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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended March 31, 1996
[ ] Transition report under Section 13 or 15(d)of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 33-99084-NY
Rollo Entertainment Inc.
(Name of Small Business Issuer in Its Charter)
Delaware 22-3372522
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5 Glenfield Road, Glenridge, New Jersey 07028
(Address of Principal Executive Office) (Zip Code)
201-655-0388
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
None
Securities registered under Section 12(g) of the Exchange Act: None
None
(Title of Class)
Check whether the issuer; (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes xx (1) No
---- ----
(1) The Company's Form SB-2 Registration Statement was declared effective
by the Securities and Exchange Commission on February 12, 1996 thereby
making the Company subject to Exchange Act reporting requirements with
this Form 10-KSB being its initial required filing.
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
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-
KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year - $0.
The aggregate market value for the 312,000 shares of voting stock (all
of one class of $.0001 par value Common Stock) held by non-affiliates * of
Registrant as of June 18, 1996 is $624,000 based upon an average of the bid
($1.75) and asked ($2.25) prices for such stock as of June 18, 1996. See Item 5
(a) which indicates the limited, if any, trading activity in the Registrant's
securities for the periods indicated. By virtue thereof, it is difficult if not
impossible to accurately arrive at a completely realistic "aggregate market
value" of Registrant shares held by non-affiliates as called for herein
especially in view of the fact that the existence of limited or sporadic
quotations should not of itself be deemed to constitute an "established public
trading market". The above statements regarding "aggregate market value" and
"established public trading market" should be taken into careful consideration
when considering the information contained herein regarding the indicated
"aggregate market value" of shares of voting stock held by non-affiliates.
* Affiliates for the purpose of this item refers to the
Registrant's officers and directors and/or any persons or
firms (excluding those brokerage firms and/or clearing houses
and/or depository companies holding Registrant's securities as
record holders only for their respective clienteles'
beneficial interest) owning 5% or more of the Registrant's
Common Stock, both of record and beneficially but does not
include the minor son of an affiliate (the latter of whom is
Registrant's counsel). Such 312,000 shares consist of 150,000
registered shares of common stock with the balance of 162,000
restricted shares being owned by the minor son of Registrant's
counsel - all as of June 18, 1996.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a
court. Yes No
----- -----
Not Applicable
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APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 4,650,000 shares as of
June 18, 1996.
Transitional Small Business Disclosure Format: Yes x No
--- ---
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.)into which the document is incorporated: (1) any annual report to
security-holders; (2) any proxy or information statement; and (3) any prospectus
filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities
Act").
Registrant's Form SB-2 Registration Statement and Exhibit Book as initially
filed and subsequently amended under SEC file #33-99084- NY and as declared
effective February 12, 1996. Information regarding such incorporation by
reference refers to Part I (Items 1 through 4 inclusive), Part II (Item 6) and
Part III (Items 9 through 12 inclusive) of this Form 10-KSB.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I
Item 1. Description of Business 5
Item 2. Description of Property 13
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
PART II
Item 5. Market For Common Equity and Related
Stockholder Matters 14
Item 6. Plan of Operations 15
Item 7. Financial Statements 17
F1 - F10
Item 8. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure 18
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance With
Section 16(a) of the Exchange Act 18
Item 10. Executive Compensation 19
Item 11. Security Ownership of Certain Beneficial
Owners and Management 21
Item 12. Certain Relationships and Related
Transactions 21
Item 13. Exhibits, List and Reports on Form 8-K 23
</TABLE>
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ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
Rollo Entertainment Inc. (the "Company") was organized under the laws
of the State of Delaware on May 8, 1995, is a development stage company formed
so as to operate as an independent artist and repertoire firm (hereinafter "A&R"
unless otherwise indicated) dedicated to locating, signing, promoting, recording
(i.e. making of demo and master tapes only since the Company does not currently
intend to establish its own recording label) and developing (primarily) new
musical entertainment artists and marketing such persons by way of contracting
of the artist to a recording label (or otherwise as hereinafter may be
indicated).
Representation of recording artists has resulted in the signing of
management contracts with certain recording artists. See "Band Development and
Advertising" below.
For the fiscal year ended March 31, 1996 the Company incurred a net
loss of $(110,358).
Potential income from entertainment artists generally may be derived
from a negotiated percentage of such artist's gross income earned with the exact
percentage dependent, to a significant degree, upon both the current popularity
of the artist and the experience of the manager. The range of the percentage of
gross income to be derived by the Company is anticipated to range from 20% to
25% and is comparable and substantially the same as the range paid in the
industry excepting that industry range (and anticipated Company range) of
percentage as relates to publishing is generally 25% to 50% (as hereinafter
indicated in "Sources of Potential Income" below). Additionally, the definition
of "gross" may vary according to the recording company and/or publishing
companies involved. Accordingly, potential Company income may be principally
derived from management, production and/or publishing. For more specific
information regarding such potential Company sources of income see "Sources of
Potential Income" and "Recording Facilities" below.
The Company's ability to successfully promote and enhance its business
activities will depend upon, among other things, its success in identifying
recording artists (by attending artists showcases and/or new artist conventions,
through recommendations and/or referrals by industry sources and personal
contacts and/or review of unsolicited material submitted to it) who meet with
(or who may in the future meet with) commercial acceptance, signing such artists
to management contracts and having the availability of sufficient funds to
promote, manage and develop such clientele's career. As of June 18, 1996 the
Company has signed 14 musical entertainment artists to Company management
contracts. Each of such contracts are comparable to each other in that the terms
and
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conditions therein each fall within the ranges and percentages referred to in
"Sources of Potential Income" and "Band Development and Advertising" below.
SOURCES OF POTENTIAL INCOME
The Company is not and has no current intentions of establishing its
own independent recording label. Rather, it shall offer its A&R services to
recording labels, i.e., acting as an independent A&R company, locating talent
and introducing such talent to recording labels in an effort, where appropriate,
to have such talent signed to recording label contracts. Through utilization of
its staff and interns (see "Employees" below) the Company shall continue its
musical talent search (worldwide) and thereafter data base its artists into
pre-specified industry recognized categories (making such data based material
available to major and/or independent recording labels assuming management signs
such artists to contractual commitments for developmental purposes).
Management envisions that the Company's initial principal sources of
income can be derived from marketing of its exclusive, signed artistic clientele
with its efforts designed to enhance contracting of artist to recording label
through direct and (to a lesser extent) telemarketing efforts (including
advertising, promoting and distributing selected artists into pre-specified
markets). Simultaneously, management intends to promote radio air play and live
performances of its clientele in an effort to prove marketability and sales
potential.
Management of the Company has labeled its marketing efforts as either
primarily or secondary. Those artists whom management feels have the strongest
potential will be contracted exclusively in the following areas:
PRIMARY MARKET -
Management - in exchange for a to be negotiated percentage of artists
gross earnings which generally is in the area of 20% of gross inclusive
of participation in recording label recording advances resulting from
contracting of Company artist to a major or independent label.
