SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO.1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 16, 1999
-----------------
Paradise Music & Entertainment, Inc.
------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 001-12635 13-3906452
-------- --------- ----------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification Number)
53 West 23rd Street, New York, New York 10010
---------------------------------------------
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (212) 590-2100
--------------
N/A
---
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On September 23, 1999, pursuant to an Asset Purchase Agreement (the
"Asset Purchase Agreement") effective as of June 1, 1999 by and among Paradise
Music & Entertainment, Inc. (the "Company"), Straw Dogs Acquisition Corp., a
wholly-owned subsidiary of the Company ("Acquisition Sub"), Consolidated
Entertainment, LLC, ("Consolidated"), Jesse Dylan and Craig Rodgers
(collectively, the "Stockholders"), Consolidated transferred substantially all
of its assets to Acquisition Sub. At the closing, on December 16, 1999,
Consolidated received 900,000 shares of the Company's common stock.
On September 23, 1999, pursuant to a Stock Purchase Agreement (the
"Stock Purchase Agreement") effective as of June 1, 1999 by and among Paradise
Music & Entertainment, Inc. (the "Company"), Straw Dogs Acquisition Corp., a
wholly-owned subsidiary of the Company ("Acquisition Sub") and Jesse Dylan
("Owner"), Owner transferred 100% of the issued and outstanding shares of common
stock of Spur & Buckle, Inc. ("S&B") to Acquisition Sub. At the closing, on
December 16, 1999, Owner received 541,000 shares of the Company's common stock.
Item 7. Financial Statements and Exhibits
(a) Pro forma Financial Information
The following unaudited pro forma condensed consolidated financial
statements (the "Pro Forma Financial Statements") are based on the historical
financial statements of Paradise Music & Entertainment, Inc. and Subsidiaries
("Paradise") and Consolidated Entertainment, LLC, (d/b/a Straw Dogs) and Spur &
Buckle, Inc. (collectively "Straw Dogs") adjusted to give effect to the
acquisition by Paradise of Straw Dogs. The Unaudited Pro Forma Condensed
Consolidated Statement of Operations gives effect to the acquisition as if it
had occurred as of July 1, 1998, and the Unaudited Pro Forma Condensed
Consolidated Balance Sheet gives effect to the acquisition as if it had occurred
as of June 30, 1999. The acquisition and the related adjustments are described
in the accompanying notes. The pro forma adjustments are based upon available
information and certain assumptions that management believes are reasonable. The
Pro Forma Financial Statements do not purport to represent what Paradise's
results of operations or financial condition would actually have been had the
acquisition in fact occurred on such dates or to project Paradise's results of
operations or financial condition for any future period or date. The Pro Forma
Condensed Consolidated Financial Statements should be read in conjunction with
the historical financial statements of Paradise and Straw Dogs included in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The acquisition will be accounted for using the purchase method of
accounting. After the acquisition, the total cost of the acquisition of Straw
Dogs will be allocated to the tangible and intangible assets and liabilities of
Straw Dogs based upon their respective fair values. The allocation of the
aggregate purchase price included in the Pro Forma Financial Statements is
preliminary.
(b) Financial Statements of Businesses Acquired
In accordance with Rule 210.3-05(b) of Regulation S-X the historical
statements for Consolidated Entertainment, LLC, (d/b/a Straw Dogs) and Spur &
Buckle, Inc., covering the fiscal years ended June 30, 1999, and 1998 are
attached to this report.
