As filed with the Securities and Exchange Commission on September 22, 1998
Registration No. 333-63143
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CHRONICLE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 2711 58-2235301
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation Classification Code Number) Identification No.)
or organization)
140 FIRST AVENUE N.E, CAIRO, GEORGIA 31728 (912) 377-2111
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Mr. John V. Whitman, Jr., President
140 First Avenue N.E
Cairo, Georgia 31728
Telephone: (912) 377-2111 Facsimile: (912) 377-7748
(Address, including zip code, and telephone number, including area code, of
registrant's agent for service)
COPIES OF COMMUNICATIONS TO:
Jackson L. Morris, Esq.
3116 West North A Street
Tampa, Florida 33609
Telephone: (813) 874-8854 Facsimile: (813) 873-9628
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the Securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each Proposed Proposed
class of securities Amount to be Maximum Maximum Amount of
to be registered registered offering price per aggregate registration
share fee
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value 3,060,452 $0.47 $1,434,434 $434.67
----------------------------------------------------------
Total: 3,060,452 $1,434,434 $434.67
</TABLE>
*Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933 (the "Securities
Act"). This estimate is based upon the average of the bid and asked
quotations for the Common Stock on the day prior to filing this Registration
Statement, $.125 and $.8125, respectively.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT
ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER
AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE
AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
CROSS REFERENCE SHEET
Sets forth the location in the prospectus of the information required to be
included in the prospectus in response to the items in Form SB-2.
Item of Form SB-2 Location in Prospectus
Item 1. Front of registration statement
and outside front cover of prospectus. Outside front cover of prospectus.
Item 2. Inside front and outside back
cover pages of prospectus. Inside front cover and outside
back cover of prospectus and
Additional Information.
Item 3. Summary information and risk
factors. Risk Factors.
Item 4. Use of proceeds. Use of Proceeds
Item 5. Determination of offering price. Distribution of Shares
Item 6. Dilution. Not applicable.
Item 7. Selling security holders. Selling Stockholders.
Item 8. Plan of distribution. Distribution of Securities.
Item 9. Legal proceedings. Business-Legal Proceedings.
Item 10. Directors, executive officers,
promoters and control persons The Company, Management,
Principal Stockholders.
Item 11. Security ownership of certain
beneficial owners and management. Principal Stockholders.
Item 12 Description of securities. Description of Securities.
Item 13. Interest of named experts and
counsel. Interest of Counsel, Experts.
Item 14. Disclosure of Commission
position on indemnification for
Securities Act liabilities. Management.
Item 15. Organization within last
five years. The Company.
Item 16. Description of business. Business.
Item 17. Management's discussion and
analysis or plan of operation. Management's Discussion and
Analysis of Results of
Operations and Financial
Condition and Plan of Operations.
Item 18. Description of property. Business, Property and Personnel.
Item 19. Certain relationships and
related transactions. Certain Transactions with
Management and Others.
Item 20. Market for common equity
and related stockholder matters. Market Price of and Dividends
on Common Stock and Related
Stockholder Matters.
Item 21. Executive compensation. Management-Management Compensation.
Item 22. Financial statements. Financial Statements.
SUBJECT TO COMPLETION. PRELIMINARY PROSPECTUS DATED SEPTEMBER 22, 1998.
Publisher of the South Georgia Chronicle
CHRONICLE COMMUNICATIONS, INC.
560,452 SHARES OF COMMON STOCK OFFERED BY SELLING STOCKHOLDERS
2,500,000 SHARES OF COMMON STOCK OFFERED BY THE COMPANY
560,452 shares of Common Stock of Chronicle Communications, Inc. (the
"Company") offered hereby are being offered and sold by selling stockholders
("Selling Stockholders") for their own account in open market or block
transactions. See, "Selling Stockholders". The Company will not receive any
proceeds from the Offering made by the Selling Stockholders. Selling
Stockholders may sell shares to or through broker-dealers and the
broker-dealers' compensation may be in the form of discounts, concessions or
commissions from the Selling Stockholders and commissions from or mark ups
charged to purchasers. The Selling Stockholders and participating
broker-dealers may be deemed to be "underwriters" as that term
is defined in the Securities Act of 1933, as amended, (the "Securities Act"),
in which event any discounts, concessions or commissions they receive, or any
profit on resales of the Shares by them, may be deemed to be underwriting
commissions or discounts under the Securities Act. The Company believes none
of the Selling Stockholders have underwriting or selling arrangements for
their Shares. See "Distribution of Shares".
2,500,000 shares of Common Stock of the Company offered hereby are being
offered and sold by the Company. The Shares offered by the Company will be
offered by the Company's directors and officers who will not be specially
compensated therefore. The Shares offered by the Company are expected to be
sold in negotiated transactions to investors and sold to securities broker-
dealers, none of which will purchase more than five percent of the Common Stock
offered hereby by the Company. In both cases, the price at which the Company
will sell the shares is expected to be related to the then current
bid and asked quotations for the Common Stock on the OTC Bulletin Board.
There is no assurance the Company will sell any of the Shares which
it is offering. See, "Distribution of Shares".
The Common Stock offered by both the Selling Stockholders and by the
Company is referred to herein as "Shares" and the offering thereof as the
"Offering".
The Company's Common Stock is quoted on the OTC Bulletin Board under
the trading symbol of CRNC. On the day prior to the date of this Prospectus,
the high bid and low asked quotations for the Company's Common Stock were
$.125 and $.8125, respectively.
The Company presently publishes one edition of a weekly community
shopper style tabloid newspaper under the title of the South Georgia Chronicle.
The South Georgia Chronicle contains personal and commercial classified
advertising and commercial display advertising for local and regional
businesses. The South Georgia Chronicle offers full process color photography
and graphics in commercial advertising. The South Georgia Chronicle is
presently published in a Thomas County Edition and a Houston County Edition is
planned, which have a combined free weekly distribution of 25,000 copies.
Thomasville is the principal city in Thomas County and Warner Robbins is the
principal city in Houston County, both in Soutwest Georgia. The Company plans
to expand to twenty editions of the Georgia Chronicle across Georgia and to
acquire additional specialty advertising and news products in print media.
AN INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK.
See "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is _________ ____, 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sales of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
such State.
REPORTS TO SECURITY HOLDERS
The Company intends to furnish to security holders annual
reports containing audited financial statements and unaudited financial
statements for each of the first three quarters of each fiscal year. In
addition, the Company may from time to time furnish to security holders
additional information about the Company and its business as deemed
appropriate by Management.
TABLE OF CONTENTS
The Company
Risk Factors
Use of Proceeds
Capitalization
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations
The Business
Management
Management Compensation
Employee Bonus Plan
Certain Transactions with Management and Others
Principal Stockholders
Description of Securities
Selling Stockholders
Distribution of Shares
Market Price of and Dividends on Common Stock and Related Stockholder Matters
Shares Available for Future Sale
Legal Matters
Experts
Additional Information
Index to Financial Statements
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer contained herein, and, if given or
made, such information or representations must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Shares in a jurisdiction to
any person to whom it is not lawful to make any such offer or solicitation in
such jurisdiction or in which the person making such offer or solicitation
is not qualified so to do. Neither delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company since the dates as of
which information is given in this Prospectus.
Until ______________, 1998 (40 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may by required to deliver a Prospectus.
This Requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
THE COMPANY
Chronicle Communications, Inc., (the "Company") was
incorporated in Georgia on April 5, 1996, under the name of JMAR
Communications, Inc., and changed its name to Chronicle
Communications, Inc. effective July 30, 1997. The Company's founder
is John V. Whitman, Jr., the Company's chairman and president. The
Company was organized for the purpose of filling the market left by the
closure of the Crisp Area Advertiser, a publication of Gray
Communication Systems, Inc. The Company employed the terminated
personnel of that company, in the production of the Company's Crisp
Area Penny Saver, a shopper style tabloid newspaper distributed free
to the community. Subsequently, the Company employed most of the
terminated sales personnel and reporting staff of the South Georgia News
and Shopper, a publication of Gray Communications Systems, Inc. in
Grady County, Georgia in production of the South Georgia Chronicle,
the Company's second shopper style tabloid newspaper distributed by third class
mail to the community, which also included community news and school
sports coverage from Grady County. Thereafter, Gray Communication
Systems, Inc. ceased publication of the South Georgia News and
Shopper. Mr. Whitman, the Company's founder, did not have a non
competition agreement with Gray Communications Systems, Inc. and
neither Mr. Whitman nor the Company acquired any assets of Gray
Communication Systems, Inc. Mr. Whitman, as the vice president of
Phillips Publishing, Inc., had founded the South Georgia News and
Shopper prior to its acquisition by Gray Communication Systems, Inc.
and, subsequently, as president of two Gray Communication Systems,
Inc. subsidiaries had managerial oversight of Crisp Area Advertiser. On
November 10, 1996, the Company published the first issue of The
Sunday South Georgia Chronicle, a broadsheet (full size) newspaper in
Grady County, which took over community news and school sports
coverage from its sister publication, the South Georgia Chronicle, and
expanded coverage to include selected state, regional, national and
international news, sports and comics through full Associated Press
membership. The Company received an award from Associated Press for
excellence in color sports photography for 1996, specifically the award
was given for a photograph taken at night time during the high school
football state playoffs. On October 5, 1997, the Company published the
first issue of The Sunday South Georgia Chronicle - Crisp County
edition, expanding the Sunday publication into a zoned edition weekly
newspaper. On February 8, 1998, the Company published the final
editions of The Sunday South Georgia Chronicle in both Grady County
and Crisp County and, effective with the February 18, 1998 editions,
changed the name of the Crisp Area Penny Saver to the South Georgia
Chronicle-Crisp County Edition, restored the community news coverage
to South Georgia Chronicle-Grady County Edition and added
community news and school sports coverage to South Georgia
Chronicle-Crisp County Edition. The two editions of the South Georgia
Chronicle served Crisp County and Grady and Thomas Counties until
August 12, 1998. After that date, the Company relocated the Grady
County Edition to Thomas County, published for the first time on September
1, 1998, and plans to publish the relocated Crisp County Edition in
Houston County in the near future.
At incorporation, the Company was authorized to issue 100,000
common shares. Effective March 18, 1997, the Company increased the
number of authorized common shares to 12,000,000 shares and
completed a stock split of sixty for one approved on October 24, 1996.
Effective July 30, 1997, the Company increased the number of
authorized shares to 35,000,000 common shares, completed a stock split
of two for one approved on March 11, 1997 and authorized 7,500,000
shares of voting convertible preferred stock which was issued to Mr.
Whitman and his wife. On September 29, 1997, Mr. and Mrs. Whitman
voluntarily surrendered the preferred stock for cancellation, believing
that the preferred stock was not in the best interest of the stockholders.
Effective on December 15, 1997, the Company's Common Stock was
reverse split one share for each two shares. Effective on July 1, 1998,
the Company's Common Stock was reverse split one share for each four
shares.
The Company's executive and production offices are located at
140 First Avenue N.E., Cairo, Georgia 31728, its telephone number is
(912) 377-2111 and its telephone facsimile number is (912) 377-4202.
The Company's website is at www.chronicleinc.com.
RISK FACTORS
Investment in the Shares involves a high degree of risk. The
following risk factors should be considered carefully in evaluating the
Company, its business, condition and prospects (financial and otherwise)
before purchasing any of the Shares. These risk factors are not
necessarily exhaustive and additional risk factors, if any, may be
material or have significance to an individual investor. Many investment
opportunities involve risk factors or a risk of loss, including the
existence of the normal and extraordinary risks. The existence of these
risk factors and possibly others should not necessarily be the sole
determining factor in whether or not to purchase Shares. All of the
information in this Prospectus should be carefully considered in
connection with the risk factors described below.
This Prospectus contains forward looking statements which
involve risks and uncertainties. Those statements appear in a number of
places in this Prospectus and include statements regarding the intent,
belief and current expectations of the Company, its directors and
management with respect to, among other things: (i) the Company's
expansion plans; and (ii) prospects for increased revenues and
profitability. Prospective purchasers of the Shares are cautioned that any
such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results
may differ materially from those projected in the forward looking
statements as a result of various factors, many of which are beyond the
control of the Company. The accompanying information contained in
this Prospectus, including without limitation the information set forth
under the headings "Risk Factors", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business", identifies important factors which could cause or contribute
to such differences
RISKS RELATED TO BUSINESS AND OPERATIONS-
Limited operating history. The Company began operations April
5, 1996 with a shopper product in one market. Subsequently, the
Company expanded operations with introduction of a shopper product in
a second market and later a traditional Sunday newspaper in both
markets. The Company has terminated publication of the Sunday
newspaper and relocated both editions of its shopper product into new
markets. The Company has financed its operations to date with sales of
Common Stock for cash and services, including part of the Shares
offered by the Selling Stockholders, contributions of property and
money from its founder and proceeds of a bank loan. The Company has
incurred a $115,338 loss from operations through the first fiscal period
ended September 30, 1996, a $872,383 loss from operations for the year
ended September 30, 1997 and a $575,175 loss from operations for the
nine months ended June 30, 1998. There is no assurance the Company
will be able to generate sufficient revenues from advertising sales to
become profitable in future periods or to successfully introduce its
Georgia Chronicle into additional markets. Without sufficient revenues,
the Company will be unable to create value in the Shares and to pay
dividends. The Company is subject to the risks inherent in any new
business, including complications, delays, unexpected costs and
uncertainties. See "Description of Business."
Limited liquidity and financial resources. The Company has
limited liquidity as a result of negative cash flow to date and its liquidity
has been limited to the sale of Common Stock, proceeds of a bank loan,
collections of accounts receivable and generation of additional accounts
receivable, primarily from sales of commercial display advertising in its
products. The Company expects limited liquidity to continue until the
savings to be realized as a result of terminating the Company's Sunday
newspapers, with the last edition on February 8, 1998, and the
community news and local sports content of its community shopper
products on August 12, 1998 are realized in the Company's operating
performance and the Company is able to expand its community shopper
products into additional markets, of which there is no assurance. The
Company plans to sell additional shares of its Common Stock pursuant
to this Prospectus in order to provide capital for the planned introduction
of the Georgia Chronicle in additional markets; but, there is no
assurance that additional Common Stock can be sold or that any other
financing will be available in the amount then needed to expand its
operations into additional markets or, if it is available, that the terms
thereof will be acceptable to the Company. The Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Stockholders.
