-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mhmyz7YKB82tDzBSrpLnkGa69k/ONtcO4iFPuU6UsS29HBi/tCsoSDLc55Q6iW4a VGWHxKHzCqZYiRipt+njLA== 0000921895-98-000710.txt : 19980828 0000921895-98-000710.hdr.sgml : 19980828 ACCESSION NUMBER: 0000921895-98-000710 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980827 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC INTERNATIONAL ENTERTAINMENT LTD CENTRAL INDEX KEY: 0001003739 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 133858917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27256 FILM NUMBER: 98699470 BUSINESS ADDRESS: STREET 1: 200 E PALMETTO PARK RD, STE 200 CITY: BOCA RATON STATE: FL ZIP: 33432 BUSINESS PHONE: 5613936685 MAIL ADDRESS: STREET 1: 200 E PALMETTO PARK RD STE 200 CITY: BOCA RATON STATE: FL ZIP: 33432 FORMER COMPANY: FORMER CONFORMED NAME: CEEE GROUP CORP DATE OF NAME CHANGE: 19951120 10QSB 1 FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _______________. Commission File Number: 0-27256 ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. (Exact name of small business issuer as specified in its charter) DELAWARE 65-0512785 (State or other jurisdiction of (I.R.S. Employer Identification number) incorporation or organization) 200 East Palmetto Park Road, Suite 200, Boca Raton, Florida 33432 (Address of principal executive offices) Registrant's telephone no., including area code: (561) 393-6685 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities 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 [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding As Of August 26, 1998 - ---------------------------------- --------------------------------- Common Stock, $.001 par value 20,551,857 TABLE OF CONTENTS Heading Page PART 1. - FINANCIAL INFORMATION Item 1. Financial Statements ................................................2 Consolidated Balance Sheet - June 30, 1998 (Unaudited) ............3-4 Consolidated Statement of Income and Comprehensive Income (Unaudited) ..................................................5 Consolidated Statement of Changes in Stockholders' Equity (Unaudited)...................................................6 Consolidated Statement of Cash Flows - Three and Six Months ended June 30, 1998 (Unaudited) ................................7-10 Notes to Consolidated Financial Statements (Unaudited) ..........11-15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......................................16-17 PART II. - OTHER INFORMATION Item 1. Legal Proceedings ...................................................18 Item 2. Changes In Securities ...............................................18 Item 3. Defaults Upon Senior Securities......................................18 Item 4. Submission of Matters to a Vote of Securities Holders ...............18 Item 5. Other Information ...................................................18 Item 6. Exhibits and Reports on Form 8-K ....................................18 Signatures ..........................................................19 PART 1 Item 1. Financial Statements The following unaudited financial Statements for the period ended June 30, 1998, have been prepared by Atlantic International Entertainment, Ltd. (the "Company"). ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. Financial Statements June 30, 1998 -2- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. CONSOLIDATED BALANCE SHEET (UNAUDITED) AS OF JUNE 30, 1998
June 30, 1998 ------------------------- (Unaudited) ASSETS CURRENT ASSETS Cash and Cash Equivalents $3,457,834 Accounts Receivable [Net of Allowance for Doubtful Accounts of $20,296] 39,182 Notes Receivable 1,529,701 Refundable Income Tax 77,215 Deferred Tax Asset 176,812 Prepaid Expenses 6,423 Other Current Assets 14,628 ----------- TOTAL CURRENT ASSETS: 5,301,795 ----------- Furniture, Fixtures and Equipment - (Net of Accumulated Depreciation of $217,023) 436,782 Software (Net of Accumulated Amortization of $419,991) 1,484,767 Cost in Excess of Net Assets of Business Acquired (Net of Accumulated Amortization of $129,575) 1,413,705 OTHER ASSETS Due From Related Parties 76,361 Other Assets 18,079 Investments 535,821 Notes Receivable (Net of Discounts and Reserve) 3,544,007 ----------- TOTAL OTHER ASSETS 4,174,268 TOTAL ASSETS $12,811,317 ===========
