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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 31,1997
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 No X .
Number of shares of Common Stock outstanding at December 31, 1996: 22,433
Number of Redeemable Warrants outstanding at December 31, 1996: 11,554
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PACIFIC RIM ENTERTAINMENT, INC.
FORM 10-QSB
MARCH 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 Consolidated condensed unaudited financial statements
Consolidated condensed unaudited balance sheets as of March 31, 1997 and
December 31, 1996 3
Consolidated condensed unaudited statements of operations for the
three months ended March 31, 1997 and 1996 4
Consolidated condensed unaudited statements of cash flow for three months
ended March 31, 1997 and 1996 5
Notes to unaudited consolidated condensed financial statements 6
ITEM 2 Management's Discussion and Analysis of Financial Condition,
Results of Operations and Plan of Operation 9
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
ITEM 4 Submission of Matters to a Vote of Security Holders
ITEM 5 Other information 10
SIGNATURES 11
</TABLE>
2
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PACIFIC RIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Unaudited Audited
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
ASSETS
Film costs inventory, net $ 500,000 $ 500,000
Fixed assets, net 5,500 6,667
------------ ------------
TOTAL ASSETS $ 505,500 $ 506,667
============ ============
LIABILITIES AND STOCK HOLDERS DEFICIT
Liabilities: $ 918,000 $ 887,000
Accounts payable and accrued expenses 328,150 323,650
------------ ------------
TOTAL LIABILITIES $ 1,246,150 $ 1,210,650
============ ============
Stockholder's deficit:
Common Stock, authorized 10,000,000 shares, par value
$.01 per share, 22,488 shares issued and outstanding in 1996 225 225
Additional paid-in-capital 11,754,762 11,754,762
Accumulated deficit (12,495,637) (12,459,707)
------------ ------------
TOTAL STOCKHOLDER'S DEFICIT (740,650) (704,083)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 565,500 $ 506,667
============ ============
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF
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PACIFIC RIM ENTERTAINMENT, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
Unaudited
1997 1996
---- ----
<S> <C> <C>
Operating Revenues $0 $0
Amortization expense and film valuation reserve (note 2) 0 (500,000)
Selling, general and administrative (30,567) (250,000)
--------- ---------
Operating Loss ($30,567) ($750,000)
Interest expense (6,000) (6,000)
-------- ---------
Loss before tax ($36,567) ($756,000)
Provision for California franchise tax $0 $0
-------- ---------
Net loss ($36,567) ($756,000)
======== =========
Net loss per share ($1.63) ($33.62)
Weighted average shares outstanding 22,488 22,488
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF
4
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PACIFIC RIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
Unaudited
Cash Flow from Operating Activities: 1997 1996
---- ----
<S> <C> <C>
Net Loss ($ 36,567) ($756,000)
Adjustments to Reconcile Net Loss to Net Cash
Used for Operating Activities:
Depreciation and Amortization 1,167 21,167
Film Cost Write Down 500,000
Changes in Operating Assets and Liabilities:
Decrease in Accounts Receivable 16,000
Deposits and Prepayments 52,281
Increase in Accounts payable and accrued expenses 30,900 116,055
Total Adjustments 32,067 705,503
--------- ---------
Net Cash Used for Operating Activities (4,500) (50,497)
Cash Flows from Financing Activities:
Proceeds from Notes Payable to Officers and
Stockholder, Net 4,500
Proceeds from Notes Payable to Investors 50,000
--------- ---------
Net Cash Provided by Financing Activities 4,500 50,000
Net Decrease in Cash 0 (497)
Cash at Beginning of Period 0 497
--------- ---------
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
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PACIFIC RIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE TWO YEARS
ENDED MARCH 31
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Shares Amount Shares Common
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance - December 31, 1993 2,775,850 $ 27,759
One-for-twenty reverse split - March 1995 (2,637,058) (26,371)
One-for-ten reverse split - February 1996 (124,913) (1,249)
Issuance of preferred stock - Private Placement 1 500 $ 5
Issuance of warrants - Private Placement 1
Issuance of common stock - Private Placement 1 125 $ 1
Issuance of preferred stock - Private Placement 2 106 $ 1
----------- ----------- ----------- --------
Balance - December 31, 1994 606 $ 6 14,004 140
Conversion of preferred shares (606) $ (6) 8,484 85
Net loss for the period
----------- ----------- ----------- --------
Balance - December 31, 1995 0 0 22,488 225