1
<PAGE>
Paradise Music Entertainment, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet
June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
ASSETS Pro Forma Pro
Paradise Straw Dogs Adjustments Forma
-------- ------------ ----------- -----
<S> <C> <C> <C> <C>
Current assets:
Cash $ 930,642 $ 19,318 $ -- $ 949,960
Marketable security -- 140,625 (140,625)(a)(2) --
Accounts receivable, net 810,922 1,525,449 -- 2,336,371
Prepaid expenses and other
current assets 2,496,106 118,513 (828,575)(a) 1,786,044
------------ ------------ ------------ ------------
Total current assets 4,237,670 1,803,905 (969,200) 5,072,375
------------ ------------ ------------ ------------
Property and equipment, net 1,125,316 710,050 -- 1,835,366
------------ ------------ ------------ ------------
Other assets:
Due from affiliate -- 693,958 700,000 (a)(4)
(600,000)(a)(3) 793,958
Due from officer -- 80,000 -- 80,000
Intangible assets -- 135,572 (135,572)(a)(1) --
Goodwill -- -- 9,471,303 (a) 9,471,303
Security deposits and other 307,787 35,110 -- 342,897
Deferred acquisition costs 95,000 -- (95,000)(a) --
------------ ------------ ------------ ------------
402,787 944,640 9,340,731 10,688,158
------------ ------------ ------------ ------------
$ 5,765,773 $ 3,458,595 $ 8,371,531 $ 17,595,899
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' AND
MEMBERS' EQUITY
Current liabilities:
Due to bank $ $ 987,418 $ $ 987,418
Accounts payable and accrued expenses 1,721,717 1,481,053 150,000 (a)
700,000 (a)(4) 4,052,770
Due to stockholder 215,000 (a)(5) 215,000
Capital lease obligation -- 10,905 -- 10,905
------------ ------------ ------------ ------------
Total current liabilities 1,721,717 2,479,376 1,065,000 5,266,093
------------ ------------ ------------ ------------
Stockholders' and members' equity 4,044,056 979,219 7,306,531 12,329,806
------------ ------------ ------------ ------------
$ 5,765,773 $ 3,458,595 $ 8,371,531 $ 17,595,899
============ ============ ============ ============
</TABLE>
2
<PAGE>
Paradise Music & Entertainment, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
Paradise Straw Dogs Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 9,661,036 $ 19,806,393 $ $ 29,467,429
------------ ------------ ------------ ------------
Operating Expenses
Cost of sales 6,305,511 15,674,362 -- 21,979,873
Selling, general and
administrative 7,101,023 3,365,410 454,565 10,920,998
------------ ------------ ------------ ------------
Total operating expenses 13,406,534 19,039,772 454,565 32,900,871
------------ ------------ ------------ ------------
Operating Income (Loss) (3,745,498) 766,621 (454,565) (3,433,442)
Interest And Other Income 37,569 1,617 -- 39,186
------------ ------------ ------------ ------------
Income (Loss) Before Income
Taxes (3,707,929) 768,238 (454,565) (3,394,256)
Income Tax Provision 6,000 -- -- 6,000
------------ ------------ ------------ ------------
Net Income (Loss) $ (3,713,929) $ 768,238 $ (454,565) $ (3,400,256)
============ ============ ============ ============
Basic And Diluted Loss
Per Common Share $ (0.98) $ (0.65)
============ ============
Weighted Average Number Of
Common Shares Outstanding 3,802,805 5,243,805
============ ============
</TABLE>
Footnotes to Pro-Forma Financial Statements
(a) The unaudited pro forma condensed consolidated balance sheet gives effect
to the proposed acquisition of Straw Dogs by Paradise by combining the
respective balance sheets of the two companies at June 30, 1999. The
acquisition was accounted for using the "purchase" method of accounting.
