<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 quarterly period ended March 31, 1996
OR
[ ] 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 0-22808
PACIFIC RIM ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4374983
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
401 City Avenue, Suite 319
Bala Cynwyd, Pennsylvania 19004
(Address of principal executive offices) (Zip Code)
(610) 660-5755
(Registrant's telephone number, including area code)
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 ___.
Number of shares of Common Stock outstanding at March 31, 1996: 22,488*
Number of Redeemable Warrants outstanding at March 31, 1996: 11,554*
* ALL SHARE FIGURES IN THIS REPORT REFLECT REVERSE STOCK SPLITS RATIFIED BY
STOCKHOLDERS IN 1997.
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PACIFIC RIM ENTERTAINMENT, INC.
FORM 10-QSB
MARCH 31, 1996
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION 3
ITEM 1 Consolidated condensed unaudited financial statements 3
ITEM 2 Management's Discussion and Analysis of Financial Condition,
Results of Operations and Plan of Operation 8
PART II - OTHER INFORMATION 9
ITEM 1 Legal Proceedings 9
ITEM 4 Submission of Matters to a Vote of Security Holders 9
ITEM 5 Other Information 9
ITEM 6 Exhibits and Reports on Form 8-K 9
SIGNATURES 10
EXHIBIT Financial Data Schedule (Filed electronically only) 11
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
PACIFIC RIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Unaudited Audited
March 31, 1996 December 31, 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash 0 0
Film costs inventory, net $ 500,000 $ 500,000
Fixed assets, net 9,163 10,000
------------ ------------
TOTAL ASSETS $ 509,163 $ 510,000
============ ============
LIABILITIES AND STOCK HOLDERS DEFICIT
Liabilities:
Accounts payable and accrued expenses 797,326 786,630
Payable to related parties 311,000 300,000
------------ ------------
TOTAL LIABILITIES $ 1,108,326 $ 1,086,630
============ ============
Stockholder's Deficit:
Common Stock, authorized 10,000,000 shares, par value 225 225
$.01 per share, 22,488 shares issued and outstanding in March 31, 1996
and December 31, 1995
Additional paid-in-capital 11,754,762 11,754,762
Accumulated deficit (12,354,150) (12,331,617)
------------ ------------
TOTAL STOCKHOLDER'S DEFICIT (599,163) (576,630)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 509,163 $ 510,000
============ ============
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF
3
<PAGE> 4
PACIFIC RIM ENTERTAINMENT, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTH ENDED MARCH 31 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Operating Revenues $ 0 $ 0
Film valuation reserve (Note2) 0 (500,000)
Selling, general and administrative (16,533) (220,000)
--------- ---------
Operating Loss (16,533) (720,000)
Interest expense (6,000) (6,000)
--------- ---------
Loss before tax (22,533) (726,000)
Provision for California franchise tax $ 0 $ 0
Net loss (22,533) (726,000)
========= =========
Net loss per share $ (1.00) $ (32.29)
Weighted average shares outstanding 22,488 22,488
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF
4
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PACIFIC RIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
ENDED MARCH 31
Unaudited
<TABLE>
<CAPTION>
Cash Flow from Operating Activities: 1996 1995
--------- ---------
<S> <C> <C>
Net Loss $ (22,533) $(726,000)
Adjustments to Reconcile Net Loss to Net Cash
Used for Operating Activities:
Depreciation and Amortization 837 500,000
Film Cost Write Down 0 500,000
Changes in Operating Assets and Liabilities:
Increase (Decrease) in Accounts payable and
accrued expenses 21,696 (274,000)
--------- ---------
Net Cash Used for Operating Activities 0 0
Net Increase in Cash 0 0
Cash at Beginning of Period 0 0
Cash at End of Period $ 0 0
========= =========
Supplemental Cash Flow Information:
Taxes Paid $ 0 0
========= =========
Interest Paid $ 0 0
========= =========
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF
