SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
June 30, 1997 33-41063-A
ART, MUSIC & ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2960590
State or Other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
4400 W. Sample Road, Suite 140, Coconut Creek, FL 33073
(Address of principal Executive Offices Zip Code)
Registrant's telephone number, including area code:(954-971-9100)
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 the filing
requirements for at least the past 90 days.
Yes No __X_
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
4,397,767 as of June 30, 1997
<PAGE>
ART, MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Unaudited)
December June 30, 1997
31, 1996
Current Assets:
Cash and cash equivalents $24,433 $26,512
Total current assets $24,433 $26,512
Other Assets:
Other Assets and Deferred $6,834,415 6,816,771
Expenses
Less Deduction from Stockholders (6,763,122) (6,763,122)
Equity
Total Other Assets 71,293 53,649
TOTAL ASSETS $95,726 $80,161
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $91,635 $85,568
Total current liabilities 91,635 85,568
Stockholder's equity:
Preferred Stock, $.001 stated 6,880,700
value;
Preferred Stock Conversion 2,486,575
Common stock, $0.01 stated value 3,642 4,397
100,000,000 shares
authorized;3,641,801 issued and
outstanding as of December 31,
1996; 4,397,767 shares issued and
outstanding as of June 30, 1997
Additional - Paid in Capital 87,743 4,481,113
Deduction for Other Assets (6,763,122) (6,763,122)
Current Income (loss) (9,498)
Retained Earnings (deficit) (204,872) (204,872)
Total Equity 4,111 (5,407)
TOTAL LIABILITIES & STOCKHOLDERS' $95,726 $80,162
EQUITY
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
ART, MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ending Six Months Ending
June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue & Interest $66,150 $389,597 $146,150 $389,597
Total Revenue & 66,150 389,597 146,510 389,597
Interest
Cost of Revenues 22,565 15,150 49,415 15,150
Expenses, General & 55,207 284,758 106,233 284,758
Administrative
Provision for 17,500 17,500
Income Tax
Net Income (loss) $(11,622) $72,189 $(9,498) $72,189
for Period
Net Income (loss) >($.01) $.02 >($.01) $.02
per share
Weighted average 4,397,767 3,641,801 4,208,775 3,641,801
number of common
shares
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE>
[CAPTION]
<TABLE>
ART, MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Three Three Six Six
Months Months Months Months
Ending Ending Ending Ending
June 30 June 30 June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss) $(11,622) $72,189 $(9,498) $72,189
Adjustments to Reconcile
Net Income (loss) to Net
Cash provided (used by)
Operating Activities:
Amortization - - - -
Rent - - - -
Changes in:
Accounts payable (1,500) 282,836 - 282,836
Cash provided (used) by 8,223 389,597 8,145 389,597
operating activities
Cash at beginning of 19,789 (340,477) 18,365 (340,477)
Period
Contributed Capital 11,622 (72,189) 9,498 (72,189)
Cash at end of period 26,512 331,956 26,515 331,956
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE>
ART, MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - ORGANIZATION:
Arts, Music, and Entertainment, Inc., ("Company") (formerly
Chatham International, Inc.) was organized originally as
Cornerstone Capital, Inc., under the laws of the State of Florida
as a corporation on May 25, 1988. On September 22, 1990 the
Company changed its' name to Chatham International, Inc. On April
5, 1996 the Board of Directors of the Company authorized the name
of the Company to be changed from Chatham International, Inc., to
Art, Music, and Entertainment, Inc., in connection with a merger,
discussed elsewhere herein, with an entity of the same name. Such
change was filed with the Secretary of State of Florida on July 18,
1996.
The Company is in the development stage, and activities have
included the arranging of an offering of common stock and warrants
to the public, and the business of import/export management.
Although the Company has realized certain sales and revenues during
1996, it will require additional funds from profitable operations,
financing, and/or equity infusions to conduct business operations
and execute its business plan(s).
The art, music, and entertainment industries in which the
Company is operating are highly volatile and competitive.
Accordingly, the Company is exposed to significant risk in
competing against other entities who have greater resources and
experience.
NOTE 2 - BASIS OF ACCOUNTING:
The consolidated financial statements of the Company and its
subsidiaries, have been presented on the basis that they are a
going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has recently acquired certain assets solely through a
merger(s) and issuance of various classes of preferred stock, and
it is dependent upon the raising of cash via operations, loans, or
equity transactions to fund its operations. There is no assurance
that the Company will be successful in raising the cash needed to
support its operations. No adjustments have been recorded with
respect to these uncertainties.