Dependence on key personnel. The Company is dependent upon
the knowledge, efforts and abilities of John V. Whitman, Jr., its founder,
chairman and president, with respect to the conduct of its current
operations and implementation of the Company's plan to expand into
other markets with additional shopper products. Marsha B. Whitman,
the Company's Grady County sales manager, has contributed
significantly to the Company's advertising sales performance
in the Grady County and surrounding market and to the general
management of the Company, but is not considered an indispensable or
key employee. Mr. and Mrs. Whitman, who are married, devote all of
their respective working time to the business of the Company. The
Company is dependent upon Mr. Whitman because of his extensive
involvement with the development of the Company's business and prior
publishing experience. The Company's dependence on Mr. Whitman is
particularly important during the period prior to the Company reaching a
level of operations at which it has the financial ability to attract and
retain executive officers at market rates of compensation and benefits
who are not founders and major stockholders of the Company. The
Company does not expect to have a need for additional executive
management or to be in a position to pay the salaries and benefits
typically required by such unaffiliated executives until it has achieved
expansion into a substantial number of additional Georgia
markets, of which there is no assurance. The termination of employment
by Mr. Whitman for any reason in the near future could be expected to
have a materially adverse effect on the Company because the Company
may not be able to find a replacement for Mr. Whitman who has his
level of dedication to the Company, except for a person who would
require a salary and benefits package which at the present time would
exceed the Company's financial resources. At present, Mr. Whitman has
a short term written employment agreement with the Company, but
together with Mrs. Whitman they are the Company's largest stockholder
and the Company's board of directors has unanimously approved a five
year employment agreement for Mr. Whitman which is planned to be prepared in
writing in the near future. The Company is depending upon Mr.
Whitman as the Company's founder and majority stockholder for his
dedication, commitment and financial interest in the Company as a basis
for his continuing employment with the Company, regardless of its
financial condition at any particular time.
Risks associated with statewide expansion. There is no assurance
the Company will be able to successfully implement its plan to
expand the Georgia Chronicle into additional markets across Georgia.
This risk is associated with availability of capital or revenues to fund the
costs of such expansion and to some extent with the Company's ability to
identify and employ in each such additional market sales personnel who
are capable of carrying out the Company's plan under the direction of
management.
Competition. The Company's South Georgia Chronicle
competes against shopper products published by others, including
national, regional and independent operators, and the Company expects
its future Georgia Chronicle editions to face similar competition. There
is no assurance that the Company's Georgia Chronicle will be able to
compete successfully against the print advertising media which are
already established in the markets into which the Company may plan to
expand the Georgia Chronicle.
Lack of dividends. The Company has not declared or paid
dividends on its Common Stock, which includes the Shares, and may
elect to retain all or most of its net profits, if any, in the foreseeable
future to provide operating capital and funding for capital investment in
the Company's business. The Company cannot predict if or when it will
have current and retained earnings or surplus from which to legally
declare and pay dividends. There is no assurance as to if or when the
Board of Directors will declare a dividend on the Common Stock, which
includes the Shares.
Voting control by management stockholders. Mr. Whitman, who
is a director and an executive officer of the Company, and Mrs.
Whitman jointly own 763,760 shares of the Company's Common Stock
(62,500 of which are included for sale in a concurrent offering made by
a Prospectus dated July 23, 1998) and Mr. Whitman holds Common
Stock Purchase Options for 94,558 shares of Common Stock at the date
of this Prospectus, or 38.35 percent of the voting stock outstanding,
before sale of any the 62,500 shares and 25.7 percent, assuming the sale
of all 62,500 shares by Mr. and Mrs. Whitman, the Company sells all
2,500,000 offered hereby and Mr. Whitman exercises all his Common
Stock Purchase Options. In addition, Jackson L. Morris, a director and
secretary of the Company owns shares and Common Stock Purchase
Options for 9.62 percent before the offering made hereby and 7.05
percent, assuming the Company sells all 2,500,000 shares offered
hereby. See, "Management Compensation-Common Stock Purchase
Options" and "Principal Stockholders". Each issued and outstanding
share of the Common Stock is entitled to one vote on each nominee for a
directorship. The Company's Articles of Incorporation do not authorize
cumulative voting for the election of directors. Any person who controls
or can obtain more than fifty percent of the votes cast for the election of
each director will control the election of all directors. Accordingly, it is
likely the stockholders who are also the directors and management of the
Company hold a sufficient number of votes to elect all of the directors of
the Company and other Selling Stockholders who have not sold all their
Shares and the purchasers of those Shares, which are sold will not be
able to elect any directors.
RISKS RELATED TO THE OFFERING-
No assurance of active public market for Shares; Volatility. At
the date of this Prospectus, there is a limited public trading market for
the Shares; and, there is no assurance an active public trading market
will develop. Development of an active trading market for the
Company's Common Stock may depend upon the interest in the
Company of securities market makers, the investing public and
institutional investors, which may depend in turn on the Company's
revenues, profits and prospects. The prices of securities of companies
which are in limited supply and traded in the over-the-counter public
securities markets, which could describe the Company, are typically
volatile. Furthermore, the Company's Common Stock is quoted on the
OTC Bulletin Board, instead of the NASDAQ Small Cap Market or a
regional exchange. That quotation medium is believed to have an
adverse impact on the interest of some securities brokerage firms and of
public investors for the securities quoted there.
Possible negative effect of Common Stock available for future
sale. 813,760 shares of the Company's Common Stock owned for more
than two years by "affiliates", as defined in Rule 144 under the
Securities Act of 1933, are not registered for sale by such affiliates under
that Act. These shares are available for sale by each such holder
pursuant to Rule 144. Shares issued upon exercise of 258,448 Common
Stock Purchase Options will be "restricted securities", as defined in that
Rule, owned by affiliates and after one from the date of issue may be
sold by each such holder pursuant to that Rule. That Rule provides that
shares held by affiliates and restricted securities may be sold in limited
amounts during any three month period pursuant to the requirements of
Rule 144 or in larger amounts if registered under that Act. The offer of
a significant number of such shares of Common Stock in the future in
the public trading market at or about the same time pursuant to Rule 144
or pursuant to a subsequent registration statement under that Act could
have a depressive effect on the public market price of the Shares.
Trading limitations on stock at a market price of less than $5 per
share. The quotations for the Company's Common Stock on the OTC
Bulletin Board has been less than $5 per share. Management cannot
predict the market price of the Common Stock in the public market at
any time in the future. At any time the quoted market price is less
than $5 per Share, certain larger stock brokerage firms may prohibit
purchase or sale of the Common Stock in their customers' accounts. All
securities brokerage firms effecting purchase orders for new clients in
the Shares at a time when the Shares have a market bid price of less than
$5 per share are required by federal law to send a standardized notice to
such new clients regarding the risks of investing in "penny stocks", to
provide additional bid, asked, broker compensation and other
information to the new customer and to make a written determination
that the Shares are a suitable investment for the new client and receive
the new client's written agreement to the transaction, unless the client is
an established client of the firm, prior to effecting a transaction for the
client. These business practices may inhibit the development of a public
trading market for the Common Stock during periods that the price is
less than $5 by both limiting the number of brokerage firms which may
participate in the market and increasing the difficulty in selling the
Common Stock. Management cannot predict if or when the Company
will qualify to have its Common Stock traded on NASDAQ or a regional
or national securities exchange, which would, if admitted to trading in
any such market, exempt transactions in the Common Stock, regardless
of the market price, from the disclosure laws described herein.
USE OF PROCEEDS
There is no assurance as to if or when the Company may receive
net proceeds from the sale of the 2,500,000 Shares offered by the
Company by this Prospecuts. Furthermore, the price or prices at which
the Company sells the Shares, if any are sold, cannot be predicted; nor,
can the Company predict the uses and needs it may have for the net
proceeds at the time of such sale or sales. Accordingly, the Company
cannot predict either the total amount of the actual net proceeds, if or
when they may be received or how they may be used. In general, the
Company anticipates using the net proceeds for working capital and
capital investment required by its expansion plans. See, "Business-
Expansion Plans" and "Distribution of Shares".
CAPITALIZATION
The following table sets forth the capitalization of the Company
at June 30, 1998. This table should be reviewed in conjunction with the
financial statements of the Company and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At June 30, 1998
---------------------
<S> <C>
Long term debt, net of current maturities: $108,736
------------
Equity: (1)
Common stock, no par value, 35,000,000
shares authorized; 2,076,191 shares issued;
2,021,191 shares outstanding 1,749,786
Accumulated earnings <deficit> <1,562,896>
------------
186,890
Less treasury stock, at cost, 55,000 shares <55,000>
------------
Total stockholders' equity 131,890
------------
Total capitalization $240,626
============
</TABLE>
Subsequent to June 30, 1998, the Company has issued an additional
151,599 shares of its Common Stock at an average value of $.16.
SELECTED FINANCIAL DATA
The following table presents selected financial data at the dates
and for the periods set forth below. The table should be read in
conjunction with the financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
April 5, 1996 to Nine Months
Year ended (date of inception) to ended June 30,
September 30, 1997 September 30, 1996 --------------------
1998 1997
(unaudited)
---------------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Statement of
Operations Data:
Sales $645,051 $377,384 $430,143 $505,714
Cost of sales 1,000,144 333,440 638,733 690,341
----------- ----------- ----------- -----------
Gross profit <355,093> 3,944 <208,590> <184,627>
Operating expenses 517,290 119,282 366,585 191,006
----------- ----------- ----------- -----------
Net loss $<872,383> $<115,338> $ <575,175> $ <375,633>
=========== =========== =========== ===========
Loss per
common share: $ <.59> $ <.11> $ <.30> $ <.27>
======= ======== ======== ========
Weighted average
common shares
outstanding: 1,473,131 1,083,804 1,905,552 1,397,032
=========== =========== ============ =========
</TABLE>
<TABLE>
<CAPTION>
At September 30, 1997 At June 30, 1998
----------------------- --------------------
(unaudited)
<S> <C> <C>
Balance Sheet Data:
Working capital <deficiency> $<137,418> $<469,725>
Total assets $797,020 $812,687
Long term obligations,
less current portion $128,474 $108,736
Total stockholders' equity $304,103 $131,890
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS AND PLAN OF OPERATIONS
The Company began operations on April 5, 1996. The
Company's fiscal year begins on October 1 and ends September 30 of
the following year. The Company's first fiscal "year" was a period of
five months and twenty-six days. The operating activity in this period
ended September 30, 1996 was limited to organizational expenses,
equipment purchases and expenses of and revenues from publication of
twenty-four issues of the Crisp Area Penny Saver and twenty-three
issues of the South Georgia Chronicle, both community news and
shopper style tabloid newspapers. The operating activity for the year
ended September 30, 1997 reflects one full year of operations with the
South Georgia Chronicle and the Crisp Area Penny Saver, the shopper
style tabloid newspapers, and forty-seven issues of The Sunday South
Georgia Chronicle in Grady County, the Company's full sized Sunday
newspaper, which began publication on November 10, 1996.
Accordingly, the operating activities reflected in the financial statements
at and for the respective periods ended September 30, 1996 and 1997 are
not comparable in terms of either duration or scope of operations. The
nine months ended June 30, 1997 reflects thirty-five issues of The
Sunday South Georgia Chronicle -Grady County Edition and the
comparable period for 1998 reflects nineteen issues of both the Grady
County and Crisp County editions of The Sunday South Georgia
Chronicle, in addition to publication of both shopper style tabloid
newspapers throughout the semi annual period. The Company
terminated publication of both the Grady County Edition and the Crisp
County Edition of The Sunday South Georgia Chronicle with the
February 8, 1998 issues. On August 12, 1998, the Company terminated
publication of the South Georgia Chronicle- Grady County Edition and
Crisp County Edition for the purpose of relocating those editions of its
community shopper product to Thomas County and Houston County,
respectively. The editions, relocated to Thomas County, first
published on September 1, 1998, does not contain community new and
local sports content; but, is primarily an advertising medium.
The Company anticipated several periods of capital formation
and operating losses which management believes are normal for a new
business. The Company's investment in facilities and equipment have
been based upon the Company's plan to expand into additional markets.
This investment has exceeded the investment which would have been
appropriate if the Company had contemplated limiting its operations to
its original markets and publications. Management believes the
Company has achieved and can continue to achieve economies of scale
by applying fixed operating costs to more than one publication and
through lower increments in production costs for additional publications.
Even though the Company realized these economies by applying the
costs of Associated Press membership, related satellite communications
equipment and syndicated features in particular, over two zoned editions
of The Sunday South Georgia Chronicle, the Company was unable to
achieve the expected profitability from the Sunday products as a result of
an unexpected shortfall in display and classified advertising sales
revenues.
LIQUIDITY-
The liquidity of the Company for the period from inception to
September 30, 1996, the year ended September 30, 1997 and the nine
months ended June 30, 1998 has been limited to proceeds from the sale
of Common Stock, proceeds from a bank loan in the original amount of
$60,000 and collections of accounts receivable from sales primarily of
commercial display advertising and to a lesser extent from sales of
business classified advertising. During the year ended September 30,
1997, the Company used cash to repay approximately $6,000 of
principal of the loan, leaving an outstanding balance of approximately
$54,000. The bank loan was used for working capital. The Company
has paid cash for all of its equipment, except for two photocopy machines
and a color printer/scanner system, which are leased from the manufacturer.
Property and equipment net of accumulated depreciation totaled $49,070
and $369,920, at September 30, 1996 and 1997, respectively.
At June 30, 1998, property and equipment net of accumulated
depreciation was $370,835. During the year ended September 30, 1997,
the Company used $21,806 of cash to purchase a full membership in
Associated Press and related satellite and telecommunications equipment
costs. In October 1996, the Company purchased an 11,000 square foot
warehouse at a price of $30,000, which it intended to renovate as its
central production facility and corporate offices. The Company
continues to own this building, but has no immediate plans for its use.
The Company used $16,300 of its cash for the down payment. The
Company has a $14,000 purchase money mortgage note on the property
due to the seller on December 1, 1998. In July 1997, the Company
purchased a 25,000 square foot office/warehouse building at a price of
$125,984 which the Company is using for its executive offices and
production facilities. The Company used $5,000 of its cash for the down
payment and an additional $25,000 of its cash for improvements. The
Company has a $118,832 purchase money mortgage note on the property
due to the seller in 2012 with an interest rate of eight percent and $1,142
in principal payable monthly, with a ten year balloon payment.
