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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year June 30, 2000
Commission File Number: 0-29249
ONTV, Inc.
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(Name of Small Business Issuer in Its Charter)
Delaware 16-1499611
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(State of Incorporation) (IRS Employer Identification Number)
75 Bermar Park, Suite 5, Rochester, New York 14624
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(Address of Principal Executive Offices) (Zip Code)
(716) 426-2390
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(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, par value $.001
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(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. [X] Yes [ ] No
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 the Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $541,955
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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
22, 2000 is $2,403,120.
The number of shares outstanding of each of the issuer's classes of common
equity, as of September 15, 2000 is 16,777,238 shares of Class A and 0 shares of
Class B.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-KSB Incorporated Document
Part III, Item 9, Item 10 Proxy Statement dated October 15, 2000
Item 11, Item 12 to be filed with the Securities and Exchange
Commission for the annual meeting of
Shareholders to be held on November 10, 2000.
Part III, Item 13 Form 10-SB/A filed May 11, 2000
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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TABLE OF CONTENTS
ITEM PART I
1. Description of Business
2. Description of Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters
6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
7. Financial Statements
8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
PART III
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
10. Executive Compensation
11. Security Ownership of Certain Beneficial Owners and Management
12. Certain Relationships and Related Transactions
13. Exhibits and Reports on Form 8 K
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Report contains "forward-looking" statements regarding potential
future events and developments affecting the business of the Company. These
forward looking statements involve risks and uncertainties and are usually
accompanied by words such as "believes," "anticipates," "plans," "expects," and
similar expressions. Our actual results could differ materially from those
expressed or implied by such forward-looking statements as a result of certain
factors, including the risk factors described above and elsewhere in this
Report. Such statements relate to, among other things, (i) competition for
customers for products and services; (ii) the uncertainty of developing or
obtaining rights to new products that will be accepted by the market and the
timing of the introduction of new products into the market; (iii) the limited
market life of the Company's products; and (iv) other statements about the
Company or the direct response industry.
The Company's ability to predict results or the effects of any pending events on
the Company's operating results is inherently subject to various risks and
uncertainties, including competition for products, customers, and media access,
the uncertainty of developing or obtaining rights to new products that will be
accepted by the market, the limited market life of the Company's products, and
the effects of government regulations. See MANAGEMENT'S DISCUSSION AND ANALYSIS
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
ONTV, Inc., formerly known as LA Group, Inc. (the Company) was incorporated in
the state of Delaware on February 29, 1996, in order to create an entity with
which to form a reverse merger with a public, non-reporting, company, Kent Toys,
Inc. Through a series of transactions, Kent merged with the Company on 3/15/96.
Upon completion of this transaction, the Company became public and all Kent
stock was then canceled.
On 6/1/98, the Company acquired What A Product, Inc., an Arizona corporation,
which was involved in the design, manufacturing, sales and marketing of products
through electronic retailing, primarily through QVC Television.
On January 6, 1999, the Company formed a wholly owned subsidiary, Seen On TV,
Inc., a New York corporation, for the purpose of selling household, health and
beauty products over the Internet. This subsidiary currently is responsible for
the electronic retailing segment of the Company's business.
On January 14, 2000, the Company purchased the domain name, AsSeenOnTV.com. The
Company has begun to develop this asset into a major website for e-commerce, and
to develop the site as an entry point or portal for consumers seeking to
purchase products that they have seen on television.
The Company presently has two main areas of business. The Company designs and
markets web sites for other businesses and derives income from revenue sharing
agreements with these companies. The major customer for this segment of the
business is Popeil Inventions, Inc., the producer of the product Ronco ShowTime
Rotisserie and BBQ. The domain name, AsSeenOnTV.com will also be operated by the
parent company and management expects to derive revenue from the marketing of
this portal. The second main area of business relates to Seen On TV, Inc. This
wholly owned subsidiary markets and sells products, on the Internet, to the
general public.
Through the Seen On TV, Inc. subsidiary, the Company operates the website
"SeenOnTV.Com". This is a destination website offering "as seen on tv" products
direct to the consumer via the Internet. The "SeenOnTV.com" website currently
derives income from buying at distributor prices and selling products to
wholesale and retail customers. The Company's management has over twelve years
of experience in the direct response television industry and maintains a wide
range of relationships with many direct response television marketing companies
as well as major manufacturers who provide products to the direct response
industry.
Specific consumer products, through Seen On TV, Inc., which the Company markets
include a wide variety of categories, i.e.: health, beauty, weight loss,
kitchen, sporting goods, and household appliances, etc. Products sold by Seen On
TV, Inc. include, but are not limited to: Ronco ShowTime Rotisserie & BBQ,
Popeil Pastamaker, Ronco Food Dehydrator, Tae-Bo video tapes, IGIA Wonder Forms,
Popeil Pocket Fisherman, IGIA IonAir, Tap Light, Egg-a-Part, IGIA Platinum Nail,
Metabolize, Oxiclean, Orangeglow, Shelf Master, True Motion Lures, Vibatouch
Fingertip Massager, QRB, Eagle Eye Sun Glasses, Hygionic Tooth Brushes, Steamin
Iron, IGIA CelluLift, Instagone, Iron Wonder, IGIA Epielle, Proactiv Solution,
PVA Mop, Quick-n-Brite, Safety Can, Silver Lighting, Sweet Simplicity, Orbitrek,
Marvin's Magic, Flowbee, Body By Jake Ab Rocker, and many more.
