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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
----------------------
MALIBU ENTERTAINMENT WORLDWIDE, INC.
(FORMERLY NAMED MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.)
5895 Windward Parkway, Suite 220
Alpharetta, Georgia 30202-4128
(770) 442-6640
----------------------
Incorporated in Georgia SEC File No.: 0-22458 IRS Employer Id.
No.: 58-1949379
----------------------
The Company (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 and (2) has been subject to such filing requirements for the past 90
days.
At May 13, 1997, 48,304,971 shares of the Company's Common Stock were
outstanding.
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND MARCH 31, 1996
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
accompanying consolidated financial statements include all adjustments
necessary to present fairly, in all materials respects, the consolidated
financial position and results of operations of the Company and its
subsidiaries as of the dates and for the periods presented. The Company's
business is seasonal in nature and the Company is engaged in the implementation
of a new business plan. Operating results for the three month period ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's report on Form 10-K
for the year ended December 31, 1996.
NET LOSS PER SHARE OF COMMON STOCK
Net loss per share of common stock is computed by dividing net loss
applicable to common stock by the weighted average number of shares of common
stock outstanding during the periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of operations
Three family entertainment centers ("FECs") that were purchased in
August 1996 were included in the Company's 1997 first quarter results but not
in the first quarter of 1996. These FECs contributed $0.8 million in
entertainment revenues for the first quarter of 1996, which was partially
offset by the period-to-period decrease of $0.6 million as a result of the
closing of two parks, one in Dallas, Texas and one in Puente Hills, California,
in order to convert the parks to "Malibu SpeedZones". 1997 first quarter net
income was lower than the comparable 1996 quarter primarily due to a $1.2
million tax benefit and a $0.8 million profit on the sale of land which were
included in the 1996 first quarter results of operations. There were no
changes in the individual components of the Company's results of operations for
the three months ended March 31, 1997 that are material when compared to the
first quarter of 1996.
The Company continues to refine and implement its previously announced
business plan, the principal components of which are (i) developing a capital
structure designed to allow the
1
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Company to achieve its business objectives, (ii) redefining the Company's
business through repositioning, disposing, expanding or redeveloping its
existing FECs, (ii) enhancing profitability through improved operating and
management efficiencies, sales and marketing programs, employee training and
the alignment of the Company's cost structure to a level appropriate for the
business transacted, (iv) growth of the Company's business through strategic
acquisitions and development of new parks, and (v) the development of the
Company's name recognition and related sponsorship opportunities. A key aspect
of the new plan is the development and roll-out of a new concept -- the "Malibu
SpeedZone" parks -- primarily designed for young adults. Malibu SpeedZones
include the Company's Malibu Grand Prix racing attraction, go-kart-type racing
attractions and the Company's new "Top-Eliminator" dragster attraction,
together with a restyled clubhouse, miniature golf course, video game room and
meeting and party rooms to complement the racing attractions. The Company has
two Malibu SpeedZone parks currently under construction at the sites of its
former Malibu GrandPrix FECs in Dallas, Texas and Puente Hills, California,
which are targeted to open in the second quarter of this year, is in the
process of redeveloping one of its FECs located outside Atlanta, Georgia to
convert it to the Malibu SpeedZone concept and, assuming that the financing
therefore is available to the Company (see "--Liquidity and Capital
Resources"), expects to convert a number of its other FECs to this concept once
it has been proven and refined.
The business of the Company is highly seasonal. Approximately
two-thirds of the Company's revenues have historically been generated during
the six-month period of April through September. As a result, the Company's
operating income can be expected to be substantially lower in the first and
last quarters of the year than the second and third quarters. As a result of
this seasonality and the fact that the Company's business plan, including their
construction at the Dallas and Puente Hills sites, is in the early stages of
implementation, the Company believes that the first quarter 1997 results of
operations are not indicative of the Company's future earnings potential.
Liquidity and Capital Resources
In January 1997, MEI Holdings, L.P., the Company's largest shareholder
("MEI Holdings"), completed a tender offer for any and all outstanding shares
of common stock ("Common Shares") it did not own at $3.50 per share and for any
and all of the Company's 9% Convertible Subordinated Debentures and all of the
9.1% Subordinated Convertible Debentures at par plus accrued and unpaid
interest for the purchased debentures. Pursuant to the tender offer, MEI
Holdings acquired 7,802,435 Common Shares, $4,249,000 aggregate principal
amount of 9% Debentures and $11,422,322 aggregate principal amount of 9.1%
Debentures. The purchased debentures were subsequently converted into equity
at a conversion rate of $3.50 per share.