Therefore, the aggregate consideration paid in connection with the
proposed acquisition will be allocated to Straw Dogs assets and
liabilities based on their fair market values with the excess
consideration treated as goodwill. The purchase price will be paid with
the issuance of 1,441,000 shares of common stock valued at $9,359,325,
including acquisition costs of $1,073,575, of which 150,000 is estimated
and accrued as of June 30, 1999. The seven day average closing market
price of $5.75 of our common stock surrounding April 22, 1999, the date of
the agreement, was used to value the acquisition. The net assets acquired
consisted of certain transactions occurring prior to the acquisition and
the computation of goodwill as follows:
Total assets of Straw Dogs as of
June 30, 1999 $3,458,595
Write off of intangible assets (1) (135,572)
Less marketable security
distributed to members (2) (140,625)
Less reclassification of
member's equity against advances
to affiliate (3) (600,000)
3
<PAGE>
Plus accrual for additional
advances to affiliate (4) 700,000
---------
Total assets acquired, as
adjusted $3,282,398
Total liabilities of Straw Dogs
as of June 30, 1999 2,479,376
Record dividend to stockholder
prior to acquisition (5) 215,000
Plus accrual for additional
advances to affiliate (4) 700,000
----------
Total liabilities assumed, as
adjusted 3,394,376
----------
Net liabilities assumed (111,978)
Purchase price 9,359,325
----------
Goodwill $9,471,303
==========
- -------------------
(1) To assign zero value to Straw Dogs intangible assets consisting of
organization costs and goodwill.
(2) To reflect marketable securities distributed to the members of Straw
Dogs prior to the consummation of the transaction.
(3) To reflect the reclassification of the members' equity of Straw Dogs
as partial satisfaction of amounts due from affiliates.
(4) To reflect estimated additional advances to the affiliate for the
period July 1, 1999 through the consummation of the transaction.
(5) To reflect the payment of a dividend to the stockholder of Spur &
Buckle prior to the consummation of the transaction.
(b) The acquisition of Straw Dogs resulted in $9,471,303 of goodwill which
will be amortized over 20 years. Intangible assets acquired from Straw
Dogs (consisting of organizational costs and goodwill) were given zero
value and the corresponding amortization of $19,000 was eliminated from
the unaudited pro forma condensed consolidated statements of operations.
The unaudited pro forma condensed consolidated statements of operations
reflect a net adjustment to amortization of $454,565 for the year ended
June 30, 1999.
4
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) and Spur & Buckle, Inc.
PAGE
----
Report of Independent Auditors F-6
Combined Balance Sheets F-7
Combined Statements of Income and Comprehensive Income F-8
Combined Statements of Stockholder's and Members' Equity F-9
Combined Statements of Cash Flows F-10-F-11
Notes to Combined Financial Statements F-12-F-15
5
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors, Members and Stockholder
Consolidated Entertainment, LLC, (d/b/a Straw Dogs) and Spur & Buckle, Inc.
We have audited the accompanying combined balance sheets of Consolidated
Entertainment, LLC, (d/b/a Straw Dogs) and Spur & Buckle, Inc. as of June 30,
1999 and 1998, and the related combined statements of income and comprehensive
income, stockholder's and members' equity, and cash flows for the years then
ended. These combined financial statements are the responsibility of the
Companies' managements. Our responsibility is to express an opinion on these
combined 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 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 audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Consolidated
Entertainment, LLC, (d/b/a Straw Dogs) and Spur & Buckle, Inc. as of June 30,
1999 and 1998, and the results of their operations and their cash flows for the
years then ended, in conformity with generally accepted accounting principles.
Rothstein, Kass & Company, P.C.
