<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to _____________
Commission File Number: 0-26443
FALCON ENTERTAINMENT CORP.
(Exact name of Small Business Issuer as specified in its Charter)
DELAWARE 22-281-1783
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
675 THIRD AVENUE, 12TH FLOOR NEW YORK, NY 10017
(Address of principal executive offices)
(212) 557-5557
(Issuer's telephone number)
NONE
(Former Name, former address and former fiscal year,
if changed since last Report.)
Check mark whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 13,375,724 Common Stock as
of October 18, 2000.
Transitional Small Business Disclosure Format (check one):
Yes No X
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FALCON ENTERTAINMENT CORP.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of August 31, 2000
and May 31, 2000
Condensed Consolidated Statements of Operations for the Three
Months Ended August 31, 2000 and 1999, and for the Period from
Inception (November 6, 1997) through August 31, 2000
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended August 31, 2000 and 1999, and for the Period from
Inception (November 6, 1997) through August 31, 2000
Notes to Condensed Consolidated Financial Statements
Item 2. Plan of Operation
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this report regarding matters that are
not historical facts are forward-looking statements. Because such forward-
looking statements include risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking statements.
All statements which address operating performance, events or developments that
management expects or anticipates to occur in the future, including statements
relating to sales and earnings growth, statements expressing general optimism
about future operating results, and statements regarding the Company's strategy
or revenue sources, are forward-looking statements. The forward-looking
statements are based on management's current views and assumptions regarding
future events and operating performance. Many factors could cause actual results
to differ materially from estimates contained in management's forward-looking
statements including, but not limited to, those set forth under the heading
"Risk Factors" in item 2 of this report. The differences may be caused by a
variety of factors, including, but not limited to, adverse economic conditions,
competitive pressures, inadequate capital , unexpected costs, lower revenues,
net income and forecasts, the possibility of fluctuation and volatility of the
Company's operating results and financial condition, inability to carry out
marketing and sales plans and loss of key executives, among other things.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission (the "SEC"), including the Company's Annual
Report on Form 10-QSB as filed with the SEC on September 13, 2000, that attempt
to advise interested parties of certain risks and factors that may affect the
Company's business. Readers are cautioned not to place undue reliance on those
forward-looking statements to reflect events or circumstances occurring after
the date hereof.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
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AUGUST 31, 2000
ASSETS (UNAUDITED) May 31, 2000
--------------------------------------------------------------------------------- ------------------------ -----------------------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ - $ 1,829,580
Certificates of deposit 51,156 150,928
Prepaid expenses 30,488 396,209
--------------------------------------------------------------------------------- ------------------------ -----------------------
Total current assets 81,644 2,376,717
PREPAID ARTIST FEES 225,084 255,084
CERTIFICATE OF DEPOSIT 374,307 348,499
PROPERTY AND EQUIPMENT 488,099 444,535
OTHER ASSETS 99,900 90,900
--------------------------------------------------------------------------------- ------------------------ -----------------------
TOTAL ASSETS $ 1,269,034 $ 3,515,735
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LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------- ------------------------ ------------------------
CURRENT LIABILITIES
Bank overdraft $ 3,826 $ -
Note payable - stockholder 395,844 393,834
Accounts payable and accrued expenses 656,858 1,112,943
Distribution payable - stockholder 50,000 50,000
--------------------------------------------------------------------------------- ------------------------ ------------------------
Total current liabilities 1,106,528 1,556,777
--------------------------------------------------------------------------------- ------------------------ ------------------------
STOCKHOLDERS' EQUITY
Common stock, par value $.00005 per share; 20,000,000 shares authorized;
13,375,724 issued and outstanding 668 662
Additional paid-in capital 8,248,179 7,927,143
Deficit accumulated during the development stage ( 8,086,341) ( 5,968,847)
--------------------------------------------------------------------------------- ------------------------ ------------------------
Total deficiency in assets 162,506 1,958,958
--------------------------------------------------------------------------------- ------------------------ ------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,269,034 $ 3,515,735
--------------------------------------------------------------------------------- ------------------------ ------------------------
</TABLE>
<PAGE>
FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended August 31, Period From Inception
(November 6, 1997)
-------------------------------------------------- through
2000 1999 August 31, 2000
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Dividend Income $ 2,633 $ 1,861 $ 96,548
Interest Income 7,697 - 12,574
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
Total revenues 10,330 1,861 109,122
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
EXPENSES
Advertising 249,491 - 3,817,447
Broadcasting fees 417,149 - 643,149
Compensation 637,027 - 1,386,607
Consulting 78,498 17,345 482,565
General and administrative 379,196 8,733 629,894
Interest 14,635 5,349 88,405
Production costs 204,161 - 511,035
Professional fees 102,667 9,470 241,361
Matrix agreement costs 45,000 - 395,000
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
Total expenses 2,127,824 40,897 8,195,463
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
NET LOSS ( $ 2,117,494) ( $ 39,036) ( $ 8,086,341)
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
NET LOSS PER SHARE ( $ 0.16) $ - ( $ 0.79)
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 13,374,313 9,641,310 10,193,810
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
</TABLE>
<PAGE>
FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Period From
Inception
(November 6,
Three Months Ended August 31, 1997) through
2000 1999 August 31, 2000
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ( $ 2,117,494) ( $ 39,036) ( $ 8,086,341)
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 32,625 - 39,342
Common stock issued for compensation 276,042 - 890,622
Common stock issued for consulting services - - 275,000
Common stock issued for talent acquisition agreement 45,000 - 45,000
Common stock issued for rent - - 12,500
Changes in operating assets and liabilities:
Prepaid expenses 365,721 - ( 30,488)
Prepaid artist fees 30,000 - ( 225,084)
Other assets ( 9,000) ( 1,980) ( 99,900)
Accounts payable and accrued expenses ( 456,085) 22,649 656,858
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
Total adjustments 284,303 20,669 1,563,850
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
Net cash used in operating activities ( 1,833,191) ( 18,367) ( 6,522,491)
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash balances of company acquired - - 54,725
Purchase of certificate of deposit ( 19,984) - ( 519,411)
Maturity of certificate of deposit 93,948 - 93,948
Purchases of property and equipment ( 76,189) - ( 527,441)
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
Net cash used in investing activities ( 2,225) - ( 898,179)
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft 3,826 - 3,826
Loans from (repayment to) stockholder, net 2,010 ( 69,935) 20,844
Net proceeds from issuance of common stock - - 7,396,000
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
Net cash provided by (used in) financing activities 5,836 ( 69,935) 7,420,670
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
DECREASE IN CASH AND EQUIVALENTS ( 1,829,580) ( 88,302) -
CASH AND EQUIVALENTS - BEGINNING 1,829,580 262,215 -
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
CASH AND EQUIVALENTS - ENDING $ - $ 173,913 $ -
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
</TABLE>
6
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Notes to Condensed Consolidated Financial Statements
BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
of Falcon Entertainment Corp. and its subsidiaries (collectively, the "Company")
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
the rules and regulations of the SEC. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation (consisting of normal
recurring accruals) have been included. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Operating results for the three-month period ended August 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
May 31, 2001. These unaudited condensed consolidated financial statements should
be read in conjunction with the audited annual consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended May 31, 2000.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NET LOSS PER SHARE
Net loss per share is computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share," based on the
weighted average number of common shares outstanding, restated to give effect to
the recapitalization. Outstanding stock warrants were not considered in the
calculation of weighted average number of common shares outstanding, as their
effect would have been anti-dilutive.
