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, 1997
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, 1997 and (2) has been subject to such filing requirements for the ninety
(90) days preceding September 30, 1997.
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, 1997, 9,886,641 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 then 50.1% owned subsidiary, Willy Bietak
Productions, Inc. ("WBPI"), produced and operated 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, 1997, 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
$2,998,840 at September 30, 1997.
(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 "Brigadoon". 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 1995, 1996 and 1997. At September 30, 1997, 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 major film studios, as
well as with numerous "independent" motion picture and television production
companies for the acquisition of artistic properties, and the services of
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
There are no material legal proceedings that involve primary claims for damages
in excess of 10 percent of current assets of the Company.
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, 1997 and 1996. Since the first quarter 1996 there is no established public
trading market for the
Company's common shares. There were only limited or sporadic quotations and none
exceed $.10.
Fiscal Years 1996 and 1997 Bid Prices
High Low
---- ---
See above explanation
b. Number of equity security holders' accounts at December 31, 1997:
509
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
1997 1996 1995 1994 1993(a)
------ ------ ------ ------ ---------
Revenues $ 4,453,624 $ 4,685,617 $ 4,151,314 $ 3,631,077 $ 963,862
Net Income (Loss) (426,078) (2,151,984) (939,169) (437,594) (466,047)
Net Income (Loss)
per Share (.04) (.22) (.11) (.05) (.07)
Weighted Average
Number of
Common Shares 9,751,594 9,751,594 8,636,952 8,636,952 6,437,917
Total Assets 1,311,966 1,740,952 1,963,738 2,876,727 3,013,572
Long Term Debt 161,537 376,362 562,187 722,924 861,961
(excluding current portion)
Stockholders'
Equity (Deficit) (2,071,627) (1,902,715) (643,455) 295,714 733,308
(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, 1997 compared to September 30, 1996
Admissions revenues attributable to the operations of ITC were $4,414,412 for
the year ended September 30, 1997 compared to $4,259,578 for the comparable
prior year period. The increase in revenues was primarily attributed to
increased ticket prices, strategic use of discounts, offset and a shift in
attendance from the smaller theatres to the main theatres. Admissions revenue
attributable to the operation of PIKE was $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
$3,394,836 for the year ended September 30, 1997 compared to $3,551,805 for the
comparable prior year period. The decrease was primarily due to a decrease in
attendance. The cost of food, beverage and merchandise were $1,085,101 for the
year ended September 30, 1997 compared to $1,110,131 for the comparable prior
year period. Such costs as a percent of related sales were 32.0% and 31.32% for
1997 and 1996, respectively. The slight decrease in gross margin of food,
beverage and merchandise sales was due primarily to increased costs of food and
beverages. 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 $5,598,720 for the
year ended September 30, 1997 compared to $5,797,235 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
$809,527 for the year ended September 30, 1997 compared to $791,433 for the
comparable prior year. The increase in operating expenses was primarily due to
inflationary increases in certain administrative costs. General and
administrative expenses attributable to the operation of PIKE were $71,655 for
the year ended September 30, 1997 compared to $1,311,533 for the comparable
year, its only year of operation. General and administrative expenses attributed
to CPPC were $226,196 for the year ended September 30, 1997 compared to $485,598
for the comparable prior year period. The decrease was primarily due to cost
containment efforts.
Interest expense was $164,976 for the year ended September 30, 1997 compared to
$113,430 for the comparable prior year period. Substantially all of the interest
expense is related to ITC's capitalized leasehold interest in building. The
increase in interest is due to funds borrowed by the Company and lent to
PIKE.Equity in net income (loss) of WBPI was ($41,688) for the year ended
September 30, 1997 compared to $42,397 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, 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
31.3% 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.
