<PAGE>
As filed with the Securities and Exchange Commission on October 13, 2000
Registration No. 333-73213
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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ALPINE ENTERTAINMENT, INC.
--------------------------
(Name of small business issuer as specified in its charter)
<TABLE>
<CAPTION>
Delaware 52-2143196 7812
------------------------------- ---------------------- -----------------------------
<S> <C> <C>
(State or other jurisdiction of (IRS Employer (Primary Standard Industrial
incorporation or organization) Identification Number) Classification Code Number)
</TABLE>
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6919 Valjean Avenue
Van Nuys, California 91406
818/909-5207
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(Address and telephone number of registrant's principal executive offices)
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Roland Carroll, 6919 Valjean Avenue, Van Nuys, California 91406, 818/909-5207
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(Name, address and telephone number of agent for service)
Copies to:
Gerard N. Casale Jr.
Joseph A. Tagliaferro III
Davidson Casale Nojima, LLP
11755 Wilshire Boulevard, Suite 1200
Los Angeles, California 90025
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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<PAGE>
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 statement 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 registration statement for the same
offering. / /
If this Form is a post effective amendment filed pursuant to Rule 462(d) 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 the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
Title of Each Class of Securities to Amount to be Proposed Proposed Amount of
be Registered registered (1) Maximum Maximum Registration
Offering Aggregate Fee)
Price per Share (2) Offering Price
(3)
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Units 1,250,000 $6.00 $7,500,000 $1,980
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
Common stock contained in units 1,250,000 N/A N/A --
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
Warrants contained in units 1,250,000 N/A N/A --
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
Common stock underlying warrants 1,250,000 N/A N/A --
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
Convertible Promissory Note N/A N/A N/A --
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
Common Stock underlying Promissory 4,380,000 $0.90 $3,942,000 $936.62
Note
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
TOTAL 6,880,000 $9,552,000 $2,763 (4)
-------------------------------------- ------------------- ---------------------- ------------------ -----------------
</TABLE>
(1) In the event of a stock split, stock dividend, or similar transaction
involving common stock of the Registrant, in order to prevent dilution,
the number of shares registered will be automatically increased to
cover the additional shares in accordance with Rule 416(a) under the
Securities Act.
(2) There is no current market for the securities and the per share book
value of the common stock is $(.0268). Consequently the proposed per
share offering price for the common stock held by the Selling Security
holders is estimated for purposes of calculating the amount of
registration fee.
(3) Estimated solely for the purpose of calculating the registration fee
based on Rule 457(0).
(4) $2,363 previously paid by electronic transfer and $400 paid
simultaneously with the filing hereof.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
2
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, OCTOBER 13, 2000
The information in this prospectus is incomplete and may be changed. These
securities may not be sold until the registration statement that has been filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
ALPINE ENTERTAINMENT, INC.
MINIMUM OFFERING OF 250,000 UNITS; MAXIMUM OFFERING OF 1,250,000 UNITS;
CONVERTIBLE PROMISSORY NOTE INTERESTS UP TO THE AMOUNT OF $3,942,000 TO BE
DISTRIBUTED BY THE HOLDER THEREOF; AND 4,380,000 SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH PROMISSORY NOTE
This is our initial public offering of our common stock. We are offering for
sale a minimum of 250,000 units and a maximum of 1,250,000 units. Each unit
consists of one share of common stock and one warrant exercisable to purchase
one share of common stock at an exercise price of $6.00 per share for a period
of 36 months from the effective date of this prospectus. INVESTING IN THE UNITS
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
RH Investment Corporation is the representative of the underwriters of this
offering. The offering is being made by the underwriters on a "best efforts"
basis. The underwriters must sell the minimum number of securities offered,
250,000 units if any are sold. The underwriters are required to use only their
best efforts to sell the maximum number of securities offering, 1,250,000. As
part of the consideration to the underwriter representative, we have agreed to
sell to the representative for the benefit of the underwriters, Warrants to
purchase up to 10% of the number of units sold at a price of $.01 per warrant.
These Warrants are non-redeemable and may be exercised at a price per share
equal to 135% of the initial public offering price of the common stock. See
"UNDERWRITING".
All funds received from the sale of the first 250,000 units will be deposited in
an escrow account to be established at a federally insured national bank. If
250,000 units are not sold within 180 days following the effective date of this
prospectus (the "Effective Date"), the offering will automatically terminate and
all funds received from the sale of the units will be returned to the
purchasers.
We are also registering the common stock underlying the promissory note
interests for up to an aggregate of $3,942,000 convertible into 4,380,000 shares
of our common stock. We have executed promissory notes totaling $ 3,942,000 in
favor of Alpine Pictures, Inc., Upon effectiveness of this registration
statement, Alpine Pictures, Inc. (the "Selling Security holder") will distribute
the promissory note to all of its shareholders, except Ryan Carroll and Roland
Carroll, without cost to such shareholders as a dividend distribution. Alpine
Pictures will not receive any proceeds from the distribution of the promissory
note. The shareholders of Alpine Pictures may convert to shares of common stock
at a conversion ratio of $0.90 per share that portion of the promissory note
distributed to them at such time or times at their sole discretion.
Before this offering, there hasn't been a public market for our common stock
nor is our stock listed on any national securities exchange. No assurances can
be given that a public market will ever develop following completion of this
offering or that, if a market does develop, it will be sustained.
<TABLE>
<CAPTION>
------------------------------------ -------------------------- ------------------------ ----------------------------
PRICE TO PUBLIC UNDERWRITING PROCEEDS TO COMPANY
DISCOUNTS AND OR OTHER PERSONS (2)
COMMISSIONS
------------------------------------ -------------------------- ------------------------ ----------------------------
<S> <C> <C> <C>
Per Unit $6.00 $0.60 $5.40
------------------------------------ -------------------------- ------------------------ ----------------------------
Minimum Offering - 250,000 $1,500,000 $150,000 $1,350,000
------------------------------------ -------------------------- ------------------------ ----------------------------
Maximum Offering -1,250,000 $7,500,000 $750,000 $6,750,000
------------------------------------ -------------------------- ------------------------ ----------------------------
</TABLE>
3
<PAGE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------------------------
RH Investment Corporation
15760 Ventura Blvd. Suite 1732
Encino, California 91436
-------------------------------------------
Footnotes from previous page:
(1) Does not include additional compensation to be paid to the Representative,
if the offering is consummated, in the form of: (a) a warrant to purchase
up to 10% of the number of units sold to the public at an exercise price
per unit of 120% of the public offering price exercisable on the first
anniversary of the Effective Date and expiring on the fifth anniversary
(the "Representative's Warrants"); and (b) a non-accountable expense
allowance equal to three percent of the aggregate initial public offering
price of the units, namely $45,000 if the minimum offering is sold and
$225,000 if the maximum offering is sold. SEE "UNDERWRITING."
(2) Does not include offering costs estimated to be $160,000 for both the
minimum offering and maximum offering.
Following the completion of this offering, certain broker-dealers may
be the principal market makers for the securities offered hereby. Under these
circumstances, the market bid and asked prices for the securities may be
significantly influenced by decisions of the market makers to buy or sell the
securities for their own account. No assurance can be given that any market
making activities of the market makers, if commenced, will be continued.
In connection with this offering, certain underwriters may engage in
passive market making transactions in the company's common stock on NASDAQ in
accordance with Rule 103 of Regulation M. See "Underwriting".
For at least one year following closing of this offering, we will be
required by the securities exchange act of 1934 to file periodic reports and
other information with the securities and exchange commission. Such material may
be inspected at the commission's principal offices at Judiciary Plaza, 450 fifth
street, N.W, Washington, DC 20459 or at its web site at http://www.sec.gov and
copies may be obtained on payment of certain fees prescribed by the commission.
We will furnish to holders of our common stock annual reports containing audited
financial statements examined and reported upon, and with an opinion expressed
by an independent certified public accountant. We may issue other unaudited
interim reports to our shareholders, as we deem appropriate.
4
<PAGE>
RISK FACTORS
An investment in our common stock is speculative in nature and involves a high
degree of risk. You should consider very carefully the following risk factors,
as well as all other information explained elsewhere in this prospectus and the
information contained in the financial statements, including all footnotes.
WE'VE INCURRED OPERATING LOSSES, EXPECT CONTINUED LOSSES AND MAY NOT ACHIEVE
PROFITABILITY. IF WE CONTINUE TO LOSE MONEY, WE MAY HAVE TO CURTAIL OUR
OPERATIONS.
The audited financial statements of Alpine of December 31, 1999,
reflect a net loss of $13,385,315 during the twelve month period ended December
31, 1999, and an accumulated deficit of $21,138,561 at December 31, 1999. These
conditions raise substantial doubt about our ability to continue as a going
concern and if substantial additional funding is not acquired or alternative
sources developed to meet our working capital needs, we will be required to
curtail our operations.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE MAY NOT BE ABLE TO SUCCESSFULLY
MANAGE OUR BUSINESS OR ACHIEVE PROFITABILITY.
We were formed in November 1998 to distribute motion pictures and other
entertainment media programming. We have no previous operating history other
than through our subsidiary, Alpine Pictures International, Inc. which has had
operations but has reflected losses since it commenced operations in 1996. Our
management team faces the challenge of successfully acquiring and distributing
motion pictures as well as other entertainment media programming. We may not be
able to successfully acquire and distribute motion pictures or other
entertainment media in order to achieve or maintain profitability.
ALPINE'S PRIOR LOSSES
Our operating subsidiary has incurred losses since its inception. There
is no assurance that our revenues will grow or be earned at current levels, or
that we'll be profitable. There is no assurance that we will not incur
operating deficits in the future.
EXISTING DEBT OF ALPINE
We have executed two non-interest bearing convertible promissory notes
in favor of Alpine Pictures, Inc., one of our shareholders, up to an amount not
greater than $3,942,000 the principal amount borrowed is payable in full on
December 31, 2001. As of June 30, 2000, we have borrowed an aggregate of
$2,192,861. Our ability to repay these notes is dependent on our ability to
successfully manage our business, implement our business strategy and achieve
profitability. There is a possibility that we won't be able to repay all or
any portion of these promissory notes. Our inability to pay these promissory
notes could have a material adverse impact on our financial condition as well as
on our affiliate's financial condition. See "RELATED TRANSACTIONS"
WE MAY NEED AND BE UNABLE TO OBTAIN ADDITIONAL FUNDING ON SATISFACTORY TERMS,
WHICH COULD DILUTE OUR SHAREHOLDERS OR IMPOSE BURDENSOME FINANCIAL RESTRICTIONS
ON OUR BUSINESS.
Future events, including the problems, delays, expenses and other
difficulties frequently encountered by movie production companies may lead to
cost increases that could make the net proceeds of this offering insufficient to
fund our proposed operations. We may require additional financing. This may not
be available on a timely basis, in sufficient amounts or on terms acceptable to
us. This financing may also dilute existing shareholders' equity. Any debt
financing or other financing of securities senior to common stock will likely
include financial and other covenants that will restrict our flexibility. Alpine
may seek additional sources of capital, including an additional offering of its
equity securities, an offering of debt securities or obtaining financing through
a bank or other entity. If we need to obtain additional financing, there's
no assurance that financing will be available.
5
<PAGE>
WE'RE UNCERTAIN OF OUR ABILITY TO ACQUIRE DISTRIBUTION RIGHTS TO FILMS
THAT ARE COMMERCIALLY MARKETABLE.
Our revenue is intended to come from the distribution of motion picture
rights which we acquire from producers and owners of motion pictures. Our
business is dependent on our ability to acquire rights to those motion pictures,
which will be commercially successful. We may not have the resources necessary
to acquire commercially marketable motion pictures. The acquisition of such
rights and the distribution of those motion pictures are highly speculative.
Furthermore, because each motion picture is an individual artistic work, its
commercial success is primarily determined by an unpredictable audience reaction
and costs involved with a film may be greater than its economic return, there's
no assurance as to the economic success of any motion picture.
MOTION PICTURE PRODUCTION AND DISTRIBUTION ARE HIGHLY COMPETITIVE
Our competition for the acquisition of distribution rights to
entertainment properties, includes major film studios such as The Walt Disney
Company, Paramount Pictures Corporation, MCA, Columbia Pictures, Tri-Star
Pictures, Twentieth Century Fox, Warner Brothers Inc. and MGM/UA, as well as
numerous independent motion picture and television companies, broadcast
television networks and pay television systems. With greater resources, these
companies are able to pay more to acquire film properties and to distribute
films to a greater market.
OUR SUCCESS IN THEATERS MAY DETERMINE OUR SUCCESS IN OTHER MEDIA MARKETS
The entertainment business, and the film and video industry in particular, are
undergoing significant changes such that ancillary markets, including home
video, pay-per-view, cable television and public television, have become
increasingly important sources of revenue for us. If programs aren't well
received in theatrical distribution or are not exhibited in theaters, their
value in the ancillary markets may also be diminished. Our inability to
distribute our products in such ancillary markets could have a material adverse
impact on our financial condition.
TELEVISION DISTRIBUTION IS SPECULATIVE AND RISKY
Television distribution is highly speculative and inherently risky. The
success of our television distribution business is affected by the same factors
described above and may also be impacted by prevailing and fluctuating
advertising rates. There is a substantial risk that some or all of our
television projects will not be commercially successful, resulting in costs not
being recouped or anticipated profits not being realized.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE MAY NOT BE ABLE TO ACQUIRE A
VARIETY AND SUFFICIENT NUMBER OF FILMS WHICH COULD RESULT IN A MATERIAL ADVERSE
IMPACT ON OUR FINANCIAL CONDITION.
We may not have the ability or sufficient capital to acquire a variety
of films for distribution. If we are unable to diversify and acquire a variety
of different films for distribution, then the failure of one or two films could
have a material adverse impact on our financial condition, causing our
shareholders to lose all or a substantial amount of their investment.
SINCE THE DOMESTIC THEATRICAL DISTRIBUTION CHANNELS ARE DOMINATED BY MAJOR
STUDIOS, WE MAY NOT BE ABLE TO SUCCESSFULLY DISTRIBUTE, IN THE DOMESTIC MARKET,
INDEPENDENTLY PRODUCED FEATURE FILMS THAT WE ACQUIRE.
We'll attempt to gain distribution of our motion pictures in all
media forms including domestic theatrical distribution. The domestic theatrical
market is dominated by several major motion picture studios that place their own
films and films they acquire into such theaters. Because the domestic theatrical
distribution channels are dominated by the major studios, we may not be able to
successfully distribute, in the domestic market, independently produced feature
films that we acquire.
6
<PAGE>
WE DISTRIBUTE OUR MOTION PICTURES INTERNATIONALLY AND AS A RESULT WE ARE SUBJECT
TO THE RISKS INHERENT IN CONDUCTING BUSINESS INTERNATIONALLY.
We distribute motion pictures in both the international and domestic
markets. We anticipate that a significant percentage of our revenues and income
may come from foreign sources because our motion pictures are more marketable in
the international market. Like other distributors, we distribute our films by
granting exhibitors licenses that entitle a particular exhibitor the exclusive
right to exhibit one of our motion pictures in a particular geographic zone in
exchange for a percentage of revenues from motion picture exhibition. We have no
continuing agreements or arrangement with any exhibitor because each License
Agreement is negotiated separately. We market our motion pictures to exhibitors
by maintaining a strong presence at international film festivals and through
similar direct marketing methods. Because of our involvement in foreign markets,
we are subject to the risks inherent in conducting business across international
borders, including, but not limited to, currency exchange rate fluctuations,
international incidents, military outbreaks, economic downturns, government
instability, nationalization of foreign assets, government protectionism and
changes in governmental policy, any of which could have a material adverse
effect on the our business, operations and our prospects for the future.
SPECULATIVE NATURE OF INVESTMENT
The entertainment industry is extremely competitive and the commercial
success of any motion picture or other program is often dependent on factors
beyond our control. We may not be able to sell or license our programs because
of industry conditions, general economic conditions, competition from other
producers and distributors, or lack of acceptance for our programs by studios,
distributors, exhibitors and audiences. We enter into distribution agreements
with licensees on a film-by-film basis and we has no guarantees or
understandings with any distributor or licensee to ensure or require it to
distribute any film before that licensee enters into such agreement. We may also
incur uninsured losses for liabilities which arise in the ordinary course of
business in the entertainment industry, or which are unforeseen, including but
not limited to copyright infringement, product liability, and employment
liability.
BECAUSE WE WILL BE HOLDING ALL INVESTMENT FUNDS IN AN ESCROW ACCOUNT, INVESTORS
WILL NOT BE ENTITLED TO RETURN OF THEIR INVESTMENT DURING THE OFFERING PERIOD.
If the minimum offering (250,000 units) is not sold by the expiration
date, all funds received will promptly be returned to the investors thereof with
interest at the same rate as paid by the escrow bank. Investors should be aware
that investment funds will be held in an escrow account and investors will not
be entitled to a return of their investment during the offering period.
FUTURE DOMESTIC AND FOREIGN GOVERNMENT REGULATION COULD ADVERSELY IMPACT OUR
FINANCIAL CONDITION.
We will be subject to and affected by significant domestic and foreign
government regulation. Foreign governments have imposed restrictions on American
programming in several foreign countries. Domestic regulation governs the
content and rating of motion pictures and other programming. Motion picture
piracy, especially in foreign countries, may significantly reduce anticipated
revenues. Government laws and regulations, whether existing today or adopted in
the future, could adversely affect our ability to market exhibit programs.
7
<PAGE>
WE RELY HEAVILY ON OUR KEY EMPLOYEES, AND THE LOSS OF THEIR SERVICES COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.
Our success is highly dependent upon the continued services of key
members of our management, including our Chief Executive Officer and Director,
Ryan Carroll and our President and Director, Roland Carroll. Ryan Carroll and
Roland Carroll are also officers and directors of our affiliate, Alpine
Pictures, Inc.. Virtually all decisions concerning the conduct of the business
of Alpine, including the properties and rights to be acquired by Alpine and the
arrangements to be made for such distribution, are made by or controlled by
Messrs. Carroll. Currently, both Ryan and Roland Carroll either directly or
indirectly spend 100% of their time working for the Company and its affiliates
and subsidiaries. These efforts are intended to ultimately accrue to the benefit
of the Company as a whole. The loss either Ryan Carroll or Roland Carroll could
have a material adverse effect on our Company. Currently, we do not have "key
man" life insurance policies on any of our executive officers.
CERTAIN OFFICERS OR DIRECTORS MAY PARTICIPATE IN POSSIBLE CONFLICTING
ACTIVITIES
Our officers and directors have participated in and may continue to
participate in other entities that engage in activities similar to ours. As a
result, conflicts of interest may arise. Ryan Carroll, who serves as our Chief
Executive Officer and as one of our directors, is a director and principal
shareholder in Alpine Pictures International, Inc.. He is also a director, and
principal shareholder of Alpine Pictures, Inc., which is an affiliate of our
company, in addition to serving as that company's secretary. Ryan Carroll is
also a director and principal shareholder of Carroll Media, Inc., which is also
an affiliate of our company. Mr. Carroll also serves as the Chairman of
Teleshare, Inc.'s Board of Directors as well as being one of that company's
principal shareholders. Roland Carroll, who serves as our President as well as
one of our directors, is a principal shareholder and director of Alpine Pictures
International, Inc.. Roland Carroll also serves as the President and Chairman of
the Board for Alpine Pictures, Inc. in addition to being one of that company's
principal shareholders. He is also a principal shareholder in Carroll Media,
Inc. and serves as that company's Chairman of the Board and President. In
addition to being a principal shareholder in Teleshare, Inc., Mr. Carroll serves
as one of that company's directors. Greg Cozine, who serves as our Vice
President of Finance and as one of our directors, is a director of Alpine
Pictures International, Inc.. He also serves as a vice president of Alpine
Pictures, Inc. and is a shareholder of that company. Rene Torres, who serves as
our Vice President of Foreign and Domestic Sales, also serves as the President
of Alpine Pictures International, Inc.. Tom Hamilton, who serves as our Vice
President of Marketing and Production, is also the secretary and executive vice
president of Alpine Pictures International, Inc. SEE "MANAGEMENT - Possible
Conflicts of Interest."
WE'VE NEVER PAID DIVIDENDS AND WE DON'T EXPECT TO PAY DIVIDENDS IN THE FUTURE
Because we've incurred operating losses since inception, we haven't
paid cash dividends on our common stock and we don't expect to pay cash
dividends on our common stock in the foreseeable future.
INVESTORS WILL SUFFER IMMEDIATE DILUTION IN VALUE OF THEIR SHARES PURCHASED.
The initial public offering price of the units is $6.00. The price paid
for the unit and the value ascribed to the share contained in this prospectus is
greater than the net tangible book value of our common stock. Investors will
sustain immediate dilution of between $3.86 (based on the maximum offering) and
$6.73 (based on the minimum offering) per share based on our net tangible book
value as of June 30, 2000. Existing shareholders acquired their shares at a
price substantially lower than offering price paid by investors and,
accordingly, the new investors will bear a disproportionate part of the
financial risk associated with our business. In addition, we have executed
convertible promissory notes for the aggregate amount of $3,942,000 at a
conversion ratio of $0.90 of promissory note principal for each share of common
stock. If all such shares are converted, we may issue 4,380,000 shares of common
stock at a value of $0.90 per share, which will result immediate and substantial
dilution of the value of the shares of common stock offered herein. SEE
"DILUTION."
8
<PAGE>
ISSUANCE OF ADDITIONAL COMMON STOCK WILL RESULT IN THE DILUTION OF EXISITING
SHAREHOLDERS
Our Certificate of Incorporation, as amended, authorizes the issuance
of a maximum of 100,000,000 shares of common stock and 20,000,000 shares of
"non-designated" preferred stock. There are currently 1,582,500 shares of common
stock outstanding and no shares of preferred stock outstanding. The future
issuance of all or part of the remaining authorized common stock could result in
substantial reduction in the percentage of our common stock held by current
shareholders, including the investors in this offering. In addition, we may
issue an aggregate of 4,380,000 shares of our common stock upon conversion of
the outstanding promissory note principal if we borrow the entire amount of
funds available in the promissory note with Alpine Pictures.
IF WE DECIDE TO ISSUE PREFERRED STOCK WITH CERTAIN RIGHTS AND PREFERENCES, SUCH
AN ISSUANCE MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
We currently have 20,000,000 shares of non-designated preferred stock
authorized by our amended and restated articles of incorporation. To date, we
have not issued any shares our preferred stock. However, the Board of Directors
may designate voting and other preferences without shareholder consent which
designations may give the holders of the preferred stock voting control and
other preferred rights such as liquidation and dividends. The authority of the
Board of Directors to issue such stock without shareholder consent may depress
the market price of our common stock.