The Company purchases a substantial majority of its products from a multitude of
vendors, and, therefore, the Company carries minimal inventory and relies, to a
large extent, on rapid fulfillment from these and other vendors. These venders
include, but are not limited to: Media Group, On-Tel Products Corp., Orange Glo
International, Inc., Ronco Inventions, Salco International, Salton, and Tactica
International, among others. The Company has no long-term contracts or
arrangements with any of its vendors that guarantee the availability of
merchandise, the continuation of particular payment terms or the extension of
credit limits. There can be no
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assurance that the Company's current vendors will continue to sell merchandise
to the Company on current terms or that the Company will be able to establish
new, or extend current, vendor relationships to ensure acquisition of
merchandise in a timely and efficient manner and on acceptable commercial terms.
If the Company were unable to develop and maintain relationships with vendors
that would allow it to obtain sufficient quantities of merchandise on acceptable
commercial terms, its business, prospects, financial condition and results of
operations would be materially adversely affected.
With the approval of shareholders, on March 8, 2000, the Company amended its
Certificate of Incorporation to change its name from LA Group, Inc. to ONTV,
Inc.
On June 2, 2000, the Company formed a subsidiary, Net e-Vantage, Inc.
Incorporated in the State of Delaware, Net e-Vantage, Inc., located in San
Diego, California, is a professional services company. Its principal business is
to acquire online and off-line strategic partnerships, Business to Business
(B2B) and Business to Consumer (B2C) product lines and services, major brand
names through direct manufacturer relationships and authorized distributors, as
well as Internet Exclusives with a wide variety of products.
Net e-Vantage, Inc. will also provide the conduit for additional capital sources
and corporate acquisitions for its growth and expansion, as well as that of the
Company. The Company, directly and beneficially, owns 76% of the outstanding
stock of Net e-Vantage, Inc., with the balance owned by its management and
advisors.
On July 31, 2000, the Company entered into an Acquisition Agreement with
What-a-Product, Ltd., a product development and manufacturing company, organized
in the Province of Alberta, Canada. For total consideration of $15,000 in cash,
and $20,000 in restricted shares of Common Stock of the Company, ONTV, Inc.
acquired 85% of the issued and outstanding shares of capital stock of
What-a-Product, Ltd. As a result of this stock purchase, the Company now owns
100% of the issued and outstanding shares of What a-Product, Ltd. Common stock.
The Company's controlling interest now permits it to use certain manufacturing
equipment and inventory, primarily related to the What-a Saw product which it
will now have the full capability to produce. This acquisition continues the
implementation of the Company's business strategy, which includes the expansion
of What-a-Product, Inc. (WAPI) into a product development and manufacturing
company. In furtherance of this strategy, the Company is seeking inventions and
new products to market under its What-a-Product brand name for direct response
and traditional retail distribution.
On July 26, 2000, the Company entered into a Joint Venture and Strategic
Alliance Agreement with Coordinated Strategic Alliances (CSA), a major product
developer and supplier to QVC Television. The agreement grants the Company
Internet and interactive digital cable marketing rights for all products
marketed, developed or acquired in the future by CSA. In exchange for these
rights, the Company issued 350,000 restricted shares of Common Stock to CSA.
Additionally, the agreement calls for both companies to expand product
development through the Company's subsidiary, WAPI. WAPI has begun to develop a
unique product and invention submission program designed to present consumer
products for introduction to various CSA distribution lines, including QVC and
Infomercial companies. In addition, the Company will feature the newly developed
products through its websites, including www.AsSeenOnTV.com, www.SeenonTV.com,
www.AsSeenOnTV.ws and www.SeenOnTV.ws.
On August 4, 2000, the Company entered into an Strategic Alliance/Joint Venture
Agreement with Commerce.TV Corporation, of Braintree, MA. Commerce.TV, an
interactive TV developer, and the Company have aligned to offer a product to
make shopping at home more convenient than has, in the past, been available.
This product will be available, in specific, nationally diverse test markets
throughout the United States during November 2000, to digital cable and
satellite TV subscribers. The product will enable the subscriber to easily and
quickly purchase consumer products that are viewed on a television screen, by
using their remote control. Management feels this will be an area of growth for
the Company in the future.
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The Company has expended no funds on research and development activities.
From inception to date, the Company has not been involved in any bankruptcy,
receivership, or similar proceeding.
As of September 15, 2000, the Company employed five full time and three part
time persons in the Rochester, NY office and two full time and two part time
employees in the San Diego office. The Company's employees are not represented
by labor unions. The Company believes relations with its employees are good.
ITEM 2. BUSINESS PROPERTIES
Under a lease executed on June 28, 2000, the Company, through its subsidiary Net
e-Vantage, Inc. rents office space in San Diego, California. This twelve-month
lease terminates on June 30, 2001, at which time it converts to a month to month
tenancy. Terms of the lease call for monthly payments, in advance, of $3,000,
which includes rent, administrative services, as well as telephone and High
Speed T-1 Internet services.
On March 31, 2000, the Company entered into a two year Lease Agreement for
office and warehouse space located at 75 Bermar Park, Suite 5, Rochester, New
York 14624. On June 1, 2000, the Company moved its corporate headquarters, along
with its fulfillment and warehouse operations into this facility. Under terms of
the lease, monthly payments of $2,279 will be made for the first year, and
$2,347 per month for the second year. In addition, the Company shall pay a
pro-rata share, along with other occupants of the building, of real estate
taxes, of which the Company estimates its share to approximate $5,000 per year.
