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 June 30, 2000
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|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ________
Commission file number 000-26169
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Neo Modern Entertainment Corp.
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(Name of small business issuer in its charter)
California 95-4627285
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
442 N. La Cienega Blvd., Suite 206, West Hollywood, CA 90048
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (310) 652-7556
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Securities to be registered pursuant to Section 12(b) of the Exchange Act: None
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Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, par value $.001 per share
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(Title of class)
[Cover page 1 of 2 pages]
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |X|
No |_|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|
The issuer's revenues for the fiscal year ended June 30, 2000 were
$15,000.
The aggregate market value of the voting common equity held by
non-affiliates (computed by the average bid and asked price of such common
equity) on September 27, 2000 was $330,631.
The number of shares of common stock, par value $.001 per share,
outstanding as of September 27, 2000 was 11,235,435 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format
Yes |_| No |X|
Forward Looking Statements: This Form 10-KSB contains, or incorporates by
reference, certain statements that may be deemed "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, each as amended. All statements, other
than statements of historical facts, that address activities, events or
developments that the Company intends, expects, projects, believes or
anticipates will or may occur in the future are forward-looking statements. Such
statements are based on certain assumptions and assessments made by management
of the Company in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors it
believes to be appropriate. The forward-looking statements included in this Form
10-KSB are also subject to a number of material risks and uncertainties,
including but not limited to public acceptance of film projects, ability to meet
cost and time estimates in budgets, availability of distribution agreements, and
general economic factors affecting the Company's operations and markets.
Stockholders and prospective investors are cautioned that such forward- looking
statements are not guarantees of future performance and that actual results,
developments and business decisions may differ from those envisaged by such
forward-looking statements.
[Cover page 2 of 2 pages]
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Part I
Item 1. Description of Business.
Principal Products and Associated Markets:
Neo Modern Entertainment Corp. (the "Company" or "we") was formed pursuant
to the corporation laws of the State of California on March 19, 1997, and we
have our principal office in West Hollywood, California. We were created to
develop, produce and arrange distribution of feature-length motion pictures.
However, lack of funds now makes it unlikely for us to undertake high-budget
productions. Our new strategy is to attempt to produce extremely low budget film
projects in order to develop a base of active operations. Our management
believes that we will be able to produce between one to three films at an
out-of-pocket cost of $50,000 to $125,000 each. This can be accomplished through
the expertise developed by our Chief Executive, Rafal Zielinski, who has
extensive experience in directing and producing films. In addition, our use of
modern technology, such as the use of digital filming methods, will be expected
to greatly reduce this aspect of a film's production cost. However, our new
strategy will require us to find a film distribution firm which is willing to
distribute our new films and to obligate itself to spend upwards of $50,000 to
create duplicate 35mm film prints for theatrical exhibition.
Our management consists of our President and Director, Rafal Zielinski,
and our two other directors, Mike Gabrawy and Regina A. Musolino. Mr. Gabrawy
and Ms. Musolino were elected to our board in 1999. Mr. Zielinski and Mr.
Gabrawy have an established track record in the business of non-studio financed
films and have each produced three independent films. Through such productions,
they have established business contacts and associations with distributors and
foreign sales agents ("Contacts"). We may use such Contacts in connection with
our proposed slate of films to better control distribution, keep distribution
fees low and maximize revenues. Exploiting such Contacts may enhance the
possibilities of having our films distributed on a national level through a
major distributor, should we wish to exploit that distribution option.
Alternatively, we should ultimately become capable of self-distribution in both
the domestic and foreign markets, if needed. By controlling the distribution
process and keeping distribution fees and expenses to a minimum, we intend to
ultimately maximize revenues and profits.
Our long term strategy is to vertically integrate our involvement in the
film production and exploitation process so as to own, or create and maintain
lasting relationships with distributors in all primary and ancillary markets. We
would also seek to eventually acquire our own studio facilities and equipment.
When appropriate, we would also provide prints and advertising funding to create
a larger net income per film by decreasing the distribution fees and distributor
overhead. However, this long term strategy must await substantial financing and
a successful track record with the films we are now seeking to produce.
We believe that the screenplays underlying our initial slate of films
require minimal refinement prior to the commencement of principal photography.
Mr. Zielinski intends to direct each such film. We hope to produce at least one
to two films of increasing budget-size per year. We intend to manage and
accumulate an ever-increasing revolving production, distribution and development
fund and to prudently manage the use and occasional rental of our digital
post-production facilities. We also intend to build a stable asset base
consisting of film libraries and related going concerns through an acquisition
strategy, utilizing our stock as consideration whenever possible. Our library
currently consists of partial rights to three films previously produced by Mr.
Zielinski: Hey Babe (1987); Ginger Ale Afternoon (1990); and Fun (1993)
(collectively, the "Film Library").
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Our artistic vision is to produce independent, alternative, "art-house"
films that are character-driven and non-formulaic. We intend to produce films
targeted at both the youth and the more specialized markets. Our management
believes that quality, commercially viable films can be produced on a
limited-budget basis through proper planning, execution and intelligent
management. Such films require less capital to produce, and consequently need to
generate less revenue to recoup costs and derive profits. If successful, the
return per dollar invested has the potential of being a significant multiple of
total costs. Our long-term agenda is to produce as many commercially successful
films as possible, thus creating a viable production vehicle through which we
would control our creative destiny and continue making films on a going forward
basis.
Distribution:
With respect to the theatrical distribution of motion pictures in the
United States, arrangements for the distribution and exhibition of a film vary
greatly. However, certain fundamental economic relationships remain constant.