5
<PAGE> 6
PACIFIC RIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
ENDED MARCH 31
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
Shares Amount Shares Common Paid to Capital
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1993 2,775,850 $ 27,759 $ 9,285,111
One-for-twenty reverse split - March 1995 (2,637,058) (26,371) 26,371
One-for-ten reverse split - February 1996 (124,913) (1,249) $ 1,249
Issuance of preferred stock - Private Placement 1 500 $ 5 1,378,586
Issuance of warrants - Private Placement 1 $ 50
Issuance of common stock - Private Placement 1 125 $ 1 $ (1)
Issuance of preferred stock - Private Placement 2 106 $ 1 317,799
Balance - December 31, 1994 606 $ 6 14,004 140 11,754,841
Conversion of preferred shares (606) $ (6) 8,484 85 (79)
Net loss for the period
------------ ------------ ------------ ------------ ------------
Balance - December 31, 1995 0 0 22,488 225 11,754,762
============ ============
Net loss for the period
------------ ------------ ------------
Balance - March 31, 1996 (unaudited) 22,488 $ 225 $ 11,754,762
============ ============ ============
<CAPTION>
Accumulated
Deficit Total
------------ ------------
<S> <C> <C>
Balance - December 31, 1993 (6,029,102) 3,283,768
One-for-twenty reverse split - March 1995
One-for-ten reverse split - February 1996
Issuance of preferred stock - Private Placement 1
Issuance of warrants - Private Placement 1
Issuance of common stock - Private Placement 1
Issuance of preferred stock - Private Placement 2
(4,889,183) (4,889,183)
Balance - December 31, 1994 (10,918,375) 836,612
Conversion of preferred shares
Net loss for the period (1,413,242) (1,413,242)
------------ ------------
Balance - December 31, 1995 (12,331,617) (576,630)
Net loss for the period $ (22,533) (22,533)
------------ ------------
Balance - March 31, 1996 (unaudited) $(12,354,150) $ (599,163)
============ ============
</TABLE>
THIS ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF
6
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PACIFIC RIM ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited consolidated condensed financial statements of
Pacific Rim Entertainment, Inc. (a Delaware corporation), and subsidiaries
(collectively the "Company"), in the opinion of management, reflect all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the financial statements for such interim periods. Interim
results are not necessarily indicative of results for a full year.
Certain information and disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted (in accordance with the Securities and Exchange Commission
(the "SEC") rules pertaining for Form 10-QSB). It is suggested that these
consolidated condensed financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-KSB.
NOTE 2 - FILM COSTS INVENTORY
Film costs inventory consisted of the following:
<TABLE>
<S> <C>
Released, net of amortization: $ 0
In process: 2,634,000
Less valuation in reserve (2,134,000)
-----------
$ 500,000
===========
</TABLE>
NOTE 3 - COMMITMENTS AND CONTINGENT LIABILITIES
Reference is made to Notes 8 and 9 of the Company's Consolidated Financial
Statements included in the Company's Form 10-K.
NOTE 4 - EARNINGS PER SHARE
The computation of the shares outstanding for the period is based on the
weighted average number of shares outstanding during the period. Warrants
outstanding have not been included in the earnings per share calculation as the
effect of their inclusion would be anti-dilutive.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PLAN OF OPERATION
THIS REPORT IS BEING FILED IN DECEMBER 1997. THE COMPANY HAS FILED VARIOUS
ANNUAL AND PERIODIC REPORTS SINCE THE DATES OF THE INFORMATION CONTAINED IN THIS
REPORT. INVESTORS SHOULD CONSULT SUCH SUBSEQUENT REPORTS IN EVALUATING THE
DISCLOSURE CONTAINED IN THIS REPORT SINCE THE SUBSEQUENT DISCLOSURE IS MATERIAL.
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto.
The Company has not had any operating revenues since 1995. It has operated on
credit and advances from its board of directors.
