-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q5L4FRRfu+htueXvIc36+Qa/ui3EMhbHUykwZYhNESoxeFzKnffzVFTFL4nioXfC 2k3FBt7uM7TOO7CURgnyaA== 0001072613-02-001365.txt : 20020819 0001072613-02-001365.hdr.sgml : 20020819 20020819150122 ACCESSION NUMBER: 0001072613-02-001365 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CECS CORP CENTRAL INDEX KEY: 0000822935 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-VIDEO TAPE RENTAL [7841] IRS NUMBER: 521529536 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17001 FILM NUMBER: 02742421 BUSINESS ADDRESS: STREET 1: 121 VINE STREET STREET 2: #1903 CITY: SEATTLE STATE: WA ZIP: 98121 BUSINESS PHONE: 2064436948 MAIL ADDRESS: STREET 1: 111 QUEEN ANNE AVENUE SUITE 501 CITY: SEATTLE STATE: WA ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: DATAVEND INC DATE OF NAME CHANGE: 19900401 FORMER COMPANY: FORMER CONFORMED NAME: CHOICES ENTERTAINMENT CORP DATE OF NAME CHANGE: 19920703 10QSB 1 form10qsb_11429.txt CECS CORP. FORM 10-QSB ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 000-17011 CECS CORP. (Exact name of Registrant as specified in its charter) DELAWARE 52-1529536 -------- ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 1925 CENTURY PARK EAST, 5TH FLOOR, LOS ANGELES, CALIFORNIA (Address of principal executive offices) 90067 (Zip Code) (310) 364-4404 (Registrant's telephone number, including area code) 391 COSGROVE AVENUE NW, BAINBRIDGE ISLAND, WASHINGTON 98110 ----------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if changed since last report) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding twelve months ended December 31, 2001 (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety days. Yes: [X] No: [ ] The number of shares of the Registrant's Common Stock, par value $.01 per share outstanding on August 15, 2002 is 62,970,875. Transitional small business Disclosure Format (check one): Yes: [ ] No: [X] ================================================================================ CECS CORP. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS (UNAUDITED) CONTENTS PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. UNAUDITED FINANCIAL STATEMENTS PAGE NO. -------- Balance Sheets 3 Statements of Operations (unaudited) 4 Statements of Comprehensive Loss (unaudited) 5 Statement of Shareholders' Deficiency 6 Statements of Cash Flows (unaudited) 7-8 Notes to Financial Statements (unaudited) 9-13 Management Discussion and Analysis of Financial Condition and Plan of Operation 14-15 PART II - OTHER INFORMATION --------------------------- ITEM 6. Exhibits 16 Signatures 16 2 CECS CORP. (A Development Stage Company) BALANCE SHEETS June 30, December 31, ---------------------------- 2002 2001 ------------ ------------ ASSETS (Unaudited) PROPERTY AND EQUIPMENT, net of accumulated depreciation of $10,165 and $7,565 respectively $ 17,061 $ 19,661 ------------ ------------ TOTAL ASSETS $ 17,061 $ 19,661 ============ ============ LIABILITIES AND SHAREHOLDERS' DEFICIENCY CURRENT LIABILITIES Accounts payable and accrued expenses $ 118,423 $ 93,023 Lawsuit settlement payable 30,000 30,000 Due to related parties 40,000 40,000 Notes payable 310,000 310,000 ------------ ------------ TOTAL LIABILITIES 498,423 473,023 ------------ ------------ COMMITMENTS AND CONTINGENCIES -- -- SHAREHOLDERS' DEFICIENCY Preferred stock; par value $0.01 per share, convertible to common stock, authorized 50,000,000 shares, 11.416 shares issued and outstanding 0.12 0.12 Common stock; par value $0.01 per share, authorized 200,000,000 shares, 62,970,875 and 47,970,875 issued and outstanding, respectively 629,709 479,709 Additional paid-in capital 21,944,371 22,079,371 Accumulated deficit (22,386,912) (22,386,912) Deficit accumulated during the development stage (668,530) (625,530) ------------ ------------ TOTAL SHAREHOLDERS' DEFICIENCY (481,362) (453,362) ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY $ 17,061 $ 19,661 ============ ============ The accompanying notes are an integral part of these financial statements. 3 CECS CORP. (A Development Stage Company) STATEMENTS OF OPERATIONS (UNAUDITED)
Cumulative from January 16, 2000 to Six months ended June 30, Three months ended June 30, June 30, --------------------------- --------------------------- ---------- 2002 2001 2002 2001 2002 --------- --------- --------- --------- --------- NET REVENUE $ -- $ -- $ -- $ -- $ -- --------- --------- --------- --------- --------- OPERATING EXPENSES General and administrative expenses 10,000 60,565 10,000 39,959 299,344 Professional and consulting fees 10,000 87,583 10,000 245,249 10,000 Depreciation expense 2,600 -- 1,339 -- 10,165 --------- --------- --------- --------- --------- TOTAL OPERATING EXPENSES 22,600 148,148 21,339 63,313 554,758 --------- --------- --------- --------- --------- LOSS FROM OPERATIONS (22,600) (148,148) (21,339) (63,313) (554,758) --------- --------- --------- --------- --------- OTHER INCOME (EXPENSE) Impairment expense -- -- -- -- (75,000) Bad debt expense - notes receivable -- -- -- -- (142,000) Gain on sale of certain contract rights -- -- -- -- 203,095 Interest expense (20,400) (17,603) (8,433) (8,314) (86,860) Lawsuit settlement -- -- -- -- (30,000) Gain (loss) on sale of marketable securities -- (317,820) -- (177,000) 16,993 --------- --------- --------- --------- --------- TOTAL OTHER INCOME (EXPENSE) (20,400) (335,423) (8,433) (185,314) (113,772) --------- --------- --------- --------- --------- NET LOSS $ (43,000) $(483,571) $ (29,772) $(248,627) $(668,530) ========= ========= ========= ========= ========= NET LOSS PER SHARE OF COMMON STOCK BASIC/DILUTED LOSS PER SHARE: $ -- $ (0.01) $ -- $ (0.01) ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. 4 CECS CORP. (A Development Stage Company) STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