The distributor of a film licenses the exhibition of the said film typically for
a period of between five and twenty-five years. The distributor normally has the
responsibility for advertising and supplying exhibitors with film prints and
other promotional materials. The exhibitor presents the film to a paying
audience at which time its collects the admission fees paid at the box office
(the "Gross Box Office Receipts"). In accordance with a license agreement with
the distributor, the exhibitor retains a percentage (somewhere between 10-90%,
although a 50/50 split is typical) of the Gross Box Office Receipts. The
exhibitor may also recover its actual operating costs incurred in presenting the
film and its expenses incurred in the advertising and promotion thereof. After
the exhibitor has deducted the funds due it, the remaining balance (the "Gross
Film Rentals") is then remitted to the distributor. The distributor initially
deducts 15-35% for the distribution of the film in the United States (the
"Distribution Fee"). The distributor also reimburses itself for its actual
expenses incurred in connection with the distribution, advertisement and
promotion of the film. After all Distribution Fees have been paid, the remaining
balance (the "Negative Cost") is furnished to the company producing the film
(the "Production Company"). The Negative Cost is the cost incurred by the
Production Company in creating the negative of the film. Generally, a film
financed and distributed by a major film studio will include a substantial
"overhead" charge of 20% of the film's budget or a set fee, to cover the cost of
that studio's production facilities, investments in the development of motion
picture properties which ultimately are not produced, and additional staff
assigned to production. After the Negative Cost, plus interest, if any, is
recouped by the Production Company, any remaining amounts constitute the film's
net profits (the "Net Profits"). Net Profits are usually first distributed to
parties who have deferred their compensation for work done on the film and are
then distributed to the film's other participants pursuant to their negotiated
agreements. Foreign distribution and television exhibition vary somewhat from
this general description.
Since we ultimately plan to control all rights to our films, and since the
films may be fully financed, we may obtain favorable distribution terms in all
primary and ancillary markets. If we ultimately self-distribute, there will be
no separate Distribution Fee. However, it is likely that we will have to use the
services of independent distribution companies, sales agencies, or consultants
which will charge Distribution Fees, for some or all markets. Domestic and
foreign theatrical exhibition rights, including non-English language rights,
will be licensed by us to recognized distributors and exhibitors. Alternatively,
we may self-distribute in association with our Contacts domestically and utilize
a sales agent for each territory in the foreign market. The private use of video
cassettes, both domestic and foreign, will be licensed by us to established home
video distributors, or possibly joint-ventured with an independent video
distributor to maximize our revenues.
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As modern technology provides the entertainment industry with DVD, cable,
t.v. satellite and internet distribution, the latter through increased broadband
technology, we will continue to explore the use of such media for distribution
and exploitation of our product.
Competition:
We compete in business with an almost infinite number of large and small
entities producing motion pictures in this country and abroad. Success in our
business is determined by a number of factors, including the skill of our
personnel, the ability to secure attractive scripts and name talent, the quality
of our products and our ability to obtain suitable distribution agreements and
outlets.
The rising costs associated with the operation of major film studios and
the increased demand for film product has opened the door for independent film
production. In 1960, independent film producers worldwide only accounted for
approximately 30 out of a total of 277 films made, or about 11% of the market.
In 1987, independent producers were responsible for the production of 423 out of
a total of 578 films made, or about 73% of the market. Although the number of
films made by independent producers decreased in 1992 to 352 out of a total of
575 films made, or about 64% of the market, a number of newly-created
independent production and distribution companies have developed into highly
successful companies within a few short years. Overall, total revenue for sales
of independent films for theatrical exhibition, home video and television
surpassed $1.8 billion in fiscal 1997, up 11% from 1996. While weakening foreign
pre-sales are a result of an abundance of product from the major studios, Europe
and Eastern Europe in particular remain developing markets. The theatrical and
home video markets--softer in years past--show stronger percentage growth, thus
reflecting the boom in theater construction and VCR penetration in international
markets. In the last three years the public's appetite for independent film has
increased, the number of independent films produced skyrocketed, and with the
launch of several specialty cable channels (i.e., Sundance Channel, Independent
Film Channel, Bravo) focusing on independent and art house films, the boom in
construction of multiplexes, the prospect of distribution on the internet as the
availability of broadband increases and the successful track record of many
independent distribution companies, such as Miramax, Fox Searchlight, Fine Line,
Paramount Classics, Artisan Entertainment, Sony Pictures Classics, Trimark,
Lion's Gate Films, USA Films (the amalgam of October Films and Gramercy
Pictures), Stratosphere, Strand Releasing and the newly formed Screen Gems, the
demand for product has increased substantially.
The 1999's produced big success stories in the film industry ranging from
"Shakespeare in Love" which grossed about $100 million for Miramax to the
micro-budget "The Blair Witch Project" which was produced for $40,000.00 and
sold by its producers to Artisan Entertainment for $1.1 million and a percentage
of the profits. Blair Witch went on to gross $142 million domestically alone.
A current market trend has been the purchase of independent film companies
by major film studios. In recent years, once-independent film companies such as
Miramax Films, Fine Line Features and Gramercy Pictures have been acquired by
entities such as The Walt Disney Company and Time-Warner, Inc. A specialized
film company can experience competitive advantages by being part of a major
studio. Such advantages include piggybacking onto an international distribution
system to tap into the growing foreign appetite for American independent fare;
utilizing a studio's music division for soundtrack recording and mastering; and
having film trailers appear on such studio's releases, including on occasion,
the studio's home video releases.
Our artistic vision is to produce independent, alternative, "art-house"
films that are character-driven and non-formulaic. We intend to produce films
targeted at both the youth and the more specialized markets. Our
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management believes that quality, commercially viable films can be produced on a
limited-budget through proper planning, execution and intelligent management. We
intend to compete by offering better and more distinctive entertainment value
through superior production, directing and acting.
Intellectual Property:
We expect that our scripts and film productions will have copyright and
similar protection. Apart from this, we do not expect to have any formal legal
protection for our trade secrets or other intellectual property and know-how and
do not have confidentiality agreements or non-competition agreements in place.
In addition, modern technology fosters illegal copying and the use of protected
material and we will be hard pressed, as is the film and music industry in
general, to stop this piracy.
We also seek to retain merchandising and other rights to the characters in
our films so that, if a trend is launched by our films by way of its music,
decor, lifestyle or characters, we have additional ways in which to financially
capitalize on it.