-3- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. CONSOLIDATED BALANCE SHEET (UNAUDITED) (Continued) AS OF JUNE 30, 1998
LIABILITIES AND STOCKHOLDERS'EQUITY: CURRENT LIABILITIES Accounts Payable and Accrued Expenses $ 760,349 Notes Payable - Officers 272,566 Due to Customers -0- Current Portion of Long-Term Debt 217,442 Current Portion of Capital Lease Obligations 9,081 Income Taxes Payable - Federal 740,081 Income Taxes Payable - State 43,882 Line of Credit -0- Other Current Liabilities 47,278 ------------ TOTAL CURRENT LIABILITIES 2,090,679 Long-Term Debt 15,444 Capital Lease Obligations 18,011 ------------ TOTAL LIABILITIES 2,124,134 ------------ SHAREHOLDERS'S EQUITY: Preferred Stock - Par Value $.001 Per Share, Authorized 10,000 Shares, Issued and Outstanding 10 Common Stock - Par Value $001 Per Share; Authorized 100,000,000 Shares, Issued and Outstanding 20,540,184 Shares 20,540 Additional Paid - in - Capital 9,355,396 Unrealized Holding Loss on Marketable Securities (61,615) Retained Earnings 1,372,852 ------------ Total Stockholders' Equity 10,687,183 ------------ Total Liabilities and Stockholders' Equity $ 12,811,317 ============
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. -4- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME (UNAUDITED)
For The Three Months Ended For The Six Months Ended June 30, June 30, --------------------------------------------------------------------- 1997 1998 1997 1998 --------------------------------------------------------------------- REVENUE $ 1,160,180 $ 1,553,227 $ 1,764,428 $ 2,708,268 Cost of Sales (133,436) (223,683) (133,435) (375,404) General and Administrative (380,350) (709,428) (660,118) (1,168,207) Provision for Doubtful Accounts -- (66,477) -- (171,539) Depreciation and Amortization (128,574) (143,185) (202,201) (279,937) Other Gains and Losses (20,728) (27,117) (18,416) (23,746) ------------ ------------ ------------ ------------ Income (Loss) from Continuing Operations Before Income Tax Expense 497,092 383,337 702,528 689,435 Income Tax Benefit (Expense) (60,210) (119,057) (119,068) (146,469) ------------ ------------ ------------ ------------ Income From Continuing Operations $ 436,882 $ 264,280 $ 583,460 $ 542,966 Discontinued Operations (Net of Income Taxes of $51,047) Loss from Discontinued Operations -- -- (45,890) -- Gain on Sale of Discontinued Operations -- -- 144,982 -- ------------ ------------ ------------ ------------ NET INCOME $ 436,882 $ 264,280 $ 682,552 $ 542,966 Unrealized Holding Loss Arising During Period -- (61,615) -- (61,615) ------------ ------------ ------------ ------------ Comprehensive Income $ 436,882 $ 202,665 $ 682,552 $ 481,351 ------------ ------------ ------------ ------------ Income (Loss) Per Common Share Continuing Operations $ 0.046 $ 0.012 $ 0.005 $ 0.036 Discontinued Operations -- -- 0.068 -- ------------ ------------ ------------ ------------ Basic Net Income Per Share of Common Stock $ 0.046 $ 0.012 $ 0.073 $ 0.036 ------------ ------------ ------------ ------------ Diluted Net Income Per Share of Common Stock $ 0.046 $ 0.012 $ 0.073 $ 0.035 ------------ ------------ ------------ ------------ Weighted Average Shares of Common Stock Outstanding 9,465,184 17,107,684 9,357,934 13,400,184 ------------ ------------ ------------ ------------ Weighted Average Fully Diluted Shares Of Common Stock Outstanding 9,465,184 17,975,684 9,357,934 13,925,184 ------------ ------------ ------------ ------------
