<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 1999
Commission file No. 0-18866
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FIRST NATIONAL ENTERTAINMENT CORP.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 93-1004651
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
477 E. BUTTERFIELD ROAD, SUITE 307, LOMBARD, IL 60148
-----------------------------------------------------
(Address of principal executive offices)
(630) 971-9924
----------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $0.005 PAR VALUE
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
As of March 31, 1999 the registrant had outstanding 18,637,458 shares of its
$.005 par value Common Stock.
<PAGE> 2
INDEX
Part I - Financial Information
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Item 1 Consolidated Balance Sheets......................................... 3
Consolidated Statements of Income................................... 5
Consolidated Statements of Cash Flow................................ 6
Notes to Consolidated Financial Statements.......................... 7
Item 2 Management's Discussion and Analysis of Financial Conditions
and Results of Operations........................................... 12
Part II - Other Information and Signatures
Item 5 Other Information................................................... 13
Item 6 Exhibits and Reports on Form 8-K.................................... 13
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST NATIONAL ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 190,720 $ 49,158
Cash Escrow Account -- 500,000
Accounts receivable, net of allowance 874,637 47,121
Loans Receivable, net of allowance 3,146,267 1,610,631
Interest Receivable 128,237 226,596
Inventories, net of allowance 132,333 --
Other 40,639 4,881
- --------------------------------------------------------------------------------
Total Current Assets 4,512,833 2,438,387
- --------------------------------------------------------------------------------
Real Estate held for development 9,000 550,000
Property and equipment, net 194,471 76,761
Other Assets
Film inventory 10,000 10,000
Intangible assets, net 6,325 0
Franchise Rights -- 186
Security Deposits 900 --
Licenses -- 150,000
- --------------------------------------------------------------------------------
Total Other Assets 17,225 160,186
- --------------------------------------------------------------------------------
TOTAL ASSETS $4,733,529 $3,225,334
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
FIRST NATIONAL ENTERTAINMENT CORP.AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short term debt $ 2,650,623 $ --
Accounts payable 164,504 276,732
Note Payable 0 0
Accrued expenses 496,929 681,641
- --------------------------------------------------------------------------------
Total Current Liabilities 3,312,056 958,373
- --------------------------------------------------------------------------------
Minority interest in consolidated subsidiary 2,788,968 2,788,968
Shareholders' Equity
Preferred stock, $.0001 par value,
authorized 10,000,000 shares,
no shares issued and outstanding -- 186
Common stock, $.005 par value,
authorized 100,000,000 shares,
issued and outstanding:
1999, 18,637,458 shares
1998, 18,672,458 shares 92,690 93,365
Dividends payable (76,562) (153,646)
Paid in capital 27,258,241 27,271,566
Accumulated deficit (28,641,864) (27,733,478)
- --------------------------------------------------------------------------------
Total Shareholders' Equity (1,367,495) (522,007)
================================================================================
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,733,529 $ 3,225,334
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
FIRST NATIONAL ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the three months ended March 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
TOTAL REVENUES $ 673,287 $ 166,325
COST OF REVENUES
Video Rental Purchases & Wages 204,089 0
- --------------------------------------------------------------------------------
GROSS PROFIT (LOSS) 469,198 166,325
- --------------------------------------------------------------------------------
OPERATING EXPENSES
Marketing, selling & royalties 0 0
General and administrative 574,963 122,229
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 574,963 122,229
OPERATING INCOME (LOSS) (105,765) 44,096
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE) 2,935 1,486
- --------------------------------------------------------------------------------
NET INCOME (LOSS) $ (102,830) $ 45,582
================================================================================
NET GAIN (LOSS) PER SHARE $ (.01) $ .00
================================================================================
Weighted average shares outstanding 18,637,458 18,672,458
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
- --------------------------------------------------------------------------------
FIRST NATIONAL ENTERTAINMENT CORP.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
For the three months ended March 31, 1999 1998
- --------------------------------------------------------------------------------
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $(102,832) $ 45,582
Adjustments to reconcile net loss to net
cash provided by operating activities:
Other amortization, depreciation, write-offs 16,643 886
Provision for loan losses 28,669 6,000
Changes in operating assets and liabilities, net 124,442 (68,462)
- --------------------------------------------------------------------------------
NET CASH (USED IN) OPERATING ACTIVITIES 169,754 (15,994)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment
and leasehold impr. (89,958) --
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (89,958) --
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans (repayment) from/to shareholder 116,713 --
Principal payments on notes (68,740) --
Notes Receivable (41,638) --
Proceeds from borrowings on notes 100,000 --
Dividends paid on preferred stock
of subsidiary (76,562) (153,646)
- --------------------------------------------------------------------------------
NET CASH (USED IN) FINANCING ACTIVITIES 29,773 (153,646)
NET INCREASE/(DECREASE) IN CASH 6,737 (169,640)
CASH - BEGINNING OF PERIOD 183,983 218,798
- --------------------------------------------------------------------------------
CASH - END OF PERIOD $ 190,720 $ 49,158
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
FIRST NATIONAL ENTERTAINMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)\
March 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 GENERAL
- --------------------------------------------------------------------------------
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of March 31,
1999 (unaudited) and the unaudited results of operations and cash flows for the
three months ended March 31, 1998. The financial statements have been prepared
in accordance with the requirements of Form 10-QSB and consequently do not
include all the disclosures normally made in an Annual Report on Form 10-KSB.
