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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 23, 1999.
STAN LEE MEDIA, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-28530 84-1341980
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
15821 Ventura Boulevard, Suite 675, Encino, California 91436
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 461-1757
Not Applicable
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Form 8-K/A amends the Form 8-K filed with the Securities and
Exchange Commission on August 3, 1999 (the "Prior Form 8-K"), by the Registrant
in connection with the Reorganization and Stock Purchase Agreement dated as of
June 25, 1999 (the "Reorganization Agreement"), pursuant to which control of the
Registrant changed to the former shareholders of Stan Lee Media, Inc., a
Delaware corporation ("SLM Delaware"), SLM Delaware became a wholly owned
subsidiary of the Registrant, the Registrant succeeded to the business
operations of SLM Delaware, and the Registrant's corporate name was changed to
Stan Lee Media, Inc., a Colorado corporation. This Form 8-K/A amends the Prior
Form 8-K by setting forth the following narrative information describing the
current business operations of the Registrant and setting forth the financial
information required to be reported on Form 8-K by Item 7 of Form 8-K.
THIS REPORT ON FORM 8-K/A INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL
FACTS INCLUDED IN THIS REPORT, INCLUDING WITHOUT LIMITATION, THOSE REGARDING THE
COMPANY'S FINANCIAL POSITION, BUSINESS, MARKETING AND PRODUCT INTRODUCTION AND
DEVELOPMENT PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO
ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S
EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS REPORT. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY OR PERSONS ACTING ON BEHALF OF THE COMPANY, ARE EXPRESSLY QUALIFIED IN
THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
DESCRIPTION OF ACQUIRED BUSINESS
BUSINESS
Stan Lee Media, Inc. (www.stanleemedia.com and www.stanlee.net) is a
newly established, Internet-based, multimedia company founded by comic book icon
Stan Lee to produce original branded characters and content for exploitation in
all media. Built on Stan Lee's signature style, we will add a new global
community of 6 to 20 year olds to the three generations of fans in 100 countries
and 25 languages already attracted by Stan Lee during his 50-year career as
founder and creative head of Marvel Comics. Stan Lee's singular co-creations
include Spider-Man, The Incredible Hulk, X-Men, The Fantastic Four, Iron Man,
Daredevil, Silver Surfer and Dr. Strange, resulting in the publication of more
than 2 billion comic books. Our highly innovative Internet site will pioneer
online publishing and animation, immersing its global community in a
content-rich environment designed to stimulate interaction, as well as
entertain, market, and generate robust e-commerce and sponsor support. In
particular, we are pioneering the use of flash animation for original episodic
branded content to help define the Internet as a viable new medium for original
entertainment. The animation technology we have selected is the most widely
distributed (currently available to an installed global base of 140 million
Internet users), enabling the timely delivery of a quality entertainment
experience, comparable to television and feature films, to users with
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modem connections of 28.8K and above. We have assembled a core management and
creative team from Fortune 500 entertainment, publishing and distribution
companies to define, develop and build our business. The Internet and creative
content driven opportunities will be fully exploited by the management cadre
that represents an enormous depth of experience in creation of multimedia
intellectual properties and franchises, Internet and direct marketing, global
marketing, branding, retail and distribution. Our non-core functions will be
out-sourced to eliminate costly infrastructure, while aligning with marketing
and audience delivering partners that ensure global dominance in our markets.
We will be a leading online destination for content, community and
commerce focusing on the comic book genre. With respect to content, our primary
assets consist of all the intellectual property currently owned by Stan Lee,
along with rights to all intellectual property that will hereafter be created by
Stan Lee. As a result of an unprecedented lifetime contract executed by Stan Lee
with Marvel Enterprises in November, 1998, Mr. Lee was given all right and title
to his name, likeness, signature and "brand," along with clear title to "Stan
Lee Presents," "Excelsior!" and "Stan's Soapbox," all slogans and trademarks
developed for Marvel by Stan Lee during his career as creative head of Marvel.
Stan Lee has assigned all of the aforesaid rights, along with all future rights
to any newly created properties, to the Company as part of a lifetime employment
agreement with the Company. Beginning in the 4th quarter of 1999, we will launch
online distribution of The 7th Portal, Stan Lee's first team of Super Heroes for
the 21st Century. These franchises, including 14 new Super Heroes and Super
Villains, will be distributed as biweekly, dramatic, Super Hero style animated
"webisodes" of 4 to 6 minutes in duration. In addition, fans can visit the
stanlee.net website to read a regularly updated Stanzine with games, goofs and
features from Stan and his staff, and we will create and publish online a
variety of franchise characters and stories for niche markets targeting the
largest audiences in the global pop culture.
Our advantages compared to Internet competition include the unencumbered
use of the genre "category killer" evidenced by Stan Lee's global brand, the
advertising and publicity benefits associated therewith (the trade-off value of
Spider-Man, The Incredible Hulk, X-Men, The Fantastic Four), the unsurpassed
talents of Stan Lee in character creation and story development, the
"first-to-market" advantage of developing high quality, episodic dramatic
animation on the Internet, and the most experienced interdisciplinary team of
Internet and digital producers and technical creative personnel joined with
comic book and animation artists to be assembled in an online studio. Further,
because of our founder's global reputation with three generations of fans, many
of whom are creative leaders in their respective disciplines, we will have
unique access to and association with many of the world's top creative talents.
These attributes will provide exponential resource strength and growth through
association of the "best of breed" strategic partners providing financial,
production, marketing and distribution capabilities utilizing all venues of
media and product dissemination. In short, our founder now personifies the genre
at large, and we believe our Company has the ability and resources to
consolidate his brand recognition in more than 100 countries around the world to
firmly establish a lifestyle brand for "tweens" between ages 6 to 20, supported
and serviced by content delivered in all media and through all methods of
distribution.
After launching, branding and community building new entertainment
franchises, they will be ported to synergistic offline media for broader
distribution, licensing and merchandising. Our business model recognizes the
strength of the Internet as an instantaneous and cost efficient global
communication medium to launch new branded content while generating significant
revenue streams from traditional media and merchandising exploitation of branded
intellectual property. In furtherance of these objectives, we anticipate joining
forces with strategic partners to sensitize such franchises to local customs and
usage extant in various regions around the globe and to harness the resources of
such multinational companies
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dominant in their respective fields. In connection with such community efforts,
we have entered into an agreement with Warner Bros. Online's "Acme City" to host
and support our website community.
With respect to commerce, we entered into an agreement in December 1998
with Organic Online, Inc. for the development of our e-commerce functionalities.
Organic developed the commerce engines running, among others, the
barnesandnoble.com and gap.com websites. In March 1999, we entered into an
agreement with Next Planet Over for online e-commerce and distribution of retail
comic books and comic related collectibles, and more recently entered into an
agreement with WhatsHotNow.com to build our official online storefront.
Industry Background
The Internet is a significant medium for communication and commerce, enabling
millions of people to share information and conduct business electronically.
International Data Corporation estimates the following:
- 142 million users worldwide accessed the Internet at the end of
1998, and this number is expected to increase to approximately
502 million users by the end of 2002; and
- worldwide business-to-consumer sales over the Internet will
increase from approximately $15 billion in 1998 to approximately
$115 billion by 2002.
While the Internet provides the ability to display
professionally-created content, it can also be used to create forums where
Internet users with similar interests and concerns can interact with each other.
Often the most relevant information to Internet users is generated by other
users. However, most websites do not provide a forum for users to interact in a
community environment and to access content created by others. As a result, we
believe that there is a significant unfulfilled demand for these online
communities, especially in connection with the comic book genre.
The stanleemedia.com and stanlee.net Strategy
Our objective is to become the leading Internet destination for content,
community and commerce relating to the comic book genre. We intend to develop
consumer loyalty, attract new users/customers, and promote commerce by
implementing the following strategies;
Continue to Build Our Brand. Stan Lee is a leader and a visionary in the
world of Super Hero characters. Millions of young people have transited
adolescence to adulthood using his almost mythic - but also very human -
characters as role models and moral compasses. His influence goes beyond that of
mere comics - before "community" became a buzz word associated with the
Internet, Lee's creations were a common touchstone in the lives of boys all over
the world. Though separated by geography and language barriers, Lee's fans are
bound together by their affinity for his powerful storytelling style and
creative genius in making the Super Heroes come to life.
Continue to Build Premier Content and Community. We will initially focus
on creating new proprietary Super Hero characters along with related content
developed specifically for the Internet with subsequent distribution through
traditional merchandising. Leveraging the global medium of the Internet to brand
new Super Heroes and Super Villains, we will subsequently partner with leading
companies to extend these brands offline -- through location based
entertainment, 3-D animated features, television, film, comics and merchandise.
