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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
Quarterly Report under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For quarterly period ended June 30, 1996
Commission file number 0-26828
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FOOD COURT ENTERTAINMENT NETWORK, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0338736
- -------------------------------- ---------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
220 E. 42nd St., New York, New York, 10017
(212) 983-4500
(Registrant's telephone number, including area code)
----------
Indicate by check mark whether the registrant (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 (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 [ ]
As of June 30, 1996, there were 3,918,125 shares of Series A Common Stock,
$0.01 par value of the registrant outstanding, 1,126,115 shares of Series B
Common Stock, $0.01 par value of the registrant outstanding, 4,345,000 Class A
Warrants of the registrant outstanding, and 3,220,000 Class B Warrants of the
registrant outstanding.
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FOOD COURT ENTERTAINMENT NETWORK, INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheets as of Dec 31, 1995
(audited) and June 30, 1996 (unaudited)........................... 2
Condensed Statements of Operations
for the three months ended
June 30, 1996 & 1995 (unaudited)
and for the six months ended
June 30, 1996 & 1995 (unaudited).................................. 3
Condensed Statement of Cash Flows
for the six months ended
June 30, 1996 & 1995 (unaudited).................................. 4
Notes to Financial Statements................................... 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 7-12
Part II. OTHER INFORMATION................................................ 13
Signature page................................................... 14
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FOOD COURT ENTERTAINMENT NETWORK, INC.
(a development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
June 30,
December 31, 1996
1995 (Unaudited)
------------ -----------
ASSETS
------
Current Assets:
Cash and cash equivalents $5,191,897 $2,038,712
Other curent assets -- 12,234
----------
Total Current Assets 2,050,946
Fixed assets-(less accumulated depreciation of
$197,221 and $377,699 respectively) 1,435,273 1,673,954
Deferred programming -- 227,123
Other assets 8,630 91,693
---------- ----------
TOTAL ASSETS $6,635,800 $4,043,716
========== ==========
LIABILITIES
-----------
Current Liabilities:
Accounts payable $ 284,431 $ 225,813
Accrued expenses 448,161 287,219
---------- ----------
Total current liabilities 732,592 513,032
Due to former employee 200,000 200,000
---------- ----------
TOTAL LIABILITIES 932,592 713,032
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STOCKHOLDERS' EQUITY
--------------------
Preferred stock-5,000,000 shares authorized,
none issued
Common Stock:
Series A common stock-$.01 par value,
25,000,000 shares authorized
3,918,125 shares outstanding $ 37,931 $ 39,181
Series B common stock-$.01 par value,
1,250,000 shares authorized
1,146,250 outstanding 11,462 11,462
Additional Paid in Capital 15,074,356 15,423,106
Deficit accumulated during the development stages (9,420,340) (12,142,864)
---------- -----------
Total 5,703,409 3,330,885
Treasury stock (201) (201)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY $5,703,208 $ 3,330,684
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,635,800 $ 4,043,716
========== ===========
See accompanying notes to condensed financial statements
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FOOD COURT ENTERTAINMENT NETWORK INC.