We also hold the right to produce several screen plays and literary
properties, subject to the payments to the authors and the reimbursement of
development costs with interest to Filmart Inc. with interest for each
respective property.
Government Approvals:
We are aware of three governmental agencies which could exert influence on
us: The Los Angeles Film Commission ("LAFC"), the Occupational Safety Hazard
Administration ("OSHA") and the Los Angeles Fire Department ("LAFD"). When we
are on location outside of Los Angeles County there may be other similar
governmental agencies which could affect our operations. The LAFC controls the
issuance of permits for filming in the Los Angeles City and County areas,
collecting a fee for its services. OSHA governs occupational health and safety
conditions in the workplace and ensures the adherence to safety guidelines so as
to minimize risk to employees and visitors. We intend to conspicuously post and
actively promote strict adherence to all applicable OSHA rules, so as to negate
any possible ramifications for noncompliance by us. The LAFD monitors film
production companies to ensure their compliance with applicable safety
guidelines and to reduce unacceptable fire and other hazardous risks to
employees or visitors. Our management will accommodate the LAFD in conducting
"spot-checks" of our stages and production facilities to ensure a safe working
condition. Our cooperation in the operation of these "spot-checks" will ensure a
safe workplace environment.
Employees:
Our Company presently has no employees or representatives, other than our
three directors who also serve in executive and administrative capacities. We
may hire two part-time employees within the next 12 months, consisting of a
clerical secretary and a Production Assistant to facilitate operations.
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Investment Considerations and Risk Factors:
An investment in our Common Stock is highly speculative, and brings with
it a number of investment considerations and risk factors which an existing
stockholder or prospective purchaser of our Common Stock should take into
account. Among these are the following:
We Have Experienced Operational Losses Throughout the Life of Our Company.
We have a history of losses and a cumulative deficit in our earnings.
Accordingly, it may be expected that it would be more difficult for us to
achieve profitable operations.
We Have a Need to Raise Capital in Order to Continue Our Operation.
At the current juncture, we do not have sufficient cash to pursue our goal
of producing motion pictures, even those of the low budget variety. To do so, we
will have to raise additional capital, and the only viable way in which to do so
is to issue additional shares of our Common Stock. This will have the effect of
diluting the interest of existing stockholders. Further, if such financing is
not available, it is unlikely that we will be able to continue our business
operations.
Our New Strategy of Producing Low Budget Films May Not Prove Viable.
Because of our lack of capital and non-existent liquidity, we have
undertaken a new corporate strategy which entails the production of low cost --
low budget films. However, we have no experience with this type of filmaking and
it will depend, in part, upon newly developed digital filming and production
methods. Accordingly, there is a risk that we will not be able to implement our
new strategy or, if we produce one or more films using this method, these films
may not be commercially successful. In addition, our new strategy does not
provide for such customary items that we have used in the past as completion
bonds and various types of insurance coverage, which would provide a reserve to
ensure the completion of production and post-production work on a film. We will
not have these coverages with our contemplated low budget products because of
the cost of putting these in place.
Competition in Our Industry is Intense and Our Projects are Subject to Fashion
and Other Vagaries Which Makes Their Acceptance Uncertain.
We have a vast array of competitors in the production of films, many of
whom have much greater resources than we do. In addition, public acceptance of
our product is subject to elements of fashion, style and the like which places
additional uncertainties upon acceptance of our future products and its
potential for commercial success.
We Are Dependent Upon a Few Individuals for Management and Conduct of Our
Business.
As noted throughout this Report, we are highly dependant upon Rafal
Zielinski, our Chief Executive Officer and sole full-time employee, and his
ability to evaluate, produce, raise capital and generally conduct our business.
Although he will be assisted, on a part-time basis, by our two directors, and
may resort to a variety of outside consultants, our present and future reliance
upon Mr. Zielinski places an additional risk upon our business, particularly
should we lose the service of Mr. Zielinski for any reason.
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Item 2. Description of Property.
Our principal offices are located at 442 N. La Cienega Blvd., Suite 206,
West Hollywood, California. Presently, our offices are rented on a
month-to-month basis at a cost of $180 per month, due on the 1st day of each
month. These facilities are suitable for our current operations.
Item 3. Legal Proceedings.
We are not engaged in any litigation or governmental proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the quarter
ended June 30, 2000.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters.
Market Information:
(a) Trading in our shares of Common Stock presently takes place on the OTC
Bulletin Board under the symbol NEOE.
The following table sets forth the range of high and low bids for our
Common Stock for our two most recent fiscal years:
Fiscal 1999: High Low
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July 1, 1998 -- September 30, 1998 $0.1875 $0.0625
October 1, 1998 -- December 1998 0.10 0.006
January 1, 1999 -- March 31, 1999 0.125 0.05
April 1, 1999 -- June 30, 1999 0.55 0.05
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Fiscal 2000: High Low
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July 1, 1999 -- September 30, 1999 $0.125 $0.04
October 1, 1999 -- December 31, 1999 0.045 0.02
January 1, 2000 -- March 21, 2000 0.56 0.05
April 1, 2000 -- June 30, 2000 0.25 0.125
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The foregoing quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
On September 27, 2000, our shares of common stock was quoted at between
$0.125 and $0.156 per share.
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(b) The number of holders of our Common Stock was approximately 141 on
September 27, 2000, computed by the number of record holders, inclusive of
holders for whom shares are being held in the name of brokerage houses and
clearing agencies.
(c) We have not paid any cash dividends with respect to our Common Stock, nor
does our Board of Directors intend to declare cash dividends on our Common
Stock in the foreseeable future, in order to conserve cash for working
capital purposes.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation:
We have had a limited operational history over our last three-and-a-half
years with no appreciable revenues and may be regarded as a developments stage
company. Our plan of operation is to raise capital sufficient to fund the
production of several extremely low-budget films, and thereby supplement our
film library and generate revenue for the subsequent production of films. We
have completed partial principal photography on our first low-budget feature
film tentatively entitled "Bohemia", and our plan calls for finishing the film
if and when we have raised sufficient capital for "Bohemia" as well as one or
more of the micro-budget films. The modest revenues received by us so far have
been from the exploitation of our film library and are utilized towards
operating costs and to pay down a portion of the debt against the film library.
