<PAGE> 1
===============================================================================
UNITED STATES
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 Quarter Ended June 30, 2000
----------
MALIBU ENTERTAINMENT WORLDWIDE, INC.
717 North Harwood, Suite 1650
Dallas, Texas 75201
(214) 210-8701
----------
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 August 9, 2000, 57,142,547 shares of the Company's Common Stock were
outstanding.
===============================================================================
<PAGE> 2
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED) (AUDITED)
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 3,781,358 $ 1,873,074
Restricted cash 1,497,989 1,527,493
Inventories 1,113,290 1,066,042
Current portion of notes receivable 15,809 25,436
Assets held for sale 14,771,621 14,771,621
Prepaid expenses 897,881 553,545
------------- -------------
Total current assets 22,077,948 19,817,211
------------- -------------
Property and equipment, less accumulated depreciation 36,883,550 38,915,251
------------- -------------
Other noncurrent
Investments in and advances to limited partnerships 115,620 188,986
Other assets 124,390 152,341
Debt issuance costs, less accumulated amortization 456,972 1,145,009
Intangible assets, less accumulated amortization 755,217 782,076
------------- -------------
Total other noncurrent assets 1,452,199 2,268,412
------------- -------------
$ 60,413,697 $ 61,000,874
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of notes payable $ 11,990,480 $ 9,726,776
Accounts payable 1,219,698 2,353,195
Accrued expenses 7,447,520 6,363,829
Accrued expenses related to assets held for sale 563,626 610,902
------------- -------------
Total current liabilities 21,221,324 19,054,702
Line of credit 7,500,000 7,500,000
Term loan revolver 2,500,000 2,500,000
Notes payable 2,205,839 2,616,666
Dividends on preferred stock 1,877,417 3,383,475
Other accrued expenses 1,886,643 1,901,784
------------- -------------
Total liabilities 37,191,223 36,956,627
------------- -------------
Commitments and contingencies
Shareholders' equity
Preferred stock, 6,000,000 shares authorized with no par value; $100,000 liquidation value
Series AA, 5000 shares authorized; 151.24 outstanding 15,124,004 14,370,897
Series BB, 5000 shares authorized; 347.61 outstanding 28,759,789 26,711,089
Series CC, 5000 shares authorized; 524.96 outstanding 52,496,643 50,058,192
Series F, 2,700,000 authorized; none outstanding
Series G, 213,551 authorized; none outstanding
Common stock, 100,000,000 shares authorized with no par
value; 57,142,547 shares issued and outstanding 145,872,669 145,745,010
Outstanding warrants 435,100 435,100
Accumulated deficit (219,465,731) (213,276,041)
------------- -------------
Total shareholders' equity 23,222,474 24,044,247
------------- -------------
$ 60,413,697 $ 61,000,874
============= =============
</TABLE>
2
<PAGE> 3
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Entertainment revenue $ 12,956,067 $ 12,346,498 $ 21,892,627 $ 20,765,718
--------------- --------------- --------------- ---------------
OPERATING EXPENSES
Entertainment expenses 9,024,240 9,362,953 16,716,583 17,206,669
General and administrative expenses 1,381,301 1,433,008 2,742,519 2,643,391
Other expenses 272,735 93,423 457,873 186,261
Depreciation and amortization 1,235,478 2,067,208 2,405,790 4,114,495
--------------- --------------- --------------- ---------------
Total operating expenses 11,913,754 12,956,592 22,322,765 24,150,816
--------------- --------------- --------------- ---------------
Operating income (loss) 1,042,313 (610,094) (430,138) (3,385,098)
OTHER (EXPENSE) INCOME
Interest expense (1,334,928) (2,915,119) (2,488,156) (5,612,410)
Interest income 48,667 7,628 80,333 17,324
Other, net (78,221) (72,047) (102,198) 67,634
--------------- --------------- --------------- ---------------
Net loss before extraordinary item (322,169) (3,589,632) (2,940,159) (8,912,550)
EXTRAORDINARY ITEM
Debt forgiveness 484,669 -- 484,669 --
--------------- --------------- --------------- ---------------
Net income (loss) $ 162,500 $ (3,589,632) $ (2,455,490) $ (8,912,550)
=============== =============== =============== ===============
NET LOSS APPLICABLE TO COMMON STOCK
Net income (loss) $ 162,500 $ (3,589,632) $ (2,455,490) $ (8,912,550)
Less: Preferred stock dividends 1,877,417 -- 3,734,202 --
--------------- --------------- --------------- ---------------
