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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB/A
(MARK ONE)
[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
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NO. 333-26307
TEAM COMMUNICATION GROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
CALIFORNIA 954519215
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12300 WILSHIRE BLVD., SUITE 400,
LOS ANGELES, CALIFORNIA 90025
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(310) 442-3500
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS
COMMON STOCK
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject of such filing requirements for the past
90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Registrant's revenues for its most recent fiscal year were $13,581,900.
The aggregate market value of the voting stock held by non-affiliates
computed based on the average of the closing bid and asked prices of such stock
as of April 9, 1999, was approximately $8,250,000.
The number of shares outstanding of the issuer's common equity as of April
9, 1999, was 3,127,161 shares of common stock, no par value.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Documents Incorporated by Reference: None
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our Common Stock began to trade on the NASDAQ SmallCap Market under the
symbol "TMTV" in July, 1998.
The following table sets forth the high and low last sales prices as
reported on the NASDAQ SmallCap Market for the time period that our Common
Stock has been publicly traded.
<TABLE>
<CAPTION>
SALES PRICES FOR
COMMON STOCK
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QUARTER ENDING HIGH LOW
-------------- ------ ------
<S> <C> <C>
September 30, 1998.......................................... 5.00 1.563
December 31, 1998........................................... 2.75 1.469
</TABLE>
HOLDERS
The approximate number of record holders of our Common Stock as of April 9,
1999, was 47, as well as 55 in street name.
DIVIDENDS
We have never paid cash dividends on our Common Stock. We anticipate that
any future earnings, of which there is no assurance, will be retained for
development of our businesses, and, therefore, it can be expected that no
dividends on our Common Stock will be declared in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
(a) Between September 1998 and January 1999 we issued shares of our Common
Stock to the following individuals and entities: (i) Fifty Nine Thousand
(59,000) shares to Delbert Reedy, an individual ("Reedy") (the "Reedy Shares"),
pursuant to the conversion of that certain promissory note, dated May 29, 1998,
payable to Reedy in the amount of Fifty Thousand Dollars ($50,000) (the "Reedy
Note"); (ii) Fifty Nine Thousand (59,000) shares to the Carter Family Trust
("Carter") (the "Carter Shares"), pursuant to the conversion of that certain
promissory note, dated May 29, 1998, payable to Carter in the amount of Fifty
Thousand Dollars ($50,000) (the "Carter Note"); (iii) Thirty One Thousand
(31,000) shares to Claudio Nessi, an individual ("Nessi") (the "Nessi Shares"),
pursuant to that certain promissory note, dated June 18, 1998 , payable to Nessi
in the amount of Fifty Thousand Dollars ($50,000) (the "Nessi Note"), (iv) 1,000
shares for Dr. Michael Berlin in connection with certain accommodations made to
Dr. Michael Berlin (the "Berlin Shares"), and (v) 50,000 shares (the "Marathon
Shares") to Marathon Consulting, Inc. ("Marathon") and 283,000 shares (the "IRS
Shares") to Investor Relations Services, Inc. ("IRS") (collectively, the
Marathon Shares and the IRS Shares are referred to herein as the "IR Shares") in
connection with the Consulting Agreement, dated as of November 17, 1998 with
Investor Relations Services, Inc., (The Reedy Shares, the Carter Shares, the
Nessi Shares, the Berlin Shares, and IR Shares the are hereinafter sometimes
collectively referred to as the "Shares," and Reedy, Carter, Nessi, Berliner,
Marathon and IRS are hereinafter sometimes collectively referred to as the
"Recipients"). The issuance of the Shares to the Recipients were made pursuant
to non-public transactions with existing security holders or service providers,
and were exempt from registration under Section 4(2) of the Securities Act of
1933.