Cumulative from Six months ended June 30, Three months ended June 30, January 16, 2000 to --------------------------- --------------------------- June 30, 2002 2001 2002 2001 2002 --------- --------- --------- --------- --------- COMPREHENSIVE LOSS Net loss $ (43,000) $(483,571) $ (29,772) $(248,627) $(668,530) Unrealized loss on investment -- (3,413) -- (1,005) -- --------- --------- --------- --------- --------- COMPREHENSIVE LOSS $ (43,000) $(486,984) $ (29,772) $(249,632) $(668,530) ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. 5 CECS CORP. (A Development Stage Company) STATEMENT OF SHAREHOLDERS' DEFICIENCY
Preferred Stock Common Stock Additional ----------------------------- ----------------------------- Paid-in Shares Amount Shares Amount Capital ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2000 17.741 $ 0.18 47,717,875 $ 477,179 $ 22,081,901 Issuance of common stock in exchange on conversion of preferred stock (6.325) (0.060) 253,000 2,530 (2,530) Net loss for the year ended December 31, 2001 -- -- -- -- -- Other comprehensive loss -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2001 11.416 0.12 47,970,875 479,709 22,079,371 Issuance of common stock for cash - May 2002 at $.001 per share (unaudited) -- -- 15,000,000 150,000 (135,000) Net loss for the six months ended June 30, 2002 (unaudited) -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Balance at June 30, 2002 (unaudited) 11.416 $ 0.12 62,970,875 $ 629,709 $ 21,944,371 ============ ============ ============ ============ ============
Deficit Accumulated Accumulated During the Other Accumulated Development Comprehensive Deficit Stage Income Total ------------ ------------ ------------ ------------ Balance at December 31, 2000 $(22,386,912) $ (61,157) $ 57,763 $ 168,774 Issuance of common stock in exchange on conversion of preferred stock -- -- -- -- Net loss for the year ended December 31, 2001 -- (564,373) -- (564,373) Other comprehensive loss -- -- (57,763) (57,763) ------------ ------------ ------------ ------------ Balance at December 31, 2001 (22,386,912) (625,530) -- (453,362) Issuance of common stock for cash - May 2002 at $.001 per share (unaudited) -- -- -- 15,000 Net loss for the six months ended June 30, 2002 (unaudited) -- (43,000) -- (43,000) ------------ ------------ ------------ ------------ Balance at June 30, 2002 (unaudited) $(22,386,912) $ (668,530) $ -- $ (481,362) ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 6 CECS CORP. (A Development Stage Company) STATEMENTS OF CASH FLOWS (UNAUDITED)
Cumulative from For the January 16, 2000 Six months ended June 30, to ------------------------ June 30, 2002 2001 2002 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (43,000) $(483,571) $(638,758) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 2,600 2,522 8,826 Issuance of stock in exchange for services -- -- 10,000 Realized loss (gain) on sale of marketable securities -- 140,820 (220,088) Loss on other investment -- 177,000 -- Impairment expense -- -- 75,000 Bad debt expense - notes receivable -- -- 142,000 Change in assets and liabilities: Decrease in due from brokers -- 39,242 -- Decrease in prepaid expenses -- 9,100 619 Increase (decrease) in accounts payable and accrued expenses 25,400 (16,946) (163,271) Increase in lawsuit payable -- -- 30,000 Decrease in due to related parties -- -- (190,000) --------- --------- --------- NET CASH USED FOR OPERATING ACTIVITIES (15,000) (131,833) (945,672) --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of marketable securities -- 203,144 948,104 Acquisition of furniture and fixtures -- (2,014) (27,226) Acquisition of non-marketable securities -- -- (75,000) Acquisition of marketable securities and rights -- -- (605,700) Issuance of notes receivable -- -- (142,000) --------- --------- --------- NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES -- 201,130 98,178 --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable -- -- 686,500 Repayment of notes payable -- (30,000) (381,500) Proceeds from issuance of preferred stock -- -- 523,000 Proceeds from issuance of common stock 15,000 -- 15,000 Other financing activities -- (61,176) -- --------- --------- --------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 15,000 (91,176) 828,000 --------- --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS -- (21,879) (19,494) CASH AND CASH EQUIVALENTS - beginning -- 23,966 19,494 --------- --------- --------- CASH AND CASH EQUIVALENTS - ending $ -- $ 2,087 $ -- ========= ========= =========
The accompanying notes are an integral part of these financial statements. 7 CECS CORP. (A Development Stage Company) STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