LIQUIDITY AND SOURCES OF CAPITAL
Cash provided (used) by operating activities for the year ended September 30,
1997 was $(11,714) compared to $(1,083,134) in the
comparable prior year period. Cash used by investing activities was ($25,023)
for the year ended September 30, 1997, which was comprised of purchases of
property and equipment. Cash provided by financing activities was $38,357 for
the year ended September 30, 1997, which was comprised of advances from officers
of $238,483, offset in part by payment on long-term capitalized leases.
At September 30, 1997, the Company had cash totaling $30,820 and a working
capital deficit of $2,998,840. The working capital deficit was comprised
primarily of notes payable of $450,000 accounts payable of $864,353 and deferred
revenues of $1,074,006. 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, 1997 and capital expenditures for fiscal 1998 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 continues to
investigate multi-station acquisitions. However, potential acquisitions are in
the early stages of investigations. 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
or a merger of the Company a viable alternative. Management prefers to be
independent.
During 1996, the Company acquired a leasehold interest in an arena football
franchise, which operated during 1996 as the PIKE from the Company's CEO, with
no consideration paid to the CEO. The leasehold interest contained an option to
purchase the franchise.
The arena football franchise failed to generate the anticipated cash flow.
Although, the Company raised additional financing from outside sources of
approximately $400,000, 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 was 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 attempted to sell the Company's interest in
the PIKE, but was unsuccessful. 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 continues to
evaluate 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
1997. ITC's operating budget for fiscal 1998 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. Additionally, 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 1998. However, there is no assurance that ITC will produce
net income for fiscal year 1998.
The Company's independent auditors issued their opinion on the Company's
financial statements for the year ended September 30, 1997, 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
$2,998,840 at September 30, 1997.
Management believes its current cash position, including proceeds from possible
exercise of stock warrants, is sufficient to sustain its operations for fiscal
1998, and to fund the cost relative to investigating potential acquisitions.
Management also believes ITC will operate profitably and that ITC will provide
sufficient funds to satisfy its working capital requirements for fiscal 1998.
However, there can be no assurance that anticipated cash flow from ITC's
operations will be achieved.
If ITC fails to generate sufficient 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, 1997.
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, 1997
Director/
Officer
Name Office Held Since Age
- ---- ----------- ----- ---
Philip Rogers President, Director 1983 63
Thomas K. Scallen Chief Executive Officer,
Director 1983 72
Ronald L. Leckelt Chief Financial Officer 1992 45
Bruce Lansbury Director 1983 67
Willy Bietak Director 1992 50
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. Mr.
Leckelt does not currently devote full time to the Company. Mr. Leckelt also
practices public accounting 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 1997 $ -0- $ -0-
1996 $ -0- $ -0-
1995 $ -0- $ -0-
Thomas K. Scallen CEO 1997 $135,000 $135,000
1996 $135,000 $135,000
1995 $135,000 $135,000
Ronald L. Leckelt CFO 1997 $ 60,000 $ 60,000
1996 $ 60,000 $ 60,000
1995 $ 60,000 $ 60,000
All Officers as a
Group
(4 in number) 1997 $195,000 $195,000
1996 $195,000 $195,000
1995 $195,000 $195,000
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, 1997, 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 years ended September 30, 1997 and 1996, the Company's chief
executive officer (CEO) provided short-term advances of $257,166 and $580,300,
respectively to the Company. These amounts are 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.
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 were repaid
by the Company's CEO. At September 30, 1997 and 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 year ended September 30, 1995, 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 years ended September 30, 1997 and 1996.
As of September 30, 1997 and 1996, the Company owed the Company's CEO $152,500
and $77,500 respectively for cumulative accrued salary. These amounts are
included in accrued expenses on the accompanying balance sheets.
As of September 30, 1997 and 1996, the Company owed the Company's CFO $75,000
and $15,000 respectively for cumulative accrued salary. These amounts are
included in accrued expenses on the accompanying balance sheets.