(b) During 1998, we granted warrants to purchase our Common Stock to
the following individuals and entities: (i) 22,000 and 10,000 warrants,
respectively, to Mansion House International and Danny Chan, respectively,
exercisable at $2.75 per share (the "Mansion/Chan Shares"), (ii) 5,000 warrants
to Hedblom Partners, exercisable at $3.50 per share (the "Hedblom Shares"),
(iii) 200,000 warrants to Glen Michael Financial (the "Glen Michael Shares");
100,000 exercisable at $1.62 per share, 75,000 exercisable at $3.00 per share
and 25,000 exercisable at $3.25 per share, and (iv) 10,000 warrants to Ralph
Olsen, exercisable at $2.00 per share (the "Olsen Shares"), to such parties for
services provided to us. In addition, we granted (x) 121,000 and 10,000
warrants, respectively, to Chase Financial Limited and Robert Herskowitz,
respectively, exercisable at $1.62 per share (the "Chase/Herskowitz Shares") and
(y) an aggregate of 20,000 warrants, 5,000 each to Investor Relations Services,
Aurora Holdings, Amber Capital and Affiliated Services, respectively (the
"IRS/Aurora Shares"), in connection with debt that was raised. We also issued to
Michael Jay Solomon and Seth Wellenson, 30,000 warrants each, exercisable at
$2.50 per share (the "Solomon Shares" and the "Willenson Shares", respectively,
for agreeing to serve as members
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of our Board of Directors. The issuance of the Mansion/Chan Shares, the
Hedblom Shares, the Glen Michael Shares, the Olsen Shares, the Chase/Herskowitz
Shares, the IRS/Aurora Shares, the Solomon Shares and the Willenson Shares were
made pursuant to non-public transactions with existing security holders, service
providers or outside members of the Board of Directors, and were exempt from
registration under Section 4(2) of the Securities Act of 1933.
(c) On January 30, 1999, we entered into a Securities Purchase Agreement
(the "Securities Purchase Agreement") with Austinvest Anstalt Balzers, Esquire
Trade & Finance Inc., Amro International, S.A. and Nesher Inc. (collectively,
the "Purchasers") pursuant to which we agreed to sell up to and issue to the
Purchasers, and the Purchasers agreed to purchase from us, an aggregate
principal amount of up to $2,000,000 of 8% Convertible Debentures (the
"Debentures") and Warrants (the "Warrants") to purchase up to 200,000 shares of
Common Stock. The sale is to take place in up to four separate trades, the first
of which (the "Initial Closing") occurred on January 30, 1999. On that date, we
sold, for an aggregate purchase price of $850,000, $850,000 principal amount of
Debentures and 85,000 Warrants.
The Debentures are convertible into shares of Common Stock at the option of
the Purchasers at any time after the Initial Closing. The conversion price for
each Debenture in effect on any conversion date will be the lesser of (A) an
amount equal to 90% of the average per share market value for five consecutive
trading days immediately prior to the Initial Closing date or (B) an amount
equal to 85% of the per share market value for the trading day having the lowest
per share market value during the five trading days prior to the conversion
date. Purchasers effect conversions by surrendering the Debentures to be
converted, together with the form of conversion notice attached thereto. If not
otherwise converted, the Debentures mature on January 27, 2002. The Warrants are
exercisable at an exercise price equal to 110% of the Per Share Market Value as
of the last Trading Day prior to the date of the issuance of the Warrants. This
price, which is subject to adjustment in the event of certain dilutive events,
was $1.96 as of the Initial Closing. The Warrants expire three years after their
date of issuance.
