FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities & Exchange Act of 1934
For fiscal year ended September 30, 1996
CENTURY PARK PICTURES CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-14247 41-1458152
(State of Incorporation) (Commission (IRS Employer
File Number) Identification
Number)
4701 IDS Center, Minneapolis, Minnesota 55402
(Address of principal executive offices) (zip code)
Registrant's telephone number: (612) 333-5100
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK par value $.001
Registrant has (1) filed all reports to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934, during the 12 months next preceding September
30, 1996 and (2) has been subject to such filing requirements for the ninety
(90) days preceding September 30, 1996.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(ss.229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of December 31, 1996, 9,887,000 common shares were outstanding. The aggregate
market value of the common shares (based upon only limited and sporadic
quotations not to exceed 1/10) of the Registrant held by non-affiliates was
$816,815.
PART I
ITEM 1. BUSINESS
(a) GENERAL DESCRIPTION OF BUSINESS
The Company develops, produces and markets various entertainment properties for
the motion picture, pay/cable and commercial television markets and, until
September 1995 through its 50.1% owned subsidiary, Willy Bietak Productions,
Inc. ("WBPI"), produced and operates small touring ice shows and theme shows
appearing in theatres, casinos, and major amusement parks and arenas. On
September 29, 1995, in consideration of guarantees of certain bank debt of WBPI,
provided WBPI by its minority shareholder, the Company transferred 65,900 of its
shares of WBPI common stock to such minority shareholder, thereby reducing the
Company's interest to 30%. The Company's wholly-owned subsidiary, International
Theatres Corporation ("ITC") operates the Chanhassen Dinner Theatre in
Chanhassen, Minnesota which the Company acquired in 1993.
If ITC fails to generate anticipated cash flow, the Company may be unable to
continue as a going concern without raising additional funds from outside
sources. Management is uncertain as to the likelihood of raising additional
funds. (See Liquidity and Sources of Capital for Further Discussion.)
The Company was organized under Minnesota law in 1983. The Company's executive
offices are located at 4701 IDS Center, Minneapolis, Minnesota 55402 and its
telephone number is (612) 333-5100.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's operations are attributable to one business segment. The
ownership, production, and operation of entertainment attractions.
(c) ACCOUNTANTS OPINION
The Company's independent auditors issued their opinion on the Company's
financial statements for the year ended September 30, 1996, which included an
explanatory paragraph as to substantial doubt about the Company's ability to
continue as a going concern. This doubt was raised primarily due to recurring
losses from operations and due to the Company's working capital deficit of
$2,949,739 at September 30, 1996.
(d) NARRATIVE DESCRIPTION OF BUSINESS
(i) International Theatres Corporation
On July 29, 1993, the Company acquired International Theatres
Corporation which operates the Chanhassen Dinner Theatre, located in suburban
Minneapolis, which the Company believes is the largest dinner theater operation
in the country. The facility, which was founded in 1968, encompasses 87,000
square feet and consists of four theaters and a related food service operation.
The Chanhassen Dinner Theatre has a total theater capacity of over 1,100 and can
serve 1,100 dinners in a two-hour period. Since the Company's purchase, the
Chanhassen Dinner Theatre has been managed by Michael Brindisi, formerly the
artistic director of Chanhassen Dinner Theatre.
The Chanhassen Dinner Theatre's four theaters play to approximately
180,000 customers annually and have played to over 6 million customers since its
inception. Each theater usually performs eight shows per week. The main theater,
which seats 576 people for dinner and theater, typically offers a musical show,
such as "42nd Street" and "Crazy For You". The other theaters seat 250, 130, and
125 people respectively, and offer a variety of popular plays, such as
"Nunsence", "Mass Appeal", "On Golden Pond", and "Sleuth". The facilities also
include cocktail lounges, private banquet areas and a ballroom. The Chanhassen
Dinner Theatre employs approximately 250 full-time employees, including 50
actors and musicians.
Ticket prices, generally include dinner and a show, and vary from
theatre to theatre. An in-house production staff produces each show, including
the development of all costumes and scenery. The Chanhassen Dinner Theatre is
open all year.
(ii) Motion Pictures, Pay/Cable, and Television
In producing entertainment properties for motion picture, pay/cable
and commercial television, the Company has limited its costs to those incurred
prior to the commencement of principal photography. It has been the Company's
intention to produce or co-produce and arrange for the distribution of primarily
feature length motion pictures with production financing derived from third
party sources. The Company has reported no revenues from motion pictures,
pay/cable and television during 1994, 1995 and 1996. At September 30, 1996, the
Company had two (2) properties in various stages of production and development
of which one (1) was substantially completed. All such properties have been
charged to expenses.
The profits of an enterprise involved in the entertainment industry
generally and, particularly, the motion picture,
television and music industries are greatly dependent upon the audience appeal
of each creative product, compared with the cost of such product's purchase,
development, production and distribution. Competition is intense both within the
motion picture and television industry and other entertainment media. The
Company is in competition with several major film studios, as well as with
numerous "independent" motion picture and television production companies for
the acquisition of artistic properties, and the services for creative and
technical personnel.
ITEM 2. PROPERTIES
The Company leases, as its headquarters, 1,941 square feet of office space at
4701 IDS Center, Minneapolis, Minnesota 55402. The Company's motion picture and
television operations leases 160 square feet of office space at 3575 Cahuenga
Blvd. West, Los Angeles, California 90048. Management believes that there is
adequate space available in the Los Angeles area to accommodate its California
operations.
International Theaters Corporation leases the Chanhassen Dinner Theatre
facilities pursuant to two leases, both of which expire on May 31, 1999. The
Company has an option to extend the term of these leases for two additional
periods of five years each. The leases cover approximately 87,000 square feet
and contain options to purchase the property for $3,665,000, before expiration.
ITEM 3. LEGAL PROCEEDINGS
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER
MATTERS
a. Price Range of Common Stock
The following table shows the range of the closing bid prices for the
Common Stock in the over-the-counter market for the fiscal years ended September
30, 1996 and 1995. The quotations for 1995 represent prices in the
over-the-counter market between dealers in
securities, do not include retail markup, markdown, or commission and do not
necessarily represent actual transactions. For first quarter 1996 there was no
established public trading market for the Company's common shares. There were
only limited or sporadic quotations and none exceed 1/10.
