SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For Quarter Ended March 31, 1998
Commission File Number 0-26828
FOOD COURT ENTERTAINMENT NETWORK, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0338736
(State of Incorporation) (Federal Identification #)
220 East 42nd Street
New York, New York 10017-5806
(Address of Principal Executive Offices)
(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 March 31, 1998, there were 13,642,082 shares of Series A
Common Stock, and 1,014,309 shares of Series B Common Stock. The
aggregate market value of Series A Common Stock held by non-
affiliates was approximately $100,000 (1) to Series A to be sold
or transferred, except to prior management.
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<TABLE>
<CAPTION>
FOOD COURT ENTERTAINMENT NETWORK, INC.
Statements of Net Liabilities in Liquidation
December 31, March 31,
1997 1998
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $284,000 $1,387
Prepaid rent 21,000
Prepaid Taxes 5,197
Fixed assets, at realizable value 450,000 450,000
Total Assets $755,000 $456,584
LIABILITIES
Accounts Payable $144,000 $216,228
Accrued Payroll 75,000 55,000
Other Accrued Expenses 344,000 363,650
Due to former employee 234,000 240,000
Obligation under employment contract 263,000 244,250
Net (liabilities in liquidation) (305,000) (662,544)
Total Liabilities & Capital $755,000 $456,584
</TABLE>
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<PAGE>
FOOD COURT ENTERTAINMENT NETWORK, INC.
Statements of Operations
(going concern basis)
Three month period
ended
March 31, 1998
Advertising revenue
Operating Expenses:
Sales and marketing 1,031
Programming 11,366
Network costs 57,508
General & administrative expenses 281,242
Development costs 0
Operating Loss: 351,147
Other (income) expenses:
Interest expense 4,653
Net Loss 355,800
Net loss per share -basis and diluted (0.85)
Number of common shares used in
computation 13,092,000
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NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Financial Statement Presentation
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 periods 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 operations for the three months ended
March 31, 1998, 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-A for the year ended December 31, 1997.
Loss Per Share of Common Stock
Net loss per share of common stock is based on the weighted
average number of shares outstanding during period.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations
The following discussion and analysis should be read in
conjunction with December 31, 1997 Form 10-KSB-A statements and
notes thereto. The Company is no longer operating. The
Company's development activities to date have consisted of
designing, developing and producing Cafe USA programming,
producing and evaluating three market tests of Cafe USA to
evaluate its acceptance in the marketplace, developing and
refining an end-to-end distribution system for the delivery and
management of Cafe USA programming into Food Courts, attracting
and engaging management, employees, consultants and advisers for
marketing operations and implementation of the Cafe USA network,
entering into agreements with advertisers and mall operators and
installing and operating Cafe USA in 20 Food Courts. To date,
the Company has received only limited revenues. The Company's
principal expenses from inception through March 31, 1998 have
been salaries and payments to consultants, ($8,338,000),
production costs for Cafe USA programming ($4,192,000) and
advertising and marketing expenses ($1,514,000). Additionally,
the Company invested $4,013,000 in capital equipment through
December 31, 1997.
During the three month period ended March 31, 1997,
principally all expenses incurred by the Company were charged to
development costs. Subsequent to March 31, 1997, expenses were
charged to individual and appropriate expense classifications,
rather than to development costs. Therefore, the individual
components of operating expenses for the three month period ended
March 31, 1997 cannot be compared to those for the three month
period ended March 31, 1998.
The Company has entered into a Purchase and Sale of Assets
Agreement on April 23, 1998 to sell all of its assets in
connection with the Cafe USA Network to Prime Spot Media USA for
$450,000. The Company intends to close on the transaction at
such time as it obtains necessary corporate approval to do so.
The Company is seeking to merge with or acquire any operating
business which is seeking to become a publicly held entity or a
private investor interested in an investment in a public shell.
If it fails to do so, the Company will be required to seek
protection from its creditors or negotiate its outstanding
liabilities and dissolve the Company.
Liquidity and Capital Resources
As of March 31, 1998 the Company has net liabilities in
liquidation of $677,700. The Company had financed its operation
almost exclusively through three private placements of
securities, bank loans and a public offering, including <PAGE 5>
$2,292,500 through the Preferred Stock Unit Offering, the Bridge
Financing of $2,250,000 of Bridge Notes, bank loans of
approximately $1,086,000, the Public Offering of approximately
$16,800,000 and the Private Offering in November 1996 of
$9,000,000.
As of April 30, 1998 the Company has entered into a Line of
Credit Loan Agreement with Robert Lenz not to exceed $60,000.
Interest shall be accrued and be payable on the unpaid balance of
the Line of Credit at a rate per annum equal to eight and one-
half percent (8-1/2%).
The Company has an employment contract with one executive
officer which provides for salary in 1998 of $150,000 and
$113,000 in 1999, plus increases and bonuses as determined by the
Board of Directors. The agreement provides for severance equal
to the remaining payments through the term of the agreement. In
addition, this agreement provides for a three year extension. At
the $150,000 per year from the date of a change in control of the
Company, as defined in the agreement. The Company has accrued
$263,000 in the accompanying financial statements.
The Company has terminated its lease agreement for its
offices. The Company remains on a month-to-month basis at a
rental to be negotiated.
During the year ended December 31, 1997 the company
terminated the employment of three executives whose employment
agreements provided for severance payments aggregated $181,000,
which has been accrued for in the accompanying financial
statements.
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. The entire
remaining unpaid balance of the $200,000 was due December 1,
1997. Interest has accrued on such obligation at the prime rate
commencing January 1, 1996 and was to be paid quarterly
thereafter. The principal balance plus interest as of March 31,
1998 was $240,000. In addition to the above, the settlement
agreement provided for the purchase by the former director and
officer from the Company of 11,250 shares of Company's Class B
Common Stock at a price of $.01 per share and the payment of
consulting fees for services provided at the request of the
Company.
The Company has agreed not to solicit warrant exercises
other than through the Placement Agent. Upon any exercise of the
Class A or Class B Warrants the Company will pay the Placement
Agent 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
<PAGE 6> by a member of the National Association of Securities
Dealers, Inc., (iii) the warrant holder 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 Private Offering and at the time of
exercise of the warrant was not in violation of Rule 10b-6
promulgated under the Exchange Act.
Plan of Operation
The Company is seeking to merge with or acquire any
operating business which is seeking to become a publicly held
entity or a private investor interested in an investment in a
public shell. If it fails to do so, the Company will be required
to seek protection from its creditors or negotiate its
outstanding liabilities and dissolve the Company.
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<PAGE>
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
A description of the Company's pending legal proceeding has
been previously reported in the Company's Report on Form 10-KSB
for the year ended December 31, 1997.
ITEM 5 - OTHER INFORMATION
Effective May 6, 1998, Robert J. Wussler resigned as a
member of the Company's Board of Directors.
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SIGNATURE PAGE
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)
June 16, 1998 By:/s/James N. Perkins
(Date) James N. Perkins
President, Chief Executive
Officer & Principal Accounting
Officer
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EXHIBIT INDEX
Exhibit
Number Document
27 Financial Data Schedule <PAGE 10>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,387
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,197
<PP&E> 450,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 456,584
<CURRENT-LIABILITIES> 1,119,128
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 456,584
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 351,147
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,653
<INCOME-PRETAX> (355,800)
<INCOME-TAX> 0
<INCOME-CONTINUING> (355,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
</TABLE>