This method will be applied to other niche audiences as well.
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The Company's initial project is the launch of Stan Lee's first team of
Super Heroes for the 21st century -- The 7th Portal. Scheduled for a media blitz
in the 4th quarter of 1999, a team of 14 original Super Heroes and Super
Villains will be the first global team ever created. Because of the
technological advances offered by the World Wide Web, the bonds between super
hero enthusiasts and Super Hero characters will become even stronger. The term
"connectivity" will have new meaning: "http://www.stanlee.net" will be their
central meeting place - an online home where they can immediately interact with
each other, and with Stan Lee himself. The Internet will revolutionize the way
that The 7th Portal characters are introduced and presented - as fully realized
animated figures with a comic book edge.
Continue to Develop Strategic Relationships to Further Revenue
Opportunities. We have established strategic alliances with leading companies
engaging in Internet e-commerce and community building, website development,
computer graphics and animation to achieve the mission of the company. Under
Stan Lee's active stewardship, the Company has assembled an award winning group
of creative talent from the comic book, television, online, feature film and
animation industries. In addition to the creation of world class content and
intellectual property, this team will focus on institutionalizing Stan Lee's
signature style and developing a global life style brand.
Utilize Technology to Improve the Experience. We have implemented a wide
range of secure, scalable services and systems for the stanleemedia.com and
stanlee.net websites. These services and systems include: website management,
advanced searching tools, transaction processing, community message boards,
payment services and a variety of marketing applications. We have developed
proprietary technologies to augment those that we have licensed from vendors,
such as Macromedia, Microsoft and IBM. Our software platform and architecture
are integrated with relational database servers. The employment of multiple web
servers, application servers and database servers, allows our systems to be
resilient and redundant. Our systems utilize communication infrastructure from
multiple providers and provide 24 hour monitoring and engineering support.
Strategic Alliances
Prior to September, 1999, we have concluded negotiations which formed
strategic alliances with Organic Online, Inc. for the development of the
website, Next Planet Over for online e-commerce and distribution of retail comic
books and comic related collectibles, WhatsHotNow.com to build our official
online store front and PentaFour Media for low-cost computer animation services
and co-production. In addition, we have joined forces with Warner Bros. Online's
"Acme City" to host and support the web site community, IBM to provide the
creative team with cutting-edge technology, eCommercial for direct marketing
campaigns via the Internet and Ad Smart Corporation for ad sales and marketing
services. Other significant commitments in 1999 are the launch of the
"stanlee.net" Internet portal with e-commerce, online gaming and online
distribution of The 7th Portal in the 4th quarter of 1999.
Intellectual Property
We rely on a combination of copyright, trademark and trade secret laws
and our contractual obligations with employees and third parties to protect our
proprietary rights. Protection of our intellectual property is limited. Despite
our efforts to protect our proprietary rights, it may be possible for a third
party to copy or obtain and use our intellectual property without our
authorization. In addition, other parties may breach confidentiality agreements
or other protective contracts we have entered into, and we may not be able to
enforce our rights in the event of these breaches.
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We have entered into confidentiality and invention assignment agreements
with our employees and consultants, and nondisclosure agreements with our
vendors and strategic partners to limit access to and disclosure of our
proprietary information. We cannot be certain that these contractual
arrangements or the other steps taken by us to protect our intellectual property
will prevent misappropriation of our technology. We have licensed in the past,
and expect that we will license in the future, some of our proprietary rights,
such as trademarks or copyrighted material, to third parties. While we attempt
to ensure that the quality of the stanlee products and brand is maintained by
these licensees, we cannot assure that these licensees will not take actions
that might hurt the value of our proprietary rights and reputation.
We are in the process of filing trademark and/or service mark
applications for the 14 Super Heroes and Super Villains of The 7th Portal in the
United States. Any claims or customer confusion related to such marks, or our
failure to obtain trademark registration, might negatively affect our business.
Employees
As of September 3, 1999, we had 25 full-time employees, 13 of whom were
in content creation and production, and product development, 3 of whom were in
marketing and sales, and 9 of whom were in general and administrative. None of
our employees is represented by a labor union. We have not experienced any work
stoppages and consider our employee relations to be good.
Facilities
Our principal executive offices are located in Encino, California, where
we lease approximately 6,000 square feet under a lease that expires in 2002.
Liquidity and Capital Resources
We have historically funded our working capital requirements from a
combination of cash provided by securities sales through private placements and
loans provided by certain stockholders. Net cash provided by financing
activities was $1,138,100 during the May to August 1999 period consisting of the
issuance of 346,029 shares of Common Stock (and warrants, expiring in April
2002, to purchase an additional 246,029 shares of Common Stock at an exercise
price of $5.00 per share). In addition, certain stockholders of the Company have
lent the Company $40,000 during the past year, $10,000 of which remains
outstanding as of the date hereof.
In July 1999, we established credit facilities with two stockholders to
finance the continued expansion of our operations. Each credit facility consists
of a commitment to lend up to USD$1,000,000 pursuant to a revolving line of
credit, with interest at LIBOR as published in The Wall Street Journal as of the
date of borrowing plus two percent (2%) per annum, computed over a 360-day year.
Each commitment expires on July 31, 2000. As of this date, no borrowings have
been made under such credit facilities.
Although we have no material commitments for capital expenditures, we
anticipate a substantial increase in our capital expenditures and lease
commitments consistent with anticipated growth in operations, infrastructure and
personnel. We believe that the credit facilities and the projected cash flow
from operations will be sufficient to finance the Company's working capital
requirements for the next six months. We may need to raise additional funds
prior to the expiration of such period. If we raise additional funds through the
issuance of equity or debt securities, such securities may have rights,
preferences or privileges senior to those of the rights of our Common Stock and
our stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.
MANAGEMENT
Our executive officers and directors, and the positions held by them, as
of September 10, 1999, are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Stan Lee Chairman and Chief Creative Officer
Devendra Mishra President, Chief Executive Officer
and Director
Gill Champion Chief Operating Officer and Director
Stephen M. Gordon Executive Vice President, Operations
Robert M. Schultz Vice President, Finance
Andrea L. Freitag Secretary and Director
</TABLE>
- ----------
Stan Lee, Founder, Chairman of the Board of Directors and Chief Creative
Officer. Known to millions as the man whose Super Heroes propelled Marvel to its
preeminent position in the comic book industry, Stan Lee's singular co-creations
include Spider-Man, The Incredible Hulk, X-Men, The Fantastic Four, Iron Man,
Daredevil, Silver Surfer and Dr. Strange. Now the Chairman Emeritus of Marvel
Media and a member of the Editorial Board of Marvel Comics, Lee first became
publisher of Marvel Comics in 1972. In 1977, he introduced Spider-Man as a
syndicated newspaper strip which became the most
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successful of all syndicated adventure strips and now appears in more than 500
newspapers worldwide -- making it the longest-running of all Super Hero strips.
In 1981 Stan Lee, as the creative head of Marvel's new cinematic venture,
transformed his Spider-Man and Hulk creations into Saturday morning television
cartoons. When Marvel Comics and Marvel Productions were acquired by New World
Entertainment in 1986, Stan's horizons expanded even further, giving him the
opportunity to become more deeply involved in the creation and development of
live-action projects for both the big and small screen. He supervised such
diverse animated series as The X-Men, Spider-Man and The Hulk. To date, Stan's
characters have populated over 24 separate television series, all of which
continue in syndication around the world. The 1998 hit movie Blade, based on a
Marvel character, has inspired an upcoming sequel and plans are underway to spin
The X-Men and Spider-Man into full-length feature films. Many of Lee's classic
animated series are also available on video, released globally by Twentieth
Century Fox Home Entertainment. The saturation factor is high -- the X-Men
series has a 90 percent recognition factor among the 30 million American
children between the ages of 6 and 14. But Lee's admirers are not limited to the
younger generation -- his avowed fans include Presidents (Ronald Reagan once
said he started every day reading Spider-Man comics and George Bush praised Lee
for encouraging and assisting "millions of young people to broaden their own
imaginations") and media titans (Steven Spielberg once explained that "Stan and
I do the same thing. Only my pictures move.") and even his competitors ("Most of
my generation of writers learned our craft from or through Stan Lee. He's an
incredible part of the business," said Paul Levitz, publisher of DC Comics).
Devendra Mishra, President, Chief Executive Officer and Director.