Fiscal Year 1996 Bid Prices
---------------- ----------
High Low
---- ---
See above explanation
Fiscal Year 1995 Bid Prices
---------------- ----------
High Low
---- ---
First Quarter 1/16 1/32
Second Quarter 1/8 1/32
Third Quarter 3/32 1/32
Fourth Quarter 1/16 1/32
b. Number of equity security holders' accounts at December 31, 1996:
980
c. Dividends:
The Registrant has never paid any cash dividends on its Common Stock
and does not plan to pay any cash dividends in the foreseeable future.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
1996 1995 1994 1993(a) 1992
------ ------ ------ --------- -----
Revenues $ 4,685,617 $ 4,151,314 $ 3,631,077 $ 603,697 $ 0
Net Income (Loss) (2,151,984) (939,169) (437,594) (466,047) (143,344)
Net Income (Loss)
per Share (.22) (.11) (.05) (.07) (.05)
Weighted Average
Number of
Common Shares 9,751,594 8,636,952 8,636,952 6,437,917 2,636,952
Total Assets 1,740,952 1,963,738 2,876,727 3,013,572 79,814
Long Term Debt. 376,362 562,187 722,924 861,961 0
(excluding current portion)
Stockholders'
Equity (Deficit) (1,902,715) (643,455) 295,714 733,308 (5,598)
(a) The Company acquired ITC on July 29, 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
THE RESULTS OF OPERATIONS
OPERATIONS
Year Ended September 30, 1996 compared to September 30, 1995
Admissions revenues attributable to the operations of ITC were $4,259,578 for
the year ended September 30, 1996 compared to $4,064,623 for the comparable
prior year period. The increase in revenues was primarily attributed to
increased ticket prices and fewer available discounts, offset in part by a
decrease in paid attendance. Admissions revenue attributable to the operation of
PIKE were $291,579 for the year ended September 30, 1996, its only year of
operation.
Food, beverage and merchandise sales attributable to the operation of ITC were
$3,551,805 for the year ended September 30, 1996 compared to $3,665,635 for the
comparable prior year period. The decrease was due to a decrease in attendance,
offset by increased merchandise sales due to the opening of a gift shop and
slight increases in prices. The cost of food, beverage and merchandise were
$1,110,131 for the year ended September 30, 1996 compared to $1,151,073 for the
comparable prior year period. Such costs as a percent of related sales were
31.2% and 31.4% for 1996 and 1995, respectively. The slight improvement in gross
margin of food, beverage and merchandise sales were due primarily to increased
prices and use of contract pricing for the purchase of major food products.
Food, beverage and merchandise sales attributed to the
operations of PIKE were $20,767 for the year ended September 30, 1996.
Operating Costs attributable to the operations of ITC were $5,797,235 for the
year ended September 30, 1996 compared to $5,843,601 for the comparable prior
year period. The decrease in operating costs was primarily attributable to a
combination of fewer theatres in year round operation and decreased attendance
which effects labor and direct operating costs. Operating costs attributable to
the operation of PIKE were $555,216 for the year ended September 30, 1996, its
only year of operation.
General and administrative expenses attributable to the operations of ITC were
$791,433 for the year ended September 30, 1996 compared to $711,746 for the
comparable prior year. The increase in operating expenses was primarily due to a
combination of higher than expected credit card fees (related to increase
usage), additional bank charges related to securing the line of credit and
inflationary increases in certain administrative costs. General and
administrative expenses attributable to the operation of PIKE were $1,311,533
for the year ended September 30, 1996, its only year of operation. General and
administrative expenses attributed to CPPC were $485,598 for the year ended
September 30, 1996 compared to $531,549 for the comparable prior year period.
The decrease was primarily due to cost containment efforts.
Interest expense was $113,430 for the year ended September 30, 1996 compared to
$117,496 for the comparable prior year period. Substantially all of the interest
expense is related to ITC's capitalized leasehold interest in building. The
decrease in interest is due to the decreases in the outstanding balance of the
capitalized leasehold interest.
Equity in net income (loss) of WBPI was $42,397 for the year ended September 30,
1996 compared to ($7,040) for the comparable prior year period. The company's
equity interest is 30%. See Note 4 to Consolidated Financial Statements for
condensed financial information of WBPI.
Year Ended September 30, 1995 compared to September 30, 1994
Admissions revenues were $4,064,623 for the year ended September 30, 1995
compared to $3,619,314 for the comparable prior year period. All of the
admission revenues were attributable to the operations of ITC. The increase in
admission revenues was primarily attributable to increased paid attendance.
All of the Company's food, beverage and merchandise sales and their
related costs of sales were generated by ITC. Food, beverage and
merchandise sales were $3,665,635 for the year ended September 30, 1995 compared
to $3,157,027 for the comparable prior year period. The increase in such sales
was primarily attributable to increased attendance. The cost of food, beverage
and merchandise sales were $1,151,073 for the year ended September 30, 1995
compared to $1,011,814 for the comparable prior year period. Such costs as a
percent of related sales were 31.4% and 32.0% for 1995 and 1994, respectively.
The slight improvement in gross margin on food, beverage and merchandise sales
were due primarily to increased prices.
Operating expenses were $5,843,601 for the year ended September 30, 1995
compared to $5,408,396 for the comparable prior year period. The increase in
operating expenses was primarily attributable to increased attendance and more
elaborate props in 1995, offset in part by reduced performers' compensation
which was due to fewer performers in certain productions in 1995 compared to
1994.
General and administrative expenses were $1,243,295 for the year ended September
30, 1995 compared to $1,227,221 for the comparable prior year period. The
increase was primarily due to inflationary increases in certain administrative
costs.
Interest expense was $117,496 for the year ended September 30, 1995 compared to
$139,305 for the comparable prior year period. Substantially all of the interest
expense is related to ITC's capitalized leasehold interest in building as
discussed in Note 3 to the Consolidated Financial Statements. The decrease in
interest is due to the decrease in the outstanding balance of the capitalized
leasehold interest.
Equity in net loss of WBPI was $7,040 for the year ended September 30, 1995
compared to $48,235 for the comparable prior year period. The Company's equity
interest is 30%. See Note 5 to the Consolidated Financial Statements for
condensed financial information of WBPI.
