As filed with the Securities and Exchange Commission on February 8, 2000
Registration No. 333-_____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CHRONICLE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 2711 58-2235301
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification No.)
Classification
Code Number)
3910 Riga Boulevard, Tampa, Florida 33619 (813) 630-
2762 (Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Mr. John V. Whitman, Jr., President
3910 Riga Boulevard
Tampa, Florida 33619
Telephone: (813) 630-2762 Facsimile: (813) 630-0259 (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
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
Common Stock,
no par value 53,481,524 $.21 $11,231,120.00
$2,965.02
---------------------------------------------------------
- -
Total: 53,481,524 $.21 $11,231,120.00
$2,965.02
*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 OTC Bulletin Board on the day prior
to filing this Registration Statement, $.28 and $.30, 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
This table 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 Outside front cover of
prospectus
and outside front cover of prospectus.
Item 2. Inside front and outside back Inside front cover and outside
cover pages of prospectus. back cover of prospectus and
Additional Information.
Item 3. Summary information Risk Factors.
and 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 Shares.
Item 9. Legal proceedings. The Business-Legal Proceedings.
Item 10. Directors, executive officers, The Company, Management,
promoters and control persons Principal Stockholders.
Item 11. Security ownership of certain Principal Stockholders.
beneficial owners and management.
Item 12. Description of securities. Description of Securities.
Item 13. Interest of named experts and Interest of Counsel, Experts.
counsel.
Item 14. Disclosure of Commission Management.
position on indemnification for
Securities Act liabilities.
Item 15. Organization within last The Company.
five years.
Item 16. Description of business. The Business.
Item 17. Management's discussion and Management's Discussion and
analysis or plan of operation. Analysis of Results of
Operations and Financial
Condition For Years
Ended September 30,
1999 And 1998
Item 18. Description of property. The Business-Description of
Property
Item 19. Certain relationships and Certain Transactions with
related transactions. Management and Others.
Item 20. Market for common equity Market Price of and Dividends
and related stockholder matters. on Common Stock and Related
Stockholder Matters.
Item 21. Executive compensation. Management-Management
Compensation.
Item 22. Financial statements. Financial Statements.
Item 23. Changes In and Disagreements Not applicable
With Accountants on Accounting and
Financial Disclosure.
SUBJECT TO COMPLETION. PRELIMINARY PROSPECTUS DATED FEBRUARY 8, 2000.
Chronicle Communications, Inc.
13,481,524 SHARES OF COMMON STOCK OFFERED BY SELLING STOCKHOLDERS
40,000,000 SHARES OF COMMON STOCK OFFERED BY THE COMPANY
13,481,524 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 BROKER-DEALERS
EFFECTING SALES ON BEHALF OF selling Stockholders 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".
40,000,000 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 officers who will not be paid any compensation
therefore. The Shares offered by the Company are expected to be sold in
negotiated transactions to investors and to securities broker-dealers, none
of which will purchase more than five percent of the Common Stock offered
hereby by the Company, and used to pay liabilities at values negotiated with
creditors and to pay for services rendered by third parties and for
acquisitions of other businesses. In all 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 be able to 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. The Company operates a commercial web-
offset printing business located in Tampa, Florida and is the publisher New
Homes Register which published and distributed in Maryland. The Company
also owns a custom computer builder located in Houston, Texas, which sells
both hardware and software to retail customers and through its E-commerce
site.
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 ________________.
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
Page
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 For Years Ended September 30, 1999 And 1998
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 March 20, 2000, (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
submitted for filing on February 2, 2000 in Florida and Georgia Articles of
Merger which provide for the Company's merger into a newly incorporated,
wholly owned subsidiary, "Chronicle Communications, Inc.", a Florida
corporation, for the sole purpose of changing the Company's state of
incorporation to Florida from Georgia. The change was approved by the board
of directors because all of the Company's direct operations presently are
conducted in Florida. Stockholder approval was not required.
The Company's founder is John V. Whitman, Jr., the Company's chairman. The
Company was organized for the purpose of establishing and operating a shopper
style tabloid newspaper in the Crisp County, Georgia market area which
included several contiguous counties. The Company later expanded operations
to include a second shopper style tabloid newspaper, including community news
features, serving the Grady County, Georgia market area which included several
contiguous counties. Subsequently, the Company added a two-edition broadsheet
(full sized) Sunday newspapers serving those markets, with a full membership
in the Associated Press. In February 1998, the Company terminated publication
of the Sunday newspapers. The Company entered the commercial printing
business with the acquisition on September 30, 1998 of Bright Now, Inc., doing
business as United Printing and Publishing in Tampa, Florida, a company which
had been in business since 1992. In the same transaction, the Company
acquired Southern Paper and Converters, Inc. which principally recycles
newsprint paper which had been in business since 1994. In February 1999, the
Company terminated publication of all shopper style tabloid newspapers and
became a holding company with its operations located entirely in its
subsidiary companies. All references herein to the Company's business
includes the business of its subsidiary companies. Also in February 1999, the
Company relocated its headquarters to the United Printing and Publishing
facility in Tampa. In January 1999, the Company acquired Bartow
Communications, Inc., a publisher of new-home real estate guide that is
distributed in the metropolitan District of Columbia area, including Maryland
and Virginia. Also in January 1999, the Company acquired RKN Enterprises,
Inc., which acts as a contract publisher for organizations and associations
which publish home builder association trade publications in South Florida.
On October 1, 1999, the Company discontinued activities related to RKN
Enterprises, Inc. and terminated all employees related to the business. In
July 1999, the Company acquired seventy percent of Gotcashback.com, Inc.,
which is a development stage company embarking on providing services to home
buyers and sellers on the Internet and which will initially serve the
metropolitan District of Columbia area, including Maryland and Virginia. In
August 1999, the Company acquired Americomp Computers, Inc., which is a
business selling personal computers and related services, networking, web site
development and web hosting and which has operated since 1994. In November
1999, the Bright Now, Inc. subsidiary filed for protection under Chapter 11
of the Federal Bankruptcy Code, and continued operations until 6:00 p.m. on
February 7, 2000, at which time the Federal Bankruptcy was converted to a
Chapter 7 Liquidation. The Company has ordered its own printing press and
has a letter of intent to acquire its own office and production facility in
Tampa, Florida, to which it has relocated its executive offices under an
occupancy agreement pending a closing of the transaction and at which it
intends to install the new printing press. See, "The Business-Commercial
Printing" and "The Business-Facilities and Personnel."
The Company's executive and production offices are located at 3910 Riga
Boulevard, Tampa, Florida 33619, its telephone number is (813) 630-2762 and
its telephone facsimile number is (813) 630-0259. The Company's Web site its
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 within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section
27A of the Securities Act of 1933, as amended, and is subject to the safe
harbors created by those sections. These forward-looking statements are
subject to significant risks and uncertainties, including information included
under Parts I and II of this prospectus, which may cause actual results to
differ materially from those discussed in such forward-looking statements. The
forward-looking statements within this prospectus are identified by words such
as "believes", "anticipates", "expects", "intends", "may", "will" and other
similar expressions regarding the Company's intent, belief and current
expectations. However, these words are not the exclusive means of identifying
such statements. In addition, any statements which refer to expectations,
projections or other characterizations of future events or circumstances and
statements made in the future tense are forward-looking statements. Readers
are cautioned that actual results may differ materially from those forecasted
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", "Plan of Operations" and
"Business", identifies important factors which could cause or contribute to
such differences. The Company undertakes no obligation to publicly release
the results of any revisions to these forward-looking statements which may be
made to reflect events or circumstances occurring subsequent to the filing of
this annual with the SEC. Readers are urged to carefully review and consider
the various disclosures made by the Company in this prospectus.]
Risks Related To Business And Operations:
Unprofitable operating history. Since the Company began operations in April
1996, the Company has not earned a profit in any period. The Company has
incurred a $1,813,577 loss from operations for the year ended September 30,
1998 and a $3,967,079 loss from operations for the year ended September 30,
1999. The Company has changed the focus of its business activities several
times since inception in an effort to establish profitable operations. There
is no assurance the Company will be able to generate sufficient revenues to
become profitable in future periods or to successfully continue its
acquisition and growth plans. Without sufficient revenues, the Company will
be unable to create value in its equity securities which includes the Shares
and to pay dividends. The Company is subject to many risks. See "Management's
Discussion and Analysis" and "Description of Business."
Limited Liquidity and Capital Resources. The Company has financed its
operations to date principally with proceeds from sales of Common Stock for
cash, services and in payment of debts, including part of the Shares offered
by the Selling Stockholders, contributions of property and money from its
founder, proceeds of a bank loan and collections of accounts receivable. The
Company has limited liquidity as a result of negative cash flows 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 commercial print sales and computer
hardware, software and related services. The Company expects limited
liquidity to continue until the Company's operations generate a positive cash
flow, 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 needed to relocate its facilities and to replace existing press
equipment; but, there is no assurance additional Common Stock can be sold or
that any other financing will be available in the amount needed for these
purposes 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 chief
executive officer, with respect to the conduct of its current operations and
implementation of the Company's plan to improve its sale performance and to
achieve profitability, of which there is no assurance. 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 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. Mr. Whitman does not have an
employment agreement with the Company, but is the Company's single 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 major 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
and the existence of a written employment agreement.
Risks associated with expansion of commercial printing activities and
computer sales and service. There is no assurance the Company will be able to
successfully implement its plan to expand its commercial printing activities,
which include the purchase of a new press and the relocation of its
operations to a newly acquired facility in Tampa. Furthermore, the Company
must significantly increase its sales of computer hardware, software and
service in order to sustain the operations of its computer business. 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 sales personnel who are capable of carrying out the Company's plan
under the direction of management.
Competition. Both the Company's commercial printing business and computer
business compete against better established, larger and more financially
stable enterprises. There is no assurance that the Company will be able to
compete successfully in its market segments.
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 and individually
own an aggregate of 6,288,274 shares of the Company's Common Stock (3,000,000
of which are included for sale pursuant to this Prospectus). In addition, Mr.
Whitman holds Common Stock Purchase Options for 10,109,903 shares of Common
Stock at the date of this Prospectus. The shares of stock and options
represent approximately 21.805 percent of the voting stock outstanding, before
sale of any the 3,000,000 shares and 21.805 percent, assuming the sale of all
3,000,000 shares by Mr. and Mrs. Whitman and the Company sells all 40,000,000
offered by this Prospectus. In addition, Jackson L. Morris, a director and
secretary of the Company owns shares and Common Stock Purchase Options for 5.0
percent before the offering made hereby and 5.0 percent, assuming the Company
sells all 40,000,000 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:
Volatility of Stock Price. The public market price of the Company's Common
Stock has been 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. 5,964,860
shares of the Company's Common Stock owned by "affiliates", as defined in Rule
144 under the Securities Act of 1933, are not registered for sale by such
affiliates under that Act and are subject to the restrictions and limitations
provided by that rule. 395,800 of these shares have been owned for more than
two years and 0 of these shares have been owned for more than one year, but
less than two years. An additional 5,569,060 shares have been owned by the
Company's affiliates for less than one year and the affiliates have Common
Stock Purchase Options covering an additional 12,428,156 shares at the date of
this Prospectus, assuming the sale of all Shares offered by the Company hereby
are sold. The 395,800 shares held for more than one year are eligible for
sale by each such holder pursuant to and subject to the requirements of Rule
144. Under the rule affiliates may sell a limited number of shares during
each three month period pursuant to the requirements of Rule 144 or affiliates
may sell larger numbers of shares if registered under that Act. The offer of
a significant number of such shares of Common Stock by affiliates 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 have been
less than $5 per share at all time since the Common Stock first began trading
in August 1998. Management cannot predict the market price of the Common
Stock in the public securities market at any time in the future. At any time
the quoted bid 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, to make a written determination that the Shares are a
suitable investment for the new client and to 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 an active 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 procedures and safeguards mandated by the "penny stock"
regulations summarized above.
