SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB/A
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED).
For the fiscal year ended June 30, 1999
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED).
For the transition period from ___________ to ___________
Commission file number: 0-27556
NETWORK EVENT THEATER, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3864111
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
529 Fifth Avenue
New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
(212) 622-7300
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
(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 the past 90 days.
Yes X No _____
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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. [X]
State issuer's revenues for its most recent fiscal year. $13,266,000
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
September 16, 1999: $276,276,664.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of September 16, 1999: 16,987,421 shares of Common Stock.
Transitional Small Business Disclosure Format (check one):
Yes ____ No X
DOCUMENTS INCORPORATED BY REFERENCE
None.
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NETWORK EVENT THEATER, INC.
AMENDMENT TO THE ANNUAL REPORT ON FORM 10-KSB
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TABLE OF CONTENTS
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Item No. Page
Part III
9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act.............................................4
10. Executive Compensation..........................................7
11. Security Ownership of Certain Beneficial
Owners and Management...........................................9
12. Certain Relationships and Related Transactions..................10
Signatures ...................................................................14
3
<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of Network Event Theater, Inc. (the
"Company") are as follows:
Name Age Position
Harlan D. Peltz 34 Chairman of the Board and Chief
Executive Officer
Don Leeds 48 President and Director
Bruce L. Resnik 53 Executive Vice President, Chief
Financial Officer and Secretary
Metin Negrin 33 Director
George Lindemann 63 Director
Howard Klein 42 Director
Harlan D. Peltz has been Chairman of the Board and Chief Executive Officer
of the Company since its incorporation in December 1995. From August 1993 to
December 1995, Mr. Peltz was the President of Universal Access Network, Inc.,
the general partner of Universal Access Network, LP, the predecessor of the
Company. From September 1991 to July 1993, Mr. Peltz was an associate at
Veronis, Suhler & Associates Inc., an investment banking firm specializing in
the media industry. From July 1990 to May 1991, Mr. Peltz worked for Home Box
Office in the area of international business development in Eastern Europe and
South America.
Don Leeds has been a director of the Company since December 1995. He was
elected Executive Vice President-Strategic Planning and Business Development of
the Company in June 1996 and then President in September 1996. From 1989 to June
1996, Mr. Leeds was a Managing Director at Veronis, Suhler & Associates Inc.
Bruce L. Resnik has been Executive Vice President, Chief Financial Officer
and Secretary of the Company since October 1996. From August 1992 to September
1996, Mr. Resnik was the Director of Finance of the International Division of
Grey Advertising.
Metin Negrin has been a director of the Company since December 1995. Since
August 1993, Mr. Negrin has been the Chief Operating Officer and a Managing
Director of The Athena Group, a real estate investment firm. From July 1990 to
July 1993, Mr. Negrin was an associate in the New York office of LaSalle
Partners, a Chicago-based real estate investment firm.
George Lindemann has been a director of the Company since August 1996.
Since February 1990, Mr. Lindemann has been the Chairman and Chief Executive
Officer of Southern Union Company, one of the largest natural gas distributors
in the United States, and since May 1982, has been the President of Cellular
Dynamics, Inc., the general partner of Activated Communications, L.P., a
diversified communications firm.
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Mr. Lindemann founded Metro Mobile CTS, Inc., a cellular telephone company, in
1982 and served as its Chairman and Chief Executive Officer until it merged with
Bell Atlantic Corporation in 1992. Mr. Lindemann also served as President of
Vision Cable Communications, a pioneer in the cable television industry, from
1972-1981.
Howard Klein has been a director of the Company since June 1998. Mr. Klein
is a founding partner of 3 Arts Entertainment, one of the leading
management/production firms in the entertainment industry. Representing some of
the world's most recognizable talent in the areas of film and television, Mr.
Klein is personally responsible for guiding the careers of many writers,
directors and performers.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors receive no cash
compensation for serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board of
Directors, subject to the provisions of certain employment agreements.
The Company has obtained key man life insurance on the life of Mr. Peltz in
the amount of $2 million.