The Company acquired "Design Ideas", a design graphics and
computer consulting proprietorship, in October 1996 for a price of
$35,000, paying $22,500 of the purchase price in cash, and leasing that
firms computer equipment. The seller recovered the leased equipment
from the Company pursuant to court order without reimbursement of the
Company. Furthermore, the Company's sales staff at the Crisp Area
Penny Saver resigned en mass in March 1997 to form a rival shopper
paper which resulted in a decline in revenues for a period of
approximately three months and litigation against the former manager.
The Company obtained an injunction against the former manager, which
has now expired, and recovered 12,500 shares of the Company's
Common Stock owned by the former manager as damages. The
Company used cash of approximately $28,000 for payment of legal fees
in the two cases in the period ending September 30, 1997. Both cases
have been concluded prior to the date of this Prospectus. The Company
used cash in the periods ended September 30, 1996 and 1997 for
advances to stockholders, who are also the Company's executive
officers. These advances totaled $99,123 and $315,075 at the end of the
respective periods. $115,000 of these advances were repaid by the
stockholders in November 1997, leaving an outstanding balance including
subsequent advances of $339,516 at June 30, 1998. See, "Certain
Transactions with Management and Others". The Company's working
capital position was a negative $44,810, $137,418 and $469,725 at
September 30, 1996, September 30, 1997 and June 30, 1998,
respectively. The Company believes the termination of the Sunday
editions and eliminations of community news and sports from the shopper
products will result in an improvement in the Company's liquidity in
future periods.
Liquidity and capital resources at June 30, 1998. The
Company's working capital position declined from September 30, 1997
to June 30, 1998, with an increase in negative working capital to
$469,725 at June 30 from $137,418 at September 30. This condition is
the result of a decline in total current assets to $102,336 from $227,025,
significantly as a result a payment of advances to stockholders in the
amount of $115,000 and an aggregate decline in prepaid and other
current items of $10,381, coupled with an increase in total current
liabilities. The increase in total current liabilities is a result of
increases in bank overdraft by $21,738, notes payable and current maturities
of long term debt by $14,535, notes payable stockholders by $86,000,
accounts payable by $32,998, accrued payroll liabilities by $77,347 and
other accrued liabilities by $4,600. Both the Company's total current
assets and total current liabilities, as well as operating expenses, have
been adversely impacted by the costs associated with registration of the
Company's common stock for sale by selling stockholders on Form SB-
2 under the Securities Act of 1933, as amended, and the Company's
efforts to encourage the development of an active public market for its
common stock, principally audit fees and fees paid to investor relations
consultants. The Company does not have any credit lines and is
dependent upon sales of Common Stock offered hereby for liquidity
until such time as net loss can be eliminated through improvement
in sales, of which there is no assurance. The Company's interest
only note payable to a bank matured June 18, 1998
and will not be renewed. See, Note 5 to the Financial Statements
included elsewhere in this Prospectus. The Company's management is
committed to increasing the number of products published by both initial
starts and acquisitions in new markets. The program of expansion by
addition of new starts and by consolidation by acquisition within its
market territory envisioned by management will require additional
equity funding, of which there is no assurance, to meet the Company's
anticipated need for liquidity and capital investment.
CAPITAL RESOURCES-
At September 30, 1996 and 1997, respectively, the Company had
an investment in computer equipment and publishing software, coin
racks and furnishings of $49,070 and $369,920, net of accumulated
depreciation. During the nine month period ended June 30, 1998, the
Company did not materially increase its investment in property and
equipment. The Company believes that its production equipment and
facilities are sufficient for a total of five editions of the Georgia
Chroncile. The Company's expansion plans call for additional
investment of approximately $35,000 in production equipment and
headquarters office improvements. Such additional investment is
expected to increase the Company's production capacity for the addition
of separate editions of the Georgia Chronicle. The Company's
headquarters/production facility is expected to be sufficient, subject to
additional capital improvements to build out the warehouse space into
additional office space as the Company's expansion requires, to
accommodate the growth needs of the Company for the planned editions.
Each additional edition of the Georgia Chronicle also will require
approximately $3,500 of computer and communications equipment.
Expansion to twenty editions of the Georgia Chronicle is expected to
take approximately twelve months, subject to availability of future cash
flows and equity or debt funding, if any.
The Board of Directors has advised management to pursue
acquisition of a six station web printing press for printing the Company's
newspapers. The estimated cost of a printing press installed is estimated
at $610,000, including approximately $25,000 of capital improvements
to the now vacant warehouse area of the Company's
headquarters/production facility and investment in paper inventory of
approximately $40,000. The Company has obtained a loan proposal
from a commercial finance company for $400,000 for financing of a
printing press. The proposal is for a five year loan at a floating rate at
350 basis points over base treasury note index for U.S. Treasury
securities with five years remaining to maturity. Accordingly, the
Company will require approximately $210,000 in equity funding to
make the acquisition of a printing press.
RESULTS OF OPERATIONS-
Years ended September 30, 1996 and 1997. As stated above,
management anticipated losses from operations during the initial periods
of operations. The losses reported during the period from inception to
September 30, 1996 and the year ended September 30, 1997 have been
more than anticipated. The Company began operations with a single
shopper product in the Crisp County market and added a second shopper
product within two weeks in Grady County. In November 1996 and
October 1997, respectively, the Company added the two editions of The
Sunday South Georgia Chronicle. At inception, the Company did not
plan for the publication of The Sunday South Georgia Chronicle, which
was subsequently developed and introduced. As noted above, the
Company was unable to generate its forecasted levels of advertising
revenues from the Sunday editions. The Company terminated
publication of the Sunday editions with the February 8, 1998 issues in
order to focus its efforts on the South Georgia Chronicle, the Company's
community news and shopper style tabloid newspapers. The Company's
sales since February 8, 1998 have been adversely affected by
termination of the Sunday editions; although related expenses have more
than offset reduction in revenues. Management believes the Company
can become profitable in future periods in part as a result of
eliminating costs of approximately $366,000 per year which were
attributable to the Sunday editions.
Aggregate classified and display advertising revenues for both
editions of The Sunday South Georgia Chronicle were $61,372 and
$39,002 for the year ended September 30, 1997 and the six months
ended March 31, 1998. Since termination of The Sunday South Georgia
Chronicle in February 1998, the Company has experienced an increase
in advertising revenues for its shopper products which more than offsets
the revenues which management believes would have been generated
from The Sunday South Georgia Chronicle, if publication had not been
terminated. Management believes this is a result of eliminating the
pricing structure which favored simultaneous advertising in both the
shopper products and The Sunday South Georgia Chronicle.
Subscription revenues for The Sunday South Georgia Chronicle were
$7,520 and $16,597 for the respective periods. Termination of The
Sunday South Georgia Chronicle resulted in refunds in the nine-month
period ended June 30, 1998 of approximately $3,900 in unearned
subscriptions collected through June 30, 1998.
During the year ended September 30, 1997, the Company
experienced a decline in revenues as a result of the effort by a former
manager of the Company's Crisp Area Penny Saver to begin publication
of a rival shopper product. This decline in revenues, estimated at
$130,000, continued for approximately six months before the Company
through litigation and increased selling effort was able to fully recover
the advertiser base for the Crisp Area Penny Saver. The time and
attention of management was partially diverted from the Company's
normal business affairs and expansion plans by this litigation during this
three month period. During that year, the Company was also deprived of
anticipated revenues by the loss of design and computer consulting
operations related to "Design Ideas". During the year ended September
30, 1997, the Company incurred approximately $29,200 in nonrecurring
legal expense in connection with the litigation in these matters.
The nine-month periods ended June 30, 1998 and 1997. The
results of operations for the nine months ended June 30, 1998 reflect
revenues and expenses related to publication of the South Georgia
Chronicle in Grady County, The Sunday South Georgia Chronicle-
Grady County Edition from the beginning of the period to February 8,
1998, The Sunday South Georgia Chronicle- Crisp County Edition
beginning October 5, 1997 and ending February 8, 1998 and the South
Georgia Chronicle in Crisp County. Results of operation for the
corresponding nine months ended June 30, 1997 reflects revenues and
expenses related to the publication of the South Georgia Chronicle in
Grady County, The Sunday South Georgia Chronicle- Grady County
Edition beginning November 10, 1996 and the Crisp Area Penny Saver
(re-named, the South Georgia Chronicle- Crisp County Edition).
Significant changes have occurred since February 8, 1998 when both
editions of The Sunday South Georgia Chronicle ceased publication.
Revenues have decreased $75,571 for the nine months ended June 30,
1998 compared to 1997. The entire decrease can be attributed to the
closure of both editions of The Sunday South Georgia Chronicle.
Certain operating expenses decreased for the period for the same reason.
Printing expense was decreased by $87,152, Sunday syndicated expense,
included in cost of sales decreased by $19,897 and payroll attributed to
cost of goods sold decreased 27.3% between February 1, 1998 to June
30, 1998. Net loss for the nine-month period ended June 30, 1998
increased to $575,175 compared to $375,633 in 1997. This loss is
partially attributable to other expense items included in general and
administrative expense, such as legal & professional services, stock
transfer costs, depreciation expense, directors' fees, president's
compensation (booked but not paid) and consulting fees, and to interest
expense which rose to $25,728 for the nine-month period ended June 30, 1998
compared to $12,163 for the period in 1997. Net cash used by operating
activities improved by $115,302 and, although the loss per share rose to
$.30 for the nine months ended June 30, 1998 compared to $.27 for the
same period in 1997. The Company continued to incur certain costs
associated with the Sunday news products through the second quarter,
despite discontinuance of those editions after February 8, 1998, and into
the third quarter. Management believes the expenses attributed to
existing properties will continue to demonstrate improvement while
revenue growth for the fourth quarter are expected to improve the
Company's operating results for the year ending September 30, 1998. It
should be noted that future revenues which can be generated from the
Company's two existing products are expected to be insufficient to
absorb fully the expenses associated with ongoing compliance with the
reporting requirements under Section 15(d) of the Securities Exchange Act of
1934, as amended, and related but necessary investor relations programs.
Management believes that growth in the Company's product base
through initial starts and acquisitions in new markets is essential to the
Company's ability to enjoy net profits adequate to provide a return to its
stockholders.
THE BUSINESS
The Company publishes two editions of a weekly community
shopper style tabloid paper under the title of the South Georgia
Chronicle. The South Georgia Chronicle contains personal and business
classified advertising and commercial display advertising. The
Company utilizes newspaper racks placed in high traffic locations
throughout each of the markets to accomplish additional distribution of
the Company's shopper papers. The South Georgia Chronicle offers full
process color photography and graphics in commercial advertising. The
existing Thomas County Edition and a Houston County Edition of the
South Georgia Chroncile will have a combined free weekly distribution of
25,000 copies. Thomasville is the principal city in Thomas County and
Warner Robbins is the principal city in Houston County, both in
Soutwest Georgia.
The Company's Internet site currently provides Company stock
and financial information, news and sports of local interest, regional
advertising, Company awards and testimonials, print advertising rates,
Internet services rates and information and links to Georgia's weather,
agricultural, entertainment and other Web sites.
EXPANSION PLANS-
The Company plans to introduce eighteen additional Georgia
Chronicle editions in selected counties across Georgia which
management has determined have sufficient commercial and economic
bases to support several print media products. Each county in the
Company's expansion plan has an aggressive Industrial Development
Authority which has an history of successful recruitment of new business
and industry. Management believes the Company can quietly expand
into a new market while introducing commercial advertisers and readers
to the concept of high quality, low priced print advertising. The
Company's goal is to open three new markets per month, subject to
available future cash flows and equity or debt financing, if any. Each
edition of the Company's Georgia Chronicle will carry the appropriate
geographic designation, such as South Georgia Chronicle.
The Company is committed to an expansion program, subject to
available funding. Management believes the Company must expand its
products into new markets, with initial starts and consolidation within its
industry by acquisition of existing shopper and news specialty products,
as well as small weekly and daily newspapers. A recent edition of the
Bithlo-Cribb report recommends that daily newspaper companies
broaden their base with the addition of weekly publications, suggesting
that weekly newspapers are a bargain at seven to nine times cash flow
compared to the limited number of daily newspapers available for
acquisition which command ten to sixteen times cash flow. The report
states: "the geographic hub and spoke or cluster approach has
consistently proven a winner." The report goes on to reflect that large
media groups are beginning to recognize the shopper publication
industry as solid and profitable, with founders of older shopper
publications bringing in younger management or selling out.
Management believes the Company is positioned to benefit from these
trends. Beginning at the Company's founding, management has
developed the Company's infrastructure for the hub and spoke structure,
with a view to expansion and acquisitions. Subject to available funding,
management intends to pursue an aggressive expansion and acquisition
program. There is no assurance that any or adequate funding will be
available, and if available, that the terms will be acceptable to the
Company.
The Company plans to expand its Internet site to provide
advertisers with added value through a statewide classified advertising
data base, with emphasis on employment advertising. The Internet site
will include links to Chambers of Commerce and Corporate Relocation
Departments across the United States.
The Company is actively evaluating the purchase of existing
publishers of specialty newspapers which the Company believes are
priced below market value and have synergism with the Company's
product mix. The Company's objective is to expand into markets which
are not saturated by numerous print media companies. The Company's
acquisition focus is on niche products with a delineated readership.
SALES-
The Company employs commissioned sales personnel to solicit
advertising from merchants and businesses in its respective market areas.
PRODUCTION-
The Company has centralized all composition and production
functions, other than printing at the present time, at its
headquarters/production facility in Cairo, Georgia. Centralization of
these functions results in production economies, including more
intensive use of equipment and personnel. Modern computer and
communications technology enables advertising copy gathered at the
Company's remote sales offices to be transmitted to the centralized production
department for page layout and ad building in both current editions and
planned future editions of the Georgia Chronicle. By composing all
editions in a central production department, the Company is able also to
realize quality assurance. The Company expects to require no additional
production equipment as it opens up the first five new markets. See,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-
At the present time, the Company contracts with United Printing
and Publishing, Inc. in Tampa, Florida for printing of its products.
COMPETITION-
The Company currently publishes the South Georgia Chronicle
in two markets, Thomas County and Houston County, Georgia. The
Company's Georgia Chronicle competes in the two existing markets and
will compete in the expansion markets, if any, with all other print
advertising media, including general circulation daily and weekly
newspapers and other shopper papers. The competition and its
effectiveness will vary from market to market. A major competitor in
almost every market will be the daily newspaper which in most cases
will be owned by a national or regional media conglomerate, and all of
which have substantially greater experience, financial resources and
established market share than the Company. The Company's
competition strategy is to provide high quality print at prices below
competitors in each market.
