U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________.
Commission file number 0-23506
DIVA ENTERTAINMENT, INC.
(Exact name of small business issuer in its charter)
DELAWARE 33-0601498
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 VARICK STREET, 13TH FLOOR, NEW YORK, NEW YORK 10014
-------------------------------------------------------
(Address of principal executive offices)
(212) 807-6994
---------------------------
(Issuer's telephone number)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 ____
The number of shares outstanding of the issuer's Common Stock, $.001
par value per share, as of January 17, 2000 is 5,498,800.
Transitional Small Business Disclosure Format (check one):
YES _____ NO X
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL INFORMATION
DIVA ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
12/31/99 6/30/99
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
ASSETS $ $
Current assets
Cash .......................................................... -- --
Accounts receivable.............................................. 1,275,068 1,201,860
Other current assets............................................. 264,292 151,599
--------- ---------
Total current assets................................................... 1,539,360 1,353,459
Property, plant and equipment, net of accumulated
depreciation of $140,994 and $96,792 at
December 31, 1999 and June 30, 1999,
respectively..................................................... 351,919 349,316
Other assets
Goodwill......................................................... 534,922 558,872
Other assets..................................................... 39,293 42,775
--------- ---------
Total other assets..................................................... 574,215 601,647
Total Assets..................................................... 2,465,494 2,304,422
========= =========
LIABILITIES
Current liabilities
Overdraft........................................................ 188,838 183,045
Accounts payable................................................. 696,804 831,467
Accrued liabilities.............................................. 282,665 161,242
Other current liabilities........................................ 1,435,829 1,195,258
--------- ---------
Total current liabilities.............................................. 2,604,136 2,371,012
Other liabilities
Debt payable after 12 months..................................... 110,664 192,448
--------- ---------
Total Liabilities................................................ 2,714,800 2,563,460
SERIES B REDEEMABLE CONVERTIBLE PREFERRED
STOCK, $0.001 par value, 3,000 shares issued
and outstanding.................................................. 3,000,000 3,000,000
1
<PAGE>
STOCKHOLDERS' DEFICIENCY
Common stock .......................................................... 5,498 5,498
Paid in capital in excess of par value................................. 50,425 50,425
Series A Convertible Preferred Stock................................... 1,150,000 1,150,000
Accumulated Deficit.................................................... (4,455,229) (4,464,961)
--------- ---------
Total Stockholders' Deficiency................................... (3,249,306) (3,259,038)
--------- ---------
Total Liabilities and Stockholders' Deficiency......................... 2,465,494 2,304,422
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
2
<PAGE>
CONSOLIDATED FINANCIAL INFORMATION
DIVA ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
12/31/99 12/31/98 12/31/99 12/31/98
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
$ $ $ $
<S> <C> <C> <C> <C>
Revenue................................ 561,142 382,758 1,152,028 767,434
SG&A expenses.......................... 554,277 532,085 1,117,275 1,034,365
Amortization of goodwill............... 11,975 11,976 23,950 23,951
--------- --------- --------- ---------
Operating Profit (Loss)....... (5,110) (161,303) 10,803 (290,882)
Interest expense....................... 514 10,256 1,070 21,940
--------- --------- --------- ---------
Pre-Tax Profit (Loss)......... (5,624) (171,559) 9,733 (312,822)
Income tax expense..................... -- -- -- --
--------- --------- --------- ---------
Net Income (Loss)............. (5,624) (171,559) 9,733 (312,822)
========= ========= ========= =========
Weighted average number of
common shares outstanding.............. 5,498,800 4,721,000 5,498,800 4,721,000
Net income (loss) per
share of common stock.................. $0.00 ($0.04) $0.00 ($0.07)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
CONSOLIDATED FINANCIAL INFORMATION
DIVA ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
12/31/99 12/31/98
(UNAUDITED) (UNAUDITED)
----------- -----------
$ $
<S> <C> <C>
Operating activities
Net income (loss)...................................................... 9,733 (312,822)
Depreciation and amortization.......................................... 68,152 54,189
Change in other net operating assets................................... 41,430 392,678
Increase in cash overdraft............................................. 5,793 60,941
Other.................................................................. (78,302) (129,071)
------ -------
Net cash provided by (used in)
operating activities................................................... 46,806 65,915
Investing activities
Capital expenditures................................................... (46,806) (89,776)
------ -------
Net cash provided by (used in)
investing activities................................................... (46,806) (89,776)
Financing activities............................................................ -- --
------ -------
Net cash provided by (used in)
financing activities................................................... -- --
------ -------
Increase in cash................................................................ -- (23,861)
Cash at July 1.................................................................. -- 23,861
Cash at September 30............................................................ -- --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
DIVA ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. 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, all adjustments considered necessary for a fair presentation have
been included, and such adjustments are of a normal recurring nature. Results
for interim periods should not be considered indicative of results for any other
interim period or for future years.
NOTE 2
No income taxes were paid during the three months ended December 31, 1999.