GOING CONCERN
The Company has incurred significant operating losses and negative cash
flows from operations since inception. The Company's ability to continue as a
going concern is dependent upon achieving profitable operations and positive
cash flows from operations or obtaining debt or equity financing. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
Management is attempting to raise additional capital of up to
$5 million through a private placement on a best efforts basis, which will
assist the Company in funding operations and provide the opportunity for the
Company to continue as a going concern. Management believes, but cannot
provide any assurance that, it will be successful in raising capital sufficient
to continue operations.
SUBSEQUENT EVENTS
In October 2000, the majority shareholder loaned the Company $700,000.
The loan bears interest at 10% per annum, is secured by all assets of the
Company, and is due on demand.
7
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Item 2. Plan of Operation
GENERAL
Falcon Entertainment Corp. (collectively with its subsidiaries,
"Falcon" or the "Company") is a diversified entertainment company that
broadcasts music videos of amateur and professional artists over cable and
direct satellite television on its television channel, IMNTV, and that webcasts
those videos over the Internet through its web site, www.IMNTV.com. It also
operates a record label, InVision Records, and intends to commence operations of
a second record label, Ecity Records. Through these labels, the Company intends
to produce and mass market the music of artists and bands, including certain of
those who submit videos for broadcast over IMNTV. It further intends to develop
its web site into a web portal to promote the Company's products and services,
promote the musicians signed to its record labels, provide music news and
related informational services and provide links to related web sites.
To date, the Company has not generated revenues from the operation of
its current business model. In March 2000, the Company completed a private
offering of its common stock, raising approximately $7,395,000 after deductions
for commissions, fees and offering expenses.
The Company was incorporated in March 1986 under the laws of the State
of Delaware under the name AVTR Systems, Inc. In April 1999, the Company changed
its name to Independent Music Group, Inc., and in December 1999 it changed its
name to Falcon Entertainment Corp. In April 1999, the Company acquired all of
the issued and outstanding capital stock of Independent Music Network, Inc., a
Delaware corporation, from the Company's President, Chief Executive Officer and
Chairman.
The Company is considered to be in the development stage, and the
accompanying financial statements represent those of a development stage
company.
PLAN OF OPERATION
Our current plan of operation for the next twelve months includes the
continued development of our broadcast programming over national cable
television, the continued design and development of our corporate web site, and
the development of our record labels, InVision Records and Ecity Records.
We expect that our primary sources of revenue will be derived from
Independent Music Network and InVision Records. We anticipate that Independent
Music Network will generate revenues primarily from television advertising
sales, video broadcasts and merchandising opportunities. We anticipate that
revenue streams from InVision will be generated from the sales and licensing of
musical recordings, representation and ownership of music publishing, licensing
of published and non-published musical compositions and the licensing and
merchandising of products related to the artists and musicians we sign. We
solicit video tapes from amateur and professional musicians for broadcast over
our IMNTV television channel, with the expectation of producing and mass
marketing certain of this music under our record labels. To accomplish our goal,
we plan to conduct and coordinate all advertising, band recruiting and video
editing as well as facilitate the broadcast of the music videos, production and
mass marketing the music of bands we sign.
Our ability to continue as a going concern is dependent upon our
ability to generate sufficient revenues from operations to meet our working
capital requirements. We expect to commence the sale of television advertising
time on our network during the first quarter of 2001, and we expect to
distribute our first musical recording in early 2001. Until we begin to produce
substantive revenues, to sustain our short term capital needs we intend to seek
additional financing. Our independent public accountants have raised substantial
doubt as to our ability to continue as a going concern if we are unable to
obtain such funding in the near future. To meet our immediate working capital
requirements, we recently borrowed $700,000 from our Chief Executive Officer.
This loan is due on demand, and is secured by all of our assets.
We may experience significant fluctuations in future operating results
due to a variety of factors, including:
- commercial acceptance of, and our ability to sell advertising time
on, IMNTV;
- the level of traffic on our Internet sites;
- the amount and timing of capital expenditures and other costs
relating to the expansion of our operations;
- technical difficulties or system downtime;
- general economic conditions and economic conditions specific to the
Internet; and
- consumer acceptance of the artists and musicians signed by our record
labels.