Production - generally in exchange for a negotiated four to six
"points" of artists production rights - each "point" being equivalent
to one percent; and
Publishing - under copyright law, mechanical royalties, i.e. amount
collected as royalties by songwriters from record companies which
record their songs, is currently $.0625 per composition up to maximum
of $.62 per CD. Under publishing agreements with the Company's
publishing division, the Company
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will have the right to collect these royalties and receive a negotiated
percentage thereof of generally from 25% to 50% (although this
percentage may vary considerably within the projected 25% to 50% range
based upon artist recognition).
Additionally, sources of potential gross income may be derived from (a)
merchandising advances and/or sales, i.e. monies received and/or
advanced for endorsements, t-shirts, patches and related items (such as
programs and posters) sold at concerts and/or by mail order, (b) CD
sales, (c) booking agent fees, (d) touring and tour support fees, and
(e) advances on music publishing royalties and/or a percentage of music
published royalties. Further, potential sources of revenue may be
derived from the reactivating and reissuance of back catalogs of
clients published recorded works (assuming a market exists therefore).
SECONDARY MARKET -
Joint Ventures - the Company will also offer joint ventures to signed
artist(s), i.e. an artist already signed to a producer and manager, or
represented by a music attorney. These ventures will be negotiated as
the need arises with potential profits to be derived by participation
in percentages from management, production and publishing.
See also "Recording Facilities" - directly below which indicates that
from time to time and if and when feasible the Company intends to rent
out studio recording time to otherwise unaffiliated persons in order to
generate income at such times as it (the Company) does not need to
utilize such facilities. Since the primary purpose for establishing the
recording facilities is for Company use, management feels that any
revenues derived from rental thereof to outside sources may be derived
by charging either competitive rates or hourly rates below then
existing market rates.
There can be no assurance that any one or more of the potential sources
of income indicated above, even if received, will be sufficient so as to justify
the expenditures inherent and incurred therein.
RECORDING FACILITIES
Management of the Company intends to establish and equip one to three
recording facility(ies) at an estimated cost of $64,000 per facility. It is
anticipated that minor construction costs and materials will average
approximately $10,000 per facility while equipping each facility will average
$54,000. Equipment intended to be purchased for each facility will necessarily
include the following: (a) 24 track tape machine, (b) 32 input/out mixing
console, (c) test tone tapes for calibration, (d) monitors, (e)
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main power, (f) DAT recorder, (g) compressors, (h) reverb units, (i) delay
units, (j) microphones, (k) headphones, (l) 24 channel snake, (m) microphone
stands and (n) cable, wiring and related minor matters. Items designated (a) and
(b) above are expected to account for approximately two-thirds of the estimated
$54,000 equipment costs.
In May of 1996 the Company purchased studio equipment necessary so as
to establish its initial 24 track recording facility. The total cost for such
equipment (inclusive of certain shipping costs and set up - wiring costs
approximated $60,000 and was paid out of a portion of the net proceeds received
by the Company from its public offering of securities; see "Public Offering of
Securities" below. Such facility is located on newly leased premises in
Montclair, New Jersey (approximately 20-25 minutes from the Lincoln Tunnel exit
into New Jersey). Sound checks for the studio are scheduled for late June 1996.
Once fully operational, management intends to hold its second "recording
marathon" event during the month of September 1996 (see also "Band Development
and Advertising" hereinafter regarding information with respect to the Company's
initial recording marathon held during November 1995). Management currently
intends to hold an open house at its studio during October 1996 and to invite
industry personnel and present Company artists live on its sound stage for
showcasing purposes.
It is management's current intention that its initial aforesaid
recording studio will be utilized both for purposes of recording those Company
artists under development as well as being utilized, on an hourly rental basis
(if and when time permits) by unaffiliated recording artists having no
association with the Company so that the Company may be able to generate
revenues through recording studio rental time (at such times as it itself does
not need to utilize such facilities). If and when a second and/or third
recording facility is established, it is currently intended that same shall be
utilized to the extent feasible and practicable almost exclusively for those
recording artists under management contractual relationships with the Company.
For further information with respect to the above referenced 24 track
studio/recording facility, see Item 2 "Description of Property" hereinafter.
BAND DEVELOPMENT AND ADVERTISING
Management's current and continuous search for new unsigned artists is
primarily being conducted through direct marketing methods to radio stations,
entertainment managers and attorneys, club owners, trade publications, recording
and rehearsal studios, A&R interns (see also "Employees" below) and direct
artist contacts.
Marketing campaigns may also be held in conjunction with
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recording labels assuming Company artist is signed to a recording contract since
such items as blanket mailings, awareness calls and in-house retail store
visits, tour marketing programs, video marketing and artist publicity can and
generally are performed by various departments and areas of major recording
labels.
Initial artist development costs (exclusive of studio costs) would
necessarily include demo and master tapes, market promotion package including
photographs, cassette and video duplication and live showcases while general
advertising costs are principally for purposes of preparing and distributing
Company brochures, announcements, sales literature, electronic press kit and/or
advertisements in trade journals and publications.
Since its recent commencement of business activities the Company has
signed certain potential recording artists to management contracts in such
marketing designated areas as pop/rock, alternative rock, techno dance, country,
jazz and rap. The Company's continuous search for artistic talent has also
resulted in ongoing contractual negotiations with additional artistic talent in
the market designated areas indicated above.
Management of the Company has also contacted various industry personnel
(both by mail and phone) to advise of the Company's relatively recent formation
and intentions and has circulated flyers in such geographical locations as the
New York metropolitan area, London, England, Toronto, Canada, Las Vegas, Nevada
and other surrounding environs; which flyers indicated in essence that the
Company (a) is now accepting unsigned original bands, artists and songwriters
seeking recording, publishing and/or management contracts for review by Grammy
Award winning producer John Rollo and staff and (b) will be conducting
"recording marathon(s)" in order to identify the best unsigned artists in the
tri-state (New York, New Jersey and Connecticut) area. The Company's initial
recording marathon, conducted from November 6, 1995 to November 11, 1995, was
one intense week of free recording and band showcasing for original bands (in a
studio environment) at an unaffiliated studio located in the State of New
Jersey. Studio availability of up to one hour was afforded to each recording
artist, thus enabling the Company to review, approximately 100 unsigned artists
during the marathon. News media coverage of the recording marathon (both in New
Jersey newspaper publications as well as on WWOR television 10 O'clock News) has
resulted in substantial exposure of the Company to the general public and the
free publicity resulting therefrom has created a situation whereby the Company
has received and continues to receive substantial unsolicited telephone calls,
tapes and CDs which material is currently being followed up and reviewed by the
Company, as time permits. Now that the Company has established its initial
recording studio it is in a position to utilize same for any future "recording
marathons" as it may determine to conduct. See also "Recording Facilities" with
respect to establishment of such facility and intentions regarding holding
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of recording marathon in September 1996.
The Company's President has recently attended Midem conferences in both
Cannes, France in January 1996 and Hong Kong in May 1996 in order to present
Company artists for potential licensing and/or recording contracts and also in
order to present the Company to foreign entities in an effort to represent
foreign artists in the United States. In that respect, the Company recently
agreed to represent SBI Records ("SBI") for licensing of its products and
artists (primarily United Kingdom artists) within the United States. SBI
currently releases in excess of 100 records per year.