(a development stage company)
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
February 12, 1992
Three month period ended Six month period ended (Inception)
June 30, June 30, Through
1995 1996 1995 1996 June 30, 1996
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Advertising revenues -- 10,000 -- 10,000 10,000
--------- --------- --------- --------- ----------
General and administrative expenses 8,169 144,923 103,053 318,876 1,313,753
Development costs 1,450,053 1,401,784 1,963,685 2,506,100 10,385,335
--------- --------- --------- --------- ----------
Total expenses 1,458,222 1,546,707 2,066,738 2,824,976 11,699,088
--------- --------- --------- --------- ----------
Operating income (loss) (1,458,222) (1,536,707) (2,066,738) (2,814,976) (11,689,088)
Other (income) expenses:
Interest expense 32,233 -- 109,244 0 641,205
Interest and other (income) (575) (38,983) (1,684) (92,452) (187,429)
--------- --------- --------- --------- ----------
NET (loss) (1,489,880) (1,497,724) (2,174,298) (2,722,524) (12,142,864)
========= ========= ========= ========= ==========
Net (loss) per share of
common stock $ (0.54) $ (0.34) $ (0.78) $ (0.63)
========= ========= ========= =========
Number of common share and common
share equivalents used in computation 2,425,185 4,387,292 2,403,384 4,335,208
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed financial statements
<PAGE>
FOOD COURT ENTERTAINMENT NETWORK, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six month period ending February 12, 1992
June 30, (inception)
--------------------------------- through
1995 1996 June 30, 1996
------------ ----------- -----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $(2,174,298) $(2,722,524) $(12,142,864)
Adjustments to reconcile net income(loss)
cash provided by operating activities:
Depreciation and amortization 277,807 180,478 754,471
Write-off of debt issuance costs 146,397
Value assigned to options and
warrants issued as compensation 108,583
Common Stock issued as consideration for
programming 350,000 350,000
Changes in operating assets and liabilities:
(Increase) in other assets (1,349) (30,297) (33,261)
(Increase)in deferred programming (227,123) (227,123)
Increase (decrease) in accrued
expenses and other liabilities 1,333,606 (219,560) 713,032
---------- ----------- ------------
Net Cash (Used In) Operating Activities (564,234) (2,669,026) (10,330,765)
---------- ----------- ------------
Cash Flows from Investing Activities
Purchase of property and equipment (1,049,840) (419,159) (2,051,653)
Organization costs (11,336)
---------- ----------- ------------
Net Cash (Used By) Investing Activities (1,049,840) (419,159) (2,062,989)
---------- ----------- ------------
Cash Flows from Financing Activities:
Net proceeds from sale of preferred
and common stock 440 15,711,828
Capital contribution 32,500
Redempton of preferred stock (1,146,250)
Preferred dividends paid (148,112)
Proceeds from bridge loan 850,000 2,250,000
Repayment of bridge loan (2,250,000)
Deferred financing costs (110,500) (65,000) (357,500)
Deferred registration costs (189,146)
Proceeds from directors and officers loans 50,000 390,000
(Repayment of) directors and officers loans (50,000)
Proceeds from note payable 256,320 954,572
Proceeds from (repayment of) note payable (954,572)
---------- ----------- ------------
Net Cash Provided in Financing Activities 857,114 (65,000) 14,432,466
---------- ----------- ------------
NET INCREASE (DECREASE) IN CASH (756,960) (3,153,185) 2,038,712
Cash at beginning of period 777,457 5,191,897 --
---------- ----------- ------------
CASH AT END OF PERIODo $ 20,497 $2,038,712 $ 2,038,712
========== =========== ============
Supplemental schedule of Net Cash financing activities:
Warrants issued in connection with bridge loan $ 85,000 $ 225,000
Director and officer loans exchanged for common
and preferred stock 150,000
Director loan contributed to capital 190,000
Supplemental disclosure of cash flow information:
Cash paid for interest 16,665 336,406
</TABLE>
See accompanying notes to condensed financial statements
<PAGE>
FOOD COURT ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Financial Statements
In the opinion of management, the accompanying unaudited, financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the Company
and its results of operations and cash flow for the interim period presented.
Such financial statements have been condensed in accordance with the
applicable regulations of the Securities and Exchange Commission and, therefore,
do not include all disclosures required by generally accepted accounting
principles.
The results of the operations for the six months ended June 30, 1996
are not necessarily indicative of the results to be expected for the entire
fiscal year.