LIQUIDITY AND SOURCES OF CAPITAL
Cash provided (used) by operating activities for the year ended September 30,
1996 was $(1,083,134) compared to $(501,830) in the comparable prior year
period. Cash provided (used) by investing activities was ($7,455) for the year
ended September 30, 1996 compared to $65,166 for the comparable prior year
period. During 1995, the Company realized decreases in due from affiliates of
$77,280, and decreases in due to affiliates of $56,347. Cash provided by
financing activities was $1,087,711 for the year ended September 30, 1996,
compared to $41,582 for the comparable prior year period. The increase in 1995
was primarily due to short-term
borrowings of $450,000, advances from related parties of $580,300 and proceeds
from issuance of commons stock of $312,424.
At September 30, 1996, the Company had cash totaling $29,200 and a working
capital deficit of $2,949,739. The working capital deficit was comprised
primarily of notes payable of $450,000 accounts payable of $931,141 and deferred
revenues of $1,090,501. The deferred revenues consist primarily of advance
ticket sales of ITC's operations. Management believes the incremental cost that
ITC will incur to realize the revenues attributable to the customers that have
purchased tickets in advance will be offset by the gross profit from food,
beverage and merchandise sales to such customers.
Management intends to continue to restrict expenditures with respect to the
future development of entertainment properties and to market its completed
properties. The Company has two completed properties. The costs of development
have been written off. Accordingly, the Company will incur little, if any, costs
of marketing. Management believes these actions may contribute to the Company's
liquidity. The Company had no material commitments for capital expenditures as
of September 30, 1996 and capital expenditures for fiscal 1997 are expected to
be immaterial.
The Company intends to continue to seek out potential acquisitions, primarily
but not necessarily limited to, television stations. The Company is currently
investigating several multi-station acquisitions. However, these potential
acquisitions are in the early stages of negotiation. The Company intends to
finance any acquisitions with senior bank financing of approximately 60%, and
the remainder with a combination of other debt and equity instruments. There are
no assurances that the Company will successfully identify these or any other
potential acquisitions or that, if identified, it will obtain financing under
terms acceptable to the Company. Management presently does not consider an
acquisition for a merger of the Company a viable alternative. Management prefers
to be independent.
In September 1995, the Company's CEO entered into a letter of intent to lease,
with the option to purchase, an arena football franchise, the franchise will be
operated by Minnesota Arena Football, Inc., a wholly-owned subsidiary of the
Company (the "PIKE"), to be located in Minneapolis, Minnesota. In connection
therewith, the CEO advanced funds of approximately $57,000 to or for the benefit
of the lessor, the league and others. During the second fiscal quarter, the
Company finalized the acquisition of the CEO's interest in the franchise with no
consideration paid to the CEO. The definitive lease agreement and contractual
arrangement with an arena were also finalized during the second quarter. The
Company's exercise of the option to purchase the franchise will be dependent in
any respect on the reception of this entertainment to
the Minnesota consumer.
During the second and third fiscal quarter, the arena football franchise failed
to generate the anticipated cash flow. Although, the Company raised additional
financing from outside sources of approximately $400,000.00, due to inadequate
cash flow and insufficient funds, the Company did not exercise its option to
purchase the Franchise. Consequently, the operations of the PIKE were
discontinued prior to September 30, 1996. Such financing will be due in
December, 1996, and is secured by the common stock of Minnesota Arena Football,
Inc. Management anticipates the majority of the financing will be converted into
the Company's common stock. Management was unsuccessful in its attempts to sell
the Company's interest in the PIKE. There are no assurances that the financing
will be converted into the Company's common stock. Management is uncertain as to
the alternate resolution of the liabilities of the PIKE. Management is
evaluating the best course of action which may involve a bankruptcy filing of
the PIKE.
Management caused several of ITC's costs to be reduced or eliminated for fiscal
1996. ITC's operating budget for fiscal 1997 projects net income. Management
plans to continue to closely monitor the operations of ITC, taking quick action
to control costs and cause expenses to be reduced, should actual revenues not
meet budgeted revenues. ITC's operations are behind budget for the first fiscal
quarter. However, management believes that advance ticket sales and advance
bookings are indicative that the second quarter's results should approximate
budget. Although ITC's operations are continuous throughout the year, ITC has
historically generated profits during the first two fiscal quarters and has
incurred losses during the third and fourth fiscal quarters. Management
anticipates that ITC's results for the first and second fiscal quarters will
provide sufficient funds to sustain their operations for the remainder of fiscal
1997. However, there is no assurance that ITC will produce net income for fiscal
year 1997.
The Company's independent auditors issued their opinion on the Company's
financial statements for the year ended September 30, 1996, which included an
explanatory paragraph as to substantial doubt about the Company's ability to
continue as a going concern. This doubt was raised primarily due to recurring
losses from operations and due to the Company's working capital deficit of
$2,949,739 at September 30, 1996.
Management believes its current cash position, including proceeds from exercise
of stock warrants, is sufficient to sustain its operations for fiscal 1997, and
to fund the cost relative to investigating potential acquisitions. Management
also believes ITC will return to profitability and that ITC will provide
sufficient funds to satisfy its working capital requirements for fiscal 1997.
However, there can be no assurance that anticipated cash flow from
ITC's operations will be achieved.
If ITC fails to generate cash flow, the Company may be unable to continue as a
going concern without raising additional funds from outside sources. Management
is uncertain as to the likelihood of raising additional funds.
During 1995, the Company adopted Financial Accounting Standards Board No. 121,
Accounting for the Impairment of Long-Lived Assets. Historically, the Company
reviewed its long-lived assets at each balance sheet date to determine potential
impairment by comparing the carrying value of the long-lived assets with
expected future net cash flows provided by operating activities of the
long-lived assets. If the sum of the expected future net cash flows was less
than the carrying value, the Company would record an impairment loss. An
impairment loss would be measured by comparing the amount by which the carrying
value exceeds the fair value of the long-lived assets.
Under the new method, the Company reviews impairment whenever events or changes
in circumstances indicate that the carrying amount of the assets is not
recoverable. Impairment is measured by comparing the carrying value of
long-lived assets to estimated fair value of the long-lived assets.
No impairment was recognized during the year ended September 30, 1996.
INFLATION
Inflation and changing prices have not had a significant impact on operations of
the Company to date. It is anticipated that future cost increases will be
recovered by adjustment in pricing admissions to the Chanhassen Dinner Theatre
and the WBPI shows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is included following "Index to Financial Statements".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AT
SEPTEMBER 30, 1996
Director/
Officer
Name Office Held Since Age
- ---- ----------- ----- ---
Philip Rogers President, Director 1983 62
Thomas K. Scallen Chief Executive Officer,
Director 1983 71
Ronald L. Leckelt Chief Financial Officer 1992 44
Bruce Lansbury Director 1983 66
Willy Bietak Director 1992 49
Mr. Rogers became President and Director upon the Company's formation in 1983.