USE OF PROCEEDS
There is no assurance as to if or when the Company may receive net proceeds
from the sale of the 40,000,000 Shares offered by the Company by this
Prospectus. 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 relocating and
re equipping its commercial printing operation, sales and marketing expenses
and for general working capital purposes. The Company may use a portion of
the Shares offered by the Company pursuant to this Prospectus to pay
liabilities and purchase services and acquire other businesses. The Company
may use a portion of the Shares offered by the Company pursuant to this
Prospectus to pay costs associated to expansion of its AmeriComp Computers
subsidiary and to fund advertising and promotion of its e-commerce sites.
See, "Business" and " Distribution of Shares".
CAPITALIZATION
The following table sets forth the capitalization of the Company at September
30, 1999. This table should be reviewed in conjunction with the financial
statements of the Company and the notes thereto included elsewhere in this
Prospectus. On February 1, 2000, the Company amended its Articles of
Incorporation to authorize a total of one hundred million shares from thirty
five million shares of common stock and to set the par value thereof at
$.001.
At September 30, 1999
Long term debt, net of current maturities: $192,000
Equity: (1)
Common stock, no par value, 35,000,000 shares authorized
15,374,199 shares issued 5,825,903
Accumulated earnings <deficit> (7,714,029
Total stockholders' equity (1,888,126)
Total capitalization (1,696,126)
Subsequent to September 30, 1999, through February 8, 2000, the Company has
issued an additional 22,213,392 shares, including 3,813,494 shares of its
Common Stock issued upon exercise of Common Stock Purchase Options by Messrs.
Whitman and Morris, and 1,000,000 shares of Common Stock issued to The
Company's Chief Operating Officer for employee bonus.
SELECTED FINANCIAL DATA
The following table presents selected financial data at the dates and for the
periods indicated. The table should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Prospectus. Statement
of Operations Data:
Year ended September 30,
1999 1998
------------------ ------------
Sales $1,934,500 $1,748,026
Cost of sales 1,704,577 1,691,021
Gross profit 229,923 57,005
Operating expenses 4,197,002 1,870,582
------------------ ------------
Net loss $<3,967,079> $<1,813,577>
Loss per
common share: $ <.51> $ <.70>
Weighted
average common
shares
outstanding: 7,798,896 2,589,632
Chronicle Communications and Affiliates, Inc.
Balance Sheets
Balance Sheet Data:
At September 30,
1999 1998
Working capital <deficiency> $<4,131,033> $<2,824,648>
Total assets $2,773,355 $1,886,237
Long-term obligations,
less current portion $192,000 $-0-
Total stockholders' equity $<1,888,126> $<1,161,220>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR YEARS ENDED SEPTEMBER 30, 1999 AND 1998.
The Company completed the acquisition of AmeriComp Computers, Inc. of
Houston, TX, on August 19, 1999. The acquisition of AmeriComp Computers,
Inc. will not be treated as a "pooling" under generally accepted accounting
principles. The Company did have to complete audits of the financial records
of AmeriComp for the periods ended September 30, 1999 and December 31, 1998.
The year ended September 30, 1999, on a consolidated basis represent 42
calendar days of the Company operating AmeriComp Computers, Inc. as a
subsidiary. The Company completed an acquisition of Bright Now, Inc. and
Southern Paper and Converters Inc. on September 30, 1998. This acquisition
of the two related companies was treated as a "pooling" under generally
accepted accounting principles. As a result of the pooling, the operations
of the parent company only and the acquired subsidiaries have been
consolidated for the fiscal years ended September 30, 1999 and 1998 and 1997.
The Company's previously reported financial statements for the fiscal year
ended September 30, 1997 has been restated to reflect the pooling. At
September 30, 1997 and 1998, the Company, on both a parent only and
consolidated basis, and its subsidiaries, considered individually, were
technically insolvent. The Company operates a commercial web-offset printing
business and a newsprint paper recycling business located in Tampa, Florida
and during part of the reported periods was the publisher of two free weekly
shopper-style tabloid newspapers, for 42 days of the period the Company
operated a custom computer reseller, and operated a real estate publication
in the Maryland area. The Company's revenues were generated through sales of
commercial printing services, sales of display advertising in its own
publications, sales of classified advertising and sales of recycled newsprint
to the packaging and shipping industry, and the sales of computer parts and
accessories.
In November 1999, the Bright Now, Inc. subsidiary filed for protection under
Chapter 11 of the Federal Bankruptcy Code, but it is continuing operations at
the present time. The Company expects the Federal Bankruptcy Court to
convert the Chapter 11 Bankruptcy to a Chapter 7 Liquidation during the month
of February, 2000. Once converted to Chapter 7, The Company will remove
associated Liabilities and Litigation from its balance sheet once approved by
its independent auditors.
The Company has ordered its own printing press and has a letter of intent to
acquire its own office and production facility in Tampa, Florida, to which it
has relocated its executive offices under an occupancy agreement pending a
closing of the transaction and at which it intends to install the new
printing press during the first two weeks of February, 2000. However, the
debt that will be eliminated by the Bankruptcy of Bright Now, Inc, will be
replaced with a mortgage of approximately $2,125,000.00 for the Company's new
corporate headquarters and long-term equipment loan of approximately
$589,000.00 for a new state of the art printing press. This property and
equipment will add approximately $3,250,000.00 in assets to the balance
sheet.
The Company's operating activity for the year ended September 30, 1999
reflect seventeen weeks of The South Georgia Chronicle - Thomas County
Edition. The Company operated its commercial printing plant and its paper
recycling
business for the entire 1999 fiscal year, Bartow Communications, New Homes
Register results from operations for nine full months, Nicholson Enterprises,
for nine full months and AmeriComp Computers for 42 calendar days. The
Company's operating activity for the year ended September 30, 1998 reflects
one full year of operations with the South Georgia Chronicle both the Grady
and Crisp County Editions, shopper style tabloid newspapers, and a full year
of operations from it's commercial printing plant and it's paper recycling
business.
The Company incurred operating losses of $3,967,079 and $1,813,577 for the
years ended September 30, 1999 and 1998, respectively. At September 30, 1999
current liabilities exceeded current assets by $4,131,033 and the Company was
in default on substantially all its debts -- See note 5 to the financial
statements appearing elsewhere herein. Additionally, major vendors had
placed the Company on a COD basis for purchases.
The Company had a slight growth in revenue for the 1999 fiscal year compared
to the 1998 fiscal year of approximately 10% or $186,474. Gross profit for
the same period rose to $229,923 for the 1999 fiscal year compared to 1998
fiscal year of $57,005 or a improvement of 9% when compared to revenues for
the reported periods.
The Company experienced an increase in General and Administrative expenses
for the 1999 fiscal year compared to the 1998 fiscal year of $2,366,640. The
increase is largely related to stock compensation to officers of $1,049,492,
stock compensation to others of $308,798, consulting expenses of $599,275,
legal expenses of $166,416 and accounting expenses of $130,834.
During the first quarter of the fiscal year, which began on October 1, 1999,
management has vigorously been working to eliminate and rectify ongoing
administrative and operational matters in order to more efficiently proceed
with our ongoing efforts to strengthen the Company. These items include the
resolution of several outstanding litigation matters, employment contracts
and property belonging to discontinued operations. Additionally, with the
finalization of the bankruptcy proceedings for Bright Now, Inc d.b.a. United
Printing and Publishing within the next 120 days, the Company will eliminate
substantially all of the long-term debt as shown on the balance sheet at
September 30, 1999, primarily composed of notes that are in default and
litigation, currently reflected on our balance sheet. However, this debt
will be replaced with a mortgage of approximately $2,125,000.00 for our new
corporate headquarters and long-term equipment loan of approximately
$589,000.00 for a new state of the art printing press. This property and
equipment will add approximately $3,250,000.00 in assets to the balance
sheet. Moreover, this new facility and press will allow us to improve our
operational and administrative efficiencies and further develop our product
lines and market.
Limited liquidity and financial resources:
During the 1999 and 1998 fiscal years, the Company funded much of its working
capital needs through the sale of its common stock. Approximately $2,190,000
in capital was raised in connection with these stock sales. The Company's
continued ability to operate is dependent on its ability to either refinance
its existing debt or raise additional capital.
During the twelve months ended September 30, 1999 and 1998, the Company
funded much of its working capital needs through the sale of its common
stock. The Company continued ability to operate is dependent on its ability
to either refinance its existing debt or raise additional capital.
The Company's working capital position declined by $1,306,385 at September
30, 1999. This condition is the result of an increase in total current
liabilities by $1,462,856 partially as a result of defaults on long-term
liabilities. The Company experienced an increase from period to period in
current maturities of long-term debt by $188,891. Accounts payable increased
by $500,886. Accrued payroll liabilities increased by $207,264 and other
accrued liabilities by $520,834.
The Company had limited liquidity as a result of negative cash flows during
the reported periods and its liquidity was 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 and revenues generated from
the commercial web printing business. The Company anticipated several
periods of capital formation and operating losses which management believes
are normal for a new and expanding business. The Company's management
believes the Company can improve its gross margins by expanding operations
and increasing revenues, thereby spreading fixed costs over a broader revenue
base.
The Company's annual results covered in this prospectus began on October 1,
1998, and ended on September 30, 1999. The Company completed an acquisition
of Bright Now, Inc. and Southern Paper and Converters Inc. on September 30,
1998. This acquisition of the two related companies was treated as a
"pooling" under generally accepted accounting principles for periods prior to
the acquisition date, including the comparative quarterly periods ended
December 31, 1998, March 31, 1999, and June 30, 1999. At June 30, 1999 and
1998, the Company, on both a parent only and consolidated basis, and its
subsidiaries, considered individually, were technically insolvent.
The Company's operating activity for the twelve months ended September 30,
1999 reflect twenty-six editions of New Homes Register, eight editions of
Business Builder, eight editions of Bonded Builder News, and the Company
operated its commercial printing plant and its paper recycling business for
the entire twelve months, and 42 calendar days of the Company operating its
AmeriComp Computers, Inc. The Company's operating activity for the twelve
months ended September 30, 1998, reflect fifty-two weeks of the South Georgia
Chronicle Thomas County Edition, thirty-nine weeks of the South Georgia
Chronicle Crisp County Edition, and revenues from its commercial printing
plant and its paper recycling business.
The Company incurred operating losses of $3,967,079 for the twelve months
ended September 30, 1999, against operating losses of $1,813,577 for the
twelve months ended September 30, 1998. At September 30, 1999 and 1998,
current liabilities exceeded current assets and the Company was in default on
substantially all its debts. Additionally, major vendors had placed the
Company on a COD basis for purchases.
The losses for the twelve months ended September 30, 1999, were directly
related to commercial printing jobs dropped at the Company's printing
facility that did not meet the Company's minimum profit standards and
seasonal downturn in the commercial printing business. Additionally, the
Company suffered revenue losses as a result of no working capital, vendors
declining credit terms and requiring payment on delivery, and further
deterioration of printing equipment resulting in loss of customer base.