We are continuing to seek sources of financing. We will also consider
possible business combinations as well as examine the possible application and
the benefits of the digital transformation of data and digital production
methods to our business.
Liquidity & Capital Resources:
We have historically raised capital to fund our operations by the sale of
our common stock. For the immediately foreseeable future, we will be required to
sell common stock or other equity securities to raise capital to fund our
operations. There can be no assurance that such capital investment will be
available on terms that will be acceptable to us. Furthermore, the sale of such
capital will further dilute the interest of current stockholders. Other capital
may also be raised through loans, deferments of goods and services, pre-sales of
rights and/or co-financing with other entities.
Year 2000 Issues:
We have reviewed and tested our internal software programs and computer
systems. We have determined that there are no significant Year 2000 issues
within our programs and systems. We are not aware of any material problems with
our vendors or suppliers. We do not anticipate incurring material expenses or
experiencing any material operational disruptions as a consequence of Year 2000
issues.
Item 7. Financial Statements.
The financial statements require by this Item are set forth at pages
indicated in Item 13 following page 17 of this Report.
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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.
We have three directors, each of whose term will expire at next year's
Annual Meeting of Stockholders. The following table contains information
regarding all directors and executive officers:
Name Age Position / Offices Held Director Since
Rafal Zielinski 46 President / CEO and Director 1997
Mike Gabrawy 31 Director 1999
Regina A. Musolino 33 Director 1999
The following is a brief account of the business experience for the last
five years for the above mentioned individuals:
Rafal Zielinski:
Mr. Zielinski has feature credits as a producer, director or writer on
seventeen feature films of diverse genres and budgets ranging from
$250,000 to $5,000,000. He has an established track record in the business
of independent, non-studio financed films. His films have been shown all
over the world, including American theatres, cable, TV and video
cassettes.
As a teenager, Mr. Zielinski attended Stowe School in England, where he
received a grant to make his first 16mm film in India. He studied cinema
verite filmaking with veteran Richard Leacock at MIT, receiving a Bachelor
of Science Degree in Art and Design from that institution. Graduate film
studies were continued at Concordia University in Montreal, Canada.
Mr. Zielinski's first feature, "Hey Babe" (1987), opened the Taormina Film
Festival, and also showed at the Toronto, Montreal and Filmex Film
Festivals.
His independent feature "Ginger Ale Afternoon" (1990) showed in
competition at the Sundance Film Festival and was picked up by Skouras
Pictures for domestic theatrical release in the United States.
Mr. Zielinski's film "Fun" (1993), also premiered at the Sundance Film
Festival, where it received two Special Jury Awards for Acting Achievement
and went on to show at the Toronto, Vancouver
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and Montreal Film Festivals, as well as many international film festivals
including Sydney, Edinburgh, Munich, Vienna, London, Stockholm, Sao Paulo,
Rimini and Mill Valley.
Mike Gabrawy:
Mr. Gabrawy's wealth of technical knowledge and story sense come from
years of exposure to the medium in all facets of development and
production. Mr. Gabrawy holds a Bachelor's degree in Film Studies from the
University of Kansas, where he made several films for various academic
departments on subjects as diverse as Religion and Psychology. After
graduation in 1992, Mr. Gabrawy immediately began working in Los Angeles
where he started out as a production assistant on over twenty commercials
and eventually served as location manager on several independent features.
Soon after Mr. Gabrawy segued into larger feature films holding various
posts in the production departments on such major film releases as "Naked
Gun 33 1/3", "Little Princess," "Stargate", "Waterworld" and "Independence
Day". Late in 1995, Mr. Gabrawy was hired at Constantin Film, an
international production and distribution company, where he served as a
production- development executive for nearly three years. Mr. Gabrawy was
actively involved if not integral in the production and/or development of
such projects as "Prince Valiant" (co-produced with Lakeshore
Entertainment), "Wrongfully Accused" (co-produced with Morgan Creek),
"Silver Surfer" and the film adaptation of the blockbuster Sony
Playstation game "Resident Evil" (for which he is currently an Associate
Producer).
In July 1998, Mr. Gabrawy left Constantin Film to pursue independent
producing full time. Most recently, Mr. Gabrawy co-produced the Venice
cult favorite "And Other Urban Myths" with Aaron Skalka, co-produced the
highly experimental feature "Green and Dimming", which was directed by
Sundance award-winner Britta Sjogren and finally line produced the quirky
dramedy "East of A".
Additionally, Mr. Gabrawy serves as a consultant to the Independent
Feature Project West, the organization responsible for the Independent
Spirit Awards, the indie alternative to the Academy Awards, under its
Resident Line Producer program.
Regina A. Musolino:
Ms. Musolino has had a diversity of experiences in her career. She was
born in Ohio and spent a number of years there studying such varied
disciplines as biology, fashion design and accounting. After working for a
Big Six accounting firm as a tax consultant for four years, she entered
law school and received her J.D. from the University of Southern
California in 1998.
Ms. Musolino has worked as an entertainment tax attorney where she
consulted with studios and production companies on tax related
implications of such matters as motion picture financing, intellectual
property and corporate structuring.
Currently, Ms. Musolino is working as an independent film producer on two
future films: a romantic comedy and an all female hip hop action film.
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Item 10. Executive Compensation.
The following table sets forth for the fiscal years indicated the
compensation paid by our Company to our Chief Executive Officer. No executive
officer has received a total annual salary and bonus exceeding $100,000.