Accordingly, the consolidated financial statements included herein should be
reviewed in conjunction with the financial statements and the footnotes thereto
included in the Company's December 31, 1998 Annual Report on Form 10-KSB.
The results of operations for the three months ended March 31, 1999 and 1998 are
not necessarily indicative of the results to be expected for the full year.
- --------------------------------------------------------------------------------
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Principles of Consolidation: The consolidated financial statements include the
accounts of First National Entertainment Corp. (a Colorado corporation) and its
subsidiaries, Equator Entertainment, First National Finance Corp., and First
National Video Corp. (collectively referred to as the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Fiscal Year Change: Effective January 1, 1998, the Company changed its fiscal
year-end of June 30 to a year-end of December 31. The six-month transition
period bridges the gap between the Company's old and new fiscal year end.
Inventories: Inventories, consisting primarily of prerecorded videocassettes,
concessions, and other accessories held for resale, are stated at the lower of
cost or market. Cost of sales is determined on a first-in, first-out basis
("FIFO"). Videocassette rental inventory, which includes video games, is stated
at cost and amortized over its estimated useful life to a $4 per videocassette
salvage value. See Note 4 for discussion of the amortization policy applied to
videocassette rental inventory.
Cash and Cash Equivalents: For purposes of the statement of cash flows, the
Company considers all investments with maturities of three months or less, when
purchased, to be cash equivalents.
Loans Receivable: Loans are stated net of the allowance for loan losses and
unearned discount. Interest on loans is included in operating revenues over the
term of the loan based upon the principal balance outstanding. Where serious
doubt exists as to the collectibility of a loan, the accrual of interest in
discontinued. Loan fees and direct loan origination costs are deferred and
amortized over the term of the loan as a yield adjustment.
7
<PAGE> 8
The Company has a reserve for unfunded restoration costs which it holds in
escrow. Payments are made from time to time as work is completed and
documentation is presented to a title company for approval. Funds are disbursed
upon a directive from the title company.
Allowance for Loan Losses: An allowance for loan losses has been established to
provide for those loans which may not be repaid in their entirety. The allowance
is increased by provisions for loan losses charged to expense and decreased by
charge-offs, net of recoveries. Although a loan is charged off by management
when deemed uncollectible, collection efforts may continue and future recoveries
may occur.
The allowance is maintained by management at a level considered adequate to
cover losses that are currently anticipated based on past loss experience,
general economic conditions, information about specific borrower situations
(including their financial position and collateral values) and other factors and
estimates which are subject to change over time. Estimating the risk of loss and
the amount of loss on any loan is necessarily subjective and ultimate losses may
vary from current estimates. These estimates are reviewed periodically, and as
adjustments become necessary, they are reported in earnings in the periods in
which they become known.
Loans are considered impaired if full principal or interest payments are not
anticipated. Each impaired loan is carried at the present value of expected cash
flows discounted at the loan's effective interest rate or at the fair value of
the collateral if the loan is collateral dependent. A portion of the allowance
for loan losses is allocated to an impaired loan if the present value of cash
flows or collateral value indicate the need for an allowance.
For impaired loans and other loans, accrual of interest is discontinued on a
loan when management believes, after considering collection efforts and other
factors, that the borrower's financial condition is such that collection of
interest is doubtful. Cash collections on impaired loans are credited to the
loan receivable balance, and no interest income is recognized on those loans
until the principal balance has been collected.
Property, Plant, and Equipment: Property, plant, and equipment are recorded at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally 3 to 7 years.
Financial Instruments: The Company's financial instruments consist principally
of loans receivable and notes payable and are carried at amounts which
approximate fair value.