Devendra Mishra is a 20-year veteran of the worldwide entertainment,
distribution and multimedia industries and has served multiple Fortune 500
companies as a senior executive. From 1994 to 1996, Mishra was President and
Chief Executive Officer of Multifoods, a billion dollar, independently-owned,
specialty distribution subsidiary of VSA, Inc., after having served as the
President of Worldwide New Media, Distribution Services and New Ventures at
Technicolor, Inc. He launched Technicolor Entertainment Services, a
state-of-the-art, physical distribution business to supply movie prints to
theaters in the United States. He also engineered and put into production an
"Optical Media Manufacturing Facility." From 1986 to 1992, Mishra held senior
management positions at LIVE Entertainment -- a diversified supplier, wholesaler
and retailer of home video, music and personal computer software -- and
eventually served as its President and Chief Operating Officer. During his
tenure at LIVE Entertainment, revenues grew from $32 million to over $600
million. At LIVE Entertainment, Mishra operationally launched the Teenage Mutant
Ninja Turtles home video and demonstrated his retail management capability by
rapidly growing Strawberries Records and Tapes in the Northeast. During this
time, Mishra also served as the Managing Director of VCL-Carolco, a leading home
video company in Germany that he helped acquire in 1989. Prior to 1986, Mishra
was Vice President of the $900 million worldwide manufacturing and distribution
operations of RCA-Ariola Records. Mishra holds a Master's degree in business
administration from Butler University, a Master's degree in operations research
from Purdue University and a Bachelor of Science degree in mechanical
engineering from the Indian Institute of Technology.
Gill Champion, Chief Operating Officer and Director. Gill Champion
brings 20 years of executive experience in global entertainment, marketing,
retail and licensing industries to his role at the Company. Prior to joining the
Company, he was Chief Financial Officer and Vice President of Mirage Holdings,
Inc., a company that went public in 1998. There, he originated the concept,
design and application for Virtual Mart and Showroom, an apparel, home
furnishings and accessories Internet site, and orchestrated Mirage Holding
Inc.'s acquisition of NetSol International, a fully integrated IT company in
Southeast Asia. Concurrently, Gill worked as a production executive on the
motion picture Jinnah. From 1990 to 1997, Champion was Chief Executive Officer
of American CinemaStores, Inc., a private company that went
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public in 1994, trading on the NASDAQ SmallCap Market. He was elected Chairman
in 1994 and opened 42 mini-stores in shopping malls and over a hundred kiosks in
entertainment venues with licensed-related apparel and merchandise. Establishing
the American Cinema Industries licensing division, he created original apparel
designs and marketing strategies for the official lines of Baywatch, the CBS
cartoon Hyperman, the film Miracle on 34th Street and the initial Forrest Gump
apparel license. On a global scale, he was responsible for both domestic and
international sales strategies and distribution, for licensed entertainment
products. From 1985 to 1989, Champion was Vice President of Real Treasures,
Inc., in Dallas, TX, a company that licensed technology pivotal in the
production process of television commercials and movie production. From 1981 to
1984, Champion was Vice President of Gaylord Broadcasting in charge of New
Projects and oversaw 15 episodes of Faerie Tale Theatre in association with
Shelly Duval and Showtime, as well as feature films and television, some made
for Spanish TV. At Producer Circle Co. he was Vice President of Production from
1976 to 1981. The Company's Broadway shows included Norman Conquest, Sweeney
Todd, On the Twentieth Century, Crimes of the Heart and the original Broadway
production of Chicago. Additional film credits include Boys from Brazil,
starring Laurence Olivier and Gregory Peck; The Shining, directed by Stanley
Kubrick and starring Jack Nicholson; and Fort Apache, the Bronx, starring Paul
Newman.
Stephen M. Gordon, Executive Vice President, Operations. Stephen Gordon
has 27 years of experience in corporate management and finance. In 1972, he
co-formed Gordon & Associates, Inc., a market maker of precious metals, coins,
bars and other related materials. He became President and CEO in 1981 and sold
the company in 1986. He then became a consultant to American Coin Company, where
he innovated a marketing strategy and dealer network to distribute the U.S.
Mint's new American Eagle Gold Coin series. From 1988 to 1992, he was a
financial workout consultant to various small-to-medium sized companies. In
1992, he was one of the founders of Gourmet Group Ltd., a nationwide network of
sales representatives, who distributed Hershey's sports line of chocolates and
Le Cordon Bleu, a French gift line of gourmet food products. He later founded
Trumpets Gourmet Teas. Gordon attended California State University at Northridge
as a business and marketing major.
Robert M. Schultz, Vice President, Finance. Before joining the Company
in July, 1999 and for the prior period beginning January 1, 1997, Robert Schultz
was Managing Director of Goldmark Advisers, Inc., an investment banking and
corporate development firm located in Los Angeles, California. Prior to
Goldmark, from 1995 through 1998, he was Vice President Corporate Finance and
Managing Director of the Capital Markets Division of J.B. Oxford & Co., a
registered broker-dealer with national and international offices. From 1993 to
1995, Schultz was the Chief Financial Officer at Portfolio Capital Corporation,
a financial services company specializing in the health care industry. From 1983
to 1993 he was the Treasurer at Monex Corporation, a holding company with
subsidiaries and affiliates involved in the wholesale and retail sales of
commodities. Schultz's experience prior to 1983 includes his acting as Vice
President and Treasurer of Gateway Sporting Goods Company, an AMEX-listed
company, and Director of Taxation for National Patent Development Corporation, a
multinational AMEX listed Company. Schultz is a CPA who began his career at KPMG
Peat Marwick and is a graduate of Pace University.
Andrea L. Freitag, Secretary and Director. Prior to joining the
Company's predecessor, Stan Lee Entertainment, Inc., in October 1998, Andrea
Freitag was the founder and President TLS Media Inc., a multi-media publishing
and distribution company, and President of Global Language Solutions Inc., a
leader in language acquisition and training products. Freitag has a post
graduate legal education.
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Other Management Personnel
Jennifer Kahn, Manager of Strategic Affairs. Jennifer Kahn joins the
Company coming from Telepictures Productions, where she served as Creative
Affairs Coordinator for the daily television show Extra. At Extra, she was
responsible for all talent related projects, including initial submission
screenings, on-camera screen tests and conducting nationwide search for weekend
anchor. In addition, she coordinated all Emmy matters, from choosing and editing
submissions, to providing story coverage and designing consideration ads; she
also coordinated all monthly focus groups and telefocus studies. In addition,
Jennifer served as Production Manager for Telepictures on the one-hour
television special, Seventeen: The Faces for Fall. Prior to Extra, Kahn was
recruited out of an administrative capacity at Saban Entertainment to be the
first Contract Administrator on day one for the new DreamWorks Television
Animation. At DreamWorks, Kahn negotiated and drafted employment agreements for
a division that grew from 10 to 150 people in six months. She also created and
implemented systems for tracking and filing option dates. Kahnr earned her
Bachelor of Science degree in Business Administration and Management from
California State University, Northridge.
Patty Smith, Project Coordinator/Production Manager. Smith comes to the
Company after spending the last 17 years at The Walt Disney Company in various
production coordination capacities, most recently at Walt Disney Imagineering in
the Virtual Reality Studio where she coordinated the many Virtual 3D projects
for Disney Quest as well as pre-visualization of attractions under construction
and other leading edge technology projects. Prior thereto, Smith worked as a
Production Coordinator for the Feature Animation division in California and for
Walt Disney World in Florida as a Production Coordinator and an Environmental
Coordinator.
CREATIVE PERSONNEL
Mark Lasoff, Executive Vice President. Mark Lasoff has been a pioneer in
the use of computer graphics and digital effects in motion pictures. In 1998, he
won the Academy Award for Best Visual Effects as the Digital Effects Supervisor
on James Cameron's Titanic. In addition, he's worked with many other top
Hollywood directors, including Ron Howard, Neil Jordan, Wolfgang Petersen and
Paul Verhoeven. Lasoff also has completed extensive visual effects production
work for a broad spectrum of other projects, including theme park attractions,
national television commercials, traditional animation and television broadcast
openings -- most notably for the 1992 Summer Olympics on NBC, for which he
received an Emmy Award. He also participated in Disney's Dinosaur, an all
computer generated feature film to be released May, 2000. Lasoff began his
entertainment career at MetroLight Studios, where he served many roles; among
them, he was software designer for the Academy Award-winning Total Recall. He
was the founding Director of Production for MetroLight's subsidiary, MetroCel
Studios, the company's digital ink and paint subsidiary. He served as the first
Computer Graphics Supervisor for Sony Pictures ImageWorks. As the senior Digital
Effects Supervisor at Digital Domain, Lasoff helped grow the department from a
handful of artists to several hundred, and helped the studio win numerous
awards, including two Oscars.