Appearing directly below is list of recording artists signed to
management contracts by the Company as of June 18, 1996 with name of artist,
type of music being recorded and development status indicated in columnar and
footnote form. Each of such contracts are comparable to each other in that the
terms and conditions therein each fall within the ranges and percentages
referred to in "Sources of Potential Income" Management of the Company
continues, as heretofore indicated, to further audition recording artists and is
in various stages of contract negotiations with approximately 9- 10 additional
recording artists. Artists under contract, as heretofore indicated, are as
follows:
<TABLE>
<CAPTION>
Artist, Location Music Market Status
- ---------------- ------------ ------
<S> <C> <C>
1. Frame, NYC Rap Currently presenting to labels
2. Trip to Mars, NJ Alternative/ Currently presenting to labels
Rock
3. Jillene, Switzerland Techno Dance Currently presenting to labels
4. National Velvet, NJ Alternative Marketing efforts to major labels
commenced
5. Nothing Yet, NJ Rock Developing Marketing plan for labels
6. Neurotica, FL Alternative/ Currently presenting to labels
Rock
7. Satellite, AZ Alternative Currently presenting to labels
8. New Frontier, NJ Country Marketing plan initiated
9. The Mist, NJ Alternative Currently presenting to labels
10. Toilet, NJ Punk Currently presenting to U.S. labels
11. Guy Smiley Alternative Currently presenting to labels
12. The Machine Industrial Currently presenting to labels
13. Don Geran Reggae Currently presenting to reggae labels
in U.S.
14. Wolfgang Mutspiel Jazz Signed to Management Contract in June
1996
</TABLE>
Footnotes refer to artist of same number.
1. Initial song expected to be released on compilation CD outside the
United States.
2. Currently performing live throughout the tri-state area.
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3. Potential releases of completed album for Austrian, German and United
Kingdom territories under active negotiations with separate release for
Asian territories under consideration.
4. Demo and video production completed. This group was chosen from the
Company's initial "recording marathon".
5. Recording demo at newly established studio in July 1996.
6. Will be recording new material at Company recording studio in July
1996.
7. Showcasing for major labels in Los Angeles during June 1996.
8. In final stages of negotiation for overseas production deal with major
recording label, to include CD, video, extensive tour dates and
television and radio appearances. Record release date is anticipated
for September 1996 with additional songs to be recorded at Company
facilities in late June 1996.
9. Currently playing live in New York City with showcase(s) being
established so as to enable A&R representatives of major labels to see
group live.
10. Signed to United Kingdom recording label with release of first single
scheduled for July 1996. Showcasing in New York during June 1996.
11. Initially financed by Canadian government "Arts Grant" to record and
promote initial CD. Currently touring in Canada with expected United
States arrival in July 1996 so as to showcase in New York and record
new material at Company studio.
12. Expecting to be in position to review offer by end of August 1996.
13. Don is currently touring on West Coast. Arrangements for European
release being concluded.
14. This renowned (see Penguin Guide to Jazz - current/1994 edition, page
960) jazz recording artist and composer is signed to Polygram, Europe
and is expected to release a new CD in September 1996 in Europe.
Marketing efforts within the United States have commenced.
The Company has developed a "homepage" concept currently programmed
into the internet so that internet users can readily obtain information about
the Company and its services by accessing thereto through utilization of
standard personal computer and proper, readily available software. The concept -
entitled "The Underworld of Music" is designed to open up an underground market
for unsigned original artists via the worldwide web homepage which can be viewed
by anyone worldwide that has access to the internet, as aforesaid, who accesses
the Company's assigned internet code and utilizes the on screen menu and
available Company options. Features of the homepage currently include (a) a
cover page introducing the Company and its business purposes, (b) studio,
industry and artist happenings and (c) Company profile with artist submission
requirements. The concept of the homepage is to satisfy secondary markets (i.e.
original unsigned bands that may have potential but need additional artist
development) and, at the same time offer a buffer zone for screening submissions
with the homepage acting as a service menu to all who view it. Management
intends to update its menu and corresponding available information as if and
when developments warrant.
EMPLOYEES
The Company currently has five full time employees inclusive of its two
officers, Such two officers are employed pursuant to written full time
employment agreements (see Item 10 "Executive Compensation").
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As heretofore indicated, the Company has already established an A&R
"intern" network whereby interns are being employed on an exclusive, commission
only basis. To date, the Company has an intern east coast representative located
in New York, a west coast intern located in Las Vegas, Nevada, a third intern
located in Toronto, Canada and one additional intern working out of its New
Jersey location. The intern(s) primary objectives are to distribute Company
information throughout their territories, in music stores, clubs and to radio
stations and college campuses and to concentrate their efforts on locating and
reviewing new artists (via, for instance attendance at live showcases) for
Company management's consideration.
Since closing of the Company's public offering of securities (see
below), it has hired three A&R representatives who intend to concentrate their
respective efforts on promoting Company artists to record labels (as well as to
locate and develop new artistic talent). Such full time salaried A&R
representatives (listed in alphabetical order) are as follows:
DAVE FELD - has had approximately 8 years of experience in the recording
industry having previously served as an A&R representative with Atlantic Records
from June 1989 to June 1992 and having subsequently operated as an independent
A&R consultant until associating with the Company. Mr. Feld has been responsible
for the signing of certain relatively well known recording artists to the
Atlantic label and has worked with certain well known producers during his
employment as an A&R representative for certain acts already signed to Atlantic.
RON JOHNSON - subsequent to his receipt of a Bachelor of Science degree from
City University of New York was employed as a staff accountant dealing with
certain clients engaged in the music/entertainment industry. Mr. Johnson, in his
A&R capacity, will be principally responsible for dealing with and developing
talent in the R&B, Rap and Dance music areas.
DEREK SIMON - subsequent to his receipt of a Bachelor of Arts degree in 1988 Mr.
Simon has been engaged for approximately 8 years in various areas of the
entertainment industry, having most recently (September 1994 to January 1996)
been employed as Senior Director of Marketing for Roadrunner Records. Prior
thereto and from September 1991 to September 1994 Mr. Simon was Associate
Director of Marketing at Columbia Records, being engaged in marketing and
promotional efforts for a diverse group of new and established artists.
The Company has commenced initial discussions with a view towards
eventually establishing branch offices both within and outside the United States
in such foreign locations as London, England, Paris, France and Geneva and/or
Montreux, Switzerland. These initial negotiations are in their formative stages
and it
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remains premature at this time to determine to what extent, if any, such
negotiations will lead to fruition.
PUBLIC OFFERING OF SECURITIES
On November 7, 1995, the Company filed a Form SB-2 Registration
Statement under the Securities Act of 1933, as amended, with the New York
Regional Office of the Securities and Exchange Commission. The offering was
declared effective on February 12, 1996. Pursuant to the offering, the Company
sold 150,000 shares of its common stock at $2.00 per share. Closing with respect
to the aforesaid public offering was held on April 9, 1996. For further
information concerning such Registration Statement, see file #33-99084-NY at the
Securities and Exchange Commission's Regional Office in New York City or at its
principal office in Washington, D.C.
