U.S. Securities and Exchange Commission
Washington D.C. 20549
Form 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number
333-16031
EMPIRE COMMUNICATIONS CORPORATION
(Name of small business issuer as specified in its charter)
Nevada 86-0793960
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4001 West 104th Terrace, Overland Park, Kansas 66207
(Address of principal executive offices)
913-469-1662
(Registrant's telephone no., including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes __X__ No ______
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of the Issuer's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for its most recent fiscal year: $ 0
The number of shares outstanding of the Issuer's common stock at December 31,
1998: 3,200,000
Transitional Small Business Disclosure Format: Yes _____ No X
1
<PAGE>
PART I
Item 1. Description of Business
The Company was incorporated in the State of Nevada on April 27, 1995,
under the name of Landmark Leasing, Corp. to engage in the equipment leasing
business. This business was not successful, and the Company sought new business
opportunities for its shareholders.
To pursue a new business opportunity in the economic consulting and
expert witness business, the Company changed its name to Litigation Economics,
Inc. on December 22, 1996, the same date on which it acquired all of the
outstanding stock of G.E.C., Inc. ("G.E.C."), an Idaho corporation formed to
engage in that business. (The description of the Company's business while
pursuing this business opportunity was set out in its Annual Report on Form
10-KSB for the year ended December 31, 1997.) This business proved to be only
marginally successful, and in connection with the new PaperDirect business
opportunity described below, the Company decided to sell G.E.C.
During the first quarter of 1998, the Company received the offer of a
new business opportunity to acquire PaperDirect, Inc. and Current Social
Expressions, businesses engaged in the wholesale distribution of specialty paper
and related products and greeting cards to the United States business community.
To accept this offer, the Company changed its name to Empire Communications
Corporation and sold a series of new preferred stock to an investor which
effected a change in control of the Company. The Company engaged in several
related material corporate actions, including a 2-for-1 forward stock split and
the sale of the G.E.C. subsidiary to a shareholder of the Company in return for
the cancellation of certain shares and a small amount of cash. During the second
quarter of 1998, the Company was unable to obtain the assurances and financial
information it needed with respect to the PaperDirect businesses, and the
parties to the PaperDirect business opportunity agreed to rescind the Company's
involvement. The Company surrendered its PaperDirect acquisition contract rights
in return for the rescission of the new preferred stock and the related change
in control. The 2-for-1 stock split stayed in place, and the Company rescinded
its sale of G.E.C. (The PaperDirect transactions were described in detail in the
Company's Current Reports on Form 8-K dated March 27, 1998, May 20, 1998 and
July 20, 1998; and in the Company's Quarterly Reports on Form 10-QSB dated May
14, 1998 and August 13, 1998.) These rescissions became effective July 14, 1998.
In December, 1998, the Company sold G.E.C. for $16,911.22 cash, and
currently has no business operations. The Company is actively seeking a
successful business opportunity through technology acquisition, merger with a
going concern or otherwise.
During its approximately four years of operations, the Company has
generated no significant revenues and continues to be considered a development
stage company. The Company raised funds at first from its founders, and then
from a public offering in July, 1997. Since its organization, the Company has
attempted to develop three different business opportunities (leasing, economic
consulting and specialty business paper goods) but these efforts have so far
proven unsuccessful.
Following the rescission of the PaperDirect transactions and change in
control, the Company has moved its executive offices to Overland Park, Kansas in
space provided by the Company's new Chief Executive Officer and sole Director,
Norman Petersen, at no cost to the Company.
2
<PAGE>
Item 2. Properties
The Company has no real property assets nor does it have any leased
space. It currently operates out of the offices of its President in Overland
Park, Kansas. The address of the Company appears on the cover page of this
report.
Item 3. Legal Proceedings
The Company is not a party to any material pending legal proceedings
and, to the best of its knowledge, no action by or against the Company has been
threatened.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of the fiscal year ending December 31, 1998.
