-----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, OiqNIESUujnZwM3TO9FLEtLMB4zPnmdwYtALrhyoNa6cIxAvax04tZGgHQ8n7ziR 3Qri2sirVpswxej2ViHpiQ== 0001023298-00-000006.txt : 20000516 0001023298-00-000006.hdr.sgml : 20000516 ACCESSION NUMBER: 0001023298-00-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVENUE ENTERTAINMENT GROUP INC /DE/ CENTRAL INDEX KEY: 0001023298 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ALLIED TO MOTION PICTURE PRODUCTION [7819] IRS NUMBER: 954622429 FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12885 FILM NUMBER: 635547 BUSINESS ADDRESS: STREET 1: 1111 SANTA MONICA BLVD STREET 2: SUITE 2110 CITY: LOS ANGELES STATE: CA ZIP: 90025 BUSINESS PHONE: 2123152502 MAIL ADDRESS: STREET 1: 9 WEST 57TH ST STREET 2: SUITE 4170 CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: CINEMASTERS GROUP INC DATE OF NAME CHANGE: 19970311 10-Q 1 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 and Exchange Act of 1934 For the quarter ended March 31, 2000 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: 001-12885 -------------------------------------- AVENUE ENTERTAINMENT GROUP, INC. ----------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) Delaware 95-4622429 - --------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 11111 Santa Monica Blvd., Suite 525 Los Angeles, California 90025 - -------------------------------------------- -------------- (Address of principal executive offices) (Zip Code) (310) 996-6815 ------------------ -------------- (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 and 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 ______ Number of shares outstanding of each of issuer's classes of common stock as of May 4, 2000: Common Stock 4,589,030 AVENUE ENTERTAINMENT GROUP, INC. Table of Contents PART I. FINANCIAL INFORMATION Page No. -------- Consolidated Condensed Balance Sheets - March 31, 2000 (unaudited) and December 31, 1999 1 Unaudited Consolidated Condensed Statements of Operations - Three Months Ended March 31, 2000 and 1999 2 Unaudited Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 3 Unaudited Notes to Consolidated Condensed Financial Statements 5 Management's Discussion and Analysis or Plan of Operation 7 PART II. OTHER INFORMATION Signatures 10 PART I. FINANCIAL INFORMATION AVENUE ENTERTAINMENT GROUP, INC. Consolidated Condensed Balance Sheets March 31, December 31, 2000 1999 -------- ---------- (unaudited) Assets Cash $ 534,231 $ 476,198 Accounts receivable 268,099 652,429 Income tax receivable 29,703 29,703 Film costs, net 949,106 959,850 Property and equipment, net 67,885 72,664 Goodwill 1,823,379 1,893,509 Other assets 16,774 18,169 ----------- ---------- Total assets $ 3,689,177 $ 4,102,522 ========= ========= Liabilities and Stockholder's Equity Accounts payable and accrued expenses $ 1,138,362 $ 1,151,045 Deferred income 202,278 149,128 Loan payable 277,500 277,500 Deferred compensation 332,206 340,783 Due to related party 99,172 99,172 ----------- ----------- Total liabilities Stockholders' equity Common stock, par value $.01 per share 45,890 45,890 Additional paid-in capital 6,957,269 6,947,894 Deficit (5,209,813) (4,755,203) Treasury Stock (3,687) (3,687) Note receivable for common stock (150,000) (150,000) --------- ---------- Total stockholders' equity 1,639,659 2,084,894 ---------- --------- Total liabilities and stockholders' equity $ 3,689,177 $ 4,102,522 ========== ========= See accompanying notes to the consolidated condensed financial statements. avenue entertainment group, Inc. Consolidated CONDENSED StatementS of Operations (unaudited) Three months Three months ended ended March 31, March 31, 2000 1999 ----------- ---------- Operating revenues $ 99,926 $ 177,669 ---------- ---------- Costs and expenses: Film production costs 51,383 66,826 Selling, general and administrative expenses 503,025 471,069 ---------- ---------- Total costs and expenses 554,408 537,895 ---------- ---------- Unrealized gain on trading securities 0 30,268 Gain on sale of investments 24,480 -------------- ----------- 0 Loss before income tax (454,482) (305,478) Income tax expense 128 2,001 ------------- ------------ Net loss $ (454,610) $ (307,479) =========== ========== Basic and diluted loss per common stock $ (.10) (.07) ===== ===== See accompanying notes to the consolidated condensed financial statements. AVENUE ENTERTAINMENT GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (unaudited)
Three months Three months ended ended March 31, March 31, 2000 1999 ------------- ---------- Cash flows from operating activities: Net loss $ (454,610) $ (307,479) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 6,043 6,124 Amortization - film production costs 23,321 60,396 Amortization - goodwill 70,130 70,130 Gain on sale of investments 0 (24,480) Unrealized gain on trading securities 0 (30,268) Proceeds from sale of marketable securities 0 142,574 Deferred compensation (8,577) 38,500 Stock compensation 9,375 9,375 Changes in assets and liabilities which affect net income: Accounts receivable 384,330 29,896 Film costs (12,577) (18,373) Other assets 1,395 (6,488) Accounts payable and accrued expenses (12,683) (10,848) Deferred income 53,150 0 Due to related party 4,996 -------------- ------------ 0 Net cash used in operating activities 59,297 (35,945) Cash flows from investing activities: Purchase of equipment (1,264) (1,231) ------------ ----------- Net cash used in investing activities (1,264) (1,231) ------------ ------------
