease in prepaid expenses 16,183
Increase in other deferred expenses 1,762
Increase (decrease) in accounts payable (21,642) (588,807)
Decrease in accrued merger and acquisition expenses (50,550)
Increase (decrease) in accrued professional fees (81,664) (104,114)
Decrease in deferred revenue (27,797)
Decrease in accrued salaries (2,859) (37,635)
Decrease in accrual for lease cancellation
and litigation reserves (1,250)
Increase (decrease) in other accrued expenses (158,648)
--------- -----------
Total adjustments (119,557) (1,748,042)
Net cash provided (used in) operating activities (187,740) (992,414)
--------- -----------
Cash Flows From Investing Activities:
Purchase of equipment, net
Purchase of videocassette rental films
Net proceeds from sale of assets (Note 4)
Net cash provided (used in) investing activities
--------- -----------
Net increase (decrease) in cash (187,740)
Cash at end of period $ 9,377 $
--------- -----------
--------- -----------
Supplemental Disclosure of cash flow information:
Cash paid during the period for interest $ 0 $ 0
</TABLE>
4
<PAGE>
Note 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein for the three-month and
six-month periods ended June 30, 1998 and 1997 and as of June 30,1998, and
December 31, 1997, are unaudited. In addition, the financial information does
not include all disclosures required under generally accepted accounting
principles because certain note information has been omitted; however, such
information reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of the results of the interim periods and such
adjustments are of a normal recurring nature. The results of operations for
the six-month period ended June 30, 1998, are not necessarily indicative of
the results to be expected for the full year.
Note 2. NET INCOME (LOSS) PER COMMON SHARE
Primary income per share for the three-month and six-month periods ended
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 three-month and six-month periods
ended June 30, 1998, 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 result of the
conversion of the Company's preferred stock.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Number of shares used in calculation:
Primary dilution 22,004,000 22,004,000 22,004,000 22,004,000
Full dilution 24,372,000 24,372,000 24,372,000 24,372,000
</TABLE>
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.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is Management's discussion and analysis of certain
significant factors which 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, 1998
and later dated information, where practicable.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
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 has no operations at the present, however, and has
engaged in no business since at least June 16, 1998.
Current Directors of the Company estimate that outstanding liabilities
of the Company are approximately $420,000 and cash in the bank is
approximately $9,000.
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.
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 risks and
uncertainties associated with adverse litigation, the ability to identify and
conclude alternative business 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 assumptions or bases believed to be reasonable and are made in good
faith, assumed facts or bases almost always vary from actual results, 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 an 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not aware of any pending legal proceedings to which the
Company is a party or of which any of its property is the subject that has
not been previously reported.
Item 6. Exhibits
(a) Exhibits.
There are no exhibits other than Exhibit 27 (Financial Data Schedule)
included as part of this report.
(b) Reports on Form 8-K.
The Company filed a Form 8-K dated June 16, 1998 which included disclosure
under Item 1. Change of Control of Registrant thereof.
6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amended report on Form 10QSB for
the period ending June 30, 1998 to be signed on its behalf by the
undersigned, thereunto duly authorized.
Choices Entertainment Corporation
(Registrant)
Date: May 18, 1999 By:
/s/ George D. Pursglove
------------------------------
George D. Pursglove, Interim
Chief Financial Officer
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 9377 0
<SECURITIES> 0 0
<RECEIVABLES> 15000 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 24377 0
<PP&E> 3147 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 27649 0
<CURRENT-LIABILITIES> 418772 0
<BONDS> 0 0
0 0
1 0
<COMMON> 220044 0
<OTHER-SE> 21236035 0
<TOTAL-LIABILITY-AND-EQUITY> 27649 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 42296 109216
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (32212) (68182)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (32212) (68,182)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (32212) (68182)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