Stock-Based Compensation: On October 23, 1995, the Financial Accounting
Standards Board (the "FASB") issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 encourages, but does not require, the recognition of
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on a fair value method of accounting. Companies
are permitted to continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APBO No. 25"); however, companies that choose to retain this method
of accounting are required to provide expanded disclosures of pro forma net
income and earnings per share in the notes to financial statements as if the new
fair value method of accounting had been adopted. The Company has elected to
continue to apply the accounting principles contained in APBO No. 25.
Income Taxes: The Company accounts for income taxes using the deferred asset and
liability method as required by SFAS No. 109, "Accounting for Income Taxes."
Deferred income taxes are provided as temporary differences arise between the
basis of asset and liabilities for financial reporting and income tax reporting.
Earnings/(Loss) Per Share: Earnings per common share (EPS) is computed under the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," which was adopted retroactively by the Company at December 31, 1997.
Basic earnings/(loss) per common share is computed by dividing net income/(loss)
available to common shareholders by the weighted average number of common shares
outstanding during the period. Since the Company has experienced net operating
losses, the outstanding options and warrants to purchase common stock have an
anti-dilutive effect. Therefore, options and warrants were not included in
computing dilutive earnings/(loss) per share.
8
<PAGE> 9
Reclassification: Certain amounts in the financial statements for the six-month
period ended December 31, 1997 and the year ended June 30, 1997 have been
reclassified to conform to the 1998 presentation.
- --------------------------------------------------------------------------------
NOTE 3 NOTES RECEIVABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
--------------------
1999 1998
-------- ---------
<S> <C> <C>
Advances to a factoring company, which are convertible to
an equity interest in 1999. The note is collaterized by
the assignment of certain accounts receivable under a
factoring agreement $623,637 $ --
10% note due January 1, 2000, convertible to a 21%
ownership in a travel company at the option of the
Company's management 125,000 --
10% note due November 1, 1999. Note is secured by real
estate. 126,000 --
-------- ---------
$874,637 $ --
</TABLE>
- --------------------------------------------------------------------------------
NOTE 4 VIDEOCASSETTE RENTAL INVENTORY
- --------------------------------------------------------------------------------
The Company amortizes its videocassette rental inventory on an accelerated
method. Under this method, videocassette rental inventory, which includes video
games, is stated at cost and amortized, beginning on the date the videocassettes
are placed into service, to its salvage value ($4 per videocassette) over an
estimated useful life of 36 months. All copies of new release videocassettes are
amortized on an accelerated bases during their first three months to an average
net book value of $8 and then on a straight-line basis to their salvage value of
$4 over the next 33 months.
- --------------------------------------------------------------------------------
NOTE 5 AMORTIZATION OF FILM INVENTORY
- --------------------------------------------------------------------------------
The Company's film inventory consists of the unamortized film costs for Happily
Ever After allocated to the secondary market.
Amortization of capitalized film property costs is computed using the
individual-film-forecast computation method as promulgated under SFAS No. 53,
"Financial Reporting by Producers and Distributors of Motion Picture Films". At
June 30, 1996, the Company intended to amortize the remaining unamortized film
costs for its Happily Ever After property over the next five years, subject to
future market conditions altering this accounting estimate. The Company's
computation of net realizable value as of June 30, 1997 resulted in a
significant change in the amount of unamortized costs permitted to be charged to
future operations. Accordingly, a charge of $2,200,000 is reflected in the
statement of operations for the year ended June 30, 1997 to reflect the
writedown of film property costs to their estimated net
9
<PAGE> 10
realizable value. At December 31, 1997, an additional review and analysis of the
film's net realizable value resulted in a charge to income of $490,000.
- --------------------------------------------------------------------------------
NOTE 6 LEASEHOLD IMPROVEMENTS AND EQUIPMENT
- --------------------------------------------------------------------------------
Leasehold improvements and equipment consisted of the following at March 31,
1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Leasehold improvements $ 79,439 $ --
Office equipment 138,551 32,434
Furniture and fixtures 27,377 13,680
Automobile -- 38,425
-------- --------
245,367 84,539
Less accumulated depreciation 50,896 7,778
-------- --------
Net property and equipment $194,471 $ 76,761
======== ========
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7 SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Preferred Stock: The Company has authorized the issuance of 10,000,000 shares of
$.0001 par value preferred stock. At December 31, 1998, the Company had not
issued any preferred shares.