Summary Compensation Table
Name and Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation($)
------------------ ---- ------ ----- ------------
Rafal Zielinski/CEO 2000 -0- -0- (1)(2)
1999 -0- -0- (1)
1998 -0- -0- (1)
----------
(1) Rafal Zielinski is compensated for his executive services pursuant to the
President/CEO's Memorandum Agreement, dated as of March 21, 1997 (the
"Services Agreement").
(2) Mr. Zielinski was issued 956,980 shares of Common Stock on August 10, 1999
for additional services rendered to our Company.
Rafal Zielinski, as our President / CEO, is compensated for his executive
services pursuant to the President / CEO's Memorandum Agreement, dated as of
March 21, 1997, by and between Filmart Corp., an entity controlled by Mr.
Zielinski ("Filmart") and us (the "Services Agreement"). Pursuant to the
Services Agreement, Mr. Zielinski's non-exclusive services are to be furnished
to us at a rate of $2,000 per month for the first year followed by an increase
of 25% in successive years over the next seven years, as indicated in the
following table:
CASH COMPENSATION PAYABLE TO FILMART INC. BY THE COMPANY
Year Payment Per Month
---- -----------------
1 $2,000.00
2 $2,500.00
3 $3,125.00
4 $3,906.25
5 $4,882.81
6 $6,103.52
7 $7,629.39
If we do not have sufficient funding to pay the above sums, such
compensation shall be deferred and paid in full or in installments at future
date(s) to be determined in good faith by us, with ten percent (10%) annual
simple interest. To date, we have not furnished Filmart with cash compensation
for Mr. Zielinski's executive services. Mr. Zielinski receives no additional
compensation for being a board member.
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Additionally, pursuant to the Services Agreement, Filmart will have the
option to purchase our Common Stock, at a price of its par value per share,
$.001 per share, in accordance with the following table:
OUR COMMON SHARES THAT MAY BE ACQUIRED BY FILMART
Number of Shares per Month Year Total Number Per Year
---------------------------- ---- ---------------------
100,000 1 1,200,000
125,000 2 1,500,000
156,250 3 1,875,000
195,312 4 2,343,750
244,140 5 2,929,687
305,175 6 3,662,109
381,469 7 4,577,636
Pursuant to the Services Agreement, on October 21, 1999, Rafal Zielinski,
as President of Filmart, exercised his option to acquire 3,637,500 shares of
Common Stock for the period of March 21, 1997 - September 20, 1999 in exchange
for $3,637.50; on December 20, 1999, 468,750 shares for the period of September
21 to December 20, 1999 in exchange for $468.75; on March 20, 2000, 468,750
shares for the period of December 21, 1999 to March 20, 2000 in exchange for
$468.75; on June 20, 2000, 585,936 shares for the period of March 21, 2000 to
June 20, 2000 in exchange for $585.94; and on June 20, 2000, 585,936 shares for
the period of June 21, 2000 to September 20, 2000 in exchange for $585.94.
In addition to compensation as President/CEO, Rafal Zielinski originally
received 1,000,000 shares of Common Stock as a founder on March 21, 1997, as
well as 1,000,000 Series A Convertible Preferred Shares on May 1, 1997
(converted to shares of Common Stock on April 9,1999) in consideration for the
exchange of property outlined in the Acquisition Agreement of May 1, 1997,
between Rafal Zielinski and affiliated corporations, as well as Mr. Zielinski
taking reduced fees (below Director's Guild of America minimums) for directing
the initial slate of up to three films for the Company. Pursuant to the
Acquisition Agreement, there are sums owing, with interest, to Filmart for
"Ginger Ale Afternoon" and "Fun", to be recouped from the respective revenues of
the two films, as well as development costs for "Bohemia" and other
scripts/literary properties, payable with interest upon production of each
respective film. Resulting from the resignation of Phil Kueber as a director and
officer and the consequent cancellation of his founder's shares, Rafal Zielinski
was issued 956,980 shares of Common Stock on August 10, 1999, per "non-dilution"
policy adapted by the board on February 23, 1998, for additional services to the
Company, in areas such as the raising of financing and management, resulting
from Mr. Kueber's absence. This compensation is in addition to the stock options
granted to Filmart pursuant to the Services Agreement.
Two of our directors, Mr. Gabrawy and Ms. Musolino, are compensated solely
through the issuance of Common Stock as follows: (i) 1,000 shares on the date of
such member's appointment to the Board; and (ii) 4,000 shares per month for a
term of one year starting from December 1, 1999, in addition to 22,967 shares
issued to Mr. Gabrawy for services up to November 30, 1999 and 8,267 shares
issued to Ms. Musolino for services up to November 30, 1999. Such compensation
payable to Mike Gabrawy and Regina
-13-
<PAGE>
A. Musolino shall be inclusive of any compensation payable to them in their
contemplated capacities of Vice President of Production and Vice President of
Business Affairs, respectively, until such time as they may hold part-time or
non-exclusive full-time employment with us. We expect that they will be a
Producer and an Executive Producer on our future films.
Producer, Director, Writer Fees
In addition to managing our Company, Rafal Zielinski shall perform
producing, directing and writing services for our films. As is customary in the
industry, these services shall be subject to his availability and non-exclusive,
thus allowing him to loan out his services for films produced by other companies
or entities simultaneously with his services as our President.
Rafal Zielinski will be a Producer of each film we produce and his
producer fee shall be 2.5% of each film budget and 2.5% of our net profit from
each film.
Rafal Zielinski Director's fee will be 2.5% of the budget on each film as
well as 2.5% on our net profit from each film for the first three films he
directs for us. The Director's fee for films after the initial three films shall
be the Director's Guild minimum, or 5% of the film budget, whichever is greater,
and 2.5% of our net profit for each film.
Mr. Zielinski's writer fees will be negotiated, subject to the proportion
of his writing services contributed to each story and screenplay, if any. Total
story and screenplay costs customarily are 5-15% of the budget of a film and
2.5-5% of the net profit participation.
Mike Gabrawy will be a Producer and Regina Musolino an Executive Producer
on each of our films. These services will be subject to his and/or her
availability on a non-exclusive basis, as is customary in the industry, to allow
them to simultaneously lend out their services to other non-Company projects.