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information
The Company's Common Stock has not been listed on any bulletin board or
exchange and there is currently no public trading market for the Company's
common stock.
(b) Stockholders
As of December 31, 1998, there were approximately 60 record holders of
the Company's Common Stock. No other class of stock is outstanding.(1) at this
time.
(c) Dividends
The Company has not previously paid any cash dividends on its
outstanding equity securities and does not anticipate or contemplate paying
dividends on its outstanding common stock in the foreseeable future. Management
intends to utilize all available funds for the development of the Company's
business. The only legal restrictions that limit the Company's ability to pay
dividends are those restrictions imposed by Nevada corporate law. No dividends
or other distributions may be made which would render the Company insolvent or
reduce assets to less than the sum of its liabilities plus the amount needed to
satisfy any outstanding liquidation preferences.
- --------
1 The Company issued a class of convertible preferred stock in connection with
the PaperDirect business opportunity referenced above. In connection with the
rescission of that business opportunity and related actions, this series of
convertible preferred stock was cancelled and rescinded.
3
<PAGE>
PART II
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction
with the Company's financial statements and the notes associated with them
contained elsewhere in this report.
Liquidity and Capital Resources
As of December 31, 1998, the Company had no cash or other current
assets, and was not engaged in any fund raising activities. The Company
presently has no commitment or arrangements for additional financing from any
source. To pursue any new business opportunity, the Company would need to raise
additional funds through the sale of equity, or would need to use its equity to
acquire a business with cash on account.
Year 2000 Issues
The Company uses personal computers to maintain its records. The
Company has not tested its personal computers for compliance with Year 2000 date
change issues. If the Company's records are lost as a result of computer
failures associated with date changes over the next 18 months, it would cause a
significant adverse impact on the Company and its shareholders.
The Company also obtains goods and services, including basic utility
services. The companies who provide these services to the Company have their own
computer systems, both data processing and machine controllers, and they also
face problems from date changes over the next 18 months. The Company has not
surveyed its suppliers and is not aware of the level of compliance of its
suppliers' computer systems. The failure of the Company's suppliers of goods and
services to provide such goods and services to the Company as a result of Year
2000-related computer problems would result in a material adverse impact on the
Company.
Results of Operations. Fiscal Year Ended December 31, 1998 Compared to
Fiscal Year Ended December 31, 1997
Operating revenue for fiscal year 1998 was $0, the same results as
experienced in 1997. (Note that the sale of the Company's G.E.C., Inc.
subsidiary in late 1998 required a restatement of the Company's financial
statements for 1997 and 1998. During 1997 and 1998, all of the Company's then
reported revenues came from G.E.C.) The Company has had no other business
operations, and has no cash or other earning assets.
Operating expenses for fiscal year 1998 totaled $22,492, up from the
$19,959 level experienced in 1997. The higher expenses were incurred in
connection with the abortive PaperDirect transaction. These expenses consumed
all of the cash held by the Company as well as the proceeds of the Company's
sale of G.E.C. in late 1998. The bulk of these expenses are non recurring.
General and administrative costs for fiscal year 1998 were $22,492 with $19,959
in 1997 (as restated for the sale of G.E.C.; see footnote 1)
Item 7. Financial Statements
The Company's audited financial statements are attached to the end of
this report.
4
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
(a) Directors and Executive Officers
The following table sets forth the directors and executive officers of
the Company, their ages, and all offices and positions with the Company. Each
director is elected for a period of one year and thereafter serves until his
successor is duly elected by the stockholders and qualifies. Officers and other
employees serve at the will of the Board of Directors.