Without shareholder approval, we cannot issue securities representing more
than 20% of our outstanding shares of Common Stock at a price below market value
or book value pursuant to applicable NASDAQ rules. We intend to immediately seek
shareholder approval ("Shareholder Approval") at a meeting of our shareholders
held in accordance with our articles of incorporation and by-laws, for the
issuance by us of all of the shares of Common Stock potentially called for as a
consequence of the conversion of the Debentures into shares of Common Stock at a
price less than the greater of the book or market value on the Original Issue
Date as and to the extent required pursuant to Rule 4460(i) of The NASDAQ Stock
Market, Inc.'s Marketplace Rules (or any successor or replacement provision
thereof). If on the Conversion Date applicable to any conversion, (A) the Common
Stock is then listed for trading on the NASDAQ National Market, the New York
Stock Exchange, the American Stock Exchange or The NASDAQ SmallCap Market, (B)
the Conversion Price then in effect is such that the aggregate number of shares
of Common Stock that would then be issuable upon conversion of all the
outstanding Debentures, together with any shares of Common Stock previously
issued upon conversion of Debentures, would equal or exceed 20% of the number of
shares of Common Stock outstanding on the Original Issue Date, and (C) we have
not previously obtained Shareholder Approval from our shareholders, may cause us
to be subject to financial penalties, as well as being required to issue
additional shares of Common Stock. Similar penalties apply in the event that we
cannot effectuate the filing of the Registration Statement in a timely fashion.
We have retained the right to redeem the Debentures at a price equal to
115% of the principal amount thereof, if the price of the our Common Stock
trades at a price of $1.50 or less per share for a specified period of trading.
The Purchasers have agreed, subject to certain limitations, that they will not
engage in any "short sales" of the Company's Common Stock. The issuance of the
shares to the Recipients were made pursuant to non-public transactions with
existing security holders or service providers, and were exempt from
registration under Section 4(2) of the Securities and Exchange Act of 1933, as
amended.
(d) On March 19, 1999, we entered into a Securities Purchase Agreement,
dated as of February 23, 1999 (the "Securities Purchase Agreement") with VMR
Luxembourg, S. A., Chateau Woltz, 34 Rue Neuve, Remich, L5560 Luxembourg,
pursuant to which we agreed to sell up to and issue to the Purchasers, and the
Purchasers agreed to purchase from the Company, an aggregate principal amount of
up to $1,000,000 of 8% Convertible Debentures (the "Debentures") and Warrants
(the "Warrants") to purchase up to 100,000 shares of Common Stock. The sale
(referred to herein as the "VMR Sale") is to take place in up to two separate
sales, the first of which (the "Initial Closing") occurred on March 16, 1999. On
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that date the Company sold, for an aggregate purchase price of $500,000,
$500,000 principal amount of Debentures and 50,000 Warrants. An additional
second sale of $500,000 was subscribed for on April 7, 1999. The purchasers have
also indicated they intend to convert their debentures into Common Stock.
The terms of the Debentures and Warrants are substantially similar to the
Debentures and Warrants issued on January 29, 1999. The holders of those
Debentures (the "Original Purchasers") have consented to this sale, and have
agreed to increase the overall size of that offering to $3,000,000. The Original
Purchasers have agreed that the registration of the underlying securities must
now be completed by May 31, 1999 , and that a special meeting of shareholders,
if necessary, must be held by April 30, 1999.
The Debentures are convertible into shares of Common Stock at the option of
the Purchasers at any time after the Initial Closing. The conversion price for
each Debenture in effect on any conversion date will be the lesser of (A) an
amount equal to 90% of the average per share market value for five consecutive
trading days immediately prior to the Initial Closing date or (B) an amount
equal to 85% of the per share market value for the trading day having the lowest
per share market value during the five trading days prior to the conversion
date. Purchasers effect conversions by surrendering the Debentures to be
converted, together with the form of conversion notice attached thereto. If not
otherwise converted, the Debentures mature on January 27, 2002. The Warrants are
exercisable at an exercise price equal to 110% of the Per Share Market Value as
of the last Trading Day prior to the date of the issuance of the Warrants. This
price, which is subject to adjustment in the event of certain dilutive events,
was $1.96 as of the Initial Closing. The Warrants expire three years after their
date of issuance.
Pursuant to the terms of the Securities Purchase Agreement, and a related
registration rights agreement, we are obligated to file a registration statement
with respect to the shares issuable upon conversion of the debentures and the
shares issuable upon exercise of the Warrants, which Registration Statement must
be declared effective, as indicated above, no later than May 31, 1999.