The Company's competition for advertising sales and classified
advertising is not limited strictly to print media. Radio and television
media also serve the immediate markets which are served by the
Company's products. But print and electronic broadcast media are not
generally viewed as being mutually exclusive to advertisers and
generally overlap to a significant degree in advertiser usage.
Accordingly, no general or specific discussion of electronic broadcast
media is included.
LITIGATION-
The Company recently has been named as a defendant in a
personal injury suit brought in the Circuit Court for Leon County,
Florida in which the plaintiff's seek damages in excess of $15,000. The
suit, Green, et ux, vs. Chronicle Comminications, Inc., Case No. 98-4839,
is based upon injury sustained by an employee of The Tallahassee
Democrat on that company's property over two years ago as a result of
actions by a former Company employee. The Company has been
advised by counsel that the claim should be fully covered by insurance.
In the ordinary course of business, the Company becomes
involved in litigation from time to time, primarily collections matters.
At the date of this Prospectus, the Company is not involved in any
litigation.
OFFICES, EQUIPMENT AND PERSONNEL-
The Company owns a 25,000 square foot office/warehouse in
Cairo, Georgia, All executive and composition/production activities
for all of the Company's existing and planned editions of the
Georgia Chronicle are and will be located at the Cairo facility.
The Company's Cairo facility is expected to be sufficient for the Company's
planned growth. In October 1996, the Company purchased an 11,000
square foot warehouse in Cairo, which it then intended to convert into
offices, but which the Company now has no plans to use in the immediate
future.
The Company has made a major commitment to state-of-the-art
computer hardware and publishing software. The Company owns a
sixteen work station computer network and a central file server
expandable to fifty user work stations with a 10-T based ether talk INA
system. Installed technology allows full pagination of all products with
simplified transport by "zip disk" to the printer. Color proofing and
scanning equipment has been installed which eliminates most darkroom
procedures. The Company has installed a computer hard drive array
which has the capacity for storing of years' worth of customer
advertising materials for future use. The Company expects to require a
new file server in the reasonably near future. An independent
consultant has evaluated the feasibility and effectiveness of
the Company acquiring a printing press for installation at the Company's
headquarters. The consultant's evaluation concludes the Company could
achieve significant cost savings in printing with its own press operation.
The Board of Directors has authorized management to pursue acquisition
of a six unit web press, subject to the availability of funding for the
purchase or lease. See, "Business-Expansion Plans" for a description of
additional equipment which will be required to implement the
Company's expansion plan.
The Company currently has ten full time employees. Mr.
Whitman, the Company's president, is the publisher of all the Company's
products. The Company employs a bookkeeper, two display advertising
sales representatives, one classified advertising sales representatives, one
reporter, one circulation manager, one Internet services manager, one
administrative assistant, and two compostion/graphic designers.
Accordingly, the Company will require the addition of appropriate
personnel, primarily an ad sales person, in each market into which it
expands, if any.
MANAGEMENT
The names, ages and terms of office of directors and executive
officers of the Company are set forth in the following table:
<TABLE>
<CAPTION>
Name Age All positions with Company Director since
- ------------------- ----- ---------------------------- --------------
<S> <C> <C> <C>
Ronald L. Mallett 48 Director and Treasurer 1997
Jackson L. Morris 54 Director, General Counsel
and Secretary 1996
John V. Whitman, Jr. 40 Director and President 1996
</TABLE>
Each director is elected by holders of a majority of the
Common Stock to serve for a term of one year and until his successor is
elected and qualified, which is generally at the annual meeting of
stockholders. Non-management directors are paid an annual cash fee of
$500 and Common Stock purchase options for their services as directors.
See, "Common Stock Purchase Options". Officers serve at the will of
the board. The Company may indemnify directors and officers against
damages which qualify, in the opinion of the disinterested members of
the board, for indemnification under Georgia law and the Company's
Bylaws. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to Georgia law, the Company has
been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
Ronald L. Mallett, a director since May 1997 and the treasurer
since August 1, 1997 of the Company, is a Vice President and the
General Manager of Thigpen Heating & Cooling, Inc. of Jacksonville,
Florida, employment which he started in June 1997. From 1990 to June
1997, Mr. Mallett was a vice president of Certified Air Contractors, Inc.
of Jacksonville, Florida. Both Thigpen Heating & Cooling, Inc. and
Certified Air Contractors, Inc. are regional heating, air conditioning and
refrigeration contractors with annual sales of approximately $4 million
and $3 million, respectively. Mr. Mallett's duties with each company
include sales and operations. Mr. Mallett is a member of the
Occupational License Tax Equity Study Commission, a post appointed
by the mayor of Jacksonville, Florida, for one year beginning 1995.
From 1990 to 1995, Mr. Mallett was the president of Jacksonville Air
Conditioning Contractors Association and in 1990 and 1991 he was a
member of the board of the American Subcontractors Association, North
Florida Chapter. Beginning in 1994 to the present Mr. Mallett has
served on several committees of the Associated General Contractors of
North Florida and was elected to the board of that organization in 1996.
Mr. Mallett retired from the U.S. Marine Corps in 1990 with the rank of
Captain after twenty-three years of service. Mr. Mallett earned a B.S.
degree in occupational education (1985) from Southern Illinois
University.
Jackson L. Morris, Esq., a director and general counsel of the
Company since inception and corporate secretary since August 23, 1998,
is an attorney in private practice since 1992. He practiced law in Tampa
and St. Petersburg, Florida with the law firm of Harris, Barrett, Mann &
Dew in 1991 and 1992. Mr. Morris was a founding member of the St.
Petersburg, Florida law firm of Greene & Mastry, P.A. in 1984,
practicing law with that firm until 1991 and with its predecessor from
1982 to 1984. Mr. Morris' law practice has been primarily in the areas
of general corporate, securities and contract law. Mr. Morris is a
member of The Florida Bar, The State Bar of Georgia (inactive) and The
District of Columbia Bar. He is admitted to practice before the United
States Tax Court and Supreme Court of the United States of America.
Mr. Morris earned a B.A. degree in economics (1966) and a Juris Doctor
degree (1969) from the Emory University in Atlanta, Georgia and a
L.L.M. degree in federal taxation (1974) from Georgetown University
Law Center.
John V. Whitman, Jr., is the founder, director and president of
the Company since inception. In February and March 1996, Mr.
Whitman was planning for a business which became the Company.
From September 1, 1995 into February 1996, Mr. Whitman was the
President of Southwest Georgia Shoppers, Inc., a subsidiary of Gray
Communications Systems, Inc., a New York Stock Exchange listed
company, (trading symbol GCS) which had purchased the assets of
Phillips Publishing, Inc. owner of the Tallahassee Advertiser, The Add
Sheet, The South Georgia News and Shopper and The Gadsden News
and Shopper. During his brief tenure with Southwest Georgia Shoppers,
Inc., Mr. Whitman was assigned the additional responsibilities of
president of the Rockdale Citizen Publishing Company, the owner of the
Gwinnett Daily Post and The Rockdale Citizen. Mr. Whitman was the
vice president and publisher of Phillips Publishing, Inc. from October
1992 to August 1995. Mr. Whitman founded The South Georgia News
and Shopper and The Gadsden News and Shopper for Phillips
Publishing, Inc. Mr. Whitman managed thirty-eight full time and forty-
three part time employees and exercised full management and financial
responsibility for Phillips Publishing, Inc.'s operations. He also served
as a consultant and motivational speaker to other Phillips publishing
divisions. For seven months in 1992, Mr. Whitman was employed by
Southeast Publishing Ventures in the capacity of District Manager, in
which he launched a new housing guide for the Treasure Coast of
Florida and turned around a new housing guide for the Orlando, Florida
market. In 1991 and 1992, Mr. Whitman was engaged in consulting in
the publishing industry and efforts to acquire a print media company for
his own account. Mr. Whitman attended Hillsborough Community
College and the University of South Florida.
MANAGEMENT COMPENSATION
Mr. Whitman, the Company's president, and his wife, Mrs.
Whitman, the Company's Sales Manager, did not take compensation
during the fiscal period and year ended September 30, 1996 and 1997,
and the nine months ended June 30, 1998. Mr. and Mrs. Whitman have
contributed their services to the Company during those periods with an
estimated fair market value of $39,600 for the fiscal period ended
September 30, 1996, $99,400 for the year ended September 30, 1997 and
$106,750 for the nine months ended June 30, 1998. The Company has
recorded these amounts as a cost of doing business and as contributed
capital in the respective periods. On May 1, 1998, the Company entered
into an employment agreement with Mr. Whitman through September
30, 1998. The agreement provides for an annual salary of $120,000.
The Company's cash flow has not permitted payment of this salary to
Mr. Whitman, but the salary has been accrued in an amount of $20,000
at June 30, 1998. The Company's payment of compensation to Mr.
Whitman is expected to be limited by the Company's cash flow. The
Company intends to implement a benefits package, including health
insurance, for its employees, which will include Mr. Whitman.
The Company issued 6,250 shares of its Common Stock to J.
Russell Dalton, a former director and the general manager, as a signing
bonus. The Company issued 2,500 to Mr. Dalton and 6,250 shares to
Mr. Mallett for agreeing to become directors of the Company.
COMMON STOCK PURCHASE OPTIONS-
The Company has issued Common Stock Purchase Options to its
directors and officers set forth in the following table.
<TABLE>
<CAPTION>
Number of Options
-----------------------------------------------------
Name of option holder: Before sale by Company (1) After Sale by Company (2)
- ---------------------- ------------------------- -------------------------
<S> <C> <C>
J. Russell Dalton (3) 1,250 1,250
Ronald L. Mallett (4) 51,250 51,250
Jackson L. Morris (5) 112,640 237,640
John V. Whitman, Jr. (6) 94,558 576,510
========================= =========================
Total options
</TABLE>
(1) Before the sale by the Company of any of the 2,500,000 Shares
offered by this Prospecuts.
(2) Assumes sale by the Company of all 2,500,000 Shares offered by
this Prospectus.
(3) Mr. Dalton is no longer a director and officer. 1,250 Options for
five years beginning October 1, 1997 exercisable at a price equal to
seventy percent of the average bid and asked price on the day prior to
exercise, unless such shares are registered pursuant to the Securities Act
of 1933, in which event the exercise price will be equal to such average.
(4) 1,250 Options for five years beginning October 1, 1997 exercisable
at a price equal to seventy percent of the average bid and asked price on
the day prior to exercise, unless such shares are registered pursuant to
the Securities Act of 1933, in which event the exercise price will be
equal to such average. 50,000 Options exercisable at a price equal to
fifty percent of the average bid price on the day prior to exercise in the
best market for the Company's Common Stock.
(5) 1,250 Options for five years beginning October 1, 1997 exercisable
at a price equal to seventy percent of the average bid and asked price on
the day prior to exercise, unless such shares are registered pursuant to
the Securities Act of 1933, in which event the exercise price will be
equal to such average. 111,390 Options and 236,390 Options,
respectively exercisable at a price equal to fifty percent of the average
bid price on the day prior to exercise in the best market for the
Company's Common Stock. Number of Options calculated assuming no
Options are exercised by others.
(6) 1,250 Options for five years beginning October 1, 1997 exercisable
at a price equal to seventy percent of the average bid and asked price on
the day prior to exercise, unless such shares are registered pursuant to
the Securities Act of 1933, in which event the exercise price will be
equal to such average. 93,308 Options and 575,260 Options exercisable
at a price equal to a percentage of the average bid price on the day prior
to exercise as further described below. The number of Options assumes
no sale of shares pursuant to the concurrent offering made by the
Prospecuts dated July 23, 1998. Number of Options calculated assuming
no Options are exercised by others.
On May 18, 1998 and on August 23, 1998, the Company granted
to Mr. Whitman and to Mr. Morris, respectively, perpetual and self
renewing Common Stock Purchase Options. These Options are set forth in the
table above. In the case of Mr. Whitman, the options are for such
number of shares of Common Stock as is necessary at any time,
and from time to time, when added to the number of shares of
Common Stock which are at such time owned by Mr. Whitman,
to equal 21.805%, as adjusted, of the total issued and
outstanding shares of the Corporation's Common Stock. The 21.805%
percentage will be reduced for sales made by Mr. Whitman, as follows:
the difference between 390,443 (one-half of the shares owned by Mr.
and Mrs. Whitman on the date of grant) and total number of shares sold
by Mr. Whitman after December 31, 1997 will be divided by 1,790,380
(the total number of shares issued and outstanding on that date) to
determine the adjusted percentage, the outstanding number of shares on
the date for which the determination is being made will be multiplied by
the adjusted percentage and the number of shares then owned by Mr.
Whitman will be subtracted from the product, the difference being the
number of Options which Mr. Whitman is then entitled to exercise. Mr.
Whitman's Options are exercisable at a percentage of the average bid
price on the day prior to exercise in the best market for the Corporation's
Common Stock, as follows: first year-twenty percent; second year-thirty
percent; third year-forty percent; fourth year and thereafter-fifty percent.
In the case of Mr. Morris, the Options are for such number of shares of
Common Stock as are equal to five percent of the Company's issued and
outstanding Common Stock at the date of exercise, reduced by the
number of Options which Mr. Morris has previously exercised pursuant
to these Common Stock Purchase Options. Mr. Morris' Options are
exercisable at fifty percent of the average bid price on the day prior to
exercise in the best market for the Company's Common Stock.
EMPLOYEE STOCK BONUS PLAN
The Company has reserved 6,250 shares of its Common Stock
for issue at the end of the first thirty-six months of operations in equal
shares to the Company's original full time employees who remain
employed by the Company at the end of that term. At the date of this
Prospectus, Timothy Hale is the only employee remaining eligible to
participate in the bonus plan. Mr. Hale is the Company's Internet
services manager and prior to that position he was the Editor of the
South Georgia Chronicle -Grady County Edition. Mr. and Mrs.
Whitman, Mr. Morris and Mr. Mallet are not eligible to participate
in the bonus plan.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
At inception before the Company began its business, Mr. and
Mrs. Whitman contributed cash, certain equipment, primarily photo
equipment and office furniture valued at $26,871, and lists of advertisers
to the Company in exchange for an aggregate of 780,885 shares of the
Company's Common Stock. The equipment has been valued at Mr. and
Mrs. Whitman's cost less depreciation. The independent members of the
initial board determined that the valuation of the equipment and list of
advertisers is fair and reasonable and does not exceed the price the
Company would have paid an unrelated third party for comparable
items. At the time of the contribution, the Company had no business,
assets or operations. The Company deems it as unlikely that any
nonaffiliated person or person who was not a founder of the Company
would have contributed any such value to the Company for the purchase
of its Common Stock under the circumstances which existed at the date
of Mr. and Mrs. Whitman's contribution.