Name of Officer or Director Age Positions with Company and Biography
Norman L. Petersen 58 President and Director of the
Company. Mr. Petersen is currently a
partner in Owen & Associates IBG,
LLC, a consulting and investment
company. He is also chairman and CEO
of a full service mortgage banking
company with 105 employees
nationwide. Mr. Petersen was
president and CEO from 1988-1996 of
Advanced Financial, Inc., the parent
company of AFI Mortgage Corp., which
is a public company trading on the
American Stock Exchange. Other
professional experience include
being on the Board of Directors of
Red Oak Hereford Farms, Inc.,
financial consulting and director of
Miller Fed Lot, a large commercial
feedlot for which he supervised the
credit division which loaned
$25,000,000 a month to borrowers who
owned cattle in the lot, director
and majority shareholder of the
holding company that owned Platte
Valley Bank and Trust Company, a
commercial bank in central Nebraska
and Vice-President of Lincoln
Production Credit Association.
(b) Involvement in Certain Legal Proceedings
None
(c) Compliance with Section 16(a) of the Exchange Act
The issuer is not subject to the provisions of Section 16(a).
Item 10. Executive Compensation
The Company has not paid compensation to any of its officers or
directors.
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
------------------------------- ------------------------
Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------
Name and Salary Bonus Other Restricted Securities Long-term All Other
Principal Position Annual Stock Awards Underlying Incentive Compensation
Compensation Options/SARs Payout
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cornelius Hofman 0 0 0 0 0 0 0
President and Chief
Executive Officer
(1/1/98 -3/31/98)
- ---------------------------------------------------------------------------------------------------------------------
Louis A. Farris, Jr. 0 0 0 0 0 0 0
President and Chief
Executive Officer
(3/31/98 -5/22/98)
- ---------------------------------------------------------------------------------------------------------------------
Norman L. Petersen 0 0 0 0 0 0 0
President and Chief
Executive Officer
5/22 /98 - present
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Stock Option and Stock Appreciation Right Plans
The Company adopted its 1996 Stock Option Plan allowing the Company to
offer its key employees, officers, directors, consultants and sales
representatives, an opportunity to acquire a proprietary interest in the
Company. The various types of incentive awards which may by provided under the
Stock Option Plan will enable the Company to respond to changes in compensation
practices, tax laws, accounting regulations and the size and diversity of its
business. The total number of shares reserved and available for distribution
under the 1996 Plan is 800,000 (adjusted for the 1998 2-for-1stock split.) The
1996 Plan is administered by the Board of Directors which determines the persons
to whom awards will be granted, the number of awards to be granted and the
specific terms of each grant, including the vesting thereof, subject to the
provision of the 1996 Plan. In connection with the stock options, the exercise
price of each grant is to be determined by the Board of Directors at the time of
the grant and may not be less than 100% of the fair market value of the Common
Stock on the date of the grant or 110% of the fair market value of the Common
Stock on the date of the grant for 10% Stockholders. The aggregate fair market
value of Stock (determined at the time of grant of the Option) with respect to
which Incentive Stock Options become exercisable by a Holder during any calendar
year shall not exceed $100,000. The Option holders will not be protected against
dilution if the Company should issue additional shares of common stock in the
future. Neither the Options, nor the shares underlying the Options have
preemptive rights. As of December 31, 1998, the Company has not issued any
Options pursuant to the Plan.
The Company has no employment agreements, and has not engaged in any
repricing of stock options.
6
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
current beneficial ownership of the Company's common stock as of December 31,
1998 of each person known to the Company to be the beneficial owner of more than
five percent (5%) of said securities, each director of the Company, and all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Name and Title of Amount and Nature of Percent
Address Securities Beneficial Ownership of Class
<S> <C> <C> <C>
Norman L. Petersen Common 193,000 6.03
4001 W. 104th Terrace
Overland Park, KS 66207
All officers and Common 193,000 6.03
directors as a group
(1 person)
Cornelius A Hofman II Common 729,000 22.78
227 South Ninth Ave.
Pocatello, ID 83201
Stacey A. Hofman Common 735,000 22.96
227 South Ninth Ave.
Pocatello, ID 83201
David N. Nemelka Common 865,000*, ** 27.03
897 S. Artistic Cr.
Springville, UT 84663
</TABLE>
* Owned or controlled by David N. Nemelka or entities controlled
by David N. Nemelka.