Common Stock: During the periods ended December 31, 1998 and 1997, respectively,
the Company issued 600,000 and 274,000 shares for employee compensation and
professional fees valued at $6,000 and $5,480.
In the second quarter of 1996, the Company initiated an equity restructuring
program in which the Company issued 1,260,000 shares of its common stock (par
value $.005) along with warrants to purchase an additional 1,260,000 shares of
its common stock (par value $.005) at $1 share. Total proceeds from the offering
amounted to $830,000. On October 6, 1996, the Company's Board of Directors
approved and issued an Extension and Optional New Pricing Offer to the holders
of these warrants. These 1,260,000 warrants originally entitled the holders to
purchase an additional share each of the Company's common stock at a price of $1
through an expiration date of December 15, 1997. The Extension and Optional New
Pricing Offer allows an extension until December 31, 1999, at a share price of
$.15 for additional consideration of $.05 per warrant or an extension until
December 31, 2000, at a share price of $.05 for additional consideration of $.10
per warrant. During the year ended June 30, 1997, warrants for 800,000 shares
were extended to December 31, 1999 and warrants for 200,000 shares were extended
to December 31, 2000. Additional paid-in capital of $60,000 was received from
these transactions for the period ended June 30, 1997. During 1998, certain
warrants previously issued in the six-month period ended December 31, 1998 were
canceled and cash of $20,000 was returned. During 1998, 100,000 warrants were
issued as part of a compensation agreement. The warrants are convertible to
common stock at twenty-five cents a share. There were 13,660,000 warrants
outstanding at December 31, 1998.
Rentrak, Inc. of Portland, Oregon is a large distributor of videocassettes on a
pay-per-view basis nationally. On December 22, 1995, the Company and Rentrak
entered into a ten-year agreement whereby Rentrak purchased 357,143
10
<PAGE> 11
shares of common stock for $200,000. Rentrak has also agreed to acquire an
additional $10,000 of common stock for each new non-Rentrak video store acquired
by the Company. No new stores have been acquired as of December 31, 1998.
Stock Options: On May 21, 1993, shareholders approved an incentive stock plan
which reserved 3,500,000 shares of the Company's common stock for issuance under
the 1993 Incentive Stock Option Plan ("ISO") and the 1993 Non-Qualified Stock
Option Plan ("NQSO") (collectively referred to as the "1993 Plan"). The 1993
Plan provides incentives to officers, directors, employees, consultants, and
advisors in the form of stock options, subject to certain restrictions. The
Company's Board of Directors determines the granting of options under the 1993
Plan, including the exercise period, contingencies, vesting periods, and
employee qualifications. Options to be issued under the ISO are intended to
qualify as "incentive stock options" under Section 422 of the 1986 Internal
Revenue Code (the "Code"), as amended. Options granted under the NQSO are
subject to fewer restrictions than the ISO and are considered "Non-Statutory
Stock Options" as defined in the Code. As of December 31, 1997, 25,000 options
had been issued under the 1993 Plan. These options were issued in August 1993 at
the exercise price of $1.53 per share. All of the outstanding options were
exercisable at December 31, 1998. No options were exercised during the year
ended December 31, 1998, the six months ended December 31, 1997, or the year
ended June 30, 1997.
Employee Stock Purchase Plan: The Company implemented an Employee Stock Purchase
Plan in 1994 which permits substantially all employees to acquire Company common
stock. Participating employees may acquire stock at the end of each six-month
period (June 30 and December 31 of each year) at a purchase price of 85% of the
lower of fair market value at the beginning or end of the period. Employees may
designate up to 10% of their base compensation for the purchase of stock under
this plan. There are no charges to income in connection with this plan.
- --------------------------------------------------------------------------------
NOTE 8 LEASES
- --------------------------------------------------------------------------------
The Company occupies certain office facilities and video stores under operating
lease arrangements. Under terms of the leases, the Company is responsible for
real estate taxes, insurance, and maintenance costs on the facilities. Total
rent expense under such arrangements was approximately $278,000, $35,000, and
$17,000 for the year ended December 31, 1998, the six months ended December 31,
1997, and the year ended June 30, 1997, respectively. The leases expire from
1999 through 2003.
Future minimum payments under noncancelable leases as of December 31, 1998 are
as follows:
<TABLE>
<S> <C>
1999 $ 308,870
2000 264,751
2001 251,142
2002 214,440
2003 180,870
------------
$ 1,220,073
============
</TABLE>
11
<PAGE> 12
ITEM 2.