The Company advanced to Mr. and Mrs. Whitman the aggregate
amounts of $99,132 during the period from inception to September 30,
1996 and $215,943 from October 1, 1996 to September 30, 1997. The
advances are carried on the Company's balance sheet as advances to
stockholders. On November 15, 1997, Mr. and Mrs. Whitman repaid
$115,000 of the advances leaving a current balance at June 30, 1998 of
$339,516. The Company has continued making advances to Mr. and
Mrs. Whitman after September 30, 1997. Mr. and Mrs. Whitman intend
to repay the outstanding advances solely out of proceeds from the sale of
their Shares which are offered by this Prospectus, if and when sold by
them. The Company would not have lent these sums to other employees
or nonaffiliated persons under any circumstances. See, "Selling
Stockholders".
The Company sold 7,500,000 shares of Convertible, Voting
Preferred Stock, $.001 par value per share, to Mr. and Mrs. Whitman for
an aggregate consideration of $7,500. Mr. and Mrs. Whitman were
permitted to purchase the preferred stock as a reward for their past
devotion to the Company, refusal to take compensation during the period
from inception (April 5, 1996) to September 30, 1997, as an incentive
for their continued devotion to the business and affairs of the Company
in the future and as assurance of their continuation of control over the
Company. The Company believes that the price at which the Preferred
Stock was sold to Mr. and Mrs. Whitman was fair and reasonable in
view of the condition to conversion, the low dividend and the low
liquidation preference. On September 29, 1997, Mr. and Mrs. Whitman
voluntarily surrendered the preferred stock to the Company for
cancellation.
Mr. and Mrs. Whitman, on their personal credit, purchased a new
1995 one ton Chevrolet short chassis truck which has been extended to
accommodate an enclosed box required by the Company's business and
a new 1996 Geo Prism two door sedan automobile. The truck was and
the automobile is used primarily in the Company's business. The
Company terminated its use of the truck in November 1997. The
Company paid and pays the financing charges on the respective vehicles
directly to unaffiliated finance companies, the insurance to an
unaffiliated company and the license tag and taxes for the account of Mr.
and Mrs. Whitman in the nature of rental or lease payments for use of
these vehicles by the Company. The Company does not make any other
payments to Mr. and Mrs. Whitman for use of the vehicles. The
Company would not have been able to purchase these vehicles on its
own limited credit history; but, believes that it could not have obtained
any better credit terms in the event it had been able so to do.
In November 1997, Mr. Whitman personally guaranteed the
Company's lease of a 1998 Izusu "City Van" diesel truck. The Company
would not have been able to lease this vehicle on its own limited credit
history. The Company has not paid any consideration to Mr. Whitman
for his personal guaranty of the vehicle lease.
In June 1996, Mr. Morris and Paul Parramore, Jr. (a former
director of the Company and a principal stockholder), together with Mr.
and Mrs. Whitman, personally cosigned a one-year loan from a bank in
the original principal amount of $60,000. Mr. Morris and Mr.
Parramore each were issued 37,500 shares, as adjusted for subsequent
stock splits, as consideration for their respective signatures. The bank
has renewed the loan with continuation of the cosigners for a second
year and has an outstanding balance of approximately $54,000 at the
date of this Prospectus. The Company believes that it would have had to
issue a greater number of shares to a nonaffiliated person to obtain such
cosigners, if any such cosigners could have been obtained from any
nonaffiliated party.
PRINCIPAL STOCKHOLDERS
The names of directors and officers and the name of each person
who owns legally and beneficially more than five percent of the
Company's issued and outstanding Common Stock at the date of this
Prospectus, the address of each such person, the number of shares which
each owns and the percentage of the Common Stock represented by such
shares (assuming in each case the exercise of Common Stock Purchase
Options held by all such persons), before and after the Offering
(assuming all Shares are sold) is set forth in the following table. See,
"Selling Stockholders".
<TABLE>
<CAPTION>
Number of Shares Percentage (5)(6)
-------------------- -----------------------
Before After Before After
Name and Address Offering Offering Offering Offering
- -------------------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Ronald L. Mallett (1)(2) 57,500 51,250 2.52 1.07
Jackson L. Morris (1)(3) 225,140 350,140 9.62 7.05
John V., Jr. & Marsha
B. Whitman (1) 763,760 701,260 34.28 14.83
John V. Whitman,
Jr. (1)(4) 94,558 576,510 4.07 10.87
All Directors and
Officers, as a
group (3 persons)
(2)(3)(4)(5) 1,140,958 2,820,118 45.89 50.43
Janet Yaron (7) 157,000 -0- 7.05 none
</TABLE>
(1) Mr. Mallett, Mr. Morris and Mr. & Mrs. Whitman's addresses are the
address of the Company.
(2) Includes 51,250 shares issuable upon exercise of Common Stock
Purchase Options. See, "Management Compensation- Common Stock
Purchase Options".
(3) Includes 112,640 and 237,640 shares, respectively, issuable upon
exercise of Common Stock Purchase Options. See "Management
Compensation-Common Stock Purchase Options".
(4) Includes 94,588 and 576,510 shares, respectively, issuable upon
exercise of Common Stock Purchase Options. See "Management
Compensation-Common Stock Purchase Options".
(5) Shares before Offering assumes no sales pursuant to the concurrent
offering made by the Prospectus dated July 23, 1998 and Shares after
offering assumes sales of all shares offered hereby, including the
2,500,000 Shares offered by the Company, and in the concurrent
offering made by the Prospectus dated July 23, 1998.
(6) The Options exercisable by each named person and by directors and
officers as a group have been added to the total issued and outstanding
shares before and after the completion of the Offering for the
computation of that person's and the group's percentage of ownership.
Options exercisable by persons other than the respective named person
have not been added to such total for that person.
(7) Ms. Yaron's address is 25-500 Main Road, Orient, New York
11957.
DESCRIPTION OF SECURITIES
The Company is authorized to issue thirty-five million shares of
Common Stock. Although the Company's Articles of Incorporation, as
amended, authorize 7,500,000 shares of Preferred Stock, the board of
directors provided in its acceptance of the surrender of the Preferred
Stock for cancellation by the holder thereof that the Preferred Stock
would not be subject to reissue and would be removed from the Articles
of Incorporation with the filing of the next amendment to the Articles.
See, "Certain Transactions with Management and Others".
Common Stock. The authorized Common Stock of the Company
consists of thirty-five million shares, no par value per share. A total of
2,021,191 shares of Common Stock were outstanding at June 30, 1998
and 151,599 additional shares were issued between that date and the date
of this Prospectus, as adjusted for a reverse split one share for each four
shares effective July 1, 1998, for a total outstanding of 2,172,790 shares
at the date of this Prospectus. Holders of the Common Stock, which
includes the Shares, (i) have equal and ratable rights with all holders of
issued and outstanding Common Stock to dividends from funds legally
available therefor, when, as and if declared by the Board of Directors of
the Company; (ii) are entitled to share ratably with holders of issued and
outstanding Common Stock in all of the assets of the Company available
for distribution to holders of Common Stock, after distribution of the
liquidation preference on the Preferred Stock, upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
preemptive, subscription or conversion rights; (iv) have no redemption
or sinking fund provisions applicable thereto; and (v) have one vote on
election of each director and other matters submitted to a vote of
stockholders. All shares of Common Stock outstanding are, and those
sold pursuant to this Prospectus when issued and delivered against
payment therefore, will be, duly authorized, legally issued, fully paid
and non-assessable. Each holder of Common Stock has a preemptive
right to purchase such number of shares in any offering, which is
subsequent to the offering in which he or she acquired his or her shares,
as is determined by dividing the number of his or her shares by the
number of shares issued and outstanding at the beginning of such
subsequent offering. The initial holders of the Company's Common
Stock have not exercised their preemptive rights with respect of
subsequent offerings. The holders in the second offering by the
Company may have the right to exercise their preemptive rights; except
all such holders have been afforded an opportunity to purchase shares in
the third offering and have purchased either a limited number of shares
or declined to purchase any additional shares. The Board of Directors is
expected to recommend an amendment to the Articles of Incorporation,
as amended, which if approved, will eliminate preemptive rights.
Convertible, Voting Preferred Stock. The preferred stock
included in the Company's Articles of Incorporation consists of
7,500,000 shares of Convertible, Voting Preferred Stock, par value of
$.001 per share, ("Preferred Stock"). The Company does not have any
preferred stock outstanding at the date of this Prospectus. The resolution
accepting surrender of the Preferred Stock for cancellation provides that
the Preferred Stock will not be reissued and will be removed from the
Articles of Incorporation when the Articles are next amended for any
purpose.
Transfer Agent. The Company has engaged Atlas Stock Transfer
Corporation, Salt Lake City, Utah to act as its transfer agent and registrar
for the Common Stock.
SELLING STOCKHOLDERS
The following table sets forth the name of each Selling
Stockholder who owns less than one percent of the issued and
outstanding Common Stock of the Company and who is registering in
this Offering, or has registered in combination with this Offering and a
concurrent offering made by Final Prospectus dated July 23, 1998 ("July
23 Offering"), all shares of Common Stock which he or she owns for
sale and who will own no Shares after this Offering and the July 23
Offering, assuming the sale of all shares included in both offerings. The
total number of Shares included in this Offering by the following Selling
Stockholders is 283,452 Shares. The Company will not receive any
proceeds from the sale of the Common Stock by the following Selling
Stockholders.
<TABLE>
<CAPTION>
Name of Selling Stockholder Number of Shares to be sold in this Offering
- ---------------------------- --------------------------------------------
<S> <C>
Albert, Mitchell S. 4,167
Allen, Gary P. 1,875
Beegle, Kenneth 2,500
Bell, Bruce (1) 3,290
Bishop, Fraser (1) 9,334
Bluhm, Jerry 833
Boaz, Keith (1) 1,941
Brock, Henry (2) 1,500
Brooks, Gina 750
Cedarleaf, Jack S. II (1) 375
Christner, Theodore 4,000
Connolly, Larkin P. 13,125
Cox, Lawrence K. 10,000
Cutler, E. William 1,250
Deighan, Thomas (1) 500
Demaree, James 1,875
Dheer, S. K. 1,251
Dickey, Kevin R. & Karen L. 8,000
Drouhard, John (1) 250
Dryden, George W. (1) 3,290
E*Trade Securities,Inc.,f/b/o Gina Mallik 1,000
Federal Industrial Services,
Michael Hadwin Trustee (1) 750
Filson, Alan (1) 18,350
Filson, James 42,000
Fitting, Robert 5,625
Gallegos, Juaniat 500
Gaziano, Angelo N. 1,974
Gerner, Robert MD 1,000
Giaimo, Alec 1,875
Gordon, John Anthony (2) 750
Hahn, Marshall S. (1) 3,665
Hamilton, Marshall (1) 500
Haney, James C. 1,250
Hunt, R. E. Trust 2,500
Hunt, Robert E., Jr. 500
Jaebker, Clifford A. 1,250
Johnson, Jessica 2,500
Kelly, Paul 1,917
Lynch, Edward C. (1) 3,290
Lynch, Melvin C. & Gigi L. 1,500
Malaney, Scott C. 1,750
McAllaster, Mark 26,665
McCurdy, Greg (1) 2,500
McQuaide, Frank 8,000
Morbelli, Thomas 9,000
Patterson, Curt A. & Debra K. 2,500
Salmon, David E. 2,500
Santucci, John (1) 5,000
Scanlon, Dennis 3,000
Shrader, Roy Jr. 2,209
Silverman, Herbert W. 26,787
Singletary, Shelton (1)(2) 250
Tague, Dorsey (1) 5,345
Taylor, Harriet (1) 2,400
Vaughn, Rollie 13,335
White, John I. & Pauline C. 1,813
Windels, Carl O. (1) 3,750
Wolitzky, Sidney 3,846
</TABLE>
(1) This Selling Stockholder has additional shares included in the July 23
Offering.
(2) Company employee.
The following table sets forth the name of each Selling
Stockholder who owns more than one percent of the issued and
outstanding Common Stock of the Company before the Offering and the
July 23 Offering, the number of Shares included in the Offering made by
this Prospectus and the percentage of Common Stock the Selling
Stockholder owns before this Offering and the July 23 Offering and will
own after the Offering and the July 23 Offering, assuming the sale of all
the Shares included in this Offering and the shares included in the July
23 Offering. The total number of Shares included in the offering by
these Selling Stockholders is 277,000 Shares. The Company will not
receive any of the proceeds from the sale of the Common Stock by the
following Selling Stockholders.
<TABLE>
<CAPTION>
Number of Number of Percent of Class
Name of Selling Number of Shares Shares in Before After
Stockholder Shares owned to be sold* July 23 Offering** Offering
Offering
- ------------------ ---------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Paul Parramore, Jr. 108,000 76,750 31,250 4.85 -0-
Mark Scheel 71,000 63,250 7,750 3.19 -0-
Janet Yaron 157,000 137,000 20,000 7.05 -0-
</TABLE>
*This column sets forth the number of Shares offered by this Prospecuts.
**This column sets forth the percentage owned before both the Offering
made by this Prospectus and the offering made by the Prospecuts for the
July 23 Offering.
The Company has an effective registration statement on Form
SB-2 under SEC Commission File No. 333-34283 with a Final
Prospectus dated July 23, 1998, the July 23 Offering, which covers an
aggregate of 839,452 shares of Common Stock, most of which, at the
date of this Prospectus, has not been sold by the Selling Stockholders
named in that registration statement.
DISTRIBUTION OF SHARES
Distribution by the Company. The Company is offering
2,500,000 shares of its authorized but unissued Common Stock for sale
by this Prospectus in a "self underwritten" public offering. The
2,500,000 Shares will be offered on behalf of the Company by the
Company's directors and officers, specifically Messrs. Mallett, Morris
and Whitman. See, "Management". They will not receive any
compensation for sales which they may make. The Company will rely
on Rule 3(a)4-11 in that none of them have been either a registered
securities broker-dealer or an affiliate or associated person thereof within
the past seventeen years. The Company will receive the net proceeds
from the sale of the 2,500,000 Shares. There is no assurance the
Company will be able sell all or any of these Shares. The Shares offered
by the Company are expected to be sold in negotiated transactions to
investors and sold to securities firms. The Company has had no
discussions and has no arrangements with securities firms regarding the
purchase of any of the Shares. No single securities firm, if any does
purchase, is expected to purchase more than five percent of the Common
Stock offered hereby by the Company. In the event any such securities
firm proposes to purchase or does purchase more than five percent of the
Shares offered by the Company, such securities firm would be deemed
to be an underwriter, required to enter into an underwriting or selling
agreement with the Company and have its underwriter's compensation
approved by the National Association of Securities Dealers, Inc.