Cumulative from For the January 16, 2000 Six months ended June 30, to ------------------------ June 30, 2002 2001 2002 --------- --------- --------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION CASH PAID DURING THE PERIOD: Interest Expense $ -- $ -- $ 27,188 ========= ========= ========= Income Taxes $ -- $ -- $ -- ========= ========= =========
During the six months ended June 30, 2001, 6.325 shares of the Company's preferred stock were converted into common stock. The accompanying notes are an integral part of these financial statements. 8 CECS CORP. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Nature of Operations ---------------------------------------------- The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the six months ended June 30, 2002 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements and footnotes included in Form 10-KSB for the year ended December 31, 2001. CECS Corp. (the "Company") was incorporated under the laws of the State of Maryland on July 11, 1985, as PPV Enterprises, Inc. ("PPV"). On August 18, 1987, the Company changed its name to DataVend, Inc. ("Datavend") and reincorporated under the laws of the State of Delaware. On March 14, 1990, the Company changed its name to Choices Entertainment Corporation ("Choices"). On June 16, 1997, the Company sold substantially all of its assets and business to West Coast Entertainment Corporation ("Westcoast"). On August 30, 1999, the Company entered into an agreement, the effect of which would have been to change the Company to a hotel properties holding and operating company. On January 16, 2000, the Company's Board of Directors adopted a plan to change the business of the Company to that of a technology holding company and terminated the plan to become a hotel company effective as of December 30, 1999. On May 26, 2000, the Company's shareholders approved the change of the name of the corporation to CECS CORP. Use of Estimates ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Loss Per Share -------------- SFAS No. 128, "Earnings Per Share" requires presentation of basic loss per share ("Basic LPS") and diluted loss per share ("Diluted LPS"). The computation of basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of outstanding common shares during the period. Diluted LPS gives effect to all dilutive potential common shares 9 CECS CORP. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2002 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Loss Per Share (continued) -------------- outstanding and all shares held in treasury during the period. The computation of diluted LPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on losses. The shares used in the computation of loss per share were as follows: June 30, -------------------------------- 2002 2001 ----------- ----------- Basic and diluted 48,471,000 47,943,000 =========== =========== Comprehensive Income -------------------- SFAS No. 130, "Reporting Comprehensive Income", establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of March 31, 2001, the Company had items that represent comprehensive income; therefore, a schedule of comprehensive income has been included in the financial statements. Recent Accounting Pronouncements -------------------------------- On June 29, 2001, Statement of Financial Accounting Standards No. 141, "Business Combinations", was approved by the Financial Accounting Standards Board ("FASB"). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Goodwill and certain intangible assets will remain on the balance sheet and not be amortized. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. The Company implemented SFAS No. 141 on January 1, 2002. On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets", was approved by the FASB. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company implemented SFAS No. 142 on January 1, 2002. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligation." SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, and will require companies to record a liability for asset retirement obligations in the period in which they are incurred, which typically could be upon completion or shortly thereafter. The FASB decided to limit the scope to legal obligation and the liability will be recorded at fair value. The effect of adoption of this standard on Company's results of operations and financial positions is being evaluated. 10 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recent Accounting Pronouncements (continued) --------------------------------- In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. It provides a single accounting model for long-lived assets to be disposed of and replaces SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." The Company implemented SFAS No. 144 on January 1, 2002. In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers." This Statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The Company does not expect the adoption to have a material impact to the Company's financial position or results of operations. Reclassification and Restatement -------------------------------- In order to facilitate the comparison of financial information, certain amounts in prior period comparative totals have been reclassified to conform with the current period presentation. NOTE 