These financial statements should be read in conjunction with the
financial statements included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
Loss Per Share of Common Stock
Net loss per share of common stock for the six months ended June 30,
1995 is based on the weighted average number of shares outstanding during such
period as modified in accordance with "cheap stock' rules of the Securities and
Exchange Commission. For the six months ended June 30, 1996 options and warrants
have been excluded as they are anti-dilutive. Series B common shares in escrow
have been excluded for all periods. Net loss has been adjusted for the six
months ended June 30, 1995 for the amortization of an assumed discount on the
Series A redeemable preferred stock.
Commitments
In April 1996 the Company entered into a two-year agreement (the
"Agreement") with Turner Private Networks, Inc. ("Turner") pursuant to which
Turner will be the exclusive provider of programming to the Company for Cafe
USA(R) and Turner Broadcasting Sales, Inc. will be the exclusive sales agent.
The Agreement, as amended, provides for the execution of definitive programming
and sales agreements by August 16, 1996, which date may be extended by mutual
consent. As consideration the Company will deliver to Turner a promissory note
for $1,250,000 and will issue 250,000 shares of Series A common stock (125,000
shares of which have been issued). The promissory note is payable to Turner upon
the later of (i) March 31, 1997 or (ii) completion and timely delivery of 52
weekly programs. The value of the promissory note and the fair value of the
common stock are being charged to operations over the first year of the
Agreement. As of June 30, 1996, the Company has charged $122,877 to operations.
The second year of programming provides for payment of up to $3,500,000 in cash
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or other consideration to be determined. The Company will pay sales commissions
of 10% and up to 15% of net ad sales (as defined in the Agreement) for the first
and second year, respectively. Pursuant to the Agreement, the Company has
nominated one member of Turner management to the Company's Board of Directors.
The Company and Capital Cities/ABC New Media ("Capital Cities/ABC")
have suspended a representation agreement between the parties pursuant to which
Capital Cities provided sales representation services to the Company. The
Company will pay Capital Cities/ABC an aggregate of $100,000 on or before
October 1, 1996, of which $25,000 has been paid and by October 1, 1997 will
either resume such agreement or pay $100,000 to terminate such agreement. As of
June 30, 1996 the Company has $75,000 accrued in connection with this agreement.
Digital Equipment Corporation ("DEC") has agreed to develop software
applications and provide hardware necessary to deliver the Cafe USA(R) program
digitally through telephone wires into malls nationwide. The Company and DEC are
negotiating the details of the arrangement including discounts on pricing,
deferred payment terms, and ownership of and marketing rights to the
hardware/software functionality. DEC has begun developing the software and the
Company has paid $100,000 as of August 5, 1996 towards these services, and has
agreed to pay $50,000 per month through the end of the year or until a completed
agreement is negotiated. It is estimated that the total cost of the software
applications development will be approximately $1,000,000.
The Company terminated the employment of Harvey S. Wilson, its former
Executive Vice President. Mr. Wilson's employment agreement entitles him to
receive severance pay, the exact amount of which is presently being negotiated.
On August 6, 1996, the Company signed an agreement with Swartz
Investments, LLC ("Swartz"), whereby Swartz will act as the Company's placement
agent with respect to a planned $5-$8 million Private Placement of Convertible
Preferred Stock on a "best efforts" basis.
6
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ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT
OF OPERATIONS
Results of Operations
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
Report. The Company is a development stage company engaged primarily in the
production of programming and the sale and marketing of Cafe USA to advertisers
and mall operators. The Company's principal expenses from its inception through
June 30, 1996 have been salaries and payments to consultants ($4,200,000),
production costs for Cafe USA(R) programming ($2,600,000) and
advertising/marketing expenses ($1,100,000). Additionally, the Company invested
approximately $2,100,000 in capital equipment and network development through
June 30, 1996. Accordingly, as of June 30, 1996, the Company had a deficit
accumulated in the development stage of approximately $12,100,000. The Company
continues to incur substantial losses and is utilizing the proceeds of its
initial public offering (the "Offering") to continue its business. For the
foreseeable future, and until significant sales, if any, of advertising occur,
the Company expects losses to continue and is entirely dependent on public or
private financing.