Net loss applicable to common stock $ (1,714,917) $ (3,589,632) $ (6,189,692) $ (8,912,550)
=============== =============== =============== ===============
Basic and diluted loss per share of common stock $ (0.03) $ (0.08) $ (0.11) $ (0.19)
=============== =============== =============== ===============
Weighted average number of shares of
common stock used in calculating
net loss per share 57,142,547 46,508,625 57,142,547 46,508,625
=============== =============== =============== ===============
</TABLE>
3
<PAGE> 4
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
2000 1999
------------ ------------
<S> <C> <C>
Operating activities:
Net loss $ (2,455,490) $ (8,912,550)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 2,405,790 4,114,495
Interest expense associated with amortization of loan costs 1,069,674 691,215
Extraordinary item (484,669) --
Non-cash compensation expense 127,659 191,490
Loss (gain) on sale of property and equipment 25,234 (71,764)
Changes in assets and liabilities
Increase in inventories (61,940) (172,075)
Increase in prepaid expenses and other assets (285,251) (204,189)
Increase in debt issuance costs and intangible assets (400,000) (136,219)
Decrease in accounts payable (1,133,497) (2,178,588)
Increase in accrued expenses 1,099,525 826,769
Increase in accrued interest due shareholder -- 3,025,135
Decrease in accrued expenses related to assets
held for sale (47,276) (138,522)
------------ ------------
Cash used in operating activities (140,241) (2,964,803)
------------ ------------
Investing activities:
Purchases of property and equipment (412,418) (2,847,630)
Proceeds from disposal of property and equipment 10,900 900,448
Principal receipts under notes receivable 9,627 9,678
Decrease in investments in and advances to
limited partnerships 73,366 2,859
Decrease (increase) in restricted cash 29,504 (380,797)
------------ ------------
Cash used in investing activities (289,021) (2,315,442)
------------ ------------
Financing activities:
Proceeds from borrowings 2,543,914 5,805,364
Payments of borrowings (206,368) (669,420)
------------ ------------
Cash provided by financing activities 2,337,546 5,135,944
------------ ------------
Increase (decrease) in cash and cash equivalents 1,908,284 (144,301)
Cash and cash equivalents, beginning of period 1,873,074 237,336
------------ ------------
Cash and cash equivalents, end of period $ 3,781,358 $ 93,035
============ ============
Cash paid for interest $ 1,343,504 $ 1,060,665
============ ============
Non-cash dividends on preferred stock $ 3,734,202 $ --
============ ============
</TABLE>
4
<PAGE> 5
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
1. 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 material 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, therefore, operating results for the six month
period ended June 30, 2000 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2000.
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, 1999. Among other things, the auditor's opinion
accompanying the Company's financial statements for the year ended December 31,
1999 includes a going-concern qualification.
2. ASSET SALES
In February 2000, the Company sold its McAllen, Texas facility for a
profit participation based on future income earned at the location for the next
5 years. In calendar year 1999, this facility generated $0.8 million of net
revenues and $0.2 million of operating losses. Substantially all of the assets
were transferred to the new owner.
In July and August 2000, the Company entered into contracts to sell
four properties that it determined to be non-core assets. The gross proceeds of
the sales would be approximately $4.4 million. If the sales are completed, the
net proceeds will be used to pay down the Company's primary lender's note. Two
of the sale agreements are subject to customary closing conditions, such as the
buyer's satisfaction with its due diligence review. There can be no assurance
that the sale transactions will close or as to the timing of such transactions.
3. DEBT OBLIGATIONS
The Company and its primary lender have agreed in writing to
forebearance agreements relating to the Company's debt obligations, which were
originally due June 30, 2000 to August 31, 2000. The Company and this lender are
currently negotiating the terms of an amended and restated credit agreement.
There can be no assurance that an agreement will be reached or as to the timing
or effects thereof.