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The consolidated financial
statements of the Company include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumption that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the balance sheet
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Film, Show, & Music Trade Names - Film, show, and music trade
name rights relate to the items and/or rights. The costs will be
amortized over the estimated amount of future usage, unless an item
is contracted for a limited amount of usage, in which case the cost
will be amortized over the contract period.
Cash and Cash Equivalents - For purposes of the Statement of
Cash Flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be
cash equivalents.
Revenue Recognition - Revenues are recorded when the Company's
products are shipped to customers. For one time shows in which the
Company acts as a promoter, the revenues are recorded when the
event occurs.
Income Taxes - As of December 31, 1996 the Company had
approximately $205,000 of tax loss carry forwards. The provision
(benefit) for income taxes is based on the pre-tax earnings (loss)
reported in the financial statements, adjusted for transactions
that may never enter into the computation of income taxes payable.
A deferred tax liability or asset is recognized for the estimated
future tax effect attributable to temporary differences in the
recognition of income and expenses for financial statement and
income tax purposes. A valuation allowance is provided in the
event that the tax benefits are not expected to be realized. At
December 31, 1996, the valuation allowance was equal to the benefit
from the tax loss carry forwards, because there is no assurance
that the benefit will be realized.
NOTE 4 - MERGERS:
On April 5, 1996 the Company entered into a merger agreement
with an entity having the name of Art, Music, and Entertainment,
Inc., and changed its name from Chatham International, Inc., to
Art, Music, and Entertainment, Inc. Under the terms of the
agreement, the Company was the surviving entity, and it issued, on
<PAGE>
a one for one basis, 66,533 common and 615,721 preferred shares,
for the similar outstanding shares of the merged entity. Further,
the preferred shares issued by the Company in connection with the
merger bear the same designations, rights, and preferences as those
of the merged entity. For financial statement purposes, the merger
was accounted for as of March 31, 1996 as a purchase. Also, for
financial reporting purposes, the acquisitions discussed below, all
of which were acquired on March 1 and 5, 1996, respectively, were
accounted for as a purchase by Art, Music & Entertainment, Inc.,
("Old AME"). Neither Old AME nor any of the acquired entities had
conducted operations as of the date of acquisition. (Also see Note
13).
The merged entity, Art, Music & Entertainment, Inc., ("Old
AME") was formed on December 16, 1994 under the laws of the State
of Florida. Since December 16, 1994 the Old AME had not conducted
operations and had not prepared a business plan. Rather, the Old
AME had been seeking other entities to acquire or with which to
merge to provide the Old AME with product lines.
On March 5, 1996, the Old AME entered into an Agreement and
Plan of Reorganization with the International Art Group, Inc.,
("Art Group") under the terms of which the Old AME acquired all of
the outstanding capital stock of Art Group in exchange for 486,754
shares of Class H Convertible Preferred Stock of the Old AME. Art
Group is not conducting operations and is reportedly the owner of
an exclusive license from the government of the United States to
publish and distribute the only official artwork to commemorate the
Quincentennial (500th anniversary) of the discovery of America. In
December 1996 the Company and the former shareholder of
International Art Group, Inc., rescinded and canceled the merger,
and 486,754 shares of the Company's Class H Preferred Stock issued
to effect the merger were returned to the Company. Revenues of
$140,400 from sales of certain of the artwork during 1996 remain
with the Company.
Old AME executed an Agreement and Plan of Reorganization on
March 1, 1996 with the International Jazz Hall of Fame Production
Co Inc. ("Jazz"). The terms of the agreement provided for the Old
AME to acquire all of the outstanding common shares of Jazz in
exchange for 44,666.68 common shares and 22,807 Class I Voting
Convertible Preferred Shares of the Old AME. Jazz is not
conducting operations and is the owner of lithographs of certain
jazz artists. During 1996, the Company realized $184,748 from
sales of the jazz lithographs, and $29,247 from its production of
a Jazz Hall of Fame induction ceremony. In January 1997, the
Company and the Class I Convertible Preferred Shareholders agreed
to exchange such convertible preferred stock for 230,000 shares of
the restricted common shares of the Company, which shares were
issued in October 1997 (See Note 13).
