-----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, CGQvmmKQDx5MbFb3YlWC/VveZp5PG9eDnvUpbkXiYXmWBSxbIXN8BwtwjnyqMhXk 9GZCVYd9r2smLymraptf6Q== 0000912057-00-024769.txt : 20000516 0000912057-00-024769.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024769 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHOICES ENTERTAINMENT CORP CENTRAL INDEX KEY: 0000822935 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-VIDEO TAPE RENTAL [7841] IRS NUMBER: 521529536 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-17001 FILM NUMBER: 634844 BUSINESS ADDRESS: STREET 1: 2455 EAST SUNRISE BOULEVARD STREET 2: STE 313 CITY: FT LAUDERDALE STATE: FL ZIP: 33304 BUSINESS PHONE: 9547524289 MAIL ADDRESS: STREET 1: 2455 EAST SUNRISE BOULEVARD STREET 2: STE 313 CITY: FT LAUDERDALE STATE: FL ZIP: 33304 FORMER COMPANY: FORMER CONFORMED NAME: DATAVEND INC DATE OF NAME CHANGE: 19900401 10QSB 1 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2000 [ ] Transition report under Section 13 or 15 (d) of the Exchange Act For the transition period from _____________ to _____________ Commission file number 000-17001 Choices Entertainment Corporation - -------------------------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in Its Charter) Delaware 52-1529536 - ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 121 Vine Street, Suite 1903 Seattle, Washington 98121-1456 ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip code) Issuer's Telephone Number, Including Area Code (206) 443-6948 -------------- - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if changed since last report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No[ ] State the number of shares outstanding of the issuer's Common Stock, as of March 30, 2000: 29,274,355 Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Index to Financial Statements Page Condensed Balance Sheet at March 31, 2000 (Unaudited) 2 Condensed Statements of Income for the Three Months Ended March 31, 2000 and 1999 (Unaudited) 3 Condensed Statement of Stockholders' Deficit for the Three Months Ended March 31, 2000 (Unaudited) 3 Condensed Statements of Cash Flow for the Three Months Ended March 31, 2000 and 1999 (Unaudited) 4 Notes to the Unaudited Condensed Financial Statements 4 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 6 PART II - OTHER INFORMATION Item 1. Legal Proceedings 8 Item 6. Exhibit Index 9
-1- Part I - FINANCIAL INFORMATION Item 1. Financial Statements CHOICES ENTERTAINMENT CORPORATION CONDENSED BALANCE SHEET (unaudited)
March 31, 2000 -------------- ASSETS Current assets: Cash $ 71,781 ------------ Total current assets 71,781 Other assets Prepaid expense and misc. 464 Non-marketable securities - net at cost 467,215 ------------ Total assets $ 539,460 ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued expense $ 175,233 Notes payable-current 297,000 ----------- Total current liabilities 472,233 ------------ Total liabilities 472,233 Stockholders' deficit: Preferred stock, par value $.01 per share: Authorized 5,000 shares: 478.829 issued and outstanding 4 Common stock, par value $.01 per share: Authorized 50,000,000 shares: 29,315,235 issued And outstanding 293,152 Additional paid-in-capital 22,276,035 Accumulated deficit (22,501,961) ------------ Total stockholders' deficit 67,227 ------------ $ 539,460 ============
See accompanying notes to financial statements. -2- CHOICES ENTERTAINMENT CORPORATION CONDENSED STATEMENTS OF INCOME (Unaudited)
For the Three Months Ended March 31, ------------------------- 2000 1999 -------- -------- Operating costs and expenses: Selling and administrative expense $ 26,711 $ 8,152 Professional and consulting expense 163,510 37,786 -------- -------- 190,221 45,938 -------- -------- Other expenses: Merger and Acquisition Expense 27,000 -0- Interest (income) expense, cash-net (587) 206 Issuance of stock in lieu of interest expense 14,000 -0- -------- -------- Income from continuing operations (230,634) (46,144) -------- -------- Gain on reconciliation of accruals 115,576 -0- -------- -------- Net income $(115,058) $(46,144) ======== ======== Net loss per share of common stock: Basic income per share: Continuing operations $ (0.01) $ -0- Net income -0- -0- ======== ======== Diluted income per share: Continuing operations $ (0.01) $ -0- Net income -0- -0- ======== ========
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT For the Three Months Ended March 31, 2000 (Unaudited)
Preferred Stock Common Stock Additional - --------------- ------------ Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total - ------ ------ ---------- -------- ----------- ---------- ----- Balance at December 31, 1999: 109.1 $1 28,504,395 $285,044 $21,496,035 $(22,386,903) $(605,823) Issuance of preferred stock in exchange for debt and cash: 390 $3 779,997 - 780,000 Issuance of common stock on conversion of preferred stock (20.271) - 810,840 8,108 - - 8,108 Net loss for the three months ended March 31, 2000: (115,058) (115,058) - --- -- ---------- -------- ----------- ------------ --------- 478.829 $4 29,315,235 $293,152 $22,276,035 $(22,501,961) $ 67,227 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