Additionally, and pursuant to the Underwriting Agreement between the
Company and its Underwriter (Greater Metropolitan Investment Services, Inc.),
the Underwriter purchased (at nominal cost) a total of 15,000 Underwriter's
Common Stock Purchase Warrants, each of which Warrants entitles the Underwriter
to purchase one share of the Company's common stock at $2.25 per share; said
Warrants being exercisable, in whole or in part, commencing February 12, 1997
and expiring February 12, 2001.
As of June 18, 1996, the Company had a total of 4,650,000 shares of
common stock outstanding, 4,500,000 shares of which were issued as restricted
securities prior to the Company's filing of its aforesaid Form SB-2 Registration
Statement in November of 1995.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently maintains is executive offices, rent free, at the
home of its President, John Rollo, at 5 Glenfield Road, Glenridge, New Jersey
07028 and its telephone number is 201- 655-0388. Management has located and
established (in May 1996) an additional executive office and recording
facility(ies) in Montclair, New Jersey has hereinafter indicated..
The Company's Glenridge offices already contain such necessary office
equipment as computers, fax machines, typewriters, telephones (as well as
standard office supplies and equipment) and by the nature of such equipment it
is not anticipated that any significant difficulties will exist in order to
"hook up" each office established with each other office (be it by way to
computer and modem, fax facilities, etc.).
On May 1, 1996, the Company entered into a five year lease agreement
for the rental of office space and more importantly studio recording facilities
at 180 Bloomfield Avenue, Montclair, New Jersey 07042. In accordance with the
terms of the lease, the
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Company occupies approximately 4,500 square feet of space on the entire second
floor of a three story building. Such facilities are utilized for both executive
offices and its aforesaid recording studio. The premises was formerly utilized
as a theater and has a sound stage which is currently being utilized for video
shots and will be utilized for live in-house industry performance showcases.
Management was attracted to this facility because of its acoustic nature
enhanced by its 13 foot ceiling. The premises is now divided into a control
room, a MIDI (writing) room, two offices and two additional rooms on each side
of the stage as well as a kitchen area and supply room. The lease commenced May
1, 1996 and requires base monthly rental payments of $1,500 per month for the
first year with ten percent (10%) increases for each of the remaining years.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a part to any material litigation nor, to
the knowledge of management, is any material litigation threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's initial fiscal year ended March 31, 1996 and it intends
to hold its annual meeting of stockholders within 90 to 120 days from the close
of such fiscal year. See also "Supplemental Information" hereinafter.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Marketing Information. The following table sets forth, for the
periods indicated, the range of high and low bid prices on the dates indicated
for the Company's securities indicated below for each full quarterly period
within the two most recent fiscal years (if applicable) and any subsequent
interim period for which financial statements are included and/or required to be
included.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, 1996 Quarterly Common Stock Price
By Quarter Ranges (1)
- -------------------------------- -------------------
Quarter Date High Low
- ------- ---- ---- ---
<S> <C> <C> <C>
4th March 31, 1996 (1) (1)
<CAPTION>
Fiscal Year Ended March 31, 1997 Quarterly Common Stock Price
By Quarter Ranges (1)
- -------------------------------- -------------------
Quarter Date High Low
- ------- ---- ---- ---
<S> <C> <C> <C>
1st June 18, 1996 (2) $1.75 $1.75
</TABLE>
(1) There was no public market for any of the Company's securities prior to
April 9, 1996 - the date of the closing of the Company's public
offering
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of securities and the first date that price quotations appeared is as
indicated in footnote 2 below. The existence of limited or sporadic
quotations should not of itself be deemed to constitute an "established
public trading market". To the extent that limited trading in the
Company's Common Stock has taken place, such transactions have been
limited to the over-the-counter market (except as otherwise may be
indicated hereinafter). All prices indicated herein are as reported to
the Company by broker-dealer(s) making a market in its securities in
the National Quotation Data Service ("pink sheets") and/or in the
Electronic Over-the-Counter Bulletin Board (the latter under the symbol
ROLO). The aforesaid securities were not traded or quoted on any
automated quotation system (other than as may be indicated herein). The
over-the-counter market quotes indicated above reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.
(2) The first printed quotation the Company has been able to receive has
been as of June 19, 1996, at which time the bid price of $2.25 was
indicated.
(b) Holders. As of June 19, 1996 the approximate number of stockholders
of the Company's Common Stock (as indicated on its transfer agent's June 18,
1996 certified list of stockholders) amounted to 7 persons and/or firms
(inclusive of those brokerage firms and/or clearing houses and/or depository
companies holding the Company's securities for their respective clientele - each
such brokerage house, clearing house and/or depository firm being considered as
one record holder). The exact number of beneficial owners of the Company's
securities is not known but would necessarily exceed the number of record owners
indicated above in that brokerage firms and/or clearing house and/or depository
companies are normally record owners for presumably any number of unidentified
beneficial owners.
(c) Dividends. The payment by the Company of dividends, if any, in the
future rests within the discretion of its Board of Directors and will depend,
among other things, upon the Company's earnings, its capital requirements and
its financial condition, as well as other relevant factors. The Company has not
paid or declared any dividends upon its Common Stock since its inception and, by
reason of its present financial status and its contemplated financial
requirements , does not contemplate or anticipate paying any dividends upon its
Common Stock in the foreseeable future.
(d) Transfer Agent. The transfer agent for the Company's common stock
is Trust Company of New Jersey, 35 Journal Square, Jersey City, New Jersey
07306.
ITEM 6. PLAN OF OPERATIONS
Due in part to the facts that (a) the Company was only relatively
recently organized in May of 1995, (b) initial funding necessary so as to
commence activities was received in July 1995 (through the sale of shares of
Company Common Stock as hereinafter indicated in Item 12), (c) no revenues from
operations have been received through March 31, 1996 and (d) the Company only
recently,
15
<PAGE> 16
on April 9, 1996, received net proceeds from the sale of shares of its common
stock (as hereinbefore described in Item 1) - the Company's plan of operation is
primarily and principally as heretofore indicated in Item 1 and the subheadings
thereunder (as well as in its February 12, 1996 Prospectus; the full contents of
which have hereinbefore been incorporated by reference). Accordingly, reference
is herewith made to Item 1 herein and the "Application of Proceeds" section to
the Company's aforesaid Prospectus for specific details regarding Company plans
for the next 12 months of its operations including the manner in which it
intends to satisfy its cash requirements over such period of time and most
specifically the information detailed therein regarding Company plans for
establishing and equipping recording facilities (through utilization of a
portion of the net proceeds received from its public offering of securities) and
the manner in which management of the Company intends to operate as an
independent A&R firm dedicated to locating, signing, promoting, recording and
developing musical entertainment artists. With respect to the former (i.e.
recording facilities), reference is herewith made to Item 1 "Recording
Facilities" and Item 2 "Description of Property". With respect to the latter,
the Company has recently signed 14 recording artists to management contracts, is
in active negotiations with approximately 9-10 additional recording artists
(both within and without the U.S.), a number of whom it expects to sign to
management contracts within the near future (although no assurance with respect
to such signing may be given at this stage) and has recently concluded (in
November 1995) its first annual "recording marathon" (as heretofore indicated in
Item 1) whereat it expected to and did sign certain recording artists to
management contracts. Unsigned band/recording artist response and participation
in the aforesaid "recording marathon" (as well as unsolicited media - print and
television - coverage thereof) exceeded management's expectations. Accordingly,
management has recently contemplated the feasibility of conducting substantially
similar "recording marathon(s)" as funding and time permits. Having established
its own initial recording studio and expecting same to be operational in late
June 1996, management intends to hold its second recording marathon in September
1996 at its newly established Montclair, New Jersey facilities. See also Item 1
Recording Facilities.