** After December 31, 1998, Mr. Nemelka acquired additional
shares of the Company's common stock in a private transaction
not involving any of the other above named shareholders. As of
March 16, 1999, Mr. Nemelka beneficially owned 1,115,000
shares, with a concomitant increase in his relative percentage
ownership in the Company.
Item 12. Certain Relationships and Related Transactions
The Company has entered into certain transactions with officers,
directors or affiliates of the Company which include the following:
-Between December 22, 1996 and March 15, 1998, the Company used as its
principal executive office, the home office of Cornelius A. Hofman II,
President, (227 South Ninth Avenue, Pocatello, Idaho 83201) in Pocatello, Idaho.
The Company paid approximately $2,100 to improve Mr. Hofman's home office in
exchange for use of the office space until the Company's business requires more
extensive administrative facilities. There was no formal written agreement for
the use of such facilities.
7
<PAGE>
In 1997, the Company subcontracted some consulting work to General
Economic Consulting, Inc., a company controlled by Cornelius A. Hofman, then a
director of the Company. As of December 31, 1997, General Economic Consulting,
Inc. received $2,544 in fees from said referral of business.
-The Company is currently using office space provided by its President
and sole director, Norman L. Petersen. Mr. Petersen is not charging the Company
for this office usage, although Mr. Petersen reserves the right to seek
reimbursement and compensation from the Company for this usage should the
Company become able to pay such amounts.
PART IV
Item 13. Exhibits and Reports on Form 8-K
Exhibits
Exhibit Title of Document Location
Reference
Number
3.01 Articles of Incorporation Incorporated by
Reference*
3.02 By-Laws Incorporated by
Reference*
10.01 Agreement of Sale of G.E.C., Inc. Filed Herewith
23.01 Consent of Accountants Filed Herewith
27.01 Financial Data Filed Herewith
99.01 1996 Stock Option Plan Incorporated by
Reference*
* Incorporated by reference from the registrants registration statement
on Form SB-2, as amended and filed with the Commission, SEC file
number 333-16031.
Reports on Form 8-K
The Company filed current reports on Form 8-K during 1998 on the
following dates, all of which reports are available under the Company's name on
the Commission's website, www.sec.gov:
March 27, 1998
May 20, 1998
July 20, 1998
July 17, 1998 (amendment)
SIGNATURES
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, thereunto duly authorized.
EMPIRE COMMUNICATIONS CORPORATION DATE:
By /s/ Norman L. Petersen March 16, 1999
----------------------
Norman L. Petersen, Director and President
8
<PAGE>
EMPIRE COMMUNICATIONS CORPORATION
(Formerly Litigation Economics, Inc.)
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1998
F-1
<PAGE>
C O N T E N T S
Independent Auditors' Report............................................ F-3
Balance Sheet........................................................... F-4
Statements of Operations................................................ F-5
Statements of Stockholders' Equity (Deficit)............................ F-6
Statements of Cash Flows................................................ F-7
Notes to the Financial Statements....................................... F-8
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Empire Communications Corporation
(Formerly Litigation Economics, Inc.)
Salt Lake City, Utah
We have audited the accompanying balance sheet of Empire Communications
Corporation (formerly Litigations Economics, Inc.) (a development stage company)
as of December 31, 1998 and the related statements of operations, stockholders'
equity (deficit) and cash flows for the years ended December 31, 1998 and 1997
and from inception on April 27, 1995 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide 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 Empire Communications
Corporation (formerly Litigation Economics, Inc.) (a development stage company)
as of December 31, 1998 and the results of its operations and its cash flows for
the years ended December 31, 1998 and 1997 and from inception on April 27, 1995
through December 31, 1998 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 4. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
January 15, 1999
F-3
<PAGE>
<TABLE>
<CAPTION>
EMPIRE COMMUNICATIONS CORPORATION
(Formerly Litigation Economics, Inc.)