As of September 30, 1996, the Company owed a company owned by the Company's CEO
$18,683 for contracted services and cash advances. The Company's CEO sold this
company during the fiscal year ended September 30, 1997, and this amount is now
owed to the Company's CEO.
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.
(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.
(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 1996.
(25) Manually signed copies of powers of attorney for members of the Board
of Directors.
(27) Financial Data Schedule.
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, 1997
INDEX
Page numbers refer to pages in the attached Consolidated Financial Statements:
Page
----
Independent Auditor's Report.............................................. F-1
Consolidated Balance Sheets - September 30, 1997
and September 30, 1996.................................................. F-2
Consolidated Statements of Operations -
Years ended September 30, 1997, 1996, and 1995.......................... F-3
Consolidated Statement of Changes in Common
Stockholders' Equity - Years Ended
September 30, 1997, 1996, and 1995...................................... F-4
Consolidated Statements of Cash Flows -
Years ended September 30, 1997, 1996, and 1995.......................... F-5
Notes to Consolidated Financial Statements................................ F-6
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 February, 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 February 23, 1998
- ----------------------------------
Philip Rogers
President & Director
s/ Thomas K. Scallen February 23, 1998
- ----------------------------------
Thomas K. Scallen
Chief Executive Officer & Director
*
s/ Bruce Lansbury February 23, 1998
- ----------------------------------
Bruce Lansbury Director
*
s/ Willy Bietak February 23, 1998
- ----------------------------------
Willy Bietak Director
* Signed pursuant to Power of Attorney
(SEE EXHIBIT 25 HERETO)
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
CENTURY PARK PICTURES CORPORATION
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
INDEX TO FINANCIAL STATEMENTS
Page
Independent auditors' report 1
Financial statements:
Consolidated balance sheets 2
Consolidated statements of operations 3
Consolidated statements of changes in stockholders' equity 4
Consolidated statements of cash flows 5
Notes to consolidated financial statements 6-15
BPK&Z BLANSKI PETER KRONLAGE & ZOCH, P.A. [LETTERHEAD]
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
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, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' deficit, 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, 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 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 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 audits provide a reasonable basis
for our opinion.
In our opinion, the 1997 and 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, 1997 and 1996,
and the consolidated results of its operations and its cash flows for the years
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.
November 15, 1997
[McGladrey & Pullen, LLP Letterhead]
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Century Park Pictures Corporation
and Subsidiary
Minneapolis, Minnesota
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit), and cash flows for Century Park Pictures
Corporation and Subsidiary for the year 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 audit.
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 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 financial statements referred to above for Century Park
Pictures Corporation and Subsidiary present fairly, in all material respects,
the results of their operations and their cash flows for the year ended
September 30, 1995, in conformity with generally 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
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
ASSETS
1997 1996
---------- ----------
CURRENT ASSETS:
Cash $ 30,820 $ 29,200
Accounts receivable 45,675 158,496
Inventories 42,256 49,206
Deferred show costs 21,717 4,025
Due from unconsolidated subsidiary 1,918 1,918
Prepaid expenses:
Royalties 12,460 15,400
Supplies 31,657 29,172
Other 36,713 30,149
---------- ----------
Total current assets 223,216 317,566
---------- ----------
PROPERTY, PLANT, AND EQUIPMENT:
Leasehold interest in building 1,000,000 1,000,000
Equipment 517,796 495,581
Furniture and fixtures 450,478 447,670
---------- ----------
1,968,274 1,943,251
---------- ----------
Less accumulated depreciation and amortization 1,291,285 993,680
---------- ----------
676,989 949,571
---------- ----------
OTHER:
Cost in excess of net assets of business acquired, less
accumulated amortization 411,052 431,418
Investment in unconsolidated subsidiary 709 42,397
---------- ----------
411,761 473,815
---------- ----------
$1,311,966 $1,740,952
========== ==========
See notes to consolidated financial statements.