This newly constructed facility is anticipated to provide ample space for
operations and growth during term of the lease.
ITEM 3. LEGAL PROCEEDINGS
On April 1, 1998, an action was commenced in the New York State Supreme Court in
New York County, Index #601272/98, by Charles Schwab & Co., Inc. against Quintin
A. Prospero, LA Group, Inc. and CDR Transfer, Inc. Charles Schwab & Co., Inc.
sold stock of the Company allegedly owned by Schwab's customer, Quentin A
Prospero. The stock was subject to a stop-transfer order (i.e., the stock
transfer agent was under instructions not to transfer the shares unless there
had been a default by the Company in performing under terms of the loan
agreement) and the customer could not make good delivery of the shares. Charles
Schwab was forced to go into the market and buy shares, resulting in an
out-of-pocket loss of $33,850. Charles Schwab claims that there was no legend on
the face of its customer's certificates and that it is not bound by the
stop-transfer order given to the stock transfer agent. The Company had valid
cross-claims against the other Defendants; however, they are both judgment
proof. While the Company may prevail on its defenses against Charles Schwab,
there is the possibility that the Company could be liable for the entire amount
for which it is being sued. It is likely that this case will be settled prior to
trial.
Additionally, on May 17, 2000, an action was filed in the Court of Common Pleas,
Summit County, Ohio, Case No: CVO2000-05-2214, by Terance L. Kelley, Inc.
against LA Group, Inc. to recover $33,000. The plaintiff was a provider of
accounting services for the Company's predecessor Company, Kent Toys, Inc. The
Company is involved in a vigorous defense of the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In February 18, 2000, the Company sought shareholder approval of several items.
Shareholder consent was sought and obtained for the following corporate issues:
(1) Amending the Certificate of Incorporation to
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change the Company's name, from LA Group, Inc., to ONTV, Inc.; (2) Increase of
the number of authorized shares of common stock of the Company, from 20,000,000,
to 100,000,000 (80,000,000 shares Class A and 20,000,000 shares Class B); (3)
Increasing the number of authorized shares of preferred stock, from 2,000,000 to
5,000,000; and (4) Ratification of all acts and deeds of the Officers and
Directors of the Corporation from the date of its inception through January 31,
2000.
On March 8, 2000, the shareholder consent was tabulated, and all four issues
were approved.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
The Common Stock of the Company, trading under the symbol of "ONTV", is quoted
on NASDAQ Over the Counter Bulletin Board ("OTCBB"). The following information
is provided, based upon quotations supplied by both The National Quotation
Bureau, LLC and the Internet research company, ASKREASEARCH.
Period Low Bid High Bid Period Low Bid High Bid
------ ------- -------- ------ ------- --------
1st 1998 n/a n/a 3rd 1999 .035 2.18
2nd 1998 n/a n/a 4th 1999 .56 .77
3rd 1998 .125 .215 1st 2000 .20 .56
4th 1998 .09 .145 2nd 2000 .16 .32
1st 1999 .05 .125 3rd 2000 .14 1.1875
2nd 1999 .02 .05 4th 2000 .25 .625
The foregoing price information is based upon inter-dealer prices, without
retail mark-up, mark down or commission, and may not represent actual
transactions.
The capitalization of the Company consists of 80,000,000 shares of Class A
Common Stock. Of this amount, 16,777,938 shares are issued and outstanding.
There are 20,000,000 shares of Class B Common Stock authorized, none of which
have been issued. In addition, the Company is authorized to issue 5,000,000
shares of preferred stock, none of which have been issued.
On January 31, 2000, the Company filed Form 10-SB, with the Securities and
Exchange Commission (SEC) in order to become a fully reporting company. On
February 24, 2000, the Company's public traded securities were delisted from
trading on the OTCBB, and began to trade on the electronic pink sheets. This
action was taken because the Company, as of that date, had not yet received
final approval for the filed registration statement from the SEC. The Company
was notified by the SEC on May 12, 2000 that approval was granted. After
petition to NASDAQ, trading, once again, began on the Over the Counter Bulletin
Board.
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Holders of record.
As of September 7, 2000, there were 16,777,938 shares of Common Stock
outstanding, held by 1013 shareholders of record.
Dividends.
The Company has not declared or paid any cash dividends on our common stock
since inception. We intend to retain any future earnings to finance the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.
ITEM 5. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion of the financial condition and results of operations of
ONTV, Inc. should be read in conjunction with the consolidated financial
statements and the notes to those statements included elsewhere in this
statement. This discussion contains forward-looking statements that involve
risks and uncertainties. The actual results of the Company may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, such as those set forth elsewhere in this Report.
RESULTS OF OPERATIONS
Fiscal Year Ended June 30, 2000 vs. Fiscal Year Ended June 30, 1999
Revenue for the fiscal year ended June 30, 2000 was $541,955, an increase of
approximately 320% over fiscal year 1999 revenue of $129,050. The Company
developed two new business segments during the latter half of the prior fiscal
year. Thus, such revenue increases were due to the fact that the 2000 fiscal
year contained a full twelve months of such revenue from each business segment,
compared to only a portion of the prior year.
The cost of goods sold, as a percentage of revenue, was 23% for the current
fiscal year ending June 30, 2000, as compared with 20% for the fiscal year ended
June 30, 1999. This increase is primarily due to the fact that merchandise for
resale over the Internet during the beginning of that business segment was
purchased somewhat lower than normal.