The Company showed a decrease in cost of good sold for the twelve months
ended September 30, 1999, over the same period in 1998. Cost of sales as a
percent of revenue was 88.1% for the twelve months ended September 30, 1999,
verses 96.7% for the same twelve months ended 1998, which represents an
almost 10.0% decline in cost of sales. Net loss per common share, basic was
($.51) and ($.70) for the twelve months ended 1999 and 1998, respectfully.
This represents a reduction of the net loss per common share, basic of $.19
or 37.3%.
The Company's management believes if it had been better capitalized during
the period it could have offset the losses by making capital equipment
purchases and repairs that would be expected to have improved efficiency and
increased its commercial printing revenues.
Year 2000 considerations:
The Company has not experienced any adverse consequences related to year 2000
considerations.
THE BUSINESS
Commercial Printing:
The Company entered the commercial printing business with the acquisition of
Bright Now, Inc. ("Bright Now") on September 30, 1998. All of the Company's
commercial printing activities have been conducted in Bright Now. On
November 23, 1999, Bright Now filed for protection under Chapter 11 of the
Federal Bankruptcy Code. See, "Legal Proceedings" and Note 3 to the
financial statements. At the date of this Prospectus, the Company expects
Bright Now's Chapter 11 case to be converted to a liquidation under Chapter 7
of the Bankruptcy Code. At the time of Bright Now's conversion to a Chapter
7 proceeding, it will cease operations and its customers will need to seek a
new commercial printer. In anticipation of Bright Now's possible cessation
of business and liquidation, and in a plan to upgrade the Company's
commercial printing facilities and equipment, the Company is in the process
of acquiring a new facility to house both its executive offices and the new
commercial printing operations of Chronicle Commercial Printing, the
Company's newly formed, wholly owned subsidiary. And, Chronicle Commercial
Printing is now installing a new printing press at this new facility. See
"Facilities and Personnel".
With its new facilities and commercial printing equipment, the Company plans
to undertake an aggressive marketing program designed to attract both the
customers who have been printing with Bright Now and additional commercial
printing business.
The Company, through Bright Now, has been printed primarily specialty
newspapers, advertiser products and house organs for others. Bright Now's
customers are located principally in the Tampa Bay Area and Central Florida,
but Bright Now also has customers in South Florida. Bright Now has accounted
for approximately forty-two percent of the Company's revenues. The
commercial printing business has been seasonal, with a decline of
approximately fifteen percent in revenues in the summer months from the peak
revenues during the winter months. Bright Now's commercial print revenues
have been generated over a broad base of customers with no one single
customer comprising over ten percent of annual print revenues. Bright Now
has not maintained contracts with any of its customers for commercial
printing. If and when Bright Now ceases operations, the Company believes
that many, if not most or all, of Bright Now's commercial print customers
will use Chronicle Commercial Printing to print their products.
The Company has discontinued a small business recycling damaged roles and
butt-end or "dink" roles of newsprint and shut down its Southern Paper and
Converters, Inc. subsidiary which conducted this activity.
PUBLICATIONS AND PUBLISHING ACTIVITIES-
The Company publishes The Register, a bimonthly guide to new homes in the
Washington, D.C. metropolitan area, including Maryland and Virginia. The
Register principally serves real estate brokers and their agents. The
Company is the only supplier of new homes information to the six state
Metropolitan Regional Information System, the regional multi-list system,
which covers Washington, D.C., Maryland, and Virginia. The Company is the
only supplier of comprehensive new homes information to the real estate
brokerage industry in its market area. The Company prints The Register at
its commercial printing plant in Tampa. To the Company's knowledge, there
are no direct competitors with The Register. The Company's own publishing
activities account for approximately nine percent of its revenues. None of
these publishing activities and customers account for more than ten percent
of the Company's revenues. The Register employs two full time and zero part
time employees.
INTERNET SERVICES-
The Company acquired seventy percent of a development stage Internet business
operating under Gotcashback.com, Inc. ("Gotcashback.com"). Gotcashback.com
plans to generate revenues from home buyers and sellers who register to use
its referral services for real estate brokers, title insurance, moving
assistance, home furnishing and mortgage services. At the closing of their
real estate transaction, the buyer or seller using Gotcashback.com will
receive a refund based on total fees and costs. Gotcashback.com expects to
participate in fees generated from several of the referral services through
its own licnesed subsidiaries engaged in providing these services and to earn
revenues based upon its participation in the various elements of real estate
transactions. Gotcashback.com expects to begin generating revenues in June
of 2000 and is beta testing its concept in the greater Washington, DC,
Virginia and Maryland markets. Gotcashback.com can be accessed at
www.gotcashback.com on the Internet. The Company is not aware of anyone
offering services similar to gotcashback.com.
COMPUTER AND SOFTWARE SERVICES-
The Company is a seller of custom-built personal computers, network
solutions, Web site design and hosting services in the Greater Houston, Texas
market area through Americomp Computers, Inc. The Company acquired Americomp
in August 1999. The Company operates an e-commerce site through which it
offers 36,000 computers, computer components and accessories. The business
was founded 1994 and has enjoyed profitable operations every year since
inception except fiscal 1999 and the first quarter of The Company's fiscal
year which began September 30, 1999. The Company supplies custom built PC's
to several Houston area community colleges and has contracts with the Houston
Area School System, as well as an active individual customer base. The
Company maintains one retail store at which it generates revenues from walk
in traffic. The Company's Web site can be accessed at www.buyaci.com.
COMPETITION-
Commercial printing is highly competitive in the Tampa Bay and Central
Florida markets. Competition is significantly based upon price, but quality
of printing and timeliness of delivery are also factors. There are
approximately four other commercial printers who have capacity to print color
cold set work with whom the Company competes. The Company's major competitor
is Web Offset which operates two printing plants, one in Tampa and one in
Clearwater. Web Offset has over nine cold set presses and currently
dominates the commercial offset web business in West Central Florida. The
Company believes that a number of these competitors have been in business
longer and have greater financial resources than the Company. Commercial
printing opportunities can be significantly influenced by advertising,
equipment upgrades, additional capital equipment purchases and a qualified
sales force. The Company's Bright Now subsidiary has been hampered by
insufficient funds to maintain the quality and efficiency of its equipment,
an aggressive advertising program and a qualified sales force. The Company's
raw materials, principally newsprint and ink, are available from numerous
suppliers. The printing industry infrequently experiences shortages in paper
supplies.
To the Company's knowledge, there are no direct competitors with The
Register. Publications such as Multiple Listing Service, New Homes Guide,
The Washington Post (Real Estate Section), and Homes and Land, however, share
many of the same advertisers and consequently share compete for many of the
same advertising dollars. It is uncertain if the Company's product could be
expanded without significant promotional dollars being spent.
The Company's computer business has hundreds of competitors many with
household names such as Dell, Compaq, CompUSA and Gateway. It is the intent
of The Company to find segments of the market not presently served by the
larger suppliers and capture a reasonable segment of the specialty computer
and accessory market. There is no assurance the Company will generate
sufficient revenues due to limited capital resources for advertising and
promotion to make it's computer business profitable. The Company also
competes with hundreds of other local, regional and national vendors of
personal computers, components and software.
The Company's Internet related businesses are bombarded with daily Internet
startup businesses. A number of Web sites are offered by well established
competitors for the Company's computer hardware and software sales Web site.
The Company believes it has identified a number of potential Internet market
segments it could operate profitably. The Company is uncertain that its
limited resources will enable it to launch and expand its Web sites in a
timely manner.
FACILITIES AND PERSONNEL-
The Company has entered into a principals for an agreement to the purchase of
a 32,000 sq ft office and light industrial building located on 5.25 acres in
Tampa, Florida. The Company has relocated its headquarters to this facility
prior to closing the purchase and is installing its new printing press at
this facility. The seller is providing the financing for the Company's
purchase of this property. The purchase is contingent upon the seller
obtaining a re-platting of the property to separate it from the larger parcel
which the seller owns.
The Company's operations in suburban Washington, D.C. and in Houston, Texas
are located in leased general office space which is suitable for the
Company's needs.
The Company's new press is manufactured by the Raghbeer. The press is model
FAST-300 and includes six printing units, six roll stands and a folder. The
FAST-300 is very similar in configuration and operation to a Goss Community
printing press. The Company has a complete pre-press facility, including
disk to film capability.
LEGAL PROCEEDINGS-
The Company's litigation is primarily, but not exclusively, confined to suits
and claims against Bright Now, Inc., d/b/a United Printing and Publishing.
Bright Now filed for protection under Chapter 11 of the Federal Bankruptcy
Code: Case No. 99-18814 in the US Bankruptcy court in the Middle District of
Florida, Tampa Division. On February 8, 2000 this proceeding was converted
to a Chapter 7 liquidation. As a result of this bankruptcy, the litigation
involving Bright Now has been concluded.
Bright Now, Inc. is a defendant in a suit alleging racial discrimination in
which the plaintiff seeks unspecified damages. The suit, Holloway vs. Bright
Now, Inc., Case No. 98-1246 in the U.S. District Court for the Middle
District of Florida, Tampa Division, alleges discrimination before the
Company acquired its subsidiary and seeks unspecified damages. The Company
believes the allegations have no merit and is vigorously defending the
action.
Bright Now, Inc. is a defendant in a foreclosure action against the Company's
printing plant and equipment based upon a first mortgage and security
interest. Judgment has been entered against Bright Now, Inc. in NationsBank,
N.A. vs. Bright Now, Inc., et al., Case No. 98-7658 in the Hillsborough
County, Florida Circuit Court. This property, as well as the printing
presses and certain other equipment, has been foreclosed on and is subject to
repossession at any time, a judgment in favor of the Company's mortgage
lender has been granted. Bright Now, Inc. has never been the owner of the
property and the Company has never taken record title to the property.
Bright Now, Inc. is a defendant in a foreclosure action against the Company's
printing plant based upon a second mortgage. The case is Second 26 Corp. vs.
Bright Now, Inc., Case No. 189-0880 in the Hillsborough County, Florida
Circuit Court.
Bright Now, Inc. is also a defendant in the following litigation with
vendors:
Prestige Paper, Inc. and Midsouth Pulp and Paper, Inc. vs. Bright Now, Inc.,
Case No. 98-3417 in the Hillsborough County, Florida Circuit Court seeks
recovery of $230,000. The Company has issued common stock as collateral for
this claim and has stipulated to entry of judgment.
Kimberly-Clark Corp. vs. Bight Now, Inc., Case No. 98-4905 in the
Hillsborough County, Florida Circuit Court seeks recovery of approximately
$130,000.
AT&T Capital Leasing Services, Inc. vs. Bright Now, Inc., Case No. 98-7681 in
the Hillsborough County, Florida Circuit Court seeks recovery of
approximately $35,248.
Unisource Worldwide, Inc. vs. Bright Now, Inc., Case No. 99-3686 in the
Hillsborough County, Florida Circuit Court seeks recovery of approximately
$14,000.
Anderson & Orcott vs. Bright Now, Inc., Case No. 98-3807 in the Hillsborough
County, Florida Circuit Court seeks recovery of approximately $10,000.