The Company also restructured its debt obligations with another
lender, which resulted in debt forgiveness of approximately $484,000 and has
been recorded in the second quarter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources; Recent Developments
The Company's internally generated cash has been insufficient to fund its
working capital, debt service and capital expenditure requirements for the past
several years. The Company historically funded its operations and capital
expenditures principally through external financing and cash flow from
operations. The Company presently expects that it will not have sufficient cash
resources to fund its operations after December 2000 unless it is able to
generate cash through asset sales or other transactions.
5
<PAGE> 6
The Company's primary lender has agreed to two forbearances of the
Company's debt obligations, which were originally due June 30, 2000. The holder
of the $21.6 million of secured debt has agreed to refrain from exercising any
of its remedies under the loan until August 31, 2000. The Company and this
lender are currently negotiating the terms of an agreement and restated credit
agreement, which is expected to be finalized by August 31, 2000. It is
anticipated that the new agreement will require the Company to continue to
divest certain assets in an effort to generate cash to fund its working
capital, debt service, capital expenditure requirements and to repay
indebtedness. If the Company is unsuccessful in selling these assets, in
obtaining other financing, modifying the terms of its existing indebtedness or
if the proceeds of such sales are significantly less than their recorded value,
the Company will be required to take extraordinary steps to preserve cash and
satisfy its obligations or to restructure its obligations, including seeking to
curtail normal operations at various facilities, liquidating assets or
significantly altering its operations. There can be no assurance that the
Company will be able to take such actions or, if so, as to the timing, terms or
effects thereof. If the Company is unable to take such actions or they are not
sufficient to permit the Company to continue to operate, the Company may seek
or be forced to seek to restructure or reorganize its liabilities, including
through proceedings under the federal bankruptcy laws.
At June 30, 2000, the Company had $22.1 million of current assets
(including $1.5 million of restricted cash) and $ 21.2 million of current
liabilities (including $12.0 million of current debt), or working capital of
$0.9 million (compared to working capital of $0.8 million at December 31, 1999,
which included $1.5 million of restricted cash).
The Company's principal uses of cash during the six months ended June 30,
2000 were to pay debt ($0.2 million) and capital expenditures ($0.4 million).
During the six months ended June 30, 2000, the Company financed its operations
primarily through borrowings from its primary lender ($2.5 million).
Seasonality
The business of the Company is 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. Furthermore, since many of the attractions
at the parks involve outdoor activities, prolonged periods of inclement weather
result in a substantial reduction of revenues during such periods. Accordingly,
the Company believes that the results of operations for the six months ended
June 30, 2000 are not necessarily indicative of the Company's future results of
operations.
Results of Operations
For the three months ended June 30, 2000, the Company had a net loss to
common shareholders of $1.7 million ($0.03 per common share), compared to a net
loss of $3.6 million ($0.08 per common share) for the comparable period last
year. For the six months ended June 30, 2000, the Company had net loss to
common shareholders of $6.2 million ($0.11 per common share), compared to a net
loss of $8.9 million ($0.19 per common share) for the comparable period last
year.
Entertainment revenue increased by $0.6 million (or 5%) and $1.1 million
(5%) respectively, for the three and six months ended June 30, 2000 from $12.3
million and $20.8 million for the three and six months ended June 30, 1999 to
$13.0 million and $21.9 million for the three and six months ended June 30,
2000. The increase in revenue is primarily due to having a group sales force
that was fully staffed in 2000, price increases implemented in the first
quarter of 2000 and increased revenues from the parks on which significant
renovations were performed during 1999. The increase was partially offset by
the loss in revenues on the facility that was sold in February 2000.
Entertainment expenses decreased by $0.3 million (or 4%) and $0.5 million
(or 3%) respectively, for the three and six months ended June 30, 2000 from
$9.4 million and $17.2 million for the three and six months ended June 30, 1999
to $9.0 million and $16.7 million for the three and six months ended June 30,
2000. The decrease is primarily due to reductions in payroll and operating
costs.
General and administrative expenses for the three and six months ended June
30, 2000 were essentially unchanged from the comparable period in 1999.
