<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 March 31, 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 May 11, 2000, 57,142,547 shares of the Company's Common Stock were
outstanding.
<PAGE> 2
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED) (AUDITED)
------------- -------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 2,510,297 $ 1,873,074
Restricted cash 1,508,525 1,527,493
Inventories 1,095,761 1,066,042
Current portion of notes receivable 25,436 25,436
Assets held for sale 14,771,621 14,771,621
Prepaid expenses 523,752 553,545
------------- -------------
Total current assets 20,435,392 19,817,211
------------- -------------
Property and equipment, less accumulated depreciation 37,741,383 38,915,251
------------- -------------
Other noncurrent
Investments in and advances to limited partnerships 116,187 188,986
Other assets 131,870 152,341
Debt issuance costs, less accumulated amortization 1,055,229 1,145,009
Intangible assets, less accumulated amortization 771,119 782,076
------------- -------------
Total other noncurrent assets 2,074,405 2,268,412
------------- -------------
$ 60,251,180 $ 61,000,874
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of notes payable $ 12,030,852 $ 9,726,776
Accounts payable 1,198,679 2,353,195
Accrued expenses 7,045,263 6,363,829
Accrued expenses related to assets held for sale 605,993 610,902
------------- -------------
Total current liabilities 20,880,787 19,054,702
Line of credit 7,500,000 7,500,000
Term loan revolver 2,500,000 2,500,000
Notes payable 2,600,525 2,616,666
Dividends on preferred stock 1,856,785 3,383,475
Other accrued expenses 1,896,307 1,901,784
------------- -------------
Total liabilities 37,234,404 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; 148.57 outstanding 14,857,155 14,370,897
Series BB, 5000 shares authorized; 340.35 outstanding 28,033,872 26,711,089
Series CC, 5000 shares authorized; 516.32 outstanding 51,632,625 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 145,808,839 145,745,010
Outstanding warrants 435,100 435,100
Accumulated deficit (217,750,815) (213,276,041)
------------- -------------
Total shareholders' equity 23,016,776 24,044,247
------------- -------------
$ 60,251,180 $ 61,000,874
============= =============
</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
OPERATING REVENUES
Entertainment revenue $ 8,936,560 $ 8,419,220
------------ ------------
OPERATING EXPENSES
Entertainment expenses 7,692,343 7,843,716
General and administrative expenses 1,361,218 1,210,383
Other expenses 185,138 92,838
Depreciation and amortization 1,170,312 2,047,287
------------ ------------
Total operating expenses 10,409,011 11,194,224
------------ ------------
Operating loss (1,472,451) (2,775,004)
OTHER (EXPENSE) INCOME
Interest expense (1,153,228) (2,697,291)
Interest income 31,666 9,696
Other, net (23,977) 139,683
------------ ------------
Net loss $ (2,617,990) $ (5,322,916)
============ ============
NET LOSS APPLICABLE TO COMMON STOCK
Net loss $ (2,617,990) $ (5,322,916)
Less: Preferred stock dividends 1,856,785 --
------------ ------------
Net loss applicable to common stock $ (4,474,775) $ (5,322,916)
============ ============
Basic and diluted loss per share of common stock $ (0.08) $ (0.11)
============ ============
Weighted average number of shares of
common stock used in calculating
net loss per share 57,142,547 46,508,625
============ ============
</TABLE>
3
<PAGE> 4
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $(2,617,990) $(5,322,916)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 1,170,312 2,047,287
Interest expense associated with amortization of loan costs 489,780 581,435
Non-cash compensation expense 63,829 --
Loss (gain) on sale of property and equipment 25,234 (143,410)
Changes in assets and liabilities
Increase in inventories (44,411) (68,034)
Decrease (increase) in prepaid expenses and other assets 81,398 (103,284)
Increase in debt issuance costs
and intangible assets (400,000) --
Decrease in accounts payable (1,154,516) (1,455,918)
Increase in accrued expenses 688,569 936
Increase in accrued interest due shareholder -- 1,466,818
Decrease in accrued expenses related to assets
held for sale (4,909) (24,598)
----------- -----------
Cash used in operating activities (1,702,704) (3,021,684)
----------- -----------
Investing activities:
Purchases of property and equipment (50,675) (653,681)
Proceeds from disposal of property and equipment 10,900 685,627
Principal receipts under notes receivable -- 4,706
Decrease (increase) in investments in and advances to
limited partnerships 72,799 (24,393)
Decrease (increase) in restricted cash 18,968 (74,768)
----------- -----------
Cash provided by (used in) investing activities 51,992 (62,509)
----------- -----------
Financing activities:
Proceeds from borrowings 2,400,000 3,105,364
Payments of borrowings (112,065) (217,153)
----------- -----------
Cash provided by financing activities 2,287,935 2,888,211
----------- -----------
Increase (decrease) in cash and cash equivalents 637,223 (195,982)
Cash and cash equivalents, beginning of period 1,873,074 237,336
----------- -----------
Cash and cash equivalents, end of period $ 2,510,297 $ 41,354
=========== ===========
Cash paid for interest $ 592,702 $ 471,717
=========== ===========
Non-cash dividends on preferred stock $ 1,856,785 $ --
=========== ===========
</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 three
month period ended March 31, 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.