During the second quarter of fiscal 1996, the Company continued
discussions and negotiated agreements with advertisers, mall developers and
potential sources of financing.
General and administrative expenses increased from the corresponding
prior year periods due principally to additional costs for staffing and
consultants.
Development costs decreased for the three months ended June 30, 1996 as
compared to the corresponding prior year period due to reduced programming and
production costs. Development costs increased for the six month period ended
June 30, 1996 as compared to the corresponding prior year period due principally
to increased sales and marketing expenses associated with promoting Cafe USA(R)
to mall developers, national advertisers and financing sources.
Interest expense decreased from the corresponding prior year periods
due to repayment of bank loans and bridge notes.
Charge to Income in the Event of Release of Escrow Shares
In connection with the offering of units of Series A Common Stock and
Series A Redeemable Preferred Stock beginning in November, 1993 (the "Preferred
Stock Unit Offering"), 750,000 share of Series B Common Stock were placed in
escrow of which 103,750 have been canceled effective as of July 5, 1994. In the
event the Company attains any of the earnings thresholds or the Company's Series
A Common Stock meets certain minimum purchase prices required for the release of
the Escrow Shares, such release will require the Company to recognize additional
compensation expense for shares held by officers, directors, consultants and
employees. Such charges could substantially increase the loss or reduce or
7
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eliminate the Company's net income, if any, for financial reporting purposes for
the period in which the Escrow Shares are released or are probable of being
released. Although the amount of compensation expense recognized by the Company
will not affect the Company's total stock holders' equity or its working
capital, it may have a depressive effect on the market price of the Company's
securities. If neither the required earnings or sale price are attained by
December 31, 1998, the Escrow Shares as well as any dividends or other
distributions made with respect thereto, will be contributed to the capital of
the Company.
Liquidity and Capital Resources
On October 16, 1995, the Company closed the offering of 2,800,000
Units, each Unit consisting of one share of Series A Common Stock , one Class A
Warrant and one Class B Warrant to D.H. Blair Investment Banking Corp. (The
"Underwriter") and on November 9, 1995 the Company closed the sale of an
additional 420,000 Units to the Underwriter pursuant to the Underwriter's
over-allotment option. The total net proceeds to the Company from the foregoing
sales was approximately $13,811,000. The proceeds were used for redemption of
preferred stock (approximately $1,294,000), repayment of notes and bank loans
(approximately $3,500,000), payment of accrued expenses and other indebtedness
(approximately $2,100,000) and approximately $2,300,000 was used to fund the
Evaluatory Period. The Company has utilized and will continue to utilize the
remainder of the proceeds to fund operations until such time as it begins to
receive sufficient revenue from operations, if ever.
As of June 30, 1996, the Company had working capital of $1,538,000. The
Company has financed its operations to date almost exclusively through private
placements of securities and bank loans and the Offering, including gross
proceeds of $2,292,500 through the Preferred Stock Unit Offering in 1994,
$2,250,000 through a Bridge Note financing in 1994 and 1995, $1,086,000 through
bank loans and $16,100,000 through the Offering.
The Company's operating activities used net cash of $1,193,000 during
the three months ended June 30, 1996, primarily as a result of its net loss from
operations of $1,490,000 for the three months ending June 30, 1996. $65,000 was
used in financing activities during the second quarter and investing activities
used net cash of approximately $220,000 for the purchase of property and
equipment.
The Company has employment contracts with 5 executive officers and
employees and consulting agreements with 2 consultants, which provide for
aggregate salaries and consultant fees in 1996 in the amount of approximately
$725,000. The Company's lease agreement for its offices provide for monthly
payments of approximately $10,400.