Depreciation and amortization for the quarter and six months ended June 30,
2000 decreased by $0.8 million and $1.7 million respectively, due principally
the writedown of assets at year-end in compliance with Statement of Financial
Accounting Standards No. 121.
6
<PAGE> 7
Interest expense decreased by $1.6 million and $3.1 million for the three
and six months ended June 30, 2000, as compared to the comparable periods in
the prior year due to the recapitalization completed in 1999 described in the
Company's 1999 Form 10-K.
Stock Listing
In June, the Company withdrew its appeal of the American Stock
Exchange's ("AMEX") decision to de-list the Company's stock. As previously
reported, the Company did not meet the published guidelines for continued
listing on the AMEX. The Company ceased trading on the AMEX on June 25, 2000.
Currently, the Company's common shares are quoted on the National Association
of Securities Dealers' Electronic Bulletin Board (the "OCTBB"). The new trading
symbol for the Company is "MBEW".
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A portion of the Company's long-term debt as of June 30, 2000 bore interest
at variable rates and the Company is exposed to market risk from changes in
interest rates primarily through its borrowing activities, which are described
in the "Notes Payable" section to the Financial Statements included in the
Company's 1999 Form 10-K. At June 30, 2000, the Company did not hold any
derivatives related to interest rate exposure for any of its debt facilities
and it does not use financial instruments for trading or other speculative
purposes. Based on the Company's borrowings at June 30, 2000, if the prime rate
were to increase by 1%, the Company's cash flow and interest expense would
increase by approximately $0.2 million. However, management has determined that
this does not materially effect the Company's financial position.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Due to the nature of the attractions at the Company's entertainment parks,
the Company has been, and will likely continue to be, subject to a significant
number of personal injury lawsuits, certain of which may involve claims for
substantial damages. The Company also is from time to time a party to other
claims and legal proceedings, and is subject to environmental, zoning and other
legal requirements. As of the date of this report, the Company does not believe
that any such matter is reasonably likely to have a material adverse effect on
the Company's financial position or results of operations. However, there can
be no assurance in this regard or that the Company will not be subject to
material claims or legal proceedings or requirements in the future.
ITEM 5. OTHER INFORMATION
Forward-Looking Statements
This Report (including any documents incorporated by reference herein)
contains certain forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) and information relating to
the Company that is based on the beliefs of the Company's management, as well
as assumptions made by and information currently available to the management of
the Company. When used herein, words such as "anticipate," "believe,"
"estimate," "expect," "intend" and similar expressions, as they relate to the
Company or the Company's management, identify forward-looking statements. Such
statements reflect the current views of the Company's management with respect
to future events and are subject to certain risks, uncertainties and
assumptions relating to the Company's ability to obtain additional capital
resources and/or working capital, the Company's operations and results of
operations of the Company and the success of the Company's business and plan,
competitive factors and pricing pressures; general economic conditions; the
failure of market demand for the types of entertainment opportunities the
Company provides or plans to provide in the future and for family entertainment
in general to be commensurate with management's expectations or past
experience; impact of present and future laws; ongoing need for capital
improvements; changes in operating expenses; adverse changes in governmental
rules or policies; changes in demographics, economics and other factors. Should
one or more of these assumptions prove incorrect, actual results or outcomes
may vary materially from those described herein as anticipated, believed,
estimated, expected or intended. Accordingly, shareholders are cautioned not to
place undue reliance on such forward-looking statements.
7
<PAGE> 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
10.27 Forbearance Agreement dated July 1, 2000, between the Company
and Foothill Capital Corporation (filed herewith)
10.28 Forbearance Agreement dated July 26, 2000 between the Company and
Foothill Capital Corporation (filed herewith)
27 Financial Data Schedule (for SEC purposes only)
(b) No reports of Form 8-K were filed during the period covered by this
report.
8
<PAGE> 9
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/ R. SCOTT WHEELER
------------------------------
R. Scott Wheeler
Chief Financial Officer
August 14, 2000
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.27 Forbearance Agreement dated July 1, 2000, between the Company
and Foothill Capital Corporation (filed herewith)
10.28 Forbearance Agreement dated July 26, 2000 between the Company and
Foothill Capital Corporation (filed herewith)
27 Financial Data Schedule (for SEC purposes only)
</TABLE>