Mr. Gabrawy's and Ms. Musolino's Producer and Executive Producer fees for each
film will be negotiated and may include cash, stock, and net profit
participation. As is customary in the film industry the total aggregate producer
fees (inclusive of all producers, executive producers, co-producers, and third
party producers, if any) and net profit participation should be in the 10-15%
range.
-14-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table of stock ownership and notes thereto relate as of
September 27, 2000 to the ownership of Common Stock, par value $.001 per share
(the "Common Stock") of the Company by (i) each person known to be the
beneficial owner of more than 5% of such voting security, (ii) each director,
(iii) each named executive officer and (iv) all executive officers and directors
as a group. The percentages have been calculated by taking into account all
shares of Common Stock owned on such date as well as all such shares with
respect to which such person has the right to acquire beneficial ownership at
such date or within 60 days thereafter. Unless otherwise indicated, all persons
listed below have sole voting and sole investment power over the shares owned.
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Ownership(1)(2) of Class
------------------- --------------- --------
Rafal Zielinski 8,768,956(3) 78%
James R. Zatolokin 1,000,000(4) 8.9%
29259 Heathcliff Street
Los Angeles, CA
Filmart, Inc. 5,811,976(5) 52%
Mike Gabrawy 63,967 *
Regina A. Musolino 49,267 *
All directors and executive officers
as a group (3 Persons)(4) 8,882,190 79%
----------
(1) Based on a total of 11,235,435 shares of Common Stock issued and
outstanding. Unless otherwise stated, all address are c/o the Company, 442
N. La Cienega Blvd., Suite 206, West Hollywood, CA 90048.
(2) All such ownership is direct unless otherwise stated.
(3) Reflects conversion of 1,000,000 shares of Class A Preferred Stock on
April 9, 1999; Also includes 5,811,976 shares held by Filmart, Inc. a
corporation whose shares are owned by Mr. Zielinski.
(4) Company stop transfer order was issued against these shares on July 17,
1999. We intend to negotiate a settlement with Jim Zatolokin as a result
of his resignation as director, officer and general counsel on October 3,
1997 to disgorge a portion of these founder's shares. The disgorged shares
will be reissued to Rafal Zielinski for additional services in areas such
as business affairs and management of our company resulting from Jim
Zatolokin's absence. Mr. Zatolokin assigned his voting rights to Mr.
Zielinski by contingent proxy per agreement of April 23, 1997 as well as
granting Mr. Zielinski a right of first negotiation to purchase Mr.
Zatolokin's shares, if he elects to sell any of them.
(5) Rafal Zielinski is President of Filmart, Inc. Shares issued hereunder are
pursuant to President/CEO Agreement by and between the Company and Filmart
Inc. dated as of March 21, 1997, pursuant to which Filmart loans out the
services of Zielinski to the Company, to act as and perform all duties of
President of the Company.
* Less than 1%
-15-
<PAGE>
Item 12. Certain Relationships and Related Transactions.
Transactions with Promoters:
Philip T. Kueber received 1,000,000 shares of our Common Stock (the
"Kueber Shares") in exchange for services rendered and $1,000; this was for
activities from and after our formation on March 19, 1997. Mr. Kueber was
subsequently named to our Board of Directors and held executive positions as
Treasurer and Vice President of Business Development. On May 26, 1998, Mr.
Kueber resigned from all executive positions and from his board membership.
Pursuant to a Settlement Agreement and Release, dated as of September 10, 1998,
by and with Mr. Kueber, he relinquished all right, title and interest in and to
the Kueber Shares in exchange for 200,000 shares of our Common Stock.
We have the Service Agreement, as previously described in this Report,
pursuant to which Filmart makes available the services of Mr. Zielinski.
Item 13. Exhibit and Reports on Form 8K.
(a) Documents filed as part of this Report:
1. Financial Statements of Neo Modern Entertainment Corp.:
Report of Independent Auditors
Balance Sheet - Years Ended June 30, 2000 and 1999
Statement of Operations - Years Ended June 30, 2000, 1999 and 1998
Statement of Shareholder's Equity - Years Ended June 30, 2000, 1999
and 1998
Statement of Cash Flow - Years Ended June 30, 2000, 1999 and 1998
Notes to Financial Statements
2. Exhibits and Index:
Exhibit
No. Description
------- -----------
3.(i) Articles of Incorporation.*
3.(ii) By-Laws.*
6.(i) President/CEO's Memorandum Agreement dated as of
March 21 ,1997 with Filmart Inc.*
11. Statement Re: Computation of Per Share Earnings.
27. Financial Data Schedule.
-16-
<PAGE>
----------
* Filed as an exhibit to our Company's Form 10-SB, as filed with the
Securities and Exchange Commission on May 19, 2000 and are hereby
incorporated by reference herein.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended June 30,
2000.
-17-
<PAGE>
NEO MODERN ENTERTAINMENT, CORP.
FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED
JUNE 30, 2000, 1999 AND 1998
<PAGE>
H. M. RICHARD & ASSOCIATES
Accountancy Corporation o Certified Public Accountants
Member of AICPA o Member of CSCPA
5857 Uplander Way o Culver City, CA 90230
Phone 310-348-4188 o Fax 310-348-4189
--------------------------------------------------------------------------------
September 14, 2000
Neo Modern Entertainment, Corp.
Los Angeles, CA 90048
To the Shareholders and the Board of Directors of Neo Modern Entertainment,
Corp.:
We have audited the accompanying balance sheets of Neo Modern Entertainment,
Corp. as of June 30, 2000 and 1999 and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Corporation'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 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 financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating an 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 Neo Modern Entertainment, Corp.
as of June 30, 2000 and 1999 and the results of their operations and their cash
flows for the years ended June 30, 2000, 1999 and 1998 in accordance with
generally accepted accounting principles.
Richard & Associates
An Accountancy Corporation
<PAGE>
NEO MODERN ENTERTAINMENT CORP.