One of the Company's subsidiaries is a defendant in Ryder Transportation
Services vs. Southern Paper and Converters,Inc., Case No. 97-19164 in the
Hillsborough County, Florida Circuit Court sought recovery of approximately
$10,000. Judgment has been entered in favor of the plaintiff.
The Company is a defendant in the following litigation with Vendors:
Tech Squared vs. Chronicle Communications, Inc., Case No. 98-SV-029 in the
Grady County, Georgia Superior Court seeks recovery of approximately $24,000.
The Tallahassee Democrat, Inc. vs. Chronicle Communications, Inc., Case No.
98-V-411 in the Grady County, Georgia Superior Court sought recovery of
approximately $30,000. Judgment has been entered in favor of the plaintiff.
Larry S. Hyman vs. Chronicle Communication, Inc., Case No. 98-5547 CI 7 This
action is for breach of contract in the acquisition of a printing plant and
seeks $739,371.70 in damages. Plaintiff's motion for summary judgment has
been denied. The Company believes it has substantial defenses to this claim
and is vigorously defending.
The Company has been named as the defendant in Patken Leasing Company, Inc.
vs. Chronicle Communications, Inc., Case No. 99014163 in the Dade County,
Florida Circuit Court seeks recovery of approximately $108,000 for sums
advance to Bright Now, Inc. The Company plans to move to dismiss in that the
corporate veil cannot be pierced. Bright Now, Inc., the Company's
subsidiary, will likely be named as a defendant by the plaintiff in a
subsequent suit, in the event the Company is successful in obtaining a
dismissal or summary judgment in this suit.
The Company and its subsidiaries are also involved as defendants in
additional litigation with vendors. The Company's subsidiary was a defendant
in several additional suits which were resolved prior to September 30, 1999
and are reflected in the financial statements elsewhere herein.
MANAGEMENT
The names, ages and terms of office of directors and executive officers of the
Company are set forth in the following table:
Name Age All positions with Company Director since
- ---------------------------------------------------------------------------
David E. Salmon 36 Director and Chief Operating Officer 1999
Jay E. Ostrow 46 Chief Financial Officer 2000
Jackson L. Morris 55 Director, General Counsel
and Secretary 1996
John V. Whitman, Jr. 41 Director and President 1996
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.
David E. Salmon, has been the Chief Operating Officer and Investor Relations
Officer of the Company since November 1, 1999. Mr. Salmon previously served
as Investor Relation Manager with the Company during 1998 and early 1999.
Mr. Salmon has served in various roles with public companies since 1992. Mr.
Salmon is a member of the National Investor Relations Institute.
Jay E. Ostrow, is the Company's Chief Financial Officer. Mr. Ostrow has
completed fourteen years of financial management and accounting services for
multi-unit restaurant corporations including dinnerhouse, casual themed and
franchised restaurants in Florida. Additionally, Mr. Ostrow provided
financial management, and accounting and consulting services on a contract
basis for a variety of Tampa Bay businesses including a publicly-held
retailer, international manufacturer and distributor, community bank, not-
for-profit organizations, finance company, private school and, restaurants.
Mr. Ostrow has held the following positions in financial management; Chief
Financial Officer of Columbia Restaurant Group, Corporate Controller of Olde
World Cheese Shop, Inc., and Corporate Controller for Wizard Studios, an
event management and production company. Recently, Mr. Ostrow has served as
Chief Financial officer and Treasurer for the Lionshare Group, Inc., a
publicly held (OTC:BB) hospitality Company.
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. The U.S.
Securities and Exchange Commission has brought a civil suit against Mr. Morris
and others alleging that he sold 50,000 shares common stock in violation of
the registration requirements of the Securities Act. Mr. Morris received the
shares as compensation for services rendered in connection with a shell
company reverse merger. The suit seeks an injunction and penalty against Mr.
Morris.
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:
Name Fiscal Year Position(s) Salary
- --------------------- ----------- -------------- -----------
John V. Whitman, Jr. 1997 President $ 99,400
1998 President $ 125,000
1999 President $ 175,000
The following table sets forth certain information about common stock
purchase options granted to Mr. Whitman and Mr. Morris during the 1999 fiscal
year and options exercised on January 28, 2000.
As % of
Number of total granted to Exercise Grant date
Name Shares all employees price Expired value
- -------------- ----------- ---------------- -------- ------ -----------
J.V. Whitman, Jr 5,915,810 83.13% (1) none $.12
J.L. Morris 1,200,736 16.87% (2) none $.12
(1) The exercise price during the respective years following date of grant
is a percentage of the average bid and asked quotation (or closing price) on
the day prior to exercise, as follows: first year - 25%; second year - 30%;
third year - 40%; thereafter - 50%. This option entitles Mr. Whitman to
maintain 21.805% ownership of the Company's total issued and outstanding
common stock at any time, and was recently amended to eliminate the
adjustment to the percentage for shares Mr. Whitman sells and to provide that
the calculation will be made with the assumption that he has never sold any
shares. Accordingly, his actual percentage owned at any time will be less
than 21.805%, as a result of sales of shares he has made.
(2) The exercise price is one-half of the average bid and asked quotation
(or closing price) on the day prior to exercise. This option entitles Mr.
Morris to maintain 5% ownership of the Company's total issued and outstanding
common stock at any time.
During fiscal year 1999, Mr. Whitman exercised options for the purchase of
1,838,487 shares of common stock at an aggregate exercise price of $.12 and
with a fair market value at the time of exercise (determined in the same
manner as the exercise price) of $.43. Mr. Whitman reduced accrued salary
payable by the Company as payment for the options shares. Mr. Whitman
exercised 3,245,078 shares of common stock on January 28, 2000, at an
aggregate exercise price of $.12 and with a fair market value at the time of
exercise (determined in the same manner as the exercise price). During the
same period, Mr. Morris exercised options for the purchase of 397,050 shares
of common stock at an aggregate exercise price of $.12 and with a fair market
value at the time of exercise (determined in the same manner as the exercise
price) of $.35. Mr. Morris exercised 568,416 shares of common stock on
January 28, 2000, at an aggregate exercise price of $.12 and with a fair
market value at the time of exercise (determined in the same manner as the
exercise price). Mr. Morris rendered legal services as payment for the
option shares
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
On January 28, 2000, The Company issued 1,000,000 shares of its common stock
to David E. Salmon, The Company's Chief Operating Officer, as a bonus. The
Company expects to continue to award common stock bonuses to Mr. Salmon in
lieu of salary increases until such time as the Company is in a position to
pay a salary commensurate with the position responsibilities and expectations.
On January 28, 2000, The Company granted an option to Jackson L. Morris, who
is both an officer and director for the Company. Mr. Morris was granted
common stock options for 568,416 shares and are being paid for in exchange for
legal services totaling $56,841.60.
See Item 10, above, and Note 7 to the Financial Statements included elsewhere
herein for advances made by the Company to Mr. Whitman, its President and
Chairman.
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.
All ownership is both legal and beneficial unless otherwise indicated. See,
"Selling Stockholders".
Name Number of Shares Number of Shares
Before sale of After sale of % %
Shares shares Before After
- ------------------------ ---------------- ----------------- -----------
David E. Salmon (1) 1,350,000 0 3.59 0.00
Jay E. Ostrow (1) 100,000 0 0.27 0.00
Jackson L. Morris (1)(4) 1,337,126 1,337,126 3.56 1.72
John V. Whitman, Jr. (1)(2)(3) 6,288,274 3,788,274 16.73 4.88
All directors and officers 9,075,400 5,125,400 24.15 6.60
as a group (4 persons)
(1) Messrs. Salmon, Ostrow, Morris and Whitman's address is the address of
the
Company.
(2) Mr. Whitman shares beneficial ownership of 671,260 shares with his
wife.
(3) Mr. Whitman Shares legal ownership of 5,838,274 with his wife. 450,000
of the shares listed above are legally owned by Mr. Whitman's children who
live in his home. Does not include 10,109,903 options which would become
effective assuming the sale of all 40,000,000 Shares offered by the company by
this prospectus
(4) Does not include 2,318,253 options which would become effective assuming
the sale of all 40,000,000 Shares offered by the Company by this prospectus
DESCRIPTION OF SECURITIES
Common Stock:
The authorized Common Stock of the Company consists of one hundred million
shares, with a par value per share of $.001,these changes were made by
amendment on file February 1, 2000, which include the Shares offered by this
Prospectus. A total of 15,374,199 shares of Common Stock were outstanding at
September 30, 1999 and 22,213,392 additional shares were issued between that
date and the date of this Prospectus, for a total outstanding of 37,587,591
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
therefore, 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.
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 has Shares included in this Offering. Assuming all such
Shares are sold, none of these selling stockholders will own any stock in the
Company. The total number of Shares included in this Offering by the following
Selling Stockholders is 9,031,524 Shares. The Company will not receive any
proceeds from the sale of the Common Stock, assuming none of the Shares
offered by the Company pursuant to this Prospectus are sold, by the following
Selling Stockholders.
Name of Selling Number of Shares to be
Stockholder sold in this Offering
Carol Bass 50,000
Carolyn Posh 21,429
Chris Warden 714,286
Claire A. Moscatel 14,286
Crystal A. Kitchens 25,000
Dan Reyes 42,857
Daniel L. Hefner &
Daniel L. Hefner 138,511
Gerald Hence 1,000,000
Ian Horn 100,000
Jacob International, Inc 881,944
James Bakhtiar 142,857
Jeff Bartlam 142,857
Jennifer L. Hefner 25,000
Jeremy DeFalco 14,285
Joe L. Whitcraft 314,286
Joe Edwards 15,000
Joel Koplik 71,429
John Web III 28,571
John Millio 714,286
Marilyn McCleave 566,000
Mark Scheel 350,000
Meredith Posh 21,429
Mike Johnston 571,428
Myles Coleman 71,428
Rapid Release Research 432,000
Ron Mallett 100,000
Rosemary Rutledge 285,714
Roy C. Shrader 128,000
Scott Reichling 40,000
Shirley Hefner 200,000
Silicon Valley Staffing 142,857
Success Unlimited 721,500
Susan Venner 142,857
Thomas J. Kilcoyne 357,142
Tom Overturf 100,000
Victor A. Paru 30,000
Wayland Tonning 28,571
Wayne Throckmorton 142,857
XL Marketing 142,857
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, 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 will own after the Offering,
assuming the sale of all the Shares included in this. The total number of
Shares included in the offering by these Selling Stockholders is 4,450,000
Shares. The Company will not receive any of the proceeds from the sale of the
Common Stock by the following Selling Stockholders. The Company believes that
some or all of the following persons may have purchased additional shares of
the Company's Common Stock in the public market, which Shares may be
registered in street name and are not reflected in the following table.
Percent of Class
Name of Selling Stockholder Number of Shares Before After
Shares owned to be sold Offering Offering
Jay E. Ostrow* 100,000 100,000 0.27 0.13
David E. Salmon* 1,350,000 1,350,000 3.59 1.74
Whitman, John V.* & Marsha B. 671,260 500,000 1.79 0.64
Whitman, John V. Jr.* 5,502,644 2,500,000 14.64 3.22
*Employee of the Company.