=========== ===========
Net loss for the period
----------- --------
Balance - December 31, 1996 22,488 $ 225
=========== ========
Net loss for the period
----------- --------
Balance - March 31, 1997 (unaudited) 22,488 $ 225
=========== ========
</TABLE>
<TABLE>
<CAPTION>
Additional Accumulated
Paid to Capital Deficit Total
--------------- ------- -----
<S> <C> <C> <C>
Balance - December 31, 1993 $ 9,285,111 (6,029,102) 3,283,768
One-for-twenty reverse split - March 1995 26,371
One-for-ten reverse split - February 1996 $ 1,249
Issuance of preferred stock - Private Placement 1 1,378,586
Issuance of warrants - Private Placement 1 $ 50
Issuance of common stock - Private Placement 1 $ (1)
Issuance of preferred stock - Private Placement 2 317,799
(4,889,183) (4,889,183)
------------ ------------ -----------
Balance - December 31, 1994 11,754,841 (10,918,375) 836,612
Conversion of preferred shares (79)
Net loss for the period (1,413,242) (1,413,242)
------------ ------------ -----------
Balance - December 31, 1995 11,754,762 (12,331,617) (576,630)
Net loss for the period ($ 127,453) (127,453)
------------ ------------ -----------
Balance - December 31, 1996 $ 11,754,762 ($12,459,070) ($ 704,083)
============ ============ ===========
Net loss for the period (36,567) (36,567)
------------ ------------ -----------
Balance - March 31, 1997 (unaudited) $ 11,754,762 ($12,485,637) ($ 740,650)
============ ============ ===========
</TABLE>
THIS ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF
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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 for the fiscal year ended December 31, 1994 (the
"Form 10-KSB"), which was filed by the Company with the SEC on April 12, 1995,
in accordance with the Securities Exchange Act of 1934, as amended.
NOTE 2 - FILM COSTS INVENTORY
At March 31, 1997 and December 31, 1996, film costs inventory consisted of the
following:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Released, net of amortization: $0 $0
In process: 2,634,000 2,634,000
Less valuation in reserve (1,634,000) (1,634,000)
----------- -----------
$1,000,000 $1,000,000
========== ==========
</TABLE>
NOTE 3 - STATEMENTS OF CASH FLOWS
The Company prepares the Statements of Cash Flows using the indirect method as
prescribed by the Statement of Financial Accounting Standards No. 95. Income
taxes and interest paid were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1997 1996
---- ----
<S> <C> <C>
Income taxes paid: $0 $0
Interest paid: $0 $0
</TABLE>
7
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NOTE 4 - 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 for the period ended December 31,
1996 for a discussion of commitments and contingent liabilities, and employment
agreements.
NOTE 5 - LOANS PAYABLE - DIRECTORS AND SHAREHOLDERS
During the three months ended March 31, 1997, the Company received loans from
its directors and shareholders totaling $4,500.
NOTE 6 - 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.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PLAN OF OPERATION
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 may include licensing or other
disposition of all or a portion of its distribution rights to existing
inventory, financial restructuring, strategic or other joint ventures with
parties willing to provide financial support to the Company, merger with an
operating entity in a similar or dissimilar field of business or other
alternatives. 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 currently holding discussions with a privately-held company with
a view toward a business combination. No definitive agreement has been reached,
and there can be no assurance that any agreement will be reached on terms
satisfactory to the Company.
The Company is planning a $450,000 private placement of Units consisting of an
8% Senior Secured Note and Common Stock Purchase Warrants. Upon completion of
the offering the Company expects that $400,000 will be used to provide funding
for operations of a combined company.
In addition, the Company is conducting discussions with a view towards selling
its interest in its partially completed "Cliff Hanger" series. No definitive
agreement has been reached and there can be no assurance that an agreement will
be executed on terms satisfactory to the Company.
If the Company does complete the sale, proceeds thereof will be used to pay down
current debt and as working capital.
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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.
10
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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: June 30, 1997 PACIFIC RIM ENTERTAINMENT, INC.
-------------------------------
Registrant
S/STEVEN ROSNER
-------------------------------
Steven Rosner
President and member of the Board
11