THE POSSIBILITY OF ISSUING PREFERRED STOCK FOR ANTI-TAKEOVER EFFECT COULD
PREVENT TAKEOVERS FAVORED BY SHAREHOLDERS
The Board of Directors has the authority, without further approval of
our stockholders, to issue preferred stock, having such rights, preferences
and privileges as the Board of Directors may determine. Any such issuance of
shares of preferred stock could have the effect of delaying or preventing a
change in control of Alpine or other take-over attempt and could adversely
materially affect the rights of holders of shares of the common stock.
OUR OFFICERS AND DIRECTORS HAVE LIMITED LIABILITY AND ARE INDEMNIFIED BY THE
COMPANY
Our Certificate of Incorporation, as amended, and By-Laws provide for
indemnification of our officers and directors against losses sustained or
liabilities incurred which arise from any transaction in such officer's or
director's respective managerial capacity unless such officer or director
violates a duty of loyalty, did not act in good faith, engaged in intentional
misconduct or knowingly violated the law, approved an improper dividend, or
derived an improper benefit from the transaction. Our Certificate of
Incorporation, as amended, and By-Laws also provide for the indemnification of
our officers and directors against any losses or liabilities incurred as a
result of the manner in which such officers and directors operate our business
or conduct our internal affairs, provided that in connection with these
activities they act in good faith and in a manner which they reasonably believe
to be in, or not opposed to, the best interests of the Company, and their
conduct does not constitute gross negligence, misconduct or breach of fiduciary
obligations.
BECAUSE OUR COMMON STOCK MAY BE SUBJECT TO PENNY STOCK REGULATION, THE LEVEL OF
TRADING IN OUR COMMON STOCK MAY BE REDUCED
Broker-dealer practices in connections with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. There has been no public market for our common stock. If a
market for our common stock develops we may be subject to the penny stock rules
set forth by the Securities and Exchange Commission. Generally, penny stocks are
equity securities with a price of less than $5.00 per share (other than
securities registered on certain national securities exchanges or quoted on the
NASDAQ). The penny stock rules require a broker-dealer, before a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and if the brker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker dealer's presumed control over the market, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, broker-dealers who sell these securities to
persons other than established customers and "accredited investors" must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security subject to the
penny stock rules, and investors in our common stock may find it difficult to
sell their shares.
9
<PAGE>
ADDITIONAL SHARES WILL COME INTO MARKET AS SHARES BECOME AVAILABLE FOR RESALE
UNDER RULE 144
All of our issued and outstanding shares are "restricted securities" as
such term is defined in Rule 144 ("Rule 144") promulgated under the Securities
Act of 1933 (the "1933 Act"). In general, under Rule 144, if adequate public
information is available with respect to a company, a person who has satisfied a
one year holding period as to his restricted securities or an affiliate who
holds unrestricted securities may sell, within any three month period, a number
of that company's shares that does not exceed the greater of one percent of the
then outstanding shares of the class of securities being sold or, if the
security is trading on the NASDAQ Stock Market or on an exchange, the average
weekly trading volume during the four calendar weeks before such sale. Sales
of restricted securities by a person whom is not an affiliate of the Company (as
defined in the 1933 Act) and who has satisfied a two-year holding period may be
made without any volume limitation. The outstanding restricted securities of the
Company may become eligible for sale in the public market pursuant to Rule 144
without additional capital contribution to the Company. Possible or actual sales
of our outstanding common stock by all or some of the present stockholders may
have a material adverse effect on the market price of our common stock should a
public trading market develop.
NO ASSURANCE THAT A PUBLIC MARKET WILL DEVELOP FOR OUR COMMON STOCK.
There is no assurance that a public trading market for our common stock
will develop or that a public trading market, if developed, will be sustained.
If for any reason our common stock is not listed on the NASD's OTC Bulletin
Board or a public trading market does not otherwise develop, investors may have
difficulty selling their common stock or warrants should they desire to do so.
WE WILL LIMIT THE NUMBER OF STATES IN WHICH WE REGISTER OUR SHARES.
We anticipate that we will primarily sell the Shares in a limited
number of states, depending on the location and registration of any selling
broker or dealer that we locate. We have not yet ascertained which states we'll
qualify and/or register the sale of the units. We may be limited in our ability
to achieve registration and qualification in some states. We can't guarantee
that all states will approve our registration or qualification. We will not
accept subscriptions from investors residing in other states unless we effect a
registration therein or determines that no such registration is required.
Furthermore, in order to comply with the applicable securities laws, if any, of
certain states, the securities will be offered or sold in such states through
registered or licensed brokers or dealers in those states. In addition, in
certain states, the securities may not be offered or sold unless they have been
registered or qualified for sale in such states or an exemption from such
registration or qualification requirement is available and with which we have
fully complied.
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements. These
forward-looking statements include, but are not limited to, statements about our
industry, plans, objectives, expectations, intentions and assumptions and other
statements contained in the prospectus that are not historical facts. When used
in this prospectus, the words "expect," "intend," "expect," "may," "seek,"
"believe," "estimate," "should," "plan," "projected," "contemplates,"
"anticipate," and similar expressions are generally intended to identify
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking statements.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 under the Securities Act
with respect to the securities offered hereby. This prospectus does not contain
all the information contained in that registration statement. For further
information regarding the Company and the securities offered hereby, reference
is made to the registration statement, including all exhibits and schedules
thereto, which may be inspected without charge at the public reference
facilities of the Commission's Washington, D.C. office, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Each statement contained in this prospectus with respect
to a document filed as an exhibit to the registration statement is qualified by
reference to the exhibit for its complete terms and conditions.
10
<PAGE>
We will be subject to the informational requirements of the Securities
Exchange Act of 1934 ("Exchange Act") and in accordance therewith will file
reports and other information with the Commission. Reports, proxy statements and
other information filed by the Company can be inspected and copied on the
Commission's home page on the World Wide Web at http://www.sec.gov or at the
public reference facilities of the Commission, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as the following Regional Offices:
7 World Trade Center, Suite 1300, New York, N.Y. 10048; and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois. 60661-2511. Copies can be
obtained from the Commission by mail at prescribed rates. Request should be
directed to the Commission's Public Reference Section, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549.
We intend to furnish our stockholders with annual reports containing
audited financial statements and such other reports as may be required by law.
USE OF PROCEEDS
If the maximum offering is sold, the proceeds to the Company will be
$6,750,000 and if the minimum offering is sold, the proceeds to Company will be
$1,350,000. We will use the proceeds from this offering to acquire distribution
rights to motion pictures or other entertainment media properties and to develop
our business plan by participating other aspects of the film industry such as
the acquisition, production and sale of entertainment media properties,
companies, or the assets of companies through affiliates or joint venture or
other relationships. We may engage in such activities through subsidiaries.
We intend to use the net proceeds as described in the following table:
Minimum Offering Maximum Offering
Total Proceeds $1,500,000 $7,500,000
Commissions or underwriting fees $ 150,000 $ 750,000
Offering expenses $ 160,000 $ 160,000
Administrative and marketing
expenses $ 480,000 $ 660,000
Acquisition of entertainment
media properties $ 461,500 $3,854,500
Co-production $ 142,000 $1,186,000
Development $ 35,500 $ 296,500
Contingency $ 71,000 $ 593,000
Our primary focus is to expand and implement our business model through
the acquisition of media properties. We may use the proceeds of this offering
toward operating expenses as necessary and in accordance with our business plan.
We believe that the proceeds from the minimum offering in addition to the
current revenues from our operations will be sufficient to fund our operations
for the next 12 months. If an amount less than maximum offering is raised, we
may be required to delay, scale back or eliminate parts of our development plan
or obtain funds through additional financing, including loans or additional
offerings of our securities.
We have executed non-interest bearing convertible promissory notes in
favor of one of our shareholders, Alpine Pictures, Inc., for an aggregate of
$3,942,000 against which we has borrowed for the benefit of APII, as of the date
hereof, a total of $2,192,861. We expect to utilize the full proceeds of the
promissory note to further its business plan through program rights acquisition
and subsequent development. The promissory note is convertible into shares of
our common stock at a conversion ratio of $.90 of outstanding loan amount per
share converted. If we receive
revenues greater than the minimum offering amount, then we will be able to
implement our business plan fully and expeditiously.
11
<PAGE>
Our primary goal is to increase our inventory and ownership percentage
of film and/or television properties. This is done through acquisition,
development and co-production. As evidenced in the use of proceeds chart, the
majority allocation of proceeds is intended for the acquisition of entertainment
and media properties. Generally speaking, with regards to our industry, it can
be said that the acquisition of properties carries with it far less risk than
the actual production of such properties. However, we do intend to use a portion
of the proceeds for the co-production of properties. The strength of our
subsidiary, Alpine Pictures International Inc., is in the international market
where our executive in charge have established business relationships with most
all of the major buyers and distributors. These relationships enable us to enter
into co-production deals with domestic buyers/distributors with the domestic
partner concentrating on the market in the United States and Alpine Pictures
International, Inc., focusing on the international market. This co-production
model was a contributing factor to the formation of our wholly owned subsidiary,
Alpine Television, Inc.. We will also use development money to gain equity
interest and distribution rights in a project from the very beginning. These
monies are used to lock down a script or buy an option on a certain property for
a certain amount of time. This allows us to shop the project to our
international and domestic buyers. If there is enough interest from our buyers
to warrant further investment, we will use some of these proceeds to attach a
director, producer, and talent to the project.
DETERMINATION OF OFFERING PRICE
We anticipate that the initial offering price of the Units will be
$6.00 per unit. The exercise price for the Warrant contained in each Unit is
also $6.00. We have ascribed an offering price value or $5.00 per share and
$1.00 per warrant or $6.00 per unit. The offering price of the Units and the
exercise price of the Warrants were arbitrarily determined by our management and
RH Investment Corporation and are not necessarily related to asset or book
value, net worth or any other established criteria of value. We have ascribed an
offering price value of $5.00 per share and $1.00 per warrant contained in the
Units for a Unit offering price of $6.00.
DILUTION
As of June 30, 2000, we had a net tangible book value of ($2,561,118)
or ($1.62) per share. This represents an immediate dilution to investors in the
offering of between $3.86 per share (based on the maximum offering ) and $6.73
per share (based on the minimum offering) assuming a $6.00 per Unit offering
price, and an aggregate increase in net tangible book value to present
shareholders of $3.76 and $2.35 per share (based on the maximum and minimum
offering respectively). The following table illustrates such effect:
Maximum Minimum
Offering Offering
Initial public price per unit $6.00 $6.00
Net tangible book value before offering $(1.62) $(1.62)
Increase per share attributable to new investors $3.76 $2.35
Net tangible book value per share after offering $2.14 $(.73)
Dilution per share to new investors $3.86 $6.73
12
<PAGE>
The following table sets forth, on a pro forma basis, the differences
between existing shareholders, new investors and promissory note holders,
assuming conversion of the full amount of the available promissory notes, in the
offering with respect to the number of shares of common stock purchased from
Alpine, the total consideration paid to Alpine and the average price per share
paid by existing shareholders and by new investors (assuming a $5.00 per share
offering price):
Minimum Offering:
<TABLE>
<CAPTION>
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
Number Percentage of Consideration Percentage Average
Outstanding Paid Of Total Price per
Shares Paid Consideration
Share
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders 1,582,500 25.5% $503 *% $0.00032
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
New Investors 250,000 4% $1,250,000 24.1% $5.00
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
Conversion of Notes 4,380,000 70.5% $3,942,000 75.9% $0.90
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
Total 6,212,500 100% $5,192,503 100%
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
Maximum Offering:
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
Number Percentage of Consideration Percentage Average
Outstanding Paid Of Total Price per
Shares Paid Consideration
Share
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
Existing Shareholders 1,582,500 21.9% $503 *% $0.00032
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
New Investors 1,250,000 17.3% $6,250,000 61.3% $5.00
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
Conversion of Notes 4,380,000 60.7% $3,942,000 38.7% $0.90
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
Total 7,212,500 100% $10,192,503 100%
---------------------------------- -------------- ---------------- ----------------- ------------------- -------------
* Less than .01%
</TABLE>
SELLING SECURITY HOLDER
On August 6, 1999 and May 5, 2000, we executed convertible promissory
notes, without interest, in favor of Alpine Pictures, Inc., for an amount up to
$3,942,000. The notes are payable in full on December 31, 2001. As of the date
hereof, we have borrowed an aggregate of $2,192,861. Upon effectiveness of this
registration statement, Alpine Pictures, Inc., intends to distribute promissory
note interests for the full amount of the promissory notes to all of its 2,149
shareholders with the exception of Messrs. Ryan Carroll and Roland Carroll.
Although Messrs. Roland and Ryan Carroll are directors, officers and controlling
shareholders of Alpine Pictures, Inc. they will not receive a proportionate
interest in the promissory notes. The holders of the promissory notes may
convert their interest into shares of our common stock at a conversion ratio of
$0.90 of promissory note principal for each share of common stock. The
distribution of the securities by Alpine Pictures, Inc., and the possible
conversion thereof by the shareholder receiving such distribution into shares of
common stock of the Company will likely have an adverse effect on the market
price of the common stock being offered for sale by the Company. The freely
tradable shares of common stock (the "public float") upon effectiveness of this
registration statement (other than exercise of the Warrants), assuming all Units
are sold and the full amount of the outstanding promissory note are converted,
will be 7,212,500 shares of common stock, of which 4,380,000 are to be
distributed by Alpine Pictures to its shareholders without remuneration assuming
conversion.
13
<PAGE>
UNDERWRITING - PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement by and among the Company, RH Investment Corporation (as the
representative of the underwriters) and the underwriters (the "Underwriting
Agreement"), the underwriters, as explained below, have agreed to make a best
efforts offering of the our units, each unit consisting of one share of common
stock and one warrant for the purchase of one share of common stock at an
exercise price of $6.00 per share for a exercise period of 36 months commencing
on the Effective Date of this prospectus. The warrants may be separated and
sold separately from the common stock after sale.
Underwriter Number Of Units
--------------------------------------------------------------------
RH Investment Corporation 250,000
TOTAL: 250,000
The following summaries of certain terms and conditions of the
Underwriting Agreement and the Representative's Warrants do not purport to be
complete statements of the terms and/or contents of such agreements. Copies of
the Underwriting Agreement and Representative's Warrants have been filed with
the Commission as exhibits to the registration statement and are also on file at
the offices of the Representative and Alpine. Reference is hereby made to each
such exhibit for a detailed description of the provisions thereof which have
been summarized above. SEE "AVAILABLE INFORMATION."
Minimum Offering And Escrow Account
In order to effect the offering, the underwriters must sell at least
the minimum number of units within 180 days of the effectiveness of this
registration statement. Our officers, directors and affiliates may not purchase
the units in this offering in order to reach the minimum offering amount. If the
minimum number of units is not sold by that date, then the offering will
terminate and all funds received from sales of the units will be promptly
returned to the purchasers. Funds received from the sale of the first 250,000
units will be deposited in a special escrow account to be established at City
National Bank, a federally insured national bank. After the minimum offering has
been sold, funds received from additional sales will be sent directly to the
Company.
At the time that the 250,000 units have been sold (the minimum
offering) before the termination date, we will release the funds from the escrow
account for deposit into our working account. Although the Underwriters will
continue to sell the Offering, on a best efforts basis, to attempt to reach the
maximum offering (1,250,000 units), we will use the released funds, at that
time, as described herein.
Maximum Offering
No more than 1,250,000 units will be sold. The offering will
automatically terminate when purchases for such number of units have been made.
Underwriters Compensation
We have agreed to give to the underwriters, as a commission for the
sale of the units, an amount equal to 10% of the aggregate purchase price of the
units sold by the underwriters.
We have agreed to pay the Representative a Non-Accountable Expense
Allowance equal to 3% of the aggregate offering price of the units of which
$5,000 per month, commencing May, 1999, of which $20,000 has been advanced to
the Representative. In accordance with the provisions of the Underwriting
Agreement, in the event that the public offering is terminated for any reason,
the Representative will be reimbursed for all accountable expenses incurred by
it not to exceed an aggregate of $85,000. Any amounts previously paid will be
credited against any amounts due.
14
<PAGE>
As part of the consideration to the Representative for its services in
connection with the public offering described in this prospectus, we have agreed
to sell to the Representative for the benefit of the Underwriters, Warrants to
purchase an aggregate of up to 10% of the number of units sold in this offering
at a price of $0.01 per warrant ("Warrant Price"). The Representative's Warrants
will be non-redeemable and will be exercisable at an exercise price per share
equal to 135% of the initial public offering price of the common stock. The
Representative's Warrants will be restricted from exercise, sale, transfer,
assignment or hypothecation, except to officers of the Representative and
members of the selling group and/or their officers or partners, for a period of
one year from the Effective Date and will, thereafter, be exercisable for a
period of four years. We, together with the Representative, have arbitrarily
determined the exercise price of the Representative's Warrants. The exercise
price should not be deemed to reflect any estimate of the intrinsic value of
either the Representative's Warrants, the units or the common stock. The
Representative's Warrants will contain anti-dilution and adjustment provisions
in the event of any merger, acquisition, recapitalization, split-up of shares,
stock dividend, sales or issuance of stock or securities convertible into stock
by the company at a price or conversion price less than the exercise price of
the Representative's Warrants or less than the market price of the common stock
at the time of such sale or indebtedness or similar event, except for dilution
which would result from issuance under any stock incentive or option plan,
reasonably acceptable to the Representative.
In connection with the underwriting of the our public offering, we
granted to the Representative certain "piggy back" and "demand" registration
rights. Under the terms of the Underwriting Agreement, we granted to the
Representative, for five years from the Effective Date, the right to
include for registration, the Representative's Warrants (including the
underlying common stock) if we file a registration statement
under the Securities Act of 1933 relating to the public sale of any of its
securities. Consequently, the "piggy back" registration rights are only
operative if we otherwise file a registration statement. In addition, we agreed
to register under the Securities Act, at its expense, the Representative's
Warrants (including the underlying common stock), upon the request of the
holders of 50% or more of the Representative's Warrants. Consequently, the
"demand" registration rights may be exercised only if the requisite percentage
of holders of the Representative's Warrants request registration thereof. Such
request may be made at any time during the exercise period of the
Representative's Warrants.
During the period in which the Representative's Warrants are
exercisable, the holders thereof are given the opportunity to profit from a rise
in the market price of the units, the common stock and the warrants which may
result in a dilution of the interest of the stockholders. We may find it more
difficult to raise additional equity capital if it should be needed for its
business while the Representative's Warrants are outstanding. At any time when
the holders thereof might be expected to exercise such warrants, the company
would probably be able to obtain additional equity capital on terms more
favorable than those provided by the Representative's Warrants. Any profit
realized on the sale of securities issuable upon the exercise of the
Representative's Warrants may be deemed additional underwriting compensation.
Lock Up Agreement
The Company has agreed that it will cause its officers, directors and
holders of more than 5% of its common stock, to enter into an agreement not to
sell or otherwise dispose of, without the consent of the Representative, any of
the Company's equity securities for one year following the Effective Date. For
five years from the Effective Date, the Company, its officers, directors and
holders of more than 5% of its common stock will provide the Representative with
prior notice of any sales of the Company's equity securities to be made under
Rule144. As of the date of this prospectus, none of the Company's officers,
directors or beneficial owners have executed the lock up agreement.
15
<PAGE>
The Underwriters
We are offering the units to the public at a price of $6.00 per unit.
The units are offered by the Underwriters subject to receipt and acceptance by
them, to the Underwriters' right to reject any order in whole or in part, to
approval of certain legal matters by counsel and to certain other conditions.
The Representative has advised us that sales to certain dealers may be
made at the public offering price less a concession not in excess of 10% or $.60
per unit. After our public offering of the units, the public offering price and
other selling terms may be changed by the Representative. The Representative
does not intend to confirm sales of more than one percent of the units offered
hereby to any accounts over which it exercises discretionary authority.
Indemnification
We have agreed to indemnify the Representative and others against
certain liabilities, including liabilities under the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be provided
to our officers, directors or control persons, We have been informed that, in
the opinion of the Commission, such indemnification is against public policy and
is therefore unenforceable. The Representative has agreed to not indemnify the
Company, its directors, and each person who controls it within the meaning of
Section 15 of the Securities Act with respect to any statement in or omission
from the registration statement or the prospectus or any amendment or supplement
thereto if such statement or omission was made in reliance upon information
furnished in writing to the Company, or any of its agents, by the Representative
specifically for or in connection with the preparation of the registration
statement, the prospectus, or any such amendment or supplement thereto. On
October 29, 1998, a principal of the Representative, Stuart S. Greenberg, was
given a 10 day suspension from association with any NASD member firm, a censure
and a $10,000 fine for failure to maintain sufficient net capital in the
brokerage firm's account. Mr. Greenberg was not in the employ of the
Representative at the time of the action by the regulatory agencies.
Market Making
Upon meeting certain requirements of the NASDAQ SmallCap Market, we
intend to apply for NASDAQ listing. If we are accepted for listing then certain
underwriters may engage in passive market making transactions in our Common
Stock in accordance with Rule 103 of Regulation M.
Following the completion of this offering, certain broker-dealers may
be the principal market makers for the securities offered hereby. Under these
circumstances, the market bid and asked prices for the securities may be
significantly influenced by decisions of the market makers to buy or sell the
securities for their own account. No assurance can be given that any market
making activities, if commenced, will be continued.
LEGAL MATTERS
LEGAL PROCEEDINGS
We are not a party to any litigation and management has no knowledge of
any threatened or pending litigation against us.
SECURITIES AND EXCHANGE COMMISSION AND STATE INVESTIGATIONS OF AFFILIATES
In 1996, the United States Securities and Exchange Commission began
investigating Alpine Pictures, Inc., and several partnerships in which it was
involved to determine whether Alpine Pictures fully complied with the
registration provisions of the Securities Act of 1933 in connection with the
offering of securities. Alpine Pictures, Inc. settled the dispute by consenting
to an injunction against future violations of securities laws. It did not,
however, admit nor deny the allegations of the Securities and Exchange
Commission.
16
<PAGE>
In January, 1998, Cavalier Partners L.P. consented to an order from the
State of Michigan to cease and desist from any violation of the Michigan
securities laws and paid administrative costs in the amount of $750. Paul
Miller, an officer of Alpine, served as general partner of Cavalier Partners
L.P. On November 17, 1997, the Department of Corporations for the State of
California issued a desist and refrain order against Alpine Pictures, Inc.,
Roland Carroll, Ryan Carroll and Carroll Media, Inc., which requires them to
desist and refrain from the offer or sale in California of any unqualified or
non-exempt security. The order does not address any specific offering.