Board and Committee Meetings
During the fiscal year ended June 30, 1999, the Board of Directors held 6
meetings and acted by unanimous written consent several times. Each member of
the Board attended at least 75% of the meetings of the Board and meetings of any
committees of the Board on which he served that were held during the time he
served.
The Audit Committee of the Board of Directors, which consists of a majority
of independent directors, makes recommendations concerning the engagement of the
Company's independent public accountants, reviews with the independent public
accountants the plans and results of the audit engagement, approves professional
services provided by the independent public accountants, reviews the
independence of the independent public accountants, considers the range of audit
and non-audit fees of the independent public accountants, reviews the adequacy
of the Company's internal accounting controls, and reviews all related party
transactions on an ongoing basis for potential conflict of interest situations.
The members of the Audit Committee are George Lindemann and Metin Negrin. The
Audit Committee did not hold any meetings in the fiscal year ended June 30,
1999.
The Stock Option Committee is made up of a majority of directors who, to
the extent legally required, qualify as "outside directors" under Section 162(m)
of the Internal Revenue Code of 1986, as amended, and as "non-employee
directors" under Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Stock Option Committee administers the
Company's two stock based stock option plans. The members of the Stock Option
Committee are Metin Negrin and Howard Klein. The Stock Option Committee did not
meet in the fiscal year ended June 30, 1999 but acted several times by written
consent.
The Board of Directors does not have a Nominating Committee or a
Compensation Committee.
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Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on a review of the reports and representations furnished to
the Company during the last fiscal year, the Company believes that each of the
persons required to file reports under Section 16(a) of the Exchange Act was in
compliance with all applicable filing requirements with respect to the Company's
most recent fiscal year.
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ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information for each of the
Company's three fiscal years ended June 30, 1997, 1998 and 1999 with respect to
compensation paid to Harlan D. Peltz, the Company's Chief Executive Officer, Don
Leeds, the Company's President, Bruce L. Resnik, the Company's Executive Vice
President and Chief Financial Officer, and Lawrence Kieves, the Company's former
President. No other executive officer received compensation in any of those
fiscal years that exceeded $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual
Compensation
<S> <C> <C> <C> <C> <C>
Securities All Other
Fiscal Underlying Compensation
Name and Principal Position Year Salary($) Bonus ($) Options ($)
- ---------------------------- ------ --------- --------- ----------- -------------
Harlan D. Peltz..................1999 150,000 180,000 -- --
Chief Executive Officer 1998 112,500 50,000(a) -- 162(b)
1997 112,500 40,000(a) -- --
Don Leeds........................1999 225,000 180,000 -- --
President 1998 200,000 40,000(a) -- 1,722(b)
1997 197,000 30,000(a) -- 50,000(c)
Lawrence Kieves..................1999 -- -- -- --
Former President 1998 -- -- -- --
1997 56,250 -- -- --
Bruce L. Resnik..................1999 210,000 180,000 -- 5,482(b)
Executive Vice President 1998 175,000 50,000(a) 100,000 7,371(b)
Chief Financial Officer 1997 129,230 25,000(a) 50,000 --
</TABLE>
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(a) Discretionary bonuses paid pursuant to each executive officer's employment
agreement with the Company and approved by the Board of Directors.
(b) Additional disability insurance and annual life insurance premiums.
(c) Additional compensation in connection with the acquisition of American
Passage Media, Inc.
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None of the executive officers of the Company named in the Summary
Compensation Table received any long-term compensation awards or payouts during
the Company's last three fiscal years.
Stock Options
During the fiscal year ended June 30, 1999, the Company granted Mr. Resnik
an option under the Company's 1997 Employee Stock Option Plan to purchase, at a
price of $11.50 per share, up to 40,000 shares of Common Stock on and after
March 24, 1999, vesting ratably over three years.
None of the executive officers of the Company named in the Summary
Compensation Table exercised any options during the fiscal year ended June 30,
1999.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of September 16, 1999 by (i) each person known
by the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's executive officers and
directors and (iii) all executive officers and directors of the Company as a
group.