8
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS FORM 10-QSB, THE FOLLOWING
FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS
BUSINESS. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES
FACING THE COMPANY AND THERE MAY BE ADDITIONAL RISKS THAT THE COMPANY DOES NOT
PRESENTLY KNOW OF OR THAT IT MAY CURRENTLY DEEM IMMATERIAL. ALL OF THESE RISKS
MAY IMPAIR THE COMPANY'S BUSINESS, PROSPECTS AND RESULTS OF OPERATIONS.
RISKS GENERALLY RELATED TO OUR BUSINESS
IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL IN THE NEAR FUTURE, WE
MAY HAVE TO CURTAIL OR CEASE OPERATIONS.
We have historically financed our operations primarily through the sale
of our securities. As of August 31, 2000, we had cash and cash equivalents of $0
and an accumulated deficit of $8,086,341. To meet our immediate working capital
needs, we recently borrowed $700,000 from our Chief Executive Officer. This loan
is due on demand, and is secured by all of our assets. We need to raise
additional funds in the immediate future in order to meet our working capital
requirements. In this regard, our independent public accountants have raised
substantial doubt as to our ability to continue as a going concern. We may not
be able to obtain additional financing on terms favorable to us, if at all. If
adequate funds are not available to us, we may have to curtail or cease
operations, which would materially harm our business and financial results.
To the extent we raise additional funds through further issuances of equity or
convertible debt or equity securities, our existing stockholders could suffer
significant dilution, and any new equity securities we issue could have rights,
preferences and privileges superior to those of holders of our common stock.
Furthermore, any debt financing secured by us in the future could involve
restrictive covenants relating to our capital raising activities and other
financial and operational matters, which may make it more difficult for us to
obtain additional capital and to pursue business opportunities.
WE HAVE A LIMITED OPERATING HISTORY THAT MAKES AN EVALUATION OF OUR
BUSINESS DIFFICULT.
Although we incorporated in March 1986, we did not begin developing our
current business model until 1999. We only began broadcasting content over our
music channel, in a limited number of markets and during a limited number of
time periods, on June 1, 2000. In addition, as of August 31, 2000 we had signed
only three artists to our record labels, and we do not anticipate distributing
any of our artists' recordings until early 2001. Our extremely limited operating
history makes it difficult to evaluate our current business and prospects or to
accurately predict our future revenues or results of operations. Our business
model, and accordingly our revenue and income potential, is new and unproven. In
addition, we are subject to risks and difficulties frequently encountered by
early-stage companies in new and rapidly evolving markets.
WE HAVE A NEW AND UNPROVEN BUSINESS MODEL AND MAY NOT GENERATE
SUFFICIENT REVENUES FOR OUR BUSINESS TO SURVIVE OR BE SUCCESSFUL.
Our business model is based on the commercial viability of a new
national cable television channel devoted to the broadcast of music videos of
amateur and professional artists, as well as of two new record labels. In order
for our business to be successful, we must not only develop services that
directly generate revenues, but also provide content and services that attract
consumers to our cable television channel and our web site. Our business model
assumes that a large audience will develop for our cable television channel,
that cable operators in many markets will air our programming, and that we will
be able to generate significant revenues through the sale of advertising time on
our channel. Our model further assumes that we will be able to generate
significant revenues through the sale of recordings by our musical artists, as
well as related merchandise. Each of these assumptions is unproven, and if any
of the assumptions is incorrect, we may be unable to generate sufficient
revenues to sustain our business or to obtain profitability.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE.
We incurred net losses of $2,117,494 in the three month period ended
August 31, 2000 and $5,866,842 in the fiscal year ended May 31, 2000. Our
accumulated deficit as of August 31, 2000 was $8,086,341. We have not achieved
profitably and expect to continue to incur losses for the foreseeable future. We
expect those losses to increase from current levels as we continue to incur
expenses to develop our products and services. We believe that our business
depends on our ability to significantly increase revenues and to limit our
operating expenses. If our revenues fail to grow at anticipated rates or our
operating expenses increase
9
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without a commensurate increase in our revenues, or we fail to adjust operating
expense levels appropriately, we may never be able to achieve profitability.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO BE VOLATILE, AND MAY
CAUSE OUR STOCK PRICE TO FLUCTUATE.
Our future revenues and operating results are likely to vary
significantly from quarter to quarter due to a number of factors, many of which
are outside of our control. Accordingly, quarter-to-quarter comparisons of our
results of operations may not be indicative of future performance. It is
possible that in some future periods our operating results will be below the
expectations of public market analysts and investors. In this event, the price
of our common stock will likely decline. Factors which may cause our revenues
and operating results to fluctuate include the following:
- our ability to attract and retain advertisers;
- the willingness of cable operators to broadcast our programming;
- market acceptance of our music channel and our music releases;
- the timing and uncertainty of sales cycles;
- our ability to sign additional artists to our record labels;
- our ability to enter into satisfactory manufacturing and distribution
arrangements for our music recordings;
- new services offered by current or future competitors; and
- general economic conditions, as well as economic conditions specific
to the music industry.
WE FACE INTENSE COMPETITION FROM BUSINESSES THAT HAVE SIGNIFICANTLY
MORE RESOURCES THAN WE DO.
We face intense competition for a finite amount of consumer
discretionary spending from numerous other entertainment companies and other
businesses in the entertainment industry, including television networks such as
MTV and VH1, major recording companies such as Sony, Time Warner, Universal and
EMI, and a wide variety of music- and entertainment-related web sites. All of
these businesses have substantially greater resources, histories of attracting
and retaining talent, obtaining properties and hiring key employees.