Roseland, New Jersey
August 30, 1999, except for Note 7
as to which the date is September 24, 1999
6
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
COMBINED BALANCE SHEETS
June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 19,318 $ 10,370
Marketable securities 140,625
Accounts receivable 1,525,449 1,446,258
Prepaid expenses and other current assets 118,513 98,095
---------- ----------
Total current assets 1,803,905 1,554,723
---------- ----------
PROPERTY AND EQUIPMENT, net 710,050 91,612
---------- ----------
OTHER ASSETS:
Due from affiliate 693,958 34,954
Due from officer 80,000 33,000
Intangible assets 135,572 143,641
Security deposits 35,110 22,206
---------- ----------
944,640 233,801
---------- ----------
$3,458,595 $1,880,136
========== ==========
LIABILITIES AND STOCKHOLDER'S AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Due to bank $ 987,418 $ 240,699
Accounts payable 413,315 413,178
Accrued expenses and other current liabilities 1,067,738 487,771
Capital lease obligation 10,905 17,570
---------- ----------
Total current liabilities 2,479,376 1,159,218
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, no par value, authorized 1,000,000 shares,
issued and outstanding 1,000 shares 1,000 1,000
Retained earnings 239,113 227,197
---------- ----------
Total stockholder's equity 240,113 228,197
---------- ----------
MEMBERS' EQUITY:
Equity 623,481 492,721
Accumulated other comprehensive income 115,625
---------- ----------
Total members' equity 739,106 492,721
---------- ----------
Total stockholder's and members' equity 979,219 720,918
---------- ----------
$3,458,595 $1,880,136
========== ==========
</TABLE>
See accompanying notes to combined financial statements.
7
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years Ended
June 30,
-------------------------
1999 1998
----------- -----------
REVENUES $19,806,393 $ 7,655,848
----------- -----------
OPERATING EXPENSES
Production costs 15,674,362 5,447,169
Sales expenses 637,416 221,439
General and administrative expenses 2,727,994 1,294,777
----------- -----------
Total operating expenses 19,039,772 6,963,385
----------- -----------
INCOME FROM OPERATIONS 766,621 692,463
OTHER INCOME 1,617 1,382
----------- -----------
NET INCOME $ 768,238 $ 693,845
=========== ===========
COMPREHENSIVE INCOME
NET INCOME $ 768,238 $ 693,845
OTHER COMPREHENSIVE INCOME,
Unrealized gain on marketable securities 115,625
----------- -----------
COMPREHENSIVE INCOME $ 883,863 $ 693,845
=========== ===========
See accompanying notes to combined financial statements.
8
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S AND MEMBERS' EQUITY
<TABLE>
<CAPTION>
Total
Accumulated Stockholder's
Other and
Common Retained Members' Comprehensive Members'
Stock Earnings Equity Income Equity
---------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES, July 1, 1997 $ 1,000 $ 74,149 $ -- $ -- $ 75,149
MEMBER LOANS PAYABLE
CONTRIBUTED TO
MEMBERS' EQUITY 62,610 62,610
MEMBERS' WITHDRAWALS (18,389) (18,389)
DIVIDENDS PAID (92,297) (92,297)
NET INCOME 245,345 448,500 693,845
---------- ---------- ---------- ---------- ----------
BALANCES, June 30, 1998 1,000 227,197 492,721 720,918
MEMBER LOANS PAYABLE
CONTRIBUTED TO
MEMBERS' EQUITY 4,193 4,193
MEMBERS' WITHDRAWALS (629,755) (629,755)
NET INCOME 11,916 756,322 768,238
OTHER COMPREHENSIVE INCOME,
Unrealized gain on marketable
securities 115,625 115,625
---------- ---------- ---------- ---------- ----------
BALANCES, June 30, 1999 $ 1,000 $ 239,113 $ 623,481 $ 115,625 $ 979,219
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
9
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 768,238 $ 693,845
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 81,429 12,707
Interest expense credited to loan payable, officer 4,193 1,338
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Increase in accounts receivable (79,191) (1,446,258)
Increase in prepaid expenses and other current assets (20,418) (92,921)
Increase in accounts payable 137 413,178
Increase in accrued expenses and other current liabilities 579,967 487,771
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,334,355 69,660
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (25,000)
Purchases of property and equipment (680,543) (74,652)
Advances to affiliate (659,004) (34,954)
Advances to officer (47,000) (33,000)
Payments for organizational costs (11,255) (50,430)
Payments for security deposits (12,904) (22,206)
Acquisition of business (100,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,435,706) (315,242)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVIITES:
Increase in due to bank 746,719 240,699
Payments on capital lease obligation (6,665) (4,241)
Dividends paid (92,297)
Advances from member 61,272
Members' capital withdrawals (629,755) (18,389)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 110,299 187,044
----------- -----------
NET INCREASE (DECREASE) IN CASH 8,948 (58,538)
CASH, beginning of year 10,370 68,908
----------- -----------
CASH, end of year $ 19,318 $ 10,370
=========== ===========
</TABLE>
See accompanying notes to combined financial statements.