<TABLE>
Percentage of
Amount and Nature of Outstanding
Name and Address of Beneficial Owner(1) Beneficial Ownership(2) Shares
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Harlan D. Peltz............................... 2,402,798(3) 14.14
George Lindemann.............................. 630,757(4) 3.7
c/o Cellular Dynamics, Inc.
767 Fifth Avenue
New York, New York 10153
Don Leeds..................................... 447,703(5) 2.6
Metin Negrin.................................. 70,535 *
Bruce L. Resnik............................... 93,323(6) *
Howard Klein.................................. 128,500(7) *
All executive officers and
directors as a group (6 individuals).......... 3,773,626 22.2
Warburg, Pincus Counsellors, Inc.............. 2,241,062 13.1
466 Lexington Avenue
New York, New York 10017
</TABLE>
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* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise indicated, the address of each beneficial owner identified
is 529 Fifth Avenue, New York, New York 10017.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date of this Form 10-KSB/A upon the exercise of options,
warrants or convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that convertible securities, options or
warrants that are held by such person (but not those held by any other
person) and which are exercisable within 60 days of the date of this Form
10-KSB/A have been exercised.
(3) Includes 63,544 shares owned by Universal Access Network, Inc., a Delaware
corporation wholly owned by Mr. Peltz.
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(4) All shares owned by Activated Communications, L.P. ("ACLP"), which is
wholly owned, directly or indirectly, by Mr. Lindemann and his family
members. Mr. Lindemann is the President, and he and his family members are
the sole shareholders, of the general partner of ACLP.
(5) Includes 376,000 shares issuable upon exercise of options granted under the
Company's 1996 Employee Stock Option Plan and by Harlan D. Peltz.
(6) Includes 83,333 shares issuable upon exercise of options granted under the
Company's 1996 and 1997 Employee Stock Option Plans.
(7) Includes 122,500 shares Mr. Klein owns jointly with his wife and 6,000
shares held in a retirement plan with his partners.
Harlan D. Peltz may be deemed a "promoter" of the Company, as such term is
defined in the Securities Act of 1933, as amended.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
In connection with the Company's hiring of Don Leeds as Executive Vice
President in June 1996, the Company granted Mr. Leeds an option under the
Company's 1996 Employee Stock Option Plan to purchase, at a price of $3.875 per
share, up to 66,666 shares of Common Stock immediately, up to an additional
66,667 shares of Common Stock on and after June 17, 1997, and up to an
additional 66,667 shares of Common Stock on and after June 17, 1998. In
addition, Harlan D. Peltz granted to Mr. Leeds an option to purchase up to
176,000 shares of his Common Stock at the same price and in equal proportions
over the same vesting periods.
In connection with the Company's hiring of Bruce L. Resnik as Executive
Vice President and Chief Financial Officer in October 1996, the Company granted
Mr. Resnik an option under the Company's 1996 Employee Stock Option Plan to
purchase, at a price of $3.44 per share, up to 16,666 shares of Common Stock on
and after October 7, 1997, up to an additional 16,667 shares of Common Stock on
and after October 7, 1998, and up to an additional 16,667 shares of Common Stock
on and after October 7, 1999.
Effective January 1995, the Company entered into a consulting agreement
with The Fields & Hellman Company ("F&H"), a corporation owned by Freddie
Fields, a former director of the Company, and Jerome Hellman. In December 1995,
the Company and F&H amended and restated the consulting agreement entitling F&H
to receive, among other things, annual consulting fees of $450,000, $550,000 and
$275,000 in 1996, 1997 and 1998, respectively, annual overhead expense
reimbursements (primarily relating to the Company's office in Los Angeles,
California) of $262,500, $275,625 and $137,813 in 1996, 1997 and 1998,
respectively, and 10% of the Company's pre-tax income through 1999. The Company
also granted F&H an option to purchase 552,560 shares of Common Stock at an
exercise price of $1.58 per share, which option was assigned 50% to each of
Jerome Hellman, personally, and a family trust of which Freddie Fields is a
trustee. For the year ended December 31, 1995, the Company paid consulting fees
of $300,000 and overhead expenses of $250,000 under such agreement.