On March 5, 1996 the Old AME signed an Agreement and Plan of
Reorganization with Marin Movies, Inc. ("Marin"). The provisions
of the agreement provide for Old AME to acquire all of the
<PAGE>
outstanding common stock of Marin in exchange for 2,800 shares of
Class G Convertible Preferred Stock of the Old AME. Marin is not
conducting operations and is the owner of master videos of 300
public domain movies. In January 1997, the Company and the Class
G Convertible Preferred Shareholders agreed to exchange such
convertible preferred stock for 28,000 shares of the restricted
common shares of the Company, which shares were issued in October
1997 (See Note 13).
An Agreement and Plan of Reorganization with Classical Music
Collection, Inc., ("Classical") was executed by the Old AME on
March 5, 1996. Under the terms of the agreement the Old AME
acquired all of the outstanding common stock of Classical in
exchange for 11,333.34 of the Old AME's common shares and 1,760 of
the Old AME's Class F Voting Convertible Preferred shares.
Classical is not conducting operations and is the owner of certain
master music recordings. In January 1997, the Company and the
Class F Convertible Preferred Shareholders agreed to exchange such
convertible preferred stock for 7,967 shares of the restricted
common shares of the Company, which shares were issued in October
1997 (See Note 13).
All of the outstanding common stock of Octopus Entertainment, Inc.,
("Octopus") was acquired by the Old AME onMarch 5, 1996
under an Agreement and Plan of Reorganization of same date. The
outstanding common stock of Octopus was acquired for 1,000 Class E
Voting Convertible Preferred Stock of the Old AME. Octopus is not
conducting operations and its sole assets are the ownership of two
trade names and certain "big-band" sheet music. In January 1997,
the Company and the Class E Convertible Preferred Shareholders
agreed to exchange such convertible preferred stock for 10,000
shares of the restricted common shares of the Company, which shares
were issued in October 1997 (See Note 13).
Also on March 5, 1996, the Old AME executed an Agreement and
Plan of Reorganization with Spellbinder Productions, Inc.
("Spellbinder"), under which the Old AME acquired all of the
outstanding common stock of Spellbinder in exchange for 9,533.34
common shares and 100,600 Class C Voting Convertible Preferred
shares of the Old AME. Spellbinder is not conducting operations,
and its sole asset is the music and related hardware for a music
and illusionary show copyrighted in 1990. In January 1997, the
Company and the Class C Convertible Preferred Shareholders agreed
to exchange such preferred stock for 100,000 shares of the
restricted common shares of the Company, which shares were issued
in October 1997 (See Note 13).
NOTE 5. DEFERRED EXPENSES:
Deferred expenses consist of amounts paid for jazz artists and
recordings of their performances which the Company expects to
convert to a saleable product(s).
<PAGE>
NOTE 6 - OTHER ASSETS:
Other assets consist of the following:
Pre-paid television time $ 4,584,850
Jazz Artists Lithographs 2,178,272
Sub-total 6,763,122
Public domain movies 60,000
Music recordings 140,000
Trade names & sheet music 10,000
Illusionary show 78,000
Sub-total 288,000
Total $ 7,051,122
The foregoing items were acquired by the Company by the
issuance of various classes of preferred stock. The carrying
values assigned to each item represents an estimate by management,
based upon a valuation by an industry knowledgeable person, in
certain instances, and sales for those items for which sales were
experienced. Although management believes that its estimate of the
values assigned are reasonable, the estimates were not
independently nor adequately determined. Accordingly, the
$6,763,122 representing the value ascribed to certain jazz art and
prepaid television network time have been included as an deduction
element of stockholders' equity in the balance sheet because the
Company has recognized revenues from sales of the items, and thus
there are some indications of value. The$288,000 of value
ascribed by management to other assets, as indicated above, have
not been assigned a carrying value in the consolidated balance sheet.
The prepaid television time was acquired by the issuance of
77,500 shares of the Company's Class A Convertible Preferred
Stock which carries a preference and stated value of $100 per
share. Management assigned an estimated value to the prepaid
television time, which value was based upon a limited number of
sales of the television time and advertising spots as reported by
the network. Due to the absence of sufficient data and an
independent analysis of the television time, the carrying amount
ascribed to the television time by management has been deducted
from stockholder's equity for financial reporting purposes. The
Company expects to use the television time to market its own
products; however, it also expects to sell any spots which it may
not require.