(A Development Stage Company)
Balance Sheet
ASSETS
December 31, 1998
CURRENT ASSETS
<S> <C>
Cash $ -
-----------------
Total Current Assets -
-----------------
TOTAL ASSETS $ -
=================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 506
-----------------
Total Liabilities 506
-----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock; authorized 5,000,000 shares at $0.001
par value; no shares issued or outstanding -
Common stock; authorized 50,000,000 shares at $0.001
par value; 3,200,000 shares issued and outstanding 3,200
Additional paid-in capital 102,800
Deficit accumulated during the development stage (106,506)
-----------------
Total Stockholders' Equity (Deficit) (506)
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ -
=================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
EMPIRE COMMUNICATIONS CORPORATION
(Formerly Litigation Economics, Inc.)
(A Development Stage Company)
Statements of Operations
From
Inception on
April 27,
For the Years Ended 1995 Through
December 31, December 31,
1998 1997 1998
------------------ ---------------- -----------------
<S> <C> <C> <C>
REVENUE $ $ $
------------------ ---------------- -----------------
EXPENSES
General 22,492 19,959 47,576
------------------ ---------------- -----------------
Total Expenses 22,492 19,959 47,576
------------------ ---------------- -----------------
LOSS FROM OPERATIONS (22,492) (19,959) (47,576)
------------------ --------------- -----------------
DISCONTINUED OPERATIONS
Loss on sale of subsidiary (58,930) (58,930)
------------------ --------------- -----------------
Total Other Expense (58,930) (58,930)
------------------ --------------- -----------------
NET LOSS $ (81,422) $ (19,959) $ (106,506)
================== =============== =================
BASIC NET LOSS PER SHARE $ (0.03) $ (0.01)
================== ===============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,200,000 2,933,000
================== ===============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
EMPIRE COMMUNICATIONS CORPORATION
(Formerly Litigation Economics, Inc.)
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, April 27, 1995 $ $ $ $
Common stock issued for
cash at $0.001 per share 2,000,000 2,000 (1,000) -
Recapitalization of G.E.C., Inc. 1,000,000 1,000 4,000 -
Net loss for the period ended
December 31, 1996 (5,125)
----------- --------- ---------- -----------
Balance, December 31, 1996 3,000,000 3,000 3,000 (5,125)
Common stock issued for
cash at $1.00 per share 200,000 200 99,800 -
Net loss for the year ended
December 31, 1997 (19,959)
----------- --------- ---------- -----------
Balance, December 31, 1997 3,200,000 3,200 102,800 (25,084)
Net loss for the year ended
December 31, 1998 (81,422)
----------- --------- ---------- -----------
Balance, December 31, 1998 $ 3,200,000 $ 3,200 $ 102,800 $ (106,506)
=========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
EMPIRE COMMUNICATIONS CORPORATION
(Formerly Litigation Economics, Inc.)
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
April 27,
For the Years Ended 1995 Through
December 31, December 31,
1998 1997 1998
------------------ ---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (81,422) $ (19,959) $ (106,506)
Adjustments to reconcile net loss to net
cash used by operating activities:
Loss on sale of subsidiary 58,930 - 58,930
Expenses paid in conjunction with
sale of subsidiary 16,912 - 16,912
Increase (decrease) in accounts payable 506 (2,372) 506
------------------ ---------------- -----------------
Net Cash (Used) by Operating Activities (5,074) (22,331) (30,158)
------------------ ---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in subsidiary (75,842) (75,842)
------------------ ---------------- -----------------
Net Cash (Used) by Investing Activities (75,842) (75,842)
------------------ ---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash acquired in recapitalization of subsidiary - - 5,000
Common stock issued for cash 101,000 101,000
------------------ ---------------- -----------------
Net Cash Provided by Financing Activities 101,000 106,000
------------------ ---------------- -----------------
NET INCREASE (DECREASE) IN CASH (5,074) 2,287 -
CASH AT BEGINNING OF PERIOD 5,074 2,247
------------------ ---------------- -----------------
CASH AT END OF PERIOD $ $ 5,074 $ -
================== ================ =================
Cash Paid for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-7
<PAGE>
EMPIRE COMMUNICATIONS CORPORATION
(Formerly Litigation Economics, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operating History
The Company was incorporated in the State of Nevada on April 27,
1995, under the name of Landmark Leasing, Corp.