The Company has entered into a settlement agreement with a former
director and officer of the Company dated October 12, 1993 regarding any claims
he had or may have had with respect to continued employment with the Company and
rights to acquire additional securities of the Company for $200,000. Payments
under such settlement agreement will be made from 25% of "Excess Cash Flow"
8
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(as defined below) of the Company, if any. However, the remaining unpaid balance
of the $200,000 shall be due and payable regardless of the Company's cash flow
no later than December 31, 1997. Interest will accrue on such obligation at the
prime rate commencing January 1, 1996 and will be paid quarterly thereafter.
"Excess Cash Flow" is defined in the agreement as follows: for any fiscal
quarter (i) net income before taxes of the company for such fiscal quarter, plus
(ii) amortization and other non-cash charges during such fiscal quarter (to the
extent deducted in computing net income), minus (iii) capital expenditures made
or accrued during such fiscal quarter. Dividends and redemptions shall not be
treated as expenses in determining the Company's net income. In addition to the
above, the settlement agreement provided for the purchase by the former director
and officer from the Company of 11,240 shares of the Company's Series B Common
Stock at a price of $0.01 per share and the payment of consulting fees for
services provided at the request of the Company.
The Company entered into an agreement with an advisor for assistance in
obtaining certain financing transactions. The Company has made certain payments
pursuant to the agreement and although, the Company has terminated such
agreement, it may be required to pay consideration, including warrants, in the
future to such advisor for any financing obtained by the Company from sources
within the scope of the agreement.
In connection with the underwriting agreement for the public offering,
the Company entered into an agreement with the Underwriter that provides for a
finder's fee to be paid to the Underwriter if it consummates a merger,
acquisition, joint venture or other similar transaction with a party introduced
by the Underwriter during the five-year period from the consummation of the
Offering. The fee is based on a percentage of the consideration paid in the
transaction ranging from 7% of the first $1,000,000 to 2 1/2 % of any
consideration in excess of $9,000,000.
The Company has agreed not to solicit Warrant exercises other than
through the Underwriter. Upon any exercise of the Class A or Class B Warrants
after one year from the date of Offering, the Company will pay the Underwriter a
fee of 5% of the aggregate exercise price, if (i) the market price of the
Company's Series A Common Stock on the date the Warrant is exercised is greater
than the then exercise price of the Warrants; (ii) the exercise of the Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc.; (iii) the warrantholder designates in writing that the exercise of the
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. and designates in writing the broker-dealer to receive
compensation for such exercise; (iv) the Warrant is not held in a discretionary
account; (v) disclosure of compensation arrangements was made both at the time
of the Offering and at the time of exercise of the Warrants; (vi) the
solicitation of exercise of the Warrant was not in violation of Rule 10b-6
promulgated under the Exchange Act.
In connection with the Preferred Stock Offering, D.H. Blair Investment
Banking Corp. was granted a five year right of refusal to act as underwriter for
9
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any public or private offerings by the Company or any holder of 5% or more of
the Company's Series B Common Stock (with certain exceptions).
Plan of Operation
The Company is in its development stage. To date, the activities have
consisted primarily of designing and developing Cafe USA(R) programming,
establishing contacts with potential advertisers and mall operators, producing
and evaluating test pilots of Cafe USA(R), developing and refining an acoustical
system for delivery of programming into mall Food Courts, and implementation of
the Cafe USA(R) network and installing and operating Cafe USA(R) in five mall
food courts. Through June 30, 1996, the Company has expended approximately $10
million dollars in development activities.
As of August 12, 1996, the Company had agreements and/or letters of
intent with four advertisers: Sears, AT&T, Lee Jeans and ABC Entertainment (for
the fourth quarter of 1996). As part of a preliminary programming and sales
agreement Turner (and its affiliates) is also an advertiser. There can be no
assurances, however, that advertisers will be willing to commit significant
expenditures for advertising on Cafe USA(R) in which event the Company will lack
sufficient revenues to sustain operations. Furthermore, if advertisers are not
willing to commit material expenditures towards advertising on Cafe USA(R) or
advertisers feedback otherwise indicates that the Cafe USA(R) program in its
current format is not being accepted by the marketplace, the Company will review
the data to determine reasons therefore, determine the modifications or changes
necessary to gain marketplace acceptance, if possible, and implement such
modifications or changes. If the Company determines that it is unable to modify
or revise the Cafe USA(R) program or delivery thereof, in a manner that will
achieve marketplace acceptance, the Company may be forced to cease operations.