Gross profit, as a percentage of revenue, was 77% for the fiscal year ended June
30, 2000, as compared with 80% for the prior fiscal year.
Operating expenses, as a percentage of revenue, approximated 71% for the fiscal
year ended June 30, 2000, as compared with 151% for the prior year. The
improvement in this ratio is primarily due to the efficiencies generated from
the inclusion of a full year of revenues from each of the two business segments.
Included in operating expenses during the current year were approximately
$100,000, which represented the costs associated with the filing of the
registration statement with the SEC in order to become a reporting company. In
addition, management and staff employees were hired to carry out the strategic
business plan of the Company. Management anticipates rising payroll and
associated costs, as additional employees will be necessary to support the
anticipated growth of the Company. Other additional costs shall include those
expenses necessary to conform with the regulatory filing requirements of our now
reporting company, and also to support shareholder communication.
Net income for the fiscal year ending June 30, 2000 was $38,651, or $.0025 per
share, as compared to ($94,485), or ($.0064) per share for the fiscal year
ended June 30, 1999.
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IMPACT OF INFLATION
Management believes inflation has not had a material effect on the Company's
operations or on its financial condition. The Company believes that it will be
able to offset any future effects of inflation. The Company does not purchase,
by contract, any product for resale. The Company sells products on an individual
basis. Management therefore believes that any increase in costs to the Company
can be immediately passed on to the customer. Although inflation could have an
impact on the volume of sales, the Company could combat this by adjusting
product mix, or by the change of product offered for sale.
LIQUIDITY AND CAPITAL RESOURCES
At the end of fiscal year 2000, working capital was ($5,026,651), a decline of
$4,996,408. The decrease in working capital was primarily due to an increase of
notes payable, a result of the purchase of the AsSeenOnTV.com domain name, as
more fully described in the subsequent paragraph. Cash flow from operating
activities increased to $105,292 for the current fiscal year, from $50,460 in
the year ending June 30, 1999. This increase resulted from an increase in
revenues and operating profits due to a full year of operating both previously
described business segments.
On January 14, 2000, the Company purchased, at a total cost of $5,000,000, the
domain name, AsSeenOnTV.com. The Company plans to develop this asset into a
major website for e-commerce, and develop the site as an entry point or portal
for consumers seeking to purchase products that they have seen on television.
After Beta testing of the site, management has identified additional
opportunities which it is exploring, as well. Consideration for the acquisition
included a cash payment of $25,000 and a non-interest-bearing promissory note of
$4,975,000. Terms of the note originally required a payment of $150,000 on July
18, 2000. The lender has extended the due date to January 1, 2001. The balance
of the note, $4,825,000 is due April 18, 2001. Two million one hundred thousand
(2,100,000) restricted shares of Company stock, which are not issued as of the
date of this filing, and the domain name, collateralize the note. The domain has
not yet been fully developed, thus the Company has not yet begun to see a full
return on its investment.
On June 16, 2000, the Company entered into a note agreement with an unrelated
individual in the amount of $250,000. The note proceeds were used, and continue
to be used, for the purpose of establishing the new Net e-Vantage, Inc.
subsidiary located in San Diego, California. The note, due December 13, 2000, is
secured by 1.5 million restricted shares of common stock. These restricted
shares have been issued and are being held in trust, although all rights
associated with these shares remain with the Company.
Management believes the profits generated from operations will be sufficient to
finance the web hosting and Internet sales segments of the business for the next
twelve months. However, the Company has begun to conduct negotiations with
several lenders to secure financing to timely repay each of the above notes.
Should such financing be successful, it may result in increased obligations that
could result in covenants that would restrict our operations. Successful
negotiations have not yet been concluded, and there can be no assurance that
financing will be available in amounts or on terms acceptable to us, if at all.
In the event negotiations are unsuccessful, and the Company is unable satisfy
the payment terms of the notes, the Company must relinquish the domain back to
the seller, as well as relinquish the collateralized restricted shares of
Company stock to each of the note holders.
As previously described, the Company has recently entered into lease contracts
with unrelated entities for office and warehouse space in Rochester, New York.
Annual rental payments total $27,416 for the first year and $25,817 for the
second year on this property.
Additionally, the Company's subsidiary, Net e-Vantage, Inc. secured lease space
for the new Net e-Vantage, Inc. subsidiary office in San Diego, California. This
one-year lease expires June 30, 2001 and, at that time, reverts to a month to
month lease. Monthly rental payments for the first year are $3,000.
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ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company are set forth on page F-1 of this
report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes in or disagreements with the Company's accountants on
any accounting or financial disclosure matters during fiscal year 2000 and
fiscal year 1999.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information called for hereunder has been omitted pursuant to paragraph G(3)
of the General Instructions for the preparation of the Annual Reports of Form
10-KSB (the "General Instructions") in as much as the Company intends to file
definitive proxy materials containing such information with the Securities and
Exchange Commission before October 28, being 120 days after the end of the 2000
fiscal year. Upon such filing, the applicable information set forth therein
shall be deemed incorporated herein.
