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U .S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from...................... to ........................
Commission File number 0-24835
PTN MEDIA, INC.
(Name of small business issuer in its charter)
Delaware 38-3399098
(State or other jurisdiction of (I.R.S. Identification No.)
Employer incorporation or organization)
313 North First Street, Suite B
Ann Arbor, MI, 48104
(Address of principal executive offices)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 3,068,080 shares of Common Stock, par
value $.001, outstanding as of November 20, 1998.
DOCUMENTS INCORPORATED BY REFERENCE:
NONE
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PURPOSE OF AMENDMENT
The purpose of this Amendment No. 1 to the registrant's Form 10-QSB for
the fiscal quarter ended September 30, 1998, is to correct certain errors and
omissions and conforming changes which were not included in the original filing.
All information contained herein is as of the date of the original filing,
November 20, 1998 and does not purport to provide an update of any information
after such date.
PART II - OTHER INFORMATION
Item 5. Other Information.
Price Adjustments
On August 1, 1998, the Board of Directors authorized PTN Media, Inc. (the
"Company") to increase the stock option exercise price with respect to all
outstanding stock options granted in March 1998 under the Company's 1998 Stock
Option Plan from $1.00 to $3.00, in response to comments from the Securities and
Exchange Commission in connection with the initial public offering (the "Initial
Public Offering" or the "Offering") of the Company's common stock, par value
$.001 per share ("Common Stock").
On August 21, 1998, Peter Klamka, the Company's President and Chief
Executive Officer, forfeited and returned two-thirds (2/3) of 50,000 shares
issued in March 1998 as compensation in consideration of accommodation to the
Company in consummating the Initial Public Offering and other good and valuable
consideration.
Increase in Credit Line; Loans from President; Use of Proceeds
Amending and restating a portion of the Form 10-QSB filed with the
Securities and Exchange Commission for the fiscal quarter ended September 30,
1998, in April 1998, Peter Klamka, the Company's Chairman, President and Chief
Executive Officer, provided the Company with a revolving credit line with a
maximum of $500,000 available (the "Klamka Credit Line"). In September 1998, the
Board of Directors of the Company authorized an increase in this line to
$610,000, and in November and December 1998, further increases to $1,000,000
were authorized. As of November 23, 1998 , borrowings outstanding under the
Klamka Credit Line aggregated $542,500. Monies loaned were used to make certain
payments to Niki Taylor's company, to provide a payment required under the
Company's Calendar Agreement with Claudia Schiffer, and for working capital.
Loans drawn on the Klamka Credit Line bear interest at a rate of 9% per
annum from the date they are made to the Company and are payable by May 2001,
provided, however, that if the Company raises aggregate gross proceeds in the
Initial Public Offering of at least $1,500,000, the entire outstanding amount of
the Klamka Credit Line and accrued interest will be repaid from the proceeds of
the Initial Public Offering.
Payment under Niki Taylor License
On September 22, 1998, the Company paid Niki, Inc. (Niki Taylor's
company) an aggregate of $100,000, the full amount owed under the Company's Web
Site License Agreement with Niki, Inc. (the "Niki Taylor License"), in addition
to a payment of $20,000 to Ms. Taylor's manager in reimbursement of costs
relating to a photo shoot, as required by the Niki Taylor License. The Niki
Taylor License remains in effect and has not as of the date hereof been
terminated by Ms. Taylor's company, and as a result of the full payment of
amounts
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required under the agreement, the Company does not anticipate any claim of
breach by Ms. Taylor's company for any prior failure to pay. The Niki Taylor
License automatically renewed for one additional year on October 1, 1998.
Public Offering; Closings of Offering
On November 17, 1998, Hornblower & Weeks, Inc. signed a Placement
Agent Agreement with the Company with respect to the Initial Public Offering.
The Company has accepted and closed on subscriptions to purchase 26,400
shares of Common Stock in the Initial Public Offering for an aggregate purchase
price of $132,000 as follows:
In October 1998, the Company accepted and closed on subscriptions
from eight investors in an aggregate gross amount of $102,000. This represents
the purchase of a total of 20,400 shares of Common Stock in the Initial Public
Offering. Pursuant to the terms of the relevant Agency Agreements, certain
Selling Agents were entitled to selling commissions in an aggregate amount of
$7,950 in connection with such sales. The Company has not, as of the date of
this Amendment to Form 10-QSB, paid any of such commissions.
In November 1998, the Company accepted and closed on a subscription
from one investor in the gross amount of $30,000. This represents the purchase
of 6,000 shares of Common Stock in the Initial Public Offering. No selling
commissions were paid in connection with this sale. Pursuant to the terms of the
relevant Agency Agreement, a Selling Agent was entitled to selling commissions
in the amount of $300 in connection with such sales. The Company has not, as of
the date of this Amendment to Form 10-QSB, paid any of such commissions.