Mr. Roger is also a principal of Philipico Picture Company, a motion picture and
television production company.
Mr. Scallen became Chairman of the Board of Directors, Vice President, and
Treasurer of CPPC upon its formation in 1983. Mr. Scallen was elected Chief
Executive Officer of the Company on March 14, 1992. Mr. Scallen was president,
director and principal stockholder of International Broadcasting Corporation, a
publicly traded company engaged in entertainment activities, the presentation of
touring shows, arena shows and motion picture or television productions until
March 1992. International Broadcasting Corporation filed for protection under
Chapter 11 of the Bankruptcy Act in August 1991.
Mr. Leckelt was elected Chief Financial Officer of the Company in June 1992. For
the three years prior, Mr. Leckelt was a general services partner with the firm
of McGladrey & Pullen, L.L.P., Certified Public Accountants and Consultants. Mr.
Leckelt does not currently devote full time to the Company. Mr. Leckelt is also
a partner with the firm of Sharp & Leckelt, Certified Public Accountants.
Mr. Lansbury became a Director of the Company upon its formation. For more than
the past five years, Mr. Lansbury has been an independent producer and is
Supervising Producer and one of the writers for the television series "Murder
She Wrote."
Mr. Bietak became a Director of the Company in 1992. He is President of Willy
Bietak Productions, Inc. and has been associated with the Company since 1986.
ITEM 11. EXECUTIVE COMPENSATION
Officer Compensation
Cash and Cash Equivalent Aggregate
Name Capacity Year Paid or Accrued Salaries Remuneration
---- -------- ---- ------------------------ ------------
Philip Rogers President 1996 $ -0- $ -0-
1995 $ -0- $ -0-
1994 $ -0- $ -0-
Thomas K. Scallen CEO 1996 $135,000 $135,000
1995 $135,000 $135,000
1994 $135,692 $135,692
Ronald L. Leckelt CFO 1996 $ 60,000 $ 60,000
1995 $ 60,000 $ 60,000
1994 $ 60,000 $ 60,000
All Officers as a
Group
(4 in number) 1996 $195,000 $195,000
1995 $195,000 $195,000
1994 $195,692 $195,692
Director Compensation
The Directors have not received any cash compensation. Directors, other than
Messrs. Scallen and Rogers, each received 2 year options to purchase 10,000
shares of the Company's common stock at $1.50 per share in 1993. These options
expired September 30, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as at September 30, 1996, the information with
respect to common stock ownership of each person known to the Company to own
beneficially more than five percent (5%) of the shares of the Company's common
stock and all Directors and Officers as a group.
Name Number of
& Address Shares Percentage
- --------- ------ ----------
Thomas K. Scallen 1,619,480 16.4%
Heron Cove, Unit B
Windham, NH 03087
All Officers and Directors
as a Group (5 in number) 1,718,855 17.3%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended September 30, 1996, the Company's chief executive officer
(CEO) provided short-term advances of $580,300 to the Company. This amount is
required to be reported as additional paid in capital in the accompanying
financial statements. The advances contain specific repayment provisions and
when repayments occur, there will be a reduction of additional paid in capital.
The advances are secured by the Company's shares of stock in ITC. During the
year ended September 30, 1995, no advances were made.
At September 30, 1995, the Company had advances to the Company's CEO totaling
$48,150. Subsequent to September 30, 1995, the advances of $48,150 was repaid by
the Company's CEO. At September 30, 1996 there were no advances to the Company's
CEO. For the year ended September 30, 1995, the Company did not charge interest
on these advances.
During the years ended September 30, 1995 and 1994, the Company paid the
Company's CEO $24,000 rent for the use of a condominium in Los Angeles. No rent
was paid during the year ended September 30, 1996.
As of September 30, 1996 and 1995, the Company owed the Company's CEO $77,500
and $2,500 respectively for cumulative accrued salary. These amounts are
included in accrued expenses on the balance sheets.
As of September 30, 1996 and 1995, the Company owed a company owned by the
Company's CEO $18,683 and $45,588, respectively for contracted services and cash
advances.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM
8-K
(a) 1. Financial Statements. See following "Index to Financial
Statements".
2. Financial Statement Schedules. See following "Index to
Financial Statements".
(b) Reports on Form 8-K
NONE
(c) Exhibits
(3.) Articles of Incorporation and By-Laws are incorporated by
reference to the Exhibits to the Registrant's Registration
Statement of September 15, 1983.
(4.) Rights of warrant holders set forth in Exhibits to Registration
No.33-58546 effective April 12, 1993 incorporated by this
reference.
(10.) Stock Purchase Agreement, dated July 29, 1993 between
registrant and International Broadcasting Corporation,
International Theatres Corporation and National Westminster
Bank USA attached as an Exhibit to Registrants Report on Form
8-K is incorporated by this reference.
(21.) Registrant owns 30% of Willy Bietak Productions, Inc., a
Nevada corporation. Incorporated by reference.
(22.i) Registrant is the sole shareholder of International Theatres
Corporation, a Minnesota corporation ("ITC"). ITC does
business under the registered trade name, Chanhassen Dinner
Theatres. Incorporated by reference.
(22.ii) Registrant is the sole shareholder of Minnesota Arena
Football, Inc., a Minnesota corporation ("MAF"). MAF did
business under the trade name Minnesota Fighting Pike until
1995. Incorporated by reference.
(25) Manually signed copies of powers of attorney for members of the
Board of Directors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized as of the 23rd day of January, 1998.
CENTURY PARK PICTURES CORPORATION
By: s/ Thomas K. Scallen
-----------------------------
Thomas K. Scallen
Chief Executive Officer
and
By: s/ Ronald L. Leckelt
-----------------------------
Ronald L. Leckelt
Chief Financial Officer
Pursuant to the Requirements of the Securities Exchange Act of 1934, this Report
has been signed on behalf of the Registrant and in capacities and on the dates
indicated.