The Company planned on operating as a leasing company of
residential property, commercial property, vehicles, and related
activities. The Company has discontinued pursuing any of these
activities and accordingly remains a development stage company.
The Company changed its name to Litigation Economics, Inc. on
December 22, 1996. The Company changed its name to Empire
Communications Corporation on March 23, 1998.
On December 22, 1996, the Company acquired all of the outstanding
stock of G.E.C., Inc., (the Subsidiary) for 1,000,000 shares of
the Company's common stock valued at $.001 per share or $1,000
which represented the capital contributed to the subsidiary. The
acquisition of the Subsidiary was recorded as a recapitalization
of the Subsidiary, whereby the acquired company is treated as the
surviving entity for accounting purposes. The Subsidiary was
formed on July 31, 1996 in the State of Idaho. The Subsidiary was
engaged in the field of economic advising and consulting and
commenced principal business operations during 1997. Accordingly,
the subsidiary was also considered a development stage company. On
December 1, 1998, the Company sold all of the outstanding stock of
the Subsidiary for $16,911.
Summary of Significant Accounting Policies
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has selected a December 31, year
end.
b. Basic Net Loss Per Share
The computation of basic loss per share of common stock is based
on the weighted average number of shares outstanding at the date
of the consolidated financial statements.
F-8
<PAGE>
EMPIRE COMMUNICATIONS CORPORATION
(Formerly Litigation Economics, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Provision for Taxes
At December 31, 1998, the Company has net operating loss
carryforwards of approximately $104,000 that may be offset against
future taxable income through 2013. No tax benefit has been
reported in the consolidated financial statements, because the
Company believes there is a 50% or greater chance the operating
loss carryforwards will expire unused. Accordingly, the potential
tax benefits of the operating loss carryforwards are offset by a
valuation allowance of the same amount.
d. Cash and Cash Equivalents
For purposes of the financial statement presentation, the Company
considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
e. 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.
NOTE 2 - COMMON STOCK OPTIONS
In October of 1996, the Board of Directors adopted the 1996 Stock
Option Plan (the "Plan"), allowing the Company to offer its key
employees, officers, directors, consultants, and sales
representatives an opportunity to acquire a proprietary interest
in the Company. The total number of shares reserved and available
for distribution under the Plan were 400,000 shares. These shares
will underlie the Options issued by the Company pursuant to the
Plan. The Option holders will not be protected against dilution if
the Company should issue additional shares of common stock in the
future. Neither the Options, nor the shares underlying the Options
have pre-emptive rights. The plan was amended on March 13, 1998 to
increase the shares available under the plan to 800,000 shares. As
of December 31, 1998, no activity has transpired with regard to
the Plan.
F-9
<PAGE>
EMPIRE COMMUNICATIONS CORPORATION
(Formerly Litigation Economics, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company does not have significant cash and has not
had significant operations. To date, the Company has been able to
cover operating costs with existing financial resources. The
Company is seeking a merger with an existing, operating Company.
In the interim, officers of the Company have committed to make
capital contributions or advances to the Company should additional
funds be needed to pay operating expenses.
NOTE 4 - STOCK TRANSACTIONS
On March 13, 1998, the Company approved a 1-for-2 stock split in
the form of a 100% stock dividend paid to shareholders of record
on March 1, 1998. These financial statements have been
retroactively restated to reflect the change.