There are a number of television channels already on the market that
offer music entertainment to their viewers. These channels are backed by large
organizations that have more resources than we do. We compete, directly and
indirectly, with these and other channels for viewers, consumers, content and
service providers, advertisers and sponsors. To be competitive, we must enhance
our services and content on a timely and cost-effective basis. There can be no
assurance that we will be successful in attracting viewers, advertisers,
sponsors or adapting our television channel to user requirements or emerging
industry standards. Similarly, the market for recorded music is dominated by the
major record companies, certain of which are a part of larger entertainment
conglomerates, and have recording divisions with significant financial resources
and promotional budgets and large artist and repertoire staffs to compete for a
limited number of promising recording artists, producers and writers. Although
we intend to use our television channel to promote the videos of our artists,
there is also intense competition within the recording industry for "air time"
by radio disc jockeys, which is essential to gain attention and create demand
for recordings. There can be no assurance that any of our labels' artists,
recordings or music videos will gain the exposure required to generate
significant market interest or that we will be able to compete successfully.
We will compete with various forms of entertainment which provide
similar value, including movies, video and audio cassettes, broadcast
television, cable programming, special pay-per-view events, sporting events and
other forms of entertainment which may be less expensive or provide other
advantages to our targeted viewers. We will also compete for advertising dollars
with traditional media. While we believe that IMNTV is currently the only
network of its kind, there can be no assurances that other companies are not
developing or will not seek to develop similar networks. If our network is
successful, it is possible that other companies may seek to enter or capitalize
on such a market and compete directly with us. Many of these companies may have
substantially greater financing, personnel, technical and other resources than
we do and may have well-established reputations for success in the development,
promotion and marketing of entertainment events. There can be no assurance that
we will be able to compete successfully with these other entities.
WE ARE SUBJECT TO ALL OF THE RISKS AND UNCERTAINTIES ASSOCIATED WITH
THE ENTERTAINMENT INDUSTRY GENERALLY, ANY OF ALL OF WHICH MAY HAVE AN ADVERSE
IMPACT ON OUR BUSINESS AND RESULTS OF OPERATIONS.
10
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Content acquisition costs, as well as promotion and marketing expenses
and third-party participation payable to producers and others, which reduce
potential revenues derived from programming events and musical recordings, have
increased significantly in recent years. Our future operating results will
depend upon numerous factors beyond our control, including the popularity, price
and timing of programming and special events being released and distributed,
national, regional, and local economic conditions, changes in demographics, the
availability of alternative forms of entertainment, critical reviews and public
tastes and preferences, which change rapidly and cannot be predicted. If we are
unable to successfully anticipate and respond to relatively rapid changes in
consumers' tastes and preferences, our business and operating results will be
adversely affected.
OUR ABILITY TO ACHIEVE OR MAINTAIN PROFITABILITY WILL BE CONSTRAINED IF
WE DO NOT EFFECTIVELY MANAGE OUR ANTICIPATED RAPID GROWTH.
We expect to significantly increase our employee base as we implement
our business model and develop our product and service offerings. We currently
have only 7 employees. As we expand our operations, we expect to significantly
increase the size of our employee base. Our management and operations are likely
to be strained by this anticipated growth. To compete effectively and to manage
future growth, we must improve our financial and management controls, reporting
systems and procedures on a timely basis. We must also expand, train and manage
our employee base. If we are not successful in managing our growth, our ability
to achieve or maintain profitability may be harmed.
WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL, WHICH WOULD
ADVERSELY AFFECT OUR ABILITY TO DEVELOP AND EFFECTIVELY MANAGE OUR BUSINESS.
Our future performance will depend largely on the efforts and abilities
of our senior executives and other key personnel. Our success will depend on our
ability to attract and retain these key employees in the future. The market for
such persons is extremely competitive and we may not find qualified replacements
for personnel who leave us. In addition, we do not maintain key person life
insurance on any of our key personnel, and have no plans to do so. The loss of,
or the inability to attract, any one or more of our key personnel may harm our
ability to develop and effectively manage our business.
CURRENT OR FUTURE GOVERNMENT REGULATION MAY ADD TO OUR OPERATING COSTS.
We may face unanticipated operating costs because of the current
uncertainty surrounding potential government regulation of the Internet and
e-commerce. We believe that we are not currently subject to direct regulation of
our current and expected activities, other than regulations applicable to
businesses generally. However, the Internet has rapidly emerged as a commerce
medium, and governmental agencies have not yet been able to adapt all existing
regulations to the Internet environment. Laws and regulations may be introduced
and court decisions reached that affect the Internet or other online services,
covering issues such as user pricing, user privacy, freedom of expression,
access charges, content and quality of products and services, advertising,
intellectual property rights and information security. Complying with new
regulations would increase our operating costs. Furthermore, as a company with a
significant Internet presence, it is unclear in which jurisdictions we are
actually conducting business. Our failure to qualify to do business in a
jurisdiction that requires us to do so could subject us to fines or penalties
and could result in our inability to enforce contracts in that jurisdiction.
In addition, through our agreement with OlympuSAT, Inc . ("OlympuSAT"),
we are indirectly subject to regulation by the Federal Communications Commission
inconnection with operations of cable television systems, satellite distribution
systems and television broadcasters. From time to time there are pending before
Congress various proposals which provide, among other things, for increased rate
regulation of cable systems, some form of "must carry" regime for local
broadcast stations, limits on the size of multiple system operators and limits
on carriage of affiliated program services. In addition, legislation is
periodically before Congress which would restore local authority to set cable
rates, to require the Federal Communications Commission to determine whether
and/or how to limit cable system ownership, and to require cable programmers to
sell their product to non-cable distributors under certain circumstances. It is
impossible to predict with accuracy whether any of these legislative proposals
will be enacted, or, if enacted, the form they will take; however, any
legislation which increases rate regulation or effects structural changes in the
cable industry could have a material adverse impact on our business and
operations.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WHICH
COULD RESULT IN THEIR UNAUTHORIZED USE BY OUR COMPETITORS AND HAVE AN ADVERSE
IMPACT ON OUR REVENUES.