Jamie Wilkinson, Executive Vice President. Jamie Wilkinson serves as the
Company's Senior Producer and Director of New Technology and manages the
12-member website content story group. Prior to joining the Company in March
1999, Wilkinson had been innovating website production at Disney Online for
three years. As producer, he was responsible for research and development of
Squeak applications and for new content areas which included Stories and Studio
Blast. As Associate Producer/
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Director of New Technology, Wilkinson managed the 15-member Disney Blast Story
group, including research and development, overall design, financial control,
and all other product responsibilities. He also handled the corporate license
acquisition of Cartoon Maker software and produced multi-user interactive
content, as well as Squeak OS development with Alan Kay. Prior thereto, at NBC
Interactive in New York, Wilkinson was the Graphic Designer who designed,
developed and maintained an internal graphics network for NBC/Microsoft. He was
responsible for the development and initial launch of NBC on Microsoft Network,
NBC.com, TNBC.com, MSNBC.com, SUPERBOWL.com, Olympics.com, NBA.com and Live
Playoff Broadcast. He also worked with the Broadcast Group to develop telefusion
content. Wilkinson's freelance credits include photography and computer imaging
for Franklin Spier Inc., Comedy Central and Grey Advertising. Wilkinson's work
has earned him three "Webbies."
Dana Moreshead, Vice President, Creative Services and Brand Management.
Dana Moreshead joined the Company in February 1999 after an 8-1/2 year tenure at
Marvel Entertainment. At Marvel, Moreshead co-founded its East Coast and West
Coast Creative Services departments which oversaw Advertising, Promotions,
Licensed Product Development and Special Projects. On the licensing end,
Moreshead developed style guides for Marvel's worldwide licensing group,
including; X-Men, Spider-Man, The Incredible Hulk, Iron Man, the Fantastic Four
and Blade. He oversaw the development and production of Marvel's 300 global
licensees. In addition, he unified and trained Marvel's International Creative
groups in brand management and creative development. Dana also oversaw the
development of Marvel's most successful promotional campaigns including: Pizza
Hut, Hi-C, Hanes, McDonalds, Sega, Capcom, Hardees, Target and Wal-Mart. Also of
particular note is Moreshead's work on the $100 million dollar Marvel's Theme
Park (a venture with Universal Studios). Prior to his appointment at Marvel,
Dana was a partner in an alliance that developed corporate identity programs for
several major companies.
Taylor Grant, Executive Editor. Taylor Grant has successfully written in
a variety of genres and formats, creating everything from children's programming
to big-screen thrillers. A Contributing Editor/Writer for National Lampoon
Magazine, he developed the Fox Family animated series Monster Farm and is
currently writing for MTV's new animated series Head Trip. He also authored Last
Day, a supernatural thriller currently under development at Imagine
Entertainment. Grant was one of the writers who developed the highly-rated
children's series Mighty Morphin Power Rangers, and as a freelance Development
Consultant and Story Analyst, he worked for a diverse array of studios and
producers, including Miramax, Nucleus Entertainment, F.M. Rocks, Saban/Fox
Family, Triad Artists and Chanticleer Films. He has also written/developed over
25 music videos for artists like Whitney Houston, Rod Stewart, The Fugees, Sean
"Puffy" Combs and Brandy. Grant is a certified broadcaster and served as a
Military Journalist in the United States Navy.
Steve Gerber, Senior Editor. Steve Gerber is best-known as the creator
of Howard the Duck. He has written extensively in comics, animation and
television, and even has a computer book to his credit. Gerber's other comic
creations include Nevada (Vertigo Press), Sludge (Malibu Comics), Destroyer Duck
(Eclipse Comics and Image Comics), as well as Omega the Unknown, Void Indigo,
Foolkiller and Suburban Jersey Ninja She-Devils, all published by Marvel Comics.
Gerber also wrote and edited the first edition of Marvel's celebrated Kiss comic
book. Gerber co-created and story-edited the animated series Thunder the
Barbarian for Ruby-Spears Productions. He has also served as story editor and
writer on such series as G.I. Joe, Transformers, and Dungeons & Dragons. His
work on The Batman/Superman Adventures for Warner Bros. Animation earned him an
Emmy Award in 1998. In collaboration with Beth Slick, Gerber co-authored BBSs
for Dummies (IDG Press), a lighthearted manual on computer telecommunications,
and an episode of Star Trek: The Next Generation.
10
<PAGE> 11
Shawn McManus, Art Director. Shawn McManus has been illustrating comic
books at Marvel, DC Comics, Image and Dark Horse, among others, for more than 15
years. His pencil and ink credits at Marvel include Spider-Man, Daredevil, Ghost
Rider and Wolverine. At DC Comics, he co-created The Man Called A-X with Marv
Wolfman and did pencils and inks for Sandman, Swampthing, Batman, Omega Men and
Green Arrow. In addition to his traditional comic work, Shawn has worked in
animation, television and the theme park industry doing character design,
background design, storyboards, and production paintings on numerous projects at
Spectra FX, Marvel and DIC Entertainment. Shawn has also worked on a freelance
basis for HBO Animation, Byron Preiss Multimedia, Drive Entertainment and CBS
Television.
Aaron Sowd, Conceptual Designer. Aaron Sowd has worked in a variety of
different media, including film, television, animation, comics and advertising.
Sowd attended C.S.U. Chico for Computer Science but ultimately ended up pursuing
his lifelong dream of a career in art. As a senior illustrator at
Hamagami/Carroll and Associates of Santa Monica, he worked on several style
guides for Fox Animation, including Anastasia and Planet Ice (now called Titan
A.E.). He also worked on toy and packaging designs and freelanced for Landmark
Entertainment on their Saturday morning cartoon property Skeleton Warriors. Sowd
has spent eight years in the comic book industry, working for major publishers
including Marvel, DC Comics, and Image Comics. Among his credits are Batman:
Harley Quinn, The Flash, Star Trek/X-Men, Wolverine/Ballistic, Weapon Zero,
Alpha Flight and Uncanny X-Men.
Duncan Rouleau, Key Designer. Duncan Rouleau has been working in comic
book publishing for five years as a writer and artist. Among the titles that he
has contributed to are The X-Men and Spider-Man for Marvel, the Justice League
of America, The Flash and Spider-Man for DC Comics. His other credits are in
screenwriting; he has several projects in development with Universal, Paramount
and Twentieth Century Fox. Rouleau has worked in almost every aspect of the
filmmaking process, from storyboards to editing music videos. Among these are
Bram Stoker's Dracula and the critically acclaimed One False Move. He is also
presently launching his own title under the Image banner.
Zachary Foley, Lead Digital Artist. Zachary Foley uses the creative
power of computers to create images, movies, music and immersive experiences. A
digital jack-of-all-trades, Foley has worked in 2D and 3D media, traditional
art, digital animation, web publishing and print. He illustrated the book
Breakthought by Steve Finkel, and contributed to the 3D work for The Trout and
Neck Show on the Game Show Network. Foley's varied experience with different
media is helpful in bring the Stan Lee style to the Internet without losing its
distinctive look and feel. A long time believer in the Internet as an
entertainment media, Foley sees his work at the Company as the opportunity to
prove that Internet-native entertainment has arrived.
Russ Heath, Conceptual Designer. Russ Heath has done illustrations and
storyboards for live-action and animation commercials. Russ has also worked as
Assistant Director of the Art Department for Doyle Dane Bernbach and Dancer
Fitzgerald. In addition, Heath was a comic book artist for Marvel, DC, EC and
Warren Comics. For 2-1/2 years, Heath worked on the syndicated newspaper strip
The Lone Ranger. He was also one of the artists on Little Annie Fanny for
Playboy Magazine. At Hanna-Barbera, Filmation, Ralph Bakshi and Marvel
Productions, Heath served as layout and model artist.
Andrey Pavlovskiy, Senior Digital Artist. Andrey Pavlovskiy joins the
Company with many years expertise in graphic design. Most recently, he was an
artist/designer at Disney Online for Story Group working on interactive comics,
stories, games and computer animation. Prior to Disney, Andrey focused his
talents as a graphic illustrator for books, brochures and magazines. He received
his Masters of Fine
11
<PAGE> 12
Arts from The Moscow Academy of Fine Arts and a Bachelors Degree in Architecture
from Beltech University in Minsk. In addition, he received a certificate from
Platt College in Multimedia Studies.