*
s/ Philip Rogers January 23, 1998
- ----------------------
Philip Rogers
President
& Director
s/ Thomas K. Scallen January 23, 1998
- ----------------------
Thomas K. Scallen
Chief Executive Officer & Director
*
s/ Bruce Lansbury January 23, 1998
- ----------------------
Bruce Lansbury Director
*
s/ Willy Bietak January 23, 1998
- ----------------------
Willy Bietak Director
* Signed pursuant to Power of Attorney
(SEE EXHIBIT 25 HERETO)
CENTURY PARK PICTURES CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES
INCLUDED IN ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
INDEX
Page numbers refer to pages in the attached Consolidated Financial Statements:
Page
----
Independent Auditor's Report........................................ F-1
Consolidated Balance Sheets - September 30, 1996
and September 30, 1995............................................ F-2
Consolidated Statements of Operations -
Years ended September 30, 1996, 1995, and 1994.................... F-3
Consolidated Statement of Changes in Common
Stockholders' Equity - Years Ended
September 30, 1996, 1995, and 1994................................ F-4
Consolidated Statements of Cash Flows -
Years ended September 30, 1996, 1995, and 1994.................... F-5
Notes to Consolidated Financial Statements.......................... F-6
[BLANSKI PETER KRONLAGE & ZOCH, P.A. LETTERHEAD]
BOARD OF DIRECTORS AND STOCKHOLDERS
CENTURY PARK PICTURES CORPORATION
MINNEAPOLIS, MINNESOTA
Independent Auditors' Report
We have audited the accompanying consolidated balance sheet of CENTURY PARK
PICTURES CORPORATION as of September 30, 1996, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
financial statements of CENTURY PARK PICTURES CORPORATION as of September 30,
1995 and 1994, were audited by other auditors whose report dated November 6,
1995, on those statements included an explanatory paragraph that described
substantial doubt about the Company's ability to continue as a going concern
discussed in Note 11 to the financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the 1996 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CENTURY PARK PICTURES CORPORATION as of September 30, 1996, and the consolidated
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company has suffered recurring losses from operations,
and its total liabilities exceeds its total assets. Those conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plan regarding those matters are also described in Note 11. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Blanski Peter Kronlage & Zoch, P.A.
August 12, 1997
Minneapolis, Minnesota
F-1
[MCGLADREY & PULLEN, LLP LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Century Park Pictures Corporation
and Subsidiary
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheet of Century Park
Pictures Corporation and Subsidiary as of September 30, 1995, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the two-year period ended September 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Century Park Pictures
Corporation and Subsidiary as of September 30, 1995, and the results of their
operations and their cash flows for each of the years in the two-year period
ended September 30, 1995, in conformity with general accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations, and its total liabilities exceed its total assets. This
raises substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ McGladrey & Pullen, LLP
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
November 6, 1995
F-1
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
ASSETS
1996 1995
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 29,200 $ 32,078
Accounts receivable 158,496 21,229
Inventories 49,206 41,339
Deferred show costs 4,025 40,350
Due from unconsolidated subsidiary 1,918
Due from related parties 53,358
Prepaid expenses:
Royalties 15,400 18,924
Supplies 29,172 28,114
Other 30,149 35,643
------------ ------------
Total current assets 317,566 271,035
------------ ------------
PROPERTY, PLANT, AND EQUIPMENT:
Leasehold interest in building 1,000,000 1,000,000
Equipment 495,581 455,237
Furniture and fixtures 447,670 447,670
------------ ------------
1,943,251 1,902,907
------------ ------------
Less accumulated depreciation and amortization 993,680 701,440
------------ ------------
949,571 1,201,467
------------ ------------
OTHER:
Cost in excess of net assets of business acquired, less
accumulated amortization 431,418 455,528
Investment in unconsolidated subsidiary 42,397
Preacquisition costs 35,708
------------ ------------
473,815 491,236
------------ ------------
$ 1,740,952 $ 1,963,738
============ ============
See notes to consolidated financial statements.
F-2
LIABILITIES AND STOCKHOLDERS' DEFICIT
1996 1995
------------ ------------
CURRENT LIABILITIES:
Notes payable $ 450,000 $
Current maturities of capitalized lease obligation 200,127 173,109
Excess of outstanding checks over bank balance 122,659
Due to related company 18,683 45,588
Accounts payable 931,141 504,118
Deferred revenue 1,090,501 848,612
Accrued expenses:
Compensation 236,100 139,422
Other 340,753 211,498
------------ ------------
Total current liabilities 3,267,305 2,045,006
------------ ------------
LONG-TERM CAPITALIZED LEASE OBLIGATION 376,362 562,187
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 7 AND 11)
STOCKHOLDERS' DEFICIT:
Common stock, $0.001 par; 200,000,000 shares
authorized 9,887,000 and 8,636,952 shares issued and
and outstanding at September 30, 1996 and 1995,
respectively 9,887 8,637
Additional paid-in capital 4,573,905 3,682,431
Accumulated deficit (6,486,507) (4,334,523)
------------ ------------
(1,902,715) (643,455)
------------ ------------
$ 1,740,952 $ 1,963,738
============ ============
F-2
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1996 1995 1994
------------ ------------ ------------
REVENUES:
Admission revenues $ 4,551,157 $ 4,064,623 $ 3,619,314
Other 134,460 86,691 11,763
------------ ------------ ------------
4,685,617 4,151,314 3,631,077
------------ ------------ ------------
Food, beverage, and merchandise sales 3,572,572 3,665,635 3,157,027
Cost of food, beverage, and merchandise sales 1,110,131 1,151,073 1,011,814
------------ ------------ ------------
GROSS PROFIT ON FOOD, BEVERAGE, AND
MERCHANDISE SALES 2,462,441 2,514,562 2,145,213
------------ ------------ ------------
NET REVENUES 7,148,058 6,665,876 5,776,290
------------ ------------ ------------
Operating costs and expenses:
Operating:
Performers' compensation 2,259,520 1,512,326 1,797,843
Costs of costumes, sets, and props 502,936 734,928 346,284
Other production costs 3,589,995 3,596,347 3,264,269
Administration 2,588,564 1,243,295 1,227,221
Depreciation and amortization 316,738 406,922 308,830
------------ ------------ ------------
9,257,753 7,493,818 6,944,447
------------ ------------ ------------
OPERATING LOSS (2,109,695) (827,942) (1,168,157)
Nonoperating income (expense)
Sale of option 865,000
Interest expense (113,430) (117,496) (139,305)
Other income 30,744 15,909 55,603
------------ ------------ ------------
LOSS BEFORE EQUITY IN NET INCOME (LOSS)
OF WBPI AND INCOME TAXES (2,192,381) (929,529) (386,859)
Equity in net income (loss) of WBPI 42,397 (7,040) (48,235)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (2,149,984) (936,569) (435,094)
Provision for federal and state income taxes 2,000 2,600 2,500
------------ ------------ ------------
NET LOSS $ (2,151,984) $ (939,169) $ (437,594)
============ ============ ============
Net loss per share of common stock $ (.22) $ (.11) $ (.05)
Weighted average number of common shares 9,751,594 8,636,952 8,636,952
See notes to consolidated financial statements.