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements -5- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Unrealized Loss Preferred Stock Common Stock Additional On Retained Total Number Of Number Of Paid In Marketable Earnings Sockholders' Shares Amount Shares Amount Capital Securities (Deficit) Equity BALANCE - JANUARY 1, 1997 -- $-- 9,190,184 $ 9,190 $1,887,376 $ -- $ (217,431) $ 1,679,135 Sale of Common Stock -- -- 75,000 75 350,175 -- -- 350,250 Sale of Common Stock -- -- 25,000 25 -- -- -- 25 Asset Acquisition [Note 8] -- -- 200,000 200 1,598,880 -- -- 1,599,080 Conversion of Debt to Equity -- -- -- -- 313,475 -- -- 313,475 Issuance of Shares in Escrow -- -- 100,000 100 -- -- -- 100 Unrealized Holding Loss on On Marketable Securities -- -- -- -- -- (42,763) -- (42,769) Income from Continuing Operations -- -- -- -- -- -- 948,225 948,225 Income from Discontinued Operations -- -- -- -- -- -- 99,092 99,092 ------ --- ---------- ------- ---------- -------- ----------- ------------ BALANCE - DECEMBER 31, 1997 -- $-- 9,590,184 $ 9,590 $4,149,906 $(42,763) $ 829,886 $ 4,946,619 ------ --- ---------- ------- ---------- -------- ----------- ------------ Sale of Common Stock Shares in Escrow -- -- -- -- 299,900 -- -- 299,900 Unrealized Holding Loss on Marketable Securities -- -- -- -- -- (2,025) -- (2,025) Sale of Common Stock -- -- 1,250,000 1,250 3,998,750 -- -- 4,000,000 Sale of Common Stock -- -- 9,700,000 9,700 -- -- -- 9,700 Sale of Preferred Stock 10,000 10 -- -- 906,840 -- -- 906,850 Unrealized Holding Loss on Marketable Securities -- -- -- -- -- (16,827) -- (16,827) Income from Continuing Operations -- -- -- -- -- -- 542,966 542,966 ------ --- ---------- ------- ---------- -------- ----------- ------------ BALANCE - JUNE 30, 1998 10,000 $10 20,540,184 $20,540 $9,355,396 $(61,615) $ 1,372,852 $ 10,687,183 ====== === ========== ======= ========== ======== =========== ============
The accompanying Notes are an Integral Part of these Consolidated Financial Statements -6- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended June 30, 1 9 9 8 1 9 9 7 ------ ------- OPERATING ACTIVITIES: Income [Loss] Income from Continuing Operations $ 264,280 $ 436,882 Adjustments to Reconcile Net Income [Loss] to Net Cash Provided by [Used for] Operating Activities: Depreciation and Amortization 143,185 128,574 Provision for Doubtful Accounts 48,976 -- Regulated Loss on Carrying Value of Investments 51,289 -- Unregulated Loss on Carrying Value of Investments 16,827 56,681 Changes in Assets and Liabilities: [Increase] Decrease in: Accounts Receivable 7,462 (1,002,217) Prepaid Expenses -- 37,486 Notes Receivable (1,278,187) -- Restricted Cash -- -- Other Assets 11,564 3,460 Increase [Decrease] in: Accounts Payable and Accrued Expenses (62,978) 93,787 Income Taxes Payable 118,999 37,105 Other Current Liabilities (18,670) 38,836 Due to Customer (75,000) 46,000 ----------- ----------- NET CASH - CONTINUING OPERATIONS (772,253) (123,406) ----------- ----------- DISCONTINUED OPERATIONS: [Loss] from Discontinued Operations -- -- Gain on disposal of Discontinued Operations -- -- Adjustments to Reconcile Net [loss] to Net Cash Operations: Depreciation -- -- ----------- ----------- CHANGES IN ASSETS AND LIABILITIES: (Increase) Decrease in: Other Assets -- -- Increase (Decrease in: Accounts Payable -- -- Customer Deposits -- -- ----------- ----------- TOTAL ADJUSTMENTS -- -- NET CASH - DISCONTINUED OPERATIONS -- -- ----------- ----------- NET CASH - OPERATING ACTIVITIES - FORWARD (772,253) (123,406) ----------- ----------- INVESTING ACTIVITIES - CONTINUING OPERATIONS: Increase in Due from Related Parties (25,759) (737) Purchase of Investments (600,000) 35,897 Purchase of Property and Equipment (264,226) (167,927) Sale of Investments 156,650 -- ----------- ----------- NET CASH - INVESTING ACTIVITIES - CONTINUING OPERATIONS - (733,335) (132,767) FORWARDED INVESTING ACTIVITIES - DISCONTINUED OPERATIONS: Disposition of Property and Equipment -- -- ----------- ----------- NET CASH INVESTING ACTIVITIES $ (733,335) $ (132,767)
