UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 2008
¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
For the transition period from to
Commission File Number 001-12885
AVENUE ENTERTAINMENT GROUP INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 95-4622429 | |
(State or Other Jurisdiction | (I.R.S. Employer | |
of Incorporation or Organization) | Identification No.) |
120 White Plains Road, Tarrytown, New York 10591
(Address of Principal Executive Offices)
(914) 631-5265
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (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 ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o Accelerated Filer o
Non-accelerated Filer o Smaller Reporting Company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 14, 2008, the registrant had outstanding 11,582,000 shares of common stock.
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PART I. FINANCIAL INFORMATION | ||||
ITEM 1. Financial Statements | 1 | |||
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 6 | |||
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk | 7 | |||
ITEM 4T. Controls and Procedures | 8 | |||
PART II. OTHER INFORMATION | ||||
ITEM 1. Legal Proceedings | 9 | |||
ITEM 1A. Risk Factors | 9 | |||
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds | 9 | |||
ITEM 3. Defaults upon Senior Securities | 9 | |||
ITEM 4. Submission of Matters to a Vote of Security Holders | 9 | |||
ITEM 5. Other Information | 9 | |||
ITEM 6. Exhibits | 9 | |||
SIGNATURES | 10 | |||
Exhibit 31.1 - Section 302 Certification of Chief Executive Officer | ||||
Exhibit 31.2 - Section 302 Certification of Chief Financial Officer | ||||
Exhibit 32.1 - Section 906 Certification of Chief Executive Officer and Chief Financial Officer |
AVENUE ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 2008 | December 31, 2007 | ||||||
(Unaudited) | (Audited) | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash | $ | 6,501 | $ | 23,562 | |||
Prepaid Expenses | - | 12,351 | |||||
TOTAL ASSETS | $ | 6,501 | $ | 35,913 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | $ | 103,827 | $ | 36,481 | |||
Loan payable - officer | 48,163 | 47,568 | |||||
Due to related party | 16,922 | 18,422 | |||||
TOTAL LIABILITIES | 168,912 | 102,471 | |||||
STOCKHOLDERS' DEFICIT: | |||||||
Preferred stock, $.01 par value, 2,000,000 shares | |||||||
authorized; none issued | - | - | |||||
Common stock, $.01 par value, 15,000,000 shares | |||||||
authorized; 11,582,000 shares issued and | |||||||
outstanding | 115,820 | 115,820 | |||||
Class B common stock, no par value, 1,000,000 shares | |||||||
authorized; none used | - | - | |||||
Additional paid-in capital | 7,245,713 | 7,245,713 | |||||
Accumulated deficit | (7,454,561 | ) | (7,358,708 | ) | |||
Treasury stock, at cost (798,918 shares of | |||||||
common stock) | (69,383 | ) | (69,383 | ) | |||
TOTAL STOCKHOLDERS' DEFICIT | (162,411 | ) | (66,558 | ) | |||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 6,501 | $ | 35,913 |
See notes to consolidated financial statements
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AVENUE ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31, | |||||||
2008 | 2007 | ||||||
Revenues | $ | 1,500 | $ | 2,176 | |||
General and administrative expenses | 97,353 | 10,589 | |||||
Net loss | $ | (95,853 | ) | $ | (8,413 | ) | |
Net loss per share - basic and diluted | $ | (0.01 | ) | * | |||
Weighted average common shares outstanding - | |||||||
basic and diluted | 11,582,000 | 10,321,030 |
* Less than $.01 per share
See notes to consolidated financial statements
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AVENUE ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, | |||||||
2008 | 2007 | ||||||
Cash Flows From Operations | |||||||
Cash Flows From Operating Activities | |||||||
Net loss | $ | (95,853 | ) | $ | (8,413 | ) | |
Adjustments to reconcile net loss to net cash | |||||||
(used in) operating activities | |||||||
Changes in operating assets and liabilities | |||||||
Prepaid expenses | 12,351 | (19,601 | ) | ||||
Accounts payable and accrued expenses | 67,346 | 1,956 | |||||
Loan payable - officer | 595 | - | |||||
Due to related party | (1,500 | ) | (2,176 | ) | |||
Net cash used in operating activities | (17,061 | ) | (28,234 | ) | |||
Cash Flows From Financing Activities | |||||||
Proceeds from collection of stock subscription receivable | - | 29,393 | |||||
(Decrease) increase in cash from operations | (17,061 | ) | 1,159 | ||||
Cash - Beginning of period | 23,562 | 1,448 | |||||
Cash - End of period | $ | 6,501 | $ | 2,607 |
See notes to consolidated financial statements.
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AVENUE ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Organization and Operations
Avenue Entertainment Group, Inc. (the “Company”) was incorporated in Delaware on March 7, 1997 and had operated through its wholly-owned subsidiaries, Avenue Pictures, Inc. and its subsidiaries (“Avenue Pictures”) and Wombat Productions, Inc. (“Wombat”).
From May 2, 2006, the Company has been inactive.
2. Summary of Significant Accounting Policies
Basis of presentation
The accompanying unaudited financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and with the rules and regulations under Regulation S-X of the Securities and Exchange Commission for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for interim financial statements have been included. These financial statements should be read in conjunction with the financial statements of the Company together with the Company's management discussion and analysis in the Company's Form 10-KSB for the year ended December 31, 2007. Interim results are not necessarily indicative of the results for a full year.
Consolidated Financial Statements
The Company's consolidated financial statements include all the accounts of the Company and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
3. Going Concern and Management’s Plans
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had incurred operating losses, has negative working capital and no operating cash flow and future losses are anticipated. The Company’s plan of operations, to raise equity financing, even if successful, may not result in cash flow sufficient to finance and expand its business. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Realization of assets is dependent upon future operations of the Company, which in turn is dependent upon management’s plans to meet its financing requirements and the success of its future operations. These financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue existence.