F-3
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
Common Stock Issued Additional
------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
---------- ----------- ----------- -------------- ------------
Balance, September 30, 1993 8,636,952 $ 8,637 $ 3,682,431 $ (2,957,760) $ 733,308
Net loss (437,594) (437,594)
---------- ----------- ----------- -------------- ------------
Balance, September 30, 1994 8,636,952 8,637 3,682,431 (3,395,354) 295,714
Net loss (939,169) (939,169)
---------- ----------- ----------- -------------- ------------
Balance, September 30, 1995 8,636,952 8,637 3,682,431 (4,334,523) (643,455)
Exercise of warrants 1,249,689 1,250 311,174 312,424
Advances from officer 580,300 580,300
Net loss (2,151,984) (2,151,984)
---------- ----------- ----------- -------------- ------------
Balance, September 30, 1996 9,886,641 $ 9,887 $ 4,573,905 $ (6,486,507) $(1,902,715)
========== =========== =========== ============== ============
See notes to consolidated financial statements.
F-4
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1996 1995 1994
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,151,984) $ (939,169) $ (437,594)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 292,628 288,308 284,719
Amortization 24,110 119,111 24,111
Gain on sale of option (865,000)
Loss on disposal of property and equipment 513 2,490 6,152
Equity in net (income) loss of unconsolidated subsidiary (42,397) 7,040 48,235
(Increase) decrease in:
Accounts receivable (137,267) 1,130 (3,353)
Inventories (7,867) 4,705 (11,311)
Deferred shows costs 36,325 (8,888) 46,243
Prepaid expenses 7,960 38,845 (35,073)
Increase (decrease) in:
Accounts payable and accrued expenses 652,956 82,023 297,952
Deferred revenue 241,889 (97,425) 127,232
Income taxes payable (500)
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,083,134) (501,830) (518,187)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property & equipment (41,245) (44,678) (19,861)
Cash paid for preacquisition costs 35,708 (23,783) (72,121)
Proceeds from sale of option 985,598
(Increase) decrease in due from WBPI (1,918) 77,280 (73,850)
(Increase) decrease in advances made to related parties 56,347 (120,863)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (7,455) 65,166 698,903
------------ ------------ ------------
See notes to consolidated financial statements.
F-5
1996 1995 1994
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Excess of outstanding checks over bank balance $ (122,659) $ 122,659 $
Net borrowing on short-term notes 450,000
Payments on long-term capitalized lease (158,807) (126,665) (113,935)
Increase in advances from related parties 26,453 45,588
Advances from officer 580,300
Net proceeds received on issurance of common stock 312,424
------------ ------------ ------------
Net cash provided by (used in) financing activites 1,087,711 41,582 (113,935)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,878) (395,082) 66,781
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 32,078 427,160 360,379
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 29,200 $ 32,078 $ 427,160
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 103,982 $ 119,187 $ 148,939
============ ============ ============
Cash paid during the year for income taxes $ 2,000 $ 2,600 $ 1,868
============ ============ ============
F-5
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
1. DESCRIPTION OF BUSINESS AND CONSOLIDATION:
CENTURY PARK PICTURES CORPORATION (the Company) is engaged in the
development, production, and marketing of entertainment properties.
International Theatres Corporation (ITC), a 100 percent owned
subsidiary, owns and operates the Chanhassen Dinner Theatres in
Chanhassen, Minnesota (see Note 2). During the normal course of
business, ITC grants credit to its corporate clients. ITC performs
on-going credit evaluations of its customers' financial condition and
generally requires no collateral from them. Due to the nature of its
business, the Company believes that no allowance for uncollectable
amounts is necessary.
Minnesota Arena Football, Inc. dba Minnesota Fighting Pike (Pike), a 100
percent owned subsidiary, was an indoor professional football team that
the Company obtained the rights to during the fiscal year ended
September 30, 1996. The Pike ceased operations on August 31, 1996. The
net loss generated by the Pike was $1,484,961 for the fiscal year ended
September 30, 1996. Management has not adopted a formal plan to dispose
of the Pike.
The Company has a 30 percent investment in Willy Bietak Productions,
Inc. (WBPI), which produces touring ice shows and theme shows appearing
in shopping malls, theatres, casinos, arenas, and major amusement parks
throughout the United States.
Principals of consolidation:
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, ITC and
Pike. All significant intercompany transactions and balances have been
eliminated in consolidation.
Investment in common stock of WBPI:
As explained further in Note 4, during the year ended September 30,
1995, the Company adopted the equity method of accounting for its 30
percent investment in WBPI. Under this method, the Company's equity in
the earnings or losses of the investee is reported currently in the
Company's earnings. However, losses of the investee are reported only
to the extent of the carrying amount of the investment plus any
Company advances or commitments. The financial statements for 1994
have been restated on a comparable basis. The effect of this
restatement was to increase net income and retained earnings by
$69,293 for the year ended September 30, 1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of estimates:
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenue and expenses. Actual results
could vary from the estimates that were used.
F-6
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Cash and cash equivalents:
For purposes of reporting the statements of cash flows, the Company
considers all cash accounts and all highly liquid debt instruments
purchased with an original maturity of three months or less, to be
cash equivalents.
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits.
Inventories:
Inventories consist primarily of food and beverages and are stated at
the lower of cost or market using the first-in, first-out method.
Property and equipment:
Property and equipment are stated at the lower of depreciated cost or
net realizable value. Depreciation is computed by the straight-line
and various accelerated methods over the following estimated useful
lives:
Years
-----
Leasehold interest in building 6
Equipment 3-7
Furniture and fixtures 3-7
Income taxes:
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the bases of
property and equipment and accrued vacation for financial and income
tax reporting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are recovered
or settled. Deferred taxes also are recognized for operating losses
that are available to offset future federal income taxes.