On July 9, 1999, the State of California filed a complaint against
Teleshare, Inc., a California telecommunications company for which Messrs.
Roland and Ryan Carroll served as directors, Alpine Pictures, Lord Protector,
Cavalier Partners, Roland Carroll, Ryan Carroll and Stewart Whipple (the
president of Teleshare) alleging violations of the California Corporation Code
and seeking a permanent injunction against the defendants against further
violations of the California Corporation Code; rescission offers to certain
purchasers of the Lord Protector and Cavalier Partners partnership interests;
and payment of fees to offset the court administrative and investigative costs.
The parties have filed a stipulation to entry of final judgment of
permanent injunction and ancillary relief without admitting or denying the
allegations in the complaint. In accordance with the stipulation to entry of
final judgment, the parties consented to a final judgment of permanent
injunction and agreed to pay administrative fees, payable in installments.
Alpine Pictures, Inc., is current in all payment installments to be paid to the
California Commissioner of Corporations. The injunction prevents Alpine
Pictures, Inc., Lord Protector Partners, Cavalier Partners, Stewart Whipple,
Roland Carroll and Ryan Carroll from offering to sell, selling, or engaging in
the business of selling any securities of any kind in violation of the
qualification or exemption requirements of the California Corporations Code
Section 251110.
On June 23, 1999, Alpine Pictures entered into a settlement agreement
with the State of Illinois agreeing to make a rescission offer to three
investors in regard to such investors' purchase of securities of Alpine Pictures
aggregating less then $10,000 which sales were made in reliance on certain
exemptions from registration in Illinois before completion of the required
filings thereto. In accordance with the settlement agreement, Alpine Pictures
offered rescission to each of the three investors within 5 business days after
the entry of the Order to Dismiss and Settlement Agreement. None of the
investors requested the return of their investment. Accordingly, none of the
proceeds from this offering will be used in the rescission.
17
<PAGE>
MANAGEMENT
OFFICERS AND DIRECTORS
The executive officers and directors of our Company and their ages are
as follows:
Name Age Position
--------------------------------------------------------------------------------
Ryan Carroll 43 Chief Executive Office, Chairman
of Board
Roland Carroll 46 President, Director
Greg Cozine 43 Vice President of Finance and
Sales Director
Rene Torres 45 Vice President of Foreign/
Domestic Sales
Tom Hamilton 58 Vice President of Marketing and
Production
Ernani V. Di Massa 55 Director of Television Operations
Scott Towle 55 Executive Programming Consultant
All directors hold office until the next annual meeting of stockholders
and until their successors are elected. Officers are elected to serve, subject
to the discretion of the Board of Directors, until their successors are
appointed.
Ryan J. Carroll has served as a directors and our Chief Executive
Officer since 1998. Mr. Carroll has been a director and principal shareholder of
Alpine Pictures International, Inc. since its inception in July 1996. Since its
inception in September, 1995, Mr. Carroll has been the secretary, a director and
a principal shareholder of Alpine Pictures, Inc., an affiliated motion picture
production company. Mr. Carroll is also a 50% shareholder and serves as a
director and secretary of Carroll Media, Inc., an affiliated California
corporation engaged in the entertainment business, since its inception in
January 1994. From February 1996 to the present, Mr. Carroll has served as
chairman of the board and a principal shareholder of Teleshare, Inc., a
California telecommunications corporation. In 1981, Mr. Carroll was appointed
Artistic Director of Chicago's Mantisis Theater Company. From 1985 to 1986, Mr.
Carroll served as Artistic Director with Paragon Arts International, Inc., a Los
Angeles based independent finance, production and distribution company. From
1986 to 1988, Mr. Carroll served as president of G.C.O. Pictures, Incorporated,
an independent film production company he co-founded with Roland Carroll. Mr.
Carroll was an executive producer of Season of Fear, a film distributed by
MGM/UA. Mr. Carroll received his C.F.A. degree in 1982 from the Goodman School
of Drama at DePaul University in Chicago, Illinois.
On November 17, 1997, the Department of Corporations for the State of
California issued a desist and refrain order against Alpine Pictures, Inc.,
Roland Carroll, Ryan Carroll and Carroll Media, Inc., which requires them to
desist and refrain from the offer or sale in California of any unqualified or
non-exempt security. The order does not address any specific offering. On July
9, 1999, the State of California filed a complaint against Teleshare, Inc.,
Alpine Pictures, Lord Protector, Cavalier Partners, Roland Carroll and Ryan
Carroll alleging violations of the California Corporation Code and seeking (i) a
permanent injunction against the defendants against further violations of the
California Corporation Code (ii) recission offers to certain purchasers of the
Lord Protector and Cavalier Partners partnership interests and (iii) payment of
fees to offset the court administrative and investigative costs. The defendants
have filed a stipulation with the court for entry of a permanent injunction and
the other requested relief.
18
<PAGE>
Roland Carroll has served as a director and our President since 1998.
Mr. Roland has been a principal shareholder and director of Alpine Pictures
International, Inc. since its inception in July 1996. Since its inception in
September 1995, Mr. Carroll has served as the president, chairman of the board
and a principal shareholder of Alpine Pictures, Inc., an affiliated motion
picture production company. Mr. Carroll is also a 50% shareholder, chairman of
the board and president of Carroll Media, Inc., an affiliated California
corporation engaged in the entertainment business, since its inception in
January 1994. From February 1996 to the present, Mr. Carroll has served as a
director and a principal shareholder of Teleshare, Inc., a California
telecommunications corporation. In 1985, Mr. Carroll co-founded and served as
president of Paragon Arts International, a Los Angeles based independent
finance, production and distribution company. From 1986 to 1988, Mr. Carroll
served as an executive producer at G.C.O. Pictures, located in Los Angeles,
California, overseeing the production of the feature length film Season of Fear.
Mr. Carroll has served from time to time as an independent consultant for the
production of television programming. Mr. Carroll attended the University
Southern California School of Cinema/Television from 1979 to 1981.
On November 17, 1997, the Department of Corporations for the State of
California issued a desist and refrain order against Alpine Pictures, Inc.,
Roland Carroll, Ryan Carroll and Carroll Media, Inc., which requires them to
desist and refrain from the offer or sale in California of any unqualified or
non-exempt security. The order does not address any specific offering. On July
9, 1999, the State of California filed a complaint against Teleshare, Inc.,
Alpine Pictures, Lord Protector, Cavalier Partners, Roland Carroll and Ryan
Carroll alleging violations of the California Corporation Code and seeking a
permanent injunction against the defendants against further violations of the
California Corporation Code; recession offers to certain purchasers of the Lord
Protector and Cavalier Partners partnership interests; and payment of fees to
offset the court administrative and investigative costs. The defendants have
filed a stipulation with the court for entry of a permanent injunction and the
other requested relief.
Greg Cozine has served as a director and our Vice President of Finance
since 1998. In addition, Mr. Cozine has served as a director of Alpine Pictures
International, Inc. since March, 1997. Since January 1996, Mr. Cozine has served
as a vice president and a shareholder of Alpine Pictures, Inc., an affiliated
motion picture production company. From 1990 to 1992, Mr. Cozine was manager of
operations and senior marketing consultant for Gold Shore Land Corporation, Los
Angeles, California where he managed all sales for a real estate development
project located north of Los Angeles, California. From 1987 to 1990, Mr. Cozine
was founder and chief executive officer of NCN Financial Group, Inc. where he
handled various financial products including energy related joint ventures and
feature film venture capital projects.
Rene Torres has served as president of Alpine Pictures International,
Inc., since 1996. From 1996 to 1999, Mr. Torres served as President of Meridian
Pictures, Inc., an independent film company located in Irvine, California. While
at Meridian, Mr. Torres was responsible for the implementation and supervision
of limited partnership offerings that funded film production. In 1985, Mr.
Torres was a founding member of Paragon Arts International, a Los Angeles based
independent finance, production and distribution company. In 1990, Mr. Torres
served as the president of Box Office Partners, located in Los Angeles,
California, which company participated in the acquisition of The Kid, starring
C. Thomas Howell, Metamorphosis, The Alien Factor, a high-tech science fiction
film, and The Treasure, a family adventure. Mr. Torres received his Bachelor of
Arts degree in Marketing from Milwaukee Area Technical College in 1976.
Tom Hamilton has served as secretary and executive vice president of
Alpine Pictures International, Inc. From 1985 to 1990, Mr. Hamilton has worked
as an associate producer of motion pictures at Paragon Arts International, a Los
Angeles based independent finance, production and distribution company. From
1990 to 1992, Mr. Hamilton was the executive vice president-director of European
operations for Euro-Films, Inc., a Franco American international film finance
and distribution company. Mr. Hamilton was based in Paris, France where he was
responsible for all European markets. Mr. Hamilton attended the University of
Grenoble in Grenoble, France in 1969.
Ernani V. Di Massa has served as the Director of Television Operations
for our wholly owned subsidiary, Alpine Television, Inc., since September, 1998.
From 1996 to 1998, Mr. Di Massa was an independent producer and formed Di Massa
Productions, Inc. Mr. Di Massa is currently working on several television
projects including a new talk show, a variety show, a medical series, and a game
show. From 1989 to 1996, Mr. De Massa was vice president of programming
development and later senior vice president of programming and development
for KingWorld. From 1982 until 1989, Mr. Di Massa produced and wrote for several
television executives and television talent. Before 1982, Mr. Di Massa worked
for the NBC Television Network where he produced the Regis Philbin Show and
helped create the network daytime hour Fantasy. Mr. Di Massa obtained his
Bachelors of Science in Psychology from LaSalle University in 1969. He obtained
a Masters Degree in clinical psychology from Temple University in 1971.
Scott Towle has been an Executive Programming Consultant for our
wholly-owned subsidiary, Alpine Television, Inc., since March, 1999. Before
joining the Company, Mr. Towle was the President of Domestic Distribution for
KingWorld, a domestic supplier of first run programming for television. From
1986 to 1990, Mr. Towle was the president of Domestic Distribution for Orion
Television.
19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Effective
Date of this Prospectus regarding the beneficial ownership of our Common Stock
by each officer and director of the Company and by each person who owns in
excess of five percent of our Common Stock. Each of the beneficial owners listed
below has sole voting power over their shares.
<TABLE>
<CAPTION>
Name, Position and Address Shares of Common Stock Percentage of Shares
-------------------------- Beneficially Owned Before After
---------------------- Offering (1) Offering (2)
-------------------------
<S> <C> <C> <C>
Ryan Carroll (3) 232,500 14.7% 8.2%
Chief Executive Officer
Chairman of Board
21111 Celtic Street
Chatsworth, California 91311
Roland Carroll (4) 232,500 14.7% 8.2%
President, Director
11319 Dona Teresa
Studio City, California 916104
Greg Cozine 105,000 6.6% 3.7%
Vice President, Director
1810 Bentley Avenue
Los Angeles, California 90034
Tom Hamilton 105,000 6.6% 3.7%
Executive Vice President, Secretary,
Alpine Pictures International, Inc.
10082 Stony Brook Drive
Huntington Beach, California 92646
Rene Torres 105,000 6.6% 3.7%
President, Alpine Pictures International, Inc.
6656 Columbus Avenue
Van Nuys, California 91405
All officers and directors 570,000 36% 20.1%
as a group (3 persons)(5)
Alpine Pictures, Inc. 645,000 40.8% 22.8%
6919 Valjean Avenue
Van Nuys, California 91406
--------------
</TABLE>
(1) Based upon 1,582,500 shares of Common Stock outstanding before the
offering.
(2) Assuming Maximum Offering sold (1,250,000) resulting in 2,832,500 shares
of Common Stock outstanding.
(3) Ryan Carroll is a controlling shareholder of Alpine Pictures, Inc. which
owns 540,000 shares of Alpine's outstanding common stock. Ryan Carroll
owns 1,078,415 shares of Alpine Pictures, Inc., which constitutes 13.7% of
the issued and outstanding shares of Alpine Pictures, Inc.
(4) Roland Carroll is a controlling shareholder of Alpine Pictures, Inc. which
owns 540,000 shares of Alpine's outstanding common stock. Roland Carroll
owns 1,078,415 shares of Alpine Pictures, Inc., which constitutes 13.7% of
the issued and outstanding shares of Alpine Pictures, Inc.
(5) All officers and directors of Alpine Entertainment, Inc.
20
<PAGE>
DESCRIPTION OF SECURITIES
AUTHORIZED CAPITAL
We currently have one hundred million (100,000,000) shares of Common
Stock authorized with a par value of $.0001 per share and twenty million
(20,000,000) shares of non-designated preferred shares with a par value of
$.0001 per share.
INCORPORATION
We were incorporated under the laws of Delaware in 1998. Our
Certificate of Incorporation, as amended, by-laws and corporate governance,
including matters involving the issuance, redemption and conversion of
securities, are subject to the provisions of the Delaware General Corporation
Law, as amended and interpreted from time to time.
COMMON STOCK
Our Certificate of Incorporation, as amended, authorizes the issuance
of 100,000,000 shares of Common Stock, $.0001 value per share, of which
1,582,500 shares were outstanding as of December 31, 2000. Holders of shares of
Common Stock are entitled to one vote for each share on all matters to be voted
on by the stockholders. Holders of Common Stock do not have cumulative voting
rights. Holders of Common Stock are entitled to share pro rata in dividends, if
any, as may be declared from time to time by the Board of Directors in its
discretion from funds legally available therefor. In the event of a liquidation,
dissolution or winding up of Alpine, the holders of Common Stock are entitled to
share pro rata all assets remaining after payment in full of all liabilities.
All of the outstanding shares of Common Stock are, and the shares of Common
Stock offered by the Company under this Offering will be, when issued and
delivered, fully paid and non-assessable.
Holders of Common Stock have no preemptive rights to purchase our
Common Stock. There are no conversion or redemption rights or sinking fund
provisions with respect to the Common Stock. All outstanding shares of Common
Stock are validly issued, fully paid and nonassessable, and all Shares to be
sold and issued as contemplated hereby will be fully paid and nonassessable when
sold in accordance with the terms hereof and in accordance with a valid and
current prospectus. The Board of Directors is authorized to issue additional
shares, on such terms and conditions and for such consideration as the Board may
deem appropriate without further stockholder action.
NONCUMULATIVE VOTING
Each holder of Common Stock is entitled to one vote per share on all
matters on which such stockholders are entitled to vote. Shares of Common Stock
do not have cumulative voting rights. The holders of more than 50 percent of the
shares voting for the election of directors can elect all the directors if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any person to the Board of Directors.
PROMISSORY NOTES
The Company is also registering for distribution by the holder thereof
to its shareholders promissory notes in the amount of $3,942,000 and the
4,380,000 shares of common stock issuable upon conversion of the full amount of
the promissory notes. Upon effectiveness of this registration statement, the
holder of the promissory notes, Alpine Pictures, Inc., an affiliate of Alpine,
will distribute the promissory notes to its shareholders as a dividend
distribution without cost to the shareholders. Alpine Pictures and Messers.
Carroll, will not receive any proceeds from the distribution of the promissory
notes. The shareholders of the Alpine Pictures may convert to shares of common
stock at a conversion ratio of $0.90 per share that portion of the promissory
notes distributed to them at such time or times at their sole discretion. The
promissory notes are payable to the holders thereof on December 31, 2001 in an
amount equal to the principal held by that shareholder less deduction for any
shares converted.
21
<PAGE>
PREFERRED STOCK
Our Certificate of Incorporation, as amended, authorizes the issuance
of 20,000,000 shares of preferred stock, $0.0001 par value per share. As of the
date hereof, no preferred stock has been designated or issued. The designation
of such issued preferred stock provides that each such share of preferred stock
will have one vote on all matters on which shareholders are entitled to vote.
Preferred stock provides for liquidation and dividend preference, if any
dividends were to be declared by the Board of Directors.
In the case of voluntary or involuntary liquidation, dissolution or
winding up of the Company, holders of shares of preferred stock are entitled to
receive the liquidation preference before any payment or distribution is made to
the holders of Common Stock or any other series or class of our stock hereafter
issued that ranks junior as to liquidation rights to the preferred stock, but
holders of the shares of the preferred stock will not be entitled to receive the
liquidation preference of such shares until the liquidation preference of any
other series or class of our stock hereafter issued that ranks senior as to
liquidation rights to the preferred stock ("senior liquidation stock") has been
paid in full. The holders of preferred stock and all series or classes of the
Company's stock hereafter issued that rank on a parity as to liquidation rights
with the preferred stock are entitled to share ratable, in accordance with the
respective preferential amounts payable on such stock, in any distribution
(after payment of the liquidation preference of the senior liquidation stock)
which is not sufficient to pay in full the aggregate of the amounts payable
thereon. After payment in full of the liquidation preference of the shares of
the preferred stock, the holders of such shares will not be entitled to any
further participation in any distribution of assets by the Company. Neither a
consolidation or merger of the Company with another corporation, nor a sale or
transfer of all or part of our assets for cash, securities or other property
will be considered a liquidation, dissolution or winding up of the Company.
The Board of Directors is authorized to provide for the issuance of
additional shares of preferred stock in series and, by filing a certificate in
accordance with the applicable law of the State of Delaware, to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof without any
further vote or action by the shareholders. Any shares of preferred stock so
issued would have priority over the Common Stock with respect to dividend or
liquidation rights. Any future issuance of preferred stock may have the effect
of delaying, deferring or preventing a change in control of Alpine without
further action by the shareholders and may adversely affect the voting and other
rights of the holders of Common Stock. At present, Alpine has no plans to issue
any preferred stock or adopt any series, preferences or other classification of
preferred stock.
DIVIDEND POLICY
We have not paid cash dividends on our common stock since inception and we do
not anticipate paying any cash dividends on our common stock in the future. We
intend to reinvest earnings, if any, in the development and expansion of our
business. Our board of directors will determine, in its sole discretion, whether
to declare any dividends on our common stock in the future, based on our
earnings, capital requirements, financial position, general economic conditions,
and other pertinent factors.
REVERSE SPLIT
In June 2000, our shareholders gave their written consent to amend our
Articles of Incorporation to effectuate a 3 for 10 reverse split of our common
stock. The reverse split will affect all shareholders of the issued and
outstanding common stock of the Company and will become effective October 2000.
Alpine declared a reverse split of 3 for 10 effective June 2000, which will
affect all shareholders of, issued and outstanding common stock of Alpine.
Thisreverse split will become effective before the effective date of this
filing, and whereupon a controlling quorum of the shareholders declare the
reverse split effective, and shall be notified to all shareholders within
reasonable means. An amendment to this filing regarding the reverse split will
accompany the final mailing to shareholders. All share and per share amounts in
this filing have been retroactively restated to reflect the reverse split as of
June 2000.
22
<PAGE>
TRADING OF SHARES
There are no outstanding options, options to purchase, or securities
convertible into, our shares which are not being registered hereby. We have not
agreed with any shareholders, to register their shares for sale, other than for
this registration. We do not have any other public offerings in process or
proposed.
TRANSFER AGENT AND REGISTRAR
Although, we currently do not have a transfer agent, we intend to hire
a transfer agent in the near future. We currently serve as our own transfer
agent.
REPORTS TO SHAREHOLDERS
We will furnish to holders of the Shares annual reports containing
audited financial statements examined and reported upon, and with an opinion
expressed by, an independent certified public accountant. We may issue other
unaudited interim reports to our shareholders as we deem appropriate.
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Our Certificate of Incorporation and Bylaws, as amended, provide that
we will indemnify all of our directors, officers or employees as agreed to the
fullest extent permitted by law. Section 145 of the Delaware General Corporation
Law ("DGCL") empowers a corporation to indemnify its directors and officers and
to purchase insurance with respect to liability arising out of their capacity or
status as directors and officers provided that this provision will not eliminate
or limit the liability of a director for any breach of the director's duty of
loyalty to the corporation or its stockholders; For acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; Under Section 174 (relating to liability for unauthorized acquisitions or
redemptions of, or dividends on, capital stock) of the General Corporation Law
of the State of Delaware; or For any transaction from which the director derived
an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder will not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of shareholders or otherwise. The
effect of the foregoing is to require the Company to indemnify its officers and
directors for any claim arising against such persons in their official
capacities if such person acted in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers or persons controlling
our Company in accordance with the foregoing provisions, it is the opinion of
the Securities and Exchange Commission that such indemnification is against
public policy as expressed in the act and is therefore unenforceable.
24
<PAGE>
THE COMPANY: ALPINE ENTERTAINMENT, INC.
ALPINE ENTERTAINMENT, INC.
Our Company, Alpine Entertainment, Inc., is a Delaware corporation
formed in 1998 to distribute domestically and internationally motion pictures or
other entertainment media programming. We have two subsidiaries, Alpine Pictures
International, Inc., an operating California independent film distribution
company and Alpine Television, Inc. which is a newly formed Delaware corporation
and not yet operational.
We currently only have operations through our subsidiary, Alpine
Pictures International, Inc. through which we have entered into oral or written
distribution agreements for over ten motion pictures. Since some of these
distribution agreements are for films that are produced by our affiliates, we
are distributing quality films in various domestic and international markets.
These markets include: theatrical exhibition, home videos, network television,
cable television, pay per view cable television, and non-theatrical exhibitors
such as airlines, schools, hospitals, libraries, hotels, syndicated television
and related markets. We may also have the right to license for distribution,
under our distribution agreements, soundtrack music, CD-ROMs, interactive
games and other merchandising items.
ALPINE PICTURES INTERNATIONAL, INC.
Alpine Pictures International, Inc. ("APII") is an operating California
corporation formed in August, 1996 engaged in the distribution domestically and
internationally of full length motion pictures, made-for-television movies, home
videos, televisions series, mini-series, CD-ROM programming and interactive
games based on the literary properties it licenses through its distribution
agreements. APII served as the general partner of Alpine Releasing Partners I,
L.P., formed in July, 1996. On February 18, 1998, the Alpine Releasing Partners
I, L.P. was merged into APII with the issuance of one share of APII common stock
for each $0.85 of limited partnership interest resulting in a total issuance of
1,344,804 shares of common stock of APII.
On February 10, 1999, we entered into An Agreement and Plan of
Reorganization with APII. Under the terms of the Reorganization Agreement,
we acquired 69.9% of the outstanding shares of APII, through the exchange of
shares of common stock of APII from consenting shareholders for common stock of
Alpine Entertainment, Inc. Under the terms of the Agreement, shares were
exchanged at a ratio of one share of Alpine Entertainment, Inc., for one shares
of APII. APII has an authorized capitalization of 20,000,000 shares of common
stock, no par value, of which 7,181,441 are outstanding to date, including
5,025,000 held by Alpine, and 10,000,000 shares of non-designated preferred
stock, no par value, of which no shares have been designated or issued. The
directors of APII are Tom Hamilton, Rene Torres, Roland Carroll, Ryan Carroll,
and Greg Cozine. Rene Torres serves as President and Tom Hamilton serves as
Secretary of APII.