Furthermore, it is possible that required modifications or revisions to Cafe
USA(R) would exhaust all of the Company's available capital.
Based upon the current plan to proceed with the expansion of Cafe USA
into additional malls, the Company is seeking to obtain commitments from
advertisers for participation in the mall expansion and is negotiating with mall
operators for installation and operation of Cafe USA(R). The Company installed
Cafe USA(R) in a fifth mall in Las Vegas, Nevada, with broadcasting of
programming having commenced May 1, 1996, and has agreements to install Cafe
USA(R) in the White Flint Mall, located in North Bethesda, Maryland, and the
Springfield Mall, located in Springfield, Virginia.
The Company has limited cash and cash equivalents remaining for
expansion (estimated to be approximately $1,630,000 at July 31, 1996) and
without additional financing, of which there can be no assurance, the Company
will not be able to pursue its expansion plans. If the Company determines to go
forward with a mall installation, it is estimated the preparations for
installation in each additional mall would take approximately 90 days from the
receipt of mall commitment. It is not anticipated that revenue during the
initial phase of the mall expansion will be sufficient to cover the Company's
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operating expenses. Until the Company has achieved a presence in a significant
number of malls, the mall expansion is dependent upon the Company obtaining
financing for the lease or purchase of the equipment installation, production
and development of programming and the marketing of Cafe USA(R) to advertisers
and mall developers. Without additional financing, it is estimated that the
proceeds of the Offering will be sufficient to fund operations in five malls
only through the fourth quarter of fiscal 1996. The Company is negotiating with
potential suppliers of equipment and programming and others to provide such
financing. There is no assurance that the financing will be available. If a
supplier of the equipment does not provide the financing and if the Company is
not able to obtain alternative financing, the Company will be unable to pursue
its plan of operations and may be forced to cease business.
On April 16, 1996, the Company entered into a two-year agreement (the
"Agreement") with Turner Private Networks, Inc. ("Turner") pursuant to which
Turner will be the exclusive provider of programming to the Company for Cafe
USA(R) and Turner Broadcasting Sales, Inc. ("Turner Sales") will act as
exclusive advertising sales agent for Cafe USA(R). The Agreement, as amended,
provides for the execution of definitive programming and sales agreements by
August 16, 1996, which date may be extended by mutual consent. Under the
agreement the Company will pay $2,500,000 for the first 52 weekly programs
produced during the initial 12 months Agreement, of which $1,250,000 shall be
paid by issuance of 250,000 shares of Series A Common Stock of the Company with
the balance of first year payment ($1,250,000) to be paid in the form of a
promissory note payable to Turner upon the maturity of the later to occur: (i)
March 31, 1997 and (ii) completion and timely delivery of 52 weekly programs
produced by Turner. The value of the promissory note and the fair value of the
common stock are being charged to operations over the first year of the
Agreement. The second year of programming provides for payment of up to
$3,500,000 in cash or other consideration to be determined to be paid in monthly
installments. Payment for advertising sales will be on a commission basis to be
set forth in a sales agreement to be entered into between the parties, which
provides for commissions of 10% of Net Ad revenues (as defined in the Agreement)
of Cafe USA(R) for the first twelve months and up to 15% Net Ad revenues for the
second year. Production of programming for the first year started on a gradual
basis until June, 1996, when full production of new weekly programs for
broadcast into five malls began.