11
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Our success depends in part on our ability to protect our proprietary
rights. There can be no assurance that the measures taken by us to protect our
proprietary rights will be adequate to prevent misappropriation or independent
development by others of programming and media concepts based upon, or otherwise
similar to, those of our network. In addition, although we believe that our
programming and concepts have been independently developed and do not infringe
on the proprietary rights or trade secrets of others, there can be no assurance
that our methods and concepts do not and will not so infringe or that third
parties will not assert infringement claims, trade secret violations,
competitive torts or other proprietary rights violations against us in the
future. In the case of infringement, we could, under certain circumstances, be
required to modify our programming or obtain a license. There can be no
assurance that we would be able to do either in a timely manner or upon
acceptable terms and conditions, and such failure could have a material adverse
effect on our operations, cash flows and financial condition. There can also be
no assurance that we will have the resources to defend or prosecute proprietary
rights infringement action.
In addition, our record label business could be adversely affected by
the unauthorized reproduction of recordings for commercial sale and by home
taping. Unauthorized recordings of our products could result in the loss of
substantial revenues. We may in the future file lawsuits, either on our own
behalf or in conjunction with other music publishers, copyright owners and
publishing organizations seeking injunctive relief and/or monetary damages from
persons and companies who interfere with our property rights. Future actions
could be costly and time consuming and may divert management's attention from
our business affairs which could have a material adverse effect on our
operations. Similarly, new technologies, including digital audio tape and
recordable CD technology, may increase the opportunity for contraband
reproduction for distribution as well as the opportunity for consumers to make
high quality home copies of recordings. In the absence of adequate copyright or
other protections, new recording technologies could adversely affect the sale of
our music and consequently adversely affect our operating results.
We have filed U.S. trademark applications with respect to a number of
our names and marks, including "IMC," "Independent Music Channel," "IMNTV" and
"InVision." We cannot assure you that we will be able to secure registration of
any of these trademarks. In addition, we do not have any trademarks registered,
nor do we have any trademark applications pending, outside of the United States.
The laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States. Effective copyright and trademark
protection may not be available in other jurisdictions. If we cannot adequately
protect our proprietary rights, our competitors could benefit from the
unauthorized use of such rights, resulting in an adverse impact on our revenues.
Even if we are able to protect our proprietary rights, we could incur
significant costs to defend our rights.
RISKS RELATED TO OUR TELEVISION BUSINESS
WE ARE DEPENDENT ON OUR CONTRACT WITH OLYMPUSAT, INC. TO PROVIDE
NATIONAL CABLE BROADCASTING SERVICES, AND WE ARE CURRENTLY IN BREACH OF THIS
CONTRACT.
Completion of our business plan of national television broadcasting is
dependent upon OlympuSAT, Inc.'s performance of its obligations under the
broadcast agreement between us and OlympuSAT to place our programming on
additional cable systems. Similarly, completion of our business plan is also
dependent upon our ability to perform our obligations under the broadcast
agreement. Our obligations include payment of certain monthly transport fees,
monthly playback fees and monthly subscriber fees. We are currently in breach
of these obligations. Accordingly, OlympuSAT might discontinue performing
services under the broadcast agreement, which would materially adversely affect
our business. Although we are working to cure our breach, we cannot assure you
that we will be able to do so in a manner satisfactory to OlympuSAT.
WE ARE DEPENDENT ON OUR AGREEMENT WITH YAHOO! TO PROVIDE OUR NATIONAL
TELEVISION MUSIC VIDEO PROGRAMMING TO THE INTERNET, AND WE ARE CURRENTLY IN
BREACH OF THIS AGREEMENT.
Completion of our business plan of distribution of music video
programming on the Internet is dependent upon Yahoo's performance of its
obligations under the television station agreement with Yahoo! Inc. Similarly,
completion of the business plan is also dependent upon our ability to perform
our obligations under the television station agreement. Our obligations include
payment of approximately $8,000 per month to Yahoo! to utilize its streaming
software and hardware to transmit our audio and video programming. We are
currently in breach of our payment obligations. Although we are working to cure
this breach, we cannot assure you that we will be able to, or that Yahoo will
not cease providing services under the agreement.
IF WE FAIL TO INCREASE THE SIZE OF THE AUDIENCE FOR OUR MUSIC CHANNEL
AND WEB SITE, WE MAY NOT BE ABLE TO ATTRACT ADVERTISERS OR STRATEGIC ALLIANCES.
Increasing the size of our audience is critical to selling advertising
and to otherwise generating revenues. If we cannot increase the size of our
audience, then we may be unable to attract advertisers. In addition, we may be
at a relative disadvantage to other media companies with larger audiences that
may be able to leverage their audiences to access more advertisers and enter
into significant strategic alliances. To increase the size of our audience, we
must:
- offer compelling music content;
- conduct effective marketing campaigns to acquire new users and
consumers;
- develop and maintain existing distribution relationships with other
web sites;
- update and enhance the features of our web site; and
- offer targeted, relevant products and services.
Our failure to achieve one or more of these objectives could adversely
affect our business, and we cannot assure you that we will be successful in
these efforts.
A significant element of our strategy is to build a loyal community of
members on our web site and web portal because we believe community features
help retain actively engaged users. If we are not successful in developing such
a community, then it may be more difficult to increase the size of our audience.
We also depend on establishing and maintaining relationships with
high-traffic web sites to increase our audience. There is intense competition
for placements on these sites, and we may not be able to establish such
relationships on commercially
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reasonable terms or at all. Even if we enter into agreements with these web
sites, they themselves may not attract significant numbers of users. Therefore,
our web site may not obtain additional users from these relationships.
OUR BUSINESS IS DEPENDENT UPON THE DISTRIBUTION OF OUR PROGRAMMING
THROUGH CABLE TELEVISION SYSTEMS.