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements -7- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended June 30, 1 9 9 8 1 9 9 7 ------- ------- NET CASH - OPERATING ACTIVITIES - FORWARDED $ (772,253) $ (123,406) ----------- ----------- NET CASH - INVESTING ACTIVITIES - FORWARDED (733,335) (132,767) ----------- ----------- FINANCING ACTIVITIES - CONTINUING OPERATIONS: Proceeds from the Conversion of Debt to Equity -- -- Proceeds from Issuance of Common Stock 4,000,000 -- Proceeds from Issuance of Preffered Stock 906,850 -- Increase in Loan Payable to Shareholder 17,421 -- Proceeds from Long Term Debt 25,423 30,900 Payment from Notes Receivable 70,000 -- Payment of Notes Payable (41,733) (7,265) Payment of Lease Payable (12,053) -- Additions to Paid In Capital -- 14,238 ----------- ----------- NET CASH - FINANCING ACTIVITIES - CONTINUING OPERATIONS 4,965,908 37,873 ----------- ----------- Financing - Activities - Discontinued Operations Additions to Paid In Capital -- -- ----------- ----------- NET CASH - FINANCING ACTIVITIES 4,965,908 37,873 ----------- ----------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 3,460,320 (218,300) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD (2,486) 238,785 ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,457,834 $ 20,485 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the quarter for: Interest $ 782 $ 1,077 Income Taxes $ -0- $ 60,210 Income Tax Refund (Applied) $ -0- $ (23,100)
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements -8- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended June 30, 1 9 9 8 1 9 9 7 ------- ------- OPERATING ACTIVITIES: Income [Loss] Income from Continuing Operations $ 542,967 $ 631,188 Adjustments to Reconcile Net Income [Loss] to Net Cash Provided by [Used for] Operating Activities: Depreciation and Amortization 279,937 202,201 Provision for Doubtful Accounts 149,552 -- Regulated Loss on Carrying Value of Investments 51,289 -- Unregulated Loss on Carrying Value of Investments 16,827 -- Changes in Assets and Liabilities: [Increase] Decrease in: Accounts Receivable 8,531 (1,850,217) Prepaid Expenses 141 77,436 Notes Receivable (2,009,546) -- Restricted Cash (15,000) -- Investments -- 56,681 Other Assets 10,372 3,231 Increase [Decrease] in: Accounts Payable and Accrued Expenses (193,729) 139,173 Income Taxes Payable 149,627 37,105 Customer Deposits -- 83,242 Other Current Liabilities 9,913 38,836 Due to Customer (20,721) -- ----------- ----------- NET CASH - CONTINUING OPERATIONS (1,019,840) (581,124) ----------- ----------- DISCONTINUED OPERATIONS: [Loss] from Discontinued Operations -- (69,531) Gain on disposal of Discontinued Operations -- 120,895 Adjustments to Reconcile Net [loss] to Net Cash Operations: Depreciation -- 1,366 ----------- ----------- CHANGES IN ASSETS AND LIABILITIES: (Increase) Decrease in: Other Assets -- 815 Increase (Decrease in: Accounts Payable -- (14,808) Customer Deposits -- (27,648) ----------- ----------- TOTAL ADJUSTMENTS -- (41,641) NET CASH - DISCONTINUED OPERATIONS -- 11,089 ----------- ----------- NET CASH - OPERATING ACTIVITIES - FORWARD (1,019,840) (570,035) ----------- ----------- INVESTING ACTIVITIES - CONTINUING OPERATIONS: Increase in Due from Related Parties (26,506) (1,582) Purchase of Investments (600,000) (1,620,000) Purchase of Property and Equipment (400,095) (222,719) Sale (Purchase) of Investments -- (73,746) Sale of Investments 156,650 -- ----------- ----------- NET CASH - INVESTING ACTIVITIES - CONTINUING OPERATIONS - (869,951) (1,918,047) FORWARDED INVESTING ACTIVITIES - DISCONTINUED OPERATIONS: (Purchase) Disposition of Property and Equipment -- 11,110 ----------- ----------- NET CASH INVESTING ACTIVITIES $ (869,951) $(1,906,937)
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements -9- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended June 30, 1 9 9 8 1 9 9 7 ------- ------- NET CASH - OPERATING ACTIVITIES - FORWARDED $(1,019,840) $ (570,035) ----------- ----------- NET CASH - INVESTING ACTIVITIES - FORWARDED (869,951) (1,906,937) ----------- ----------- FINANCING ACTIVITIES - CONTINUING OPERATIONS: Proceeds from the Conversion of Debt to Equity -- 1,949,330 Proceeds from Issuance of Common Stock 4,299,900 -- Proceeds from Issuance of Preffered Stock 906,850 -- Increase in Loan Payable to Shareholder 105,930 (9,709) Proceeds from Long Term Debt 25,423 -- Payment from Notes Receivable 70,000 -- Line of Credit (1,800) Increase in equipment loans -- 30,900 Payment of Notes Payable (41,733) (7,265) Payment of Lease Payable (28,205) -- Additions to Paid In Capital -- 14,238 ----------- ----------- NET CASH - FINANCING ACTIVITIES - CONTINUING OPERATIONS 5,336,365 1,977,494 ----------- ----------- Financing - Activities - Discontinued Operations Additions to Paid In Capital -- 98,775 ----------- ----------- NET CASH - FINANCING ACTIVITIES 5,336,365 2,076,269 ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,446,574 (400,703) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 11,260 421,188 ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,457,834 $ 20,485 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the quarter for: Interest $ 782 $ 1,368 Income Taxes $ -0- $ (77,215) Income Tax Refund (Applied) $ -0- $ 119,068