Advertising costs:
Advertising costs are charged to operations when the advertising first
takes place. Advertising expense for the periods ended September 30,
1996, 1995 and 1994 was $952,117 and $536,673 and $401,337,
respectively.
Loss per share:
Net loss per share is computed based upon the weighted average number
of common shares outstanding during the year using the treasury stock
method. Common equivalent shares are excluded as the effect would be
anti-dilutive. Dilutive common equivalent shares consist of stock
options and convertible debt. Fully diluted and primary earnings per
share are the same amounts for all years presented.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Intangibles:
Costs in excess of net assets of business acquired is being amortized
on the straight-line basis over 25 years. Preacquistion costs are
costs incurred in an attempt to acquire businesses. These costs are
expensed if the business is not acquired.
3. RELATED PARTY TRANSACTIONS:
During the years ended September 30, 1996, the Company's chief executive
officer (CEO) provided short-term advances of $580,300 to the Company.
This amount is required to be reported as additional paid in capital in
the accompanying financial statements. The advances contain specific
repayment provisions and when repayments occur, there will be a
reduction of additional paid in capital. The advances are secured by the
Company's shares of stock in ITC. During the year ended September 30,
1995, no advances were made.
At September 30, 1995, the Company had advances to the Company's CEO
totaling $48,150. Subsequent to September 30, 1995, the advance of
$48,150 was repaid by the Company's CEO. At September 30, 1996 there
were no advances to the Company's CEO. For the year ended September 30,
1995, the Company did not charge interest on these advances.
During the years ended September 30, 1995 and 1994, the Company paid the
Company's CEO $24,000 rent for the use of a condominium in Los Angeles.
No rent was paid during the year ended September 30, 1996.
As of September 30, 1996 and 1995, the Company owed the Company's CEO
$77,500 and $2,500, respectively for cumulative accrued salary. These
amounts are included in accrued expenses on the balance sheets.
As of September 30, 1996 and 1995, the Company owed a company owned by
the Company's CEO $18,683 and $45,588 for contracted services and cash
advances.
4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY:
During the year ended September 30, 1995, the Company transferred a
portion of its investment in common stock of Willy Bietak Production,
Inc. (WBPI) to Willy Bietak Enterprises, Inc. in consideration of the
guarantees of certain bank debt of WBPI. This resulted in reducing the
Company's ownership percentage in WBPI from 50.1% to 30%. This change in
ownership percentage resulted in a deconsolidation of WBPI. These
consolidated financial statements reflect the financial position,
results of operations, and cash flows as if the deconsolidation occurred
as of October 1, 1993.
No value was recorded in the financial statements for the Company's
equity interest at September 30, 1995.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (CONTINUED):
Condensed financial information of WBPI as of September 30, 1996 and
1995, and for each of the years ended September 30, 1996, 1995, and
1994, is as follows:
1996 1995 1994
------------ ------------ ------------
BALANCE SHEET
Total current assets $ 225,829 $ 472,428 $
Total noncurrent assets 343,486 170,447
Total current liabilities 492,287 707,172
Total noncurrent liabilities 0 0
Equity 77,028 (64,297)
OPERATIONS
Admissions revenues $ 3,325,250 $ 2,906,753 $ 3,208,050
Operating costs 2,821,097 2,702,973 3,152,150
General and administrative costs 368,660 194,762 221,497
Nonoperating (income) expense (7,128) 3,685 (3,473)
Income tax expense 1,297 337 3,448
------------ ------------ ------------
Net income (loss) $ (141,324) $ 4,996 $ (165,572)
============ ============ ============
5. NOTES PAYABLE:
The Company has notes payable to various individuals totaling $400,000.
The notes bear interest at the rate of 12% to 15% and are secured by the
Company's right, title, and interest in the Pike. The notes matured
between June and December 1996. The notes are convertible into common
stock of the Company. These notes are in default at September 30, 1996.
ITC obtained a line of credit with a bank during the year ended
September 30, 1996. The total amount available was $50,000 at September
30, 1996. The line of credit bears interest at the rate of 2.5% over the
bank's base rate and the amount outstanding at September 30, 1996 was
$50,000. It is secured by all ITC assets. The line of credit matures
January 1998.
ITC also has a standby letter of credit of $50,000. There were no
amounts outstanding on the letter of credit at September 30, 1996.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
6. INCOME TAXES:
The Company's net deferred tax assets and liabilities consisted of the
following at September 30:
1996
----------------------------------------------
Federal State Total
------------ ------------ ------------
Deferred tax assets:
Other (current) $ 29,000 $ 10,000 $ 39,000
Property and equipment (non-current) 364,000 121,000 485,000
Net operating loss carryforwards
(non-current) 1,110,000 439,000 1,549,000
------------ ------------ ------------
1,503,000 570,000 2,073,000
Valuation allowance (1,503,000) (570,000) (2,073,000)
------------ ------------ ------------
$ 0 $ 0 $ 0
============ ============ ============
Deferred tax liabilities $ 0 $ 0 $ 0
============ ============ ============
1995
----------------------------------------------
Federal State Total
------------ ------------ ------------
Deferred tax assets:
Other (current) $ 29,000 $ 10,000 $ 39,000
Property and equipment (non-current) 337,000 112,000 449,000
Net operating loss carryforwards
(non-current) 516,000 166,000 682,000
------------ ------------ ------------
882,000 288,000 1,170,000
Valuation allowance (882,000) (288,000) (1,170,000)
------------ ------------ ------------
$ 0 $ 0 $ 0
============ ============ ============
Deferred tax liabilities $ 0 $ 0 $ 0
============ ============ ============
During the years ended September 30, 1996 and 1995, the Company recorded
valuation allowances of $2,073,000 and $1,170,000, respectively, on the
deferred tax assets to reduce the total amounts that management believes
will ultimately be realized. Realization of deferred tax assets is
dependent upon sufficient future taxable income during the period that
deductible temporary differences and carryforwards are expected to be
available to reduce taxable income. There was no other activity in the
valuation allowance accounts.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
6. INCOME TAXES (CONTINUED):
Loss carryforwards for tax purposes as of September 30, 1996, have the
following expiration dates which include any limitations on amounts
which can be utilized.