LIABILITIES AND STOCKHOLDERS' DEFICIT
1997 1996
----------- -----------
CURRENT LIABILITIES:
Notes payable $ 450,000 $ 450,000
Current maturities of capitalized lease obligation 214,826 200,127
Due to related company 18,683
Accounts payable 864,353 931,141
Deferred revenue 1,074,006 1,090,501
Accrued expenses:
Compensation 371,016 236,100
Other 247,855 340,753
----------- -----------
Total current liabilities 3,222,056 3,267,305
----------- -----------
LONG-TERM CAPITALIZED LEASE OBLIGATION 161,537 376,362
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 7 AND 11)
STOCKHOLDERS' DEFICIT:
Common stock, $0.001 par; 200,000,000 shares
authorized 9,886,641 and shares issued and
outstanding 9,887 9,887
Additional paid-in capital 4,831,071 4,573,905
Accumulated deficit (6,912,585) (6,486,507)
----------- -----------
(2,071,627) (1,902,715)
----------- -----------
$ 1,311,966 $ 1,740,952
=========== ===========
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
1997 1996 1995
----------- ----------- -----------
REVENUES:
Admission revenues $ 4,414,412 $ 4,551,157 $ 4,064,623
Other 39,212 134,460 86,691
----------- ----------- -----------
TOTAL REVENUES 4,453,624 4,685,617 4,151,314
----------- ----------- -----------
Food, beverage, and merchandise sales 3,394,836 3,572,572 3,665,635
Cost of food, beverage, and merchandise sales 1,085,101 1,110,131 1,151,073
----------- ----------- -----------
GROSS PROFIT ON FOOD, BEVERAGE, AND
MERCHANDISE SALES 2,309,735 2,462,441 2,514,562
----------- ----------- -----------
NET REVENUES 6,763,359 7,148,058 6,665,876
----------- ----------- -----------
Operating costs and expenses:
Operating:
Performers' compensation 1,421,274 2,259,520 1,512,326
Costs of costumes, sets, and props 410,547 502,936 734,928
Other production costs 3,766,899 3,589,995 3,596,347
Administration 1,107,378 2,588,564 1,243,295
Depreciation and amortization 317,971 316,738 406,922
----------- ----------- -----------
7,024,069 9,257,753 7,493,818
----------- ----------- -----------
OPERATING LOSS (260,710) (2,109,695) (827,942)
Nonoperating income (expense)
Interest expense (164,976) (113,430) (117,496)
Other income 43,396 30,744 15,909
----------- ----------- -----------
LOSS BEFORE EQUITY IN NET INCOME (LOSS)
OF UNCONSOLIDATED SUBSIDIARY AND
INCOME TAXES (382,290) (2,192,381) (929,529)
Equity in net income (loss) of unconsolidated
subsidiary (41,688) 42,397 (7,040)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (423,978) (2,149,984) (936,569)
Provision for federal and state income taxes 2,100 2,000 2,600
----------- ----------- -----------
NET LOSS $ (426,078) $(2,151,984) $ (939,169)
=========== =========== ===========
Net loss per share of common stock $ (.04) $ (.22) $ (.11)
Weighted average number of common shares 9,751,594 9,751,594 8,636,952
See notes to consolidated financial statements.