During the first quarter of 1997, the Company financed its operations
primarily through cash flow from operations and capital contributions by MEI
Holdings. The Company's principal uses of cash during the first quarter of
1997 were to finance operations and costs associated with the development of
the business plan ($3.8 million) and to renovate the parks which are being
converted into Malibu SpeedZones ($5.6 million).
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The Company believes that, with respect to its current operations, the
Company's cash on hand, funds from operations and the net proceeds of
anticipated asset sales will be sufficient to fund the Company's reasonably
foreseeable working capital and debt service requirements. However, the
Company presently expects that funding for capital expenditures during 1997 for
the Company's existing FECs and the conversion of certain FECs to the Malibu
SpeedZone concept will require the Company to secure additional capital
resources, which could involve the issuance of debt or equity securities,
securitization of assets or other capital transactions. The cost of conversion
of existing FECs to the Malibu SpeedZone concept, or the development of new
Malibu SpeedZone parks, will be dependent upon various factors, including land
acquisition, construction and other costs, but is expected to be substantial
($5-10 million per facility). The pursuit of any acquisition opportunities
which may become available and the implementation of the Company's business
plan on a more rapid timetable than the Company presently contemplates also may
require the Company to issue additional debt or equity securities or to
consider possible changes in its capitalization or structure. Accordingly,
there can be no assurances that the Company will be able fully to implement its
business plan or to pursue those or other opportunities that otherwise might be
available to the Company or as to the timing or terms thereof.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
At the Company's annual meeting of shareholders on April 28, 1997, the
Company's shareholders approved, among other things, (i) the change in the name
of the Company from Mountasia Entertainment International, Inc. to Malibu
Entertainment Worldwide, Inc., (ii) the grant of ordinary voting rights to 24.9
million shares of capital stock held by MEI Holdings, and the termination of
certain standstill restrictions previously applicable to MEI Holdings, (iii)
the adoption of a long-term equity incentive plan, and (iv) the election of
directors, a majority of whom are designees of MEI Holdings. After giving
effect to the grant of ordinary voting rights to MEI Holdings and related
conversion of nonvoting preferred stock into common stock, the Company has
48,304,971 shares of common stock outstanding, 81.4% of which are owned by MEI
Holdings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits Description
Exhibit 27 Financial Data Schedule (SEC purposes only)
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 8,546,616 $ 2,583,735
Restricted cash 1,035,085 966,075
Accounts receivable, net of allowance for doubtful accounts 78,157 109,537
Stock subscription receivable -- 16,076,260
Inventories 1,589,465 1,359,331
Current portion of notes receivable 118,239 172,284
Assets held for sale 6,271,003 6,271,003
Other current assets 1,879,206 1,261,694
------------- -------------
Total current assets 19,517,771 28,799,919
------------- -------------
Property and equipment, less accumulated depreciation 89,807,017 85,484,158
------------- -------------
Other noncurrent
Investments in and advances to limited partnerships 2,239,614 2,288,129
Notes receivable 272,268 272,267
Other assets 425,390 190,479
Debt issuance costs, less accumulated amortization 1,988,621 2,453,798
Intangible assets, less accumulated amortization 2,684,331 2,608,608
------------- -------------
Total other noncurrent assets 7,610,224 7,813,281
------------- -------------
$ 116,935,012 $ 122,097,358
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of notes payable $ 1,203,367 $ 1,120,467
Accounts payable 2,284,346 2,354,823
Accrued expenses 6,119,677 5,777,707
Accrued expenses related to assets held for sale 3,152,088 3,250,000
Income taxes payable 9,999 86,888
------------- -------------
Total current liabilities 12,769,477 12,589,885
Line of credit 7,477,552 7,250,053
Term loan revolver 12,500,000 12,500,000
Notes payable 5,447,674 5,788,475
Convertible subordinated debentures 725,100 16,521,422
Other accrued expenses 2,302,140 2,438,383