DISTRIBUTION OF SHARES
Distribution by the Company:
The Company is offering 40,000,000 shares of its authorized but unissued
Common Stock for sale by this Prospectus in a "self underwritten" public
offering. The Company's Chairman, Mr. Whitman, will offer the 40,000,000
Shares on behalf of the Company. See, "Management". Mr. Whitman will not
receive any compensation for sales of the Shares which he may make. The
Company will rely on Rule 3(a)4-11 in that Mr. Whitman has never been either a
registered securities broker-dealer or an affiliate or associated person
thereof. The Company will receive the net proceeds from the sale of the
40,000,000 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. The Company may also issue
Shares to creditors in payment of the Company's liabilities. The Company does
not have agreements with any of its creditors to accept Shares in payment of
amounts due to them. There is no assurance the Company will be able to pay
any of its debts with the Shares. The value at which any creditor may accept
Shares in payment of amounts due is expected to be negotiated between the
Company and the individual creditor and 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 acceptance. The Company may also acquire services or property,
including the acquisition of other businesses, in exchange for Shares.
Distribution by Selling Stockholders:
The Selling Stockholders are offering 13,481,524 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 Prospectus. 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 there under, 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 there under 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 National Association of Securities Dealers, Inc, quotes the Company's
Common Stock under the stock symbol "CRNC" on the OTC Bulletin Board. The
following table sets forth the approximate high and low bid quotations for the
Company's Common Stock for each calendar quarter during the twelve months
ended September 30, 1999. These quotations are inter-dealer quotations
without retail markup, markdown or commissions and may not represent actual
transactions.
Quarter ended High Bid Low Bid
March 1999 .875 .875
June 1999 .29 .29
September 1999 .46 .33
December 1999 .625 .07
The high and low bid quotations for the Company's Common Stock on February 7,
2000 were $.234 and $.3125 and the closing price on that date for the
Company's Common Stock on the OTC Bulletin Board was $.3125:
The Company had approximately 646 holders of its common stock at September
30, 1999. At February 7, 2000, the Company had approximately 1200 holders of
its common stock. The Company's transfer agent is Atlas Stock Transfer of
Salt Lake City, Utah.
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
77,587,591 shares of Common Stock. In addition, if all the outstanding Common
Stock Purchase Options were to be exercised, totaling 12,428,156 shares of
Common Stock, the Company would have a total of 90,015,747 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, 12,428,156 of those shares are
subject to the requirements of Rule 144 by virtue of being either issued
within the last twelve months in a transaction not involving a public offering
(a "restricted security") or being owned by "affiliates" of the Company and
not being included in a registration statement for resale by those affiliates.
In general under Rule 144 as currently in effect, a person who is an affiliate
of the Company or has owned a "restricted security" for more than twelve
months 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 (775,876 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 filing of a Form 144 with the Commission
with respect to the proposed sale (8,584,950 shares, at the date of this
Prospectus). Sales under Rule 144 and sales by affiliates are subject to the
filing of a Form 144 with respect to such sale and certain other limitations
and restrictions. The Company may, at any time, file a registration statement
covering shares held by the Company's affiliates and shares which are a
restricted security, in which event the holder thereof would be able to
immediately sell such shares into the public trading market upon the effective
date of such registration statement.
INTEREST OF 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 1,337,126 shares of the Company's Common Stock, none
of which are offered for sale by this Prospectus, and Common Stock Purchase
Options to acquire 2,318,253 shares assuming the sale of the 40 million shares
being offered by the Company in this prospectus are sold. See "Management
Compensation-Common Stock Purchase Options" and "Principal Stockholders".
EXPERTS
The Company's financial statements at and for the period ended September 30,
1999 and 1998 included in this Prospectus and the related Registration
Statement have been audited by BELLA, HERMIDA, GILLMAN, HANCOCK & MUELLER,
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.
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditor's Report on Financial Statements
December 20, 2000
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Chronicle Communications, Inc.
We have audited the accompanying consolidated balance sheets of Chronicle
Communications, Inc., (a Georgia Corporation) and subsidiaries as of
September 30, 1999, 1998 and 1997, and the related consolidated statements of
operations, changes in stockholders' equity (deficit), and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
The financial statements as of September 30, 1997, and for the year then
ended have been restated to reflect the pooling of interests with Bright Now,
Inc. as described in Note 3 to the consolidated financial statements. We did
not audit the individual financial statements of Chronicle Communications,
Inc., which statements reflect total assets of $797,020 as of September 30,
1997 and total revenues of $645,051 for the year then ended. Those
statements were audited by other auditors whose report, dated February 20,
1998, on those statements included an explanatory paragraph describing
conditions that raised substantial doubt about the Company's ability to
continue as a going concern. Our opinion, insofar as it relates to the
amounts included for the individual financial statements of Chronicle
Communications, Inc. as of September 30, 1997, and for the year ended, is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 and the report of other auditors provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Chronicle Communications, Inc.
and subsidiaries as of September 30, 1999, 1998 and 1997, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2, the Company's
significant operating losses, negative cash flows and debt position 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.
Respectfully submitted,
/s/ BELLA, HERMIDA, GILLMAN, HANCOCK & MUELLER
Certified Public Accountants
Plant City, Florida
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30,
1999 1998 1997
CURRENT ASSETS:
Cash $ 7,707 $ 14,457 $ 1,455
Accounts Receivable 197,218 123,055 312,806
Inventory 32,110 85,297 101,384
Other Current Assets 101,413 22,144
Advances to Stockholders,
Current Portion 115,000
Total Current Assets 338,448 222,809 552,789
PROPERTY AND EQUIPMENT,
Net of Accumulated
Depreciation of $745,659
(1999), $504,453 (1998)
and $338,344 (1997) 1,334,850 1,496,990 1,662,512
ADVANCES TO STOCKHOLDERS 491,308 160,021 200,075
OTHER ASSETS 608,749 6,417 12,764
TOTAL ASSETS $2,773,355 $1,886,237 $2,428,140
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Bank Overdraft $ 31,944 $ 5,014 $ 28,613
Short-Term Notes 322,321 304,270 181,897
Current Maturities
of Long-Term Debt 1,178,390 1,030,331 180,790
Accounts Payable 1,585,523 1,084,637 852,150
Accrued Payroll Liabilities 532,231 324,967 204,981
Other Accrued Liabilities 819,072 298,238 72,554
Total Current Liabilities 4,469,481 3,047,457 1,520,985
LONG-TERM LIABILITIES 192,000 849,715
Total Liabilities 4,661,481 3,047,457 2,370,700
STOCKHOLDERS' EQUITY:
Common Stock, No Par
Value, 35,000,000
Shares Authorized,
15,374,199, 3,367,785
and 2,388,708 Shares
Issued and Outstanding at
September 30, 1999, 1998
and 1997, respectively 5,825,903 2,515,366 1,920,449
Accumulated Deficit (7,714,029 ) (3,676,586 ) (1,863,009)
Total Stockholders'
Equity (Deficit) (1,888,126 ) (1,161,220 ) 57,440
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY (DEFICIT) $2,773,355 $1,886,237 $2,428,140
The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended September 30,
1999 1998 1997
SALES $1,934,500 $1,748,026 $2,421,931
COST OF SALES 1,704,577 1,691,021 2,198,196
GROSS PROFIT 229,923 57,005 223,735
OPERATING EXPENSES:
General and Administrative 3,934,388 1,567,748 1,559,489
Interest 262,614 302,834 180,749
Total Operating Expenses 4,197,002 ,870,582 1,740,238
LOSS FROM OPERATIONS (3,967,079) (1,813,577 ) (1,516,503)
OTHER INCOME (EXPENSE) ( 70,364) 88,992
NET LOSS $4,037,443) $(1,813,577) $(1,427,511)
NET LOSS PER COMMON
SHARE, BASIC $( 0.51) $( 0.70) $( .68)
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,798,896 2,589,632 2,113,131
The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Common Stock Preferred Stock Accumulated
Shares Amount Shares Amount Deficit
Balance,
October, 1996 1,789,750 $787,346 $ $( 435,498 )
Common Stock Issued:
For Cash, Net of
Offering Costs 570,083 977,759
For Consulting Services 2,500 2,500
For Payment of
Directors' Fees 8,750 17,500
For Employee Compensation 17,625 35,944
Preferred Stock Issued
for Services 7,500,000 7,500
Surrender and Cancellation of
Preferred Stock Issued (7,500,000) (7,500)
Contribution of Services 99,400
Net Loss for the Year (1,427,511)
Balance,
September 30, 1997 2,388,708 $1,920,449 $- $(1,863,009)
Common Stock Issued:
For Cash, Net of
Offering Costs 360,241 283,620
For Consulting Services 577,500 255,000
For Commissions Payable 7,720 22,398
For Interest on Loans 10,760 16,299
For Employee Compensation 3,000 6,600
For Debt Repayment 19,856 11,000
Net Loss for the Year (1,813,577)
Balance,
September 30, 1998 3,367,785 $2,515,366 $(3,676,586)
Common Stock Issued:
For Cash, Net of
Offering Costs 2,826,378 667,871
For Consulting Services 2,518,468 575,025
For Employee Compensation 2,263,580 1,012,160
For Debt Repayment 1,070,738 326,203
For Operating Expenses 394,389 133,241
For Acquisitions 2,500,000 407,812
For Shareholder Advances 432,861 188,225
Net Loss for the Year (4,037,443)
Balance,
September 30, 1999 15,374,199 $5,825,903 $- $(7,714,029)
The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30,
1999 1998 1997
OPERATING ACTIVITIES:
Net Loss $(4,037,443) $(1,813,577) $(1,427,511)
Adjustments to Reconcile
Net Loss to Net Cash Used
in Operating Activities:
Depreciation and Amortization 170,354 172,456 161,039
Loss (Gain) on the Sale of Assets 14,462 ( 88,992)
Loss on Investments 55,902
Expenses Paid with Stock 2,147,778 300,297 38,444
Expenses Paid with Debt 396,236
Contributed Services 99,400
Increase or Decrease in:
Accounts Receivable 116,295 189,751 24,122
Inventory 63,730 16,087 2,411
Other Assets ( 33,134 ) 22,144 70,101
Accounts Payable 312,913 232,487 396,612
Accrued Liabilities 615,895 345,670 212,129
Net Cash Used in
Operating Activities ( 177,012 ) ( 534,685) ( 512,245)
INVESTING ACTIVITIES:
Cash from Acquisitions 46,929 119,620
Purchase of Property and
Equipment ( 14,549 ) ( 586) ( 556,261)
Net Cash Provided by
(Used in) Investing
Activities 32,380 ( 586) ( 436,641)
FINANCING ACTIVITIES:
Bank Overdraft 20,135 ( 23,599) ( 26,247)
Proceeds from Issuance of Debt 68,500 174,004 849,257
Principal Payments of Debt ( 33,448) ( 40,805) ( 652,825)
Advances to Stockholders ( 129,343) 155,053 ( 215,952)
Proceeds from Issuance of Stock 212,038 283,620 977,759
Net Cash Provided by
Financing Activities 137,882 548,273 931,992
NET INCREASE (DECREASE) IN CASH ( 6,750 ) 13,002 ( 16,894)
CASH AT BEGINNING OF YEAR 14,457 1,455 18,349
CASH AT END OF YEAR $ 7,707 $ 14,457 $ 1,455
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Years Ended September 30,
1999 1998 1997
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash Paid during the Year for
Interest $29,455 $29,172 $150,517
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Stock Issued for Payment
of Expenses $2,147,778 $ 0 $17,500
Equipment Purchased with Notes $ 0 $ 0 $86,799
Stock Issued for Debt Repayment $ 43,640 $11,000 $ 0
Stock Issued for Acquisitions
and Investments $ 512,049
Stock Issued for Stockholder
Advances $ 397,234
Proceeds from Sale of
Investments for Stockholders
Advances $ 8,297
Property Surrendered for
Debt Repayment $ 14,000
The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Chronicle Communications, Inc., a Georgia Corporation, was originally organized
as a publisher of several newspaper and shopper editions in several Georgia
counties. During 1998, these publications were discontinued and the Company
began a series of acquisitions in the publishing and computer communications
field. Chronicle Communications, Inc. now serves as the parent company to the
acquired businesses.