NOTE 3
The effects of non-cash investing and financing activities have been excluded
from the statement of cash flows in accordance with SFAS 95.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The revenue for Diva Entertainment, Inc. (the "Company") increased from
$383,000 for the fiscal quarter ended December 31, 1998 to $561,000 for the
quarter ended December 31, 1999. This is an improvement of 46% and is marginally
lower than the 53% gain made in the first quarter of this financial year. As a
result, the revenue increased by 50% from $767,000 for the six months ended
December 31, 1998 to $1,152,000 for the six months ended December 31, 1999.
In contrast the SG&A expenses of the Company only increased by 4% from
$532,000 for the quarter ended December 31, 1998 to $554,000 for the quarter
ended December 31, 1999. This increase is lower than the 12% increase incurred
in the first quarter of this financial year. As a result the SG&A expenses only
increased by 8% for the six months ended December 31, 1999 compared with the
corresponding period in the previous year ($1,117,275 compared with $1,034,365).
Therefore the net operating loss for the fiscal quarter ended December
31, 1999 is much lower than the net loss for the corresponding period in the
previous year ($5,000 compared with $161,000). For the fiscal six months ended
December 31, 1999, the Company made an operating profit of $11,000 that
contrasts with the operating loss of $291,000 for the corresponding period in
the previous year.
The operating performance of Prima Eastwest Model Management, Inc.
("Prima") in the quarter ended December 31, 1999, showed a significant
improvement from the corresponding period in the previous year (a profit of
$43,000 compared with a profit of $12,000). The sales were 30% higher,
increasing from $228,000 in the quarter ended December 31, 1998 to $297,000 in
the quarter ended December 31, 1999 while the SG&A expenses increased by 19%
from $204,000 in the quarter ended December 31, 1998 to $242,000 in the quarter
ended December 31, 1999. These results are closer to the anticipated performance
of Prima compared with the previous quarter when sales were lower than for
corresponding periods in previous years. Due to losses in the quarter ended
September 30, 1999, the operating profit of Prima for the six months ended
December 31, 1999 at $15,000 was lower than for the six months ended December
31, 1998 at $36,000. The revenue for the six months ended December 1999 was
$546,000, which is an increase of 21% over the $452,000 revenue for the six
months ended December 31, 1998. At the same time, SG&A expenses increased by
29%. These expenses increased from $392,000 in the six months ended December 31,
1998 to $507,000 in the six months ended December 31, 1999. Although these
higher expenses are partly due to the new and more expensive rented office,
management is reviewing the expenses to ensure that they do not continue to
increase at levels so much above inflation without a corresponding increase in
productivity and sales.
Management forecast losses at Que Management, Inc. ("Que") for the
first years of operations. However, the results of Que were better than forecast
and management believes that many of the initial expenses will not be repeated.
Furthermore, Que has already begun working and co-operating closely with Prima
to the benefit of both companies. This enabled the Company to make a significant
improvement on its Que operations for the quarter ended December 31, 1999
compared with the quarter ended December 31, 1998. The loss declined to $43,000
from $123,000. However this does represent a decline in operations compared with
the quarter ended September 30, 1999 when Que had an operating profit of
$59,000. Nevertheless Que did perform better for the six months ended December
31, 1999 compared with the six months ended December 31, 1998 (a profit of
$16,000 compared with a loss of $230,000) The main reason for the better results
in 1999
6
<PAGE>
compared with 1998 is that the revenue increased significantly while the SG&A
expenses only experienced modest increases. In the quarter ended December 31,
1999, Que had revenue of $264,000 compared with $158,000 for the fiscal quarter
ended December 31, 1998, which is an increase of 67%. At the same time SG&A
expenses only increased by 9% from $281,000 for the quarter ended December 31,
1998 to $307,000 for the quarter ended December 31, 1999. In the six months
ended December 31, 1999, Que had revenue of $605,000 compared with $319,000 for
the six months ended December 31, 1998, which is an increase of 89%. At the same
time SG&A expenses only increased by 7% from $549,000 for the six months ended
December 31, 1998 to $589,000 for the six months ended December 31, 1999.
Management is continuing to emphasize the need to increase revenue with a
proportionate increase in SG&A expenses although there can be no guarantee that
this can be achieved on a continuing basis.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On August 9, 1999, the Company filed a Current Report on Form 8-K
regarding a corporate reorganization effective April 1, 1999.
On September 28, 1999, the Company filed a Current Report on Form 8-K
dated June 1, 1999, regarding a change in the Company's fiscal year end and the
appointment of accountants.
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DIVA ENTERTAINMENT, INC.
Date: February 11, 2000 By: /s/ PETER C. ZACHARIOU
-----------------------------
Peter C. Zachariou, President
8
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,275,068
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,539,360
<PP&E> 351,919
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,465,494
<CURRENT-LIABILITIES> 2,604,136
<BONDS> 0
0
3,000,000
<COMMON> 5,498
<OTHER-SE> 3,254,804
<TOTAL-LIABILITY-AND-EQUITY> 2,465,494
<SALES> 1,152,028
<TOTAL-REVENUES> 1,152,028
<CGS> 0
<TOTAL-COSTS> 1,141,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,733
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,733
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,733
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
