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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE OF
1934
For the transition period from ____________ to ____________
Commission File No. 0-23914
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 87-0521389
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
16055 Space Center Blvd., Ste. 230
Houston, Texas 77062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICERS)
ISSUER'S TELEPHONE NUMBER: (713) 486-6115
Not applicable
(FORMER NAME OR FORMER ADDRESS, 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 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
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PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check Whether the Registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Not applicable
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
August 5, 1996
Common stock: 20,200,590
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management and commence on the
following page, together with Related Notes. In the opinion of management, the
Financial Statements fairly present the financial condition of the Registrant.
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ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
- ------ ------------ -------------
(Unaudited) (Note)
<S> <C> <C>
Current Assets:
Cash $ 33,070 $ 62,277
Accounts Receivable 416,675 455,766
Retail Inventories 149,794 133,683
Other Current Assets 587,595 307,430
----------- -----------
1,187,134 959,156
Property and Equipment 4,172,266 3,641,044
Less Accumulated Depreciation (1,355,836) (1,082,201)
----------- -----------
2,816,430 2,558,843
Other Assets 2,566 248,594
----------- -----------
Total Assets $ 4,006,130 $ 3,766,593
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts Payable and Accrued Expenses $ 725,843 $ 586,792
Notes Payable and Current Portion of Long-Term Debt 419,665 366,215
Other Current Liabilities 147,944 15,350
----------- -----------
1,293,452 968,357
Long-Term Debt 174,727 8,626
Deferred Income Taxes 75,028 75,028
Stockholders' Equity
Common Stock 20,200 20,231
Additional Paid-In Capital 2,391,881 2,470,990
Unearned Compensation 0 (67,269)
Retained Earnings 50,842 290,630
----------- -----------
2,462,923 2,714,582
----------- -----------
Total Liabilities And Stockholders' Equity $ 4,006,130 $ 3,766,593
=========== ===========
</TABLE>
See Notes To Condensed Consolidated Financial Statements.
Note: The Balance Sheet at December 31, 1995, has been derived from the Audited
Financial Statements at that date.
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ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
---- ----
<S> <C> <C>
Revenues $ 1,818,935 $ 1,620,422
Cost Of Goods Sold 931,447 757,225
----------- -----------
Gross Profit 887,488 863,197
General and Administrative Expenses 669,317 767,245
Depreciation and Amortization 319,545 129,976
Interest Expense 36,394 15,136
----------- -----------
(Loss) Before Income Taxes (137,768) (49,160)
Income Taxes 0 0
----------- -----------
Net (Loss) ($137,768) ($49,160)
=========== ===========
Net (Loss) Per Share ($0.01) ($0.00)
=========== ===========
Weighted Average Shares Outstanding 20,220,370 19,506,396
=========== ===========
</TABLE>
See Notes To Condensed Consolidated Financial Statements.
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ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
--------- ---------
<S> <C> <C>
Revenues $3,621,542 $3,405,814
Cost Of Goods Sold 1,817,323 1,667,618
---------- -----------
Gross Profit 1,804,219 1,738,196
General and Administrative Expenses 1,391,735 1,603,950
Depreciation and Amortization 595,910 241,619
Interest Expense 56,362 64,036
---------- -----------
(Loss) Before Income Taxes (239,788) (171,409)
Income Taxes 0 0
---------- -----------
Net (Loss) ($239,788) ($171,409)
========== ===========
Net (Loss) Per Share ($0.01) (40.01)
========== ===========
Weighted Average Shares Outstanding 20,220,370 19,480,470
========== ===========
</TABLE>
See Notes To Condensed Consolidated Financial Statements.
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ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
---- ----
<S> <C> <C>
Cash From (Used In) Operations $ 69,870 ($ 13,000)
Investing Activities
Purchase of Property and Equipment (549,285) (512,000)
Sale of Note Receivable 192,900 0
Other 49,628 0
---------- ---------
(306,757) (512,000)
Financing Activities
Borrowing and Repayment of Debt 219,551 (74,000)
Issuance of Additional Common Stock (11,871) 896,000
---------- ---------
207,680 822,000
Increase (Decrease) In Cash ($ 29,207) $297,000
========== =========
</TABLE>
See Notes To Condensed Consolidated Financial Statements.
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ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q and Item 10 of
Regulation S-B. Accordingly, they do not include all of the information for
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month period ended June
30, 1996, are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
NOTE 2 - DISCOUNT ON NOTE RECEIVABLE
On June 21, the Company discounted the note receivable of $192,900 it
had received in connection with the sale of its retail music operations to
$100,000 and sold it back to its makers, including a former director of the
Company. The discounted price was equal to an offer received by the company
from an outside third party to purchase the note. The discount of $92,900 is
being amortized over the balance of the year.
NOTE 3 - UNEARNED COMPENSATION
In 1995, the Company granted 100,000 shares and 30,000 shares,
respectively, of the Company's unregistered and restricted common stock to a
Division President/Director of the Company and an officer of the Company. These
shares were granted pursuant to employment agreements with these individuals and
vested over twenty-four months. During the current quarter, the 100,000 shares
granted to the Division President was determined to have been part of the
consideration given for an investment in a military club management services
company owned by the Division President prior to joining the company. This
investment was written off in 1994.
Also during the quarter, in a cost reduction effort, the officer and
the Company mutually agreed to cancel the stock grant.
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ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
NOTE 4 - LOAN TO OFFICER
During the quarter, the Company moved its corporate headquarters from
San Diego, California, to Houston, Texas. In conjunction with the move, the
Company advanced $15,000 to the Chairman of the Board/Chief Executive Officer to
purchase his personal residence in Texas. The loan is secured by the equity in
his California home and will be paid upon its sale. The loan bears interest at
6%.