On September 30, 1998, the Company acquired Bright Now, Inc. and Subsidiaries
in a business combination accounted for as a pooling of interests. The
accompanying financial statements for 1998 are based on the assumption that the
companies were combined for a full year and the financial statements of the
prior year have been restated to give effect to the combination. Bright Now,
Inc. operates a commercial printing plant in Tampa, Florida.
On January 3, 1999, the Company acquired Bartow Communications, Inc. in a
combination accounted for as a purchase. The financial statements include the
results of operations of Bartow Communications, Inc. from the date of
acquisition through September 30, 1999. Bartow Communications, Inc. publishes
real estate editions in the Washington, D.C. area.
On August 19, 1999, the Company acquired Americomp Computers, Inc., a computer
equipment retailer, located in Houston, Texas. The combination was accounted
for as a purchase and the financial statements include the results of
operations for Americomp Computers, Inc. from the acquisition date through
September 30, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassification of Financial Statement Presentation
Certain reclassifications have been made to the 1997 and 1998 financial
statements to conform to the 1999 financial statement presentation. Such
reclassifications had no effect on net income as previously reported.
Cash Equivalents
For purposes of financial statement presentation, the Company considers all
highly liquid instruments with maturity of three months or less to be cash
equivalents. The Company holds no such instruments at September 30, 1999, 1998
and 1997.
Accounts Receivable
The Company grants unsecured credit to its customers for terms of 10 to 60
days. The Company considers all accounts receivable to be collectible;
therefore, no allowance for uncollectible accounts has been recorded.
Inventory
Inventories are recorded at the lower of cost (first-in, first-out) or market.
Inventories consist principally of paper, printing supplies and computer parts.
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Property and Equipment
Property and equipment is stated at cost and depreciated using the straight-
line method over estimated useful lives ranging from 5 to 40 years.
Expenditures for maintenance and repairs are charged to expense as incurred.
Major improvements are capitalized.
Deferred Financing Costs
Costs connected with obtaining and executing debt agreements are capitalized
and amortized on the straight-line basis over the term of the related debt.
Amortization expense charged to operations for the years ended September 30,
1999, 1998 and 1997 amounted to $11,415, $6,347 and $19,476, respectively.
Deferred Tax Assets and Liabilities
Deferred income taxes are the result of the expected future tax consequences of
temporary differences between the financial statement and tax bases of assets
and liabilities. A valuation allowance is provided against deferred income tax
assets in circumstances where management believes recoverability of a portion
of the asset is not reasonably assured.
Earnings (Loss) per Share
Basic net earnings (loss) per common share is computed by dividing the net
earnings (loss) by the weighted-average number of common shares outstanding.
Common stock equivalents have not been included in the computation for these
periods because their inclusion would be antidilutive. Diluted earnings per
share are computed to include potential dilution from the exercise or
conversion of securities, such as stock options or warrants, into common stock.
Because the effect of including these securities is antidilutive, they
have been excluded from the computation and the diluted loss per share is
equal to the basic loss per share.
Stock-Based Compensation
The Company accounts for stock issued to employees as provided in Accounting
Principles Board Opinion No. 25, 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 and provides pro forma disclosure of
the application of Statement of Financial Accounting Standards No. 123.
Principles of Consolidation
The consolidated financial statements include the accounts of Chronicle
Communications, Inc. and all wholly owned subsidiaries. All material
intercompany transactions have been eliminated.
NOTE 2: GOING CONCERN
The Company incurred operating losses of $3,967,079, $1,813,577 and $1,516,503
for the years ended September 30, 1999, 1998 and 1997, respectively. At
September 30, 1999, current liabilities exceeded current assets by $4,131,033,
and the Company is in default on substantially all of its debt. Major vendors
have placed the Company on a COD basis for future purchases. Bright Now, Inc.
has filed for reorganization under Chapter 11 of the United States Bankruptcy
Code.
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 2: GOING CONCERN (CONTINUED)
These factors 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 classifications of liabilities that might be
necessary in the event the Company cannot continue in existence.
During 1999, 1998 and 1997, the Company funded much of its working capital
needs through the sale of its common stock. Approximately $2,190,000 in capital
was raised in connection with these stock sales. The Company's continued
ability to operate is dependent on its ability to refinance its existing debt,
raise additional capital, collect stockholder advances and reverse negative
operating trends.
NOTE 3: ACQUISITIONS
On January 3, 1999, the Company acquired Bartow Communications, Inc. for
125,000 shares of the Company's common stock, in a business combination
accounted for as a purchase. Bartow Communications, Inc. is primarily engaged
in real estate publishing in the Washington, D.C. area. The results of
operations of Bartow Communications, Inc. are included since the date of
acquisition. The total cost of the acquisition was $14,062, which exceeded the
fair value of the net assets of Bartow Communications, Inc. by $214,824.
The excess was allocated to goodwill and is being amortized on a straight line
basis over a period of twenty years.
On August 19, 1999, the Company acquired Americomp Computers, Inc. for
2,250,000 shares of the Company's common stock, in a combination accounted for
as a purchase. Americomp Computers, Inc. is primarily engaged in retail sales
of personal computer equipment. The total cost of the acquisition was
$373,500, which exceeded the fair value of the net assets of Americomp
Computers by $401,791. The excess was allocated to goodwill and is being
amortized on a straight line basis over a period of twenty years. The results
of operations of Americomp Computers are included since the date of
acquisition. The following presents pro forma information as if the acquisition
had occurred on January 1, 1998.
1999 1998
Net Sales $3,204,178 $5,478,613
Net Income $(4,127,078) $(1,687,920)
Earnings per Share:
Basic $( .51 ) $( .57)
Fully Diluted $( .51 ) $( .57)
The above amounts reflect adjustments for amortization of goodwill acquired
in the purchase. The amounts included for Americomp Computers, Inc. are
based on a December 31 year end, and therefore reflect only nine months
activity for the year ended September 30, 1999.
On September 30, 1998, the Company acquired Bright Now, Inc. and Subsidiaries
in a business combination accounted for as a pooling of interests. Bright
Now, Inc., which operates a commercial printing press plant, became a wholly
owned subsidiary through the exchange of 640,000 shares of the Company's
common stock for all of the outstanding stock of Bright Now, Inc. and
subsidiaries. In accordance with generally accepted accounting principles,
the financial statements for 1998 are presented as if the companies were
combined for the entire year, and the prior year's financial statements have
been restated for the effects of the combination.
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 3: ACQUISITIONS (CONTINUED)
Summarized results of operations of the separate companies for the period
from October 1, 1997 through September 30, 1998, the date of acquisition, are
as follows:
Chronicle
Communications, Inc. Bright Now, Inc.
Net Sales $ 456,246 $1,291,780
Net Loss $ 1,363,223 $ 450,354
The summarized assets and liabilities of the separate companies on the date
of acquisition were as follows:
Chronicle
Communications, Inc. Bright Now, Inc.
Current Assets $ 19,676 $ 203,133
Property and Equipment 325,855 1,171,135
Other Assets 160,946 5,492
Total Assets $ 506,477 $ 1,379,760
Liabilities $ 970,680 $2,076,777
The following is a reconciliation of net sales and net loss as previously
reported for 1997 with restated amounts:
Year Ended
September 30, 1997
Net Sales:
As previously reported $ 645,051
Bright Now, Inc. 1,776,880
As Restated $ 2,421,931
Net Loss:
As previously reported $( 872,383)
Bright Now, Inc.( 555,128)
As Restated $(1,427,511)
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 4: PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less
accumulated depreciation:
1999 1998 1997
Land $ 30,875 $ 30,875 $ 30,875
Building and Improvements 691,471 721,471 721,471
Machinery and Equipment 1,358,163 1,249,097 1,248,510
Total 2,080,509 2,001,443 2,000,856
Less, Accumulated Depreciation 745,659 504,453 338,344
Net Property and Equipment $1,334,850 $1,496,990 $1,662,512
Depreciation expense for the years ended September 30, 1999, 1998 and 1997
was $158,939, $166,109 and $141,563, respectively.
NOTE 5: SHORT-TERM DEBT
Short-Term Debt consists of the following:
1999 1998 1997
Line of credit payable to bank; unsecured;
bearing interest at bank prime plus 2.5%;
in default, entire principal plus interest,
costs and fees due immediately $30,931 $ 25,000 $ 25,000
Note payable to individual; secured by
mortgage on real estate; bearing interest
at 10%; in default, entire principal plus
interest due immediately 46,245 46,245 46,245
Note payable to individual; unsecured;
bearing interest at 11%; in
default, entire principal plus
interest due immediately 12,500 12,500
Loans payable to individuals; unsecured;
bearing interest at various rates with
various repayment terms 232,645 220,525 110,652
Total Short-Term Debt $322,321 $304,270 $181,897
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 6: LONG-TERM DEBT
Long-Term Debt consists of the following:
1999 1998 1997
Mortgage note payable; bearing
interest at 8%; monthly
payments of principal and
interest of $1,142; in
default, entire principal
plus interest and fees due
immediately; secured by
mortgage on real estate;
guaranteed by the Company's
president and majority
stockholder $ 110,567 $ 115,965 $ 118,832
Note payable to bank; bearing
interest at 11%; in default,
entire unpaid balance of
principal and interest due
immediately; secured by
equipment, trade accounts
receivable, and 42,500
shares of the Company's
common stock; co-signed
by four stockholders 40,832 56,927 54,887
Note payable to stockholder;
bearing interest at 11%;
in default, entire unpaid
balance of principal and
interest due immediately;
secured by all of the
property of the Company 25,000 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
Note payable to bank; bearing
interest at 10.95%; monthly
payments of $4,231; in default
with entire principal, plus
interest, costs and fees
due immediately; secured by
mortgage on real estate 521,350 404,280 404,901
Note payable to bank; bearing
interest at bank prime plus
2.5%; monthly payments of
$5,609; in default with
entire principal, plus
interest, costs and fees
due immediately; secured
by blanket lien on all
business assets 297,641 237,355 247,230
Note payable to financial
institution; bearing interest
at 18%; monthly payments
of $3,849;in default with
entire principal, interest,
costs and fees due immediately;
secured by lien on equipment
and judgment entered
March 19, 1998 171,000 171,000 122,342
Note payable to vendor;
payable at a minimum of
$1,500 monthly by
applying a portion of
purchases over 36 months;
secured by equipment 5,804 43,313
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 6: LONG-TERM DEBT (CONTINUED)
1999 1998 1997
Loans payable to individuals; unsecured;
bearing interest at various rates with
various repayment terms 204,000
Total 1,370,390 1,030,331 1,030,505
Less, Current Maturities 1,178,390 1,030,331 180,790
Net Long-Term Debt $ 192,000 $ 0 $ 849,715
Based on current borrowing rates, the fair value of notes payable
approximates their carrying amount.