IMNTV must compete for a limited amount of broadcast space on cable
television systems with a large number of well-established programmers supplying
a variety of alternative programming. We expect that our ability to generate
revenues through sales of advertising time on IMNTV will be dependent in large
part on our ability to distribute our television programming to a large
audience. We do not know how many cable televisions systems have channels
available for, or any interest in, programming featuring independent music
interests or whether OlympuSAT will be able to secure available channels for our
programming on a profitable basis. Accordingly, we cannot assure you that we
will be able to secure channel space in a large number of markets or be able to
expand our operations as planned. If we are unable to broaden and maintain the
distribution of our channel and its programming, our ability to generate
revenues and our results of operations would be adversely affected.
IF WE ARE UNABLE TO ATTRACT ADVERTISERS AND SPONSORS TO OUR INDEPENDENT
MUSIC NETWORK, OUR BUSINESS WOULD BE HARMED.
We expect to rely heavily upon the sale of advertising time on IMNTV to
generate revenues. Such sales will likely be dependent upon our ability to
demonstrate that our programming is able to reach the demographics that
advertisers and sponsors seek to target. Our success in these efforts will be
affected by a number of factors including, among others, our ability to deliver
high quality, entertaining programming that is appealing to our targeted
viewers. There can be no assurance, however, that we will be successful in our
endeavors or that we will receive sufficient advertising revenues to obtain or
maintain profitability.
Our ability to generate advertising revenues also may be adversely
affected by economic downturns which, if prolonged, might have an adverse impact
on television advertising, in general, and on our results of operations, cash
flows and financial condition. Additionally, advertising revenues may be
adversely impacted by many other factors beyond our control, including the
amount of funds that advertisers dedicate to television advertising and
sponsorship in general and to our programming in particular, the number of
advertisers seeking audiences within the demographic groups to which our
programming is targeted, competition within national and regional markets from
other media, and regulatory restrictions on advertising and sponsorships such as
liquor or cigarette advertising. There can be no assurance that we will be able
to attract advertisers. The inability to attract advertisers or to maintain
these relationships once obtained would have an adverse affect on our results of
operations, cash flows and financial condition.
IF IMNTV DOES NOT ATTRACT LOYAL SUPPORT FROM ITS TARGETED VIEWING
AUDIENCE, OUR BUSINESS WILL BE ADVERSELY AFFECTED.
Our business plan is predicated on IMNTV attracting active and loyal
support from the community of music fans that have an interest in independent
music. There can be no assurance that there will be significant support from our
anticipated viewership segment or that sufficient public acceptance of our
programming will enable IMNTV to operate profitably. Moreover, there can be no
assurance that a sufficient number of advertisers will support our programming
because it may be considered too far outside mainstream programming, or it may
not reach a large enough audience. If we do not engender such support from our
targeted audience or advertisers, our results of operations, cash flows and
financial condition would be adversely affected.
SEASONALITY IN REVENUES IN THE TELEVISION INDUSTRY MAY HAVE AN ADVERSE
AFFECT ON OUR RESULTS OF OPERATIONS, CASH FLOWS AND FINANCIAL CONDITION.
Advertising revenues in the television industry fluctuate due to
seasonality. Television network revenues are typically lower in the third
quarter due to the number of reruns broadcast during the summer months. In the
future, our results of operations may fluctuate from quarter to quarter, which
could have a material adverse affect on our results of operations, cash flows
and financial condition.
WE MAY NOT BE ABLE TO ESTABLISH THE IMNTV BRAND.
We are new and little known in the entertainment sector and, although
we were incorporated in 1986, our efforts in the entertainment industry only
commenced in 1999. In order to generate traffic to our web site and web portal
and attract an audience
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to our entertainment channel, we will need to spend significant resources on
marketing and promoting our record label, music programming and our web site. If
we are unable to establish brand recognition in the areas in which we operate,
our business may be negatively affected.
DELIVERY OF OUR CONTENT VIA TELEVISION OR THE INTERNET MAY BE
INTERRUPTED DUE TO SYSTEMS FAILURES, NATURAL DISASTERS OR OTHER CAUSES.
We are subject to the risk that delivery of our services via cable
television or the Internet may be interrupted as a result of satellite failure,
communications and/or network equipment damage caused by natural disasters such
as earthquakes and fires, hardware failures, increased stress on communications
and/or network hardware, local power losses or other telecommunications failures
and/or capacity constraints on us or our vendors' or suppliers' hardware. Any
such interruptions may cause us to lose viewers and, accordingly, may adversely
affect our business and results of operations.
RISKS RELATED TO OUR RECORDING BUSINESS
WE HAVE A LIMITED ARTIST ROSTER AND IT IS UNCERTAINTY THAT THESE
ARTISTS WILL EVER GAIN MARKET ACCEPTANCE, WHICH COULD SUBSTANTIALLY HARM OUR
BUSINESS.
The success of our business model will depend, in large part, on our
ability to generate significant revenues in the future from the exploitation of
a limited number of new and unknown recording artists in limited musical genres.
At present we have only three artists signed to our label. Accordingly, our
continued success will be dependent upon our ability to sign and retain
promising artists who will appeal to popular taste over a significant period of
time. As is typically the case in the record industry, demand and market
acceptance for newly introduced and unknown artists and recordings is subject to
a high level of uncertainty. Achieving market acceptance for new artists and
recordings will require us to spend significant efforts and expenditures for
advertising, marketing and promotional activities, including obtaining access to
television and radio "air time" to create awareness of and demand for our
recordings by consumers. We currently have limited marketing capabilities,
resources and personnel. There can be no assurance that we will be able, for
financial or other reasons, to successfully promote and market our newly
recorded music or that any of our efforts will result in initial or continued
market acceptance for our products.
WE ARE SUBJECT TO BUSINESS RISKS ASSOCIATED WITH TALENT DEVELOPMENT.