See accompanying notes to financial statements. -3- CHOICES ENTERTAINMENT CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31, ---------------------------- 2000 1999 -------- -------- Cash flows from operating activities: Net loss $(115,058) $(46,144) -------- -------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Change in assets and liabilities: Change in accounts payable and accrued expense (200,703) (5,000) Change in accrued merger and acquisition expenses 27,000 (50,000) Change in accrued professional fees - (20,970) Change in other accrued expenses (4,570) 5,000 -------- -------- Total adjustments (178,273) (29,030) -------- -------- Net cash provided by (used in) operating activities (293,331) (75,174) -------- -------- Cash flows from investing activities: Purchase of non-marketable securities (467,215) -0- -------- -------- Net cash provided by (used in) investing activities (467,215) -0- -------- -------- Cash flows from financing activities: Proceeds from notes payable 297,000 75,000 Repayment of notes payable (250,000) -0- Issuance of preferred stock for cash and in exchange for notes payable 780,000 -0- Other long-term liabilities (14,167) 206 -------- -------- Net cash provided by (used in) financing activities 812,833 75,206 -------- -------- Net increase (decrease) in cash 52,287 32 Cash at beginning of period 19,494 2,074 -------- -------- Cash at end of period $ 71,781 $ 2,106 ======== ======== Supplementary disclosure of cash flow information: Cash paid during the period for interest $ 167 $ -0- ======== ========
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS Note 1. Financial Statements Quarterly Financial Statements: The accompanying unaudited financial statements for the three-month period ended March 31, 2000 and 1999 have been prepared in accordance with the instructions for Form 10QSB and do not include all of the information and footnotes required by generally accepted accounting principles for completed financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the results for the interim period have been made. The results of operations for the three-month period ended March 31, 2000, are not necessarily indicative of the results to be expected for the full year. -4- Note 2. Summary of Significant Accounting Policies Net Income (Loss) Per Common Share Primary income per share for the three-month periods ended March 31, 2000 and March 31, 1999 was computed by dividing the net income by the weighted average number of common shares outstanding during the periods. Fully diluted income per share for the three-month period ended March 31, 2000 and March 31, 1999, was computed by dividing the net income by the weighted average number of common shares outstanding during the periods, as well as the number of common shares that would be outstanding as a result of the conversion of the Company's preferred stock.
For the Three Months Ended March 31, ------------------------- 2000 1999 ---------- ---------- Number of shares used in calculation Basic 24,489,387 22,004,000 Diluted 28,853,327 26,364,395
Cash and Cash Equivalents The Company considers all certificates of deposit and highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Revenue Recognition Revenue is recognized using the accrual method of accounting. Securities Marketable securities are carried at lower of cost or market. Non-marketable securities are carried at cost. Note 3. Liquidity The Company continues to rely on borrowing and capital raising activities to provide funds for its operating and investing activities. The Company's viability for the foreseeable future is and will continue to be dependent upon its ability to find business opportunities and to secure needed capital. No assurance can be given that the Company will be successful in that regard. In the event the Company is not successful, it is unlikely that there would be any amounts available for distribution to the Company's stockholders. Note 4. Notes Payable The Company has been dependent on borrowing for operating capital. The Company has borrowed $297,000 as of the quarter ending March 31, 2000. The notes mature on or before June 29, 2000 and bear interest at 12% per annum, compounded annually, interest and principal payable at maturity. Note 5. Related Party Transactions In August 1999, the Company's Board of Directors passed a resolution expressly recognizing the obligation of the Company to compensate each of Jim Sink, George Pursglove, Thomas Renna and Tracy Shier for services rendered and to be rendered to the Company in connection with the change of control of the Company and the -5- maintenance of it as an existing, reporting corporation. Pursuant to that resolution, the Board fixed the obligation to each of the named individuals at $120,000 and gave each the option to take some part or that entire amount in securities of the Company. On December 29, 1999 the Board of Directors of the Company passed a resolution instructing the Company's transfer agent to issue restricted shares of the Company's common stock to the named individuals, in an amount of shares and in exchange for release of an amount of the Company's obligation as follows: Jim Sink--2,400,000 shares--$120,000; George Pursglove--1,200,000 shares--$60,000; Thomas Renna--1,200,000 shares--$60,000; and Tracy Shier--1,200,000 shares--$60,000. At or about the time of the adoption of the December 29th resolution, the price of the stock was approximately $.05 per share. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is our discussion of certain significant factors that have affected the Company's financial condition changes in financial condition, and results of operations. The discussion also includes the our liquidity and capital resources at March 31, 2000 and later dated information, where practicable. The following discussion should be read in conjunction with the Financial Statements and notes included in this form 10-QSB. The Board of Directors (the "Board") of Choices Entertainment Corporation (the "Company" or "We") adopted a proposal on January 17, 2000 to change the business of the Company to that of a technology holding company. We are acquiring, investing in, and incubating companies engaged in Internet, computing and other technologies in various stages of development. We have acquired securities issued by publicly traded Photochannel Networks Inc. In January 2000, the Company subscribed to a private placement of CAN$2,300,000 principal amount of Convertible Subordinated Redeemable 0% Debentures maturing April 30, 2000 (the "Debentures") issued by PhotoChannel Networks Inc., a British Columbia corporation ("Photochannel"). The subscription agreement calls for advances to Photochannel in exchange for the issuance of Debentures as follows: CAN$350,000 by January 31, 2000; CAN$750,000 by February 29, 2000; and CAN$1,200,000 by April 14, 2000. The Debentures are convertible into Photochannel common stock, no par value, ("Photochannel Stock")at the rate of 1 share of Photochannel Stock for each CAN$.50 in debenture principal amount. Also, the company was granted warrants pursuant to a vesting schedule to purchase additional shares of Photochannel Stock as follows: 140,000 warrants with an exercise price of CAN$.75; 300,000 warrants with an exercise price of CAN$1.00; and 480,000 warrants with an exercise price of CAN$1.25. Each warrant entitles the Company to purchase 1 share of Photochannel Stock at the exercise price, for cash. The warrants are presently fully vested and will expire June 30, 2000. As of the date of the filing of this report on Form 10KSB, the Company had completed its obligations under the subscription agreement and has converted the Debentures to common stock. All of the securities acquired in this transaction as well as the securities into which the securities acquired are convertible or exercisable against are restricted securities ad must be held for the applicable holding period from the date of conversion or exercise, as the case may be. The applicable holding period in most cases will be 1 year. We have acquired securities of non-publicly traded Tridium Research, Inc. In March 2000, the Company paid $50,000 cash to acquire 250,000 shares of common stock of Tridium Research Inc., a Washington corporation ("Tridium") based in Kirkland, Washington. The 250,000 shares of common stock acquired represents approximately 5% of all -6- Tridium common stock issued and outstanding. The Company has also obligated itself to provide an additional $200,000 to Tridium, upon terms and conditions to be determined. The Company generated no revenues during the three-months ended March 31, 2000. The primary source of funds for the quarter was the completion of a private placement of the Company's Series C Preferred Stock (the "Preferred Stock") and shareholder loans. In February 2000, the Company closed a self-offered private offering of 390 shares of the Company's Preferred Stock in the aggregate offering amount of $780,000. Offering expenses were less than $3,000. Each share of the Preferred Stock is convertible into 40,000 shares of the Company's common stock and carries the voting rights of the underlying common stock. The proceeds from this offering were used to retire all notes payable, to pay down the obligations of the Company to officers and directors of the Company, to pay down accounts payable to an immaterial amount, and to acquire interests in the two companies identified above. The Company paid down $250,000 of notes outstanding as a result of the private placement discussed above but borrowed $297,000 at an interest rate of 12%. We anticipate that the Company will not generate any significant revenues until the we accomplish our business objective of merging or acquiring revenue producing assets from a nonaffiliated entity. We presently have no liquid financial resources to offer an acquisition candidate and must rely upon an exchange of our stock to complete a merger or acquisition. Between December 31, 1999 and March 31, 2000 the Company incurred a net loss on continuing operations of $(230,634) resulting in a net working capital deficiency of approximately $400,452 as of March 31, 2000. The Company's viability for the foreseeable future is and will continue to be dependent upon its ability to find other business opportunity and to secure needed capital existing disputes. No assurance can be given that the Company will be successful in that regard. In the event the Company is not successful, it is unlikely that there would be any amounts available for distribution to the Company's stockholders. We estimate that outstanding