FIRST NATIONAL ENTERTAINMENT CORP.AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Corporation's revenues were obtained during the quarter from First National
Finance Corp. ("FNFC") and its subsidiary Prairie Business Credit, Inc. ("PBCI")
and Windy City Video stores. The significant increase was due to the purchase of
the video stores in the second quarter of 1998.
The Corporation expects PBCI revenues to increase during the second half of the
year as funding will be in place to support an expansion of its Accounts
Receivable factoring business.
Newly formed Equator Entertainment had no revenue and does not anticipate a
revenue stream until late 1999.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999 the Corporation had cash of $190,720 as compared to $49,158
for the same period in 1998. Due to timing on certain loan fees and interest
loans were obtained from a shareholder and officer in the amount of $116,713. At
the same time the bank term loan was increased by $100,000. Accounts Receivable
primarily in factoring decreased to $874,637 and loans receivable increased to
$3,146,267 due to increased business loan activity of FNFC.
Net Cash flow from operating activities increased over the prior year by
$185,748. Added to net cash provided by Investing and Financing activities
resulted in an increase of $6,737 of cash for the period versus ($169,640) for
the same period in the prior year.
FINANCING ACTIVITIES
Management believes its working capital and existing credit availability will be
adequate to meet its operating requirements for the foreseeable future. The
Corporation is attempting to establish a line of credit to optimize growth
opportunities in it's PBCI subsidiary.
RESULTS OF OPERATIONS - Three months Ended March 31, 1999 compared to Three
Months Ended March 31, 1998.
Revenues increased to $673,287 with increased activity in business loans, video
store rentals and sales and factoring activity. This amount compared to the 1998
amount of $166,325.
Cost of Revenues relating to the video stores amounted to $204,089 in 1999
versus $-0- in 1998.
Operating Costs and Expenses. Operating expenses amounted to $574,963 compared
to $122,229. The significant increase was attributable to Equator with
additional key personnel and video and PBCI.
Net (loss) of ($102,830) can be attributed to certain timing on repayment of
business loans and start up costs in Equator Entertainment. Earnings per share
were dilutive.
TAXES ON INCOME
Taxes on income are zero due to the cumulative net operating loss carryforwards
of approximately $28.0 million at March 31, 1999, for federal tax reporting
purposes. The net operating loss carryforwards expire in varying amounts
beginning in the year 2000.
12
<PAGE> 13
"Forward looking statements" as defined in the Private Securities Litigation
Reform Act of 1995 may be included in this report. A variety of factors could
cause the Corporation's actual results to differ from the reported results
expressed in such forward looking statements. Investors are referred to the
Corporations' most recent 10K.
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
During the Quarter ended March 31, 1999 the company filed an 8K dated
February 4, 1999 which, under Item 2 the Board of First National Entertainment
Corp. approved the acquisition of the assets and name of Prairie Business
Credit, Inc.
This company will be a subsidiary of First National Finance Corp. Mr.
Trevor Morgan was appointed President and will lead the company in the business
of accounts receivable financing.
Also, the Board of FNAT created a new wholly owned subsidiary of FNAT,
Equator Entertainment, Inc. ("EEI") and it in turn acquired the assets of PK
Productions located in the Los Angeles area.
Mr. Peter Keefe was installed as President of EEI. Joining Mr. Keefe is
Mr. Regis Brown as Senior Vice President of Worldwide Marketing.
Equator Entertainment is in the business of creating, producing and
distributing world class quality children's television program series. Equator
also anticipates to be involved in market related licensing applications from
toys to books
Item 6. Mr. Peter Keefe received Board approval to become a director of
First National Entertainment Corp. retroactive to July 1, 1998.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
First National Entertainment Corp.
Dated: May 14, 1999 /s/ Charles E. Nootens
---------------- -----------------------
Charles E. Nootens
President
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
NATIONAL ENTERTAINMENT CORP'S., BALANCE SHEET AT MARCH 31, 1999 AND STATEMENTS
OF OPERATINS FOR THREE MONTHS ENDED MARCH 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 190,720
<SECURITIES> 0
<RECEIVABLES> 4,327,810
<ALLOWANCES> 178,669
<INVENTORY> 132,333
<CURRENT-ASSETS> 40,639
<PP&E> 245,367
<DEPRECIATION> 50,896
<TOTAL-ASSETS> 4,733,529
<CURRENT-LIABILITIES> 3,312,056
<BONDS> 0
0
0
<COMMON> 92,690
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,733,529
<SALES> 0
<TOTAL-REVENUES> 673,287
<CGS> 204,089
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 572,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (102,830)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (102,830)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
