SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-QSB
(Mark One)
+---+ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
| X | SECURITIES EXCHANGE ACT OF 1934
+---+
MARCH 31, 1999
FOR THE QUARTER ENDED
OR
+---+
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
+---+ THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ________________
Commission File No. 0-20190
CLASSICS INTERNATIONAL ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3859518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
919 NORTH MICHIGAN AVENUE, SUITE 3400, CHICAGO, IL 60611 (Address of
principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (312) 482-9006
- -----------------------------------------------------------------
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 NO X
The number of shares of registrant's Common Stock, $.001 par value, outstanding
as of October 29, 1999 was 17,378,916 shares.
<PAGE>
CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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<TABLE>
<CAPTION>
CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS ................................................................... $ 0 $ 0
OTHER ASSETS .................................................................... 0 0
------------ ------------
$ 0 $ 0
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable .......................................................... $ 1,414,511 $ 1,414,511
Dividends payable ......................................................... 529,800 488,850
Accrued liabilities ....................................................... 340,931 333,764
Stockholder loans and other notes payable ................................. 201,845 201,845
------------ ------------
TOTAL CURRENT LIABILITIES ..................................... 2,487,087 2,438,970
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock ........................................................... $ 2,012,488 $ 2,012,488
Common stock, $.001 par value, 30,000,000
shares authorized; 17,378,916 shares issued
and outstanding ......................................................... 17,379 17,379
Additional paid-in capital ................................................ 12,493,490 12,493,490
Stock subscription receivable ............................................. (44,500) (44,500)
Accumulated deficit ....................................................... (16,965,944) (16,917,827)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT ................. (2,487,087) (2,438,970)
============ ============
$ 0 $ 0
============ ============
</TABLE>
F-1
See Notes to Consolidated Financial Statements
<PAGE>
CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
QUARTER ENDED MARCH 31,
1999 1998
-------- ----------
Loss from continuing operations ................. $ 0 $ 0
Loss from discontinued operations ............... (7,167) (26,500)
-------- ----------
Loss before extraordinary gain .................. (7,167) (26,500)
Extraordinary gain - cancellation of debt ....... 0 218,515
-------- ----------
Net income (loss) ............................... (7,167) 192,015
Preferred stock dividends ....................... (40,950) (40,950)
-------- ----------
Net income (loss) applicable to common stock .... $ (48,117)$ 151,065
======== ==========
Basic and Diluted Income (Loss) Per Common Share:
Loss from continuing operations ................. $ 0 $ 0
Loss from discontinued operations ............... 0 0
Extraordinary gain .............................. 0 .01
Preferred stock dividends ....................... 0 0
Net income (loss) per common share
-------- ----------
- basic and diluted ........................... $ 0 $ .01
======== ==========
Average common shares outstanding ............... 17,378,916 17,378,916
======== ==========
F-2
See notes to the consolidated financial statements
<PAGE>
CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
1999 1998
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................... $ (7,167) $ 192,015
Adjustments to reconcile net income (loss) to net
cash used in operations:
Loss from discontinued operations .......... 7,167 26,500
Extraordinary gain - cancellation of debt .. 0 (218,515)
------- --------
NET CASH USED IN OPERATING ACTIVITIES .................. 0 0
CASH FLOWS FROM INVESTING ACTIVITIES: .................. 0 0
CASH FLOWS FROM FINANCING ACTIVITIES: .................. 0 0
NET DECREASE IN CASH ................................... 0 0
CASH AT BEGINNING OF YEAR .............................. 0 0
------- --------
CASH AT END OF YEAR .................................... $ 0 $ 0
======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest
and income taxes ..................................... $ 0 $ 0
======= ========
F-3
See Notes to Consolidated Financial Statements
<PAGE>
CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(UNAUDITED)
NOTE 1 - ORGANIZATION:
Classics International Entertainment, Inc. (the "Company") was incorporated
under the laws of the State of Delaware on November 20, 1992. The Company had
four subsidiaries: Moondog's, Inc., which on August 5, 1997, filed for
protection under Chapter 7 of the Bankruptcy laws; Dream Factory, Inc., which on
May 2, 1996, filed for protection under Chapter 7 of the Bankruptcy Laws; First
Classics, Inc., the holder of a license for the exclusive use of the Classics
Illustrated copyrights, trade names and other intangibles, excluding non-print
media rights; and Classics Media Group, Inc., the exclusive licensee of the
Classics Illustrated properties for non-print media purposes. The Dream Factory,
Inc. and Moondog's, Inc. Bankruptcy cases were brought to closure in September,
1996 and January, 1998, respectively.