The Company's plan of operation for the next twelve months (in addition
to as indicated above) indicates (a) management's belief that the Company can
satisfy its cash requirements and operate, in the manner indicated in its
Prospectus, without raising additional funds during the next twelve months, (b)
that the only expected purchase or sale of plant and/or significant equipment
relates to the Company's establishing recording studio(s) and (c) management's
intentions to hire certain additional employees if, as and when needed. See also
Item 1 "Employees".
The Company, as of March 31, 1996 had total assets of $22,794
16
<PAGE> 17
and total liabilities of $80,352 (of which $70,000 is represented by a long term
note payable to a majority stockholder). From its inception (May 8, 1995)
through March 31, 1996 the Company has incurred losses totaling $110,358. The
March 31, 1996 financial statements do not take into account or consideration
the Company's subsequent receipt (in April 1996) of net proceeds of $235,750
from its public offering of securities nor does it take into account or
consideration the subsequent loan to the Company by its counsel and a principal
stockholder of $32,500 in May 1996. See notes 8 and 9 to audited financial
statements. The company's assets are kept in a highly liquid form with a
significant portion of its cash assets being presently placed in interest
bearing account(s). By placing the Company's funds in relatively liquid assets,
the Company balances its need to have quick access to its assets in the form of
cash (for carrying out its business purposes any time that an appropriate
opportunity arises) with the desire to earn interest income at competitive rates
to help defray ongoing administrative costs.
As of March 31, 1996 the Company did not have any current material
commitments for capital expenditures. Its capital is considered adequate for all
intended or anticipated administrative expenses.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements have been prepared in accordance
with the requirements of Regulation S-X and supplementary financial information
included herein, if any, has been prepared in accordance with Item 302 of
Regulation S-K, such information appears on pages F-1 through F-10 inclusive of
this Form 10-KSB, which pages follow this page.
ROLLO ENTERTAINMENT INC.
MARCH 31, 1996
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Deficiency F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6 - F-10
</TABLE>
17
<PAGE> 18
[BEDERSON & COMPANY LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of
Rollo Entertainment Inc.
Glen Ridge, New Jersey
We have audited the accompanying balance sheet of Rollo Entertainment Inc. (a
development stage company) as of March 31, 1996 and the related statements of
operations, stockholders' deficiency and cash flows for the period from May 8,
1995 (date of inception) to March 31, 1996. 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 present fairly, in
all material respects, the financial position of Rollo Entertainment Inc. at
March 31, 1996 and the results of its operations and its cash flows for the
period from May 8, 1995 (date of inception) to March 31, 1996 in conformity with
generally accepted accounting principles.
BEDERSON & COMPANY LLP
/s/ BEDERSON & COMPANY LLP
--------------------------
West Orange, New Jersey
May 21, 1996
F (1)
<PAGE> 19
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 4,720
---------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $247 1,700
---------
OTHER ASSETS:
Organization costs 1,316
Public offering expenses 15,058
---------
TOTAL OTHER ASSETS 16,374
---------
TOTAL ASSETS $ 22,794
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 4,400
Payroll taxes withheld and accrued 5,733
Accrued expenses 219
---------
TOTAL CURRENT LIABILITIES 10,352
---------
LONG-TERM DEBT:
Note payable - stockholder 70,000
---------
STOCKHOLDERS' DEFICIENCY:
Common stock, $.0001 par value,
authorized 10,000,000 shares;
issued and outstanding 4,500,000 shares 450
Additional paid-in capital 52,350
Deficit accumulated during the development stage (110,358)
---------
TOTAL STOCKHOLDERS' DEFICIENCY (57,558)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 22,794
=========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F (2)
<PAGE> 20
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
PERIOD FROM MAY 8, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
<TABLE>
<S> <C>
REVENUES $ --
-----------
OPERATING EXPENSES:
Officer's salaries 57,300
Studio and video recording cost 20,407
Artist and musician cost 5,200
Payroll taxes 5,901
Office expenses 5,914
Shows and conventions 5,285
Professional fees 4,900
Travel 2,292
Telephone 1,183
Advertising 1,510
Taxes 200
Depreciation 247
-----------
TOTAL OPERATING EXPENSES 110,339
-----------
LOSS FROM OPERATIONS BEFORE OTHER EXPENSES
AND PROVISION FOR INCOME TAXES (110,339)
OTHER EXPENSES:
Interest expenses - stockholder 19
-----------
LOSS BEFORE PROVISION FOR INCOME TAXES (110,358)
PROVISION FOR INCOME TAXES --
-----------
NET LOSS $ (110,358)
LOSS PER SHARE $ (.02)
===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,500,000
===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F (3)
<PAGE> 21
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
PERIOD FROM MAY 8, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-----------------
Number of Paid-in Development
Shares Amount Capital Stage Total
--------- ---- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Inception - May 8, 1995 -- $-- $ -- $ -- $ --
July 1995, issuance of
common stock for cash 21 1 49,999 -- 50,000
September 1995, issuance of
common stock to an officer
for operating expenses paid
on behalf of Company 8 1 1,483 -- 1,484
September 1995, issuance of
common stock for operating
expenses 16 1 1,315 -- 1,316
Stock split 4,499,955 447 (447) -- --
Net loss -- -- -- (110,358) (110,358)
--------- ---- -------- --------- ---------
BALANCE - March 31, 1996 4,500,000 $450 $ 52,350 $(110,358) $ (57,558)
========= ==== ======== ========= =========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F (4)
<PAGE> 22
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM MAY 8, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(110,358)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation 247
Issuance of common stock for operating expenses 2,800
Increase in operating liabilities:
Accounts payable 4,400
Payroll taxes withheld and accrued 5,733
Accrued expenses 219
---------
NET CASH USED BY OPERATING ACTIVITIES (96,959)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,947)
Organization costs paid (1,316)
---------
NET CASH USED BY INVESTING ACTIVITIES (3,263)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 50,000
Proceeds from stockholder note 70,000
Public offering expenses (15,058)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 104,942
---------
NET INCREASE IN CASH 4,720
CASH - beginning of period --
---------
CASH - end of period $ 4,720
=========
NON-CASH OPERATING ACTIVITIES:
Common stock issued for operating expenses $ 2,800
=========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F (5)
<PAGE> 23
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Rollo Entertainment Inc. was incorporated in the State of Delaware
on May 8, 1995, and is in the development stage with a limited
operating history. The Company currently operates as an
independent artist and repertoire firm representing musical
entertainment artists. Its only source of funds has been from the
issuance of common stock and issuance of a note for cash from a
stockholder.