ALPINE TELEVISION, INC.
Our wholly owned subsidiary, Alpine Television, Inc., ("ATI") was
incorporated in Delaware in February, 1999, to distribute and develop
entertainment media projects for presentation on television, including
pay-per-view, pay, network, syndication or basic cable television. ATI has an
authorized capitalization of 100,000,000 shares, par value $0.0001, of common
stock of which 1,000 shares are outstanding and 20,000,000 shares of
non-designated preferred stock of which none are outstanding. Currently, we own
all 1,000 outstanding shares of ATI. Ernani Di Massa, Jr., serves as chief
executive officer of ATI and David Craddick serves as its president. ATI is
currently developing and producing a series of first0run television programming.
These formats include: game shows, reality-based shows, talk shows, and court
shows. The development/production process includes the production of the
pilot/presentation videos and attending major international and domestic
television sales markets. ATI is developing these products for broadcast, cable,
pay per view, and other ancillary markets.
EMPLOYEES
As of October 1, 2000, we have eleven full-time employees, including
our executive officers. We utilize independent contractors and consultants from
time to time to assist in promoting, marketing, and distributing motion
pictures. Our independent contractors are generally paid on a commission, hourly
or job-related basis, depending on the service being performed. Our future
success will depend, in part, on our ability to continue to attract, retain and
motivate highly qualified technical, marketing and management personnel. Our
employees are not represented by any collective bargaining unit. We have never
experienced a work stoppage. We believe our relationship with our employees is
good.
25
<PAGE>
BUSINESS
Our current principal business consists of acquiring distribution and
ancillary rights and distributing motion pictures and entertainment media
properties domestically and internationally.
Motion Picture Industry Overview
Production and distribution are the two principal activities of the
motion picture industry. The "major" studios dominate the motion picture
industry in the United States by controlling the distribution of films that they
produce as well as films that are produced by "independent" studios. These major
studios include among others: The Walt Disney Company, Paramount Pictures
Corporation, Warner Brothers, Inc., MCA, Twentieth Century Fox, Columbia
Pictures, Tri-Star Pictures and MGM/UA. Beginning in 1996, the distribution of
independent films brought increasing commercial success to the "major" studios
that were distributing them. Our management believes that this increasing
commercial success of independent films will create a greater demand for
independent films in both the international and domestic market.
Motion Picture Production And Financing
Production, the first of the two principal activities of the film
industry, consists of four steps: development, pre-production, production and
post-production.
Development begins when the producer commissions or acquires the
screenplay. Once in possession of the screenplay, the producer typically seeks
production financing and tentative commitments from a director, the principal
cast members and other creative personnel. By "pre-licensing" a motion picture,
a producer licenses a third party to exploit the completed motion picture in
various markets and media in exchange for financing some or all of the motion
picture's direct production costs. While the producer seeks financing, it also
prepares a tentative production schedule and budget.
Pre-production begins when the screenplay is completed and the
financing commitments have been arranged. During pre-production, the producer
engages creative personnel to the extent not previously committed; finalizes the
filming schedule and production budget; obtains insurance; establishes filming
locations; secures whatever studio facilities are required; and, if necessary,
secures completion guarantees.
Production begins when principal photography begins and ends when
principal photography ends, which is generally less than three months.
Independent production companies generally attempt to obtain all or a
substantial portion of their financing of a motion picture before commencement
of principal photography, at which point substantial production costs begin to
be incurred and require payment.
Post-production begins upon completion of principal photography. During
post-production, the producer edits the motion picture, adds audio effects, and
synchronizes the audio tracks with the pictures. Upon completion of
post-production, the producer has a negative, which he will use to make release
prints of the motion picture.
Motion Picture Distribution
Distribution, the second of the two principal activities of the film
industry, consists of selling domestic and international licenses that entitle a
third party to exploit a motion picture and its underlying intellectual property
in various markets and media.
26
<PAGE>
A distributor acquires from a motion picture producer a right to
distribute a picture in one or more markets and/or media in exchange for a
certain minimum advance or guarantee upon the delivery of the completed motion
picture. After the distributor has recouped the amount advanced plus its
distribution costs, it may retain ongoing distribution fees, which are computed
as a percentage of the gross revenues generated from the distributor's
distribution of the motion picture. All revenues beyond the distributor's
ongoing distribution fee belongs to the producer.
A motion picture typically generates a substantial portion of its total
revenue during its initial distribution cycle, which is generally the first five
years after a motion picture's initial domestic theatrical release. However,
some commercially successful motion pictures may continue to generate revenue
after their initial distribution cycle from the re-licensing of distribution
rights in certain media and from the licensing of distribution rights with
respect to new media and technologies.
Theatrical Distribution
The theatrical distribution of a motion picture involves the licensing
and booking of the motion picture to theatrical exhibitors, the promotion of the
picture through advertising and publicity campaigns and the manufacture of
release prints from the film negative. These activities cause a distributor
incur substantial costs before the first weekend of a film's domestic
theatrical release and significantly impact the ultimate success of the film's
theatrical release.
When a film is screened in a cinema, the cinema owner retains a fixed
amount of proceeds from ticket sales for the film and a percentage of the
proceeds that escalates over time. After the remainder of the ticket sale
proceeds is remitted to the distributor, the distributor retains a distribution
fee and recoups the costs incurred in distributing the film. The remaining
proceeds are then remitted to the film's producer.
THE ANCILLARY MARKETS
In recent years, licensing the distribution of motion pictures in
markets other than domestic theatrical markets (i.e., in ancillary markets) has
created increasingly more revenue for producers of such motion pictures. The
rights to ancillary markets, including non-theatrical, video, cable, television,
music and merchandising, are generally sold for distribution after initial
theatrical distribution. The sale or licensing of ancillary rights continues to
be a growing source of revenue for motion pictures. These rights can be sold as
a package or individually as follows:
o HOME VIDEOS. A motion picture typically becomes available for
videocassette distribution within four to six months after its
initial domestic theatrical release. Home video distribution
consists of the promotion and sale of videocassettes to local,
regional and national video retailers that rent or sell
videocassettes to consumers. We anticipate that our films may
be released directly to the home video market.
o TELEVISION. Television rights are generally licensed first to
pay-per-view for an exhibition period within six to nine
months following initial domestic theatrical release, then to
pay television approximately twelve to fifteen months after
initial domestic theatrical release, thereafter in certain
cases to free television for an exhibition period, and then to
pay television again. These films are then syndicated to
either independent stations or basic cable outlets. Since
groups of motion pictures are typically packaged and licensed
as a group for exhibition on television over a period of time,
revenues from these television licensing "packages" may be
received over a period that extends beyond five years from the
initial domestic theatrical release of a particular film.
Television rights can include the following:
27
<PAGE>
o Pay Television - The right to broadcast the motion
picture over cable systems nationwide as part of a
paid subscription to the cable channels or via other
media such as direct broadcast satellite.
o Pay-Per-View Cable - The right to broadcast
the motion picture over cable systems for a
fee on a per-viewing basis.
o Network Television - The right to license to
one of the major television networks for one
or more broadcasts of the motion picture.
o Syndicated Television - The right to market
television rights on a market-by-market
basis to individual television stations
around the country for a specific number of
broadcasts or for an unlimited number of
broadcasts over a period of time.
o NON-THEATRICAL. The rights to distribute the film to the armed
services, airlines, schools, hospitals, cruise ships,
correctional facilities, community groups, libraries, hotels
and motels in other than 35mm gauge release prints or in video
format.
o OTHER RIGHTS. Music contained in a film may be licensed for
sound recording, public performance and sheet music
publication. Rights in motion pictures may be licensed to
merchandisers for the manufacture of products such as video
games, toys, T-shirts, posters and other merchandise. Rights
may also be licensed to create novelizations of the screenplay
and other related book publications.
o FOREIGN MEDIA. The right to market all of the above rights,
including theatrical exhibition, on a territory-by-territory
basis in foreign countries. In addition to their domestic
distribution activities, motion picture producers and
distributors generate substantial revenues from distribution
of motion pictures in international markets (in the same media
in which films are distributed in the domestic market).
Through a subsidiary, Alpine has primarily concentrated its
distribution operations in the international market and
anticipates that it will continue to do so. Based upon its
distribution of films in the past two years, Alpine
distributes approximately 52% of its films in the European
market, 17% in Mexico and Latin America, 8.5% in Hong Kong and
Taiwan and less than 8% in Turkey, India, Malaysia, India and
the Philippines. Foreign distributors often pay a fixed price
up front and collect all gross revenues from the exhibition of
the film in their territory for their own account.
OVERVIEW OF CURRENT OPERATIONS OF ALPINE
As of the date of this prospectus, our operations have primarily been
focused on the distribution of motion pictures. We concentrate on the
distribution of films ranging between $1,000,000 to $5,000,000 in production
costs. Generally, we enter into an agreement with an owner or producer of a
motion picture which provides for our Company to serve as the exclusive
distributor agent for the owner/producer in designated territories for a
specified term (the "Sales Agency Agreement"). The Sales Agency Agreement may
also grant our Company certain other rights to distribute the motion picture in
all media, including but not limited to, theatrical exhibition, non-theatrical
exhibition, all forms of television, and home video. We also attempt to acquire
the merchandizing, publication and sound track rights to the motion picture.
In consideration for these rights, we usually pay the owner/producer of
the film a cash advance, which is reimbursable from the gross receipts, derived
from the film in such designated territory. We usually agree to pay for
distribution costs, including reworking the film to meet foreign country
standards, which are reimbursed from gross receipts to a certain agreed upon
maximum level. After reimbursement of the cash advance and distribution costs,
we receive a percentage of the gross receipts derived from the film. The
remaining gross receipts are paid to the owner/producer. The owner/producer
receives a certain percentage from gross receipts before the reimbursement of
the cash advance or distribution costs or payment of our percentage.
28
<PAGE>
Generally, for each picture which we have agreed to distribute, we will
enter into agreements with subdistributors allowing the subdistributor to
license certain rights to the film in certain specified territories for a
designated period of time (the "License Agreement"). The License Agreement
stipulates exactly which rights are licensed including; cinematic rights, video
rights, ancillary rights and/or television rights. For such licensing rights,
the subdistributor will pay our Company a certain guaranteed amount. After
payment of such guaranteed amount and recoupment of certain costs by the
subdistributor, we receive a percentage of the gross receipts received by the
subdistributor in the exploitation of the film. Although we may use certain
subdistributors for several of our film projects, each transaction is separately
negotiated and we have no continuing agreements or arrangements with any
subdistributors to give them exclusive or first rights to the distribution of
any particular film.
CURRENT OPERATIONS SPECIFIC PROJECTS
We have entered into Sales Agency Agreements for the following motion
pictures.
<TABLE>
<CAPTION>
Sales Agent Fee As Percent Expense
Of Gross Revenues From The Reimbursement
Titles From The Motion Picture(1) Ceiling (2)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lord Protector(3)(4) 20% $50,000
Destiny of Marty Fine(4) 25% (of 60% of gross) $50,000
The Maze(4) 25% $70,000
Killers(4) 30% $70,000
Paper Dragon (4) 20% $50,000
Resolution (4) 20% (Domestic) $50,000
25% (Foreign)
Tear It Down (4) 20% $50,000
Salmon Run (4) 25% $75,000
Good Bye Paradise (4) 25% $75,000
Lancelot-Guardian of Time 20% $50,000
An Angel's Gift(3)(5) 20% $50,000
Final Game(3)(5)(6) 20% $50,000
Shalakan (3)(5)(6) 20% $50,000
An Angel on Abbey Street(3)(5)(6) 20% $50,000
Dead Homiez 30% N/A
Rebel(3)(5)(6) 20% $50,000
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</TABLE>
(1) In accordance with the typical Sales Agency Agreement, APII is entitled to
receive a percentage of the gross receipts from the licensing of the
motion picture before the payment of any other expenses or any
distributions to the producer.
(2) The Sales Agency Agreements typically provide a ceiling for reimbursable
costs. These expense ceilings do not include cash advances, which may be
made by Alpine to the owner/producer which, are generally repayable to
Alpine from the gross revenues earned by the motion picture.
(3) This motion picture(s) was or is being produced or co-produced by an
affiliate of Alpine.
(4) This motion picture is completed.
(5) This motion picture(s) is in pre-production or production phase.
(6) The capital or financing for the production of this motion picture has not
yet been raised or is only partially raised as of the date hereof.
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LICENSE AGREEMENTS (see Appendix (B))
MARKETING AND SALES PLANS FOR DOMESTIC AND INTERNATIONAL DISTRIBUTION
We intend to distribute programming in the domestic United States
market and throughout the international market, either directly or through other
distribution companies. We distribute films and programs by marketing them to
exhibitors in trade shows and by other direct marketing methods. Film
distributors may give minimum guarantees for sales volumes and commit to pay a
minimum amount regardless of actual sales.
Television programs are generally sold directly to television stations
and networks in return for licensing fees, whereby the producer can retain the
right to sell the program in other markets and in syndication after its initial
showing. Once full-length motion pictures have had a theatrical release, they
often can be distributed to television stations, cable television operators and
home video sales and rental companies. In this regard we intend to acquire all
of the ancillary rights to the programming distributed by it, including the
right to distribute home videos, CD-ROM programs, interactive games,
soundtracks, sequels and other applications based on the programming. We may
distribute projects produced by our affiliates, or by unaffiliated producers.
The terms and conditions of the Sales Agency Agreement are negotiated by
management in arms length transactions with unaffiliated producers, or
determined in our discretion when entered into with our affiliates.
TRADE SHOW MARKETING
We intend, either by ourselves or with an affiliate, to maintain an
office at each of the major film markets (AFM in Los Angeles, during late
February early March; MIP, in Cannes, France during April; Cannes Film Festival
and Market in Cannes, France during May; MIPCOM in Cannes, France during early
October; and MIFED in Milan, Italy during late October and early November). We
will attempt to establish a presence at the numerous film festivals and minor
markets held throughout the world each year such as the USA Film Festival in
Park City, Utah and the IFP in New York City.
COMPETITION
We compete with several "major" film studios (the Walt Disney Company,
Paramount Pictures Corporation, Universal Pictures, etc.) which are dominant in
the motion picture industry, as well as numerous independent motion picture and
television production and distribution companies. There can be no assurance of
the economic success of any entertainment project since revenues depend
primarily upon the project's or film's acceptance by the public.
Due to technical developments, the entertainment industry in general is
continuing to undergo significant changes. These developments have resulted in
the availability of alternative and competing forms of leisure time
entertainment, including pay/cable television services and home entertainment
equipment such as videocassette, video games and computers. Such technological
developments have also resulted in the creation of additional revenue sources
through the licensing of rights with respect to such new media. Due to the rapid
growth of technology, shifting consumer tastes, and the popularity and
availability of other forms of entertainment, it is impossible to predict the
overall effect these factors will have on the potential revenue from and
profitability of feature-length motion pictures.
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Because our operations have focused on the international distribution
of films, we anticipate that our business relationships combined with the
acquisition of quality media properties will enable us to compete
internationally. The distribution of theatrical motion pictures is also a highly
competitive and speculative business involving a high degree of risk relative to
the marketing, releasing, distribution, and other exploitation of films.
Furthermore, each market and territory for the distribution of films is
generally independent of all other markets, so that obtaining an agreement for
the exploitation of films in one market or territory does not necessarily mean
that a similar agreement will be obtained in other markets and territories. It
is impossible to accurately predict the effects that any of these competitive
factors may have on the success of films distributed by Alpine.
INTELLECTUAL PROPERTY
As of the date of this prospectus, we do not have any registered
trademarks. We may apply for a registered trade name on the Principal Register
of the United States Patent and Trademark Office for our subsidiary "Alpine
Pictures International, Inc." We intend to pursue the registration of our
trademarks wherever possible and to oppose vigorously any infringement of our
marks. We are not aware of any infringing uses that could materially affect our
business or any prior claim to trademarks that would prevent us from using
trademarks in our business.
Copyrights to the motion pictures and programs will, in most all cases,
remain with the producer of the film or program. We expect that only the
distribution rights relating to the films will be acquired by the Company. We
intend to take all steps necessary to protect our interest in any copyrights.
GOVERNMENT REGULATION
In 1994, the United States was unable to reach agreement with its major
international trading partners to include audiovisual works, such as television
programs and motion pictures, under the terms of the General Agreement on Trade
and Tariffs Treaty ("GATT"). The failure to include audiovisual works under GATT
allows many countries (including members of the European Union) to continue
enforcing quotas that restrict the amount of American programming which may be
aired on television in such countries. The Council of Europe has adopted a
directive requiring all member states of the European Union to enact laws
specifying that broadcasters must reserve a majority of their transmission time
(exclusive of news, sports, game shows and advertising) for European works. The
directive does not itself constitute law, but must be implemented by appropriate
legislation in each member country. In addition, France requires that original
French programming constitute a required portion of all programming aired on
French television. These quotas generally only apply to television programming
and not to theatrical exhibition of motion pictures. Additional or more
restrictive quotas or more stringent enforcement of existing quotas could
materially and adversely affect the our business by limiting our ability to
fully exploit the programs internationally.
The Code and Ratings Administration of the MPAA assigns ratings
indicating age-group suitability for theatrical distribution of motion pictures.
We expect that the program producers will follow the practice of submitting the
programs for such ratings. United States television stations and networks, as
well as foreign governments, impose additional restrictions on the content of
motion pictures that may restrict in whole or in part theatrical or television
exhibition in particular territories. Management's current policy is to
distribute motion pictures for which there will be no material restrictions on
exhibition in any major territories or media. This policy often requires
production of "cover" shots or different photography and recording of certain
scenes for insertion in versions of a motion picture exhibited on television or
theatrically in certain territories. There can be no assurance that content
restrictions on the programs will not limit or affect our ability to exhibit it
in certain territories and media.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
We were formed to acquire the rights to and to distribute in the
domestic or international markets motion pictures or other entertainment media
programming. We are engaged in the production and distribution of quality films
in domestic and international markets including theatrical exhibition, home
videos, network television, cable television, pay per view cable television, and
non-theatrical exhibitors such as airlines, schools, cruise ships, correctional
facilities, etc. We anticipate that we may participate in other aspects of the
film industry, including the acquisition, production and sale of entertainment
media properties or the acquisition of companies, or the assets of companies,
involved in the development, production, distribution, acquisition or sale of
entertainment media properties either by itself or through affiliates or joint
venture or other relationships.
We enter into Sales Agency Agreements with the owners or producers of a
motion picture for the exclusive rights to distribute and market films.
Typically, we agreed to pay a production fee to the owner/producer for such
rights. We receive reimbursement of this production fee and reimbursement of its
distribution costs (up to a negotiated ceiling amount) as well as an agreed
percentage of the revenues derived from the exploitation of the film.
For each motion picture that we intend to distribute, we enter into
licensing agreements with one or more "subdistributors" for licensing rights in
specified geographical locations to certain specified rights such as theatrical
rights, non-theatrical rights, home video rights, television rights, or other
media rights (sound recording, public performance, sheet music publication,
merchandising). We receive a fee from each "subdistributor" as well as a
percentage of the revenues derived from the use of the licensed rights.
RESULTS AND PLAN OF OPERATIONS
We currently have two subsidiaries, both of which have operations.
Alpine Pictures International, Inc., has suffered losses from operations since
inception. Alpine Pictures International, Inc. has entered into distribution
agreements for over 10 movies and has entered into over 30 "subdistributor"
agreements through its newly-created subsidiary, Alpine Television, Inc.
Currently, Alpine Pictures International has four productions on its 2001
Production Slate. One of the four projects is already in production, and one of
the four projects is in pre-production. The remaining two products are in
development. Alpine Television, Inc. is currently involved with four projects: a
promotional video, a court show, a game show, and a health program.
LIQUIDITY AND CAPITAL RESOURCES
We have executed two non-interest bearing convertible promissory notes
in favor of one of our shareholders, Alpine Pictures, Inc., for an aggregate up
to $3,942,000. To date, we have borrowed a total of $2,192,861 for the benefit
of APII. We utilized the $2,192,861, with an imputed interest rate of 6%, for
day to day operations and program rights acquisitions as described within our
business plan. We expect to utilize the full proceeds of the promissory notes to
further our business plan through program rights acquisition and future
development. The promissory notes are convertible into shares of our common
stock at a conversion ratio of $0.90 of outstanding loan amount per share
converted. Alpine Pictures will distribute the promissory notes among its
shareholders upon effectiveness of this registration statement and such
shareholders will have the right to convert any or all of the distribution.
Messrs. Carroll will not participate in the distribution of the proceeds of the
promissory notes.
We believe that the proceeds of this offering in addition to the
revenues from our current operations and the proceeds from the promissory notes
will be sufficient to fund our operations for the next 12 months. If we receive
revenues greater than the minimum offering amount, then we'll be able to
implement our business plan fully and expeditiously.
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We anticipate revenues to increase as a result of acquisitions of
higher quality films and television products made from the proceeds of this
offering. Our marketing plan anticipates that the proceeds from this offering
will also permit us to increase our national exposure by enabling us to attend
additional trade shows and film festivals.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997
APII had an decrease in revenues for the year ended December 31, 1998
compared to the year ended December 31, 1997 resulting from a decrease in the
number of film license sales.
Operating expenses increased from $3,660,849 for the year ended
December 31, 1997 to $4,204,143 for the year ended December 31, 1998 primarily
due to an increase in non-cash stock based compensation of approximately
$365,000, a increase in direct film costs of approximately $90,000 and an
increase in employee and employee related compensation/ benefits of $87,294.
Because of the increase in operating expenses, APII had an increase in
net loss from $3,582,408 for the year ended December 31, 1997 to $4,153,625 for
the year ended December 31, 1998.
FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1998
APII had an increase in revenues for the year ended December 31, 1999
compared to the year ended December 31, 1998 resulting from an increase in film
license sales.
Operating expenses decreased from $4,204,143 for the year ended
December 31, 1998 to $1,834,077 for year ended December 31, 1999.
Because of the increase in interest expense APII had an increase in net
loss from $4,153,625 for year ended December 31, 1998 to $13,385,315 for the
year ended December 31, 1999 due to a decrease in non cash stock based
compensation of approximately $3,240,000 and increases in consulting and
professional fees of approximately $390,000, increases in rent of $35,000,
increases in marketing of $60,000, and increases in general and administrative
expenses of $50,000.
DESCRIPTION OF PROPERTY
We currently occupy office space at 6919 Valjean Avenue, Van Nuys,
California 91406 from our affiliate, Alpine Pictures, Inc. We sublease this
space for $2912.08 per month on month to month basis.