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements -10- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. Notes to Consolidated Financial Statements (Uunaudited) June 30, 1998 Note 1 - BASIS OF PREPARATION The accompanying unaudited interim financial statements include all adjustments (consisting only of those of a normal recurring nature) necessary for a fair statement of the results for the interim periods. The results of operations and cash flows for the three month period ended March 31, 1998, are not necessarily indicative of the results of operations or cash flows to be reported for the full year ending December 31, 1998. Note 2 - BUSINESS ACQUISITIONS The business acquisition in the first quarter of 1997 has been accounted for under the purchase method. The results of operations of the acquired business are included in the consolidated financial statements from the date acquisition. On March 26, 1997, the Company concluded its acquisition of 100% of the outstanding stock of The EmiNet Domain, Inc., located in Boynton Beach, Florida. EmiNet is an Internet Service Provider (ISP), and developer of Internet related software products as well as hosting commercial Web sites. The Company paid $20,000 in cash and issued 200,000 shares of the Company's common stock (approximate market value on date of issue $2,000,000). The Stock Purchase Agreement also contains additional payments contingent on the future earnings performance of EmiNet. Any additional payments made, when the contingency is resolved, will be accounted for as additional costs of the acquired assets and amortized over the remaining life of the assets. The following unaudited pro forma consolidated results of operations for the years ended December 31, 1997 and 1996 are presented as if the EmiNet acquisition has been made at the beginning of each period presented. The EmiNet Domain, Inc. operated as an S Corporation in 1995 and 1996. Included in the expenses to arrive at Net Earnings are reclassifications of Shareholders' Draw to Officers Salaries and Income Tax Expense in the amounts of $132,200 for the short year 1996 and $86,000 for 1997. The unaudited pro forma information is not necessarily indicative of either the results of operations that would have occurred had the purchase been made during the periods presented or the future results of the combined operations. Years ended December 31 1997 1996 Net Sales $ 4,593,078 $ 878,097 Net Earnings Income (Loss) $ 1,096,976 $ (347,072) Basic Net Income (Loss) per common share $ .12 $ (.04) Diluted Net Income (Loss) per common share $ .12 $ (.04) -11- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. Notes to Consolidated Financial Statements (Uunaudited) (Continued) June 30, 1998 Note 3 - MAJOR CUSTOMERS Income fees derived from major customers are tabulated as follow:
Three Months Ended Six Months Ended June 30, June 30, 1997 1998 1997 1998 (Unaudited) (Unaudited) Customer A (Software System) -- -- -- -- Customer B (Software System) -- -- -- -- Customer C (Software System) -- -- -- -- Customer D (Software System) -- -- -- -- Customer E (Software System) 410,000 -- 600,000 -- Customer F (Software System) 450,000 -- 410,000 -- Customer G (Software System) 150,000 -- 450,000 -- Customer H (Software System) -- -- 150,000 -- Customer I (Software System) -- -- -- -- Customer J (Software System) -- -- -- -- Customer K (Software System) -- -- -- 450,000 Customer L (Software System) -- -- -- 220,000 Customer M (Software System) -- -- -- 350,000 Customer N (Software System) -- 615,000 -- 615,000 Customer O (Software System) -- 675,000 -- 675,000