10
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended June 30,
-------------------------
1999 1998
----------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Member loans payable contributed to members' equity $ 4,193 $ 62,610
=========== ===========
Equipment recorded under capital lease obligation $ -- $ 21,811
=========== ===========
See accompanying notes to combined financial statements.
11
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations - Consolidated Entertainment, LLC, (d/b/a Straw
Dogs) a television commercial production company and Spur & Buckle,
Inc. a motion picture development company (collectively the "Company")
are located in the United States.
Basis of Combination - The combined financial statements of the Company
include the accounts of Consolidated Entertainment, LLC, (d/b/a Straw
Dogs), a limited liability company, as of June 30, 1999 and 1998 and
for the year ended June 30, 1999 and the period February 14, 1998 (date
of inception) through June 30, 1998, and its affiliate through common
majority ownership, Spur & Buckle, Inc. as of June 30, 1999 and 1998
and for the years then ended. All significant intercompany transactions
and balances have been eliminated in combination.
Fair Value of Financial Instruments - The fair value of the Company's
assets and liabilities which qualify as financial instruments under
Statement of Financial Accounting Standards No. 107 approximates the
carrying amounts presented in the combined balance sheets.
Marketable Securities - The Company's marketable securities consist of
common stock. The securities are classified as available-for-sale and
are reported at their fair values as provided for under Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Available-for-sale
securities are carried at fair value with the unrealized gains reported
as a component of other comprehensive income.
Property and Equipment - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and
amortization are computed using the straight-line method over estimated
useful lives of 5 years or the term of the respective lease.
Intangible Assets - Organizational costs are amortized on a
straight-line basis over 5 years.
Goodwill represents the excess of cost over the fair market value of
net assets of an acquired business and is being amortized over 15
years. The Company monitors the cash flows of the acquired operations
to assess whether any impairment of recorded goodwill has occurred.
Revenue Recognition - Revenue is recognized in the month in which the
production is filmed. Revenue for services is recognized as the
services are performed.
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 expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes - The stockholder of Spur & Buckle, Inc. has elected to
treat the Company as an "S" Corporation for federal and state income
tax purposes. Accordingly, the individual stockholder is liable for tax
on corporate income and receives the benefit of corporate loss.
Consolidated Entertainment, LLC (d/b/a Straw Dogs) is a limited
liability company. Therefore, the members are liable for tax on income
and receive the benefit of losses. Effective January 1, 1999
Consolidated Entertainment, LLC (d/b/a Straw Dogs) elected to be taxed
as an "S" Corporation for federal and state income tax purposes.
12
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 2 - ACQUISITION:
In February 1998, Consolidated Entertainment, LLC acquired Straw Dogs
for a purchase price of $100,000, which was allocated to goodwill.