Our wholly owned subsidiary, Alpine Television, Inc., ("ATI") currently
occupies 4989 square feet of office space in Manhattan Beach, California. ATI
currently subleases this space for $11,772.50 per month. The sublease expires
April 14, 2003. ATI has the option to extend the lease for one two year period,
subject to a 5% rent increase per year.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH ALPINE PICTURES, INC.
Our officers and directors may be subject to various conflicts of
interest, including among others, the negotiation of agreements between our
Company and Alpine Pictures, Inc., for the distribution rights of films produced
by Alpine Pictures, Inc.. Roland Carroll serves as president and a director, and
Ryan Carroll serves as chief financial officer and a director of Alpine
Pictures, Inc., an operating California motion picture production company formed
in 1995. Messrs. Carroll are controlling shareholders of Alpine Pictures, Inc.
Messrs. Cozine, Torres and Hamilton are also directors of Alpine Pictures, Inc.
Alpine Pictures, Inc. was a shareholder of Alpine Pictures International, Inc.,
representing 25% of the then issued and outstanding shares of Alpine Pictures
International, Inc., before acquisition by Alpine of such shares. Alpine
Pictures, Inc. has produced or is in the process of producing the following full
length motion pictures An Angel's Gift, An Angel On Abbey Street, Shalakan,
Rebel, Lancelot - Guardian of Time, and Lord Protector. Through our subsidiary,
we have entered into distribution agreements with Alpine Pictures, Inc. for the
distribution rights of certain of these films. SEE "BUSINESS Current
Operations". We anticipate that we will continue to distribute films produced by
Alpine Pictures, Inc. or affiliates thereof. The distribution agreements entered
into will not be negotiated on an arms-length basis, however, we anticipate that
the terms of such agreements will be favorable to the Company. We anticipate
that we will distribute those motion picture projects and theatrical projects
which Alpine Pictures, Inc., will produce. However, there is no assurance that
certain opportunities may be presented to Alpine Pictures, Inc. which because
not then available to Alpine would be detrimental to Alpine.
MERGER WITH ALPINE RELEASING PARTNERSHIPS L.P.
Alpine Pictures International, Inc. served as the general partner
Alpine Releasing Partners L.P., a California limited partnership. On February
15, 1998, Alpine Releasing Partners L.P. ("ARPLP") merged into Alpine Pictures
International Inc. ("APII"). Under the terms of the merger agreement, APII
issued one share of its common stock for each $0.85 of limited partnership
interests in ARPLP. At the time of the merger, ARPLP had issued an aggregate of
$1,138,000 limited partnership interests. As a result of the conversion of ARPLP
interests into API's common stock, APII issued an aggregate of 403,441 shares of
Alpine to the limited partners of ARPLP.
COMPENSATION OF OFFICERS AND DIRECTORS
OFFICER COMPENSATION
Because we are a newly formed company, we have not paid salaries to
date. However, salaries have been paid in our operating subsidiary, Alpine
Pictures International, Inc.. We have agreed to compensate Ryan Carroll, our
Chief Executive Officer, with an annual salary of $78,000 and Roland Carroll,
our President , with an annual salary of $78,000. In addition, we provide health
insurance coverage and a 401(k) plan for our employees as well as a car
allowance. As of the date of this prospectus, we have not entered into any
employment agreements with our executive officers or other employees. We
anticipate that we will enter into employment agreements with our employees and
executive officers in the future. We currently have no written employment
agreements with our employees. Our Board of Directors may at their option
determine additional compensation or benefits to be granted to one or all of our
employees.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors. However, our directors are reimbursed for expenses actually incurred
in connection with attendance at Board of Directors meetings. No officers or
directors will benefit directly from the Promissory Notes or the Offering other
than through their normal compensation arrangements.
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EXPERT AND LEGAL OPINION
LEGAL OPINION
Through a majority vote of our shareholders, we changed corporate
securities Counsel to the firm of Davidson Casale Nojima, LLP, formerly known as
Casale Coffee Nojima, LLP. Davidson Casale Nojima, LLP, of , Los Angeles,
California has given its opinion as attorneys-at-law that the Units, and the
securities comprising the Units, when issued under the terms hereof will be
fully paid and non-assessable. Davidson Casale Nojima, LLP has passed on the
validity of the securities being issued but purchasers of the securities offered
by this prospectus should not rely on Davidson Casale Nojima, LLP with respect
to any other matters.
EXPERT OPINION
The financial statements in this Prospectus have been included in
reliance upon the report of Weinberg & Company, P.A., Certified Public
Accountants, and upon the authority of such firm as expert in accounting.
APPENDIX (1)
DILUTION
Dilution represents the difference between the initial public offering
price per share paid by the purchasers in the Offering and the net tangible book
value per share immediately after completion of the offering. Net tangible book
value per share represents the net tangible assets of Alpine (total assets less
total liabilities), divided by the number of shares outstanding upon closing of
the offering. We are a new company without operations or revenues except through
its operating subsidiary.
APPENDIX (2)
LICENSE AGREEMENTS
We have entered into several License Agreements providing for the
international distribution of our films as follows:
On or about May 14, 1998, APII licensed the following rights in Poland
to Nuvola Corporation A.V.V. for seven years with respect to "Lancelot: Guardian
of Time" for a licensing fee of U.S. $6,500:
(a) cinematic rights, theatrical,non-theatrical, and public video;
(b) video rights, home video cassette,commercial video, and home
sell-thru;
(c) ancillary rights, hotels, airlines,and ships flying the Polish
flag and without bookings in the United States;
(d) television rights, pay TV (terrestrial, cable, and satellite),
and free TV (terrestrial, cable, and satellite); and
(e) pay per-view rights, residential,non-residential, and demand
view.
On or about May 13, 1998, APII licensed the following rights in
Yugoslavia to TUCK for seven years with respect to "Tear it Down" and "Killers"
for an aggregate licensing fee of U.S. $6,000:
(a) cinematic rights, theatrical,non-theatrical, and public video;
(b) video rights, home video cassette,commercial video, and home
sell-thru;
(c) ancillary rights, hotels, airlines,and ships flying the
Yugoslavian flag and without bookings in the United States;
(d) television rights, pay TV (terrestrial, cable, and satellite),
and free TV (terrestrial, cable, and satellite); and
(e) pay-per-view rights, residential,non-residential, and demand
view.
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On or about May 18, 1998, APII licensed the following rights in Spain
to Telesis, S.L. for seven years with respect to "Killers" for a licensing fee
of U.S. $15,000:
(a) cinematic rights, theatrical, non-theatrical, and publicvideo;
(b) video rights, home video cassette, commercial video, and home
sell-thru;
(c) ancillary rights, hotels, airlines, and ships flying the
Spanish flag and without bookings in the United States;
(d) television rights, pay TV(terrestrial, cable, and satellite),
and free TV (terrestrial, cable, and satellite); and
(e) pay-per-view rights, residential, non-residential, anddemand
view.
On or about May 19, 1998, APII licensed the following rights in the
United Kingdom, Republic of Ireland, Malta, and Gibraltar to Third Millennium
for seven years with respect to "Killers" for a licensing fee of U.S. $15,000:
video rights, home video cassette, commercial video, and home sell-thru.
On or about November 3, 1998, APII licensed the following rights in
Spain to V.F. Multimedia, S.L. for ten years with respect to "Tear It Down,"
"Resolution," "Paper Dragons," "Lord Protector," "Lancelot," and "Tiger Street"
for a licensing fee of U.S. $70,000:
(a) pay-per-view rights, residential,non-residential, and demand
view;
(b) pay TV rights, terrestrial, cable, andsatellite; and
(c) free TV rights, terrestrial, cable, and satellite.
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On or about November 3, 1998, APII licensed the following rights in the
Philippines to Conrad Luzon for eight years with respect to "Paper Dragons" and
"Lancelot" for a licensing fee of U.S. $2,000:
(a) video rights, home video cassette, commercial video, and home
sell-thru;
(b) pay-per-view rights,residential, non-residential, and demand
view;
(c) pay TV rights, terrestrial,cable, and satellite; and
(d) free TV rights, terrestrial, cable, and satellite.
On or about November 3, 1998, APII licensed the following rights in
Turkey to Inter Medea Teacart, Ltd. for seven years with respect to "Tear It
Down" for a licensing fee of U.S. $5,000:
(a) video rights, home video cassette,commercial video, and home
sell-thru;
(b) ancillary rights, hotels, airlines,and ships flying with the
Turkish flag and without bookings in the United States;
(c) pay-per-view rights, residential, non-residential, demand
view;
(d) pay TV rights, terrestrial, cable, and satellite; and
(e) free TV rights, terrestrial, cable, and satellite.
On or about November 3, 1998, APII licensed the following rights in
Turkey to SAR-An International Co., Ltd. for five years with respect to "Tiger
Street," "Paper Dragons," and a third film to be named for a licensing fee of
U.S. $10,000:
(a) video rights, home video cassette, commercial video, and home
sell-thru;
(b) pay-per-view rights, residential, non-residential, and demand
view;
(c) pay TV rights, terrestrial, cable, and satellite; and
(d) free TVrights, terrestrial, cable, and satellite.
On or about November 3,1998, APII licensed the following rights in the
United Kingdom, Erie, Malta, and Gibraltar to Marquee Pictures for nine years
with respect to "Dead Homes" for a licensing fee of U.S. $10,000:
(a) videorights, home video cassette, commercial video, home
sell-thru, and DID;
(b) ancillary rights, hotels and ships flying the territory flag
and without bookings in the United States; and
(c) television rights, if Distributor securesan agreement for all
television rights, Licensor will split minimum guarantee 50/50
with Distributor.
On or about October 5, 1998, APII licensed the following rights in the
United Kingdom, Republic of Ireland, Malta, and Gibraltar to Third Millennium
Distribution Ltd. for five years with respect to "Tear It Down" for a licensing
fee of U.S. $15,000: video rights, home video cassette, commercial video, and
home sell-thru.
On or about March 2, 1998, APII licensed the following rights in Turkey
to Yen Taal Film for seven years with respect to "Paper Dragons" for a licensing
fee of U.S. $3,000: television rights, pay TV (terrestrial, cable, and
satellite), free TV (terrestrial, cable, and satellite), pay-per-view
(residential, non-residential, and demand view).
On or about February 27,1998, APII licensed the following rights in
Latin America to Global Communications for seven years with respect to "Paper
Dragons" for a licensing fee of U.S. $35,000:
(a) video rights, home videocassette, commercial video, and home
sell-thru;
(b) pay TV rights, terrestrial,cable, and satellite; and
(c) free TV rights, terrestrial, cable, and satellite.
On or about March 2, 1998, APII licensed the following rights in the
Philippines with Conrad Luzon for eight years with respect to "Lord Protector"
for a licensing fee of U.S. $1,500:
(a) video rights, home video cassette,commercial video, and home
sell-thru;
(b) pay-per-view rights, residential,non-residential, and demand
view;
(c) pay TV rights, terrestrial, cable, andsatellite; and
(d) free TV rights, terrestrial, cable, and satellite.
On or about March 2, 1998, APII licensed the following rights in
Malaysia to Suraya Film Production for seven years with respect to "The Gift"
(U.S. $2,000), "Lord Protector" (U.S. $2,000), "Lancelot" (U.S. $2,000) "Salmon
Run" (U.S. $1,000), and "Goodbye Paradise" (U.S. $1,000) for a licensing fee of
U.S. $8,000:
(a) video rights, home video cassette, commercial video, and home
sell-thru;
(b) ancillary rights, hotels, airlines, and ships flying
theMalaysian flag and without booking in the United States;
(c) pay-per-viewrights, residential, non residential, and demand
view;
(d) pay TV rights,terrestrial, cable, and satellite; and
(e) free TV rights, terrestrial, cable,and satellite.
On or about February 27, 1998, APII licensed the following rights in
Mexico to Duplitek S.A. De C.V. for seven years with respect to "Paper Dragons"
for a licensing fee of U.S. $2,500: video rights, home video cassette,
commercial video, and home sell-thru.
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On or about February 27, 1998, APII licensed the following rights in
Mexico to Duplitek S.A. De C.V. for seven years with respect to "Killers" for a
licensing fee of U.S. $7,500:
(a) video rights, home video cassette, commercialvideo, and home
sell-thru;
(b) pay TV rights, cable; and
(c) free TV rights,terrestrial, cable, and satellite.
On or about March 2,1998, APII licensed the following rights in Hong
Kong and Macau to Mel Ah (HK) Co. Ltd. for seven years with respect to "Killers"
and "Resolution" for a licensing fee of U.S. $7,000:
(a) video rights, homevideo cassette, commercial video, home
sell-thru, VCD, DID, and LO;
(b) ancillary rights, hotels, airlines, and ships flying the
territory flag and without bookings in the United States;
(c) pay-per-view rights, residential,non-residential, and demand
view;
(d) pay TV rights, terrestrial, cable, andsatellite; and
(e) free TV rights, terrestrial, cable, and satellite.
On or about March 1, 1998, APII licensed the following rights in India
to Global Film Distributors, Inc. for seven years with respect to "Killers" for
a licensing fee of U.S. $6,100:
(a) cinematic rights, theatrical,non-theatrical, and public video;
(b) video rights, home video cassette,commercial video, and home
sell-thru;
(c) ancillary rights, hotels, airlines,and ships flying the Indian
flag and without bookings in the Units States;
(d) pay-per-view rights, residential, non-residential, and demand
view; and
(e) payTV rights, terrestrial, cable, and satellite; and (0 free
TV rights, terrestrial, cable, and satellite.
On or about February 27,1998, APII licensed the following rights in
Russia, CIS, and the Baltic States in Worldvision Communications for seven years
with respect to "Goodbye Paradise" (U.S. $5,000), "Paper Dragons" (U.S. $5,000),
"Resolution" (U.S. $5,000), and "Pink As The Day She Was Born" (U.S. $5,000) for
a licensing fee of U.S. $20,000:
(a) cinematic rights, theatrical,non-theatrical, and public video;
(b) video rights, home video cassette andcommercial video;
(c) ancillary rights, hotels, airlines, and ships flying the
territory flag and without bookings in the United States;
(d) pay TV rights,terrestrial, cable, and satellite; and
(e) free TV rights, terrestrial, cable, and satellite.
On or about November 3,1998, APII licensed the following rights in
Malaysia to Suraya Film Production for five years with respect to "Tear It
Down" and "Resolution" for a licensing fee of U.S. $2,500:
(a) video rights,home video cassette, commercial video, and home
sell-thru;
(b) pay-per-viewrights, residential, non-residential, and demand
view;
(c) pay TV rights,terrestrial, cable, and satellite; and
(d) free TV rights, terrestrial, cableand satellite.
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On or about March 25, 1998, APII licensed the following rights in
Taiwan to Ta Lai Hwa Jaan Films Co., Ltd. for seven years with respect to
"Killers" for licensing fee of U.S. $7,000:
(a) cinematic rights, theatrical,non-theatrical, and public video;
(b) video rights, home video cassette, commercial video, home
sell-thru, and video gram;
(c) ancillary rights, hotelsairlines, and ships flying the
Taiwanese flag and without bookings in the United States;
(d) pay-per-view rights, residential, non-residential, and demand
view;
(e) pay TV rights, terrestrial, cable, and satellite; and
(f) free TV rights,terrestrial, cable, and satellite.
On or about May 20, 1998, APII licensed the following rights in Taiwan
to Hwa Jaan Films Co. for seven years with respect to "Paper Dragon" for a
licensing fee of U.S. $5,000:
(a) video rights, home video cassette, commercialvideo, home
sell-thru, video gram, and public video;
(b) ancillary rights,hotels, airlines, and ships flying the
Taiwanese flag and without bookings in the United States;
(c) pay-per-view rights, residential, non-residential and demand
view;
(d) pay TV rights, terrestrial, cable, and satellite; and
(e) free TV rights, terrestrial, cable, and satellite.
The following table categorizes the above information by motion picture,
licensed country, licensee and date:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lord Protector Italy La Italiana Produzioni SAS 10/30/96
Poland Novola Corp. A.V.V. 10/30/96
Russia Dream Co. Ltd. 10/30/96
Taiwan USR Entertainment Inc. 10/30/96
Latin America Global Communications 11/18/97
Turkey Yen Guven Filmcilik 11/10/97
Indonesia Indo-American Entertain, Inc. 03/18/97
Thailand Right Pictures Co., Ltd. 03/17/97
Hungary Power Video 03/05/97
Malaysia Suraya Film Production 03/02/98
Philippines Conrad Puzonnn 03/02/98
39
<PAGE>
The Maze Latin America Global Communications 11/18/97
Russia Worldvision Communications 11/06/97
Italy Glickson Investments Ltd. 06/02/97
Lancelot Latin America Global Communications 11/19/97
Indonesia Pt Parkit Films 11/10/97
Turkey Yen Guven Filmcilik 11/10/97
Russia Worldvision Communications 11/06/97
Poland Nuvola Corporation AVV 05/14/98
Malaysia Suraya Film Production 03/02/98
Dead Homes Latin America Global Communications 11/18/97
Thailand Right Pictures Public Company 11/04/97
Destiny of Marty Fine Latin America Global Communications 11/18/97
Killers Uruguay Mark Findley International Corp 11/11/97
France Metropolitan Film Export 06/21/97
Brazil Park Pictures & Entertainment Corp. 06/24/97
Germany Splendid Film Gkein BmbH 06/06/97
Benelux Exclusive Film and Video 05/28/97
Malaysia Sunny Film Corporation Sdn Bhd 05/28/97
Peru, Ecuador Columbia Aiwastar Ltd. 05/28/97
Korea Oz Cinema 03/17/97
Thailand Right Pictures Co., Ltd. 03/17/97
Japan Pueblo Film Distribution Hungary Kft 03/01/97
United Kingdom Third Millennium 05/19/98
Spain Higher Dreams 09/01/98
Former Yugoslavia Zvammir Djordavic 06/15/98
Hong Kong Mei Ah International 03/02/98
Taiwan Ta Lai Hwa Jaaan Films 03/25/98
India Global Film Dispural 03/01/98
Final Game Indonesia Pt. Parkit Films 11/10/97
Hollywood Blvd. Russia Worldvision Communications 11/06/97
Paper Dragon Taiwan HWA Jaan Films Co. 05/20/98
Turkey Yen Taal Film 03/02/98
Mexico Duplitek 03/03/98
Russia Worldvision Communications 02/27/98
Latin America Global Communications 02/27/98
The Gift Malaysia Suraya Film Production 03/02/98
Salmon Run Malaysia Suraya Film Production 03/02/98
Goodbye Paradise Malaysia Suraya Film Production 03/02/98
Russia Worldvision Communications 02/27/98
Resolution Russia Worldvision Communications 02/27/98
</TABLE>
40
<PAGE>
ALPINE ENTERTAINMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
41
<PAGE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
2000 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents 141,908 38,049
Due from non-consolidated affiliates 1,091 1,091
Employee Advances 1,500 1,500
Prepaid Taxes 800 800
Prepaid Expenses 8,650 17,175
Total Current Assets 153,949 58,615
PROPERTY AND EQUIPMENT, NET
9,907 9,222
OTHER ASSETS
Deferred Offering Costs 73,030 50,530
Total Other Assets 73,030 50,530
TOTAL ASSETS 236,886 118,367
------------
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses 37,507 39,985
Accounts payable - related parties 552,621 300,322
Distributor deposits 15,015 15,015
Total Current Liabilities 605,143 355,322
CONVERTIBLE PROMISSORY NOTE PAYABLE 2,192,861 1,702,061
TOTAL LIABILITIES 2,798,004 2,057,383
STOCKHOLDERS DEFICIENCY
Preferred stock, $0.0001 par value, 20 million
shares authorized, zero issued and outstanding - -
Common stock,$0.0001 par value, 100 million
shares authorized, 1,582,500 and 1,582,500
shares issued and outstanding as of June
30, 2000 and 1999, respectively 158 158
Additional paid-in capital 19,199,387 19,199,387
Accumulated deficit (21,760,663) (21,138,561)
TOTAL STOCKHOLDERS DEFICIENCY (2,561,118) (1,939,016)
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY 236,886 118,367
---------------------------------------------
42
<PAGE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
AND JUNE 30, 1999
2000 1999
-------------- --------------
REVENUES
Film license sales $ 56,396 $ 31,302
-------------- --------------
Total Revenue 56,396 31,302
OPERATING EXPENSES
Salaries and Wages 90,209 271,967
Professional Fees 30,680 35,490
General and Administrative 26,294 13,286
General Marketing 5,296 2,271
Direct Film Marketing,
Advertising, Distribution and
Rework Expenses 80,640 219,197
Rental Expenses 43,681 26,209
Depreciation Expense 1,698 1,698
-------------- --------------
Total Operating Expenses 678,498 570,118
LOSS FROM OPERATIONS (622,102) (538,816)
OTHER EXPENSES
Interest Expense 10,710,000 -
NET LOSS $ (11,332,102) $ (538,816)
-------- ============== ==============
NET LOSS PER COMMON SHARE -
BASIC AND DILUTED $ (7.16) $ (0.34)
============== ==============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING DURING
THIS PERIOD - BASIC AND DILUTED 1,582,500 1,576,130
43
<PAGE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND 1999
2000 1999
-------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (11,332,102) (538,816)
Depreciation Expense 1,698 1,698
Non Cash Interest Expense 10,710,000 -
Changes in operating assets and liabilities:
Decrease (increase) in:
Employee advances - 19
Due from affiliates - 75,409
Prepaid Expenses 8,525 -
Increase (decrease) in:
Accounts payable and accrued expenses 249,821 142,021
-------------- --------------
Total adjustments 10,970,044 219,147
Net cash used in operating
activities (362,058) (319,669)
-------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Fixed Assets Purchased (2,383) -
-------------- --------------
Net cash provided by investing
activities (2,383) -
-------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from convertible
promissory note 490,800 368,000
Deferred offering costs (22,500) (12,430)
-------------- --------------
Net cash used in financing activities 468,300 355,570
-------------- --------------
Net increase in cash 103,859 35,901
Cash and Cash equivalents-beginning 38,049 2,087
-------------- --------------
Cash and Cash equivalents-ending $ 141,908 $ 37,988
============== ==============
44
<PAGE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000 AND 2000
----------------------------
NOTE 1 BASIS OF PRESENTATION
------ ---------------------
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles and the rules and regulations of the
Securities and Exchange Commission for interim financial
information. Accordingly, they do not include all the
information and footnotes necessary for a comprehensive
presentation of financial position and results of operations.