Anthony Winn, Storyboard Artist. Anthony Winn has been working in the
comic book industry for eight years as an artist and creator, storyboard artist
and sequential artist. During this time, he has worked on several major comic
book titles including, X-Men, Wolverine, Cyberforce, Ripclaw and Star Wars. In
addition, Winn has provided storyboards for the Saturday Morning Kids' Show and
CBS Promotional Clip. In the feature film genre, he developed storyboards for
the horror film Freddy vs. Jason. In his spare time, Winn instructs comic book
layout classes for "The Associates in Arts."
Jason Thomas, Digital Artist. Jason Thomas comes to the Company straight
out of UCLA's School of Film and Television where he earned his Masters Degree
in Fine Arts. While at UCLA Jason worked as a teacher's aide in the department
of new media and visual effects. It was there that Jason perfected his knowledge
of Flash Animation, 3D Animation and Web Design.
TECHNICAL TEAM
Gary Manfredi, Director of Technology. Gary Manfredi comes with a strong
background in art and technology and has been creating interactive,
consumer-based entertainment for the CD-ROM and Online industry for several
years. At Disney Online from 1997 to 1999, Gary designed and engineered Disney
Blast applications specializing in creativity and learning tools. Activities
included product conception, design documentation, coordination and engineering.
In 1999, in conjunction with Walt Disney Imagineering Research and Development,
Manfredi was pioneering the application and development of the Squeak/Smalltalk
programming environment for Disney Online to be the future platform for advanced
multiplayer applications. Prior to Disney, Manfredi was Lead Engineer from 1996
to 1997 at Cloud 9 Interactive, creators of educational and entertainment titles
including The Marvel Super Heroes Creativity Center. In 1994, Manfredi
co-founded Big Top Productions to create and publish interactive CD-ROM titles
using licensed cartoon characters. He served as Senior Product Designer, Lead
Engineer and Director of Creative Synthesis. At Image Smith from 1993 to 1994,
Gary was key to creating the top selling Yearn 2 Learn PEANUTS CD-ROM featuring
the PEANUTS licensed cartoon characters.
David Medinnis, Chief Technical Officer. David Medinnis was part of the
management team that developed WhoWhere? Inc. into a $140 million company
acquired by Lycos. Medinnis was responsible for the technology development and
deployment of all internal computer networks: LAN/WAN and Intranet development,
multimedia, telephony infrastructure and the development and maintenance of the
WhoWhere? LAN. In 1996, Medinnis was the Information Systems & Technology
Manager/Web Services Program Manager for CommerceNet. The following year he was
promoted to Director of Applied Technology and assumed responsibility for all
technology management, development and deployment there. From 1994 to 1996,
Medinnis was Director of Information Services at Los Trancos, where he was
responsible for business operations and administration. Medinnis owned and
managed A Wrinkle in Time from 1992 to 1993, where his extensive
responsibilities ranged from sales data analysis, marketing, general retail and
operational management. Medinnis has published widely on topics relating to
information services.
Richard Yaker, Director of Web Services. Yaker received his BS degree in
Electrical Engineering from Columbia University in 1990, and has been promoting
the use of computers as a community-building tool ever since. While at Columbia,
Yaker saw the promise in the budding New York music scene made up
12
<PAGE> 13
of bands such as Blues Traveler and The Spin Doctors, and offered them exposure
to the Internet community via the USENET newsgroups. While working for Amdahl
Corp. in March 1994, Yaker was exposed to an experimental copy of Mosaic, the
first graphical web browser, and his vision of the future instantly
crystallized. In 1995, Yaker, as Chief Technology Officer, launched RockWeb
Interactive, one of the first three music collectives on the Internet, and
oversaw the early adoption of Real Networks 1.0 audio streaming technology,
becoming the first music site to license the ground shattering streaming media
product. Yaker also developed the first Frame based web chat, cited for mention
in several publications on web development and web browser technology. By May
1995 RockWeb had appeared in Internet World, Netguide and was named one of the
"Top 101 Websites In the World" by PC Computing Magazine. RockWeb's WebChat was
named the "Hippest Chat Community" by MSN in Spring 1997. Yaker joined Netscape
in December 1995 to form a Developer Relations Group and launch the DevEdge
Community Program, and acted as the senior technical advisor to DevEdge
high-profile clients, CNET, Hotwired, ABC, Disney, CNNfn and CBS Sportsline.
Employment and Consulting Agreements
The Company entered into a lifetime employment agreement with Stan Lee
in 1998 in consideration for the assignment and transfer of all of Mr. Lee's
right, title and interest in and to any and all ideas, names, titles,
characters, symbols, logos, designs, likenesses, visual representations,
artwork, stories, plots, scripts, episodes, literary property, and the
conceptual universe related thereto, including his name and likeness. Mr. Lee's
services for and on behalf of the Company shall be exclusive with the exception
of those services provided under a lifetime agreement with Marvel Enterprises,
Inc., which require no more than an average of 10-15 hours per week on its
behalf. The employment agreement provides for base salary compensation of
$250,000 annually, a bonus equal to 10% of the Company's net profits after taxes
relating to projects personally initiated by Mr. Lee and/or accomplished with
approved entities from his participation as assigned to the Company, stock
options equal to the highest number of options offered to Company executives,
reimbursement of certain business expenses, including without limitation,
business-related travel and entertainment expenses, and a term life insurance
policy in the minimum principal sum of $2 million. To date, no options have been
granted to Mr. Lee.
The Company entered into a consulting agreement with Paraversal, Inc. to
provide the services of Peter Paul, the Co-Founder of the Company, to assist the
Company in structuring corporate partnering relationships and strategic
alliances, and to coordinate the Company's public relations efforts. The
consulting agreement provides for a three-year term, initial monthly
compensation of $16,000, increasing to monthly compensation of $20,000 as of
March 2000, stock options to be mutually agreed upon, and reimbursement of
certain business expenses, including without limitation, business-related travel
and entertainment expenses. To date, no options have been granted under this
agreement. Mr. Paul is the spouse of Andrea L. Freitag, the Secretary and a
Director of the Company.
13
<PAGE> 14
Stock Options and Warrants
On July 23, 1999, the Company entered into written compensatory
agreements with certain executives and key employees to purchase 950,000 shares
at an exercise price of $2.50 per share, the estimated fair market value at the
date of grant. The term of the options is five years from the date of grant.
Substantially all of the options are exercisable in installments, vesting
fifty-percent (50%) after one year, and vesting up to all of the optioned shares
after two years following the date of grant. In addition, on July 23, 1999, the
Company entered into a written compensatory warrant agreement with an employee
to purchase 300,000 shares at an exercise price of $3.00 per share. The warrants
vest ratably over a three-year term, are exercisable in installments, and the
term of the warrants is five years after the date of vesting.
On July 23, 1999, the Company entered into agreements with consultants
in exchange for options to purchase 725,000 shares of the Company's Common
Stock, at an exercise price of $2.50 per share, the estimated fair market value
at the date of grant. The options vest as of January 22, 2000, and may be
exercised any time after vesting to and including July 22, 2009.
The Company also has issued warrants, expiring in April 2002, to acquire
246,029 shares of Common Stock at an exercise price of $5.00 per share to
investors in certain of the Company's private placement transactions.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of September 3, 1999 by (i) each
person known by the Company to be the beneficial owner of more than five percent
of its Common Stock; (ii) each director; and (iii) all directors and executive
officers as a group. Unless otherwise indicted, each of the following
stockholders has sole voting and investment power with respect to the shares
beneficially owned, except to the extent that such authority is shared by
spouses under applicable law.
<TABLE>
<CAPTION>
Name of Shareholder Number of Shares Percent of Common Stock
- ------------------- ---------------- -----------------------
<S> <C> <C>
Stan Lee(1) 3,600,000 31.5%
P.F.P. Family Holdings, L.P.(2) 2,700,000 23.6
Devendra Mishra 50,000 *
Gill Champion(3) 50,000 *
Stephen M. Gordon(4) 270,000 2.4
Robert M. Schultz(5) 10,000 *
All executive officers and directors 6,680,000 58.4
as a group (6 persons)
</TABLE>
- ----------
* Less than one percent (1%) of the issued and outstanding shares
of Common Stock.
(1) Includes 3,600,000 shares held in the name of the Lee Family
1985 Trust.
14
<PAGE> 15
(2) Andrea L. Freitag, the Secretary and a Director of the Company,
is a General Partner of P.F.P. Family Holdings, L.P.
(3) Excludes options to purchase 100,000 shares granted to Mr.
Champion, 50% of which vest as of July 23, 2000, and all of
which vest as of July 23, 2001.
(4) Includes 220,000 shares held directly by Mr. Gordon and his
spouse, and 50,000 shares held in a custodial capacity on behalf
of a minor child, and excludes options to purchase 100,000
shares granted to Mr. Gordon, 50% of which vest as of July 23,
2000, and all of which vest as of July 23, 2001.