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4. Income Taxes
Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the Company's financial statements in accordance with FASB Statement 109, "Accounting for Income Taxes", and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company's consolidated financial statements.
The Company's policy is to classify assessments, if any, for tax related interest as interest expenses and tax related penalties as general and administrative expenses.
5. Fair Value Measurements
Effective January 1, 2008, the Company adopted both SFAS 157 and SFAS 159 without any effect.
Statement of Financial Accounting Standards (“SFAS”) No. 157, "Fair Value Measurements" (“SFAS 157”), defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require the use of fair value measurements. A fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability, or, in the absence of a principal market, the most advantageous market for the asset or liability.
SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement 115" (“SFAS 159”) permits an entity to elect to measure various financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected should be reported in earnings at each subsequent reporting date.
6. Related Party Transactions
As of March 31, 2008, loan payable - officer was $48,163, payable on demand, with interest at 5%, per annum.
7. Stock Subscription Receivable
In January and February 2007, the Company collected the stock subscription receivable of $29,393.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included in this report. This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
Our company cut back daily operations in late 2005 and essentially ceased daily operations in May 2006. In September 2005, we sold certain assets to Cary Brokaw Productions, and subsequently ceased the business of producing feature films, television films and made-for-television/cable movies. Cary Brokaw also resigned as a director of ours and as our Chief Executive Officer, President and Chief Financial Officer. Gene Feldman assumed certain duties previously held by Mr. Brokaw, including becoming our Chairman of the Board.
In May 2006, Gene Feldman was diagnosed with lymphoma and resigned from his position with us. On August 25, 2006, Gene Feldman passed away. On September 1, 2006, Mr. Feldman’s nephew, Michael D. Feldman, stepped in to become our Chief Executive Officer and Chairman of the Board, and Jerome I. Feldman, Gene Feldman’s brother and Michael D. Feldman’s father, became our Chief Financial Officer, Treasurer and Vice Chairman of the Board. Since Gene Feldman’s resignation, we have been substantially inactive. All monies disbursed by us from May 2006 to date were used to pay for directors and officers’ insurance premiums and the cost of maintaining our public company status. During that period, we have had no employees, other than our officers and our board of directors has not met.
Effective May 2006, we sold our remaining assets to the estate of Gene Feldman, pursuant to an agreement between Gene Feldman and us in early 2006; however, the actual closing of the transaction did not occur until January 2007. We have no current operations and do not expect to have revenue from operations in the near future. Our present focus is to acquire a target company or business seeking the perceived advantages of being a publicly-held corporation.
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
Operations for the three months ended March 31, 2008 and 2007 are not comparable because, commencing in mid 2007, we started the process of bringing our SEC filings current whereas in early 2007, the company was dormant.
As of March 31, 2008, we had negative working capital of $162,411 compared to negative working capital of $1,805 at March 31, 2007.
We do not have sufficient funds to continue our operating activities. Future operating activities are expected to be funded by sales of common stock to and loans from officers, directors and major stockholders.
Off-balance Sheet Arrangements
As of the date of this report, we have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.
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Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the three months ended March 31, 2008 and 2007. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
Application of Critical Accounting Policies and Estimates
The significant accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are as follows:
Consolidated Financial Statements
Our consolidated financial statements include the accounts our company and our wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated.
Fair Value of Financial Instruments
Our carrying values of cash and due to related party approximate their fair values because of the short-term maturity of these instruments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income (Loss) per Common Share
Basic net income (loss) per share was computed by dividing the net income (loss) for the period by the basic weighted average number of shares outstanding during the period. Diluted net income (loss) per share was computed by dividing the net income (loss) for the period by the weighted average number and any potentially diluted shares outstanding during the period.
Share-Based Compensation
We recognize compensation expense for all share-based payment awards made to employees, directors and others based on the estimated fair values on the date of the grant. Options are valued using the Black-Scholes Option-Pricing Model using the market price of our common stock on the date of valuation, an expected dividend yield of zero, the remaining period or maturity date of the warrants and the expected volatility of our common stock.
Deferred Income Taxes
Deferred income taxes are provided for temporary differences between financial statement and income tax reporting under the liability method, using expected tax rates and laws that are expected to be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not, that the deferred tax asses will not be realized.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not required.
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ITEM 4T. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2008, based on their evaluation of these controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in reports it files or submits under the Exchange Act is accumulated and communicated to management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
We have identified certain matters that constitute material weakness (as defined under the Public Company Accounting Oversight Board Auditing Standard No. 2) in our internal controls over financial reporting. The material weaknesses that we have identified relate to the fact that that our overall financial reporting structure, internal accounting information systems and current staffing levels are not sufficient to support our financial reporting requirements. We are working to remedy our deficiency.
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ITEM 1. Legal Proceedings
We are not the subject of any material pending legal proceedings and, to the knowledge of our management, no material proceedings are presently contemplated against us by any federal, state or local governmental agency. Further, to the knowledge of our management, no director or executive officer is party to any action which any has an interest adverse to us.
There are no material changes in the risk factors previously disclosed in our annual report on Form 10-KSB for the year ended December 31, 2007.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities during the Three Months ended March 31, 2008
There were no sales of unregistered securities during the three months ended March 31, 2008.
None.
None.
None.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
Exhibit 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 14, 2008
AVENUE ENTERTAINMENT GROUP, INC. |
Michael D. Feldman |
Chairman, Chief Executive Officer |
(principal executive officer) |
By: /s/ Jerome I. Feldman |
Jerome I. Feldman |
Vice Chairman, Chief Financial Officer, Treasurer |
(principal financial and accounting officer) |
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