Note 4 - CAPITAL STOCK ------------- On September 18, 1996 and October 31, 1996, the Company issued 521,500 and 365,200 shares, respectively of common stock in a private placement of its securities. The Company received net proceeds of approximately $826,881. On January 16, 1997, the Company entered into a stock purchase agreement with Brindenberg Securities, A/S under Regulation S of the Securities and Exchange Commission. A total of 75,000 shares were issued under the agreement for $525,000 net of offering costs and expenses of approximately $175,000. In February 1997, the Company issued 25,000 shares of its common stock to an outside consultant for services to be rendered. The consultant never performed the required services and therefore, the common shares issued will be returned in 1998. In March 1997, the Company issued 200,000 shares of the Company's common stock as part of the acquisition of EmiNet Domain, Inc. [See Note 3]. -12- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. Notes to Consolidated Financial Statements (Uunaudited) (Continued) June 30, 1998 In December of 1997, the Company sold 100,000 shares of the Company's common stock to Australian Advisors for a total of $300,000 pursuant to Regulation Statement S-8. Also in December 1997, the Company converted debt totaling $313,475 to equity. The shares related to the conversion were unissued at December 31, 1997 and the conversion ratio has been set at $4.00 per share. In the second quarter of 1998, the Company sold 1,250,000 shares for a total of $4,000,000 pursuant to Regulation Statement S-8. Also in the second quarter of 1998, 9,700,000 shares of common stock were issued to Atlantic International Entertainment Australia, a wholly owned subsidiary for use in a proposed takeover of the Australian company, Coms21. As of August 21, 1998, the offer had not yet been accepted by the shareholders of Coms21. In the second quarter of 1998, 10,000 shares of 5% Convertible Preferred Stock, $.001 par value, were issued for cash. Each share is convertible into common stock by virtue of a formula contained in the Purchase Agreement which relates to the average price per share of common stock within the conversion period. Note 5 - PER SHARE DATA Per share data are based on the weighted average number of common shares outstanding during the respective periods, retroactively adjusted to reflect the common shares issued in exchange for all outstanding common shares of The EmiNet Domain, Inc., including the additional shares sold pursuant to a "Reg S" offering in February, 1997. The diluted net income per share is based upon the options issued and outstanding as well as the assumed conversion of the Company's issued and outstanding preferred stock. Note 6 - INCENTIVE STOCK OPTION PLAN On January 1, 1997, the Company adopted an Incentive Stock Option Plan for Employees, Directors, Consultants and Advisors [the "Plan"]. The Plan will expire December 31, 2006 unless further extended by appropriate action of the Board of Directors. Employees, directors, consultants and advisors of the Company, or any of its subsidiary corporations, are eligible for participation in the Plan. The Plan provides for stock to be issued pursuant to options granted and shall be limited to 250,000 shares of Common Stock, $.001 par value. The shares have been reserved for issuance in accordance with the terms of the Plan. The exercise of these options may be for all or any portion of the option and any portion not exercised will remain with the holder until the expiration of the option period. The options expire on December 23, 2002. -13- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. Notes to Consolidated Financial Statements (Uunaudited) (Continued) June 30, 1998 Note 6 - INCENTIVE STOCK OPTION PLAN (CONTINUED) --------------------------------------- In addition, options were granted to the Board of Directors on April 2, 1998 for an aggregate amount of 700,000 options. A summary of the changes in outstanding Common Stock options for all outstanding plans is as follows:
Weighted-average ---------------- Shares Exercise Price ------ -------------- OUTSTANDING AT DECEMBER 31, 1995 -- -- Granted -- -- Exercised -- -- Canceled -- -- OUTSTANDING AT DECEMBER 31, 1996 -- -- Granted 175,000 3.25 Exercised -- -- Canceled -- -- ------- ----- OUTSTANDING AT DECEMBER 31, 1997 175,000 3.25 ------- ----- EXERCISABLE AT DECEMBER 31, 1997 175,000 3.25 ------- ----- GRANTED AT APRIL 2, 1998 700,000 4.125 ------- ----- OUTSTANDING AT JUNE 30, 1998 875,000 3.95 ------- -----
The following table summarizes information about stock options at December 31, 1997:
OUTSTANDING STOCK OPTIONS EXERCISABLE WEIGHTED-AVERAGE STOCK OPTIONS RANGE OF REMAINING WEIGHTED-AVERAGE WEIGHTED AVERAGE - -------- --------------------------------------- ---------------- EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE - --------------- ------ --------------------------------- ------ -------------- $ 3.25 175,000 4.50 $ 3.25 175,000 $ 3.25 $ 4.125 700,000 4.75 $ 4.75 700,000 $ 4.75
The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, for stock options issued to employees in accounting for its stock option plans. The exercise price of certain options issued during 1997 was the market price at the date of grant. Accordingly, no compensation expense has been recognized for the Company's stock-based compensation plans for fiscal year 1997. -14- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. Notes to Consolidated Financial Statements (Uunaudited) (Continued) June 30, 1998 Note 7 - Business Agreements In February 1998, the Company entered into an agreement with ELG Health Management Services ["ELG"] to market the Atlantic International Medical ["AIM"] products and services. ELG will provide the Company 40% of the net profits from the sale and distribution of medical products. In February 1998, the Company entered into a Development Service Agreement with International Transaction System Corp. ["ITS']. The Company's responsibilities under the agreement include engaging in the development activity required to host ITS on the Company's software and selling debt card processing [`DCP']. ITS' responsibilities include development activity required to develop the DCP test methodology and/or test cases so that the Company may validate correct operation of the DCP and provide service support. Under the Agreement, the Company paid $20,000 to acquire access to DCP through ITS for the purpose and exclusive application in the Company's software. Transaction fees earned by customers will be distributed 75% and 25% to the Company and ITS, respectively. The initial term of the agreement is 10 years, and automatically renews in 5 year consecutive periods, unless terminated by either party. -15- ATLANTIC INTERNATIONAL ENTERTAIMENT, LTD. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RECENT DEVELOPMENTS On April 3, 1998 the company entered into a Securities Purchase Agreement for the sale of $500,000 of a newly created 5% Convertible Preferred Stock. The Agreement also grants the purchaser the right to purchase up to an additional $2,500,000 in said class of securities at market prices. The preferred stock contributed into the Company's common stock at the purchaser's option. In June 1998 the second tranche for an additional $500,000 was sold under the same rights and restrictions. On April 30, 1998, the Company entered into a Securities Purchase Agreement with Hosken Consolidated Investments, Ltd. ["HCI"], where HCI purchased one million shares of the Company's common stock for $4,000,000 pursuant to Regulation D. In a simultaneous transaction, HCI has subscribed for 25% of the Company's South African subsidiary, Atlantic International Entertainment, Ltd. South Africa. HCI received its equity in consideration for its services to be rendered related to introducing the Company to the South African gaming and wagering community. In May 1998, the Company's wholly-owned subsidiary, AIE, Australia, Ltd. submitted an acquisition bid for an Australian listed company, Coms21. The Company offered Coms21 shareholders the equivalent of $.70 Australian dollar per share in the form of the