(5) Excludes options to purchase 100,000 shares granted to Mr.
Schultz, 50% of which vest as of July 23, 2000, and all of which
vest as of July 23, 2001.
DESCRIPTION OF SECURITIES
The following statements with respect to the Company's securities are
not complete and are qualified in all respects by the provisions of the
Company's Articles of Incorporation, as amended, and Bylaws.
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, no par value, and 10,000,000 shares of Preferred Stock,
no par value (the "Preferred Stock"). At September 3, 1999, the Company had
11,431,029 shares of Common Stock issued and outstanding and held of record by
more than 380 persons. At such date, there were no shares of Preferred Stock
issued and outstanding.
Common Stock
Each share of Common Stock entitles the holder thereof to one vote for
each share on all matters submitted to the stockholders. The Common Stock is not
subject to redemption or to liability for further calls. Holders of Common Stock
will be entitled to receive such dividends as may be declared by the Board of
Directors of the Company out of funds legally available therefor and to share
pro rata in any distribution to stockholders. The stockholders have no
conversion, preemptive or other subscription rights. Shares of authorized and
unissued Common Stock are issuable by the Board of Directors without any further
stockholder approval.
Preferred Stock
The Board of Directors is authorized, without further action by the
stockholders, to issue from time to time shares of Preferred Stock in one or
more classes or series and to fix the designations, voting rights, liquidation
preferences, dividend rights, conversion rights, rights and terms of redemption
(including sinking fund provisions) and certain other rights and preferences of
the Preferred Stock. The issuance of shares of Preferred Stock under certain
circumstances could adversely affect the voting power of the holders of Common
Stock and may have the effect of delaying, deferring or preventing a change in
control of the Company.
15
<PAGE> 16
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is Securities
Transfer Corporation, Dallas, Texas. Its telephone number is (972) 447-9890.
SHARES ELIGIBLE FOR FUTURE SALE
As of September 3, 1999, there were 11,431,029 shares of Common Stock
issued and outstanding. Of these shares, 2,049,500 shares of Common Stock are
freely tradable either without restriction under the Securities Act of 1933 (the
"Securities Act") or without regard to the volume limitations of Rule 144 under
the Securities Act by persons other than "affiliates" of the Company, and an
additional 475,500 shares of Common Stock are freely tradable shares subject to
lock-up agreements expiring ratably over the next approximate five-month period.
The remaining shares of Common Stock (8,906,029 shares) are "restricted shares"
that were acquired in transactions exempt from registration under the Securities
Act and have been held for less than two years or are held by affiliates of the
Company. Of such amount, 8,500,000 shares of Common Stock were issued in
connection with the Reorganization and Stock Purchase Agreement described in the
Prior Form 8-K relating to the change in control of the Registrant; 346,029
shares of Common Stock were issued in connection with private placements during
May through August 1999 pursuant to which $1,138,100 of cash was received for
said stock; and 60,000 shares of Common Stock were issued to certain employees
in consideration for past services (50,000 shares of which is subject to
employment conditions). These shares may not be resold unless they are
registered under the Securities Act or are sold pursuant to an applicable
exemption from registration, such as Rule 144 of the Securities Act.
Rule 144 generally permits a stockholder of the Company (including an
affiliate) who has beneficially owned restricted shares of Common Stock for at
least one year to sell without registration, within any three-month period, that
number of shares so held equal to the greater of one percent of the then
outstanding shares of Common Stock (approximately 114,000 shares) or the average
weekly trading volume of the Common Stock during the four calendar weeks
immediately preceding such sale. Sales under Rule 144 also are subject to
certain manner of sale provisions, notice requirements and the availability of
current public information regarding the Company. A person who has not been an
"affiliate" of the Company at any time during the three months preceding a sale,
and who has beneficially owned shares for at least two years, is entitled to
sell such shares under Rule 144 without regard to the volume limitations, manner
of sale provisions or notice or current public information requirements. As
defined in Rule 144, an "affiliate" of an issuer is a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such issuer and generally includes members of the
Board of Directors and senior management. The foregoing is a summary of Rule 144
and is not intended to be a complete description.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
This Form 8-K/A amends the Prior Form 8-K by setting forth the following
financial information required to be reported on Form 8-K by Items 7 of Form
8-K.
16
<PAGE> 17
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONTENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS
Balance sheets F-3
Statements of operations F-4
Statements of shareholders' equity F-5
Statements of cash flows F-6
Notes to financial statements F-7 - F-16
</TABLE>
F-1
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Stan Lee Media, Inc.
(a Development Stage Enterprise)
Encino, California
We have audited the accompanying balance sheet of Stan Lee Media, Inc. (a
Development Stage Enterprise) as of December 31, 1998, and the related
statements of operations, shareholders' equity and cash flows for the period
from inception (October 13, 1998) through December 31, 1998. 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 Stan Lee Media, Inc. (a
Development Stage Enterprise) as of December 31, 1998, and the results of its
operations and its cash flows, for the period from inception (October 13, 1998)
through December 31, 1998, in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Los Angeles, CA
April 29, 1999, except Note 9, which is
as of June 14, 1999
F-2
<PAGE> 19
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, June 30, December 31,
1999 1999 1998
- ----------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 75,593 $ 123,223 $ 21,276
Subscriptions receivable -- -- 275,000
Prepaid expenses (Note 7) 12,500 12,500 10,000
- ----------------------------------------------------------------------------------------------------------
Total current assets 88,093 135,723 306,276
INVESTMENT (Note 6) 51,300 51,300 --
PROPERTY AND EQUIPMENT, less accumulated 112,005 112,221 1,898
depreciation (Note 3)
TRADEMARKS 6,638 6,638 --
- ----------------------------------------------------------------------------------------------------------
$ 258,036 $ 305,882 $ 308,174
==========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 188,148 $ 155,639 $ 5,175
Obligations under capital leases, current 9,120 10,847 --
portion (Note 5)
Deferred revenue (Note 6) 51,300 51,300 --
Advances from related party (Note 4) 10,000 30,000 --
- ----------------------------------------------------------------------------------------------------------
Total current liabilities 258,568 247,786 5,175
- ----------------------------------------------------------------------------------------------------------
OBLIGATIONS UNDER CAPITAL LEASES, LONG-TERM 60,968 60,968 --
PORTION (Note 5)
COMMITMENTS (Note 5)
SHAREHOLDERS' EQUITY (Notes 1 and 8)
Preferred stock -- -- --
Common stock 11,369 8,500 8,100
Subscription stock -- 564,000 --
Additional paid-in capital 1,352,014 327,320 327,320
Deficit accumulated during the development stage (1,424,883) (902,692) (32,421)
- ----------------------------------------------------------------------------------------------------------
Total shareholders' equity (61,500) (2,872) 302,999
- ----------------------------------------------------------------------------------------------------------
$ 258,036 $ 305,882 $ 308,174
==========================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 20
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period
From
October 13,
SEVEN SIX 1998
MONTHS MONTHS (Inception)
ENDED ENDED to
JULY 31, JUNE 30, December 31,
1999 1999 1998
- ----------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C>
NET SALES $ -- $ -- $ --
OPERATING EXPENSES
Salaries and benefits 161,380 82,633 --
Rent 59,979 47,510 --
Advertising and promotion 71,808 30,028 5,000
Production consulting 67,700 62,850 150
Office expenses 42,492 33,540 265
Professional fees 71,635 62,160 --
Printing and reproduction 32,874 27,573 --
Telephone 10,292 7,527 180
Automobile expense 15,653 13,803 405
Entertainment and travel 29,184 26,144 3,176
Equipment lease and rental 34,080 10,108 --
Insurance 11,408 11,075 --
Amortization and depreciation 15,760 12,290 54
Internet access 2,206 1,916 70
Repairs 5,486 5,227 --
Consulting fees 639,788 435,150 23,020
Franchise taxes 100 100 --
- ----------------------------------------------------------------------------------------
Total operating expenses 1,271,825 869,634 32,320
- ----------------------------------------------------------------------------------------
OPERATING LOSS (1,271,825) (869,634) (32,320)
INTEREST EXPENSE (637) (637) (101)
COSTS INCURRED ON MERGER 120,000 -- --
- ----------------------------------------------------------------------------------------
NET LOSS $(1,392,462) $ (870,271) $ (32,421)
========================================================================================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 21
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF SHAREHOLDERS' EQUITY
SEVEN MONTHS ENDED JULY 31, 1999 (UNAUDITED),