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On May 20, 1997, the Company entered into a revised agreement with F&H. The
revised agreement relieved Messrs. Fields and Hellman of their obligation to
devote a substantial portion of their business time to the Company, but provided
that each would continue to be available to perform consulting services for the
Company and that Mr. Fields would continue to serve as a director of the Company
at his election. The revised agreement further provided that the Company would
continue to pay F&H the monthly consulting fees and expense reimbursements
provided for in the original agreement (totaling $412,812 for the period from
July 1, 1997 through December 31, 1997), but that the Company could at any time
elect to pay 50% of the remaining balance in a single cash payment and 50% by
issuing to Messrs. Fields and Hellman registered shares of Common Stock. The
revised agreement terminated December 31, 1997.
Common Places
On June 28, 1999, the Company, its partially-owned subsidiary,
CommonPlaces, LLC ("CommonPlaces"), YouthStream Media Networks, Inc., a
newly-formed Delaware corporation ("YouthStream"), Nunet, Inc. and Nucommon,
Inc., wholly-owned subsidiaries of YouthStream, Mr. Peltz, Benjamin Bassi,
chairman and chief executive officer of CommonPlaces, William Townsend, a senior
executive of CommonPlaces, and Mark Palmer, a senior executive of CommonPlaces,
entered into an agreement and plan of merger (the "Merger Agreement") to merge
the Company and CommonPlaces into the subsidiaries of YouthStream, which will be
the holding company in the proposed corporate restructuring of the Company. If
the mergers are completed, stockholders of the Company and common unitholders of
CommonPlaces (other than the Company) will become stockholders of YouthStream. A
special meeting of stockholders of the Company will be held to consider and vote
upon a proposal to approve the transaction.
In the mergers, the holders of the Company's common stock will receive one
share of YouthStream common stock for each share of the Company they hold, and
holders of CommonPlaces common units will receive 0.89 shares of YouthStream
common stock for each common unit of CommonPlaces they hold. The Merger
Agreement provides that each outstanding option or warrant to purchase shares of
the Company's common stock issued pursuant to the Company's 1996 and 1997 stock
option plans or otherwise and each outstanding option to purchase CommonPlaces
common units issued pursuant to CommonPlaces' 1999 unit option plan will be
assumed by YouthStream and will be deemed to constitute an option or warrant to
acquire, on the same terms and conditions that were applicable to the Company's
stock option or CommonPlaces' common unit option, the same number of shares of
YouthStream common stock as the holder of the option or warrant would have been
entitled to receive.
The Merger Agreement provides that it may be terminated and the mergers may
be abandoned before the effective time of the mergers in certain circumstances,
including if the mergers have not been completed, without fault of the
terminating party, on or before February 29, 2000.
At the effective time of the mergers, Messrs. Bassi, Townsend and Palmer,
Mr. Peltz, individually and as voting trustee, and YouthStream will enter into a
stockholders agreement, under which they will agree, for a period of three
years, to vote all their shares of common stock of YouthStream in favor of the
election, as director, of Mr. Bassi and a nominee of Mr. Bassi and Mr. Peltz and
nominees of Mr. Peltz so that, subject to the vote of YouthStream's
stockholders, Mr. Peltz and his nominees will constitute at least a majority of
YouthStream's board of directors. Messrs. Bassi, Townsend, Palmer and Peltz also
will agree to limit transfers of their shares in YouthStream.
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At the effective time of the mergers, YouthStream, Messrs. Bassi, Townsend
and Palmer and Mr. Peltz, as voting trustee, will enter into a voting trust
agreement, under which Messrs. Bassi, Townsend and Palmer will transfer to Mr.