ITEM 10. EXECUTIVE COMPENSATION
The information called for hereunder has been omitted pursuant to paragraph G(3)
of the General Instructions in as much as the Company intends to file definitive
proxy materials containing such information with the Securities and Exchange
Commission before October 28, being 120 days after the end of the 2000 fiscal
year. Upon such filing, the applicable information set forth therein shall be
deemed incorporated herein.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for hereunder has been omitted pursuant to paragraph G(3)
of the General Instructions in as much as the Company intends to file definitive
proxy materials containing such information with the Securities and Exchange
Commission before October 28, being 120 days after the end of the 2000 fiscal
year. Upon such filing, the applicable information set forth therein shall be
deemed incorporated herein.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for hereunder has been omitted pursuant to paragraph G(3)
of the General Instructions in as much as the Company intends to file definitive
proxy materials containing such information with the Securities and Exchange
Commission before October 28, being 120 days after the end of the 2000 fiscal
year. Upon such filing, the applicable information set forth therein shall be
deemed incorporated herein.
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8 K
(a) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
3 (i) Articles of Incorporation(1)
3 (ii) By-laws(1)
4 Form of Certificate evidencing Common Stock(1)
9 Voting trust agreement(3)
10 Material contracts(1)
11 Computation of per share earnings(2)
12 Annual Report to share holders(3)
16 Letter on change in certifying accountant(3)
18 Letter on change in accounting principles(3)
21 Subsidiaries of the small business issuer(1)
24 Power of Attorney(3)
27 Financial Data Schedule
99 Employment contract of Daniel M. Fasano(1)
Employment Contract of Frank T. Costanzo(1)
Employment Contract of Curt B. Westrom(1)
Analysis of Intangible Assets(1)
Origin of Goodwill(1)
--------
(1) Incorporated by reference to Exhibits filed as part of Registrant's Form
10-SB under SEC file Number 000-29249.
(2) See Financial Statements.
(3) Not Applicable.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed by the registrant.
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
September 26, 2000 ONTV, Inc.
By: /s/ Daniel M. Fasano
----------------------------------
Daniel M. Fasano
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Chief Executive Officer
/s/ Daniel M. Fasano And Chairman of the
---------------------- Board of Directors September 26, 2000
Daniel M. Fasano
Chief Financial Officer
And Treasurer (Principal
/s/ Curt B. Westrom Accounting and Financial
---------------------- Officer) September 26, 2000
Curt B. Westrom
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ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC.
& SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
--------------------------------------
FINANCIAL REPORTS
AT
JUNE 30, 2000
--------------------------------------
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ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC.
& SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Independent Auditors' Report F-1
Consolidated Balance Sheets at June 30, 2000 and 1999 F-2
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended June 30, 2000, 1999 and 1998 F-3
Consolidated Statements of Operations for the Years Ended June 30, 2000,
1999 and 1998 F-4
Consolidated Statements of Cash Flows for the Years Ended June 30, 2000,
1999 and 1998 F-5
Notes to Consolidated Financial Statements F-6 to F-11
</TABLE>
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders
ONTV, Inc. and Subsidiaries
(Formerly LA Group, Inc.
& Subsidiaries)
Rochester, New York
We have audited the accompanying consolidated balance sheets of ONTV,
Inc. and Subsidiaries (Formerly LA Group, Inc. & Subsidiaries) (A Delaware
Corporation) as of June 30, 2000 and 1999, and the related consolidated
statements of operations, changes in stockholders' equity (deficit), and cash
flows for each of the three years in the period ended June 30, 2000. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ONTV, Inc.
(Formerly LA Group, Inc. & Subsidiaries) as of June 30, 2000 and 1999, and the
results of its operations and its cash flows for each of the three years in the
period ended June 30, 2000, in conformity with generally accepted accounting
principles.
Rochester, New York
July 18, 2000
F-1
<PAGE> 16
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC. & SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
================================================================================================
June 30, 2000 1999
------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 243,897 $ 16,549
Accounts Receivable 16,995 10,308
Marketable Securities 53,096 33,006
Inventory 38,547 4,001
Deposits 12,420 --
Due from Officer 40,177 10,334
Prepaid Expenses 2,591 600
------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 407,723 74,798
PROPERTY AND EQUIPMENT - NET OF ACCUMULATED DEPRECIATION 33,340 3,870
Intangible Assets - Net of Accumulated Amortization 5,073,039 66,750
------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 5,514,102 $ 145,418
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 100,612 $ 66,417
Accrued Expenses 78,948 20,393
Accrued Taxes 29,814 18,231
Notes Payable 5,225,000 --
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,434,374 105,041
------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock: $.001 Par; 100,000,000 Shares Authorized,
16,777,938 and 15,277,938 Class A Shares Issued
and Outstanding in 2000 and 1999, Respectively 16,778 15,278
Additional Paid In Capital 465,630 465,630
Accumulated Deficit (401,880) (440,531)
------------------------------------------------------------------------------------------------
80,528 40,377
Less: Stock Held in Trust 1,500 --
------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 79,028 40,377
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,514,102 $ 145,418
================================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE> 17
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC. & SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
=============================================================================================================
Additional
Number Common Paid In Accumulated Stockholders'
of Shares Stock Capital Deficit Equity
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - JUNE 30, 1997 13,962,938 $ 13,963 $ 188,166 $ (218,291) $ (16,162)
Common Stock Issued -
Kent Acquisition 300,000 300 14,700 -- 15,000