NOTE 5 - ACQUISITION OF NATIONAL VIDEO SUBSCRIPTION, INC.
On June 17, the Company signed a definitive agreement to acquire
National Video Subscription, Inc. of Anaheim, California, for $3.1 million in a
combination of stock and cash. The acquisition is contingent on completing a
private placement of $3.5 million. Under the terms of the Agreement, the
closing was to have taken place on or before July 31, 1996. The closing date
has been extended to August 31, 1996.
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ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
ITEM 2.--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Three Months Ended June 30, 1996 Compared To Three Months Ended June 30,1995
Revenues for the second quarter of 1996 increased by $198,514 or 12.3% over the
comparable period for 1995. This increase was due to increases in NiteLife,
Inc. of $127,891 or 12.7% and Just Games, Inc. of $164,987 or 39.4% partially
offset by a decrease in Performance Sound and Light of $94,364 or 48%. The
increase in Just Games, Inc. was primarily due to the completion of a design and
installation contract for a family entertainment center at Kamesaya Naval
Communication Center, Japan. The decrease in Performance Sound and Light, is
partially attributable to the sale of Harper's Music Store in August 1995, which
contributed $35,134 in revenues in the second quarter of 1995.
Gross profit for the second quarter of 1996 increased $24,291 or 2.8% over the
first quarter of 1995 primarily as a result of the increases in revenues as
noted above.
General and administrative expenses decreased $97,928 or 12.8% from the same
period in 1995. This decrease is due to reductions in spending in most areas.
Depreciation and amortization increased $189,569 or 145.9% during the current
quarter over the same period in 1995. This increase is primarily due to
increases in purchases of property and equipment, deferred installation costs
related to new club contracts and other deferred costs.
Interest expense increased $21,258 or 140.5% over the similar period in 1995.
This increase reflects higher short-term borrowing with associated higher
interest costs.
As a result of the above, the net loss for the second quarter of 1996 increased
$88,608 or 180.2% to $137,768 from a loss of $49,160 for the second quarter of
1995.
Six Months Ended June 30,1996 Compared To Six Months Ended June 30, 1995
Revenues for the six months of 1996 increased $215,728 or 6.3% over the same
period in 1995. This increase was due to increases in NiteLife, Inc. of
$361,957 or 19.3% and Just Games, Inc. of $27,415 or 2.8% partially offset by a
decrease in Performance Sound and Light of $173,644 or 30.9%. The decrease in
Performance Sound and Light is primarily due to the sale of Harper's Music Store
in August 1995, which contributed $146,469 in revenues for the first six months
of 1995.
General and administrative expenses decreased $212,215 or 13.2% from the same
period in 1995. This decrease is due to reductions in expenses in most areas.
Depreciation and amortization increased $354,291 or 146.6% during the first six
months of 1996 over the same period in 1995. This increase is due to increases
in purchases of property and equipment, deferred
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installation costs related to new club contracts and other deferred costs.
Interest expense increased $7,674 or 12.0% in 1996 over the similar period in
1995. This increase is due to higher short-term borrowing and associated higher
interest costs.
As a result of the above, the net loss for the first six months of 1996
increased $68,379 or 40.0% over the first six months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30,1996, the Company had a working capital deficit of $101,318 compared
to a deficit of $9,201 at December 31, 1995. This increase is due primarily to
increases in accounts payable and accrued expenses and other current
liabilities. Capital expenditure requirements for the remainder of the year
will require the Company to seek additional financing. The Company is currently
exploring various opportunities for outside financing although there can be no
assurances that these efforts will be successful.
As described in Note 5, the Company has signed a definitive agreement to acquire
National Video Subscription, Inc. for $3.1 million in a combination of stock and
cash. The acquisition is contingent on completing a private placement for $3.5
million. The closing of the acquisition has been extended to August 31, 1996
from July 31, 1996. The Company is currently exploring various opportunities
for equity funding, although there can be no assurances that such efforts will
be successful.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None: not applicable.
ITEM 2. CHANGES IN SECURITIES.
None: not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None: not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None: not applicable
ITEM 5. OTHER INFORMATION
None: not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
Form 8-K Current Report dated May 31, 1996 was filed with
The Securities and Exchange Commission on May 31, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1939, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENTERTAINMENT TECHNOLOGIES &
PROGRAMS, INC.
Date: August 13, 1996 By James D. Butcher /s/
--------------------
James D. Butcher, Chairman & CEO
Date: August 13, 1996 By Bernard J. Prem /s/
-------------------
Bernard J. Prem, CFO
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 33,070
<SECURITIES> 0
<RECEIVABLES> 416,675
<ALLOWANCES> 0
<INVENTORY> 149,794
<CURRENT-ASSETS> 1,187,134
<PP&E> 4,172,266
<DEPRECIATION> 1,355,836
<TOTAL-ASSETS> 4,006,130
<CURRENT-LIABILITIES> 1,293,452
<BONDS> 174,727
0
0
<COMMON> 20,200
<OTHER-SE> 2,442,723
<TOTAL-LIABILITY-AND-EQUITY> 4,006,130
<SALES> 3,621,542
<TOTAL-REVENUES> 3,621,542
<CGS> 1,817,323
<TOTAL-COSTS> 1,817,323
<OTHER-EXPENSES> 1,987,661
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,346
<INCOME-PRETAX> (239,788)
<INCOME-TAX> 0
<INCOME-CONTINUING> (239,788)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (239,788)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