------------- -------------
Total liabilities 41,221,943 57,088,218
------------- -------------
Contingent liability for guaranteed stock values 777,861
------------- -------------
Shareholders' equity
Preferred stock, 6,000,000 shares authorized with no par value
Series F, 2,700,000 authorized; 1,886,436 and 808,692 issued
and outstanding 38,371,322 22,700,000
Series G, 213,551 authorized; 213,551 and 213,551 issued
and outstanding 4,826,260 4,826,260
Common stock, 100,000,000 shares authorized with no par
value; 28,896,467 and 28,472,877 shares
issued and outstanding 97,187,239 97,062,239
Outstanding warrants 2,440,100 2,440,100
Notes receivable from employees (5,784,926) (5,681,951)
Accumulated deficit (61,326,926) (57,115,369)
------------- -------------
Total shareholders' equity 75,713,069 64,231,279
------------- -------------
$ 116,935,012 $ 122,097,358
============= =============
</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31,
1997 1996
------------ ------------
<S> <C> <C>
OPERATING REVENUES
Entertainment revenue $ 7,170,920 $ 6,996,729
------------ ------------
OPERATING EXPENSES
Entertainment expenses 7,050,939 6,841,562
General and administrative expenses 1,793,199 1,720,757
Other expenses 158,082 222,738
Depreciation and amortization 1,367,654 1,293,336
------------ ------------
Total operating expenses 10,369,874 10,078,393
------------ ------------
Operating loss (3,198,954) (3,081,664)
OTHER (EXPENSE) INCOME
Interest expense (792,968) (1,112,938)
Interest income 149,993 42,938
Other (66,438) 847,549
------------ ------------
Loss before benefit for income taxes (3,908,367) (3,304,115)
Benefit for income taxes 1,256,674
Equity in net losses of limited partnerships, net of tax (24,691) (72,368)
------------ ------------
Net loss $ (3,933,058) $ (2,119,809)
============ ============
NET LOSS APPLICABLE TO COMMON STOCK
Net loss $ (3,933,058) $ (2,119,809)
Less: Preferred stock dividends (402,818)
------------ ------------
Net loss applicable to common stock $ (3,933,058) $ (2,522,627)
============ ============
Net loss per share of common stock $ (0.14) $ (0.23)
============ ============
Weighted average number of shares of
common stock and common stock equivalents
used in calculating net loss per share 28,896,467 10,966,810
============ ============
</TABLE>
5
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
PREFERRED COMMON OUTSTANDING UNEARNED
STOCK STOCK WARRANTS COMPENSATION
---------- ------ ----------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $ 5,220,140 $ 43,868,329 $3,064,933 $(497,222)
Issuance of preferred stock 34,188,260
Issuance of common stock 51,087,602
Discount on 9% subordinated debentures
Interest on notes receivable from employees
Stock issuance costs (3,353,921)
Purchase and cancellation of stock (722,744)
Unearned compensation in connection
with the financial advisory agreements 234,722
Warrants issued 60,000
Adjustment to common stock as a result
of guaranteed stock prices (682,201)
Accretion and payment of preferred stock
dividends 1,509,441
Accretion of preferred stock discount
Preferred stock converted (3,812,826) 3,812,826
Preferred stock redeemed (6,279,800)
Subordinated debt converted 3,052,348
Preferred stock converted to
subordinated debt (3,160,500)
Payment of dividends (138,455)
Cancellation of warrants (684,833) 262,500
Net loss
----------- ----------- ---------- --------
Balance, December 31, 1996 27,526,260 97,062,239 2,440,100
Issuance of common stock
Interest on notes receivable from employees
Stock issuance costs
Subordinated debt converted 15,671,322 125,000
Net loss
----------- ----------- ---------- --------
Balance, March 31, 1997 $43,197,582 $97,187,239 $2,440,100 $ --
=========== =========== ========== =========
<CAPTION>
NOTE
RECEIVABLE RETAINED
FROM EARNINGS
EMPLOYEES (DEFICIT) TOTAL
----------- ------------- ------------
<S> <C> <C> <C>
Balance, December 31, 1995 $ -- $ (6,217,605) $ 45,438,575
Issuance of preferred stock 34,188,260
Issuance of common stock (5,568,266) 45,519,336
Discount on 9% subordinated debentures 236,250 236,250
Interest on notes receivable from employees (113,685) (113,685)
Stock issuance costs (531,657) (3,885,578)
Purchase and cancellation of stock (722,744)
Unearned compensation in connection --
with the financial advisory agreements 234,722
Warrants issued 60,000
Adjustment to common stock as a result --
of guaranteed stock prices (682,201)
Accretion and payment of preferred stock --
dividends (2,969,464) (1,460,023)
Accretion of preferred stock discount --