NOTE 7: INCOME TAXES
The Company has tax loss carryforwards of approximately $7,456,370 that may
be applied against future taxable income. These losses create a deferred tax
asset at September 30, 1999, 1998 and 1997. Due to the uncertainty of the
Company's realization of this benefit, management has established a valuation
allowance equal to the total amount of the deferred tax assets.
1999 1998 1997
Loss Carry forward $1,112,296 $612,208 $320,509
Less, Valuation Allowance 1,112,296 612,208 320,509
Net Deferred Tax Assets $ 0 $ 0 $ 0
The loss carry forwards expire as follows:
Year of Expiration Amount
2011 $ 68,400
2012 1,385,735
2013 1,923,731
2014 4,078,504
$7,456,370
NOTE 8: RELATED PARTY TRANSACTIONS
The Company has made advances to its president and majority stockholder.
These advances have no specific terms, are non-interest bearing, and are
unsecured. The balances of these advances, less the amounts repaid, are as
follows:
1999 1998 1997
Advances to Stockholders $751,730 $444,021 $315,075
Less, Amount Repaid 260,422 284,000
Net Advances to Stockholders $491,308 $160,021 $315,075
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 9: STOCK OPTIONS
The Company issues stock options to its officers and directors as
compensation for their services. The Company has elected to account for
these stock options using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Compensation expense is
measured as the excess of the quoted market price of the stock over the
option price on the measurement date and charged to the period in which the
related services are performed. Compensation charged to operations amounted
to $382,668, $36,579 and $0 for the years ended September 30, 1999, 1998 and
1997, respectively.
FASB Statement No. 123 requires pro forma disclosure of information
regarding net income and earnings per share determined as if the Company has
accounted for these stock options using the fair value method of that
Statement. The pro forma information for September 30, 1999, 1998 and 1997
is as follows:
1999 1998 1997
Pro Forma Net Loss $4,379,774 $1,823,473 $1,440,142
Pro Forma Net Loss
per Common Share $ 0.56 $ 0.70 $ .068
The estimated fair value of these stock options was calculated using the
Black-Scholes option pricing model. The weighted-average fair value of the
options at their grant date and the assumptions used in the models are as
follows:
1999 1998 1997
Weighted-Average Fair Value $ .42 $ .12 $ .21
Risk-Free Interest Rate 5.01% 5.00% 5.84%
Dividend Yield 0 0 0
Volatility Factor of Expected
Market Price 4.19 3.22 -
Weighted-Average Expected Life 1 1 3.25
A summary of the Company's stock option activity and related information is
as follows:
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Exercise Price Exercise Price Exercise Price
Options Per Share Options Per Share Options Per Share
Outstanding,
October 1 390,094 $ .03 5,000 $.03 $
Granted 3,303,056 $ .12 390,094 .03 5,000 .03
Exercised (2,286,787 ) $ .12
Canceled/Expired ( 5,000) .03
Outstanding,
September 30 1,406,363 $ .12 390,094 $.03 5,000 $.03
All shares outstanding at September 30, 1999 are exercisable at prices
ranging from $.02 to $.05 with estimated remaining lives of less than one
year.
CHRONICLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 AND 1997
NOTE 10: EQUITY
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.
During the year ended September 30, 1997, the shares were issued to the
Company's president at par value. These shares were surrendered to the
Company on September 29, 1997 and cancelled by the Board.
On November 15, 1997, the Company approved a one-to-two reverse common stock
split. On July 1, 1998, the Company approved a one-to-four reverse common
stock split. All references to number of shares of common stock in the
accompanying financial statements have been restated to reflect these
transactions.
On July 8, 1999, the Company issued warrants to Generation Capital
Associates exercisable for up to 600,000 shares of common stock at $150,000.
Unexercised warrants will expire December 31, 2000.
Subsequent to September 30, 1999, the Company issued an additional 6,838,421
shares of common stock, including approximately 2,211,363 restricted shares
and 4,627,058 free-trading shares, for general corporate purposes in the
amount of $1,479,915.
NOTE 11: COMMITMENTS AND CONTINGENCIES
The Company has been involved in litigation resulting from its default on a
bank loan secured by a mortgage on the property on which its plant is
currently operating. As a result of an order resulting from the plaintiff's
motion for final judgement, the court has scheduled foreclosure sale of the
property. The Company has been successful in postponing the foreclosure
while it seeks financing from other sources. The Company is also a
defendant in litigation with numerous other creditors resulting from the
Company's default on debt obligations. Some of these obligations are
secured by the Company's assets. To the extent the Company is unable to
cure these defaults, it may be obligated to surrender operating assets to
satisfy creditors. No estimate of the amount of resulting loss can be made.
The Company leased 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 $2,823, $38,679 and $45,644 for the
years ended September 30, 1999, 1998 and 1997, respectively.
NOTE 12: CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash equivalents and unsecured trade
receivables. The Company's cash equivalents are maintained with financial
institutions located in Florida and Georgia. The Company holds no cash
equivalent in excess of federally insured limits. The Company grants credit
to customers, substantially all of whom are located in Florida and Georgia.
The Company's ability to collect these receivables is dependent upon
economic conditions in Florida and Georgia and the financial condition of
its customers.
NOTE 13: SUBSEQUENT EVENTS
Subsequent to September 30, 1999, Bright Now, Inc. filed for reorganization
under Chapter 11 of the United States Bankruptcy Code. A hearing on a
motion to dismiss or convert the case to Chapter 7 is scheduled for February
7, 1999.
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.
Registration fees:
Federal $2,965.02
Printing $ 500.00
Accounting $3,000.00
------------
Total: $6,465.02
===========
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 which legal
counsel exercises from time to time to offset the amount of his fees in
general. See, "Management Compensation-Common Stock Purchase Options" in the
Prospectus included elsewhere in 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 following information covers the Registrant's unregistered sales of
securities within the three year period ending on September 30, 1999 and the
interim period subsequent thereto.
First 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).
Second Offering:
(a) Date of offering-August 1, 1997Securities sold-Convertible, Voting
Preferred StockAmount 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. The shares of Common stock issued in the first, second and fourth
offerings have not been reduced for cancellations of certain shares issued.
Third Offering:
(a) Dates of offering-June 1, 1997 to September 23, 1998Securities sold-
Common StockAmount sold- 556,168
(b) Issued as a bonus to three employee and to two new directors for joining
board, sold to thirty-one new investors (seventeen accredited and fourteen
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 two 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).
Fourth Offering:
(a) Dates of the offering-September 24, 1998 to November 8, 1999 Securities
sold-Common Stock Amount sold-12,812,758 shares (includes 432,861 shares to be
canceled which were issued in error in exercise of executive
options)
(b) Issued as compensation for services and as bonuses to five employees of
the Registrant, sold for cash to nine investors (seven accredited and two non
accredited), issued in payments of accounts payable by the Registrant and a
subsidiary to eight creditors, issued upon exercise of options by three
directors and executive officers, issued as payment for consulting services to
eighteen firms and individuals, issued in payment of miscellaneous expenses to
two persons, including one director and executive officer and issued in
acquisitions of five companies to twelve persons.
(c) $271,000 valued at market for employee compensation and bonuses,
$294,786.73 sold for cash, $512,650.86 in amount of accounts payable
liquidated, $1,281,064.98 valued at market for options exercised by directors
and executive officers (net of shares to be canceled), $569,954.50 negotiated
value of consulting fees paid, $10,948 in amount of miscellaneous expenses
liquidated, $1,833,752.50 valued at market in consideration of acquisitions
(d) The registrant relies upon Section 4(2) of the Securities Act of 1933, as
amended, in that the offering did not involve a public offering.
Fifth Offering:
(a) Date of the offering-September 1999 Securities sold-Series A Zero Coupon
Preferred Stock and Common Stock Amount-169,904 shares of preferred stock and
306,000 of Common Stock
(b) Issued for cash to a private investment partnership which is an
accredited investor
(c) $50,000 sold for cash and approximately $3,500 valued at market as a
contractual penalty for late filing of this registration statement
(d) The registrant relies upon Section 4(2) of the Securities Act of 1933, as
amended, in that the offering did not involve a public offering.
Sixth Offering:
(a) Date of the offering- January 28 to February 8, 2000
Securities sold- Common Stock
Amount- 12,511,074 shares
(b) Sold for cash to twenty-six accredited investors; issued in payment to
two trade creditors; issued in settlement of claims by three former
employees; and; issued upon exercise of options by two directors for (i)
offset against accrued salary and (ii) offset against accrued professional
fees pay.
(c) $405,050 sold for cash; $51,000 in payment of creditors; $87,377 in
settlement of claims by former employees; and, $351,547 in offset against
accrued salary and professional fees, with a market value at time of exercise
of $0.20.
(d) The registrant relies upon Section 4(2) of the Securities Act of 1933,
as amended, in that the offering did not involve a public offering.
Item 27. Exhibits. Sequential Page Number
3.1a Articles of Incorporation, as amended through April 1999n/a
3.1b Articles of Amendment filed May 1999 [insert]
3.2 By-Laws*n/a
5 Opinion re: legality [insert]
10.1 Stock Exchange Agreement for Americomp Computer, Inc. [insert]
23.1 Consent of counsel (included in Exhibit 5) [insert]
23.2 Consent of independent public accountant [insert]
*Filed as Exhibits to Registration Statement on Form SB-2,
Commission File No. 333-34283
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
registration statement to be signed on its behalf by the undersigned, in the
City of Tampa, State of Florida on February 8, 2000.
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
registration statement was signed by the following persons in the capacities
and on the dates stated.
Signature Capacity in which signed: Date signed:
/s/ David E. Salmon Director, Chief Operating Officer February 8, 2000
David E. Salmon
/s/ Jackson L. Morris Director and Secretary February 8, 2000
Jackson L. Morris
/s/ John V. Whitman, Jr. Director, President February 8, 2000
John V. Whitman, Jr. Principal Executive Officer
EXHIBIT 3.1
RESTATED AND AMENDED ARTICLES OF INCORPORATION OF
CHRONICLE COMMUNICATIONS, INC.
The undersigned, being the President of Chronicle Communications, Inc., a
Georgia corporation, does hereby certify to the Secretary of State of
Georgia, Department of Corporation, the within Restated and Amended Articles
of Incorporation of the Corporation, as follows:
ARTICLE I - NAME AND ADDRESS
Section 1. The name of the Corporation shall be Chronicle Communications,
Inc.
ARTICLE II - DURATION
Section 1. The Corporation shall have perpetual existence.
ARTICLE III - PURPOSE AND POWERS
Section 1. The Corporation is formed for the purpose of engaging in any
lawful activity or business for which corporations may be incorporated under
the laws of the State of Georgia.
Section 2. The Corporation may exercise all powers, rights and privileges
conferred on corporations pursuant to the laws of the State of Georgia.
ARTICLE IV - CAPITAL STOCK
The Corporation shall be authorized to issue capital stock, as follows:
(a) One hundred million (100,000,000) shares of common stock, all of one
class, having a par value of $.001 per share; and
(b) One hundred sixty-nine thousand nine hundred four shares of Series A
Zero Coupon Preferred Stock the Corporation, each share having a par value of
$.10 and a redemption value of $.175233661 per share, being convertible into
one share of the Corporation's common stock at the election of the holder and
not being entitled to payment of a dividend; provided, that, the conditions
to demand for redemption and election of conversion being subject to
negotiation and agreement between the Corporation and the purchaser of the
such preferred stock.