See accompanying notes to the consolidated condensed financial statements. AVENUE ENTERTAINMENT GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (unaudited) Three months Three months ended ended March 31, March 31, 2000 1999 ------------- ---------- Net increase (decrease) in cash 58,033 (37,176) Cash at beginning of year 476,198 427,240 ------- ---------- Cash at end of period $ 534,231 $ 390,064 ========== ========== Supplemental cash flow information: Cash paid during the year for: Interest $ 403 $ 2,707 ========== ============ Income taxes $ 128 $ 2,001 ========== ============ See accompanying notes to consolidated condensed financial statements. AVENUE ENTERTAINMENT GROUP, INC. Notes to Consolidated CONDENSED financial Statements (Unaudited) 1. Summary of significant accounting policies The Company Avenue Entertainment Group, Inc. (the "Company") is principally engaged in the development, production and distribution of feature films, television series, movies-for-television, mini-series and film star biographies. Generally, theatrical films are first distributed in the theatrical and home video markets. Subsequently, theatrical films are made available for worldwide television network exhibition or pay television, television syndication and cable television. Generally, television films are first licensed for network exhibition and foreign syndication or home video, and subsequently for domestic syndication on cable television. The revenue cycle generally extends 7 to 10 years on film and television product. Basis of presentation The accompanying interim consolidated financial statements of the Company are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-KSB for the year ended December 31, 1999. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company at March 31, 2000, the results of operations and its cash flows for the three months ended March 31, 2000 and 1999 have been included. The results of operations for the interim period are not necessarily indicative of results, which may be realized for the full year. AVENUE ENTERTAINMENT GROUP, INC. Notes to Consolidated CONDENSED Financial Statements (Continued) (Unaudited) 2. Film costs Film costs consist of the following: March 31, December 31, 2000 1999 -------- ------ ---- In process or development $ 280,700 $ 267,404 Released, net of accumulated amortization 668,406 692,446 ---------- --------- of $16,364,798 and $16,341,477, respectively 949,106 $ 959,850 ========== ========== 3. Loan payable On May 27, 1997, the Company entered into an unsecured demand note (the "Note") which provided the Company with borrowings in the principal amount of $150,000, at prime plus 1%, with Fleet Bank, National Association. The Note is payable on demand, but in any event not later than May 27, 2000. As of March 31, 2000, $47,500 had been borrowed under the Note. The Company believes that it will be able to extend the note for an additional period on similar terms and conditions, however there can be no assurance that such loan will be extended. On June 3, 1999, the Company entered into an unsecured loan for $1,000,000 at prime plus 1% with City National Bank which matured on October 1, 1999. As of March 31, 2000 $230,000 had been borrowed under the loan of which $80,000 was prepaid on April 3, 2000 and the loan has been extended through June 1, 2000. Item 2. MANAGEEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion and analysis should be read in conjunction with the Company's consolidated condensed financial statements and related notes thereto. Liquidity and Capital Resources At March 31, 2000, the Company had approximately $534,000 of cash. Revenues have been insufficient to cover costs of operations for the quarter ended March 31, 2000. The Company has a working capital deficiency and has an accumulated deficit of $5,210,000 through March 31, 2000. The Company's continuation as a going concern is dependent on its ability to ultimately attain profitable operations and positive cash flows from operations. The Company's management believes that it can satisfy its working capital needs based on its estimates of revenues and expenses, together with improved operating cash flows, as well as additional funding whether from financial markets, other sources or other collaborative arrangements. The Company believes it will have sufficient funds available to continue to exist through the next year, although no assurance can be given in this regard. Insufficient funds will require the Company to scale back its operations. The Independent Auditor's Report dated April 12, 2000 on the Company's consolidated financial statements states that the Company has suffered losses from operations, has a working capital deficiency and has an accumulated deficit that raises substantial doubt about its ability to continue as a going concern. The accompanying financial statements do not include any adjustments that may result from the Company's inability to continue as a going concern. Results of Operations For the quarter ended March 31, 2000, the Company had a loss before income taxes of approximately $454,000 compared to a loss of $305,000 for the quarter ended March 31, 1999. The loss for the period