NOTE 2 - BASIS OF PRESENTATION:
The accompanying unaudited financial statements reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of financial
position and the results of operations for the interim periods presented.
The results of operations for any interim period are not necessarily indicative
of the results attainable for a full fiscal year.
The financial statements have been prepared on the basis that the Company will
continue as a going concern. The ongoing losses and working capital deficiency
raise substantial doubt about the Company's ability to continue as a going
concern. Continued existence is dependent upon the Company's ability to raise
additional equity capital or debt financing, neither of which can be assured.
The accompanying financial statements do not include any adjustments that might
be necessary should the Company be unable to continue as a going concern.
These statements have been prepared by the Company and are unaudited. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principals have been
omitted. As such, these financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1998.
F-4
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS:
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AS COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1998.
The Company ceased its operations at the end of 1996. Hence there are no losses
from continuing operations subsequent to 1996.
LOSS FROM DISCONTINUED OPERATIONS
The loss from discontinued operations was $26,500 for the quarter ended March
31, 1998 versus a loss of $7,167 for the quarter ended March 31, 1999.
EXTRAORDINARY GAIN - CANCELLATION OF DEBT
The extraordinary gain resulting from the cancellation of debt was $218,515 for
the quarter ended March 31, 1998 compared to no such gain for the quarter ended
March 31, 1999.
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK
Net income applicable to common stock was $151,065 for the quarter ended March
31, 1998 compared to a loss of $48,117 for the quarter ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the company had working capital and total capital
deficiencies of $2,438,970. As of March 31, 1999, the company had working
capital and total capital deficiencies of $2,487,087.
The ongoing losses and working capital deficiency raise substantial doubt about
the Company's ability to continue as a going concern. Continued existence is
dependent upon the Company's ability to raise additional equity capital or debt
financing, neither of which can be assured.
F-5
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
In July, 1994, the Company discharged for cause, four officers of its Dream
Factory subsidiary. The officers who were discharged commenced an action against
the Company seeking approximately $19,000,000 arising out of the alleged
wrongful termination of their employment. The Company subsequently settled the
claims of two of these four officers in return for a payment obligation of
$600,000, which represented approximately $2,000,000 of the original claim.
While the Company believes that it has good and sufficient defenses and counter
claims in the forgoing legal matter, the Company would be adversely affected to
the extent of the damages recovered should the plaintiffs prevail. However, the
ultimate outcome of the litigation cannot presently be determined. Accordingly,
excepting for having previously recorded the $600,000 settlement, no additional
provision for any liability that may result upon adjudication has been made in
the accompanying consolidated financial statements.
ITEM 5: OTHER INFORMATION
Not applicable.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) No Exhibits
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15 (d) 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.
Dated: November 4, 1999
CLASSICS INTERNATIONAL ENTERTAINMENT, INC.
BY:\S\Richard S. Berger
Richard S. Berger
Sole Director and Principal Accounting Officer
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<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000894789
<NAME> CLASSICS INTERNATIONAL ENTERTAINMENT, INC.
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 0
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<CURRENT-LIABILITIES> 2,487,087
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0
2,012,488
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<INCOME-CONTINUING> 0
<DISCONTINUED> (7,167)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,167)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