NOTE 5 - DISCONTINUED OPERATIONS
On December 31, 1998 the Company agreed to sell all of its
ownership of G.E.C., Inc. to a third party for $16,911 in the
form of the assumption of the debts of the Company.
F-10
GEC, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into this 1st day of December, 1998, by and
between Empire Communications Corporation (hereinafter referred to as "Seller"
or "Empire") and Dassity, Inc. (referred to as "Buyer" or "Dassity").
WITNESSETH:
WHEREAS, Empire owns all of the outstanding, shares of stock
in GEC, Inc., a Utah corporation, (referred to as "GEC"); and
WHEREAS, Dassity desires to purchase and Empire desires to
sell all of Empire's shares of stock in GEC (said shares are hereinafter
referred to as "GEC's Shares"); and
WHEREAS, the parties desire to set forth in writing their
agreement and understanding with respect to said purchase and sale of GEC's
Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and the promises, representations, warranties, and covenants of
the parties set forth below and all other good and valuable consideration the
sufficiency of which is hereby acknowledged, the parties intending to be legally
bound do hereby agree as follows:
AGREEMENT:
1. Definitions. For purposes of this Agreement, the
capitalized terms in this Agreement have the meanings stated in this Section 1:
a. "Agreement" shall mean this Stock Purchase
Agreement.
b. "GEC" shall mean GEC, Inc., an Idaho
corporation.
c. "Closing" and "Closing Date" shall have the
meaning set forth in Section 6. below.
d. "Liens" shall mean mortgages, deeds of trust,
pledges, taxes, security interests, liens,
leases, licenses, liabilities, encumbrances,
costs, charges and claims of any nature
whatsoever, direct or indirect, whether accrued,
absolute, contingent or otherwise (including
without limitation, any agreement to give any of
the foregoing).
e. "Purchase Price" shall mean the amount to be
paid to Empire for GEC's Shares as set forth
in Section 3. below.
f. "Related Party" shall mean a person described
in Section 267(b) of the Internal Revenue Code
of 1986, as amended.
2. Sale/Purchase of GEC's Shares. Seller agrees to sell
and does hereby sell, and the Buyer agrees to purchase and do hereby purchase,
GEC's Shares, free and clear of any Liens, upon the terms and conditions set
forth herein.
1
<PAGE>
3. Purchase Price. The purchase price (the "Purchase
Price") to be paid to Seller for GEC's Shares shall be Sixteen Thousand One
Hundred Thirty-Four and 22/100 Dollars ($16,911.22). If there are any Liens
attached to or encumbering GEC's Shares at Closing, then the Purchase Price
shall be reduced by the amount of such Liens.
4. Payment of Purchase Price. The Purchase Price shall
be paid on or before December 31, 1998 in one or more cash payments. As long as
the total Purchase Price is paid prior to December 31, 1998, the unpaid portion
of the Purchase Price between the date of this Agreement and the date of payment
shall bear no interest.
5. Closing. The closing ("Closing") of the transactions
contemplated by this Agreement shall take place at 10:00 a.m. local time, on the
31st day of December, 1998 (the "Closing Date"), or on such other date to which
the parties shall agree. The place of Closing shall be at the offices of
McKinley Capital in Utah County, Utah.
6. Empire's Obligations at Closing. At the Closing,
Empire shall deliver to Dassity the certificates for GEC's Shares duly endorsed
in blank or accompanied by a stock power duly executed in favor of Dassity,
together with a copy of resolutions approving the sale of GEC's Shares by the
Empire Board of Directors.
7. Dassity's Obligations at Closing. At or before the
Closing, Dassity shall pay to the order of Empire the full Purchase Price:
8. Representation and Warranty. Empire represents and
warrants to Dassity that Empire is unequivocally the record and beneficial owner
of all of GEC's Shares, free and clear of any liens, pledges, encumbrances,
agreements, equities, options, claims, security interests, restrictions, or
charges.