It is management's opinion, however, that all material
adjustments (consisting of normal recurring adjustments) have
been made which are necessary for a fair financial statements
presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the
year.
For further information, refer to the audited financial
statements and footnotes included in the company's Form SB-2
for the years ended December 31, 1999 and 1998.
NOTE 2 CONVERTIBLE PROMISSORY NOTE
------ ---------------------------
On May 5, 2000, the Company issued to an affiliate, Alpine
Pictures, Inc. ("API"), a non-interest bearing promissory note
(the "Note") for $1,890,000 due December 31, 2001. The
principal amount to be repaid will be based on the total of
periodic amounts drawn from the Note, which was $140,861 at
June 30, 2000. In accordance with the Note, API agrees to
provide the Company with $778,000 in postproduction services
in addition to $37,000 per week to be funded beginning May 26,
2000 through November 17, 2000. The Note is convertible
immediately in part or in whole, to the common stock of the
Company at a price of $0.90 per share or a total of 2,100,000
shares, as amended for a three-for-ten reverse stock split,
for the $1,890,000. (See Below) In addition, API may use or
assign the Note in part or in full to pay a dividend to its
shareholders or satisfy API's creditors. The Note contains a
beneficial conversion feature whereby the intrinsic value is
computed at the IPO price of $6.00 less the $0.90 conversion
price of the debt or $5.10 per share. Consequently, the
Company will recognize non-cash interest expense in the
aggregate of $10,710,000 on the funding dates.
NOTE 3 RECAPITALIZATION
------ ----------------
In June 2000, the Company's Board of Directors authorized a
three-for-ten reverse stock split of the Company's issued and
outstanding shares. All share quantities, amounts, and per
share data have been retroactively restated in the
accompanying financial statements to give effect to the
reverse to stock split.
NOTE 4 NON-CASH CHARGES TO OPERATIONS
------ ------------------------------
As reflected in the consolidated statements of operations and
cash flows, the Company has incurred significant non-cash
charges to operations during the six months ended June 30,
2000. These charges to operations amounted to $10,710,000 in
the first six months of 2000 for a beneficial conversion
feature on a convertible promissory note (See Note 2).
45
<PAGE>
NOTE 5 GOING CONCERN
------ -------------
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
The Company incurred a net loss of $11,332,102 during the six
months ended December 31, 1999, and has an accumulated deficit
of $21,760,663 at December 31, 1999. These conditions raise
substantial doubt about the Company's ability to continue as a
going concern and if substantial additional funding is not
acquired or alternative sources developed to meet the
Company's working capital needs, management will be required
to curtail its operations.
The Company intends to raise between $1.5 million (minimum)
and $7.5 million (maximum) in the initial public offering
which was submitted in 1999. In addition, the Company will
receive funds and working capital advances from its affiliate
at various dates during 2000 in exchange for a $1,890,000
promissory note. Management believes that actions presently
being taken to obtain additional funding provide the
opportunity for the Company to continue as a going concern.
46
<PAGE>
ALPINE ENTERTAINMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
<PAGE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
CONTENTS
--------
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGE 2 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999
AND 1998
PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
PAGE 4 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
DEFICIENCY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
PAGES 5 - 6 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
PAGES 7 - 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER
31, 1999 AND 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors of:
Alpine Entertainment, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Alpine
Entertainment, Inc. and Subsidiaries as of December 31, 1999 and 1998 and the
related consolidated statements of operations, changes in stockholders'
deficiency, 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.
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 misstatements. 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 provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Alpine
Entertainment, Inc. and Subsidiaries as of December 31, 1999 and 1998 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 13 to
the consolidated financial statements, the Company has suffered recurring losses
from operations and has a large accumulated deficit that raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 13. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 6, 2000
1
<PAGE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
1999 1998
-------------- --------------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 38,049 $ 2,087
Due from non-consolidated affiliates 1,091 76,000
Employee advances 1,500 1,519
Prepaid taxes 800 800
Prepaid expenses 17,175 -
-------------- --------------
Total Current Assets 58,615 80,406
-------------- --------------
PROPERTY AND EQUIPMENT, NET 9,222 10,837
-------------- --------------
OTHER ASSETS
Deferred offering costs 50,530 23,100
-------------- --------------
Total Other Assets 50,530 23,100
-------------- --------------
TOTAL ASSETS $ 118,367 $ 114,343
------------ ============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 39,985 $ 35,986
Accounts payable - related parties 300,322 243,556
Distributor deposits 15,015 16,682
-------------- --------------
Total Current Liabilities 355,322 296,224
CONVERTIBLE PROMISSORY NOTE PAYABLE 1,702,061 -
-------------- --------------
TOTAL LIABILITIES 2,057,383 296,224
-------------- --------------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.0001 par value, 20
million shares authorized, zero issued
and outstanding - -
Common stock, $0.0001 par value, 100 million
shares authorized, 1,582,500 and 1,507,500
shares issued and outstanding as of
December 31, 1999 and 1998, respectively 158 151
Additional paid-in capital 19,199,387 7,571,394
Accumulated deficit (21,138,561) (7,753,246)
-------------- --------------
(1,939,016) (181,701)
Less subscriptions receivable - 180
-------------- --------------
TOTAL STOCKHOLDERS' DEFICIENCY (1,939,016) (181,881)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 118,367 $ 114,343
---------------------------------------------- ============== ==============
See accompanying notes to consolidated financial statements.
2
<PAGE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
1999 1998
-------------- --------------
REVENUES
Film license sales $ 76,762 $ 50,518
-------------- --------------
Total Revenues 76,762 50,518
-------------- --------------
OPERATING EXPENSES
Compensation 665,012 3,610,197
Consulting 299,147 -
Professional fees 188,734 98,420
Direct film marketing, advertising,
distribution and rework expenses 395,295 360,800
General marketing 70,059 11,615
Rental expenses 88,354 45,433
Depreciation 2,815 2,264
General and administrative 124,661 75,414
-------------- --------------
Total Operating Expenses 1,834,077 4,204,143
-------------- --------------
LOSS FROM OPERATIONS (1,757,315) (4,153,625)
OTHER EXPENSES
Interest expense 11,628,000 -
-------------- --------------
NET LOSS $ (13,385,315) $ (4,153,625)
-------- ============== ==============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (8.50) $ (2.76)
============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD - BASIC AND DILUTED 1,574,075 1,507,500
============== ==============
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
<CAPTION>
Additional
Common Stock Limited Partnership Interest Paid-in
Shares Amount Units Amount Capital
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 967,500 $ 97 228.60 $ 1,024,742 $ 3,008,500
Capital from private
placement to minority
interest - - - - 588,937
Merger of limited partnership
representing minority
interests - - (228.60) (1,024,742) 964,478
Issuance of common stock to
affiliate 540,000 54 - - 3,239,946
Subscriptions received - - - - -
Write-off of deferred
offering costs - - - - (230,467)
Net loss 1998 - - - - -
-------------- -------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1998 1,507,500 151 - - 7,571,394
Recapitalization:
Shares issued to original
shareholders of Alpine
Entertainment, Inc. 75,000 7 - - (7)
Subscriptions received - - - - -
Beneficial conversion feature - - - - 11,628,000
Net loss 1999 - - - - -
-------------- -------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1999 1,582,500 $ 158 - $ - $ 19,199,387
-------------------------- ============== ============== ============== ============== ==============
(CONTINUED)
Corporation Partnership
Accumulated Accumulated Subscription
Deficit Deficit Receivable Total
--------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1997 $ (3,599,621) $ (60,264) $ (323) $ 373,131
Capital from private
placement to minority
interest - - - 588,937
Merger of limited partnership
representing minority
interests - 60,264 - -
Issuance of common stock to
affiliate - - (180) 3,239,820
Subscriptions received - - 323 323
Write-off of deferred
offering costs - - - (230,467)
Net loss 1998 (4,153,625) - - (4,153,625)
--------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1998 (7,753,246) - (180) (181,881)
Recapitalization:
Shares issued to original
shareholders of Alpine
Entertainment, Inc. - - - -
Subscriptions received - - 180 180
Beneficial conversion feature - - - 11,628,000
Net loss 1999 (13,385,315) - - (13,385,315)
--------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1999 $ (21,138,561) $ - $ - $ (1,939,016)
-------------------------- =============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
4
</TABLE>
<PAGE>
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
1999 1998
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (13,385,315) $ (4,153,625)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 2,815 2,264
Compensation from capital stock issuance - 3,239,820
Interest expense 11,628,000 -
Changes in operating assets and liabilities:
(Increase) decrease in:
Prepaid expenses (17,175) -
Increase (decrease) in:
Bank overdraft - (6,518)
Accounts payable and accrued expenses 3,999 (985)
Accounts payable - related parties 56,766 -
Other liabilities - (8,591)
Distributor deposits (1,667) 14,676
-------------- --------------
Net cash used in operating activities (1,712,577) (912,959)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Employee advances 19 440
Due from non-consolidated affiliates 74,909 275,715
Purchase of property and equipment (1,200) (5,573)
-------------- --------------
Net cash provided by investing activities 73,728 270,582
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock 180 424,008
Due to affiliate 1,702,061 243,556
Deferred offering costs (27,430) (23,100)
-------------- --------------
Net cash provided by financing activities 1,674,811 644,464
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 35,962 2,087
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,087 -
-------------- --------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 38,049 $ 2,087
--------------------------------------- ============== ==============
See accompanying notes to consolidated financial statements.
5
<PAGE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
---------------------------------------------------------
During 1999, the Company issued 75,000 shares of its common stock
under an agreement and plan of reorganization (See Note 12).
During 1998, 540,000 shares of common stock were issued to certain
directors, officers, and affiliates of APII, which in turn were
recorded as subscriptions receivable at 1998, and paid in the following
year. Non-cash compensation expense was recognized in accordance with
SFAS 123.
During 1998, APII issued 403,441 shares of common stock in exchange for
partnership units in accordance with an Agreement of Merger (See Note
6). The $964,478 value is reflected in the statement of changes in
stockholders' deficiency as additional paid-in capital from merger with
limited partnership minority stockholders.
6
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------ ------------------------------------------
(A) DESCRIPTION OF BUSINESS
---------------------------
Alpine Entertainment, Inc. ("AEI") was incorporated in
Delaware on November 5, 1998 to serve as a vehicle to effect a
merger, exchange of capital stock, asset acquisition or other
business combination with a domestic or foreign private
business.
On February 9, 1999, AEI acquired 69.9% of Alpine Pictures
International, Inc. ("APII") in a transaction accounted for as
a recapitalization of APII (See Note 12). The accompanying
consolidated financial statements reflect the historical
operations of APII for the periods presented and those of AEI
from the recapitalization date.
APII is a California corporation formed in August 1996 and
engaged in the business of distributing, marketing, licensing,
and selling motion picture in all markets, including domestic
and international theatrical exhibition, home video, network
television, cable television, pay per view cable television,
non-theatrical exhibitors such as airlines, schools,
hospitals, libraries, hotels, syndicate television and related
markets. APII may also have the right to license the ancillary
rights for motion pictures for which it enters into
distribution agreements, including soundtrack music and
merchandising items. APII enters into distribution agreements
with affiliated and unaffiliated motion picture producers. The
distribution agreements generally provide for APII to be
allocated a percentage of gross revenues from the motion
pictures which it licenses and distributes, as well as to be
repaid advances, if any, which it makes to producers and to be
reimbursed its distribution and film rework expenses (See Note
10(A).
In February 1999, Alpine Television, Inc. ("ATI"), a wholly
owned subsidiary of AEI, was incorporated in Delaware to
distribute and develop entertainment media projects for
presentation on television, including pay-per-view, pay,
network, syndication or basic cable television.
The consolidated entities are hereinafter referred to as the
"Company."
(B) PRINCIPLES OF CONSOLIDATION
-------------------------------
The consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant
inter-company balances and transactions are eliminated in
consolidation.
(C) USE OF ESTIMATES
--------------------
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements and
revenues and expenses during the reported period. Actual
results could differ from those estimates.
(D) CASH AND CASH EQUIVALENTS
-----------------------------
For purpose of the cash flow statements, the Company considers
all highly liquid investments with original maturities of
three months or less at time of purchase to be cash
equivalents.
7
<PAGE>
(E) PROPERTY AND EQUIPMENT
--------------------------
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs are
charged to expense as incurred. Depreciation is provided using
the straight-line method over the estimated useful lives of
the assets as follows:
Equipment 5 Years
Furniture and fixtures 7 Years
(F) DEFERRED OFFERING COSTS
---------------------------
Direct offering costs of equity offerings are deferred and
charged to equity as proceeds are received. Deferred offering
costs at December 31, 1999 relate to the Form SB-2 offering
(See Note 8).
(G) INCOME TAXES
----------------
The Company accounts for income taxes under the Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("Statement
No. 109"). Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those measured using enacted tax
rates expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a
change in tax rates in recognized is income in the period that
includes the enactment date.
(H) REVENUE RECOGNITION
-----------------------
The Company recognizes revenue in accordance with Statement of
Financial Standards No. 53, "Financial Reporting by Producers
and Distributors of Motion Picture Films" ("SFAS 53"). Under
SFAS 53, a producer or distributor recognizes revenue when the
license fee is known, the film costs have been reasonably
determined, the film has been shipped and accepted by the
sub-licensee distributor and is available for showing, and
collectibility of the full license fee is assured. Based on
Company experience, collectibility of the full license fee is
assured only upon cash receipt from the sub-licensee
distributor. Therefore, under the Company's flat fee type
contracts, revenue is recognized upon receipt of final payment
from and the shipment to and acceptance by the sub-licensee
distributor. Under revenue sharing type contracts, revenue is
recognized as payments are received from the sub-licensee
distributor. Initial deposits on sub-licensee distributor
contracts are recorded as distributor deposits and recognized
when the final payment is received and the film is shipped to
and accepted by the sub-licensee distributor.
(I) DIRECT FILM MARKETING, ADVERTISING, DISTRIBUTION, AND
---------------------------------------------------------
REWORK EXPENSE
--------------
The Company incurs certain film pre-release and post-release
marketing and advertising expenses, distribution expense, and
film rework expenses such as adding subtitles or dubbing or
other editing required to prepare the films for distribution
in foreign geographic markets. The Company considers such
8
<PAGE>
expenses to be period costs and accordingly expenses them in
the period incurred. Contractual terms with each film producer
allow the Company to recoup its marketing, advertising,
distribution and rework costs, subject to limitations as
defined in each contract, from future revenues generated from
the film. Such recoupment amounts, when received, are recorded
as an offset against the current film marketing, advertising,
and rework expense.
(J) CONCENTRATIONS
------------------
There were no financial instruments that potentially subject
the Company to significant concentration of credit risk at
December 31, 1999 and 1998. The following is an approximate
summary of the percentage of film sales by geographic region.
1999 1998
----------- -----------
Japan 25% -
France 20% 6%
Spain 18% -
United States 13% -
Latin America 10% 20%
Netherlands 6% -
England 3% 8%
Hong Kong 2% -
Indonesia 1% -
Thailand 1% 5%
Philippines 1% 10%
Italy - 25%
Germany - 12%
Argentina - 7%
Taiwan - 4%
Russia - 3%
----------- -----------
100% 100%
=========== ===========
(K) PER SHARE DATA
------------------
Net loss per common share for the years ended December 31,
1999 and 1998 is computed by dividing net loss by the weighted
average common shares outstanding during the year as defined
by Financial Accounting Standards, No. 128, "Earnings per
Share". The weighted average shares at December 31, 1998 have
been retroactively restated to reflect a nominal issuance of
540,000 shares on December 31, 1998 as if the issuance
occurred on January 1, 1998, in accordance with SAB Topic 4-D
(See Note 4(B)). In addition the weighted average shares at
December 31, 1998 and 1999 have been retroactively restated to
reflect only the common shares issued to the majority
shareholders of APII at the recapitalization date (See Notes
1(A) and 12) and the three-for-ten reverse stock split
authorized in June 2000, before the issuance of the
accompanying consolidated financial statements. (See Note 15)
As of December 31, 1999, there were 2,280,000 shares for a
convertible promissory note that could potentially dilute
basic EPS in the future which were not included in the
computation of diluted earnings per share due to their
anti-dilutive effect.
(L) RECLASSIFICATIONS
---------------------
Certain amounts in 1998 financial statements have been
reclassified to conform to the 1999 presentation.
9
<PAGE>
NOTE 2 PROPERTY AND EQUIPMENT
------ ----------------------
Property and equipment at December 31, 1999 and 1998 consists
of the following:
1999 1998
-------------- --------------
Equipment $ 11,722 $ 10,522
Furniture and fixtures 4,377 4,377
-------------- --------------
16,099 14,899
Less accumulated depreciation (6,877) (4,062)
-------------- --------------
$ 9,222 $ 10,837
============== ==============
NOTE 3 CONVERTIBLE PROMISSORY NOTE
------ ---------------------------
On August 6, 1999, the Company issued to an affiliate, Alpine
Pictures, Inc., a non-interest bearing convertible promissory
note (the "Note") for $2,052,000 due December 31, 2001. The
principal amount to be repaid is based on the total of
periodic cash amounts drawn from the Note, which was
$1,702,061 at December 31, 1999. The remaining amount was
funded after December 31, 1999. The Note is convertible
immediately in part or in whole to common stock of the Company
for the price of $0.90 per share or a total of 2,280,000
shares, amended for a three-for-ten stock split, (See Notes
4(B) and 15). In addition, Alpine Pictures, Inc. may use or
assign the Note in part or in full to pay a dividend to its
shareholders or satisfy Alpine Pictures, Inc.'s creditors. The
Note contains a beneficial conversion feature whereby the
intrinsic value is computed at the proposed IPO price of $6.00
less the $0.90 conversion price of the debt or $5.10 per share
(See Note 8). Consequently, the Company recognized non-cash
interest in the aggregate of $11,628,000 during 1999 based on
the commitment to fund the $2,052,000 as of December 31, 1999
(See Note 15 for additional convertible promissory note after
year end).
NOTE 4 STOCKHOLDERS' DEFICIENCY
------ ------------------------
(A) PREFERRED STOCK
-------------------
The Company is authorized to issue 20,000,000 shares of
preferred stock at $.0001 par value, with such designations,
voting and other rights preferences as may be determined from
time to time by the Board of Directors. No preferred shares
have been issued through the date of this report.
(B) COMMON STOCK
----------------
The Company is authorized to issue 100,000,000 shares of
common stock at $.0001 par value.
The Company authorized a three-for-ten reverse stock split
during June 2000, before the issuance of the accompanying
financial statements. All share quantities and amounts in the
accompanying consolidated financial statements have been
retroactively restated to effect the reverse stock split. (See
Note 15)
During 1999, the Company issued 75,000 shares of its common
stock to acquire 69.9% of Alpine Pictures International, Inc.
(See Note 12).
10
<PAGE>
During 1998, APII issued 540,000 common shares to an affiliate
for a $180 subscription receivable. APII recognized $3,239,820
in compensation expense based upon the proposed $6.00 public
offering price as effected by a three-for-ten reverse stock
split on the issued and outstanding shares. (See Note 15) The
resulting valuation price is $1.80 per share.
NOTE 5 PARTNERSHIP AGREEMENT
------ ---------------------
In 1996, a limited partnership was formed known as Alpine
Releasing Partners I, LP ("ARP") (See Note 6). Alpine Pictures
International, Inc. ("APII") was named as general partner.
Under the terms of the partnership agreement, (a) the
partnership shall continue for ten (10) years unless
terminated sooner by the partners, (b) in general, income and
loss shall be allocated annually to the general partner 1% and
limited partners 99%. In February 1998 ARP was merged into
APII (See Note 6).
NOTE 6 MERGER OF ALPINE PICTURES INTERNATIONAL, INC. AND ALPINE
------ --------------------------------------------------------
RELEASING PARTNERS I, LP
------------------------
On December 17, 1997, APII entered into an Agreement of Merger
(the "Agreement") to merge ARP into APII with APII as the
surviving entity. Under the terms of the Agreement, the
effective date of the merger was February 15, 1998 and APII
issued one share of its common stock for each $0.85 of limited
partnership interest. This resulted in a total issuance by
APII of 403,441 shares of its common stock to the limited
partners. The $964,478 value is reflected in the statement of
changes in stockholders deficiency as additional paid-in
capital from merger with limited partnership minority
shareholders.
NOTE 7 PRIVATE PLACEMENTS
------ ------------------
In July 1997 the APII issued a Private Placement Memorandum
(the "Placement") under the Securities and Exchange
Commission Regulation CE Section 3(b), Rule 1001, of the
Securities Act of 1933, as amended, and under Section 25102(n)
of the California Corporations Code to offer 294,000 shares of
its common stock, no par value, with an option to increase the
offering by up to an additional 36,000 shares for a maximum
offering of 330,000 shares. Under terms of the Placement, the
shares were offered on a "best efforts" basis at $1.00 per
share in minimum units of 20,000 shares with no minimum
capitalization required by APII.
Under the Placement, which terminated in 1998, APII issued
243,491 shares of common stock for total proceeds of $811,637
of which 176,681 shares were issued during 1998 for proceeds
to APII of $588,937. In addition, offering expenses of
$319,605 were incurred under the private placement, of
which $230,467 was charged against equity in 1998. These share
quantities have been adjusted for the reverse stock split.
(See Note 15)
NOTE 8 LETTER OF INTENT FOR INITIAL PUBLIC OFFERING
------ --------------------------------------------
In May 1999, the Company executed a letter of intent (the
"Letter") with an investment banking firm whereby the
investment banking firm is to make a best efforts initial
public offering (the "offering") of units of common stock and
warrants of the Company at $6.00 per unit, aggregating between
11
<PAGE>
$1.5 million (minimum) and $7.5 million (maximum). Under the
Letter, the Company is committed to pay the investment banking
firm $5,000 per month. In addition, certain offering expenses
incurred by the investment banking firm, up to $85,000, are
reimbursable by the Company whether or not the offering is
consummated.
On September 9, 1999, Form SB-2/A was filed relating to the
above offering. As of December 31, 1999, no shares were issued
under this offering. As of the date of the accompanying
audit report the Form SB-2/A has not become effective and is
pending further comments from the Securities and Exchange
Commission.
NOTE 9 INCOME TAXES
------ ------------
There was no current income tax expense or benefit in 1999 and
1998 due to the Company's net losses. The tax effects of
temporary differences that give rise to significant portions
of deferred tax assets at December 31 are as follows:
1999 1998
-------------- --------------
Deferred tax assets:
Net operating loss carryforward $ 1,100,000 $ 513,000
Stock based compensation 2,078,941 2,078,941
-------------- --------------
Total gross deferred tax assets 3,188,941 2,591,941
Less valuation allowance (3,188,941) (2,591,941)
-------------- --------------
Net deferred tax assets $ - $ -
============== ==============
At December 31, 1999, the Company had net operating loss
carryforwards of approximately $3,265,000 for income tax
purposes, available to offset future taxable income expiring
on various dates through 2019. The valuation allowance for
deferred tax assets as of January 1, 1999 was approximately
$2,591,941. The net change in the total valuation allowance
for the year ended December 31, 1999 was an increase of
approximately $597,000.