Currently, we have entered into recording contracts with only three
artists. There can be no assurance that we will be able to attract other
artists, or, if we are able to attract such talent, that we will be able to
develop that talent successfully or in such a manner that significant sales of
artist product will result. There can be no assurance that any artist developed
by us will not request a release from his or her agreement with us. Because of
the highly personal and creative nature of a recording artist's contractual
obligations, it is not feasible to force an unwilling artist to perform the
terms of his or her contract. The failure to enter
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into recording contracts with additional talented artists, or the loss of an
artist with whom we have signed a recording contract, could have a materially
adverse effect on our results of operations.
RECORD PRODUCTION AND PROMOTION ACTIVITIES ARE SPECULATIVE AND ARE
SUBJECT TO ALL OF THE RISKS GENERALLY ASSOCIATED WITH THE RECORDING INDUSTRY.
Many commercial recordings released in the United States do not earn
sufficient gross receipts to cover the costs of production, promotion, marketing
and distribution and to return initial investments. Production costs and
promotion, marketing and distribution expenses, as well as third-party
participation costs payable to producers, recording artists and others, which
reduce potential revenues derived from record sales, have increased
significantly in recent years. Our future operating results will depend on
numerous factors beyond our control, such as the popularity and timing of other
recordings being released, retail prices, national, regional and local economic
conditions, changes in consumer demographics and critical reviews and public
tastes and preferences, which change rapidly and cannot be accurately predicted.
Our ability to plan for record production and promotional activities will be
significantly affected by our ability to anticipate and respond to changes in
consumer tastes and preferences, primarily those consumers comprising our target
market. A decline in the popularity of pre-recorded music, in the recording
industry generally or in our particular market segments could materially
adversely affect our business prospects and financial results.
Record production activities are also subject to unforeseen events,
unanticipated production cost overruns and technical and operating difficulties.
Significant up-front expenses associated with record production and promotion
could adversely affect our future operating results. Although we expect to seek
to reduce the financial risk of individual recordings by limiting our initial
production runs, actual production costs may exceed production budgets and the
occurrence of material cost overruns could have a material adverse effect on our
operating results.
WE HAVE NOT ENTERED INTO ANY AGREEMENTS WITH DISTRIBUTORS TO DISTRIBUTE
MUSIC RECORDED FOR OUR RECORD LABELS.
Our success will be largely dependent upon the marketing efforts of our
distributors. Any distributors we may engage will continue to distribute other
recordings, including recordings in which they may have a large financial
interest and, accordingly, more incentive to actively distribute. If we are
unable to enter into distribution agreements with recognized distributors on
terms satisfactory to us, or if such distribution agreements are cancelled after
inception, our business and results of operations will be adversely affected.
ADVANCES IN NEW TECHNOLOGIES MAY INCREASE THE LIKELIHOOD FOR CONTRABAND
REPRODUCTION, WHICH COULD HARM OUR BUSINESS.
New technologies, including digital audio tape and recordable CD
technology, may increase the opportunity for contraband reproduction for
distribution as well as the opportunity for consumers to make high quality home
copies of recordings. New recording technologies could adversely affect the sale
of CDs and tapes. We expect that our labels' recordings will initially be
produced primarily for CDs. A leveling off or a decline in sales of CDs as a
result of the introduction of new technologies could adversely affect our
business, operating results, cash flows and financial condition.
OUR MUSIC PRODUCTS WILL BE SUBJECT TO RETURN IF NOT SOLD TO CONSUMERS.
At the time of product sales, we may establish a reserve for future
returns based primarily on historical return rates and recognize revenues net of
estimated product returns. We anticipate that the agreements we may enter into
with distributors will permit the distributors to withhold up to approximately
35% of revenues for product returns. Product returns which significantly exceed
our reserves would materially adversely affect our operating results.
WE WILL RELY ON THIRD-PARTY VENDORS FOR THE MANUFACTURE OF CDS AND
TAPES. WE DO NOT YET, AND MAY NEVER, MAINTAIN AGREEMENTS WITH ANY PRODUCT
MANUFACTURERS AND MAY NEED TO PURCHASE CDS AND TAPES PURSUANT TO PURCHASE ORDERS
PLACED FROM TIME TO TIME IN THE ORDINARY COURSE OF BUSINESS.
We will be dependent on the ability of third-party manufacturers and
other vendors to provide adequate supplies of CDs and tapes on a timely basis
and on favorable terms. Several of these manufacturers may require that we
purchase certain minimum
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quantities of CDs and tapes with each purchase order. Although we believe that
alternative manufacturing sources are currently available, there can be no
assurance that manufacturers will have sufficient production capacity or
incentive to satisfy our product and scheduling requirements during any period
of sustained demand or that we will not be subject to price fluctuations or
periodic delays. Failure or delay by our manufacturers in supplying CDs and
tapes to us on favorable terms could result in material interruptions in our
operations and adversely affect our ability to deliver our products on a timely
and competitive basis.
WE ANTICIPATE THAT A PORTION OF OUR SALES OF CDS AND TAPES WILL BE MADE
IN INTERNATIONAL MARKETS, WHICH WILL SUBJECT US TO SPECIAL RISKS.
We expect that a portion of our sales of CDs and tapes will be to
foreign countries. Accordingly, we will be subject to increased credit risks,
customs duties and other trade restrictions, fluctuations in foreign currency
exchange rates, shipping delays and international political and economic
developments. A decline in the economic prospects of emerging foreign markets
could adversely affect our ability to initiate, and once initiated, expand,
international sales. Foreign sales also involve potential difficulties in
enforcing foreign license arrangements in the event of non-performance by the
licensee.
RISKS RELATED TO OUR COMMON STOCK
OUR COMMON STOCK IS TRADED ON THE "OVER THE COUNTER BULLETIN BOARD" AND
THERE IS CURRENTLY ONLY A LIMITED TRADING MARKET FOR OUR SHARES.