Common Stock Issued -
For Cash 150,000 150 7,350 -- 7,500
Common Stock Issued -
What a Products Acquisition 790,000 790 25,489 -- 26,279
Capital Contributed in the form
of Services -- -- 100,000 -- 100,000
Net Loss -- -- -- (127,755) (127,755)
-------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 1998 15,202,938 15,203 335,705 (346,046) 4,862
Common Stock Issued for Cash 75,000 75 29,925 -- 30,000
Capital Contributed in the form
of Services -- -- 100,000 -- 100,000
Net Loss -- -- -- (94,485) (94,485)
-------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 1999 15,277,938 15,278 465,630 (440,351) 40,377
Common Stock Issued as Collateral
on Note Payable 1,500,000 1,500 -- -- 1,500
Net Income -- -- -- 38,651 38,651
-------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 2000 16,777,938 $ 16,778 $ 465,630 $ (401,880) $ 80,528
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 18
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC. & SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
Years Ended June 30, 2000 1999 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues, Net of Returns $ 541,955 $ 129,050 $ 48,311
-------------------------------------------------------------------------------
COST OF GOODS SOLD 122,290 25,970 13,239
-------------------------------------------------------------------------------
Gross Profit 419,665 103,080 35,072
-------------------------------------------------------------------------------
EXPENSES
Contributed Services -- 100,000 100,000
Amortization 21,282 21,242 14,221
Depreciation 1,000 143 75
Freight and Delivery 28,225 7,359 703
Interest 1,292 1,119 1,110
Legal and Accounting 71,334 9,701 10,810
Litigation Contingency -- 16,500 --
Payroll and Payroll Taxes 133,523 -- --
Other Expenses 129,063 38,424 34,933
-------------------------------------------------------------------------------
TOTAL EXPENSES 385,719 194,488 161,852
-------------------------------------------------------------------------------
Income (Loss) Before Taxes
Other Income (Loss) and
Income Taxes 33,946 (91,408) (126,780)
Equity in Income (Loss) of
Unconsolidated Investment 5,030 (1,934) --
-------------------------------------------------------------------------------
Income (Loss) Before Taxes 38,976 (93,342) (126,780)
Provision for Income Taxes 325 1,143 975
-------------------------------------------------------------------------------
NET INCOME (LOSS) $ 38,651 $ (94,485) $ (126,780)
EARNINGS PER SHARE
================================================================================
Income (Loss) Per
Common Share - Basic and
Diluted $ 0.0025 $ (0.0064) $ (0.0087)
Weighted Average Number of
Common Shares Outstanding 15,339,413 14,679,760 14,679,760
================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE> 19
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC. & SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
=================================================================================================
Years Ended June 30, 2000 1999 1998
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 38,651 $ (94,485) $(127,755)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH FLOWS FROM OPERATING ACTIVITIES:
Amortization 21,282 21,242 14,221
Depreciation 1,000 143 75
Contributed Services -- 100,000 100,000
Equity in (Income) Loss of Unconsolidated Investments (5,030) 1,934 --
Increase in Value of Minority Interest 700 -- --
CHANGES IN ASSETS AND LIABILITIES:
Accounts Receivable (6,687) (10,308) --
Inventory (34,546) (3,106) 5,723
Prepaid Expenses (1,991) (600) --
Security Deposits (12,420) -- --
Accounts Payable 34,195 12,016 (2,629)
Accrued Expenses 58,555 16,352 1,804
Accrued Taxes 11,583 6,762 5,960
Other -- 510 797
-------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 105,292 50,460 (1,804)
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Marketable Securities (15,060) (35,000) --
Acquisition of Property and Equipment (24,470) (3,850) (238)
Acquisition of Intangible Assets (27,571) (400) --
Due To/From Officer (35,843) (24,746) (5,587)
-------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (102,944) (63,996) (5,825)
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Debt (25,000) -- --
Proceeds from Borrowings 250,000 -- --
Proceeds from Issuance of Common Stock -- 30,000 7,500
-------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 225,000 30,000 7,500
-------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 227,348 16,464 (129)
Cash and Cash Equivalents - Beginning of Year 16,549 85 214
-------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 243,897 $ 16,549 $ 85
=================================================================================================
SUPPLEMENTAL DISCLOSURES
Interest Paid $ -- $ -- $ --
Income Taxes Paid $ -- $ -- $ --
=================================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE> 20
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC.
& SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE A - SUMMARY OF TRANSACTION
SEGMENT DATA, GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS
The Company operates in two industry segments and generates revenue
from customers throughout the United States. The company is primarily
engaged in retail sales of general merchandise and consumer goods.
ONTV, Inc. was formed on February 29, 1996 under the laws of the
State of Delaware. The Company has since merged with other companies
as well as acquired the stock of other companies. The Company was
authorized to issue 20,000,000 shares of common stock $.001 par value
and 5,000,000 shares of preferred stock. There are no preferred
shares issued or outstanding at June 30, 2000. On March 8, 2000, the
shareholders voted to increase the authorized number of common shares
from 20,000,000 to 100,000,000. The new structure of common stock
consists of 80,000,000 shares of Class A common stock and 20,000,000
shares of Class B common stock. The Board of Directors has the
authority to determine the rights and restrictions of the Class B
common shares. However, none of the rights or restrictions of the
Class B common shares shall be greater than those of the Class A
common shares. At June 30, 2000 and 1999 there were no Class B shares
issued or outstanding.
NAME CHANGE
On March 14, 2000, the company amended its Certificate of
Incorporation to change its name from the LA Group, Inc. to ONTV,
Inc.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the LA
Group and its wholly or majority owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
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 disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expense during the reporting period. Actual results can
differ from those estimates.