At the present time the Company's only assets are its rights in its "Little
Toot" special and completed series, and its partially completed "Cliff Hanger"
series. The Company had determined not to complete the "Cliff Hanger" series,
and present management is seeking to maximize value for stockholders and
creditors by pursuing various alternatives, which include disposition of its
distribution rights to existing inventory. There can be no assurance that any of
these efforts will be successful, and if such efforts do not succeed the Company
will be unable to continue as a going concern.
The Company is planning a $450,000 private placement of Units consisting of an
8% Senior Secured Note and Common Stock Purchase Warrants. In addition, the
Company is conducting discussions with a view towards selling its interest in
its partially completed "Cliff Hanger" series.
The Company is incurring general and administrative costs. Such costs are fully
accrued at the end of the period.
8
<PAGE> 9
PART II
ITEM 1. LEGAL PROCEEDINGS
See Item 5.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
See Item 5.
ITEM 5. OTHER INFORMATION
CHANGES IN CONTROL OF REGISTRANT.
Following the cessation in 1995 of the Company's program creation and
production businesses, management sought to obtain additional financing or to
merge or form a joint venture of the Company's operations with those of another
business. The efforts were unsuccessful, and, in late 1996, a group of the
Company's common stockholders acted by written consent to replace the incumbent
management with a Board of Directors designated by such stockholders. The
incumbent board rejected such removal, claiming that as a result of recent
issuances of additional Common Stock, the holders executing such consents did
not constitute a majority of the Common Stock. The holders instituted litigation
in the Delaware Court of Chancery, seeking, inter alia, to cancel the
recently-issued shares and for an order declaring the consents valid and
effective. That litigation was settled in January, 1997 with the incumbent board
agreeing (i) to cancel the purported issuance of additional Common Stock, and
(ii) that all directors other than Mr. Ike Suri would resign and be replaced by
designees of such holders. Pursuant to that agreement, Messrs. Frank Cantatori,
Joel Gossman and Robert Fallah have resigned from all positions held by them
with the registrant. Steven Rosner and Bernard Buchwalter and Richard Someck
were appointed as directors in their stead. Following the replacement of the
board, the new board issued to each of the new directors, and to Mr. Suri, 1,000
shares of Common Stock at a price of $0.01 per share, as compensation for
service as directors for the ensuing year. The newly elected board also resolved
to indemnify Mr. Suri for not more than $13,000 in legal fees which he had
incurred on the registrant's behalf in resisting the change in control. The
present Board of Directors consists of Messrs. Buchwalter, Rosner, Someck and
Suri. As of the date of this report, the numbers of the shares of Common Stock
beneficially owned, directly or indirectly by the Directors are as follows:
<TABLE>
<CAPTION>
Number of Shares of % of Common
Director Common Stock Owned Outstanding
<S> <C> <C>
Buchwalter 4500 16.75%
Rosner 4500 16.75%
Someck 2750 10.25%
Suri 1000 3.75%
</TABLE>
In February, 1997, the Company relocated its offices from 1223 Wilshire Blvd.,
Suite 316, Santa Monica, California to 401 City Ave., Suite 319, Bala Cynwyd,
Pennsylvania 19004.
ITEM 6. EXHIBITS AND REPORTS ON 8-K
(a) Exhibit 27: Financial Data Schedule
(b) Reports on 8-K: None
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
Dated: December 10, 1997 PACIFIC RIM ENTERTAINMENT, INC.
-------------------------------
Registrant
/s/ STEVEN ROSNER
Steven Rosner
President and member of the Board
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 500,000
<CURRENT-ASSETS> 509,163
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 509,163
<CURRENT-LIABILITIES> 1,108,326
<BONDS> 0
0
0
<COMMON> 225
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 509,163
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,233
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,000
<INCOME-PRETAX> (22,533)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,533)
<EPS-PRIMARY> (1.00)
<EPS-DILUTED> (1.00)
</TABLE>