Because of the limited trading market for shares of our common stock,
historic market prices may not be indicative of the prices at which our shares
can be bought or sold. The market price of our common stock may fall due to a
number of factors, including:
- actual or anticipated fluctuations in our operating results;
- changes in expectations as to our future financial performance;
- availability of additional shares of common stock for public sale;
- changes in securities analysts' financial estimates; and
- the operating and stock price performance of our competitors and
other comparable companies.
THE HOLDINGS OF OUR CONTROLLING STOCKHOLDER MAY LIMIT YOUR ABILITY TO
INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER MATTERS SUBJECT TO A
STOCKHOLDER VOTE, INCLUDING A SALE OF OUR COMPANY ON TERMS THAT MAY BE
ATTRACTIVE TO YOU.
James Fallacaro, our Chief Executive Officer and President and Chairman
of our Board of Directors, currently owns approximately 63% of our outstanding
common stock. Mr. Fallacaro's stock ownership and management positions enable
him to exert considerable influence over us, including the election of directors
and the approval of other actions submitted to our stockholders. In addition,
without the consent of Mr. Fallacaro, we may be prevented from entering into
transactions that could be viewed as beneficial to other stockholders, including
a sale of our company. This could prevent you from selling your stock to a
potential acquiror at prices that exceed the market price of our stock.
SHARES OF OUR COMMON STOCK ELIGIBLE FOR PUBLIC SALE COULD DEPRESS OUR
STOCK PRICE.
The market price of our common stock could decline as a result of sales
by our existing stockholders of shares of common stock in the market, or the
perception that these sales could occur. In addition to shares of our common
stock that may be eligible for sale under Rule 144 or other exemptions from
registration under U.S. securities laws, we are obligated to register a total of
4,190,000 shares of our common stock, including shares issuable upon the
exercise of outstanding warrants, for resale.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
<S> <C>
(a) Exhibits required by Item 601 of Regulation S-B
Exhibits:
3.1 Certificate of Incorporation as filed with the State of Delaware Secretary of State on March 10, 1986.*
3.2 Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of
State and dated June 17, 1986.*
3.3 Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of
State on March 19, 1999.*
3.4 Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of
State on April 9, 1999.*
3.5 Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of
State on December 9, 1999.**
3.6 Bylaws.*
10.1 Stock Purchase Agreement between Independent Music Group, Inc. and James Fallacaro dated March 26, 1999.*
10.2 Network Carriage Agreement by and between Independent Music Group, Inc. and OlympuSAT, Inc. dated December 6,
1999.**
10.3 Employment Agreement between the Company and Mark Eddinger dated February 15, 2000.***+
10.4 Consulting Agreement between the Company and Star West LLC dated February 15, 2000.***
10.5 Television Station Agreement between Yahoo!, Inc. and the Company dated March 20, 2000.***
10.6 Income and Talent Acquisition Agreement by and between InVision Records, Inc. and Harlan Productions, Inc., d/b/a
Matrix Music Works, dated May 8, 2000.***
10.7 Right of First Refusal Agreement by and between InVision Records, Inc. and Harlan Productions, Inc., d/b/a Matrix
Music Works, dated May 8, 2000.***
10.8 Agreement of Lease between Royal Realty Corp. and the Company dated April 14, 2000.***
10.9 Promissory Note made by the Company in favor of James Fallacaro and Corinne Fallacaro, dated October 3, 2000.
10.10 Security Agreement executed by the Company in favor of James Fallacaro and Corinne Fallacaro, dated October 3,
2000.
27.1 Financial Data Schedule
* Incorporated by reference to the Company's Registration
Statement on Form 10-SB filed with the SEC on June 21, 1999.
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** Incorporated by reference to the Company's Quarterly Report on
Form 10-QSB for the period ended November 30, 1999, filed with
the SEC on January 14, 2000.
*** Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the period ended May 31, 2000, filed with the
SEC on September 13, 2000.
+ Management contract.
(b) Reports on Form 8-K
None.
</TABLE>
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Falcon Entertainment Corp., a Delaware corporation
BY: /S/ JAMES FALLACARO Date: October 20, 2000
------------------------
James Fallacaro, Chairman and
President (Principal Executive Officer
and Principal Financial Officer)
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO.: DESCRIPTION:
<S> <C>
3.1 Certificate of Incorporation as filed with the State of Delaware Secretary of State on March 10, 1986.*
3.2 Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of State and
dated June 17, 1986.*
3.3 Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of State on
March 19, 1999.*
3.4 Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of State on
April 9, 1999.*
3.5 Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of State on
December 9, 1999.**
3.6 Bylaws.*
10.1 Stock Purchase Agreement between Independent Music Group, Inc. and James Fallacaro dated March 26, 1999.*
10.2 Network Carriage Agreement by and between Independent Music Group, Inc. and OlympuSAT, Inc. dated December 6, 1999.**
10.3 Employment Agreement between the Company and Mark Eddinger dated February 15, 2000.***+
10.4 Consulting Agreement between the Company and Star West LLC dated February 15, 2000.***
10.5 Television Station Agreement between Yahoo!, Inc. and the Company dated March 20, 2000.***
10.6 Income and Talent Acquisition Agreement by and between InVision Records, Inc. and Harlan Productions, Inc., d/b/a Matrix
Music Works, dated May 8, 2000.***
10.7 Right of First Refusal Agreement by and between InVision Records, Inc. and Harlan Productions, Inc., d/b/a Matrix Music
Works, dated May 8, 2000.***
10.8 Agreement of Lease between Royal Realty Corp. and the Company dated April 14, 2000.***
10.9 Promissory Note made by the Company in favor of James Fallacaro and Corinne Fallacaro, dated October 3, 2000.
10.10 Security Agreement executed by the Company in favor of James Fallacaro and Corinne Fallacaro, dated October 3, 2000.
27.1 Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement on Form
10-SB filed with the SEC on June 21, 1999.
** Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
for the period ended November 30, 1999, filed with the SEC on January 14,
2000.
*** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the period ended May 31, 2000, filed with the SEC on September 13, 2000.
+ Management contract.
</TABLE>
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