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED),
AND FOR THE PERIOD FROM INCEPTION (OCTOBER 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Subscription Paid-In Development
Shares Amount Stock Capital Stage Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of founders 6,900,000 $ 6,900 $ -- $ 3,100 $ -- $ 10,000
shares (October 1998)
($0.001 per share)
Issuance of stock for 420,000 420 -- -- -- 420
services ($0.001 per
share)
Issuance of stock for 780,000 780 -- 324,220 -- 325,000
cash ($0.417 per share)
Net loss for period -- -- -- -- (32,421) (32,421)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, at December 31,
1998 8,100,000 8,100 -- 327,320 (32,421) 302,999
Issuance of stock for 400,000 400 -- -- -- 400
services ($0.001 per
share) (Note 8)
Subscription stock (Note 8) -- -- 564,000 -- -- 564,000
Net loss for six months -- -- -- -- (870,271) (870,271)
ended June 30, 1999
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, at June 30, 1999 8,500,000 8,500 564,000 327,320 (902,692) (2,872)
Reverse merger (Note 9) 2,525,000 2,525 -- (13,062) -- (10,537)
Issuance of stock for 60,000 60 -- 149,940 -- 150,000
services ($2.50 per
share) (Note 8)
Subscription stock (Note 8) -- -- 174,100 -- -- 174,100
Issuance of subscribed 246,029 246 (738,100) 737,854 -- --
stock ($3.00 per
share) (Note 8)
Issuance of stock for 37,500 38 -- 149,962 -- 150,000
cash ($4.00 per share)
(Note 8)
Net loss for month ended -- -- -- -- (522,191) (522,191)
July 31, 1999
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, at July 31, 1999 11,368,52 $ 11,369 $ -- $ 1,352,014 $(1,424,883) $ (61,500)
==============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 22
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
From
October 13,
1998
JANUARY 1, JANUARY 1, (Inception)
1999 TO 1999 TO to
JULY 31, JUNE 30, December 31,
1999 1999 1998
- --------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (522,191) $ (870,271) $ (32,421)
Adjustments to reconcile net loss to net cash
and cash equivalents provided by (used in)
operating activities:
Depreciation 3,470 12,290 54
Stock issued for services -- 400 420
Stock issued during merger 2,869 -- --
Changes in:
Prepaid expenses -- (2,500) (10,000)
Accounts payable 32,509 150,464 5,175
- --------------------------------------------------------------------------------------------------------
Net cash used in operating activities (483,343) (709,617) (36,772)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (3,254) (122,613) (1,952)
Application for trademarks -- (6,638)
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (3,254) (129,251) (1,952)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from affiliates (20,000) 30,000 --
Lease obligations (1,727) 71,815 --
Subscription stock (564,000) 564,000 --
Capital contribution 1,024,694 275,000 60,000
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities: 438,967 940,815 60,000
- --------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (47,630) 101,947 21,276
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 123,223 21,276 --
- --------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 75,593 $ 123,223 $ 21,276
========================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 23
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
1. NATURE OF Stan Lee Entertainment, Inc. ("Entertainment")
BUSINESS (a Development Stage Enterprise) was incorporated
in the State of Delaware on October 13, 1998. Stan
Lee Media, Inc. ("SLM Delaware") was originally
incorporated in the State of Delaware on January
14, 1999. Entertainment was merged with SLM on
April 14, 1999 in the State of Delaware with the
name of the surviving corporation being Stan Lee
Media, Inc.
Effective July 23, 1999, SLM Delaware engaged in a
share exchange with Boulder Capital Opportunities,
Inc. ("Boulder") a public company, incorporated in
the State of Colorado. The new name of the company
after the share exchange is Stan Lee Media, Inc.
("SLM") This share exchange was accounted for as a
reverse acquisition in which SLM Delaware is
considered the predecessor of the Company because
it had operations at the time of the share
exchange. In this share exchange, the shareholders
of SLM Delaware received 8,500,000 shares of common
stock of Boulder in exchange for all of the issued
and outstanding shares of common stock of SLM
Delaware. The number of shares outstanding after
this transaction were 11,025,000.
SLM is a newly established, internet based,
multi-media company producing original characters
and content built on Stan Lee's branded
recognition. This development stage company will
create a web-site with games, merchandise and
trading areas. A lifetime employment agreement,
effective April 1, 1999, was made between SLM and
Stan Lee which provides that SLM is granted all of
Stan Lee's rights, title, and interest in all
ideas, names, titles, characters, symbols, logos,
designs, visual representations, artwork, and
literary property including Stan Lee's name and
likeness used and created by Stan Lee for SLM.
Under this agreement, Stan Lee will serve as
Chairman and Chief Creative Officer of SLM and his
services are exclusive with the exception of those
services he is required to provide for Marvel
Enterprises, Inc., as Chairman Emeritus, which will
require no more than an average of 10-15 hours per
week of his time. See Note 5.
F-7
<PAGE> 24
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
2. SUMMARY OF CASH AND CASH EQUIVALENTS
SIGNIFICANT
ACCOUNTING For purposes of the statement of cash flows, cash
POLICIES and cash equivalents include cash on hand.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost, with
depreciation computed utilizing the straight-line
method.
INVESTMENT
The investment is carried at lower of cost or
market.
INCOME TAXES
SLM accounts for income taxes utilizing Statement
of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" which requires
recognition of deferred tax assets and liabilities
for the expected future tax consequences that have
been included in the financial statements or tax
returns.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose SLM
to concentration of credit risk consist primarily
of cash and cash equivalents. SLM places its cash
and cash equivalents with major financial
institutions. At times, cash balances may be in
excess of the amounts insured by the Federal
Deposit Insurance Corporation, however, management
believes the risk of loss to be minimal.
F-8
<PAGE> 25
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
2. SUMMARY OF USE OF ESTIMATES
SIGNIFICANT
ACCOUNTING The preparation of financial statements in
POLICIES conformity with generally accepted accounting
(CONTINUED) 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 expenses during the reporting
period. Actual amounts could differ from those
estimates.
YEAR 2000
Like other companies, SLM could be adversely
affected if its computer systems or those that its
suppliers or customers use, do not properly process
and calculate date-related information and data
from the period surrounding and including January
1, 2000. This is commonly known as the "Year 2000"
issue. Additionally, this issue could impact
non-computer systems and devices. At this time,
because of the complexities involved in the issue,
management cannot provide assurances that the Year
2000 issue will not have an impact on the SLM's
operations.
UNAUDITED INFORMATION
The financial statements include the unaudited
balance sheets as of June 30, 1999 and July 31,
1999 and the related statements of operations,
changes in shareholders' equity (deficit) and cash
flows for the six months ended June 30, 1998 and
seven months ended July 31, 1999. This unaudited
information has been prepared by the Company on the
same basis as the audited financial statements and,
in management's opinion, reflects all adjustments
(consisting only of normal recurring accruals)
necessary for a fair presentation of the financial
information, in accordance with generally accepted
accounting principles, for the periods presented.
Results for interim periods are not necessarily
indicative of the results to be expected for the
entire year.
F-9
<PAGE> 26
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
3. PROPERTY AND Property and equipment consists of the following:
EQUIPMENT
<TABLE>
<CAPTION>
JULY 31, June 30, Estimated
1999 1999 Useful Life
-------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment $ 117,459 $ 117,459 3 years
Computer software 3,092 3,092 3 years
Furniture and fixtures 7,269 4,015 5 years
-------------------------------------------------------------------
127,820 124,566
Less accumulated depreciation 15,815 12,345
-------------------------------------------------------------------
$ 112,005 $ 112,221
===================================================================
</TABLE>
4. RELATED PARTY A shareholder of the Company advanced $10,000 and
TRANSACTIONS $30,000 at July 31, 1999 and June 30, 1999,
respectively, as working capital. The balance is
non-interest bearing and due on demand with no
specific payment provisions.
5. COMMITMENTS SLM entered into a sublease agreement to lease
office space from November 1, 1998 to April 30,
2002. Minimum future annual payments under this
agreement as of July 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year ended Amount
------------------------------------------------------------------
<S> <C>
1999 $ 37,500
2000 90,000
2001 90,000
2002 30,000
------------------------------------------------------------------
$ 247,500
==================================================================
</TABLE>
The Company has entered into an employment
agreement with Stan Lee. Under the agreement Stan
Lee will receive a base salary of $250,000 per
year, beginning April 1, 1999 and is payable for
the remainder of his life. In addition, Stan Lee
shall also receive an annual bonus equal to ten
percent of all net profits after taxes reported by
the Company. Stan Lee will serve as Chairman and
Chief Creative Officer of SLM.