The contract to sell four other properties by the Company entered into
in March 2000 has been cancelled by the purchaser according to their rights
under the agreement. The Company is continuing to negotiate with the purchaser
under the cancelled agreement as well as other purchasers to sell these and
other assets to raise cash to meet the requirements of the Company's primary
lender. However, there can be no assurance that any transaction will occur or
as to the timing of any such transaction.
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, including financing from
its largest shareholder, 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. Furthermore, the Company will not have sufficient cash
resources to fund its debt obligations through June 2000 without selling
assets, obtaining other financing or in modifying the terms of its existing
indebtedness. Therefore, the Company is seeking to sell certain non-core
assets. If the Company is unsuccessful in selling these non-core 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.
2
<PAGE> 6
At March 31, 2000, the Company had $20.4 million of current assets
(including $1.5 million of restricted cash) and $ 20.9 million of current
liabilities (including $12.0 million of current debt), or negative working
capital of $0.5 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 three months ended March 31,
2000 were to fund operations ($1.7 million), pay debt ($0.1 million) and
interest ($0.6 million). During the three months ended March 31, 2000, the
Company financed its operations primarily through borrowings from its primary
lender ($2.4 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 three months ended
March 31, 2000 are not necessarily indicative of the Company's future results
of operations.
Results of Operations
For the three months ended March 31, 2000, the Company had a net loss to
common shareholders of $4.5 million ($0.08 per common share), compared to a net
loss of $5.3 million ($0.11 per common share) for the comparable period last
year.
Entertainment revenue increased by $0.5 million (or 6%) for the three
months ended March 31, 2000 from $8.4 million for the three months ended March
31, 1999 to $8.9 million for the three months ended March 31, 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 in the latter part of 1999. The increase was partially offset by the
loss in revenues on the facility that was sold in February 2000.
Entertainment expenses and general and administrative expenses for the
three months ended March 31, 2000 were essentially unchanged from the
comparable period in 1999.
Depreciation and amortization for the quarter ended March 31, 2000
decreased by $0.9 million due principally the writedown of assets at year-end
in compliance with Statement of Financial Accounting Standards No. 121.
Interest expense decreased by $1.5 million for the three months ended March
31, 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.
Amex Listing
The Company's common shares are listed for trading on the American Stock
Exchange ("AMEX"). The Company has been notified that it does not currently meet
the published guidelines of the AMEX for continued listing and that the AMEX has
initiated delisting procedures. However, the generation of cash through sales of
non-core assets is intended to improve the Company's financial position and
results of operations. Accordingly, the Company has appealed the AMEX's initial
determination to delist its common shares and requested that AMEX continue the
listing. There can be no assurance that the AMEX will continue the Company's
listing.
If the AMEX were to delist the Company's common shares, it is possible that
the shares would continue to trade in the over-the-counter market or that price
quotations would be reported by other sources. The public market for the
Company's common shares and the availability of such quotations would, however,
depend on the number of holders of Company common shares at that time and the
interest in maintaining a market for the common stock on the part of securities
firms. Accordingly, there can be no assurance that there would be a market for
the shares or that any securities firm would maintain a market in or quote
prices for the shares. If AMEX were to delist the Company's common shares, the
market for the shares could be adversely affected.
3
<PAGE> 7
The Company's common shares are currently "margin securities," as that term
is defined under the rules of the Board of Governors of the Federal Reserve
System. Because they are margin securities, among other things, brokers are
allowed to extend credit on the collateral of the shares. If the shares were to
be delisted by the AMEX and were not otherwise publicly traded or quoted, it is
possible that the shares would no longer constitute margin securities and,
therefore, could no longer be used as collateral for loans made by brokers.
Impact of Year 2000 Issues
The Company was required to modify or replace portions of its computer
software and certain hardware so that those systems would properly utilize
dates beyond December 31, 1999. The costs of those modifications and
replacements were $40,000. With modifications or replacements of existing
software and certain hardware, the year 2000 issues did not materially
adversely affect the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A portion of the Company's long-term debt as of March 31, 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 March 31, 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 terms and outstanding amounts of the
Company's borrowings at March 31, 2000, the Company has determined that there
are no material interest rate risk exposures to the Company's financial
position, results of operations or cash flows as of such date.
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.
4
<PAGE> 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
27 Financial Data Schedule (for SEC purposes only)
(b) No reports of Form 8-K were filed during the period covered by this
report.
5
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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/ R. SCOTT WHEELER
----------------------------------
R. Scott Wheeler
Chief Financial Officer
May 12, 2000
6
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
27 Financial Data Schedule (for SEC purposes only)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,510,297
<SECURITIES> 0
<RECEIVABLES> 25,436
<ALLOWANCES> 0
<INVENTORY> 1,095,761
<CURRENT-ASSETS> 20,435,392
<PP&E> 37,741,383<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,251,180
<CURRENT-LIABILITIES> 20,880,787
<BONDS> 12,600,525
0
94,523,652
<COMMON> 145,808,839
<OTHER-SE> 435,100
<TOTAL-LIABILITY-AND-EQUITY> 60,251,180
<SALES> 8,936,560
<TOTAL-REVENUES> 8,936,560
<CGS> 0
<TOTAL-COSTS> 10,409,011
<OTHER-EXPENSES> 7,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,153,228
<INCOME-PRETAX> (2,617,990)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,617,990)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,474,775)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
<FN>
<F1>PP&E IS NET OF ACCUMULATED DEPRECIATION
</FN>
</TABLE>