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
1997 1996 1995
--------- ----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(426,078) $(2,151,984) $(939,169)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 297,605 292,628 288,308
Amortization 20,366 24,110 119,111
Loss on disposal of property and equipment 513 2,490
Equity in net (income) loss of unconsolidated subsidiary 41,688 (42,397) 7,040
(Increase) decrease in:
Accounts receivable 112,821 (137,267) 1,130
Inventories 6,950 (7,867) 4,705
Deferred shows costs (17,692) 36,325 (8,888)
Prepaid expenses (6,109) 7,960 38,845
Increase (decrease) in:
Accounts payable and accrued expenses (24,770) 652,956 82,023
Deferred revenue (16,495) 241,889 (97,425)
--------- ----------- ---------
NET CASH USED IN OPERATING ACTIVITIES (11,714) (1,083,134) (501,830)
--------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property & equipment (25,023) (41,245) (44,678)
Cash paid for preacquisition costs 35,708 (23,783)
(Increase) decrease in due from unconsolidated subsidiary (1,918) 77,280
Decrease in advances made to related parties 56,347
--------- ----------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (25,023) (7,455) 65,166
--------- ----------- ---------
1997 1996 1995
--------- ----------- ---------
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 (200,126) (158,807) (126,665)
Increase in advances from related parties 26,453 45,588
Advances from officer 238,483 580,300
Net proceeds received on issurance of common stock 312,424
--------- ----------- ---------
Net cash provided by financing activites 38,357 1,087,711 41,582
--------- ----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,620 (2,878) (395,082)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 29,200 32,078 427,160
--------- ----------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 30,820 $ 29,200 $ 32,078
========= =========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 100,359 $ 103,982 $ 119,187
========= =========== =========
Cash paid during the year for income taxes $ 2,100 $ 2,000 $ 2,600
========= =========== =========
CENTURY PARK PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
Common Stock Issued Additional
------------------------ Paid-In Accumulated
Shares Amount Capital Deficit Total
---------- ------------ ------------- -------------- --------------
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)
Advances from officer 257,166 257,166
Net loss (426,078) (426,078)
---------- ------------ ------------- -------------- --------------
Balance, September 30, 1997 9,886,641 $ 9,887 $ 4,831,071 $ (6,912,585) $ (2,071,627)
========== ============ ============== ============== ==============
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
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 with an additional loss of $104,582 for the fiscal
year ended September 30, 1997. 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.
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.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Cash:
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,
1997, 1996 and 1995 was $661,468 and $952,117 and $536,673,
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, 1997, 1996, AND 1995
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
3. RELATED PARTY TRANSACTIONS:
During the years ended September 30, 1997 and 1996, the Company's chief
executive officer (CEO) provided short-term advances of $257,166 and
$580,300, respectively 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, 1997 and 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 year ended September 30, 1995, 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 years ended September 30, 1997 and 1996.
As of September 30, 1997 and 1996, the Company owed the Company's CEO
$152,500 and $77,500, respectively for cumulative accrued salary. These
amounts are included in accrued expenses on the balance sheets.
As of September 30, 1996, the Company owed a company owned by the
Company's CEO $18,683 for contracted services and cash advances. The
Company's CEO sold this company during the fiscal year ended September
30, 1997 and this amount is now owed to the Company's CEO.
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.
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, 1997, 1996, AND 1995
4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (CONTINUED):
Condensed financial information of WBPI as of September 30, 1997 and
1996, and for each of the years ended September 30, 1997, 1996, and
1995, is as follows:
1997 1996 1995
----------- ----------- -----------
BALANCE SHEET
Total current assets $ 65,866 $ 225,829 $
Total noncurrent assets 582,828 343,486
Total current liabilities 710,625 492,287
Total noncurrent liabilities 0 0
Equity (61,931) 77,028
OPERATIONS
Admissions revenues $ 2,520,646 $ 3,325,250 $ 2,906,753
Operating costs 2,173,233 2,821,097 2,702,973
General and administrative costs 462,471 386,660 194,762
Nonoperating (income) expense (2,419) (7,128) 3,685
Income tax expense 26,319 1,297 337
----------- ----------- -----------
Net income (loss) $ (138,958) $ 141,324 $ 4,996
=========== =========== ===========
5. NOTES PAYABLE:
The Company has notes payable to various individuals totaling $400,000
at September 30, 1997 and 1996. 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, 1997 and 1996. As of September 30, 1997, the
notes had not been converted into common stock.