REVENUE RECOGNITION
Revenue from product sales are recognized when both the goods are
shipped, and the customer's right of return has expired.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Corporation to
significant concentrations of credit risk consist principally of bank
deposits which may at times exceed federally insured limits. The
company had cash balances that exceeded insured limits at June 30,
2000 of $143,897. Cash is placed primarily in high quality short term
interest bearing financial instruments. Sales recorded by the Company
from one significant customer amounted to 55.1% and 45.4% of total
revenue for the fiscal years ending June 30, 2000 and 1999,
respectively. At June 30, 2000 and 1999, the Company had trade
accounts receivable with the customer representing 62.8% and 67.5% of
total receivables, respectively. The company periodically monitors
the credit worthiness of its customers to which it grants credit
terms in the ordinary course of business. The Company does not
foresee a credit risk with these receivables and accordingly no
allowance for doubtful accounts has been recorded.
- continued -
F-6
<PAGE> 21
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC.
& SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less. The company maintains cash and
cash equivalents at financial institutions which periodically may
exceed federally insured amounts.
INVESTMENTS
The company has a 20% investment in a non majority owned company. The
investment is accounted for under the equity method. Under the equity
method the company records its pro rata share of income or loss of
the investee as part of the investors net income with a corresponding
adjustment to the carrying value of the investment. Dividends
received from the investee are also recorded as an adjustment to the
carrying value of investment.
DUE FROM OFFICER
Due from officer consists of short-term advances due on demand. The
amount due from officer bears no interest and contains no formal
repayment terms.
INVENTORY
Inventory is stated at the lower of cost or market using the
first-in, first-out method.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost, less accumulated
depreciation computed using the straight line method over the
estimated useful lives as follows:
Leasehold Improvements 5 Years
Computer Equipment 5 - 7 Years
Office Furniture 5 - 7 Years
Maintenance and repairs are charged to expense. The cost of the
assets retired or otherwise disposed of and the related accumulated
depreciation are removed from the accounts.
TRADEMARKS
Trademarks are carried at cost and are amortized using the
straight-line method over the estimated useful lives of 10 years from
the date the company acquired the trademark.
GOODWILL
Goodwill results from the excess of the fair market value of assets
acquired over the purchase price. Goodwill is carried at cost and is
amortized using the straight line method over 5 years.
WEBSITE AND DOMAIN NAME
The company has made expenditures in designing and developing a
website. The company will amortize the cost of website development as
a charge to operations when it becomes operational.
- continued -
F-7
<PAGE> 22
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC.
& SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
NET INCOME PER COMMON SHARE
Net income (loss) per common share is computed in accordance with
SFAS No. 128, "Earnings Per Share." Basic Earnings Per Share is
calculated by dividing income available to common stockholders by the
weighted average number of common shares outstanding for each period.
Diluted Earnings per share is the same as Basic Earnings Per Share
since there are no outstanding warrants, options, or convertible
securities, for periods ending June 30, 2000, 1999 or 1998.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes," using the asset and liability
approach, which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of such
assets and liabilities. This method utilizes enacted statutory tax
rates in effect for the year in which the temporary differences are
expected to reverse and gives immediate effect to changes in income
tax rates upon enactment. Deferred tax assets are recognized, net of
any valuation allowance, for temporary differences and net operating
loss and tax credit carryforwards. Deferred income tax expense
represents the change in net deferred assets and liability balances.
The Corporation had no material deferred tax assets or liabilities
for the periods presented.
PROVISION FOR INCOME TAXES
Deferred income taxes result from temporary differences between the
basis of assets and liabilities recognized for differences between
the financial statement and tax basis thereon, and for the expected
future tax benefits to be derived from net operating losses and tax
credit carryforwards. A valuation allowance is recorded to reflect
the likelihood of realization of deferred tax assets.
NOTE C - BUSINESS SEGMENTS
The Company operates in two principal business segments. Through its
wholly owned subsidiary Seen on TV, Inc., the Company delivers
products directly to the consumer via its internet website. (Segment
I) The Company is also engaged in website hosting and development.
(Segment II)
Information on the Company's current business segments was as
follows:
<TABLE>
<CAPTION>
==================================================================================================================
Years Ended June 30,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SEGMENT I
Sales $ 268,341 $ 94,025 $--
Cost of Sales 122,290 24,175 --
------------------------------------------------------------------------------------------------------------------
Gross Profit $ 146,051 $ 69,850 $--
Expenses 96,498 36,903 --
------------------------------------------------------------------------------------------------------------------
Net Income $ 49,553 $ 32,947 $--
------------------------------------------------------------------------------------------------------------------
Total Assets $ 71,716 $ 27,907 $--
==================================================================================================================
</TABLE>
- continued -
F-8
<PAGE> 23
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC.
& SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE C - BUSINESS SEGMENTS - CONTINUED
<TABLE>
<CAPTION>
==================================================================================================================
Years Ended June 30,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SEGMENT II
Sales $ 298,818 $ 58,673 $--
Cost of Sales -- -- --
------------------------------------------------------------------------------------------------------------------
Gross Profit $ 298,818 $ 58,673 $--
Expenses 277,380 143,904 --
------------------------------------------------------------------------------------------------------------------
Net Income(Loss) $ 21,438 $ (85,231) $--
------------------------------------------------------------------------------------------------------------------
Total Assets $ 5,483,379 $ 150,659 $--
==================================================================================================================
</TABLE>
RECONCILIATION OF SEGMENT INFORMATION TO CONSOLIDATED AMOUNTS
Information for the company's reportable segments relates to the
company's consolidated totals as follows:
<TABLE>
<CAPTION>
==================================================================================================================
Years Ended June 30,
2000 1999 1998
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Total Revenues for Reportable Segments $ 567,159 $ 152,698 $--
Other Revenues 4,796 6,352 --
Elimination of Intercompany Revenues (30,000) (30,000) --
------------------------------------------------------------------------------------------------------------------
Total Consolidated Revenues $ 541,955 $ 129,050 $--
==================================================================================================================
PROFIT OR LOSS
Total Profit or Loss for Reportable Segments $ 70,991 $ (82,284) $--
Other Profit or Loss (19,890) 4,299 --
General Corporate Expenses (14,950) (16,500) --
------------------------------------------------------------------------------------------------------------------
Total Consolidated Net Income $ 36,151 $ (94,485) $--
==================================================================================================================
ASSETS
Total Assets for Reportable Segments $ 5,555,095 $ 178,566 $--
Elimination of Intersegment Receivables (97,584) (92,556) --
Assets Not Attributable to Segments 70,086 59,408 --
------------------------------------------------------------------------------------------------------------------
Total Consolidated Assets $ 5,527,597 $ 145,418 $--
==================================================================================================================
</TABLE>
F-9
<PAGE> 24
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC.
& SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consisted of the
following:
<TABLE>
<CAPTION>
================================================================================================================
June 30, 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Warehouse Equipment $ 6,000 $ --
Office Furniture 7,346 --
Computer Equipment 16,262 4,013
Leasehold Improvements 4,875 --
----------------------------------------------------------------------------------------------------------------
$ 34,483 $ 4,013
Less: Accumulated Depreciation 1,143 143
----------------------------------------------------------------------------------------------------------------
Net Property and Equipment $ 33,340 $ 3,870
================================================================================================================
</TABLE>
Depreciation expense for the years ended June 30, 2000 and 1999 was
$1,000 and $143, respectively.
NOTE E - INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
=================================================================================================================
June 30, 2000 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Website Development and Domain Name $ 5,027,571 $ --
Goodwill 95,145 95,145
Trademarks 15,382 15,382
Other 3,575 3,275
-----------------------------------------------------------------------------------------------------------------
$ 5,141,673 $ 113,802
Less: Accumulated Amortization 68,634 18,391
-----------------------------------------------------------------------------------------------------------------
Net Intangible Assets $ 5,073,039 $ 95,411
=================================================================================================================
</TABLE>
Amortization expense for the years ended June 30, 2000 and 1999 was
$21,282 and $21,242, respectively.
NOTE F - CONTINGENCIES
The company has been named a defendant in a lawsuit. While the
company may prevail, it is possible that the company may be liable
for the amount of the claim. The company believes that in the event
the outcome is unfavorable, the amount can be settled for
approximately $16,500. Accordingly, this amount has been recorded in
the accompanying financial statements.
The Company has been named a defendant in a suit brought by a vendor
against the predecessor company for services rendered. The suit
requests indemnification for the debt in the amount of $24,375. The
loss has been recorded for in the accompanying financial statement,
however, management has indicated its plans to vigorously contest the
suit and believes that the loss, if any, will not have a material
impact on the company's financial position, results of operations, or
cash flows in future years.
F-10
<PAGE> 25
ONTV, INC. AND SUBSIDIARIES
(FORMERLY LA GROUP, INC.
& SUBSIDIARIES)
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE G - NOTES PAYABLE
In January, 2000, the Company entered into an agreement with an
unrelated entity to acquire the domain name "As Seen on TV.Com" for
$5 million. The consideration includes cash of $25,000 and a
non-interest bearing promissory note of $4,975,000. The note is
collateralized by 2.1 million shares of company stock which are not
issued as of the date of the report, and the domain name. The terms
of the note require a payment of $150,000 due on July 18, 2000 with
the balance of the note due on April 18, 2001. The debt is non
recourse and should the company default on the note terms, the domain
name would revert back to the seller, and the company would forfeit
the stock given as collateral. The balance of the note at June 30,
2000 was $4,975,000. The original payment of $150,000 due on July 18,
2000 has been extended by the lender until September 1, 2000.
In June 2000 ONTV, Inc. entered into a loan agreement with an
unrelated entity in the amount of $250,000. This note is for working
capital and is secured by a promissory note and 1,500,000 shares of
common stock. These shares are issued and are being held in trust by
the corporation at June 30, 2000. All rights associated with these
shares remain with ONTV, Inc. The note is due December 13, 2000 with
10% interest included.
NOTE H - LEASES
The corporation has entered into a 2 year lease beginning June, 2000
from an unrelated entity. The lease requires monthly payments of
$2,279/month for the first year increasing to $2,347 per month for
year two. Tenant agrees to pay for all taxes, maintenance and a
portion of common area fees. Future minimum lease payments for the
five years succeeding June 30, 2000 are as follows:
2001 2002 2003 2004 2005
---------------------------------------------------------------
$ 27,416 $ 25,817 $ -- $ -- $ --
===============================================================
NOTE I - LINE OF CREDIT
The corporation has a line of credit with Key Bank, NA for $10,000
with interest at the prime rate plus 3 percent. The balance was $-0-
at June 30, 2000 and 1999, respectively.
F-11