Beginning on the date on which the initial registration statement (the
"Registration Statement") is filed with the Securities and Exchange Commission
(the "Commission"), we have the right to deliver a written notice to the
Original Purchasers requiring the Purchasers to purchase an additional $350,000
aggregate principal amount of Debentures and Warrants to purchase an additional
35,000 shares of Common Stock for an aggregate purchase price of $350,000.
Subject to the terms and conditions set forth in Section 4.2 of the Securities
Purchase Agreement, and elsewhere in the Securities Purchase Agreement and
beginning on the date that the Registration Statement is declared effective by
the Commission, we have the right to request that the Original Purchasers
purchase an additional $400,000 aggregate principal amount of Debentures and
Warrants to purchase an additional 40,000 shares of Common Stock for an
aggregate purchase price of $400,000. The issuance of the shares to the
foregoing recipients were made pursuant to non-public transactions with existing
security holders or service providers, and were exempt from registration under
Section 4(2) of the Securities and Exchange Act of 1933, as amended.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, certain information
regarding the ownership of Common Stock by: (i) each person who is known by the
us to own of record or beneficially more than 5% of the outstanding Common
Stock; (ii) each of our directors; and (iii) each named executive officer; and
(iv) all directors and executive officers as a group. Except as otherwise
indicated, the shareholders listed in the table have sole voting and investment
power with respect to the shares indicated.
<TABLE>
<CAPTION>
AGGREGATE NUMBER PERCENT OF
OF SHARES BENEFICIAL SHARES
NAME AND ADDRESS(1) OWNED(2) OUTSTANDING
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<S> <C> <C>
Drew S. Levin(3)........................................ 684,123 23.6%
Joe Cayre(4)............................................ 263,617 9.2%
Michael Jay Solomon(5).................................. 50,000 *%
W. Russell Barry(6)..................................... 30,000 *%
Jonathan D. Shapiro(7).................................. 18,750 *%
Glen Michael Financial(8)............................... 200,000 6.6%
All officers and directors as a group (8 persons)....... 756,623 25.4%
</TABLE>
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* Less than 1%
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(1) Address is c/o Team Communications Group, Inc., 12300 Wilshire Boulevard,
Suite 400, Los Angeles, California 90025.
(2) Gives effect to the anti-dilution provisions of the sale of 2.5% of the
Company's Common Stock from Mr. Drew Levin to Mr. Morris Wolfson, Mr.
Abraham Wolfson, Mr. Aaron Wolfson and Wedmore Corporation N.V. and the
conversion of the Conversion Note computed on a fully diluted basis.
(3) Includes 249,488 shares which Mr. Joseph Cayre has agreed to transfer to Mr.
Levin pursuant to Mr. Levin's arrangements with Mr. Cayre. Mr. Levin has
pledged his shares and his options to Mr. Cayre pursuant to Mr. Cayre's loan
transaction with the Company. Includes options to acquire 85,000 shares of
Common Stock at an exercise price of $1.00 per share which the Company
granted to Mr. Levin concurrently with the execution of his Employment
Agreement.
(4) Includes options to purchase 48,743 shares of the Company's Common Stock at
an exercise price of $0.43 per share.
(5) Includes a warrant to purchase 30,000 shares of Common Stock at an exercise
price $2.50 per share.
(6) Includes a warrant to purchase 30,000 shares of Common Stock at an exercise
price $2.50 per share.
(7) Pursuant to Mr. Shapiro's employment agreement, he has been granted options
to purchase 90,000 shares of the Company's Common Stock at an exercise price
of $1.65 per share, of which 18,750 shares are exercisable within 60 days.
(8) Includes a warrant to purchase 200,000 shares of Common Stock; 100,000 of
which are exercisable at $1.62 per share, 75,000 of which are exercisable at
$3.00 per share and 25,000 exercisable at $3.25 per share, all of which are
exercisable within 60 days.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TEAM COMMUNICATIONS GROUP, INC.
By: /s/ Jonathan D. Shapiro
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Jonathan D. Shapiro,
President, Chief Operating Officer
and Director