ARTICLE V - BOARD OF DIRECTORS
Section 1. The business and affairs of the Corporation shall be managed by a
Board of Directors, the members of which shall be hereinafter referred to as
Directors.
Section 2. The number of Directors shall be as provided in the Bylaws of the
Corporation, but shall not be less than three (3).
Section 3. Directors shall be elected and hold office as provided in the
Bylaws.
ARTICLE VI - BYLAWS
Section 1. The Board of Directors shall adopt Bylaws for the Corporation at
a meeting of the Board of Directors following the filing of these Articles of
Incorporation.
Section 2. The power to adopt, alter, amend or repeal the Bylaws of the
Corporation may be exercised by the Board of Directors or the stockholders in
accordance with the provisions of the Bylaws.
Section 3. Any Bylaws adopted by the Board of Directors or the stockholders
may be altered, amended or repealed by the other group; provided, however,
that any Bylaw adopted by the stockholders may provide that it shall be
altered, amended, or repealed only by the stockholders.
IN WITNESS WHEREOF, for the purpose of restating and amending the Articles of
Incorporation, as amended, of the Corporation under the laws of the State of
Georgia, the undersigned, John V. Whitman, Jr., President of Chronicle
Communications, Inc., has executed the within Restated and Amended Articles
of Incorporation this January 5, 2000 and caused said Articles to be filed in
the office of the Secretary of State for the State of Georgia.
[CORPORATE SEAL] Chronicle Communications, Inc.
Attest:
By: _________________________
John V. Whitman, Jr., President
_________________________
Jackson L. Morris, Secretary
CERTIFICATE
The undersigned, John V. Whitman, Jr., President of Chronicle Communications,
Inc., a Georgia corporation, does hereby certify to the Secretary of State of
Georgia,Department of Corporation, as follows:
(a) This Certificate is filed with respect to and accompanies Restated and
Amended Articles of Incorporation of Chronicle Communications, Inc., a
Georgia corporation, executed January 5, 2000, as required by O.C.G. 14-2-
1007(d); and
(b) The Restated and Amended to the Articles of Incorporation were duly
approved and adopted on January 5, 2000 by an action by written consent by of
a majority of the issued and outstanding shares of common stock, there being
no other class of stock authorized or entitled to vote thereon as either a
single or a separate voting group, as required by O.C.G. 14-2-1006,
pursuant to approval by the board of directors and recommendation of the
within amendment to the stockholders for approval, on January 5, 2000, by an
action by written consent.
IN WITNESS WHEREOF, the undersigned, John V. Whitman, Jr., President of
Chronicle Communications, Inc., has executed this Certificate, for the
purposes stated herein, this January 5, 2000.
[CORPORATE SEAL] Chronicle Communications, Inc.
Attest:
By: _________________________
John V. Whitman, Jr., President
_________________________
Jackson L. Morris, Secretary
EXHIBIT 3.2
ARTICLES OF MERGER
Merger of Parent into a Wholly Owned Subsidiary
Pursuant to the provisions of 607.1104, Fla. Stat., the Florida Business
Corporation Act, and O.C.G. 14-2-1104, the Georgia Business Corporation
Code, Chronicle Communications, Inc., a Georgia corporation, (the "Parent
Company") which is the owner of all the issued and outstanding common stock
of Chronicle Communications, Inc., a Florida corporation, ( the "Subsidiary
Company), being the only equity securities of the Subsidiary Company issued,
outstanding and entitled to vote on the merger provided herein, has, by
action of its Board of Directors taken and approved on February 1, 2000,
adopted the following Plan of Merger:
1. The name of the parent corporation is Chronicle Communications, Inc., a
Georgia corporation, and the name of the subsidiary corporation is Chronicle
Communications, Inc., a Florida corporation.
2. The Parent Company shall be merged into the Subsidiary Company and the
Subsidiary Company, a Florida corporation, shall be the surviving
corporation. The sole purpose of the merger hereby effected is to change the
state of incorporation of the Parent Company to Florida from Georgia.
3. The Articles of Incorporation of the surviving corporation shall be the
Articles of Incorporation of the Subsidiary Company.
4. The Articles of Incorporation of the Subsidiary Company are identical in
substance to the Restated and Amended Articles of Incorporation of the Parent
Company, excepting only such information identifying the initial registered
agent and registered office of the Subsidiary Company as is required to be
included therein under Florida Business Corporation Act.
5. The each share of the Parent Company's issued and outstanding common
stock and Series A Zero Coupon Preferred Stock shall become and be
automatically converted into the corresponding share of the Subsidiary
Company, as the surviving corporation, without the requirement that any
certificate representing such shares be tendered for reissue.
6. The Parent Company, being the owner of all the issued and outstanding
equity securities of the Subsidiary Company and there being no other
stockholder of the Subsidiary Company, is the only person entitled to vote on
and it has voted for approval of the merger.
5. The holders of record of the Parent Company's common stock and Series A
Zero Coupon Preferred Stock are the only persons entitled to receive notice
of the merger by mailing.
6. The Bylaws of the Parent Company shall be the Bylaws of the surviving
corporation.
IN WITNESS WHEREOF, the undersigned, John V. Whitman, Jr., Chairman of the
Board both of the Parent Company and of Subsidiary Company has executed the
within Articles of Amendment this 1st day of February, 2000, on behalf of all
said corporations, and caused said Articles to be filed in the office of the
Secretaries of State for the States of Florida and of Georgia, effective upon
the filing thereof.
(CORPORATE SEAL)
ATTEST:
Chronicle Communications, Inc.
a Georgia corporation
By: ___________________________
Secretary John V. Whitman, Jr.
(CORPORATE SEAL)
ATTEST:
Chronicle Communications, Inc.
a Florida corporation
By: ___________________________
Secretary-John V. Whitman, Jr.
EXHIBIT 3.3
ARTICLES OF INCORPORATION OF
CHRONICLE COMMUNICATIONS, INC.
The undersigned, for the purpose of forming a corporation under the
provisions of Chapter 607, Fla. Stat., the Florida Business Corporation Act,
hereby states the following:
ARTICLE I - NAME AND ADDRESS
Section 1. The name of the Corporation shall be Chronicle Communications,
Inc.
Section 2. The principal office and the initial mailing address of the
Corporation shall be 3910 Riga Boulevard, Tampa, Florida 33619-1344.
ARTICLE II - DURATION
The Corporation shall have perpetual existence.
ARTICLE III - PURPOSE AND POWERS
Section 1. The Corporation is formed for the purpose of engaging in any
lawful activity or business for which corporations may be incorporated under
the laws of the State of Florida.
Section 2. The Corporation may exercise all powers, rights and privileges
conferred on corporations pursuant to the laws of the State of Florida.
ARTICLE IV - CAPITAL STOCK
The Corporation shall be authorized to issue capital stock, as follows:
(a) One hundred million (100,000,000) shares of common stock, all of one
class, having a par value of $.001 per share; and
(b) One hundred sixty-nine thousand nine hundred four (169,904) shares of
Series A Zero Coupon Preferred Stock the Corporation, each share having a par
value of $.10 and a redemption value of $.175233661 per share, being
convertible into one share of the Corporation's common stock at the election
of the holder and not being entitled to payment of a dividend; provided,
that, the conditions to demand for redemption and election of conversion
being subject to negotiation and agreement between the Corporation and the
purchaser of the such preferred stock.
ARTICLE V - BOARD OF DIRECTORS
Section 1. The business and affairs of the Corporation shall be managed by a
Board of Directors, the members of which shall be hereinafter referred to as
Directors.
Section 2. The number of Directors shall be as provided in the Bylaws of the
Corporation, but shall not be less than three (3).
Section 3. Directors shall be elected and hold office as provided in the
Bylaws.
ARTICLE VI - BYLAWS
Section 1. The Board of Directors shall adopt Bylaws for the Corporation at
a meeting of the Board of Directors following the filing of these Articles of
Incorporation.
Section 2. The power to adopt, alter, amend or repeal the Bylaws of the
Corporation may be exercised by the Board of Directors or the stockholders in
accordance with the provisions of the Bylaws.
Section 3. Any Bylaws adopted by the Board of Directors or the stockholders
may be altered, amended or repealed by the other group; provided, however,
that any Bylaw adopted by the stockholders may provide that it shall be
altered, amended, or repealed only by the stockholders.
ARTICLE VII - REGISTERED OFFICE AND AGENT
Section 1. The street address of the initial registered office of the
Corporation shall be 3910 Riga Boulevard, Tampa, Florida 33619-1344.
Section 2. The name of the initial registered agent of the Corporation
located at said address shall be John V. Whitman, Jr.
ARTICLE VIII - INCORPORATOR
The name and address of the incorporator is John V. Whitman, Jr., 3910 Riga
Boulevard, Tampa, Florida 33619-1344.
IN WITNESS WHEREOF, for the purpose of forming a corporation under the laws
of the State of Florida, the undersigned executed these Articles of
Incorporation on January 28, 2000.
____________________________
John V. Whitman, Jr.
ACCEPTANCE BY REGISTERED AGENT
I hereby accept to act as initial Registered Agent for Chronicle
Communications, Inc., as stated in these Articles of Incorporation.
_______________________________
John V. Whitman, Jr.
EXHIBIT 5: OPINION RE: LEGALITY
JACKSON L. MORRIS
ATTORNEY AT LAW
3116 West North A Street
Tampa, Florida 33609-1544
February 8, 1999
By Certified First Class U.S. Mail and Telephone Facsimile
Board of Directors
Chronicle Communications, Inc.
Tampa, Florida
Re: Registration Statement on Form SB-2
Gentlemen:
I am general counsel for and a director and corporate secretary of Chronicle
Communications, Inc., a Georgia corporation, (the "Company"). I have been
asked to provide an opinion letter in connection with the registration under
the Securities Act of 1933, as amended, (the "Act") on Form SB-2
("Registration Statement") for the offer and sale of up to 13,481,524 shares
of the Company's common stock, no par value per share which are currently
issued, outstanding and owned by stockholders of the Company ("Stockholders'
Shares") and 40,000,000 shares of the Company's common stock, no par value
per share which are to be offered and sold by the Company ("Company Shares").
Based upon my review of the Company's Restated and Amended Articles of
Incorporation, appropriate records of proceedings of the Company's board of
directors, subscription documents and the Company's audited balance sheet for
the year ended September 30, 1999 and and such additional records as I deem
appropriate, it is my opinion that: The Stockholders' Shares included in the
Registration Statement are legally authorized, duly and validly issued, fully
paid and non-assessable; and, The Company Shares included in the Registration
Statement are legally authorized and, upon issuance and delivery against
payment or receipt of consideration therefor, will be duly and validly
issued, fully paid and non-assessable.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and the reference to me therein under the caption "Interest of
Counsel."
Very truly yours
Jackson L. Morris
/s/ Jackson L. Morris
EXHIBIT 23.1: CONSENT OF COUNSEL
Included 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 of
our report dated December 20,2000, relating to the September 30, 1998 and 1999
consolidated financial statements of Chronicle Communications, Inc. and to the
reference to our firm under the caption "Experts" in the Prospectus.
/s/ W. Andrew Mueller
W. Andrew Mueller, C.P.A.
Bella, Hermida, Gillman, Hancock & Mueller
Plant City, Florida
February 8, 2000