Preferred stock converted --
Preferred stock redeemed (6,279,800)
Subordinated debt converted 3,052,348
Preferred stock converted to --
subordinated debt (3,160,500)
Payment of dividends (138,455)
Cancellation of warrants (422,333)
Net loss (47,632,893) (47,632,893)
----------- ------------ ------------
Balance, December 31, 1996 (5,681,951) (57,115,369) 64,231,279
Issuance of common stock
Interest on notes receivable from employees (102,975) (102,975)
Stock issuance costs (278,499) (278,499)
Subordinated debt converted 15,796,322
Net loss (3,933,058) (3,933,058)
----------- ------------ ------------
Balance, March 31, 1997 $(5,784,926) $(61,326,926) $ 75,713,069
=========== ============ ============
</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
1997 1996
------------ ------------
<S> <C> <C>
Operating activities:
Net loss $ (3,933,058) $ (2,119,809)
Adjustments to reconcile net loss to
net cash used by operating activities
Equity in net losses of limited partnerships,
net of tax 24,691 72,368
Increase in allowance for doubtful accounts -- 30,000
Depreciation and amortization 1,367,654 1,293,336
Amortization of loan costs 186,678 220,687
Amortization of warrants -- 112,500
Loss (gain) on sale of property and equipment 66,438 (847,549)
Changes in assets and liabilities, net of acquisition
Decrease (increase) in accounts receivable 31,380 (14,992)
(Increase) decrease in inventories (230,134) 3,528
Increase in other assets (852,423) (3,396,241)
Increase in debt issuance costs
and intangible assets (100,000) (75,001)
(Decrease) increase in accounts payable (70,477) 217,488
Increase in accrued expenses 205,727 348,656
Decrease in income taxes payable (76,889) --
Decrease in accrued expenses related to assets
held for sale (97,912) --
------------ ------------
Cash used by operating activities (3,478,325) (4,155,029)
------------ ------------
Investing activities:
Purchases of property and equipment (5,753,624) (471,137)
Proceeds from sale of property and equipment 20,950 2,663,359
Principal payments under notes receivable 122,794 5,636
Increase in notes receivable (68,750) --
Decrease (increase) in investments in and advances to
limited partnerships 23,824 (695,469)
(Increase) decrease in restricted cash (69,010) 840,100
(Increase) decrease in restricted certificates of deposit -- (25,847)
------------ ------------
Cash (used) provided by investing activities (5,723,816) 2,316,642
------------ ------------
Financing activities:
Proceeds from borrowings 227,500 --
Payments of borrowings (257,902) (3,568,278)
Issuance of preferred stock -- 3,500,000
Issuance of common stock -- 2,825,000
Decrease in stock subscription receivable 16,076,260 --
Increase in interest on notes receivable from employees (102,975) --
Payment of contingent liability for stock price guarantee (777,861) --
Stock issuance costs -- (715,690)
Purchase of stock -- (6,875)
Payment of dividends -- (168,432)
------------ ------------
Cash provided by financing activities 15,165,022 1,865,725
------------ ------------
Increase in cash and cash equivalents 5,962,881 27,338
Cash and cash equivalents, beginning of period 2,583,735 1,549,338
------------ ------------
Cash and cash equivalents, end of period $ 8,546,616 $ 1,576,676
============ ============
</TABLE>
7
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Company
caused this report to be signed on behalf by the undersigned, thereunto duly
authorized.
MALIBU ENTERTAINMENT WORLDWIDE, INC.
By: /s/ RICHARD M. FITZPATRICK
-------------------------------------
Richard M. FitzPatrick
Chief Financial Officer
May 13, 1997
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<PAGE> 10
INDEX TO EXHIBITS
Exhibit No Description
- ---------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,581,701
<SECURITIES> 0
<RECEIVABLES> 468,664<F1>
<ALLOWANCES> 0
<INVENTORY> 1,589,465
<CURRENT-ASSETS> 19,517,771
<PP&E> 89,807,017<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,935,012
<CURRENT-LIABILITIES> 12,769,477
<BONDS> 27,353,693
0
43,197,582
<COMMON> 97,187,239
<OTHER-SE> (64,671,752)
<TOTAL-LIABILITY-AND-EQUITY> 116,935,012
<SALES> 6,937,559
<TOTAL-REVENUES> 7,170,920
<CGS> 0
<TOTAL-COSTS> 10,369,874
<OTHER-EXPENSES> (83,555)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 792,968
<INCOME-PRETAX> (3,933,058)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,933,058)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,933,058)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
<FN>
<F1>ACCOUNTS RECEIVABLE AND PROPERTY AND EQUIPMENT REPRESENT NET NUMBERS.
</FN>
</TABLE>