("NASD"). Agreement with such securities firm acting as an
underwriter will require an amendment to the registration statement of
which this Prospectus is a par, naming the underwriter therein and
disclosing material information about such agreement and compensation
arrangements. In both the case of sales to investors and of sales to
securities firms, the price at which the Company sells the Shares is
expected to be related to the bid and asked quotations for the Common
Stock on the OTC Bulletin Board at the date of such sale. At the date of
this Prospectus, the Company is unable to determine what the purpose of
a purchase, if any would be, by a securities firm and if such securities
firm would be purchasing for its own account or acting as agent. Any
securities firm who acquires more than ten percent of the Company's
Common Stock should be aware of and comply with Rule 2720 of the
NASD covering conflict of interest. The Company may also use up to
500,000 of the Shares offered hereby to pay fees to certain consultants
and for bonuses to certain employees. The Company has not offered any
of the 500,000 Shares to consultants or employees.
Distribution by Selling Stockholders. The Selling Stockholders
are offering 560,452 Shares for their own accounts. The Company has
prepared the registration statement and is paying the costs of the
registration statement of which this Prospectus is a part. The Company
will not receive any proceeds from the sale of the Common Stock by the
Selling Stockholders. The Company is solely responsible for the content
of the registration statement and of this Prospectus. The Company has
not engaged an underwriter for the Offering made by the Selling
Stockholders. The Selling Stockholders have advised the Company that
none of them have engaged an underwriter for the Offering. Generally,
the Company expects the individual Selling Stockholders to place their
respective Shares in their individual accounts at their own securities
brokers and request the entry of sell orders against their stock positions.
The Selling Stockholder may sell the Shares in open market or
block transactions or otherwise in accordance with the rules of the OTC
Bulletin Board, or in private transactions, at prices related to the
prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling Shares to or
through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions
from the Selling Stockholders for whom such broker-dealers may act as
agent or to whom they sell as principal or both. Upon any sale of Shares
offered hereby, the Selling Stockholders and participating broker-dealers
or selling agents may be deemed to be "underwriters" as that term is
defined in the Securities Act, in which event any discounts, concessions
or commissions they receive, which are not expected to exceed those
customary in the types of transactions involved, or any profit on resales
of the Shares by them, may be deemed to be underwriting commissions
or discounts under the Securities Act.
Any Selling Stockholder or any affiliate of a Selling Stockholder
or any Selling Stockholders who are acting in concert may violate
Regulation M promulgated by the U.S. Securities and Exchange
Commission pursuant to the Securities Exchange of Act of 1934, as
amended, in the event any such person, directly or indirectly, places a
bid to purchase, purchases, or attempts to induce another person to bid
for or purchase shares of the Common Stock in the public market before
the time such Selling Stockholder or all the Selling Stockholders who
are acting in concert, as the case may be, have sold all of their shares of
Common Stock which are covered by this Prospectus. Accordingly, no
Selling Stockholder and no affiliate of a Selling Stockholder and no
Selling Stockholders who are acting in concert should place bids for the
purchase of, purchase or attempts to induce another person to bid for or
purchase shares of the Common Stock in the public market for the
Common Stock, in the event a public market develops, until such person
has sold all of his shares covered by this Prospecuts. Any person who,
directly or indirectly, bids for or effects any purchase of the Common
stock for the purpose of pegging, fixing or maintaining the price of the
Common Stock (known as "stabilizing"), which bid or purchase does not
comply with Regulation M, will be in violation of the regulation.
Furthermore, no stabilizing is permitted at a price that the person
stabilizing knows or has reason to know does not comply with
Regulation M or which is the result of activity that is fraudulent,
manipulative, or deceptive under the federal securities laws and
regulations.
Pursuant to the provisions under the Securities Exchange Act of
1934, as amended, ("Exchange Act") and the rules and regulations
thereunder, any person engaged in a distribution of the Shares offered by
this Prospectus may not simultaneously engage in market making
activities with respect to the Shares during the applicable "cooling off"
period prior to the commencement of such distribution. In addition, and
without limiting the foregoing, the Selling Stockholders will be subject
to applicable provisions of the Exchange Act and the rules and
regulations thereunder including, without limitation, Regulation M,
which provisions may limit the timing of purchases and sales of Shares
by the Selling Stockholders.
MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market quotations. The Company's Common Stock is quoted
under the stock symbol "CRNC" on the OTC Bulletin Board operated by
the National Association of Securities Dealers, Inc. The following table
sets forth the approximate high and low bid and asked quotations for the
Company's Common Stock for the current quarter, during which the
Common stock was first traded. These quotations are inter-dealer
quotations without retail markup, markdown or commissions and may
not represent actual transactions.
<TABLE>
<CAPTION>
Quarter ending High Bid Low Bid High Asked Low Asked
- ------------------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
September 30, 1998 $1.00 $.125 $1.25 $.8125
</TABLE>
Number of stockholders. At September 4, 1998, the Company had 176
stockholders of record.
Dividends. Dividends on the Common Stock can be paid
lawfully only out of current and retained earnings and surplus of the
Company, when, as and if declared by the Board of Directors. The
Company has not declared or paid any dividends on the Common Stock
or the Preferred Stock and there is no assurance dividends will be paid in
the foreseeable future. The payment of dividends in the future rests
within the discretion of its Board of Directors and will depend, among
other things, upon the Company's earnings, its capital requirements and
its financial condition, as well as other factors which the board of
directors deems relevant. The Company does not expect to pay cash
dividends within the next five years based upon its plan to invest its
profits, if any, in expansion of the Company's shopper products and
community news products.
SHARES AVAILABLE FOR FUTURE SALE
Sale of a substantial number of additional shares of Common
Stock into the public trading market following the Offering could
adversely affect the prevailing market prices for the Common Stock, as a
result of an increased supply in the number of shares available for
trading.
Following completion of this Offering, assuming the sale of all
the Shares offered by the Company, the Company will have outstanding
an aggregate of 4,672,790 shares of Common Stock, including the
3,060,453 Shares included in this Offering and 839,452 shares included
in a concurrent offering (most of such shares are still owned by the
selling stockholders identified in the Final Prospectus for that offering
dated July 23, 1998 related thereto). In addition, if all the outstanding
common stock purchase options were to be exercised, totaling 866,650
shares of Common Stock, the Company would have a total of 5,593,190
shares issued and outstanding.
Of the total shares which would be outstanding, assuming the
sale of all the Shares offered by the Company pursuant to this Prospectus
and exercise of all outstanding common stock purchase options,
1,679,160 of those shares are subject to the requirements of Rule 144 by
virtue of being owned by "affiliates" of the Company and not being
included in a registration statement for resale by those affiliates and by
virtue of being "restricted securities". In general under Rule 144 as
currently in effect, a person who is an affiliate of the Company or owns
"restricted securities" is entitled to sell in "broker's transactions" or to
market makers, within any three month period, a number of shares that
does not exceed the greater of (i) one percent of the then issued and
outstanding shares of Common Stock (55,931 shares , assuming the sale
by the Company of the Shares offered hereby) or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks
preceding the sale. Sales under Rule 144 are also subject to the filing of
a Form 144 with respect to such sale and certain other limitations and
restrictions. Shares of Common Stock sold upon exercise of common
stock purchase options which are not covered by an effective registration
statement at the time of sale by the Company are subject to a one year
holding period prior to any resale by the person exercising the options,
in to the other limitations provided in Rule 144. The Company may, at
any time, file a registration statement covering shares held by the
Company's affiliates.
LEGAL MATTERS AND INTEREST COUNSEL
The Company will rely on an opinion given by Jackson L.
Morris, Esq., Tampa, Florida, as to the legality of the Shares. Mr.
Morris is a director of the Company and the holder of 112,500 shares of
the Company's Common Stock, none of which are offered for sale by
this Prospectus, and Common Stock Purchase Options. See
"Management Compensation-Common Stock Purchase Options".
EXPERTS
The Company's financial statements at and for the period ended
September 30, 1997 and 1996 included in this Prospectus and the
Registration Statement have been audited by Pender, Newkirk &
Company, independent certified public accountants, as stated in their
report appearing herein, and are included in reliance upon such reports
given upon the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, ("Exchange Act") and, in
accordance therewith, files reports and other information with the U.S.
Securities and Exchange Commission ("Commission") in Washington,
D.C. pursuant to Section 15(d) of the Exchange Act. These reports and
other information may be inspected without charge at the principal office
of the Commission, at Judiciary Plaza, 450 Fifth Street N.W., Room
1024, Washington, D.C. 20549, and at the Northeast Regional Office of
the Commission at Seven World Trade Center, Suite 1300, New York,
New York 10049. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street N.W.,
Room 1024, Washington, D.C. 20549, upon payment of prescribed fees.
The Commission maintains a web site that contains such material filed
electronically with the Commission at http://www.sec.gov. The
Commission's web site can also be accessed through the Company's web
site at http://www.chronicleinc.com.
The Company has filed with the Commission a registration
Statement on Form SB-2 (together with all amendments thereto, the
"Registration Statement"), Commission File No. 333-63143, under
the Securities Act of 1933, as amended, with respect to the Shares
offered by this Prospectus. This Prospectus does not contain all the
information set forth in the Registration Statements and the exhibits and
schedules filed therewith, certain portions of which have been omitted as
permitted by the Rules and Regulations of the Commission. For further
information with respect to the Company and the Shares offered hereby,
reference is hereby made to the Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this
Prospectus regarding the contents of any contract or other document
referred to are not necessarily complete and in each such instance,
reference is made to the copy of such contract, agreement or other
document filed as an exhibit to the Registration Statement, each such
statement being deemed to be qualified in its entirety by such reference.
The Registration Statement, including all exhibits and schedules thereto,
may be inspected without charge at the offices of the Commission set
forth above and are available at the Commission's and the Company's
web sites.
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report on Financial Statements
Balance Sheets
Statements of Operations
Statement of Changes in Stockholders' Equity
Statement of Cash Flows
Notes to Financial Statements
Independent Auditors' Report
Board of Directors
Chronicle Communications, Inc.
Cairo, Georgia
We have audited the accompanying balance sheet of Chronicle
Communications, Inc. as of September 30, 1997 and the related
statements of operations, changes in stockholders' equity, and cash flows
for the year ended September 30, 1997 and the period April 5, 1996
(date of inception) through September 30, 1996. 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 Chronicle
Communications, Inc. as of September 30, 1997 and 1996 and the results
of its operations and cash flows for the year and the period then ended 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 3 to the financial statements, the Company's negative working
capital of approximately $138,000 at September 30, 1997, significant
operating losses of approximately $988,000 since inception, and
negative cash flows from operations of $566,000 since inception raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Pender Newkirk & Company
Pender Newkirk & Company
Tampa, Florida
December 17, 1997 except for the last paragraph of Note 3
as to which the date is February 20, 1998
Chroncile Communications, Inc.
Balance sheets
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1998
------------------ --------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Accounts receivable $91,016 $82,801
Prepaid directors' fees 14,584
Prepaid expenses 8,962
Other current assets 6,425 10,573
Advances to stockholders,
current portion 115,000
------------- ------------
Total current assets 227,025 102,336
------------- ------------
Property and equipment,
net of accumulated depreciation 369,920 370,835
Advances to stockholders,
less current portion 200,075 339,516
------------- ------------
Total $797,020 $812,687
============= ============
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdraft $3,421 $25,159
Notes payable and current maturities
of long term debt 84,245 73,780
Notes payable stockholders 86,000
Accounts payable 101,794 134,792
Accrued payroll liabilities 132,207 209,554
Other accrued liabilities 38,176 42,776
Deferred Income 4,600
-------------
Total current liabilities 364,443 572,061
------------- ------------
Long term debt, net of current maturities 128,474 108,735
------------- ------------
Stockholders' equity:
Preferred Stock, $.001 par value, 7,500,000
shares authorized, no shares issued and outstanding
Common stock, no par value; 35,000,000 authorized
1,748,708 issued and outstanding at
September 30, 1997;
2,076,191 issued, 2,021,191 outstanding
at June 30, 1998 (unaudited) 1,291,824 1,749,786
Accumulated deficit <987,721> <1,562,896 >
------------- ------------
186,890
Less treasury stock: 55,000 shares <55,000>
------------
Total stockholders' equity 304,103 131,890
------------- ------------
Total $797,020 $812,687
============= ============
</TABLE>
Read independent auditors' report.
The accompanying notes are an integral part of the financial statements
Chronicle Communications, Inc.
Statements of Operations
<TABLE>
<CAPTION>
April 5, 1996
Year ended (date of inception) to Nine months ended
September 30, 1997 September 30, 1996 June 30,
------------------ ------------------- ------------------------
1998 1997
(as restated) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales $ 645,051 $ 337,384 $ 430,143 $ 505,714
Cost of sales 1,000,144 333,440 638,733 690,341
----------------- ------------------- ----------- -----------
Gross
profit <loss> <355,093> 3,944 <208,590> <184,627>
----------------- ------------------- ----------- -----------
Operating expenses
General and
administrative 485,018 105,386 340,857 178,843
Interest 9,772 13,896 25,728 12,163
Other 22,500
----------------- ------------------- ----------- ----------
517,290 119,282 366,585 191,006
----------------- ------------------- ----------- ----------
Net loss $ <872,383> $ <115,338> $ <575,175> $<375,633>
================= =================== =========== ==========
Net loss per
common share $ <.59> $ <.11> $ <.30> $ <.27>
Basic ========= ========= ========= ========
</TABLE>
Read independent auditors' report.
The accompanying notes are an integral part of the financial statements.
Chronicle Communications, Inc.