Basis of Accounting
The Company maintains its records on the accrual basis of
accounting. Income is recognized when services are performed in
accordance with written contracts. Expenses are recorded when
incurred.
Certain Significant Risk and Uncertainties
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during this period.
Actual results could differ from those estimates.
Property and Equipment
Property and equipment, including significant betterments, are
recorded at cost. Upon retirement or disposal of properties, the
cost and accumulated depreciation are removed from the accounts,
and any gain or loss is included in income. Maintenance and repair
costs are charged to expense as incurred.
Depreciation
Depreciation of property and equipment is provided for over the
estimated useful life of five years. Depreciation is recorded on
the straight-line method.
Organization Costs
All costs incurred by the Company in connection with its
incorporation and organization have been capitalized and will be
amortized over a period of sixty (60) months after it has
commenced significant operations.
Loss Per Common Share
Loss per common share is computed by dividing the net loss by the
weighted average number of shares of common stock outstanding
during the period.
Expenses Related to the Proposed Public Offering
All costs to be incurred by the Company in connection with the
proposed public offering of the Company's securities will be
charged to additional paid-in capital upon the successful
completion of the offering. The effective date of the public
offering was on February 12, 1996 and the closing date was April
9, 1996 (see Note 9).
F (6)
<PAGE> 24
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 2 - PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
<TABLE>
<S> <C>
Office equipment $1,947
Less: Accumulated depreciation 247
------
$1,700
======
</TABLE>
NOTE 3 - NOTE PAYABLE - STOCKHOLDER
On March 29, 1996, the Company issued in exchange for $70,000 a
five percent (5%) unsecured note due on June 30, 1998 to Targas
Trading SA, a majority stockholder. Interest accrued at March 31,
1996 was $19.
NOTE 4 - INCOME TAXES
The Company adopted Statement of Financial Accounting Standard 109
("SFAS"). SFAS 109 provides for an asset and liability approach to
accounting for income taxes that require the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that will be recognized in the Company's
financial statements or tax returns.
In estimating future consequences, SFAS 109 generally considers
all expected future events other than proposed changes in the tax
law or rates prior to enactment.
Deferred income taxes at March 31, 1996 relates to a federal and
state net operating loss of $110,358 and $110,158, respectively,
which has been fully offset by a valuation allowance. The
valuation allowance has been established equal to the full amount
of the deferred tax assets, as the Company is not assured at March
31, 1996, that it is more likely than not that these benefits will
be realized.
A reconciliation between the statutory federal income tax rate
(34%) and the effective income tax rates based on continuing
operations is as follows:
<TABLE>
<S> <C>
Statutory federal income tax benefit $(37,522)
State income tax benefit (9,914)
Valuation allowance 47,436
--------
Total provision for income tax $ -
========
</TABLE>
Federal net operating loss carryforward of $110,358 will expire in
the year 2011 and the state net operating loss of $110,158 will
expire in the year 2000.
F (7)
<PAGE> 25
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 5 - COMMITMENTS
The Company previously maintained its office, rent free, at the
home of its president. On May 1, 1996, the Company entered into a
5 year lease agreement for the rental of its new offices
commencing May 1, 1996 (see Note 9). The lease terms require base
monthly rent of $1,500 per month for the first year with ten
percent (10%) increases for each of the remaining years. The
minimum annual future payments are as follows:
<TABLE>
<CAPTION>
Year Ended
March 31,
<S> <C>
1997 $16,500
1998 19,650
1999 21,615
2000 23,776
2001 26,149
</TABLE>
The Company entered into an employment agreement with its
President, John Rollo, for a term of two (2) years commencing upon
closing of the Company's public offering of securities and
terminating two years from the date of such closing. The agreement
provides for an annual salary of $75,000 per year, all or a
portion of which, dependent upon the net proceeds raised, shall be
paid out of the net proceeds of the public offering. If and to the
extent that such salaries are not paid out of the net proceeds of
the public offering they shall be accrued and paid when the
Company generates sufficient revenues from its operations. The
agreements became effective on April 9, 1996 (see Note 9).
The Company entered into an employment agreement with its
Secretary - Treasurer, Scott Patterson, for a term of two (2)
years commencing upon closing of the Company's public offering of
Securities and terminating two years from the date of such
closing. The agreement provides for an annual salary of $50,000
per year, all or a portion of which, dependent upon the net
proceeds raised, shall be paid out of the net proceeds of the
public offering. If and to the extent that such salaries are not
paid out of the net proceeds of the public offering they shall be
accrued and paid when the Company generates sufficient revenues
from its operations. The agreement became effective on April 9,
1996 (see Note 9).
NOTE 6 - COMMON STOCK
On October 12, 1995, the Company amended its certificate of
incorporation increasing its total number of shares of common
stock authorized from 200 shares to 10,000,000 shares. Immediately
thereafter, the Company effectuated a 100,000 for 1 stock split to
its then outstanding 45 shares of common stock so that immediately
subsequent thereto, the number of common shares outstanding are
4,500,000 shares.
F (8)
<PAGE> 26
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 6 - COMMON STOCK (Continued)
The accompanying financial statements reflect the retroactive
effect of the stock split, where applicable.
In July 1995, the Company issued 2,070,000 (post split) shares of
common stock at $.02 per share for $50,000.
In July 1995, the Company issued 810,000 (post split) shares of
common stock at $.0018 per share to its President for operating
expenses paid on behalf of the Company in the amount of $1,484.
In July 1995, the Company issued 1,620,000 (post split) shares of
common stock at $.0008 per share to its legal counsel for
operating expenses paid on behalf of the Company in the amount of
$1,316.
NOTE 7 - CONDITIONAL STOCK OPTION PURCHASE AGREEMENT
The President, in accordance with the terms and conditions of a
written addendum to his employment agreement (see Note 5), was
granted certain non-assignable conditional stock options to
purchase a number of additional shares of common stock at $.20 per
share, based upon the Company achieving certain specifically set
forth goals within three years from the date of the closing of its
public offering of securities, as follows:
Gold Certification - 250,000 stock options
Platinum Certification - An additional 100,000 stock
options
Multi platinum Certifications - An additional 50,000
stock options
Gold certification refers to the sale of no less than 500,000
albums, CD's or cassettes within the continental United States.
Platinum certification refers to the sale of one million, while
Multi platinum refers to the sale of more than one million albums,
CD's and cassettes sold within the continental United States.
NOTE 8 - RELATED PARTY TRANSACTIONS
A majority stockholder, Targas Trading SA, advanced the Company
$70,000 in exchange for a five percent (5%) unsecured note due on
June 30, 1998. Interest has been accrued at March 31, 1996 in the
amount of $19. The balance of the note at March 31, 1996 was
$70,000.
The Company's legal counsel and a principal stockholder, was paid
the sum of $32,500 for legal services with regard to the Company's
Public offering on April 9, 1996 (see Note 9). On May 3, 1996, the
Company issued in exchange for $32,500 a five percent (5%)
unsecured note due on demand to the same principal stockholder.
F (9)
<PAGE> 27
ROLLO ENTERTAINMENT INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 9 - SUBSEQUENT EVENTS
On April 9, 1996, the Company sold 150,000 shares of common stock
for $235,750, net of public offering expenses of $64,235.