Calendar Agreement with Claudia Schiffer
In November 1998, the Company entered into a Licensed Calendar
Agreement with well-known model Claudia Schiffer ("Calendar Agreement"). The
Calendar Agreement grants the Company the right to use the name, likeness, and
endorsement of Ms. Schiffer in the advertisement, promotion and sale of a
16-month 1999 calendar with photographs of her, in downloadable electronic
format and CD-Rom ("Licensed Calendar"). Ms. Schiffer will provide photographic
images and voice recording for the Licensed Calendar. The Company agreed to pay
Ms. Schiffer an advance royalty in the aggregate amount of $75,000, of which
$37,500 was paid upon execution of the Calendar Agreement, and the remaining
$37,500 is required to be paid upon approval of the Licensed Calendar. The
Company agreed to pay to Ms. Schiffer royalties of a percentage of sales ranging
from 20% of Net Sales for 0-20,000 units, to 60% of Net Sales for 50,001 units
and above. This advance payment will be credited against any earned royalty
payment. The Calendar Agreement terminates December 31, 1999.
Proposed Web Site License Agreement with Claudia Schiffer; Payment to
Claudia Schiffer; Issuance of Additional Shares of Common Stock
The Company intends to enter into a Web Site License Agreement with
Claudia Schiffer (the "Schiffer License Agreement") upon the earlier to occur of
such time as (i) the Company has receives at least $150,000 in additional net
proceeds from the sale of shares in the Initial Public Offering or (ii) Peter
Klamka, the Company's President, loans sufficient funds to the Company to make
the initial required advance royalty to Ms. Schiffer (such date, the "Effective
Date"). The Schiffer License Agreement would grant the Company the exclusive
license for an on-line Internet service devoted to Ms. Schiffer. The Company
would have the right to use Ms. Schiffer's name and likeness for an Internet
site including a merchandise "boutique", monthly column
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and interviews or on-line chat sessions. Ms. Schiffer also would make
promotional appearances and voice recordings to promote the site and provide
content for it. The Schiffer License Agreement would continue until the year
2001. The Company would pay Ms. Schiffer guaranteed minimum royalties of
$300,000 for the first year of the Schiffer License Agreement, $400,000 for the
second year, and $500,000 for the third year, which would be credited against
earned royalties ranging from 25% to 80% of site revenues and profits from
boutique merchandise sales.
The Schiffer License Agreement would also grant to Ms. Schiffer,
219,682 shares of Common Stock (the "Shares"), with the right to maintain the
ratio of her Common Stock ownership to that of Peter Klamka, the Company's
President. The Company expects to value the Shares at $4.00 per share of common
stock, if issued anytime prior to the existence of an active trading market in
the Company's stock. If the Shares are issued any time after the existence of an
active trading market in the Company's stock, then the Company intends to value
the shares at 80% of the market value of the Company's stock on the date of
issuance. The Company agreed to indemnify Ms. Schiffer for any U.S. income tax
liability resulting from the issuance of these shares, however, the Company has
been assured that Ms. Schiffer is not a U.S. citizen or resident, and therefore
is not likely to be responsible for any such taxes.
A payment of $150,000 is required upon execution and delivery of the
Agreement ("Initial Payment"). The Company has delivered executed versions of
the Schiffer License Agreement to Ms. Schiffer's attorney, and has delivered a
stock certificate representing the shares to Ms. Schiffer's manager. The Company
was informed by Ms. Schiffer's attorney that the Schiffer License Agreement will
be executed and delivered by Ms. Schiffer upon receipt of the Initial Payment
and the Shares.
After the Initial Public Offering, as a result of the proposed issuance
of shares to Ms. Schiffer, she will own 6% of the outstanding shares of Common
Stock of the Company (assuming all shares offered in the Offering are sold).
www.fragrancedirect.com
The Company is nearing completion of the building of a website with the
Internet address "www.fragrancedirect.com." On this website the Company will
sell colognes, perfumes and other fragrances direct to Internet users, much in
the same way that books are sold on websites such as "Amazon.com." The site will
be promoted through hyper-links from the Company's affiliated websites. The
Company also intends to create mutual linking arrangements with operators of
apparel sites and to make barter arrangements for advertising.
The Company anticipates that its prices will be lower than the
manufacturers suggested retail prices, however, not necessarily less than all
retail outlets. The website, currently being tested, is expected to open to the
public in late November or early December, although there can be no assurance
thereof.
The website was built and will be maintained by an outside contractor
whom the Company agreed to pay a $3000 one-time fee, $299 per month maintenance
and 5% of gross sales from the site with a $50,000 per year cap. The outside
contractor will process credit card orders.
The Company intends to obtain product liability insurance in such
amounts as it may deem appropriate to insure against any possible product
liability exposure resulting from the sale of fragrances on website.
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There can be no assurance that the Company will generate any revenues
from the website. In addition, the Company is aware of at least two similar
websites attempting to compete for the on-line fragrance business.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: March 5, 1999 PTN MEDIA, INC
By: /s/ Peter Klamka
Peter Klamka, President and Secretary
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