Peltz, as voting trustee, 50% of their shares of common stock of YouthStream,
which the voting trustee may vote during the term of the agreement. The voting
trust agreement will terminate upon the earliest of (i) a merger, consolidation
or combination of YouthStream with another business, if, as a result of that
transaction, Mr. Peltz does not hold the position of chairman of the board,
president, chief executive officer or chief operating officer of the combined
entity; (ii) the date Mr. Peltz ceases to own of record or beneficially at least
10% of the number of shares of common stock of YouthStream he owns on the date
of the voting trust agreement; (iii) the death of Mr. Peltz; or (iv) Mr. Peltz
ceasing to serve as chairman of the board, president, chief executive officer or
chief operating officer of YouthStream.
At the effective time of the mergers, Mr. Bassi and Mr. Peltz will enter
into employment agreements with YouthStream. Mr. Bassi's employment agreement
will provide that Mr. Bassi will serve as president of YouthStream and
CommonPlaces for a term of three years, unless sooner terminated in accordance
with the employment agreement, and he will report directly to Mr. Peltz. Mr.
Peltz's employment agreement will provide that Mr. Peltz will serve as chairman
of the board and chief executive officer of YouthStream for a term of three
years, unless sooner terminated in accordance with the employment agreement. Mr.
Bassi and Mr. Peltz will each receive a salary of $250,000 a year, which may be
increased through a raise or bonus of up to $40,000 following the end of each
fiscal year at the discretion of YouthStream's board of directors, based upon
performance.
At the effective time of the mergers, YouthStream will have a stock
incentive plan, under which 2,500,000 shares of common stock of YouthStream will
be reserved for issuance in connection with grants of various types of options
and other stock-based awards, including the options that are converted under the
Merger Agreement.
At the effective time of the mergers, Messrs. Townsend and Palmer will
agree to vesting provisions with respect to shares of common stock of
YouthStream they receive in the mergers that will insure that substantially
similar vesting rights, including those related to termination of employment and
the change of control of YouthStream, apply to the shares of YouthStream as
applied to the common units they held in CommonPlaces, except that a portion of
their shares in YouthStream will vest earlier than their common units in
CommonPlaces.
Provisions of YouthStream's certificate of incorporation and bylaws may
make it difficult for a third-party to acquire, or may discourage acquisition
bids for, YouthStream and could limit the price that certain investors might be
willing to pay in the future for shares of common stock of YouthStream. For
example, YouthStream's certificate of incorporation eliminates the ability of
stockholders to act by written consent and its bylaws further provide that
special meetings of stockholders may be called only by the board of directors,
the chairman of the board of directors or the president. The certificate of
incorporation imposes super-majority voting requirements in connection with the
amendment of any bylaw, including those provisions relating to the classified
board of directors and the inability of stockholders to act by written consent
in lieu of a meeting. In addition, the board of directors of YouthStream will
have the authority to issue, at any time, without stockholder approval, up to
5,000,000 shares of preferred stock and to determine the price, rights,
privileges, and preferences of those shares, which may be senior to the rights
of holders of the common stock. The issuance of a new class of preferred stock
could adversely affect the holders of common stock and could dissuade a
potential
12
<PAGE>
acquiror from acquiring outstanding shares of common stock at a price that
represents a premium to the then current trading price.
Finally, at the effective time of the mergers, YouthStream is expected to
adopt a stockholder rights plan to protect stockholders against unsolicited
attempts to acquire control of the new holding company. The plan provides that
each outstanding share of common stock will have one right to purchase one-tenth
of a share of common stock attached to it; upon an acquiror's procurement of 15%
or more of YouthStream's common stock, each right will entitle the holder to
purchase a number of shares of common stock of the acquiror having a market
value of twice the purchase price of each right. The rights plan could have the
effect of dissuading a potential acquiror from acquiring outstanding shares of
YouthSteam common stock at a price that represents a premium to the then current
trading price.
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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, hereunto duly
authorized.
NETWORK EVENT THEATER, INC.
By: /s/ Harlan D. Peltz
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Harlan D. Peltz
Chief Executive Officer and
Chairman of the Board
Date: October 27, 1999
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