9. Paragraph and Other Headings. The paragraph and other
headings of this Agreement are for reference purposes only and shall not be
deemed to alter the meaning or intent of the language of this Agreement
exclusive of such headings.
10. Default. It is understood and agreed that time is of
the essence of this Agreement. If the Buyer shall default or fail to perform
fully and promptly any of the terms of this Agreement, this Agreement shall be
null and void.
11. Entire Agreement. This Agreement constitutes the
entire Agreement by and between the parties hereto with respect to the subject
matter hereof and supersedes all prior negotiations between these parties and
any other statement whether oral or written shall not be deemed a part of this
Agreement unless specifically incorporated herein by reference.
12. Severability. Each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement be deemed to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13. Governing Law. This Agreement and documents to be
executed pursuant hereto shall be construed in accordance with and governed by
the laws of the State of Utah.
14. Notices. Any notice or other communication required
or permitted hereunder shall be sufficiently given if delivered personally or
sent by registered or certified mail, postage prepaid and return receipt
requested, addressed as follows:
If to Empire:
Empire Communications Corporation
4001 West 104th Terrace
Overland Park, Kansas 66207
2
<PAGE>
or such other address(es) as Empire may advise Dassity in writing.
If to Dassity:
Dassity, Inc.
55 West 200 North
Provo, Utah 84601
or such other address(es) as Dassity may advise Empire in writing.
15. Modifications. This Agreement may not be modified,
altered or amended in any manner unless such modification, alteration or
amendment shall be reduced to writing and executed by all parties to this
Agreement.
16. Inurement. This Agreement shall inure to the benefit
of the respective parties hereunder, devisees, personal representatives,
successors and assigns.
17. Attorney's Fees. If any party to this Agreement shall
bring suit against the other party as a result of any alleged breach or failure
by such other party to fulfill or perform any covenants or obligations under
this Agreement, in such event, the prevailing party shall, in addition to any
other relief granted or awarded by the Court, be entitled to judgment for
reasonable attorneys' fees incurred by the prevailing party by reason of such
action and all costs of suit and those incurred in preparation thereof, at both
trial and appellate levels.
18. Construction. As used in this Agreement, the
masculine, feminine or neuter gender and the singular or plural numbers shall
each be deemed to include the other whenever the context so indicates. This
Agreement shall be construed as a whole and in accordance with its fair meaning
and without regard to any presumption or other rule requiring construction
against the party preparing this Agreement or any part hereof.
19. No Waiver. The waiver by one party of the
performance of any covenant or condition hereunder shall not invalidate this
Agreement, nor shall it be considered to be a waiver by such party of any
covenant or condition hereunder. The waiver by either or both parties of the
time for performing any act hereunder shall not be deemed a waiver of any other
act or an identical act required to be performed at a later time. The exercise
of any remedy provided by law and the provisions of this Agreement for any
remedy shall not exclude other remedies unless they are expressly excluded.
IN WITNESS WHEREOF, the Parties have executed this Agreement in their
respective fiduciary capacity on the day and year first above written.
Dassity Inc.:
/s/ Brenda Hall
----------------------
Brenda Hall, President
Empire Communications Corporation:
/s/ Norman L. Petersen
-----------------------
Norman Petersen, President
3
Board of Directors
Empire Communications Corporation
Salt Lake City, Utah
We consent to the use in the Registration Statement of Empire Communications
Corporation on Form 10-KSB, of our report dated January 15, 1999 of Empire
Communications Corporation for the year ended December 31, 1998, which are part
of the Registration Statement, and to all references to our firm included in
this Registration Statement.
Jones, Jensen & Company
Salt Lake City, Utah
March 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 506
<BONDS> 0
0
0
<COMMON> 3,200
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,492
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (81,422)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81,422)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