liabilities of the Company are approximately $138,000 and cash in the bank is approximately $17,218. This Quarterly Report on Form 10-QSB contains forward looking information with respect to, among other things, plans future events or future performance of the Company, the occurrence of which involve certain risks and uncertainties that could cause actual results or future events to differ materially from those expressed in any forward looking statements. These risks and uncertainties include, but are not limited to, the risk and uncertainties associated with adverse litigation, the ability to identify and conclude alternative business opportunities, and those risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. Where any forward looking statement includes a statement of the assumption or bases believed to be reasonable and are made in good faith, assumed facts or bases almost always vary from actual result, and the differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward looking statement, the -7- Company expresses and expectation or belief as to plans or future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. The words "believe", "expect" and "anticipate" and similar expressions identify forward-looking statements. The Company is aware of the issues associated with Year 2000 ("Y2K") software compliance and the need to upgrade existing programming code in any computer system that it may use or purchase as the year 2000 approaches. The year 2000 issue relates to whether a computer system will properly recognize dates after 1999. If it cannot adequately process beyond the year 1999 and is not corrected, significant difficulties may be encountered in using the computer system. The Company currently uses computer time on a system that is available on an as needed basis provided for by an affiliate of the Company. It is not anticipated that the Company will incur any negative impact as a result of this potential problem. However, it is possible that this issue may have an impact on the Company if the Company successfully consummates a merger or acquisition. Management intends to address this potential problem with any prospective merger or acquisition candidate. There can be no assurances that new management of the Company will be able to avoid a problem in this regard after a merger or acquisition is so consummated. Part II - OTHER INFORMATION Item 1. Legal Proceedings The Company is a defendant to the lawsuit Dion Signs & Service, Inc. vs. Choices Entertainment Corporation, Civil Action No. 91-6871. The case is now pending in the Providence County Superior Court, Providence, Rhode Island. Dion Signs & Service, Inc. alleges that it is owed approximately $33,000 plus interest, costs and reasonable attorney's fees for the failure by Choices Entertainment Corporation to pay for signage that was erected at various locations pursuant to a contract. The Company is advised that pre-judgment interest on the claim accrues from the date the cause of action arose and that the amount of pre-judgment interest could approximate the amount of the claim, or approximately $33,000. The Company is further advised that the case has not been set for trial, there has been very little discovery, and that it is not possible to determine the likelihood of the outcome of this case at this time. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Choices Entertainment Corporation (Registrant) Date: May 15, 2000 By: /s/ Tracy M. Shier ------------------------------------- Tracy M. Shier, Director, President and Interim Chief Financial Officer -8- INDEX TO EXHIBITS Exhibit No. Description of Exhibit - ------- ---------------------- 3(a) Certificate of Incorporation, as amended (1) (b) Certificate of Designations of Series C Preferred Stock, as amended (2) (c) By-Laws, as amended (3) 4(a) Form of Certificate Evidencing Shares of Common Stock (4) (b) Form of 5% Promissory Note (5) 10.99 Consulting Agreement between Registrant and Thomas Renna (7) 27 Financial Data Schedule (8) - ------------------------------------------------------------------------------ (1) Filed as an Exhibit to Registrant's Registration Statement on Form S-8 (File No. 33-87016) and incorporated herein by reference. (2) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB, for the year ended December 31,1996 and incorporated herein by reference. (3) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1999 and incorporated herein by reference. (4) Filed as an Exhibit to Registrant's Registration Statement on Form S-1, inclusive of Post-Effective Amendment No.1 thereto (File No. 33-198983) and incorporated herein by reference. (5) Filed as an Exhibit to Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1995 and incorporated herein by reference. (6) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1997. (7) Filed as an Exhibit to Registrant's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999. (8) Filed herewith. (9) To be filed by amendment. -9- EX-27 2 EXHIBIT 27
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 71,781 467,215 0 0 0 71,781 0 0 539,460 472,233 297,000 0 4 293,152 21,236,035 539,460 0 0 0 190,221 30,413 0 (587) (230,634) 0 (230,634) 0 0 0 (115,058) .01 0
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