The Company and Capital Cities/ABC New Media ("Capital Cities/ABC")
have suspended a representation agreement between the parties pursuant to which
Capital Cities provided sales representation services to the Company. The
Company will pay Capital Cities/ABC an aggregate of $100,000 on or before
October 1, 1996, of which $25,000 has been paid and by October 1, 1997 will
either resume such agreement or pay $100,000 to terminate such agreement. As of
June 30, 1996 the Company has $75,000 accrued in connection with this agreement.
Digital Equipment Corporation ("DEC") has agreed to develop software
applications and provide hardware necessary to deliver the Cafe USA(R) program
digitally through telephone wires into malls nationwide. The Company and DEC are
11
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negotiating the details of the arrangement including discounts on pricing,
deferred payment terms, and ownership of and marketing rights to the
hardware/software functionality. DEC has begun developing the software and the
Company has paid $100,000 as of August 5, 1996 towards these services, and has
agreed to pay $50,000 per month through the end of the year or until a completed
agreement is negotiated. It is estimated that the total cost of the software
applications development will be approximately $1,000,000.
On August 6, 1996, the Company signed an agreement with Swartz
Investments, LLC ("Swartz"), whereby Swartz will act as the Company's placement
agent with respect to a planned $5-$8 million Private Placement of Convertible
Preferred Stock on a "best efforts" basis.
12
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11
(b) The Company filed a report on Form 8-K with the Securities and
Exchange Commission on April 29, 1996, relating to the execution
of the Agreement with Turner.
13
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SIGNATURES
In accordance with the requirements of the Securities Exchange of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Food Court Entertainment Network, Inc.
--------------------------------------
(Registrant)
August 14, 1996 By: /s/ Stephen G. Bowen
- --------------- --------------------------------------
(Date) Stephen G. Bowen, President
August 14, 1996 By: /s/ Darren M. Sardoff
- --------------- --------------------------------------
(Date) Darren M. Sardoff,
Chief Financial Officer
14
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EXHIBIT INDEX
Exhibit Page
Number Document Number
- ------- -------- ------
11 Schedule of Computation of
Net Loss Per Share 1
<PAGE>
EXHIBIT 11
FOOD COURT ENTERTAINMENT NETWORK, INC.
COMPUTATION OF NET LOSS PER SHARE OF COMMON STOCK
For the three month period ended June 30, 1996
Net (loss)................................................... ($1,489,880)
Adjustment to net (loss)
Reduction of interest on bridge loans................... 57,589
Amortization of deferred financing costs................ 74,197
Amortization of debt discount........................... 57,822
Reduction of interest on line of credit................. 9,643
Interest on hypothetical investment..................... 6,564
Dividends on Preferred Stock............................ (22,925)
Preferred stock discount................................ (6,941)
----------
($1,313,931)
==========
Weighted average shares outstanding (net of 20,135 in
treasury, 10,135 of which are in escrow)................ 1,699,240
Add: Net shares from exercise of options/warrants:
Assumed exercise of options............................. 1,701,908
Assumed repurchase of shares............................ (339,848)
----------
1,362,060
Less: Escrow shares (net of 10,135 in escrow
excluded above)........................................ (636,115)
----------
Weighted average number of shares............................ 2,425,185
==========
NET LOSS PER SHARE OF COMMON STOCK........................... ($0.54)
==========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000940800
<NAME> FOOD COURT ENTERTAINMENT NETWORK, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<EXCHANGE-RATE> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,038,712
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,050,946
<PP&E> 1,673,954
<DEPRECIATION> 377,699
<TOTAL-ASSETS> 4,043,716
<CURRENT-LIABILITIES> 513,032
<BONDS> 0
0
0
<COMMON> 50,643
<OTHER-SE> 3,280,041
<TOTAL-LIABILITY-AND-EQUITY> 4,043,716
<SALES> 10,000
<TOTAL-REVENUES> 10,000
<CGS> 0
<TOTAL-COSTS> 1,546,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (38,983)
<INCOME-PRETAX> (1,497,724)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,497,724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,497,724)
<EPS-PRIMARY> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