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, 1997 and 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,
1997 and 1996 was $50,000. The line of credit is secured by all ITC
assets and 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, 1997 and
1996.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
6. INCOME TAXES:
The Company's net deferred tax assets and liabilities consisted of the
following at September 30:
1997
-------------------------------------------
Federal State Total
----------- ----------- -----------
Deferred tax assets:
Other (current) $ 97,000 $ 32,000 $ 129,000
Property and equipment (non-current) 385,000 129,000 514,000
Net operating loss carryforwards
(non-current) 1,155,000 453,000 1,608,000
----------- ----------- -----------
1,637,000 614,000 2,251,000
Valuation allowance (1,637,000) (614,000) (2,251,000)
----------- ----------- -----------
$ 0 $ 0 $ 0
=========== =========== ===========
Deferred tax liabilities $ 0 $ 0 $ 0
=========== =========== ===========
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
=========== =========== ===========
During the years ended September 30, 1997 and 1996, the Company recorded
valuation allowances of $2,251,000 and $2,073,000, 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, 1997, 1996, AND 1995
6. INCOME TAXES (CONTINUED):
Loss carryforwards for tax purposes as of September 30, 1997, 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 1,970,000
2012 160,000
-----------
$ 3,851,000
===========
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:
1997 1996 1995
---------- ---------- ----------
Income tax benefit at federal statutory
rates excluding the investment in WBPI $ (145,000) $ (731,000) $ (317,000)
States taxes 2,100 2,000 2,600
Effect of limiting tax credit on net
operating losses to taxes paid $ 145,000 $ 731,000 $ 317,000
---------- ---------- ----------
$ 2,100 $ 2,000 $ 2,600
========== ========== ==========
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, 1997, 1996, AND 1995
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, 1997, 1996, and 1995, was $301,453, $292,669, and $325,777,
respectively. Future minimum rental payments required under these
leases for each of the next five years are as follows:
1998 $ 300,443
1999 196,571
----------
$ 497,014
==========
Capitalized leases:
The Company leases the buildings used in the operations of ITC under a
capitalized lease. 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, 1997, 1996, 1995.
The following is a summary of leased assets and lease obligations
included on the balance sheets at September 30:
1997 1996
------------ ------------
Leasehold interest in building $ 1,000,000 $ 1,000,000
Less accumulated amortization 714,286 542,857
------------ ------------
Net amortized value $ 285,714 $ 457,143
============ ============
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
7. COMMITMENTS AND CONTINGENCIES (CONTINUED):
Future minimum payments required under the lease together with the
present value as of September 30, 1997 are as follows:
Year ending September 30:
1998 $ 255,750
1999 170,500
---------
Total minimum lease payments 426,250
Less amount representing interest 49,887
---------
Present value of net minimum lease payments 376,363
Less current portion 214,826
---------
Long-term portion $ 161,537
=========
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, 1997, 1996, AND 1995
9. RETIREMENT PLANS (CONTINUED):
For the years ended September 30, 1997, 1996, and 1995. ITC's
contribution to the plans were $26,114, $89,326, and $87,750,
respectively.
10. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash transactions:
During the year ended September 30, 1997 an officer of the Company
assumed $18,683 of obligations due to non-related parties. There were no
non-cash transactions for the years ended September 30, 1996 and 1995.
11. CORPORATE LIQUIDITY:
During 1997, 1996, and 1995, the Company incurred substantial losses of
$426,078, $2,151,984, and $939,169, respectively, and has a working
capital deficit as of September 30, 1997, and 1996 of $2,948,840 and
$2,949,739, 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 1998 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 (see Note 3). With these actions, management believes it
will have sufficient cash to operate in the 1998 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, 1997
or 1996.
CENTURY PARK PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
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:
1997 1996
------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------- -------------------
Assets:
Cash $ 30,820 $ 30,820 $ 29,200 $ 29,200
Liabilities:
Notes payable 450,000 450,000 450,000 450,000
The carrying amounts of cash and the short-term notes payable
approximate fair values.