On April 9, 1996, the Company issued to the Company's underwriter
15,000 common stock purchase warrants for a nominal consideration
($15). Each warrant is exercisable at $2.25 per share commencing
on February 12, 1997 and expiring on February 12, 2001.
The Company entered into a lease agreement on May 1, 1996 for the
rental of office space for a term of five (5) years commencing May
1, 1996.
On May 3, 1996, the Company issued in exchange for $32,500 a five
percent (5%) unsecured note due on demand.
F (10)
<PAGE> 28
ITEM 8. CHANGES IN THE AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
No disagreements with accountants on accounting and financial
disclosure matters existed during the Company's fiscal year ended March 31,
1996.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The Directors and Executive Officers of the Company, as of June 18,
1996, were as follows:
<TABLE>
<CAPTION>
*Name and Address Position(s) Held Age
- ----------------- ---------------- ---
<S> <C> <C>
John Rollo President and 41
5 Glenfield Road Director
Glenridge, NJ 07028
Scott Patterson Secretary-Treasurer 32
16 Morningside Avenue and a Director
North Haledon, NJ 07508
</TABLE>
* Both of the above named individuals have served in the capacities
indicated since the Company's formation in May 1995 and each may be
deemed a "parent" and "promoter" of the Company as those terms are
defined in the Rules and Regulations promulgated under the Securities
Act of 1933, as amended.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
JOHN ROLLO (40 years of age) has been President and a director of the Company
since its inception in May of 1995. Prior thereto and for a period of
approximately 20 years, Mr. Rollo has been engaged in the creative development
and technical production of musical recordings and in such capacity has been the
recipient of a Grammy Award for engineering and mixing of Jimmy Cliff's
"Cliffhanger" and a second Grammy Award for participating (producing Joe
Cocker's contribution) in the Bodyguard soundtrack CD for Arista Records.
Additionally, Mr. Rollo has earned Recording Industry Association of America
("RIAA") awards for his involvement with in excess of 20 Platinum and 15 Gold
Record sales worldwide; RIAA being the recognized industry association for sales
certification purposes. He has signed many new artists to major labels both in
England and
18
<PAGE> 29
the United States; working with the artists in order to develop songs, produce
recordings and overseeing progress through the various creative phases leading
up to and including final contract negotiations. In addition to the
aforementioned Grammy Award winners, Mr. Rollo has been engaged as producer
and/or engineer with the following recognized recording artists (as well as
others): Joe Cocker, Jimmy Cliff, Southside Johnny & the Asbury Jukes, Phoebe
Snow, Bonnie Tyler, Paul Young, The Kinks, Eric Clapton, George Benson, Kool &
the Gang, O'Jays, Stevie Nicks and Gang of Four. In addition to Mr. Rollo's
independent activities, as outlined above, he has acted as chief engineer and
record producer for the House of Music (then located in West Orange, New Jersey)
from 1985-1990. Mr. Rollo currently devotes his full time and best efforts to
the Company's business activities and intends to continue to do so in accordance
with the terms and conditions of a written two year employment agreement with
the Company.
Securities owned of record and/or beneficially: 810,000 shares of
common stock as of June 18, 1996.
SCOTT PATTERSON (30 years of age) has been Secretary-Treasurer and a director of
the Company since its inception. Mr. Patterson has had in excess of 10 years of
experience in various aspects of studio management, engineering, artist
management and production aspects within the recording industry and has worked
with the Company's President (on various independent projects) for approximately
the past 5 years. Additionally, from 1988 to May 1995 Mr. Patterson was employed
in certain specific entertainment related areas as follows and all within the
State of New Jersey: (a) studio manager for PMR Studios from 1988-1989, (b)
music production for Indie Music Productions from 1989-1992 and (c) music
production for Independent Artists and Repertoires from 1992-May 1995. Mr.
Patterson currently devotes his full time to the Company's business activities
in accordance with the terms and conditions of a written two year employment
agreement with the Company which commenced April 9, 1996.
Securities owned of record and/or beneficially: -0- shares of
common stock as of June 18, 1996.
ITEM 10. EXECUTIVE COMPENSATION
Remuneration paid (and/or accrued, if applicable and so specifically
indicated) to current officers and/or directors of the Company during fiscal
year ended March 31, 1996 is indicated in the chart appearing directly
hereinafter.
19
<PAGE> 30
<TABLE>
<CAPTION>
Securities
Salaries, Fees, or Property, Aggregate of
Capacities Directors' Fees, Insurance Benefits Contingent
Name of In Which Commissions or Reimbursement, Forms of
Individual Served and Bonuses Personal Benefits Remuneration
- ---------- ---------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C>
John Rollo President and $51,300 $ (2) $ (1)
Director
Scott Patterson Secretary/ $ 6,000 $ -0- $ -0-
Treasurer and
Director
</TABLE>
The Company has entered into written two year employment agreements
with its two officers which agreements commenced April 9, 1996 (upon closing of
its public offering of securities) and pursuant to which the Company's President
and Secretary-Treasurer are entitled to receive annual salaries of $75,000 and
$50,000 respectively. If and to the extent that such first year's salaries are
not paid out in the manner contemplated, same shall be accrued on the books and
records of the Company and paid to such persons if and when the Company
generates sufficient revenues therefore, without prejudice to its day to day
business operations.
No compensation of any nature was paid to any director for services
rendered to the Company in such capacity excepting for repayment made, if any,
for accountable expenses incurred on the Company's behalf.
(1) In accordance with the terms and conditions of a written addendum to
the aforesaid employment agreement between the Company and its
President (John Rollo), such officer was granted certain non-assignable
conditional stock options to purchase a number of additional restricted
Company shares at $.20 per share, based upon the Company achieving
certain specifically set forth goals within three years from April 9,
1996, as follows:
For each album/CD/cassette of a recording artist under
management contract with the Company which may achieve -
Gold certification - 250,000 stock options
Platinum certification - an additional 100,000 stock options
Multiplatinum certification - an additional 50,000 stock
options
Gold certification refers to the sale of no less than 500,000 units
(albums/CDs/cassettes) within the continental United States. Platinum
certification refers to the sale of one million units within the
continental United States, while Multiplatinum refers to the sale of
more than one million units sold within the continental United States -
each as certified to by the Recording Industry Association of America
("RIAA-US").
The number of stock options referred to above (assuming any of such
achievement goals are realized, of which there can be no assurance
whatsoever) may be issued to either the Company's President and/or such
Company employees as he may designate in writing.
(2) See Item 12 regarding issuance of shares of Company common stock to its
President in July 1995.
20
<PAGE> 31
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - The following
persons and/or firms are known to the Company to be the beneficial owners of
more than 5% of the 4,650,000 shares of the Company's outstanding $.0001 par
value Common Stock as of June 18, 1996. To the best of the Company's knowledge
each individual and/or firm has beneficial ownership of the shares and each
individual and/or firm has sole voting power and sole investment power with
respect to the number of shares beneficially owned (except as may otherwise be
indicated herein).