NOTE 10 OPERATING AGREEMENTS
------- --------------------
(A) AGREEMENTS WITH PRODUCERS/OWNERS
------------------------------------
As part of its primary operations, the Company enters into
agreements with various producers/owners (the "owner") of
feature films (the "film") to act as distributor agent of the
owner for the sales, collections and servicing of the film in
specified media and geographic territories, for a stipulated
term. Under the agreements, various provisions exist for
extension and/or cancellation of the contracts, limited
reworking of the film to meet local country requirements, and
sublicensing of distribution by the Company. The Company
generally retains a percentage fee based on gross receipts
from film sales, as defined in the agreements, and is allowed
reimbursement of out-of-pocket sales, marketing, distribution,
servicing, rework technical materials, and other customary
expenses incurred up to a stipulated cap from the remaining
gross receipts. The balance after the Company's fee and
out-of-pocket expenses is payable to the owner. Under certain
agreements the owner is paid a stipulated percentage out of
gross receipts before any fee and/or expense distributions
to the Company.
12
<PAGE>
(B) LICENSING AGREEMENTS WITH DISTRIBUTORS
------------------------------------------
The Company enters into licensing agreements with
sub-distributors for distribution of films for which the
Company is the agent of producers/owners, as discussed above.
The agreements generally stipulate a fixed fee and less
commonly, royalty fees or a combination thereof allowing the
sub-distributor to distribute certain films within a specified
territory. The Company generally obtains a non-refundable
deposit from distributors, which is recorded as a deposit
liability until the film is delivered to and balance received
from the distributor, or the agreement is canceled.
(C) CONSULTING AGREEMENT
------------------------
In August 1998, APII entered into an agreement with a firm
whereby the firm was to provide certain stipulated services
relating to positioning APII to enter the public capital
markets.
The firm provided a holding company to effect a business
combination (See Note 12). The holding company was 100% owned
by the firm before the business combination. In
consideration for these services APII paid the firm $60,000 in
1998 and $40,000 in 1999 which is included in the statement of
operations as professional fees.
In addition, the firm was to receive a five-year transferable
warrant to acquire up to 250,000 shares of the holding
company's common stock at the purchase price of $1.00 per
share. As of the date of the accompanying audit report the
Company has not issued these warrants and has not amended the
agreement to change the quantity of warrants pursuant to the
reverse stock-split. (See Note 15)
(D) OPERATING LEASE
-------------------
On August 3, 1999, ATV entered into an operating lease
agreement commencing on April 15, 2000 and terminating on
April 14, 2003 for $11,772 per month. The lease contains an
option to extend for a two-year period.
Future minimum lease payments at December 31, 1999 are as
follows:
December 31, 2000 $ 94,176
2001 141,264
2002 141,264
2003 47,088
--------------
$ 423,792
==============
(E) SERVICE AGREEMENTS
----------------------
On September 27, 1999, ATV entered into a service agreement
with a company (the "Lender") for the services of an
individual (the "Artist") to serve as an officer of ATV. The
agreement is for a three-year period commencing October 1,
1999. The compensation for these services is as follows:
Year #1
-------
The Artist will receive a $250,000 annual salary. The
Lender will receive 150,000 options to purchase shares
of the Company's common stock at the pre IPO price of
$3.00 per share to be exercised when fully vested but
not before October 1, 2000. In addition, the Lender will
also be awarded 150,000 shares of the Company's common
stock upon the official date of the IPO.
13
<PAGE>
Year #2
-------
The Artist will receive a $375,000 annual salary. The
Lender will receive 150,000 options to purchase the
Company's common stock at the IPO price of $3.00 per
share to be exercised when fully vested but not before
October 1, 2001. In addition, the Lender will be awarded
150,000 shares of common stock in October 1, 2000.
Year #3
-------
The Artist will receive a $400,000 annual salary. The
Lender will receive 200,000 options to purchase the
Company's common stock at the IPO price of $3.00 per
share to be exercised when fully vested but not before
October 1, 2002. In addition, the Lender will be awarded
200,000 shares of common stock in October 1, 2001.
In addition, the Lender will receive certain contingent
payments as follows: (a) 8% of ATV's share of the net
profits derived for all projects developed and (b)
contingent payments upon the obtaining by the
Lender/Artist of investment capital for ATV starting at
5% for the first one million dollars and decreasing by
1% for each subsequent one million dollars.
(F) EMPLOYMENT AGREEMENT
------------------------
On September 27, 1999, ATV entered into an employment
agreement with an individual to serve as an officer of ATV.
The agreement is for a three-year period commencing October 1,
1999. The compensation for these services is as follows:
Year #1
-------
The individual will receive a $250,000 annual salary and
will receive 150,000 options to purchase shares of the
Company's common stock at the pre IPO price of $3.00 per
share to be exercised when fully vested but not before
October 1, 2000. In addition, the individual will also
be awarded 150,000 shares of the Company's common stock
upon the official date of the IPO.
Year #2
-------
The individual will receive a $375,000 annual salary and
will receive 150,000 options to purchase the Company's
common stock at the IPO price of $3.00 per share to be
exercises when fully vested but not before October 1,
2001. In addition the individual will be awarded 150,000
shares of common stock in October 1, 2000.
Year #3
-------
The individual will receive a $400,000 annual salary and
will receive 200,000 options to purchase the Company's
common stock at the IPO price of $3.00 per share to be
exercised when fully vested but not before October 1,
2002. In addition, the individual will be awarded
200,000 shares of common stock in October 1, 2001.
14
<PAGE>
In addition, the individual will receive certain
contingent payments as follows: (a) 8% of ATV's share of
the net profits derived for all projects developed and
(b) contingent payments upon the obtaining by the
individual of the investment capital for ATV starting at
5% for the first one million dollars and decreasing by
1% for each subsequent one million dollars.
NOTE 11 RELATED PARTY TRANSACTIONS
------- --------------------------
During 1998 and 1997 investor lead lists were purchased from a
non-combined affiliate, First National Information Network,
Inc. (FNIN) for an aggregate amount of $163,457.
Such investor lists were used in marketing campaigns to sell
shares of common stock under the private placements (See Note
7). Accordingly, $118,604 was charged against equity in 1998.
The Company also periodically advanced funds to FNIN. The net
effect of amounts due to FNIN for investors lead list
purchases and advances due from FNIN totaled $76,000 at
December 31, 1998, and is reflected as due from non-combined
affiliates in current assets at that date. The amount of
$76,000 was repaid in January 1999.
During 1998 the Company issued 540,000 shares of common stock
to an affiliate, Alpine Pictures, Inc. (See Note 3(B)).
The Company's affiliate, Alpine Pictures, Inc. borrows funds
from, or lends funds to, and pays certain shared office
expenses of the Company. The net effect of these transactions
resulted in a due to affiliate of $300,322 and $243,556 at
December 31, 1999 and 1998, respectively.
See Notes 3 and 15 for the issuance of convertible promissory
notes to Alpine Pictures, Inc.
The Company periodically enters into distribution agreements
with Alpine Pictures, Inc. to distribute films produced by
this affiliate.
NOTE 12 AGREEMENT AND PLAN OF REORGANIZATION
------- ------------------------------------
Under an agreement dated February 9, 1999, effective February
10, 1999, (the ("Effective Date"), Alpine Entertainment, Inc.,
("AEI") acquired approximately 69.9% of the issued and
outstanding shares of common stock of Alpine Pictures
International, Inc. ("APII") from consenting stockholders in
exchange for common stock of AEI. The 30.1% minority interest
of non-consenting stockholders is comprised of the shares held
by the former limited partners of ARP (See Note 5) that they
received from APII under the terms of the Merger Agreement
discussed in Note 6 and all shares issued under the private
placements. (See Note 7)
Under the terms of the agreement, shares were exchanged at a
ratio of one share of AEI for every share of the APII. As a
result of the exchange, APII became a majority owned
subsidiary of AEI and the consenting stockholders of APII
became stockholders of approximately 96% of AEI.
Generally Accepted Accounting Principles require that the
company whose shareholders retain a majority interest in a
combined business be treated as the acquirer for accounting
purposes. As a result, the acquisition was treated as an
acquisition of AEI by APII and a recapitalization of APII. The
15
<PAGE>
Company's financial statements include the following: (1) The
Balance Sheet consists of APII's net assets at historical cost
and AEI's net assets at historical cost, (2) the
non-consenting stockholders are treated in the consolidated
financial statements as minority stockholders of APII, the
legal subsidiary, and (3) the Statement of Operations includes
APII's operations for the period presented and AEI's
operations from the date of acquisition.
At the Effective Date, a minority interest value was not
recorded since there was a net stockholders' deficiency in
APII. The Company decreased the carrying value of the common
stock by $65 to reflect the issuance of 1,507,500 shares only
to majority stockholders of APII and charged the $65 to
additional paid-in capital. As of December 31, 1999, due to
continuing losses in 1999, there is no liability to the
minority stockholders of APII since AEI acquired the net
liabilities of APII and APII incurred a net loss for the year
ended December 31, 1999.
NOTE 13 GOING CONCERN
------- -------------
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
The Company incurred a net loss of $13,385,315 during the year
ended December 31, 1999, had a negative cash flow from
operating activities of $1,712,577, and has an accumulated
deficit of $21,138,561 at December 31, 1999. These conditions
raise substantial doubt about the Company's ability to
continue as a going concern and if substantial additional
funding is not acquired or alternative sources developed to
meet the Company's working capital needs, management will be
required to curtail its operations.
The Company intends to raise between $1.5 million (minimum)
and $7.5 million (maximum) in the initial public offering
which was submitted in 1999 (See Note 8). In addition, the
Company will receive funds and working capital advances from
its affiliate at various dates during 2000 in exchange for a
$1,890,000 promissory note (See Note 15). Management believes
that actions presently being taken to obtain additional
funding provide the opportunity for the Company to continue as
a going concern.
NOTE 14 NON-CASH CHARGES TO OPERATIONS
------- ------------------------------
As reflected in the consolidated statements of operations and
cash flows, the Company has incurred significant non-cash
charges to operations during the years ended December 31, 1999
and 1998. These charges to operations amounted to $3,239,820
in 1998 for stock based compensation (See Note 4(B)) and
$11,628,000 in 1999 for a beneficial conversion feature on a
convertible promissory note (See Note 3). In addition, the
Company will recognize approximately $10,710,000 of non-cash
interest expense in 2000 relating to a beneficial conversion
feature (See Note 15).
NOTE 15 SUBSEQUENT EVENTS
------- -----------------
On May 5, 2000, the Company issued to an affiliate, Alpine
Pictures, Inc. ("API"), a non-interest bearing promissory note
(the "Note") for $1,890,000 due December 31, 2001. The
principal amount to be repaid will be based on the total of
periodic amounts drawn from the Note, which was $150,000 at
May 1, 2000. Pursuant to the Note, API agrees to provide the
Company with $778,000 in postproduction services in addition
to $37,000 per week to be funded beginning May 26, 2000
through November 17, 2000. The Note is convertible immediately
16
<PAGE>
in part or in whole, to the common stock of the Company at a
price of $0.90 per share or a total of 2,100,000 shares, as
amended for a three-for-ten reverse stock split, for the
$1,890,000. (See Below) In addition, API may use or assign the
Note in part or in full to pay a dividend to its shareholders
or satisfy API's creditors. The Note contains a beneficial
conversion feature whereby the intrinsic value is computed at
the IPO price of $6.00 less the $0.90 conversion price of the
debt or $5.10 per share. Consequently, the Company will
recognize non-cash interest expense in the aggregate of
$10,710,000 on the funding dates.
In June 2000, the Company's Board of Directors authorized a
three-for-ten reverse stock split of the Company's issued and
outstanding shares. All share quantities, amounts, and per
share data have been retroactively restated in the
accompanying financial statements to give effect to the
reverse to stock split.
17
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
-----------------------------------
(FORMERLY ALPINE PICTURES
-------------------------
INTERNATIONAL, INC. AND AFFILIATE
---------------------------------
(A LIMITED PARTNERSHIP))
------------------------
FINANCIAL STATEMENTS
--------------------
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
<PAGE>
CONTENTS
--------
PAGE 1 - INDEPENDENT AUDITORS REPORT
PAGE 2 - BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997
PAGE 3 - STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
PAGE 4 - STATEMENT OF CHANGES IN EQUITY FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997
PAGE 5 - 6 - STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
PAGE 7 - 16 - NOTES TO FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1998 AND 1997
<PAGE>
INDEPENDENT AUDITORS REPORT
---------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Alpine Pictures International, Inc.
We have audited the accompanying balance sheet of Alpine Pictures International,
Inc. as of December 31, 1998 and the combined balance sheet of Alpine Pictures
International, Inc. and affiliate (a limited partnership) as of December 31,
1997 and the related statements of operations, changes in equity (deficit), and
cash flows for the year ended December 31, 1998 and the related combined
statements of operations, changes in equity (deficit), and cash flows for the
year ended December 31, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alpine Pictures International,
Inc. as of December 31, 1998 and the financial position of Alpine Pictures
International, Inc. and affiliate (a limited partnership) as of December 31,
1997 and the results of their operations and their cash flows for the two years
then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company has suffered recurring losses from operations
and has a large accumulated deficit that raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 11. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 6, 1999 (except for Note 12(c) as to which
the date is October 15, 1999
1
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
--------------------------
ASSETS
------
1997
1998 Combined
-------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ 2,087 $ -
Due from non-combined affiliates 76,000 260,715
Employee advances 1,519 1,959
Prepaid taxes 800 800
-------------- --------------
Total Current Assets 80,406 263,474
-------------- --------------
DUE FROM NON-COMBINED AFFILIATE - 91,000
-------------- --------------
PROPERTY AND EQUIPMENT, NET 10,837 7,528
-------------- --------------
OTHER ASSETS
Deferred offering costs 23,100 65,215
-------------- --------------
Total Other Assets 23,100 65,215
-------------- --------------
TOTAL ASSETS $ 114,343 $ 427,217
------------ ============== ==============
LIABILITIES AND EQUITY (DEFICIT)
--------------------------------
CURRENT LIABILITIES
Bank overdraft $ - $ 6,518
Accounts payable and accrued expenses 35,986 36,971
Due to affiliate 243,556 -
Other current liabilities - 8,591
Distributor deposits 16,682 2,006
-------------- --------------
Total Current Liabilities 296,224 54,086
-------------- --------------
TOTAL LIABILITIES 296,224 54,086
-------------- --------------
COMMITMENTS AND CONTINGENCIES
EQUITY (DEFICIT) (181,881) 373,131
-------------- --------------
TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 114,343 $ 427,217
-------------------------------------- ============== ==============
See accompanying notes to financial statements.
2
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
1997
1998 Combined
-------------- --------------
REVENUES
Film license sales $ 50,518 $ 74,532
-------------- --------------
Total Revenues 50,518 74,532
-------------- --------------
OPERATING EXPENSES
Compensation 3,610,197 3,104,239
Commissions - 20,628
Professional fees 98,420 101,787
General and administrative 75,414 138,146
General marketing 11,615 10,953
Direct film marketing, advertising,
distribution and rework expenses 360,800 270,554
Rental expenses 45,433 12,744
Depreciation 2,264 1,798
-------------- --------------
Total Operating Expenses 4,204,143 3,660,849
-------------- --------------
NET LOSS FROM OPERATIONS (4,153,625) (3,586,317)
-------------- --------------
OTHER INCOME
Other income - 3,909
-------------- --------------
NET LOSS $ (4,153,625) $ (3,582,408)
-------- ============== ==============
Net loss per common share basic and diluted $ (0.61) $ (1.66)
============== ==============
Weighted average number of
shares outstanding during
the period basic and diluted 6,858,349 2,150,000
============== ==============
See accompanying notes to financial statements.
3
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
FOR THE PERIOD FROM DECEMBER 31, 1996 TO DECEMBER 31, 1998
----------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK LIMITED
------------------------------ PARTNERSHIP INTEREST
SHARES AMOUNT UNITS AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 350,000 $ 35 48.93 $ 225,972
Issuance of common stock pursuant
to private placement 222,700 222,700 - -
Issuance of limited partnership units - - 179.67 898,341
Issuance of common stock to employees 2,875,000 2,875,000 - -
Write-off of deferred offering costs - (89,138) - (99,571)
Net loss 1997 - - - -
-------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1997 3,447,700 $ 3,008,597 228.60 $ 1,024,742
Issuance of common stock pursuant
to private placement 588,937 588,937 - -
Issuance of common stock
in exchange for partnership units 1,344,804 964,478 - -
Cancellation of partnership units - - (228.60) (1,024,742)
Issuance of common stock to affiliate 1,800,000 3,240,000 - -
Subscriptions received - - - -
Write-off of deferred offering costs - (230,467) - -
Net loss 1998 - - - -
-------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1998 7,181,441 $ 7,571,545 - $ -
-------------------------- ============== ============== ============== ==============
(CONTINUED)
<PAGE>
CORPORATION PARTNERSHIP
ACCUMULATED ACCUMULATED SUBSCRIPTION
DEFICIT DEFICIT RECEIVABLE TOTAL
-------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1996 $ (53,289) $ (24,188) $ (35) $ 148,495
Issuance of common stock pursuant
to private placement - - - 222,700
Issuance of limited partnership units - - - 898,341
Issuance of common stock to employees - - (288) 2,874,712
Write-off of deferred offering costs - - - (188,709)
Net loss 1997 (3,546,332) (36,076) - (3,582,408)
-------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1997 $ (3,599,621) $ (60,264) (323) $ 373,131
Issuance of common stock pursuant
to private placement - - - 588,937
Issuance of common stock
in exchange for partnership units - - - 964,478
Cancellation of partnership units - 60,264 - (964,478)
Issuance of common stock to affiliate - - (180) 3,239,820
Subscriptions received - - 323 323
Write-off of deferred offering costs - - - (230,467)
Net loss 1998 (4,153,625) - - (4,153,625)
-------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1998 $ (7,753,246) $ - (180) $ (181,881)
-------------------------- ============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
STATEMENTS OF CASH FLOWS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
1997
1998 Combined
-------------- --------------
Cash flows from operating activities:
Net loss $ (4,153,625) $ (3,582,408)
-------------- --------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 2,264 1,798
Compensation expense on capital
stock issuances 3,239,820 2,874,712
Changes in operating assets and liabilities:
(Increase) decrease in:
Prepaid taxes - (800)
Increase (decrease)in:
Bank overdraft (6,518) 6,518
Accounts payable and accrued expenses (985) 33,371
Other liabilities (8,591) 8,591
Distributor deposits 14,676 2,006
-------------- --------------
Total adjustments 3,240,666 2,926,196
-------------- --------------
Net cash used in operating activities (912,959) (656,212)
-------------- --------------
Cash flows from investing activities:
Employee advances 440 (1,959)
Due from non-combined affiliates 275,715 (253,348)
Purchase of property and equipment (5,573) (9,326)
-------------- --------------
Net cash provided by (used in)
investing activities 270,582 (264,633)
-------------- --------------
Cash flows from financing activities:
Proceeds from the issuance of common stock 424,008 133,562
Proceeds from the issuance of limited
partnership units - 798,770
Due to affiliate 243,556 -
Deferred offering costs (23,100) (60,798)
-------------- --------------
Net cash provided by financing activities 644,464 871,534
-------------- --------------
Net increase (decrease) in cash 2,087 (49,311)
Cash and cash equivalents-beginning - 49,311
-------------- --------------
CASH AND CASH EQUIVALENTS-ENDING $ 2,087 $ -
-------------------------------- ============== ==============
See accompanying notes to financial statements.
5
<PAGE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
---------------------------------------------------------
During 1997 and 1998 2,875,000 and 1,800,000 shares, respectively of
common stock were issued to certain directors, officers, and affiliates
of the Company, which in turn were recorded as subscriptions receivable
at December 31, 1997 and 1998, and paid in the following year. Non-cash
compensation expense was recognized pursuant to SFAS 123. (See Note 3)
During 1998, the Corporation issued 1,344,804 shares of common stock in
exchange for the partnership units pursuant to the merger (See Note 5).
See accompanying notes to financial statements.
6
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
(A) Description of Business
---------------------------
Alpine Pictures International, Inc. (the "Corporation") is a California
corporation formed in August 1996 and engaged in the business of
distributing, marketing, licensing, and selling motion pictures in all
markets, including domestic and international theatrical exhibition,
home video, network television, cable television, pay per view cable
television, non-theatrical exhibitors such as airlines, schools,
hospitals, libraries, hotels, syndicated television and related
markets. The Corporation may also have the right to license the
ancillary rights for motion pictures for which it enters into
distribution agreements, including soundtrack music and merchandising
items. The Corporation enters into distribution agreements with
affiliated and unaffiliated motion picture producers. The distribution
agreements generally provide for the Corporation to be allocated a
percentage of gross revenues from the motion pictures which it licenses
and distributes, as well as to be repaid advances, if any, which it
makes to producers and to be reimbursed its distribution and film
rework expenses. (See Note 8). Alpine Releasing Partners I, L.P., the
Corporation's controlled affiliate, was a California Limited
Partnership (the "Partnership") formed in July 1996 to finance the
acquisition and distribution of certain feature length motion pictures
principally in conjunction with the Corporation who was the general
partner. The partnership was merged into the Corporation in February
1998. (See Note 5).
The combined entities are hereafter referred to as the "Company."
In February 1999, the Company was acquired by Alpine Entertainment,
Inc. ("AEInc.") in a transaction accounted for as a recapitalization of
the Company. (See Note 12)
(B) PRINCIPLES OF COMBINATION
-----------------------------
The combined financial statements as of December 31, 1997 included the
accounts of the Corporation and its controlled affiliate, Alpine
Releasing Partners I, L.P. All significant intercompany balances and
transactions were eliminated in combination.
(C) USE OF ESTIMATES
--------------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
7
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
(D) CASH AND CASH EQUIVALENTS
-----------------------------
For purpose of the cash flow statements, the Company considers all
highly liquid investments with original maturities of three months or
less at time of purchase to be cash equivalents.