NOTE 7 - NOTES PAYABLE:
A founder and major shareholder of the Company has from time
to time, loaned funds to the Company under a number of notes
payable of varying amounts. As of quarter end, the notes totaled
$43,596, including accrued interest. All of the notes payable
bear interest at the rate of 10% per annum and are either
currently due or past due.
<PAGE>
NOTE 8 - COMMON AND PREFERRED STOCK:
Common Stock - The Company has been authorized to issue
100,000,000 shares of common stock with a par value of $.001 per
share. During 1993, the Company authorized the issuance of
3,000,000 shares to two persons, who are the founders and major
shareholders of the Company, for services rendered. Also, during
1993, a total of 165,000 shares issued for services by an
individual, who was formerly an officer, were canceled. The
3,000,000 shares were issued by the transfer agent in July 1996.
The 165,000 shares were canceled by the Company and the transfer
agent, and the Company retains the responsibility for defense of
the canceled common shares. For financial statement purposes,
these issued and canceled shares have been reflected as of the
date of issuance and cancellation in 1993 in accordance with the
respective actions of the Board of Directors.
At quarter end, there were 4,397,767 common shares
outstanding. Common shares receive dividends when dividends are
declared by the Board of Directors of the Company. Each share
has one vote.
Preferred Stock - The Articles of Incorporation, as amended,
of the Company authorize the issuance 100,000,000 preferred
shares with a par value of $.001 per share. As of December 31,
1996 the following classes of preferred stock were designated and
outstanding.
Class of
Voting Convertible Preferred
Preference
Amount
Shares $
Class A 77,500 $ 7,750,000
Class B
Class C 100,600 10,060,000
Class D
Class E 1,000 100,000
Class F 1,760 176,000
Class G 2,800 280,000
Class I 22,807 2,280,700
206,467 $ 20,646,700
Less amount to reduce to estimated
asset values ascribed by
management 13,478,000
$ 7,168,700
The unamortized amount of the ascribed value for the Class A
and Class I preferred stock shown above have been deducted as an
element of stockholders' equity in the consolidated balance
sheet, while the above values indicated for the remaining classes
of preferred stock have been assigned no carrying value in the
consolidated balance sheet.
<PAGE>
Class A Voting Preferred Stock - The Board of Directors
voted to establish the Class A series of preferred stock and
directed that such series have one vote per share, and which may
be redeemed annually by the Company to the extent of 3% of the
after tax annual net earnings of the Company either in cash or
common stock, and a preference and stated value of $100 per
share. The redemption in the form of common stock shall be at
the rate of 70% of the average bid price for the last fifteen
trading days of the year. In January, 1996, the Company issued
77,500 shares of the Class A Preferred Stock to acquire certain
television time. In January 1997, the Company and the Class A
convertible preferred shareholders agreed to exchange such
preferred stock for 380,000 shares of the restricted common
shares of the Company, which shares were issued in October 1997.
Class C Voting Preferred Stock - The Board of Directors
established this series with 100,600 shares authorized, with a
stated value of $100 per share. The Class C has one vote per
share; is equal in liquidation with the other preferred stock
classes; may be redeemed annually by the Company to the extent of
20% of the annual net income of Spellbinder at the rate of $100
per share; or, the redemption maybe in common stock at the rate
of 70% of market price. The Company issued 100,600 of these
shares to acquire Spellbinder. In January 1997, the Company and
the Class C convertible preferred shareholders agreed to exchange
the convertible preferred stock for 100,000 shares of the
restricted common shares of the Company, which shares were issued
in October 1997. In connection with the exchange of shares the
Company agreed to fund $1,800,000 within one year from January
1997, and also agreed to pay annual royalties under a five year
royalty agreement ranging from 5% to 10%per annum of gross
revenues derived from the Spellbinder project, with the maximum
of royalties to be paid capped at $8,000,000.
Class E Voting Preferred Stock - This series was established
by the Board of Directors with 6,500 shares with a $100.00 per
share value. The Class E has the same rights and privileges as
Class C, except that the annual redemption amount is 20% of the
annual net income of Octopus. The Company issued 1,000 shares to
Octopus. In January, the Company and the Class E convertible
preferred shareholders agreed to exchange the convertible
preferred stock for 10,000 shares of the restricted common shares
of the Company, which shares were issued in October 1997.