2 GOING CONCERN The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has no established source of revenue. As of June 30, 2002, the Company has losses from inception totaling $23,055,442 and net losses of approximately $43,000 and $484,000 for the six months ended June 30, 2002 and 2001, respectively. As of June 30, 2002, the Company has no cash in the bank. The Company's viability for the foreseeable future is dependent upon its ability to find business opportunities and raise needed capital. The Company's viability in raising needed capital is seriously in question. In the event the Company is not successful in securing needed capital in the near term, as to which no assurance can be given, the Company does not believe that its viability as an ongoing business is assured. This matter raises substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. 11 NOTE 2 GOING CONCERN (Continued) Management is exploring merging or acquiring a company with viable operations. NOTE 3 PROPERTY AND EQUIPMENT Property and equipment at cost, consisted of the following: June 30, December 31, --------------------------- 2002 2001 ---------- --------- Computer Equipment $ 3,102 $ 3,102 Furniture and Fixture 17,171 17,171 Office Equipment 6,953 6,953 ---------- --------- 27,226 27,226 Less: Accumulated Depreciation (10,165) (7,565) ---------- --------- Property and Equipment, net $ 17,061 $ 19,661 ========== ========= For the six months ended June 30, 2002 and 2001, depreciation expense was $2,600 and $2,522. NOTE 4 LAWSUIT SETTLEMENT PAYABLE The Company was a defendant to lawsuit from Dion Signs & Services ("Dion") vs. Choices Entertainment Corporation ("Choices"), Civil Action No. 91-6871. Dion alleged that it was owed approximately $33,000 plus interest, costs and reasonable attorney fees for the failure by Choices to pay for signage that was erected at various locations pursuant to a contract. The lawsuit was settled during May 2001, whereby the judgment totaling $30,000 was brought against the Company. As of June 30, 2002, no payments were made on this obligation and the Company has $1,800 accrued interest for the six months ended June 30, 2002. NOTE 5 RELATED PARTY TRANSACTIONS As of June 30, 2002 and December 31, 2001, the Company owed $40,000 to a related party. NOTE 6 NOTES PAYABLE As of June 30, 2002 and December 31, 2001, the Company had notes payable outstanding totaling $310,000. The notes are evidenced in writing and are held by 5 individuals who are stockholders in the Company. The notes bear interest at 12% per annum with interest and principal due between October through December of 2000. The Company incurred interest expense of approximately $18,600 and $17,603 for the six months ended June 30, 2002 and 2001, respectively, relating to these notes. As of June 30, 2002, the notes were still outstanding and in default. 12 NOTE 7 STOCKHOLDERS' DEFICIENCY Convertible Preferred Shares ---------------------------- The aggregate number of shares of convertible preferred stock that the Company has authority to issue is 50,000,000 shares at a par value of $0.01. As of June 30, 2002 and December 31, 2001, the Company had issued 11.416 shares of its redeemable convertible preferred stock. Common Stock ------------ The aggregate number of shares of common stock that the Company has authority to issue is 200,000,000 shares at a par value of $0.01. As of June 30, 2002 and December 31, 2001, 62,970,875 and 47,970,875 shares were issues and outstanding, respectively. The Company's common stock is currently traded in the over-the-counter market on the OTC-Bulletin Board. On May 2, 2002, the Company entered into a Common Stock Purchase Agreement (the "Agreement") by and among the Company and Dydx Consulting, LLC and MBA & Associates (collectively, the "Purchasers"). The Agreement provided for the sale to the Purchasers of 5,000,000 shares of CECS CORP. at $.001 per share, or $5,000, and was deemed to have closed as of June 24, 2002. The Purchasers nominated two members to fill the vacancies on the Company's Board of Directors, Menachem Beychok and Valerie A. Broadbent, who were appointed to the Board of Directors as of June 24, 2002. Neither Mr. Beychok nor Ms. Broadbent is the beneficial owner of any securities of the Company. In May 2002, the Company also entered into private sales to two existing shareholders of 5,000,000 shares each of the Company's common stock at $.001 per share, or $10,000. The Company has not declared or paid any dividends on its preferred or common stock. The Board of Directors does not contemplate the payment of dividends in the foreseeable future. NOTE 8 SUBSEQUENT EVENTS Subsequent to June 30, 2002, the Company received an additional $2,500 from the Purchasers for operating expenses. In August 2002, the Company dismissed its independent auditors, Merdinger Fruchter Rosen & Company, PC ("MFRC"). There were no disagreements with MFRC on any matter of accounting principals or practices, financial statement disclosure or auditing scope or procedure. The Company's Board of Directors authorized and approved Stonefield Josephson, Inc., as its new independent auditors. This event was reported in the Company's Form 8-K filed on August 16, 2002. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors that have affected the Company's financial condition, changes in financial condition and results of operations. It also includes a discussion of the Company's liquidity and capital resources at June 30, 2002, and later dated information, where practicable. This discussion should be read together with the Company's Financial Statements and the Notes thereto. OVERVIEW The Board of Directors (the "Board") of Choices Entertainment Corporation (the "Company" or "We") adopted a proposal on January 17, 2000 to change the business of the Company to that of a technology holding company. Since then, we acquired, invested in, and incubated companies engaged in Internet, computing and other technologies in various stages of development, all of which have been written off or sold. On May 26, 2000 at the Annual Meeting, our stockholders adopted a resolution proposed by the Board of the Company changing the name of the Company from Choices Entertainment Corporation to CECS CORP. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2002, the Company had a net working capital deficit of approximately $498,523 and approximate cash balances of zero (unaudited). The Company had no revenues for this period. We anticipate that the Company will not generate any significant revenues until we accomplish our business objective of merging or acquiring revenue producing assets. We presently have no liquid financial resources to offer an acquisition candidate and must rely upon an exchange of our stock to complete a merger or acquisition. The Company's viability for the foreseeable future is and will continue to be dependent upon its ability to find other business opportunities and to secure needed capital. No assurance can be given that the Company will be successful in that regard. In the event the Company is not successful, it is unlikely that there would be any amounts available for distribution to the Company's stockholders. MATERIAL CHANGES IN RESULTS OF OPERATIONS Three Months and Six Months Ended June 30, 2002 and 2001 - -------------------------------------------------------- Net Revenue: For the three months and six months ended June 30, 2002 and 2001, there were no net sales due to a reduction in the Company's scope of operations. 14 Net Loss: The Company had a net loss of $43,000 and $483,571 for the six months ended June 30 2002 and 2001, respectively. The substantial reduction in net loss is attributable to a reduction in scope of operations due to the seeking a merger candidate. The Company had a net loss of $29,772 and $248,627 for the three months ended June 30, 2002 and 2001, respectively. The substantial reduction in net loss is attributable to a reduction in the scope of operations due to the Company actively seeking a merger candidate. This Quarterly Report on Form 10-QSB contains forward looking information with respect to, among other things, plans, future events or future performance of the Company, the occurrence of which involve certain risks and uncertainties that could cause actual results or future events to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, but are not limited to, the ability to identify and conclude alternative business opportunities, and those risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. Where any forward-looking statement includes a statement of the assumption or bases believed to be reasonable and are made in good faith, assumed facts or bases almost always vary from actual result, and the differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, the Company expresses an expectation or belief as to plans or future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. The words "believe," "expect" and "anticipate" and similar expressions identify forward-looking statements. 15 PART II - OTHER INFORMATION INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION OF EXHIBIT - ------- -------------------------------------------------------------------- 99.1 Certification of Principal Executive Officer (filed herewith) 99.2 Certification of Principal Financial Officer (filed herewith) CECS CORP. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CECS CORP. ---------- (Company) /s/ Valerie A. Broadbent ------------------------------------ Valerie A. Broadbent President August 19, 2002 16 EX-99.1 3 ex99-1_11429.txt CERTIFICATION OF EXECUTIVE OFFICER EXHIBIT 99.1 ------------ CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Quarterly Report of CECS CORP. (the "Company") on Form 10-Q for the period ended June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Valerie A. Broadbent, President and Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Valerie A. Broadbent - ------------------------------------ Valerie A. Broadbent President and Chief Executive Officer August 16, 2002 EX-99.2 4 ex99-2_11429.txt CERTIFICATION OF EXECUTIVE OFFICER EXHIBIT 99.2 ------------ CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Quarterly Report of Hollywood Partners.com, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Valerie A. Broadbent, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Valerie A. Broadbent - ------------------------------------ Valerie A. Broadbent Chief Financial Officer August 16, 2002 -----END PRIVACY-ENHANCED MESSAGE-----