(E) PROPERTY AND EQUIPMENT
--------------------------
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures from maintenance and repairs are charged to
expense as incurred. Depreciation is provided using the straight-line
method over the estimated useful life's of the assets as follows:
Equipment 5 years
Furniture and fixtures 7 years
(F) DEFERRED OFFERING COSTS
---------------------------
Direct offering cost of equity offerings are deferred and charged to
equity as proceeds are received. Deferred offering costs at December
31, 1998 relate to the Form SB-2 offering (See Note 12(B)) while
deferred offering costs at December 31, 1997 related to the private
placement and were fully charged to equity in 1998 (See Note 6).
(G) INCOME TAXES
----------------
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109.
"Accounting for Income Taxes" ("Statement No.109"). Under Statement
109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those measured using enacted tax rates expected to be
recovered or settled. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates in recognized is income
in the period that includes the enactment date.
(H) REVENUE RECOGNITION
-----------------------
The Company recognizes revenue in accordance with Statement of
Financial Standards No. 53, "Financial Reporting by Producers and
Distributors of Motion Picture Films" ("SFAS 53"). Under SFAS 53, a
producer or distributor recognizes revenue when the license fee is
known, the film costs have been reasonably determined, the film has
been shipped and accepted by the sub-licensee distributor and is
available for showing, and collectability of the full license fee is
assured. Based on Company experience, collectability of the full
license fee is assured only upon cash receipt from the sub-licensee
distributor. Therefore, under the Company's flat fee type contracts,
revenue is recognized upon receipt of final payment from and the
shipment to and acceptance by the sub-licensee distributor. Under
revenue sharing type contracts, revenue is recognized as payments are
received from the sub-licensee distributor. Initial deposits on
sub-licensee distributor contracts are recorded as distributor deposits
and recognized when the final payment is received and the film is
shipped to and accepted by the sub-licensee distributor.
8
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
(I) DIRECT FILM MARKETING, ADVERTISING, DISTRIBUTION AND REWORK EXPENSE
-----------------------------------------------------------------------
The Company incurs certain film pre-release and post-release marketing
and advertising expenses, distribution expense, and film rework
expenses such as adding subtitles or dubbing, or other editing required
to prepare the films for distribution in foreign geographic markets.
The Company considers such expenses to be period costs and accordingly
expenses them in the period incurred. Contractual terms with each film
producer allow the Company to recoup its marketing, advertising,
distribution and rework costs, subject to limitations as defined in
each contract, from future revenues generated from the film. Such
recovered amounts, when received, are recorded as an offset against the
current film marketing, advertising and rework expense.
(J) CONCENTRATIONS
------------------
There were no financial instruments which potentially subject the
Company to significant concentration of credit risk at December 31,
1998 and 1997.
The following is an approximate summary of the percentage of film sales
by geographic region.
1998 1997
---- ----
Italy 25% 45%
Latin America 20% -
Germany 12% 19%
Philippines 10% -
England 8% -
Argentina 7% -
France 6% -
Indonesia - 8%
Poland - 7%
Thailand 5% 2%
Taiwan 4% -
Peru - 1%
Russia 3% 18%
---- ----
100% 100%
==== ====
(K) PER SHARE DATA
------------------
Net loss per common share for the year ended December 31, 1998 and 1997
is required to be computed by dividing net loss by the weighted average
common shares outstanding during the year as defined by Financial
Accounting Standards, No. 128, "Earnings per Share". However, the
weighted average shares have been retroactively restated to reflect a
nominal issuance of 1,800,000 shares on December 31, 1998 as if the
issuance occurred on January 1, 1997 pursuant to SAB Topic 4-D and to
reflect only the majority shareholders outstanding common stock
pursuant to the reorganization. (See Note 12)
9
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
(L) RECLASSIFICATIONS
---------------------
Certain amounts in 1997 financial statements have been reclassified to
conform to the 1998 presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment at December 31, 1998 and 1997 consists of the
following:
1998 1997
-------------- --------------
Equipment $ 10,522 $ 8,142
Furniture and fixtures 4,377 1,184
-------------- --------------
14,899 9,326
Less accumulated depreciation (4,062) (1,798)
-------------- --------------
$ 10,837 $ 7,528
============== ==============
NOTE 3 - EQUITY
---------------
In July 1997 the Corporation amended its articles of incorporation to
increase the authorized no par value common stock to 20,000,000 from
10,000,000 and to authorize 2,000,000 shares of no par value preferred
stock.
The Board of Directors of the Corporation may designate different
series of preferred stock and may fix the authorized number of shares
for each series. The holders of each series of preferred stock shall
have such rights, preferences and privileges as may be determined by
the Board of Directors prior to the issuance of such shares.
As of December 31, 1998 and 1997, there were no preferred shares issued
or outstanding.
During 1997, the Company issued 2,875,000 common shares to officers and
employees for prior services rendered. The employees and officers paid
$288 for the shares and the Company recognized $2,874,712 in
compensation expense, based upon the then recent $1.00 cash offering
price, pursuant to SFAS 123.
During 1998, the Company issued 1,800,000 common shares to an affiliate
for a $180 subscription receivable. The Company recognized $3,239,820
compensation expense based upon the proposed $6.00 public offering
price as effected by a proposed three-for-ten reverse stock split on
the issued and outstanding shares. The resulting valuation price is
$1.80 per share.
NOTE 4 - PARTNERSHIP AGREEMENT
------------------------------
In 1996, a limited partnership was formed known as Alpine Releasing
Partners I, L.P. (see Note 6). Alpine Pictures International, Inc. was
named as general partner. Under the terms of the partnership agreement,
(a) the partnership shall continue for ten (10) years unless terminated
sooner by the partners, (b) in general, income and loss shall be
allocated annually to the general partner 1% and limited partners 99%.
In February 1998 Alpine Releasing Partners I, L.P. was merged into
Alpine Pictures International, Inc. (See Note 5)
10
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
NOTE 5 - MERGER OF ALPINE PICTURES INTERNATIONAL, INC. AND ALPINE RELEASING
PARTNERS I, L.P.
--------------------------------------------------------------------------------
On December 17, 1997, the Corporation entered into an Agreement of
Merger (the "Agreement") to merge the Partnership into the Corporation
with the Corporation as the surviving entity. Under the terms of the
Agreement, the effective date of the merger was February 15, 1998, and
the Corporation issued one share of its common stock for each $0.85 of
limited partnership interest resulting in a total issuance by the
Company of 1,344,804 shares of its common stock to the limited
partners.
NOTE 6 - PRIVATE PLACEMENTS
---------------------------
In July 1997 the Corporation issued a Private Placement Memorandum (the
"Placement") pursuant to the Securities and Exchange Commission
Regulation CE Section 3(b), Rule 1001, of the Securities Act of 1933,
as amended, and under Section 25102(n) of the California corporations
code to offer 980,000 shares of its common stock, no par value, with an
option to increase the offering by up to an additional 120,000 shares
for a maximum offering of 1,100,000 shares. Under terms of the
Placement, the shares were offered on a "best efforts" basis at $1.00
per share in minimum units of 20,000 shares with no minimum
capitalization required by the Corporation.
Under the Placement, which terminated in 1998, the Corporation issued
811,637 shares of common stock during 1998 and 1997 with gross proceeds
to the Corporation of $811,637 and offering expenses of $319,605 of
which $230,467 and $89,138 were charged against equity in 1998 and
1997, respectively.
In July 1996, the Partnership issued a Private Placement Memorandum
(the "Placement") under Rule 506 of Regulation D under Section 4(2) of
the Securities Act of 1933, as amended, and under Section 25102(n) of
the California Corporations Code to offer, on a "best efforts" basis,
200 limited partnership units at a subscription price of $5,000 per
unit. Under terms of the Placement, the minimum investment was 5 units
or $25,000 and no minimum capitalization was required. Additionally,
the general partner was required to make a capital contribution equal
to 1% of aggregate partnership capital at the termination of the
offering. Under the Placement, the Partnership raised approximately
$898,341 in 1997, and the placement was terminated in June 1997.
Offering costs of the placement aggregated $118,267 of which $99,571
were charged against equity in 1997.
11
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
NOTE 7 - INCOME TAXES
---------------------
There was no current income tax expense or benefit in 1998 and 1997 due
to the Company's net losses.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets at December 31, are as follows:
1998 1997
---- ----
Deferred tax assets:
Net operating loss carryforward $ 513,000 246,000
Stock based compensation 2,078,941 977,402
-------------- --------------
Total gross deferred tax assets 2,591,941 1,223,402
Less valuation allowance (2,591,941) (1,223,402)
-------------- --------------
Net deferred tax assets $ - $ -
============== ==============
At December 31, 1998, the Company had net operating loss carryforwards
of approximately $2,232,300 for income tax purposes, available to
offset future taxable income expiring on various dates through 2016.
The valuation allowance for deferred tax assets as of January 1, 1998
was approximately $1,223,400. The net change in the total valuation
allowance for the year ended December 31, 1998 was an increase of
approximately $1,368,600.
NOTE 8 - OPERATING AGREEMENTS
-----------------------------
(A) AGREEMENTS WITH PRODUCERS/OWNERS
------------------------------------
As part of its primary operations, the Company enters into agreements
with various producers/owners (the "owner") of feature films (the
"film") to act as distributor agent of the owner for the sales,
collections and servicing of the film in specified media and geographic
territories, for a stipulated term. Under the agreements, various
provisions exist for extension and/or cancellation of the contracts,
limited reworking of the film to meet local country requirements, and
sublicensing of distribution by the Company. The Company generally
retains a percentage fee based on gross receipts from film sales, as
defined in the agreements, and is allowed reimbursement of
out-of-pocket sales, marketing, distribution, servicing, rework,
technical materials, and other customary expenses incurred up to a
stipulated cap from the remaining gross receipts. The balance after the
Company's fee and out-of-pocket expenses is payable to the owner. Under
certain agreements the owner is paid a stipulated percentage out of
gross receipts prior to any fee and/or expense distributions to the
Company.
(B) LICENSING AGREEMENTS WITH DISTRIBUTORS
------------------------------------------
The Company enters into licensing agreements with sub-distributors for
distribution of films for which the Company is the agent of
producers/owners, as discussed above. The agreements generally
stipulate a fixed fee and less commonly, royalty fees or a combination
thereof allowing the sub-distributor to distribute certain films within
a specified territory. The Company generally obtains a non-refundable
deposit from distributors which is recorded as a deposit liability
until the film is delivered to and balance received from the
distributor, or the agreement is canceled.
12
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
(C) CONSULTING AGREEMENT
------------------------
In August 1998 the Company entered into an agreement (the "Agreement")
with a firm whereby the firm will provide certain stipulated services
relating to positioning the Company to enter the public capital
markets. (See Note 12(B))
The firm is to provide a holding company to which the firm will retain
250,000 common shares and warrants to purchase an additional 250,000
common shares at a price of $1.00 per share. In addition, the Company
will pay the firm $100,000 for its services and the services of its
affiliates. As of December 31, 1998, the Company paid $60,000 which is
included in the statement of operations as professional fees.
(See Note 12(A))
NOTE 9 - COMMITMENTS AND CONTINGENCIES
--------------------------------------
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (Year 2000) approaches.
The "Year 2000" problem is pervasive and complex as virtually every
computer operation will be affected in some way by the rollover of the
two-digit year to 00. The issue is whether computer systems will
properly recognize date-sensitive information when the year changes to
2000. Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail.
The Company uses a standard off the shelf accounting software package
for all of its accounting requirements. Management has contacted the
software vendor and confirmed that the accounting software is Year 2000
compliant. Management has also verified that critical vendors' systems
will be Year 2000 compliant. Costs of investigating Year 2000
compliance issues have not been material to date. As a result,
management believes that the effect of investigating and resolving Year
2000 compliance issues will not have a material effect on the Company's
future financial position or results of operations.
NOTE 10 - RELATED PARTY TRANSACTIONS
------------------------------------
During 1998 and 1997 investor lead lists were purchased from a
non-combined affiliate, First National Information Network, Inc. (FNIN)
for an aggregate amount of $163,457.
Such investor lists were used in marketing campaigns to sell shares of
common stock under the private placements (See Note 6). Accordingly,
$118,604 and $44,853 were charged against equity in 1998 and 1997,
respectively. The Company also periodically advances funds to FNIN. The
net effect of amounts due to FNIN for investors lead list purchases and
advances due from FNIN totaled $76,000 and $91,000 at December 31, 1998
and 1997, respectively, and are reflected as due from non-combined
affiliates in current assets and due from non-combined affiliate-long
term at those dates, respectively. The amount of $76,000 was repaid in
January 1999.
13
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
During 1998 the Company issued 1,800,000 shares of common stock to its
affiliate, Alpine Pictures, Inc. During 1997, 2,875,000 shares of
common stock were issued to key officers and employees.
The Company's affiliate, Alpine Pictures, Inc. borrows funds from, or
lends funds to, and pays certain shared office expenses of the Company.
The net effect of these transactions resulted in a due to affiliate of
$243,556 at December 31, 1998 and a due from non-combined affiliates of
$260,715 at December 31, 1997.
The Company periodically enters into distribution agreements with its
non-combined affiliate, Alpine Pictures, Inc. to distribute films
produced by such affiliate.
NOTE 11 - GOING CONCERN
-----------------------
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company incurred a
net loss of $4,153,625 during the year ended December 31, 1998, had a
negative cash flow from operating activities of $912,959 and has an
accumulated deficit of $7,753,246 at December 31, 1998. These
conditions raise substantial doubt about the Company's ability to
continue as a going concern and if substantial additional funding is
not acquired or alternative sources developed to meet the Company's
working capital needs, management will be required to curtail its
operations.
The Company's current parent, AEInc., intends to raise between $1.5
million (minimum) and $7.5 million (maximum) in an initial public
offering during 1999. (See Note 12(B)) Management believes that actions
presently being taken to obtain additional funding provide the
opportunity for the Company to continue as a going concern.
NOTE 12 - SUBSEQUENT EVENTS
---------------------------
(A) AGREEMENT AND PLAN OF REORGANIZATION
----------------------------------------
Under an agreement dated February 9, 1999, effective February 10, 1999,
Alpine Entertainment, Inc., ("AEInc.") a new corporation formed on
November 5, 1998 under the laws of Delaware, acquired 69.9% of the
issued and outstanding shares of common stock of the Company from
consenting stockholders in exchange for common stock of AEInc.
Under the terms of the agreement, the Company's shares were exchanged
at a ratio of one share of AEInc. for every share of the Company. As a
result of the exchange, the Company became a majority owned subsidiary
of AEInc., and the consenting stockholders of the Company became
stockholders of approximately 96% of AEInc.
Generally Accepted Accounting Principles require that the Company whose
shareholders retain a majority interest in a combined business be
treated as the acquirer for accounting purposes. As a result, the
acquisition will be treated as an acquisition of AEInc. by the Company,
and a recapitalization of the Company.
14
<PAGE>
ALPINE PICTURES INTERNATIONAL, INC.
(FORMERLY ALPINE PICTURES INTERNATIONAL, INC.
AND AFFILIATE (A LIMITED PARTNERSHIP))
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
--------------------------------
The Company's financial statements immediately following the
acquisition will be as follows: (1) The Balance Sheet will consist of
the Company's net assets at historical cost and AEInc.'s net assets at
historical cost, (2) the non-consenting stockholders will be treated in
the consolidated financial statements as minority stockholders of
Alpine Pictures International, Inc., the legal subsidiary, and (3) the
Statement of Operations will include the Company's operations for the
period presented and AEInc.'s operations from the date of acquisition.
(B) LETTER OF INTENT FOR PUBLIC OFFERING
----------------------------------------
In May 1999, the Company's parent at that time, AEInc. executed a
letter of intent (the "Letter") with an investment banking firm whereby
the investment banking firm will make a best efforts underwritten
public offering (the "offering") of units of common stock and warrants
of AEInc. aggregating between $1.5 million (minimum) and $7.5 million
(maximum). Under the Letter, AEInc. is committed to pay the investment
banking firm $5000 per month, and certain offering expenses incurred by
the investment banking firm, up to $85,000, are reimbursable by the
Company whether or not the offering is consummated.
(C) CONVERTIBLE PROMISSORY NOTES
--------------------------------
On August 6, 1999, the Company issued to its affiliate, Alpine
Pictures, Inc., a non-interest bearing convertible promissory note (the
"Note") for $2,052,000 due December 31, 2001. The principal amount to
be repaid will be based on the total of periodic amounts drawn from the
note, which was $1,200,000 at August 6, 1999. Pursuant to the note, an
additional $85,200 per week is to be funded beginning August 13, 1999
through October 15, 1999. All amounts were funded by October 15, 1999.
The note is convertible immediately in part or in whole, to the common
stock of Alpine Entertainment, Inc. at a price of $0.90 per share or a
total of 2,280,000 shares for the $2,052,000. In addition, Alpine
Pictures, Inc. may use or assign the note in part or in full to pay a
dividend to its shareholders or satisfy Alpine Pictures, Inc.'s
creditors. The note contains a beneficial conversion feature whereby
the intrinsic value is computed at the IPO price of $6.00 less the
$0.90 conversion price of the debt or $5.10 per share. The Company
recognized non-cash interest expense in the aggregate of $11,628,000,
on the funding dates.
15
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or representations may not
be relied on as having been authorized by Alpine or by any of the underwriters.
Neither the delivery of this prospectus nor any sale made hereunder
will under any circumstances create an implication that there has been no
change in the affairs of the Company since the date hereof. This prospectus does
not constitute an offer to sell, or solicitation of any offer to buy, by any
person in any jurisdiction in which it is unlawful for any such person to make
such offer or solicitation. Neither the delivery of this prospectus nor any
offer, solicitation or sale made hereunder, will under any circumstances create
any implication that the information herein is correct as of any time subsequent
to the date of the prospectus
250,000 Units Minimum Offering date of the Prospectus.
1,250,000 Units Maximum Offering convertible promissory note interests
up to the amount of $2,052,000 to be distributed by the holder thereof;
and 7,600,000 shares of common stock issuable upon conversion of the
promissory notes
TABLE OF CONTENTS
Page
Prospectus Summary
Risk Factors
Available Information
The Company
Use of Proceeds
Dilution
Dividend Policy
Business
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Management
Security Ownership of Certain Beneficial
Owners and Management
Related Transactions
Selling Security holder
PROSPECTUS
Concurrent Distribution by Selling Security holder
Underwriting
Description of Securities
Legal Proceedings
Legal Matters September ___, 1999
Experts
Financial Statements
Until ________ all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligations to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Alpine is incorporated in Delaware. Under Section 145 of the General
Corporation Law of the State of Delaware, a Delaware corporation has the power,
under specified circumstances, to indemnify its directors, officers, employees
and agents in connection with actions, suits or proceedings brought against them
by a third party or in the right of the corporation, by reason of the fact that
they were or are such directors, officers, employees or agents, against expenses
incurred in any action, suit or proceeding. Our Certificate of Incorporation, as
amended, and By-laws provide for indemnification of directors and officers to
the fullest extent permitted by the General Corporation Law of the State of
Delaware.
The General Corporation Law of the State of Delaware provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director
For any breach of the director's duty of loyalty to the corporation or
its stockholders; For acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; Under Section 174
(relating to liability for unauthorized acquisitions or redemptions of, or
dividends on, capital stock) of the General Corporation Law of the State of
Delaware; or For any transaction from which the director derived an improper
personal benefit.
Our Certificate of Incorporation, as amended, contains such a
provision.
<PAGE>
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING ALPINE PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION OF
THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.
Filing Fee - Securities and Exchange Commission $ 2,800
Fees and Expenses of Accountants 40,000
Fees and Expenses of legal counsel 100,000
Printing and Engraving Expenses 10,000
Miscellaneous Expenses 3,700
Total $ 160,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
As listed below, Alpine issued shares of its Common Stock par value
$.0001 per share to the following individuals or entities for the consideration
as listed in cash or services. All sales made within the United States or to
United States citizens or residents, were made in reliance upon the exemption
from registration provided by Section 4(2) of the Securities Act of 1933.
Date Shareholder Number of Consideration
Shares
12/1/98 TPG Capital Corporation 37,500 $ 50.00
12/1/98 Brokerlink Capital, Research
and Communication 37,500 $ 50.00
2/10/99 Rene Torres 105,000 $ 35.00*
2/10/99 Ryan Carroll 232,500 $ 77.50*
2/10/99 Roland Carroll 232,500 $ 77.50*
2/10/99 Tom Hamilton 105,000 $ 35.00*
2/10/99 Greg Cozine 105,000 $ 35.00*
2/10/99 Paul Miller 105,000 $ 35.00*
2/10/99 Linda McArthur 45,000 $ 15.00*
2/10/99 Phil Hammond 7,500 $ 2.50*
2/10/99 Neil Kaufman 7,500 $ 2.50*
2/10/99 Barnard Natalino 7,500 $ 2.50*
2/10/99 Jack Larson 7,500 $ 2.50*
2/10/99 Jack Phelan 7,500 $ 2.50*
2/10/99 Alpine Pictures, Inc. 540,000 $ 180.00*
* These shares were originally purchased from Alpine Pictures International,
Inc. and exchanged for shares of Alpine Entertainment, Inc. on February 10,
1999 at a share exchange ratio of one-for-one.
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 Underwriting Agreement
1.2 Investment Banking Agreement
2.1* Plan of Regorganization
3.1** Certificate of Incorporation
3.2** By-Laws of Alpine
4.1 Form of Common Stock Certificate
4.2 Convertible Promissory Notes
5.1 Opinion of Davidson Casale Nojima, LLP
10.1 Sample Sales Agency Agreement
10.2 Sample International Distribution Agreement
10.3 Lease Agreement with Alpine Pictures Inc.
10.4 Lease Agreement with RP Holdings, Inc.
10.5 Form of Escrow Agreement
21.1* Subsidiaries of Alpine
24.1 Consent of Weinberg & Company, certified public accountants
24.2 Consent of Davidson Casale Nojima, LLP (included in Exhibit 5)
27.1* Financial Data Schedule
-----
* To be filed by Amendment.
** Previously filed
(b) The following financial statement schedules are included in this
Registration Statement.
None.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) 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 explained in the 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.
(b) 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 is that such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. If 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.
(c) The undersigned registrant hereby undertakes that:
(i) 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 497(h) under
the Securities Act will be deemed to be part of this registration statement as
of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
will 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, Alpine Entertainment, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form SB-2 and has
duly caused this Registration Statement on Form SB-2 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Van Nuys,
California on the 12th day of October, 2000.
ALPINE ENTERTAINMENT, INC.
By: /s/ Roland Carroll
------------------
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Ryan Carroll Chief Executive Officer October 13, 2000
-----------------------
Ryan Carroll Director
/s/ Roland Carroll President October 13, 2000
----------------------- Director
Roland Carroll
/s/ Greg Cozine Director October 13, 2000
----------------------- Vice President, Director
Greg Cozine