Company's U.S. shares. In May of 1998, the Company instituted a Section 125 benefit plan for it's Employees. In June of 1998, the Company instituted a 401K Employee benefit plan on behalf of its Employees. The Company is not required to make matching contributions under this plan. In the second quarter of 1998, the Company completed installations of four new licenses, two for Internet Casino Extension (ICE) and two for webSports products. RESULTS OF OPERATIONS The Company's revenues increased approximately 34% in the second quarter 1998 over the same period in 1997. Revenues from operations in the second quarter 1998 were $1,553,227, as compared with $1,160,180 for the same period in 1997. Net income from continuing operations declined approximately 52% in the second quarter 1998 as compared to the second quarter 1997, $202,664 (0.01 per share) and $436,882 (0.04 per share) respectively. The increase in revenues was the result of continued market penetration from industry awareness of Atlantic's products as well as a strong sales and marketing push. The net profit after taxes and extraordinary items declined approximately -16- ATLANTIC INTERNATIONAL ENTERTAIMENT, LTD. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) 52% or $234,218. Operating expenses rose by approximately 45% or $306,802 over the same period in 1997. Operating expenses for the second quarter 1998 were $1,103,413 as compared to $663,088 for the second quarter 1997. This was largely due to global expansion efforts, expenses related to the development of new products and increased sales and support staffing. Operating expenses rose by approximately 77% or $508,089 over the same period in 1997. Operating expenses for the second quarter 1998 were $709,428 as compared to $380,350 for the second quarter 1997. This was largely due to global expansion efforts, expenses related to the development of new products and increased sales and support staffing. For the six months ended June 30, 1998 net income from operations represented 20% of total revenues as compared to 38% for the six months ended June 30, 1997. The decline in net income to total revenues was a result of continued global expansion and product development. During the second quarter of 1998, funds of $5,216,450 were generated from the sale of 10,950,000 shares of common and 10,000 shares of preferred stock. In the opinion of management, inflation has not had a material impact in the operations of the Company. -17- ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. PART II Item 1. Legal Proceedings Litigation - The Company is party to litigation arising from the normal course of business. In management's' opinion, this litigation will not materially affect the Company's financial position, results of operations or cash flows. Item 2. Changes in Securities This Item is not applicable to the Company. Item 3. Defaults upon Senior Securities This Item is no applicable to the Company. Item 4. Submission of Matters to a Vote of Security Holders This Item is not applicable to the Company. Item 5. Other Information This Item is not applicable to the Company. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule -18- In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Atlantic International Entertainment, Ltd. Date: August 27, 1998 By:/s/ Richard A. Iamunno --------------------------------- (Signature) Richard A. Iamunno, President And Chief Executive Officer Date: August 27, 1998 By:/s/ David P. Halaburda --------------------------------- (Signature) David P. Halaburda Chief Financial Officer -19- EX-27 2 ARTICLE 5 FDS FOR 10-QSB
5 This schedule contains summary financial information extracted from Atlantic International Entertainment, Ltd.'s financial statements as of June 30, 1998 and is qualified in its entirety by reference to such financial statements. 6-MOS JUN-30-1998 JUN-30-1998 3,457,834 0 1,568,883 (20,296) 0 5,301,795 2,558,563 637,014 12,811,317 2,090,679 0 20,540 0 10 10,666,633 12,811,317 2,708,268 2,708,268 375,404 2,332,864 1,446,501 171,539 25,389 689,435 146,469 542,966 0 0 0 542,966 .04 .04
-----END PRIVACY-ENHANCED MESSAGE-----