Statements of Changes in Stockholders' Equity
For the Period April 5, 1996 (date of inception) to June 30, 1998
<TABLE>
<CAPTION>
Common Stock Preferred Stock Accumulated Treasury
---------------------------------
Shares Amount Shares Amount Deficit Stock
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued:
For cash 228,045 $85,100
For note guarantee 75,000 21,250
For equipment 41,550 11,771
For customer
list (as restated) 730,155
For legal services 75,000 1,000
Contribution of
services
(as restated) 39,600
Net loss (as restated) $<115,338>
-------------------------------------------------------
Balance,
September 30, 1996
(as restated) 1,149,750 158,721 <115,338>
Common stock issued:
For cash,
net of offering
costs of $181,900 570,083 977,759
For consulting
fees 2,500 2,500
For payment of
directors' fees 8,750 17,500
For employee bonuses 17,625 35,944
Preferred stock issued
for services 7,500,000 7,500
Surrender and
cancellation of
preferred stock <7,500,000> <7,500>
Contribution of services 99,400
Net loss <872,383>
-------------------------------------------------------
Balance,
September 30, 1997 1,748,708 1,291,824 0 0 $ <987,721>
---------------------------------------------------------
Common stock issued:
For cash,
net of offering
costs $52,587
(unaudited) 217,313 238,913
For consulting
fees and services
(unaudited) 75,625 85,000
For repayment of
notes payable and
interest
(unaudited) 34,545 27,299
Contribution of
services (unaudited) 106,750
Acquisition of
treasury stock (unaudited) 55,000
Net loss
(unaudited) <575,175>
----------------------------------------------------------
Balance, June 30,
1998 (unaudited) 2,076,191 $1,749,786 0 $0 $<1,562,896> 55,000
==========================================================
</TABLE>
Read independent auditors' report.
The accompanying notes are an integral part of the financial statements.
Chronicle Communications, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
April 5, 1996 Nine months ended
Year Ended (date of inception) to June 30,
September 30, 1997 September 30, 1996 ---------------------
1998 1997
-----------------------------------------------------------------
(as restated) (unaudited) (unaudited)
Operating Activities
<S> <C> <C> <C> <C>
Net loss $ <872,383> $ <115,338> $<575,175> $<375,633>
-----------------------------------------------------------------
Adjustments to
reconcile net
loss to net
cash (used by)
operating
activities:
Depreciation
and
amortization 46,566 11,226 59,922 32,477
Interest paid
with stock 16,299
Loss on sale
of equipment 2,908
Bonuses,
consulting fees
and interest
paid with stock 38,444 1,000
Contributed services 99,400 39,600 106,750 74,550
(Increase) decrease
in:
Accounts receivable
and other assets <33,145> <61,380> 4,067 <87,540 >
Increase (decrease)
in:
Accounts payable 44,734 57,060 32,998 <39,373>
Accrued
liabilities 116,709 53,674 77,347 2,425
Deferred income 4,600
---------------------------------------------------------
Total adjustments 320,216 101,180 297,383 <17,461>
---------------------------------------------------------
Net cash used by
operating
activities <552,167> <14,158> <277,792> <393,094>
---------------------------------------------------------
Investing activities
Proceeds from sale
of property and
equipment 22,500
Purchase of property
and equipment <378,657> <41,442> <25,215> <249,240>
---------------------------------------------------------
Net cash used by
investing activities <356,157> <41,442> <25,215> <249,240>
---------------------------------------------------------
Financing activities
Net advances to
stockholders <215,952> <99,123> <24,441> <134,459>
Bank overdraft <9,190> 12,611 21,738 <12,611>
Proceeds from issuance
of notes payable and
long-term debt 158,525 60,000 14,000
Payments on notes
payable and long-term
debt <5,806> <5,203> <5,000>
Proceeds from issuance
of stock net of
brokerage commissions 977,759 85,100 238,913 792,727
Net proceeds from
stockholder loans 72,000
--------------------------------------------------------
Net cash provided by
financing activities 905,336 58,588 303,007 654,657
--------------------------------------------------------
Net (decrease)
increase in cash <2,988> 2,988 0 12,323
Cash at beginning
of period 2,988 0 0 2,988
--------------------------------------------------------
Cash at end of period $0 $2,988 $0 $15,311
========================================================
</TABLE>
Read independent auditors' report.
The accompanying notes are an integral part of the financial statements.
Chronicle Communications, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended April 5, 1996
(date of inception) to Nine months ended
June 30,
September 30, 1997 September 30, 1996 1998 1997
---------------------------------------------------------------
(as restated) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Supplemental
disclosure
of cash flow
information and
noncash investing
and financing
activities
Cash paid
during the
period for
interest $9,772 $1,582 $9,429 $6,941
</TABLE>
During the year ended September 30, 1996 president and majority
stockholder of the Company contributed equipment of $11,771 to the
Company in exchange for common stock In addition, the Company
capitalized $21,250 of loan guarantee fees in exchange for Common
Stock.
During the year ended September 30, 1997, the Company issued 8,750
shares of common stock valued at $17,500 to directors for future
services on the board.
During the nine months ended June 30, 1998:
The Company issued 75,000 shares of stock valued at $75,000 to
consultants for future services. During the quarter ended June 30, 1998,
the Company then terminated the agreement and received 55,000 shares
of the stock which was recorded as treasury stock.
The Company issued 25,000 shares of stock to a consultant to provide
EDGAR filing services. These services were valued at $10,000 and have
been recorded as a prepaid asset. The Company recognized a $2,500
amortization expense in the current quarter.
The Company repaid $27,299 of notes payable and interest to a
stockholder through issuance of 34,545 shares of common stock.
Read independent auditors' report.
The accompanying notes are an integral part of the financial statements.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
1. Background information
Chronicle Communications, Inc. (the Company), a Georgia corporation,
was incorporated on April 5, 1996 as JMAR Communications, Inc. The
Company subsequently changed its name to Chronicle Communications,
Inc. on July 30, 1997. The Company is a publisher of two weekly
shopper-style tabloid newspapers that are distributed to customers in
Crisp County and Grady County, Georgia.
2. Going concern
As shown in the financial statements, the Company has incurred net
losses of approximately $1,563,000 since inception and current liabilities
exceed current assets by approximately $470,000 at June 30, 1998.
These factors, combined with the fact that the Company has not
generated positive cash flows from operating activities since its inception
and is past due on bank debt in an amount of approximately $55,000,
raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets or the
amounts and classification of liabilities that might be necessary in the
event the Company cannot continue in existence. Management of the
Company is currently seeking additional bank and investor financing to
mitigate the above factors.
Additionally, on February 8, 1998, the Company published the last
issues of The Sunday South Georgia Chronicle in both Grady County
and Crisp County, Georgia. The Sunday South Georgia Chronicle was
the Company's only general newspaper product. Management believes
the termination of the Sunday paper will result in the following savings,
however, no assurance can be given that the Company will, in fact,
achieve these results. Actual results could differ materially from these
estimates. In connection with this termination, the Company terminated
its membership in Associated Press which management believes will
result in annual savings to the Company of $24,000, and returned
equipment to that association, resulting in a reduction of $12,000 in
fixed assets and accounts payable related to the equipment. The
Company also terminated five full-time employees and part-time
employees effective February 8, 1998, eliminating a combined annual
payroll expense and contract labor expense which management believes
will approximate $218,000. Management believes termination of the
Sunday editions also resulted in a reduction in printing expense of
approximately $124,000 per year.
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
3. Significant accounting policies
The significant accounting policies followed are:
In the opinion of management, all adjustments, consisting
only of normal recurring adjustments necessary for
a fair presentation of (a) the results of operations for the
nine-month periods ended June 30, 1998 and 1997, (b)
the financial position at June 30, 1998, and (c) cash flows
for the nine-month periods ended June 30, 1998 and
1997, have been made.
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.
The Company capitalizes cosigning fees relating to notes payable. These
fees are amortized by the straight-line method over the life of the
original note. Amortization expense charged to operations amounted to
$14,167 for the year ended September 30, 1997 and $7,083 for the
period ended September 30, 1996. Amortization expense amounted to
$14,167 for the nine-month period ended June 30, 1997. No
amortization expense was charged to operations for the nine-month
period ended June 30, 1998, as the fees were fully amortized.
Property and equipment are recorded at cost. Depreciation is calculated
by the straight-line method over the estimated useful lives of the assets,
ranging from five to thirty-nine years. Additions to and major
improvements of property and equipment are capitalized. Maintenance
and repair expenditures are charged to expense as incurred. As property
or equipment is sold or retired, the applicable cost and accumulated
depreciation are eliminated from the accounts and any gain or loss is
recorded. For income tax purposes, the Company uses accelerated
methods of depreciation for certain assets. Depreciation expense
recorded in the financial statements amounted to $32,399 for the year
ended September 30, 1997 and $4,143 for the period ended September
30, 1996. For the nine-month periods ended June 30, 1998 and 1997,
depreciation expense amounted to $24,300 and $18,283, respectively.
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their
respective income tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized as income in the period that included
the enactment date.
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
3. Significant accounting policies (continued)
The Financial Accounting Standards Board issued Statement 123 (SAFS
123), "Accounting for Stock-Based Compensation," effective for fiscal
years beginning after December 15, 1995. This statement provides that
expense equal to the fair value of all stock-based awards on the date of
the grant be recognized over the vesting period. Alternatively, this
statement allows entities to continue to apply the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," whereby compensation expense is recorded on the
date the options are granted equal to the excess of the market price of the
underlying stock over the exercise price. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide pro
forma disclosure of the provisions of SAFS 123.
The Company issues stock in lieu of cash for certain transactions.
Generally, the fair value of the stock, based on comparable cash
purchases, is used to value the transactions.
During the period ended June 30, 1998, the Company adopted Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share." This statement requires dual presentation of basic and diluted
earnings per share (EPS) for complex capital structures on the face of the
income statement. Basic EPS is computed by dividing income available
to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution from the exercise or conversion of securities into common stock.
The September 30, 1997 and June 30, 1997 earnings per share have been
restated to give effect to the application of SFAS 128 and does not differ
from EPS as previously reported under APB Opinion No. 15, "Earnings
Per Share."
Subscription revenue is deferred at the time of sale. A proportionate
share of the gross subscription price is credited to revenue monthly.
Costs connected with the procurement of subscriptions are expensed as
incurred.
Advertising revenue is billed and recognized into revenue as incurred.
Advertising costs are charged to expense when incurred. Advertising
expense amounted to $3,507 for the year ended September 30, 1997 and
$640 for the period ended September 30, 1996. For the nine-month
periods ended June 30, 1998 and 1997, advertising expense amounted to
$3,507 and $3,256, respectively.
The Company records as an expense and as additional capital the
estimated fair value for all services provided to it by its majority
stockholders in accordance with Securities and Exchange Commission
Staff Accounting Bulletin 1:B.
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
4. Property and Equipment
Property and equipment consist of:
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1998
------------------ ---------------
<S> <C> <C>
Buildings and improvements $179,360 $186,234
Furniture and fixtures 25,334 25,334
Computer equipment 113,282 121,555
Camera and publishing equipment 78,914 80,882
Vehicles 4,490 4,490
------------------ ---------------
401,380 418,495
Less accumulated depreciation 31,460 47,660
------------------ ---------------
$369,920 $370,835
================== ===============
</TABLE>
Substantially all of the Company's property and equipment is pledged as
collateral on notes payable and long-term debt.
5. Notes Payable and Long-Term Debt
Notes payable and long-term debt consist of:
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1998
------------------ -------------
<S> <C> <C>
Mortgage note payable; bearing interest
at 8.0%; monthly payments of principal
and interest of $1,142 through July 7,
2012; secured by mortgage deed to
real estate; guaranteed by the Company's
president and majority stockholder $ 118,832 $ 113,628
Note payable to bank; bearing interest
at 11.0%; entire unpaid balance of
principal and interest due June 18,
1998 and is past due; secured by equipment, trade
accounts receivable, and 42,500
shares of the Company's common
stock; co-signed by four stockholders
of the Company 54,887 54,887
</TABLE>
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
5. Notes Payable and Long-Term Debt (continued)
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1998
------------------ -------------
<S> <C> <C>
Note payable to stockholder;
bearing interest at 11.0%;
entire unpaid balance of
principal and interest due
on demand; secured by all
property of the Company 25,000 25,000
Note payable to individual;
bearing interest at 10.5%;
monthly payments of interest
only through December 1, 1998;
secured by mortgage deed to
real estate 14,000 14,000
Notes payable to stockholders:
bearing interest at 10%;
payable on demand; unsecured 61,000
--------------- -------------
212,719 268,515
Less amounts currently due 84,245 73,780
Less amount due to stockholders 86,000
--------------- -------------
$ 128,474 $ 108,735
=============== =============
</TABLE>
A written demand for repayment of a $10,000 stockholder loan, included
in notes payable to stockholders, has been received. The loan has no
fixed maturity or other terms, is not represented by a note and has
interest paid in full by issuance of common stock.
The following is a schedule by year of the principal payments required
under these notes as of June 30, 1998:
1999 $159,780
2000 4,910
2001 5,319
2002 5,761
2003 6,239
Thereafter 86,506
----------
$ 268,515
==========
There were no outstanding notes payable to stockholders at September
30, 1997.
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
6. Income Taxes
The Company has tax loss carryforwards of approximately $1,300,000
that may be applied against future taxable income. These losses give
rise to a deferred tax asset at June 30, 1998. Management has
established a valuation allowance equal to the amount of the deferred tax
asset due to the uncertainty of the Company's realization of this benefit.
Loss carryforward $ 195,000
Less valuation allowance 195,000
---------
Net deferred tax asset $ 0
=========
The loss carryforwards expire as follows:
Year of
Expiration
2011 $ 68,400
2012 739,800
2013 491,800
-----------
$ 1,300,000
===========
7. Lease Commitments and Related Party Transactions
The Company leases part of its operating facilities and various office
equipment under operating leases with terms of less than one year. Rent
expense for these leases amounted to $38,323 for the year ended
September 30, 1997 and $4,500 for the period ended September 30, 1996.
Rent expense relating to these leases amounted to $7,636 and $6,865 for
the nine-month periods ended June 30, 1998 and 1997, respectively.
The Company leased two vehicles from its president and majority
stockholder on a month-to-month basis. The rent expense for these
vehicles amounted to $3,672 for the year ended September 30, 1997 and
$2,368 for the period ended September 30, 1996. No amounts were
incurred during the nine months ended June 30, 1998 and 1997.
The Company has advanced two stockholders/employees approximately
$315,000 as of September 30, 1997 and $339,500 as of June 30, 1998.
These advances have no specific terms, are non-interest bearing, and are
unsecured.
On April 22, 1998, the Company entered into an agreement with a
certain individual to provide financial consulting services to the
Company in exchange for 12,500 shares of the Company's common
stock. As of June 30, 1998, no shares had been issued under this
agreement.
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
7. Lease Commitments and Related Party Transactions (continued)
On May 1, 1998, the Company entered into an employment agreement
with its president and chairman expiring September 30, 1998. The
agreement obligates the Company to pay him an annual salary of
$120,000. In addition, upon termination by the Company, the president
and chairman is entitled to payment of all accrued and unpaid salary to
the date of termination, as well as the same salary for a period of twenty-
four months following the termination.