Class F Voting Preferred Stock - This series was established
by the Board of Directors with 1,760 shares with a $100.00 per
share value. The Class F has the same rights and preferences as
Class C, except that the annual redemption amount is 20% of the
net annual income in excess of $270,000 of Classical. The
Company issued 1,760 shares to Classical. In January 1997, the
Company and the Class F convertible preferred shareholders agreed
to exchange such convertible preferred stock for 7,967 shares of
the restricted common shares of the Company, which shares were
issued in October 1997.
<PAGE>
Class G Voting Preferred Stock - This class of preferred
stock was established to acquire Marin. The class has the same
rights and privileges as Class C, except that the annual
redemption amount is 20% of the annual net income of Marin. The
Company designated and issued 2,800 shares to Marin, with such
shares having a stated value of $100 per share. In January 1997,
the Company and the Class G convertible preferred shareholders
agreed to exchange such convertible preferred shares for 28,000
shares of the restricted common shares of the Company, which
shares were issued in October 1997.
Class H Voting Preferred Stock - The Board of Directors
established this class of preferred stock for the purpose of
acquiring Art Group. The Class H has the same rights and
privileges of Class C, except that the annual redemption amount
is 20% of the annual net income of Art Group. The Company
designated and issued 486,754 shares to the Art Group, with such
shares having a stated value of $100 per share. On December 20,
1996, the Company and the former shareholder of Art Group agreed
to rescind and cancel the merger, and the aforementioned 486,754
shares of the Class H Preferred Stock were returned to the
Company.
Class I Voting Preferred Stock - This series was designated
by the Board of Directors for the purpose of acquiring Jazz. The
Class I has the same rights and privileges of Class C, except
that the annual redemption amount is 20% of the annual net income
of Jazz. The Company designated and issued 22,807 shares to
Jazz, with such shares having a stated value of $100 per share.
In January 1997, the Company and the Class I convertible
preferred shareholders agreed to exchange such convertible
preferred shares for 230,000 shares of the restricted common
shares of the Company, which shares were issued in October 1997.
NOTE 9 - PUBLIC OFFERING:
The Company offered a maximum of 3,000 units to the public
at a proposed offering price of $1,000 per unit. Each unit
consisted of 166 shares of the Company's common stock, and a U.S.
Treasury-backed Zero Coupon obligation which will have a value of
$1,000 at maturity. Each U.S. Treasury-backed Zero Coupon
obligation will be purchased from the offering proceeds at an
estimated cost of $200 by the underwriter of the proposed public
offering, in the name of the unit holder.
Ninety-eight units of the offering were sold in 1992. The
Company received net proceeds of $67,770, from the sales of the
units after deduction of brokers' commissions and the cost of the
Zero Coupon Obligation, as discussed above.
The agreement also allowed the Underwriter to purchase a
maximum of 49,800 warrants for a total price of $498.00. These
warrants were exercisable over a four year period commencing one
year from the effective date of the proposed public offering at
an exercise price of $7.20 per share. Such warrants expired in
1996.
<PAGE>
The purpose of the offering was to provide funds to the
Company to enter the business of import/export management. As of
December 31, 1995, the Company had not realized revenues since
the date of organization.
NOTE 10 - WARRANTS:
During 1989 the Company sold "units" to certain
stockholders. Such units consisted of one share of common stock
and three warrants for the purchase of one share of common stock
each at an exercise price of $6.50 each for a period of 18 months
from the date of the prospectus. As of December 31, 1991 there
were warrants outstanding of 400,000. Such warrants have
expired.
NOTE 11 - INCOME TAXES:
The provision (benefit) for income taxes differs from the
amount of income tax determined by applying the applicable United
States statutory federal income tax rate to pre-tax income as a
result of the following differences at December 31, 1996.
Income tax provision (benefit) - 34% $(24,641)
Increase (decrease) in rates resulting from
State income taxes (2,631)
Valuation allowance for recognized deferred
tax assets 27,272
Effective tax rates $ -0-
On a consolidated basis, the Company has deferred tax assets
of approximately $77,000. The deferred tax assets maybe reduced
as a result of net operating loss carryforwards which will not be
available due to changes in control caused by the mergers, and
the issuance of substantial additional stock. All of the
deferred tax assets result primarily from unused net operating
losses.
The Company will need to realize significant profits to
utilize the losses, all of which may not be available as noted
previously, and may be further limited due to the organization,
capitalization, and acquisition costs incurred. Because of these
uncertainties, a valuation allowance was established in the same
amounts as the deferred tax assets because the benefit is more
likely than not to be lost.