F-10
<PAGE> 27
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
5. COMMITMENTS EQUIPMENT LEASES
(CONTINUED)
SLM entered into various capital leases for
computers and related equipment. The leases range
from 24 to 60 month terms. Minimum future annual
payments under the agreements as July 31, 1999 are
as follows:
<TABLE>
<CAPTION>
Year ended Amount
------------------------------------------------------------------
<S> <C>
1999 $ 15,036
2000 36,087
2001 28,270
2002 10,507
2003 5,772
2004 1,443
------------------------------------------------------------------
$ 97,115
==================================================================
</TABLE>
6. INVESTMENT IN On March 16, 1999, SLM entered into an agreement
NPO ONLINE, INC. between NPO Online, Inc. ("NPO"), a Company which
STOCK will provide an e-commerce store front Internet
site, that is linked between SLM's Internet site,
which will enable purchasing of retail Comic Books
and related retail Comic Book products of SLM and
NPO. In exchange for exclusive retail linking
rights, and joint marketing and promotions, SLM
will receive 10% of the gross revenue received for
the NPO sales transacted through this Internet site
to be paid to SLM, on a monthly basis for the
previous month's sales. If SLM sells any
merchandise through the NPO site and fulfills the
order itself, SLM will pay 10% of those gross sales
to NPO. For any resale or collectible merchandise
sold by SLM using NPO's storefront, which is not
readily available on the retail market, SLM will
pay 7.5% of those gross sales to NPO.
F-11
<PAGE> 28
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
6. INVESTMENT IN NPO will be the exclusive provider of retail comic
NPO ONLINE, INC. books for SLM and neither SLM nor Mr. Stan Lee
STOCK (CONTINUED) shall endorse or promote the marketing or sale of
comic books by any other online retailer other than
NPO. For this exclusivity, NPO issued 180,000
shares of its common stock with a fair value of
$0.285 per share to SLM, at the grant date of March
16, 1999. If SLM decides to sell any of the shares,
NPO has the first right to purchase those shares.
The total authorized capital stock of NPO is
11,000,000 shares of common stock, $0.001 par value
per share, of which 7,003,158 shares are issued and
outstanding as of March 16, 1999.
The obligations under the agreement are in effect
on the date that the website becomes operational
and the agreement term is for an initial period of
three years from March 16, 1999.
7. PREPAID EXPENSES Prepaid expenses include a deposit for the lease of
an office space and professional retainers paid for
future services to be provided.
8. SHAREHOLDERS' SLM has 100,000,000 authorized shares of common
EQUITY stock at no par value, stated value of $0.001 per
share and 10,000,000 shares of preferred stock at
no par value. No preferred stock was issued as of
July 31, 1999.
The stock issued for services between January 1,
1999 and June 30, 1999 was issued for services
provided before any stock was issued for cash. Each
stock was valued at $0.001 per share at that time.
All subscription receivables were collected
subsequent to December 31, 1998.
F-12
<PAGE> 29
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
8. SHAREHOLDERS' STOCK OPTIONS AND WARRANTS
EQUITY
(CONTINUED) On July 23, 1999 SLM entered into written
compensatory stock option and warrant agreements
with certain executives and key employees to
purchase 1,250,000 shares at $2.50 per share, the
estimated fair market value at the date of grant.
The maximum term of the options and warrants is
five years. The options and warrants are subject to
various vesting terms over the next two to four
years.
On July, 1999 SLM entered into agreements with two
parties for consulting services in exchange for
options to purchase 725,000 shares of SLM's common
stock, at an exercise price of $2.50 per share, the
estimated fair market value at the date of grant.
575,000 of these options were granted to Ziffren,
Brittenham, Branca & Fischer LLP as consideration
for future services as SLM's general entertainment
counsel in connection with structuring and
negotiating entertainment-related transactions and
all other entertainment related matters. The
options vest as of January 22, 2000 and may be
exercised any time after vesting to and including
July 22, 2009.
RESTRICTED STOCK
On July 23, 1999, ten thousand (10,000) shares of
restrictive stock was issued to certain employees
in consideration for past services issued at $2.50
per share. Another fifty thousand (50,000) was also
issued and to be delivered in June 2000 subject to
employment conditions.
On July 30, 1999, 37,500 shares of restricted stock
was issued as part of Private Placement resulting
in proceeds of $150,000 (valued at $4.00 per
share).
F-13
<PAGE> 30
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
8. SHAREHOLDERS' SUBSCRIPTION STOCK
EQUITY
(CONTINUED) During May through July of 1999, a total of
$738,100 in cash was received for subscription
stock. The subscription stock consists of 246,029
shares of restrictive stock that were issued on
July 23, 1999 in consideration for purchase for a
value of $3.00 per share. In addition, warrants
were issued to purchase another 246,029 shares at
$5.00 per share.
STOCK-BASED COMPENSATION
Statements of Financial Accounting Standards No.
123 "Accounting for Stock-Based Compensation" (SFAS
123) establishes a fair value method of accounting
for stock-based compensation plans and for
transactions in which an entity acquires goods or
services from nonemployees in exchange for equity
instruments. SFAS 123 also encourages, but does not
require companies to record compensations utilizing
the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Accordingly,
compensation cost for stock options is measured as
the excess, if any, of the fair market price of the
Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.
Also, in accordance with SFAS No. 123, the Company
has provided footnote disclosure with respect to
stock-based employee compensation. The cost of
stock-based employee compensation is measured at
the grant date on the value of the award and is
recognized over the service period. The value of
the stock-based award is determined using a pricing
model where compensation cost is the excess of the
fair value of the stock as determined by the model
at grant date or other measurement date over the
amount an employee must pay to acquire the stock.
F-14
<PAGE> 31
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
9. WARNER BROS./ On June 14, 1999, SLM and Warner Bros./AcmeCity
ACMECITY ("WBAC") signed a "Community" agreement which
AGREEMENT provides that SLM will receive all web community
hosting; e-mail; community tools which include free
home pages, chat and message boards; with direct
buttons from each home page to stanlee.net home
page of SLM. These services will be given to SLM at
no cost, as well as 50% of the net advertising
revenue earned from the site to be paid on a
quarterly basis by WBAC to SLM in exchange for
exclusively hosting SLM's global community of
users. SLM will also have the option to sell
advertising inventory on the WBAC site.
WBAC will be the exclusive provider of personal
home page services for SLM and will have exclusive
access among all personal home page providers.
The E-Commerce rights state that WBAC will be
responsible for sales and fulfillment of any
premium services such as purchasing additional
memory for a personal home page, and will pay SLM
20% of the net revenues derived from the sale of
these products.
SLM will be responsible for sales and fulfillment
of all goods and services within the Community
relating to Stan Lee products and merchandise and
will pay WBAC 12.5% of the gross revenue derived
from these sales regardless of whether such sales
are completed online or by other means. If SLM does
not source the products then SLM shall pay WBAC 50%
of all revenue it receives from sales of the
products if the sale was due to the traffic from
the WBAC site. In addition, SLM shall pay WBAC 50%
of all revenue it receives from the sale of comic
books through any other third party if such sale
was due to traffic driven from the site.
The terms of the agreement will be for 18 months
from June 14, 1999 and WBAC will have one option to
renew for an additional 18 months. The option must
be exercised by WBAC no later than 60 days prior to
the initial term.
F-15
<PAGE> 32
STAN LEE MEDIA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR JULY 31 AND JUNE 30, 1999 IS UNAUDITED)
10. REVOLVING CREDIT On July 23, 1999 SLM Inc. entered into two
AGREEMENTS revolving credit agreements for a total of
US$2,000,000 dollars available credit. Each credit
agreement will expire on July 31, 2000. For each
borrowing, a promissory note will be executed that
will bear interest, from the date of the borrowing,
at LIBOR, as published on The Wall Street Journal
plus two percent (2%) per annum computed over a 360
day year. Interest is due and payable monthly on
the first day of each month beginning at least 30
days after issuance of the Note.
11. SUBSEQUENT EVENT During August 1999, the Company issued 62,500
shares of restricted common stock as part of a
Private Placement resulting in proceeds of $250,000
(valued at $4.00 per share).
F-16
<PAGE> 33
ITEM 8. CHANGE IN FISCAL YEAR
On September 9, 1999, the Board of Directors of the Company voted to
change the Company's fiscal year from a year ending April 30 to a year ending
December 31. The Company intends to file a report on Form 10-Q for the quarterly
period ending September 30, 1999 and a Form 10-K for the eight-month transition
period ending December 31, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
STAN LEE MEDIA, INC.
(Registrant)
Date: September 13, 1999. By: /s/ Gill Champion
---------------------------------------
Gill Champion,
Chief Operating Officer
33