The above related party transactions are not necessarily indicative of the
amounts which would have been incurred had comparable transactions
been entered into with independent parties.
8. Stock Options
The Company issues stock options to its directors on an annual basis
beginning September 30, 1997 as compensation for their services as
directors. The exercise price of each option is equal to the price at
which the Company last sold shares of its common stock. The lives of
the options are five years.
The Company applies APB Opinion 25 in accounting for its stock
options. Accordingly, no compensation cost has been recognized for the
options because the estimated exercise price equaled the fair market
value on the date of the grant. No options were granted during the nine-
month period ended June 30, 1998.
Following is a summary of stock option activity for the period ended
June 30, 1998:
<TABLE>
<CAPTION>
Number of Weighted Average
Shares Exercise Price
----------------------------------
<S> <C> <C>
Outstanding and exercisable at
October 1, 1997 5,000 $ 2.00
============================
Outstanding and exercisable at
June 30, 1998 5,000 $ 2.00
============================
</TABLE>
Following is a summary of the status of stock options outstanding and
exercisable at June 30, 1998:
<TABLE>
<CAPTION>
Weighted Weighted
Average Remaining Average
Exercise Price Number Contractual Life Exercise Price
- ----------------- ------------ -------------------- --------------
<S> <C> <C> <C> <C>
$2.00 5,000 4.25 Years $2.00
</TABLE>
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
8. Stock Options (continued)
The weighted average fair value of the options at their grant date during
1997 was $1.68. The estimated fair value of each option granted is
calculated using the Black-Scholes option-pricing model. The following
summarizes the weighted average of the assumptions used in the model:
Risk-free interest rate 5.84%
Expected years until exercise 3.25
On May 18, 1998, the Company granted to the President perpetual and
self-renewing common stock purchase options. These options will
enable such person to maintain ownership of 21.805% of the Company's
total issued and outstanding shares of the common stock. The
percentage is reduced by the number of shares sold by such person after
December 1, 1997. The exercise price of the options is based on the
average bid quotation on the day prior to exercise.
9. Equity
On October 24, 1996, the Board of Directors approved the
implementation of an Employee Stock Fund (the Fund). At June 30,
1998, 6,250 shares of the Company's common stock had been reserved
for issuance to the Fund.
On October 24, 1996, the Board of Directors approved an increase in the
number of common stock shares authorized from 100,000 to 12,000,000.
In connection with this increase, the Board of Directors authorized a 60
for 1 stock split to stockholders of record on October 24, 1996. On
March 11, 1997, the Board of Directors authorized a 2 for 1 stock split
to stockholders of record on June 6, 1997. On June 6, 1997, the Board
of Directors approved an additional increase in the number of common
stock shares authorized from 12,000,000 to 35,000,000. On November
15, 1997, the Board of Directors approved a reverse split on outstanding
common stock, without a change in par value or total number of
authorized shares, in a ratio of one new share for each two outstanding
shares. On July 1, 1998, the Board of Directors approved a reverse split
on outstanding common stock without a change in the par value or total
number of authorized shares, in a ratio of one new share for each four
outstanding shares. All references in the accompanying financial
statements to the number of shares have been restated to reflect these
transactions.
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
9. Equity (continued)
On March 11, 1997, the Board of Directors authorized the Company to
issue up to 7,500,000 shares of $.001 par value convertible voting
preferred stock. The preferred stock has a liquidation preference over
the common stock equal to par value and has the right to receive
dividends in an amount of $.001 per share prior to the payment of any
dividends on the common stock. Each share of convertible preferred
stock is convertible into one share of the Company's common stock,
subject to the fulfillment of certain conditions specified by the Board of
Directors.
During the year ended September 30, 1997, the 7,500,000 shares of
preferred stock were issued to the Company's president and his wife at
par value. However, the preferred shares were surrendered to the
Company on September 29, 1997. In connection with the tender and
acceptance of the surrender, the Board of Directors approved
cancellation of the series of preferred stock.
The Company entered into a financial consulting agreement in the
quarter ended March 31, 1998. Under the agreement, the consulting
firm was to provide investor relations and financial consulting services
to the Company. The Company issued 75,000 shares under the
agreement valued at $75,000 and was recorded as a prepaid asset. As of
March 31, 1998, the Company has expensed $16,200 as consulting
expense which includes $12,000 in cash paid prior to March 31, 1998.
During the quarter ended June 30, 1998, the Company terminated its
relationship with the consulting firm. The consulting firm returned
55,000 of the Company's shares issued to it. The remaining balance in
prepaid consulting of $15,800 was expensed for services provided up to
the date of termination
10. Earnings Per Share
The following data shows the amounts used in computing earnings per
share:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, June 30,
-------------------- ---------------------
1997 1996 1998 1997
--------------------------------------------
<S> <C> <C> <C> <C>
Net loss $(872,383) $(115,338) $(575,175) $(375,633)
==============================================
Weighted average
number of common
shares used in basic
and diluted EPS 1,473,131 1,083,804 1,905,552 1,397,032
===================== ======================
</TABLE>
Read independent auditors' report.
Chronicle Communications, Inc.
Notes to Financial Statements
For the Year Ended September 30, 1997 and the Period April 5, 1996
(Date of Inception) through September 30, 1996
(Information at June 30, 1998 and for the Nine Months Ended June 30,
1998 and 1997 is Unaudited)
10. Earings Per Share (continued)
Options on 5,000 shares of common stock were not included in
computing diluted net loss per share at June 30, 1998, as their effect
would be anti-dilutive due to the losses incurred. No options were
outstanding at June 30, 1997.
11. Subsequent Events
During July 1998, the Company issued 451,600 shares of its common
stock, 340,100 shares for services of investor relations consultants and
111,500 shares for cash in the aggregate amount of $49,500.
On August 23, 1998, the Company granted to the Chief Fiancial Officer
50,000 common stock purchase options exercisable for a period of five
years at a price equal to one-half the average bid price on the day prior
to exercise.
On August 23, 1998, the Company granted to the Secretary and General
Counsel perpetual and self-renewing common stock purchase options.
These options will enable such person to purchase five percent of the
Company's total issued and outstanding shares of common stock. The
number of shares purchasable at any time is reduced by the number of
shares previously purchased under the option . The exercise price of the
options is equal to one-half the average bid quotation on the day prior to
exercise.
Read independent auditors' report.
II--INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Registrant may indemnify a director and must indemnify an
officer who is made party to a proceeding because he is or was a director
or officer against liability incurred in the proceeding if he acted in a
manner he believed in good faith to in or not opposed to the best
interests of the Registrant and, in the case of any criminal proceeding, he
had no reasonable cause to believe his conduct was unlawful. A director
or officer's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants
in and beneficiaries of the plan is conduct that satisfies the requirements
of Georgia law regarding indemnification. The Registrant may not
indemnify a director or an officer in connection with a proceeding by or
in the right of the Registrant in which the director or officer was
adjudged liable to the Registrant or in connection with any other
proceeding in which the director or officer was adjudged liable on the
basis that personal benefit was improperly received by him.
Indemnification in a proceeding by or in the right of the Registrant is
limited to reasonable expenses incurred in connection with the
proceeding. To the extent a director or officer is successful on the merits
or otherwise in the defense of any proceeding to which was a party, or in
defense of any claim, issue or matter therein, because he is or was a
director of the Registrant, the Registrant must indemnify the director or
officer against reasonable expenses incurred by him in connection with
the proceeding. The Registrant may pay or reimburse the reasonable
expenses incurred by a director or officer in advance of final disposition
of a proceeding, provided the director furnishes the Registrant with
written affirmation of his good faith and a written undertaking to repay
any advances if it is ultimately determined that he is not entitled to
indemnification. The Board or special legal counsel must make a
determination in each case of indemnification of a director, but not of an
officer, that indemnification is permissible in the circumstances because
the director has met the required standard of conduct.
Article XI of the Registrant's Bylaws also contain provisions for
indemnification of directors and officers. See, Exhibit 3.2.
Item 25. Other Expenses of Issuance and Distribution.
Registation fees:
Federal $ 434.67
NASD 643.44
Printing 400.00
Accounting 4,000.00
-----------
Total: $ 5,478.11
Legal counsel is a director and secretary of the Registrant and is not
being paid any cash fee for preparation of this Registration Statement,
prior registration statements or reports filed under the Securities
Exchange Act of 1934, as amended, for other legal services or for
services as director and secretary. In recognition of such services,
however, the Registrant has granted to its legal counsel certain common
stock purchase options. See, "Management Compensation-Common
Stock Purchase Options" in Part I of this Registration Statement. The
Registrant is not paying any engraving costs or transfer agent's fees
specifically for the offering covered by this Registration Statement.
Item 26. Recent Sales of Unregistered Securities.
The number of shares stated below have been adjusted for the one share
for two shares reverse stock split effective on December 15, 1997.
First Offering:
(a) Dates of offering-April 5, 1996 to May 31, 1996
Securities sold-Common Stock
Amount sold- 1,116,000 shares, as adjusted for stock splits
(b) Sold to the founder, to two directors who were not founders (one
director is also the founder's and Registrant's counsel) and one investor
who had a pre-existing business and personal relationship with the
founder and one director.
(c) $55,100 cash, $1,000 value in legal services, $21,250 value for bank
loan cosigners' fees, $206,879 for mailing list and $11,771 for
contribution of equipment at depreciated value to be used in Registrant's
business. Total cash and value of all stock issued: $296,000.
(d) Registrant relies upon Section 4(2) of the Securities Act of 1933 in
that the offering was made by an issuer and did not involve a public
offering due to the limited number of investors and the preexisting
relationships between and among the investors.
Second Offering:
(a) Dates of offering-September 20, 1996 to May 30, 1997
Securities sold-Common Stock
Amount sold- 454,428 shares as adjusted for stock splits
(b) Granted as bonuses to five employees of the Registrant, sold for
cash to one employee, sold for cash to eighty-three investors who had a
personal relationship with the founder or with a directors or with a
consultant to the Registrant or with an existing stockholder of the
Registrant and sold for services to eleven consultants.
(c) $7,100 value of employee bonuses, $555,091 sold for cash and
$170,336 value for consulting services in connection with the sale of
common stock. Total cash and value of all stock issued: $822,727
(d) Registrant relies upon Section 3(b) of the Securities Act of 1933 and
Rule 504 promulgated thereunder in that the offering did not exceed
$1,000,000 (including securities sold in the six month period preceding
the offering in reliance upon Section 3(b), there having been none).
Third Offering:
(a) Date of offering-August 1, 1997
Securities sold-Convertible, Voting Preferred Stock
Amount sold-7,500,000 shares
(b) Sold to the founder, his wife and both are executive officers, one of
whom is a director (two persons)
(c) $7,500 sold for cash pursuant to subscription receivable from related
party.
(d) The Registrant relies upon Section 4(2) of the Securities Act of 1933
in that the offering was made by an issuer and did not involve a public
offering due to the investors limited to persons who are the cofounders,
directors and executive officers of the Registrant. The Registrant asserts
that the offering Convertible, Voting Preferred Stock to the founder and
his wife, both of whom are executive officers (2 persons) for a special
purpose should not be integrated with the offering of common stock
being made under Rule 504 because of the difference in the type of
securities, the difference in price per share, the different purpose for
which it was issued and possible other factors. The 7,500,000 shares of
Convertible, Voting Preferred Stock were voluntarily surrendered to the
Registrant for cancellation on September 29, 1997.
Fourth Offering:
(a) Dates of offering-June 1, 1997 to present
Securities sold-Common Stock
Amount sold- 743,788, as adjusted for stock splits
(b) Issued as a bonus to three employee and to two new directors for
joining board, sold to forty new investors (seventeen accredited and
twenty-three non-accredited) who had a personal relationship with the
founder or with a directors or with a consultant to the Registrant or with
an existing stockholder of the Registrant, sold to twenty-two existing
stockholders and issued to five consultants, one of whom was already a
stockholder.
(c) $6,450 value of employee bonuses, $7,000 value to new directors,
$533,111 sold for cash and $271,250 sold for consulting services in
connection with the sale of Common Stock and public relations.
(d) The Registrant relies upon Section 3(b) of the Securities Act of 1933
and Rule 505 promulgated thereunder in that the Registrant realized in
May 1997 that its funding requirements could exceed the $1,000,000
limitation of Rule 504 and it terminated the Rule 504 offering at May
31, 1997 and commenced an offering under Rule 505 in which it has
sold stock to not more than thirty-five non accredited investors (actual
number of non-accredited investors is fourteen).
The shares of Common stock issued in the first, second and fourth
offerings have not been reduced for cancellations of certain shares
issued.
Item 27. Exhibits.
3.1 Articles of Incorporation, as amended *
3.2 By-Laws *
5 Opinion re: legality **
10 Employment Agreement with John V. Whitman, Jr.*
23.1 Consent of counsel (included in Exhibit 5) **
23.2 Consent of independent public accountant
_______________________________________
*Filed as Exhibits to Registration Statement on Form SB-2, Commission File No.
333-34283.
**Previously Filed
Item 28. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (230.424(b) of this chapter) if, in
the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorized
this Amendment number 1 to the registration statement to be signed on its behalf
by the undersigned, in the City of Cairo, State of Georgia on
September 22, 1998.
Chronicle Communications, Inc.
By: /s/ John V. Whitman, Jr.
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment number 1 to the registration statement was signed by the following
persons in the capacities and on the dates stated.
Signature Capacity in which signed: Date signed:
/s/ Ronald L. Mallett Director, Chief Accounting Officer
Ronald L. Mallett and Principal Financial Officer
September 22, 1998
/s/ Jackson L. Morris Director and Secretary
Jackson L. Morris
September 22, 1998
/s/ John V. Whitman, Jr. Director, President
John V. Whitman, Jr. Principal Executive Officer
September 22, 1998
EXHIBIT 5: OPINION RE: LEGALITY (Previously Filed)
EXHIBIT 23.1: CONSENT OF COUNSELIncluded in Exhibit 5
EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form SB-2
Amendment #1 of our report dated December 17, 1997, except for the last
paragraph of Note 3, as to which the date is February 20, 1998, relating
to the September 30, 1996 financial statements of Chronicle Communications,
Inc. and to the reference to our firm under the caption "Experts" in the
Prospectus.
/s/ Pender Newkirk & Company
Pender Newkirk & Company
Tampa, Florida
September 22, 1998