BALANCE SHEET
June 30, 2000 and 1999
2000 1999
--------- ---------
ASSETS
Current assets:
Cash $ 294 $ 168
Subscription Recievable 7,000 22,500
--------- ---------
Total Current Assets $ 7,294 $ 22,668
--------- ---------
Other assets:
Completed film less accumulated amortization of
$355,248 in 2000 and $340,248 in 1999, less
$90,000 Note to Deluxe (Note 7) 20,000 35,000
Organization costs less accumulated amortization of
$2,700 and $1,900 1,300 2,100
Projects in process (Note 7) 342,046 339,938
--------- ---------
Total assets $ 370,640 $ 399,706
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables $ 73,951 $ 139,066
Long term liabilities (Note 10) 220,720 198,535
--------- ---------
Total Liabilities 294,671 337,601
--------- ---------
Stockholders' equity:
Common stock $.001 par value; shares authorized
100,000,000 reserved for stock options
12,927,246, issued and outstanding 10,560,395 for
2000 and 5,172,225 for 1999 10,560 5,172
Preferred stock $.50 par value; authorized 20,000,000
shares; none issued and outstanding,
Paid-in capital 214,579 261,603
Retained earnings (deficit) (149,170) (204,670)
--------- ---------
Total stockholders' equity 75,969 62,105
--------- ---------
Total liabilities and stockholders' equity $ 370,640 $ 399,706
========= =========
See accompanying notes to the financial statements.
F-2
<PAGE>
NEO MODERN ENTERTAINMENT CORP.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2000, 1999, AND 1998
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales (Notes 4 and 10) $ 15,000 $ 6,726 $ 25,474
----------- ----------- -----------
Costs and expenses:
Amortization of film costs 15,000 6,726 25,474
Selling and shipping 1,548 2,000 8,000
Administrative and general 25,445 42,584 49,154
Interest expense 18,000 12,704 6,368
Applied to film project -- (11,056) (11,104)
----------- ----------- -----------
Total costs and expenses 59,993 52,958 77,892
----------- ----------- -----------
Loss before income taxes and adjustment
to accounts payable (44,993) (46,232) (52,418)
Reduction to accounts payable 100,493
Income tax (benefit) (Note 10) -- -- --
----------- ----------- -----------
Net income (loss) $ 55,500 $ (46,232) $ (52,418)
=========== =========== ===========
Income (Loss) per share:
Basic and diluted 0.01 (0.01) (0.02)
Number of shares used in the per share calculation:
Basic and diluted 8,082,255 4,517,735 3,481,622
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE>
NEO MODERN ENTERTAINMENT CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2000, 1999, AND 1998
<TABLE>
<CAPTION>
Restricted Common Stock Common Stock Convertible Preferred
------------------------ ------------------------ ------------------------
Number Number Number
of Shares Amount of Shares Amount of Shares Amount
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 3,100,000 $ 3,100 -- $ -- 1,000,000 $ 1,000
Issuance of common stock for cash -- -- 296,000 296 -- --
Issuance of restricted shares for cash 9,800 10 -- -- -- --
Issuance of common stock for services -- -- 457,445 457 -- --
Stock issuance cost -- -- -- -- -- --
Net loss for the year ended
June 30, 1998 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1998 3,109,800 3,110 753,445 753 1,000,000 1,000
Conversion of preferred stock 1,000,000 1,000 -- -- (1,000,000) (1,000)
Net issuance of restriced
common stock for cash 50,000 50
Net issuance of common shares for services -- -- 200,000 200 -- --
Net issuance of restricted common shares
for services 58,980 59 -- -- -- --
Stock issuance cost -- -- -- -- -- --
Net loss for the year ended
June 30, 1999 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1999 4,218,780 $ 4,219 953,445 $ 953 -- $ --
Issuance of restricted shares for cash 20,000 20
Issuance of restriced shares for services 207,234 207
Filmart Stock options excercised 5,160,936 5,161
Stock issuance cost
Net loss for the year ended
June 30, 2000
---------- ---------- ---------- ---------- ---------- ----------
9,606,950 9,607 953,445 953 -- --
========== ========== ========== ========== ========== ==========
<CAPTION>
Paid-In Retained Stockholders'
Capital Earnings Equity
---------- ---------- ----------
<S> <C> <C> <C>
Balance, June 30, 1997 $ -- $ (106,020) $ (101,920)
Issuance of common stock for cash 147,704 -- 148,000
Issuance of restricted shares for cash 4,890 -- 4,900
Issuance of common stock for services 228,266 -- 228,723
Stock issuance cost (164,065) -- (164,065)
Net loss for the year ended
June 30, 1998 -- (52,418) (52,418)
---------- ---------- ----------
Balance, June 30, 1998 216,795 (158,438) 63,220
Conversion of preferred stock -- -- --
Net issuance of restriced
common stock for cash 24,950 25,000
Net issuance of common shares for services -- 200
Net issuance of restricted common shares
for services 29,431 -- 29,490
Stock issuance cost (9,573) -- (9,573)
Net loss for the year ended
June 30, 1999 -- (46,232) (46,232)
---------- ---------- ----------
Balance, June 30, 1999 $ 261,603 $ (204,670) $ 62,105
Issuance of restricted shares for cash 9,980 10,000
Issuance of restriced shares for services (207) --
Filmart Stock options excercised (5,161) --
Stock issuance cost (51,636) (51,636)
Net loss for the year ended
June 30, 2000 55,500 55,500
---------- ---------- ----------
214,579 (149,170) 75,969
========== ========== ==========
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
NEO MODERN ENTERTAINMENT CORP.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2000, 1999, AND 1998
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 55,500 $ (46,232) $ (52,418)
Ammortization of Flm Cost & Organization Expense 15,800 7,526 26,274
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Changes in assets and liabilities:
(Increase) Decrease in subscription recievables 15,500 (22,500)
Trade payables (65,115) 27,500 30,000
--------- --------- ---------
Net cash (used in) operating activities 21,685 (33,706) 3,856
--------- --------- ---------
Cash flows from investing activities:
Film costs (2,108) (27,500) (96,230)
Stock Issuance Cost (51,636)
Proceeds from issuance of stock 10,000 25,000 121,599
--------- --------- ---------
Net cash provided by (used in) investing activities (43,744) (2,500) 25,369
--------- --------- ---------
Cash flows from financing activities:
Borrowing (repayment) of long-term debt 22,185 36,355 (29,206)
--------- --------- ---------
Net cash provided by (used in) financing activities 22,185 36,355 (29,206)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 126 149 19
Cash and cash equivalents at beginning of year 168 19 --
--------- --------- ---------
Cash and cash equivalents at end of year $ 294 $ 168 $ 19
========= ========= =========
Supplemental disclosure of cash flow information:
Interest paid $ 18,000 $ 12,704 $ 6,368
========= ========= =========
Income taxes paid $ -- $ -- $ --
========= ========= =========
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
NEO MODERN ENTERTAINMENT, CORP.