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (3) of Class
- ------------------- ------------------------ --------
<S> <C> <C>
John Rollo 810,000(1) 17.42%
5 Glenfield Road
Glenridge, NJ 07028
Gary B. Wolff 1,458,000(2) 31.35%
747 Third Avenue
New York, NY 10017
Targas Trading SA 2,070,000 44.52%
c/o Akar Verwaltungs AG
Seestrasse 17
P.O. Box 53
CH-8702 Zollikon 2
Switzerland
</TABLE>
(1) Does not include any shares which may be issued to John Rollo pursuant
to a non-assignable Conditional Stock Option Purchase Agreement,
whereby such individual may purchase a number of additional restricted
Company shares at a nominal cost of $.20 per share contingent upon the
occurrence (within three years from April 9, 1996) of certain
specifically set forth objectives relating to the Company's field of
endeavor.See Item 10 hereof.
(2) Does not include 162,000 shares owned by Mr. Wolff's minor son.
Excepting as may be attributable to Mr. Wolff by operation of law, Mr.
Wolff disclaims any beneficial interest in those shares of common stock
owned by his minor son.
(3) All shares referred to herein are "restricted" securities as that term
is defined under the Securities Act of 1933.
(b) Security Ownership of Management - The number and percentage of
shares of $.0001 par value Common Stock of the Company owned of record and
beneficially, by each current officer and director of the Company and by all
current officers and directors of the Company as a group, is as follows - as of
June 18, 1996. To the best of the Company's knowledge each individual has
beneficial ownership of the shares and each individual has sole voting power and
sole investment power with respect to the number of shares beneficially owned
(except as may otherwise be indicated herein).
21
<PAGE> 32
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (2) of Class
- ------------------- -------------------- --------
<S> <C> <C>
John Rollo 810,000(1) 17.42%
5 Glenfield Road
Glenridge, NJ 07028
Scott Patterson -0- -0-
16 Morningside Avenue
No. Haledon, NJ 07508
All Officers and 810,000 17.42%
Directors as a Group
(2 persons)
</TABLE>
(1) Does not include any shares which may be issued to John Rollo pursuant
to a non-assignable Conditional Stock Option Purchase Agreement,
whereby such individual may purchase a number of additional restricted
Company shares at a nominal cost of $.20 per share contingent upon the
occurrence (within three years from April 9, 1996) of certain
specifically set forth objectives relating to the Company's field of
endeavor. See Item 10 hereof.
(2) All shares referred to herein are "restricted" securities as that term
is defined under the Securities Act of 1933.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the fiscal year ended March 31, 1996 there have not been any
material transactions between the Company and any director, executive officer,
security holder or any member of the immediate family of any of the
aforementioned which exceeded $60,000 other than as may be indicated in this
Form 10-KSB.
Additionally, from its incorporation in May of 1995 through September
30, 1995 the Company issued a total of 4,500,000 shares of its $.0001 par value
Common Stock for an aggregate cash consideration of $52,800 or $.0117 per share.
The following chart indicates the name, number of shares issued, cash
consideration paid and date of purchase for each of those persons and/or firms
referred to directly below (who purchased, in the aggregate, the above indicated
4,500,000 shares of Company Common Stock).
<TABLE>
<CAPTION>
No. of Cash Date of
Name Shares Issued Consideration Purchase
---- ------------- ------------- --------
<S> <C> <C> <C>
John Rollo (1) 810,000 $ 1,479 July 6, 1995
Gary B. Wolff (2) 1,620,000 1,321 July 6, 1995
Targas Trading SA
(3) 2,070,000 50,000 July 6, 1995
--------- -------
Totals 4,500,000 $ 52,800
--------- --------
</TABLE>
(1) As of June 18, 1996 Mr. Rollo is the only Company officer owning shares
of
22
<PAGE> 33
its Common Stock.
(2) Mr. Wolff subsequently transferred 162,000 shares of Company common
stock to his minor son. Mr. Wolff's son is under management contract
with the Company as a recording artist. The management contract between
the Company and the son of its counsel (Gary B. Wolff) is comparable to
and substantially the same as those management contracts signed by each
of the other recording artists indicated in Item 1 "Band Development and
Advertising".
(3) Targas Trading SA is a Liechtenstein corporation whose shares are owned
in bearer name by its controlling person, Dr. Alfred Steinbrugger, who
founded and continues to operate Targas Trading SA for business
consultation, advisor and investment purposes.
See Item 10 hereto regarding Executive Compensation.
From time to time and prior to the April 9, 1996 closing of the
Company's public offering of securities, the Company has been the recipient of
loans aggregating $70,000. Such $70,000 was loaned to the Company by Targas
Foundation, an affiliated corporation, and payment of both principal and
interest (the latter at the rate of five percent (5%) per annum) is due June 30,
1998. The primary purpose for receipt of such loan was so as to enable the
Company to embark upon its expressed intentions regarding its proposed business
activities prior to closing of its public offering of securities (and prior to
its ability to utilize the net proceeds received therefrom).
Additionally, and subsequent to closing of its public offering of
securities, Company counsel loaned the Company $32,500, which sum bears interest
at the rate of five per cent (5%) per annum and is due and payable on demand.
Each of the above referenced loans is evidenced by a promissory note.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
Reference is herewith made to pages F-1 through F-10 inclusive of this
10-KSB with respect to the financial statements and notes thereto included
therein.
No exhibits are being filed with this Form 10-KSB.
During the last quarter of the Company's fiscal year ended March 31,
1996 no Form 8-K was filed.
23
<PAGE> 34
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Rollo Entertainment Inc.
By /John Rollo/
-----------------------
John Rollo, President
Date: June 20, 1996
In accordance with the Exchange act, This report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
/John Rollo/ President and Dated: June 20, 1996
- --------------------
John Rollo a Director
/Scott Patterson/ Secretary- Dated: June 20, 1996
- -------------------
Scott Patterson Treasurer and
a Director
24
<PAGE> 35
SUPPLEMENTAL INFORMATION
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
The Company's fiscal year ended March 31, 1996. The Company contemplates
holding its first annual meeting of stockholders within 90 to 120 days from the
close of its fiscal year.
Four copies of all material to be mailed to stockholders with respect to
such Annual Meeting of Stockholders (when scheduled to be held) will be
furnished to the Securities and Exchange Commission but such documents, when
furnished, will not be deemed to be "filed" with the Securities and Exchange
Commission or otherwise subject to liabilities of Section 18 of the Act (except
to the extent that the Registrant specifically incorporates such material by
reference in any subsequent Form 10-KSB); it is expected that such documents
will consist of a Form of Proxy, Notice of Annual Meeting with Information
Statement as well as such schedules and/or exhibits as may be annexed thereto.
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, STATEMENT OF OPERATIONS, AND STATEMENT OF STOCKHOLDERS DEFICIENCY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10K-SB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> MAY-08-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,720
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,720
<PP&E> 1,947
<DEPRECIATION> 247
<TOTAL-ASSETS> 22,794
<CURRENT-LIABILITIES> 10,352
<BONDS> 70,000
0
0
<COMMON> 450
<OTHER-SE> (58,008)
<TOTAL-LIABILITY-AND-EQUITY> 22,794
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 110,339
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> (110,358)
<INCOME-TAX> 0
<INCOME-CONTINUING> (110,358)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (110,358)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