was primarily the result of reduced revenues earned as well as a small increase in selling, general and administrative expense. Included in the quarter ended March 31, 1999 was 30,268 and 24,480, respectively of unrealized gains on trading securities and gains on sales of investments, both relating to the common stock of GP Strategies Corporation. Revenues Revenues for the three months ended March 31, 2000 were approximately $100,000 compared to $178,000 for the three months ended March 31, 1999. The revenues earned in 2000 were derived from the licensing of rights of the "Hollywood Collection" in secondary markets through Janson Associates. In addition, the Company received a nonrefundable $50,000 in supervisory development fees related to the setup of two motion pictures with a third party financier. The revenues earned in 1999 were derived from the sale of the domestic rights to "Betty Buckley, In Performance and In Person" to the Bravo Cable network for $50,000, as well as licensing of rights of the "Hollywood Collection" in secondary markets. In addition, the Company received a $44,000 production fee in 1999, relating to the motion picture "Wayward Son". Film production costs Film production costs for the three months ended March 31, 2000 were $51,000 compared to $67,000 for the three months ended March 31, 1999 and included additional costs of $25,000 associated with the "Timeshifters." Selling, General and Administrative Selling, general and administrative (S,G&A) expenses for the three months ended March 31, 2000 were $503,000 compared to $471,000 for the three months ended March 31, 1999. The increased in S,G&A during 2000 is the result of salary expenses which were covered by a production during the three months ended March 31, 1999. Recent Accounting Developments In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company has adopted SFAS No. 133 by January 1, 2000. The Company is currently evaluating the impact the adoption of SFAS No. 133 will have on the consolidated financial statements. Year 2000 During 1999, the Company completed any required modifications to its critical systems and applications relating to year 2000 issues. The Company also completed a survey of its significant suppliers to assess their vulnerability if these companies were to fail to remediate their year 2000 issues. The responses received indicated that the Company's suppliers were aware of the year 2000 issue and were implementing all necessary changes prior to the end of calendar year 1999. The Company also formulated contingency plans to ensure that business-critical processes were protected from disruption and will continue to function during and after the year 2000. During 1999, the Company did not incur any material costs in connection with identifying, evaluating or remediating year 2000 issues. The Company's business and operations experienced no material adverse effects from the calendar change to the year 2000 or from the leap year that occurred in 2000, and we have not been notified of any disruptions to or failures in the systems of any of our suppliers. The Company will continue to monitor our information technology and non-information technology systems and those of third parties with whom we conduct business throughout the year 2000 to ensure that any latent year 2000 issues that may arise are addressed promptly. Although we do not anticipate any additional expenditures relating to year 2000 compliance, we cannot provide any assurance as to the magnitude of any future costs until significant time has passed. Forward-Looking Statements This report contains certain forward-looking statements reflecting management's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the ability of the Company to reverse its history of operating losses; the ability to obtain additional financing and improved cash flow in order to meet its obligations and continue to exist as a going concern; production risks; dependence on contracts with certain customers; future foreign distribution arrangements; the risk that the Company's preparations with respect to the risks presented by the year 2000 issue will not be adequate; and dependence on certain key management personnel. All of these above factors are difficult to predict, and many are beyond the control of the Company. Market Risk Exposure The financial position of the Company is subject to market risk associated with interest rate movements on outstanding debt. The Company has debt obligations with variable terms. The carrying value of the Company's variable rate debt obligation approximates fair value as the market rate is based on prime. PART II. OTHER INFORMATION AVENUE ENTERTAINMENT GROUP, INC. March 31, 2000 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. AVENUE ENTERTAINMENT GROUP, INC. DATE: May 15, 2000 BY: Gene Feldman Chairman of the Board DATE: May 15, 2000 BY: Cary Brokaw President and Chief Executive Officer, Director DATE: May 15, 2000 BY: Sheri L. Halfon Senior Vice President, Chief Financial Officer EX-27 2
5 0001023298 AVENUE ENTERTAINMENT GROUP, INC. 3-MOS DEC-31-2000 MAR-31-2000 534,231 0 268,099 0 949,106 0 67,885 0 3,689,177 2,049,518 0 0 0 45,890 1,593,769 3,689,177 99,926 99,926 51,383 554,408 503,025 0 0 (454,482) 128 (454,610) 0 0 0 (454,610) (.10) (.10)
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