(A Development Stage Company)
Notes to Financial Statements
Note 1 Organization
The company was incorporated on March 19, 1997, under laws of the state of
California. The Company is engaged in the development, production and
distribution of motion pictures.
Note 2 Method of Accounting
Assets, liabilities, revenues and expenses are recorded under the accrual method
of accounting for both financial statements and income tax purposes.
Note 3 Accounting 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, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual results
could differ from those estimates.
Note 4 Film Library and Projects under Development
Film Library and projects in progress are stated at the lower of amortized cost
or market. Upon completion, cost are amortized on an individual production basis
in the proportion of current gross revenues divided by the Management's estimate
of total gross revenues with such estimates being reviewed at least quarterly
pursuant to FASB 53.
Note 5 Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards SFAS) No. 109 "Accounting for Income Taxes". The Statement
employs an asset and liability method of accounting for income taxes. Under the
asset and liability method, deferred income taxes are recognized for tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. Under
SFAS No. 109, the effect on deferred income taxes of a change in tax rates is
recognized income in the period that includes the enactment date.
Note 6 Development Stage Company
Since the inception, the Company has been primarily involved in raising capital,
commencing production schedules for various projects under progress, and
acquiring services in the field of legal, financial, and entertainment to
promote the company and develop it's future infrastructure.
The Company has devoted substantially all of its efforts toward establishing the
entity, by developing various projects and operating the day to day activities.
The Company has not generated any significant revenues since its inception. Upon
development, release and distribution of motion pictures, more steady revenue
can be expected. Theses financial statements comply with the reporting
requirements under SFAS No. 7 for Development Stage Companies
F-6
<PAGE>
NEO MODERN ENTERTAINMENT, CORP.
(A Development Stage Company)
Notes to Financial Statements
Note 7 Film Library and Projects in Progress
On May 1, 1997 the Company acquired the rights, interests, and titles to certain
feature motion pictures and projects in progress from Filmart, Inc., Rafael
Zelinsky and related companies subject to the related liabilities. The Company
incurred additional costs for Projects in Progress, which were capitalized
pursuant to FASB 53. As of June 30, 2000 the cost for the completed film "Fun"
amounted to $465,248, accumulated amortization was $365,248 for 2000 and
$340,248 for 1999, less amounts payable from proceeds to Deluxe of $90,000 for
2000 and $90,000 for 1999, leaving a net balance of $20,000 for 2000 and $35,000
balance for 1999.
The cost of the film in progress "Bohemia" is $342,046 with an estimated cost to
complete of $200,000 ($100,000 for the completion of principal photography and
$100,000 for post production).
Note 8 Organization Cost
Organization cost is amortized ratably over a 60 months period.
Note 9 Accounts Payable
Account payable includes project development costs, which consists of expenses
incurred but not paid. The accounts payable includes liabilities and obligation
acquired as part of the agreement with Filmart, Inc., as explained in Note 7, in
addition to the Company's current payable.
Note 10 Long Term Payable
Long term debt consist of the following as of June 30, 2000 and 1999:
2000 1999
---- ----
Rafael Zelinsky & Filmart Inc.
including interest @ prime plus one 173,122 163,872
Other plus interest @
prime plus one 37,663 34,663
-----------------
Total Long Term Liabilities 210,785 198,535
Note 11 Capital Stock
Due to limited cash resources, the Company engaged various individuals or
entities to provide legal, financial, creative, script writing and
administrative services by issuing common stock.
Note 12 Compensation
On October 31, 1999 the Board of Directors ratified an employment contract to
the President/CEO for a term of seven years starting from March 21, 1997 calling
for the issuance of 18,088,182 in stock options at par value exercisable
5,160,936 shares by June 21, (which were exercised), the balance exercisable
every 90 days incrementally through March 21, 2004. The contract also calls for
compensation starting March 21, 1997, of $2,000 per month increasing by 25% each
year for seven years to be paid plus 10% simple interest when funds are
available in excess of operating needs as approved by the Board of Directors. No
salary has been paid to date. In addition the other 2 members of Board of
Directors will receive 8000 shares per month until November 2000.
F-7
<PAGE>
NEO MODERN ENTERTAINMENT, CORP.
(A Development Stage Company)
Notes to Financial Statements
Note 13 Commitment & Contingencies
Compensation owed to the President/CEO due to date is $103,219 plus interest.
This will be paid by Board approval (see Note 12).
F-8
<PAGE>
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.
NEO MODERN ENTERTAINMENT CORP.
By: /s/ Rafal Zielinski
-------------------------------------
Name: Rafal Zielinski
Title: President
Date: September 29, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant in the capacities and on the
dates indicated:
Signature Title Date
--------- ----- ----
/s/ Rafal Zielinski President, Chief Executive September 29, 2000
------------------------ Officer and Director
Rafal Zielinski
/s/ Regina A. Musolino Director September 29, 2000
------------------------
Regina A. Musolino
-18-