NOTE 3- PROPERTY AND EQUIPMENT:
Property and equipment consist of the following as of June 30, 1999 and
1998:
1999 1998
Computer equipment $ 71,127 $ 45,863
Office furniture and fixtures 192,842 26,004
Video vault equipment 35,910 24,596
Leasehold improvements 477,127
----------------------
777,006 96,463
Less accumulated depreciation
and amortization 66,956 4,851
----------------------
$ 710,050 $ 91,612
======================
NOTE 4- INTANGIBLE ASSETS:
Intangible assets consist of the following as of June 30, 1999 and
1998:
1999 1998
Organizational costs $ 62,752 $ 52,030
Goodwill 100,000 100,000
----------------------
162,752 152,030
Less accumulated amortization 27,180 8,389
----------------------
$ 135,572 $ 143,641
======================
13
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 5 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
At June 30, 1999 and 1998, accrued expenses and other current
liabilities consist of the following:
1999 1998
Accrued sales commissions $ 109,907 $ 78,854
Accrued production costs 364,557 151,986
Accrued director compensation 496,245 215,082
Accrued insurance 50,619 32,479
Other 46,410 9,370
-------------------------
$ 1,067,738 $ 487,771
=========================
NOTE 6 - DUE TO BANK:
Consolidated Entertainment, LLC has an informal agreement with a bank,
which allows the Company to overdraft its bank account, which bears
interest at 3% above the prime lending rate (7.75% at June 30, 1999).
NOTE 7 - RELATED PARTY:
The Company has advanced amounts to an officer and an affiliate, which
are non-interest bearing and have no specified repayment terms.
On September 24, 1999, the Company entered into an agreement to sell
the net assets of Straw Dogs and 100% of the stock of Spur & Buckle,
Inc. to Paradise Music & Entertainment, Inc. (Paradise) for an
aggregate of 1,441,000 shares of Paradise's common stock. The
transaction is pending stockholder approval by Paradise's stockholders
in addition to other customary closing conditions. The agreement
provides for, among other things, advances to the affiliate (a real
estate company owned by the members of the Company) of approximately
$700,000, to be partially repaid with the net capital of the Company
prior to the consummation of the sale. In addition, the affiliate is in
the process of refinancing the real estate owned and the proceeds of
this refinancing, not to exceed $500,000, will be used for repayment of
these advances. The remaining balance will be represented by a
promissory note. The note will require monthly payments of principal
and interest.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
The Company has various employment agreements with directors, which
expire through November 15, 1999, and provide for compensation
aggregating up to $86,000 per diem plus additional and special
compensation as defined in the agreements. One of the agreements
provides for a minimum annual guaranteed compensation of $150,000. For
the years ended June 30, 1999 and June 30, 1998, approximately
$4,175,000 and $1,020,000, respectively have been expensed under these
agreements. These costs are included in production costs.
14
<PAGE>
CONSOLIDATED ENTERTAINMENT, LLC,
(d/b/a STRAW DOGS) AND SPUR & BUCKLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED):
Spur & Buckle, Inc. has an employment agreement with its key officer.
The agreement provides for the officer to earn all amounts received by
the employer which are attributable to the services of the employee,
less all business expenses attributable to the development, production,
realization and collection of such amounts. For the years ended June
30, 1999 and 1998, approximately $755,000 and $695,000 respectively,
was charged to operations pursuant to this agreement.
The Company is a defendant in various lawsuits related to matters
arising in the normal course of business. It is the opinion of
management that the disposition of these lawsuits will not individually
or in the aggregate materially adversely affect the combined financial
position, results of operations or cash flows of the Company.
The Company leases space for its Los Angeles office on a monthly basis
and its New York office, which expires in 2001. The leases provide for
minimum annual rent plus adjustments for increases in the Consumer
Price Index and certain expenses over base period amounts. Aggregate
future minimum rental payments are as follows:
Year ending June 30,
2000 $ 50,400
2001 50,400
2002 4,200
-----------
$ 105,000
===========
Rent expense for the years ended June 30, 1999 and 1998 was
approximately $190,000 and $55,000, respectively.
NOTE 9 - MAJOR CUSTOMERS:
Approximately $2,900,000 of commercial production revenues for the year
ended June 30, 1998 was derived from three advertising agencies, each
of which exceeded 10% of the Company's revenues.
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
PARADISE MUSIC & ENTERTAINMENT, INC.
(Registrant)
February 10, 2000 By: /s/ Richard Flynn
----------------------------------------
Richard Flynn
Chief Operating Officer, Chief Financial
Officer, Treasurer and Secretary