Accumulated net operating losses aggregating $205,000 expire
in varying amounts through 2011 as shown below.
2005 $ 3,000
2006 9,000
2007 54,000
2008 32,000
2009 16,000
2010 19,000
2011 72,000
<PAGE>
NOTE 12 - RELATED PARTIES:
The Company has utilized the office space and related
facilities of one of its founders, and has reimbursed such
founder for certain expenses under an informal agreement. Such
founder is also a major shareholder of the Company. The
incorporator and former sole shareholder of Old AME also owned
50% of the outstanding common shares of Jazz and Marin; but, is a
diminimus shareholder of the Company. Consulting and office use
fees of approximately $116,000 were paid to the latter during
1996.
As of December 31, 1996, the Company established an
allowance for doubtful receivables in the amount of $20,000 with
a corresponding charge to operations, for an advance of $20,000
made to the former owner of a subsidiary, and the then owner of
2,800 shares of the Company's Class G Preferred Stock. During
1996, payments totaling $6,900 were made to the former owners of
certain of the subsidiary companies and owners of the assets
acquired for management fees.
The Company leases space on a month to month basis,
beginning May 1, 1996, for its administrative offices from an
individual with whom the Company has a financial consulting
contract. The monthly rental amount is $461.97.
The financial consulting agreement provides for a total
payment of $250,000 during the three year period ending July 13,
1998, plus a maximum of $30,000 of expenses during such period.
During 1996, payments were made under the agreement and to
related principals totaled approximately $129,000.
In the second quarter of 1996 the Company sold $52,000 of
its prepaid television time to a corporation, one of whose
principals is the trustee of the trust which sold the television
time and certain other assets to the Company. The entity which
purchased the television time was also paid $7,900 for certain
computer services.
NOTE 13 - CANCELLATION OF PREFERRED STOCK:
The Company renegotiated in January 1997 with the former
owners of the various assets acquired by the respective classes
of convertible preferred stock, culminating in October 1997 with
the exchange of all of the classes of issued preferred stock for
restricted common shares of the Company. The number of the
restricted common shares issued for the each class of preferred
shares is indicated in the respective section of Notes 4 and 8
herein. In addition, the Company agreed with the Class C
Convertible Preferred Shareholders to fund the project
represented by such shares with $1,800,000, and also agreed to
pay annual royalties for five years ranging from 5% to 10% of the
gross revenues derived from the project. The royalties are
capped at a maximum of $8,000,000.
<PAGE>
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THREE MONTH PERIOD ENDED JUNE 30, 1997
The Company had revenue for the three month period of $66,150 for
1997 as compared to $389,597 in revenues in the 1996 period. The
cost of revenues for the period in 1997 was $22,565 and in 1996
cost was $15,150. The 1996 period revenues were much higher due
to several large sales of television time, and such sales were
smaller in 1997 in the quarter. The Company recorded a net loss
of ($116,207) for the period in 1997 after $55,207 in general and
administrative expenses and net income of $72,189 in the 1996
period. The Company losses may continue until consistent sales
income can be achieved. While the Company is seeking capital
sources for investment to build a sales effort; there is no
assurance that sources can be found.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $26,512 in cash capital at the end of the period,
which is insufficient for any significant operations. The
Company will be forced to either borrow or make private
placements of stock or sell assets or inventory in order to fund
operations. No assurance exists as to the ability to achieve
sales or loans, or make private placements of stock.
RESULTS OF OPERATIONS FOR SIX MONTH PERIOD ENDED JUNE 30, 1997
The Company had revenues for the six month period of $146,150 in
1997 and $389,597 in 1996. The cost of revenues for the period
was $49,415 in 1997 compared to $15,150 in 1996. The Company had
general and administrative expenses in the six month period in
1996 of $284,758 resulting in a net income of $72,189 for the
period. In the 1997 six month period, the Company had $106,233
in general and administrative expenses and a net loss of
($9,498). Losses can be expected to continue until
capitalization of a significant sales effort is achieved.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were made for the period for
which this report is filed.
ART, MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES
(A Development Stage Company)
SIGNATURES
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.
ART, MUSIC & ENTERTAINMENT,
INC.
Date: December 24, 1997 /s/ Norman Brander
Norman Brander, President