Expiration Date Amount
--------------- -----------
1998 $ 8,000
1999 17,000
2000 17,000
2001 17,000
2002 17,000
2003 17,000
2004 17,000
2005 17,000
2006 17,000
2007 17,000
2008 482,000
2009 331,000
2010 747,000
2011 1,980,000
-----------
$ 3,701,000
===========
The Company's provision for income taxes differs from applying the U.S.
federal income tax rate of 34% to income before income taxes. The
primary differences result from the following as of September 30:
1996 1995 1994
----------- ----------- -----------
Income tax benefit at federal statutory
rates excluding the investment in WBPI $ (731,000) $ (317,000) $ (132,000)
State taxes 2,000 2,600 2,500
Effect of limiting tax credit on net
operating losses to taxes paid 731,000 317,000 132,000
----------- ----------- -----------
$ 2,000 $ 2,600 $ 2,500
=========== =========== ===========
7. COMMITMENTS AND CONTINGENCIES:
Operating leases:
The Company leases the land used in the operations of ITC under a
noncancelable operating lease that expires May 31, 1999, and has two
five-year renewal options.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
7. COMMITMENTS AND CONTINGENCIES (CONTINUED):
The Company leases office space under a noncancelable operating lease
that expires April 30, 1999. There is an option to renew the lease for
an additional five years at an increased monthly rental.
Total rent expense under the above leases for the years ended
September 30, 1996, 1995, and 1994, was $292,669, $325,777, and
$346,093, respectively. Future minimum rental payments required under
these leases for each of the next five years are as follows:
1997 $ 297,571
1998 297,571
1999 194,895
-----------
$ 790,037
===========
Capitalized leases:
The Company leases the buildings used in the operations of ITC under a
capitalized lease (Note 3). The lease expires May 1999 with two
five-year renewal options. In addition, the lease provides for options,
which expire on May 31, 1999, to purchase the land and buildings.
Amortization expense was $171,429 for each of the years ended September
30, 1996, 1995, 1994.
The following is a summary of leased assets and lease obligations
included on the balance sheets at September 30:
1996 1995
------------ ------------
Leasehold interest in building $ 1,000,000 $ 1,000,000
Less accumulated amortization 542,857 371,428
------------ ------------
Net amortized value $ 457,143 $ 628,572
============ ============
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
7. COMMITMENTS AND CONTINGENCIES (CONTINUED):
Future minimum payments required under the lease together with the
present value as of September 30, 1996 are as follows:
Year ending September 30:
1997 $ 277,063
1998 255,750
1999 170,500
-----------
Total minimum lease payments 703,313
Less amount representing interest 126,824
Present value of net minimum lease payments 576,489
Less current portion 200,127
Long-term portion $ 376,362
===========
8. STOCKHOLDER'S DEFICIT:
Private Placement:
During the year ended September 30, 1993, the Company completed a
private placement of 1,500,000 units, each consisting of two shares of
common stock and a two-year warrant for the purchase of two additional
shares of common stock at an exercise price of $1.50 per share. During
fiscal year ended September 30, 1995, the Company extended the
exercise date on these warrants to December 18, 1995, and reduced the
exercise price from $1.50 to $0.25 per share.
During the year ended September 30, 1996, warrants to purchase
1,249,692 shares of common stock were exercised.
Stock options:
The Company has issued options to purchase up to 10,000 shares of
common stock of the Company to three of its directors. The exercise
price is $1.50 per share. These options expire February 24, 1998.
9. RETIREMENT PLANS:
ITC has a 401(k) incentive savings plan covering substantially all of
its non-union employees. Eligible employees may defer up to 10% of their
compensation to the plan. ITC will match 25% of the employees
contribution up to 6% of the employees compensation.
ITC also contributes to a retirement plan established by the union for
its employees who are represented by a collective bargaining unit. The
required contribution is 8% of gross wages.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
9. RETIREMENT PLANS (CONTINUED):
For the years ended September 30, 1996, 1995, and 1994. ITC's
contribution to the plans were $89,326, $87,750, and $71,730,
respectively.
10. SALE OF OPTION:
During the fiscal year ended September 30, 1993, the Company entered
into a letter of intent and acquired an option to purchase two
television stations. In August 1994, the Company sold the option for
$985,598. The gain on the sale of the option has been reflected in the
consolidated statement of operations net of related option acquisition
costs in the amount of $120,598.
11. CORPORATE LIQUIDITY:
During 1996, 1995, and 1994, the Company incurred substantial losses of
$2,151,984, $939,169, and $437,594, respectively, and has a working
capital deficit as of September 30, 1996 and 1995, of $2,949,739 and
$1,773,971, respectively. The impact of these losses is to limit the
liquidity and available cash resources for operations.
The Company's plans as they relate to ITC include close monitoring of
the 1997 budget with quick action to reduce expenses should revenues not
meet with budgeted expectations.
The Company's operations exclusive of its subsidiaries consist of
acquisition searches and certain administrative costs, both of which
could be scaled back and/or financed by the Company's CEO and major
stockholder. With these actions, management believes it will have
sufficient cash to operate in the 1997 fiscal year.
12. ADOPTION OF NEW ACCOUNTING POLICY:
During the fourth quarter of the fiscal year ended September 30, 1995,
the Company adopted Financial Accounting Standards Board Statement No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF. Statement No. 121 requires that
long-lived assets and identifiable intangibles to be held and used by an
entity must be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. Statement No. 121 provides criteria for determining when
assets should be considered potentially impaired.
As a result of ongoing losses at ITC, the Company reviewed ITC's
long-lived assets for possible impairments. As a result, as of September
30, 1995, the Company recognized an impairment charge of $95,000 related
to its cost in excess of net assets of the business acquired in 1993,
with no related tax benefit. This impairment charge was included in
amortization expense in the consolidated financial statements. In
determining the amount of the impairment charge, the Company developed
its best estimate of the fair value of the long-lived assets and
compared this to the carrying value of the long-lived assets. The excess
of the carrying value over the fair value of the asset was recognized as
an impairment loss.
No impairment was recognized during the years ended September 30, 1996.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of the Company's financial instruments, none
of which are held for trading purposes, are as follows at September 30:
1996 1995
-------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------- ---------------------
Assets:
Cash and equivalents $ 29,200 $ 30,820 $ 32,078 $ 32,078
Liabilities:
Checks written in excess of bank
balance 122,659 122,659
Notes payable 450,000 450,000
The carrying amounts of cash and cash equivalents, checks written in
excess of bank balance and the short-term notes payable approximate fair
values.