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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
ANTRA HOLDINGS GROUP, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 22-3517670
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1515 Locust Street
Philadelphia, Pennsylvania 19102
(Address of principal executive offices)
(215) 732-1300
(Issuer's telephone number, including area code)
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered Name of each exchange on which
- --------------------------------------- each class is to be registered
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Not applicable Not applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.001 per share
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PART I
Item 1. Description of Business.
Introduction
Antra Holdings Group, Inc. is a holding company. Through our wholly
owned subsidiary, Antra Music Group, Inc., we produce, acquire, license and
distribute high-quality recorded music. Antra Music was formed in 1997 to
promote urban contemporary music. Also in 1997, Antra Music entered into an
agreement with Ricardo Brown, the urban recording artist known as "Kurupt". We
primarily focus on urban music, the area of the industry that includes hip-hop,
rap and rhythm and blues. We believe, based on industry sources and census data,
that this area offers significant growth and profit potential.
Hip-Hop or Urban Music was the most dynamic segment of the contemporary
music industry in 1997. The Recording Industry Association of America (RIAA)
figures, compiled by Chilton Research Services, show Hip-Hop or Urban with the
largest percentage increase in consumer record purchases, accounting for 10.1%
of total shipments or $1.23 billion. This figure represents an increase of more
than 250% over ten years.
Through a joint venture with A&M Records, we released our first
recording in October 1998. This was a two-CD set by our primary artist, Kurupt,
entitled "Kuruption." Kuruption sold approximately 400,000 copies. A&M
terminated the joint venture after its parent company, Polygram Holding Group,
merged with Seagrams. A&M transferred to us all of its rights in the former
joint venture's agreements with Kurupt and Baby S, but retained exclusive
ownership of all rights to recordings made prior to the termination.
We entered into an agreement with Artemis Records on July 28,1999. The
distribution agreement replaces our former joint venture and enables us to
retain exclusive ownership of all of our master recordings.
Kuruption was Kurupt's initial album. We plan to release a second
Kurupt album entitled "Streetz Iz A Mutha," with tracks produced by Daz
Dillinger, and Dr. Dre. The release is currently scheduled for November 2, 1999.
We also plan a release in the first quarter of 2000 and expect to release 3 to 5
albums during the calendar year 2000.
We have recording contracts with several other artists including The
Spooks, El-Drex and Baby S. El-Drex also signed a co-publishing agreement.
Additionally, we have various arrangements with other artists, including Roscoe,
Dawna, Sloppy Joe and Crush.
Antra plans to enter into or has commenced several different ancillary
businesses:
o We have established a publishing subsidiary to receive revenues
generated from the publication of our artists.
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o We are also in the process of establishing a "Recordstogo.com" joint
venture.
o We may in the future produce and sell music videos.
Structure of the Music Industry
The music business consists of several functions: publishing,
production, manufacturing, licensing, distribution and promotion.
Publishing. The process begins when a songwriter writes a piece of
music and agrees with a publishing company to market the work to the industry.
By contracting for the rights to music written by different songwriters, the
publishing company builds a library of music, known as a catalog. The publishing
company markets its music catalog to producers, artists and record companies,
and collects royalties on each recording of the music that is sold.
Antra currently has co-publishing agreements with several artists.
Under these publishing agreements, Antra and the artist jointly own certain
compositions, in equal shares. Antra can exploit the compositions in any
commercial manner. Antra is entitled to all gross receipts earned by a
composition, but must pay fifty percent (50%) of the net income to the artist.
Antra recently established a publishing subsidiary.
Production. Once the record company decides to record a song with a
performing artist, the record company underwrites the costs associated with
producing a market-ready recording (master recording) of the song. This entails
paying for recording studio time, hiring studio musicians and paying sound
mixers to edit the tape. The artist is responsible for delivering satisfactory
master recordings to the record company.
Antra's joint venture with A&M produced Kurupt's initial album,
"Kuruption" Antra plans to release a second Kurupt album entitled "Streetz Iz A
Mutha," with tracks produced by Daz Dillinger, and Dr. Dre. The release is
currently scheduled for November 2, 1999. We also plan a release in the first
quarter of 2000 and expect to release 3 to 5 albums during the calendar year
2000.
Manufacturing. Once a master is completed, the record company contracts
with a manufacturer or duplicator of recording formats to make multiple copies.
Antra contracts with others to manufacture its records or arranges for
manufacturing through an agreement with its distributor. Amounts advanced by the
distributor for the manufacture of Antra's next album will be repaid out of the
revenues from the sale of this album.
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Licensing. Antra, like many other recorded music ventures, will license
the musical works it intends to sell. This means that Antra will purchase the
right to reproduce and sell the musical works in exchange for royalties paid to
the music publisher and artist.
Distribution. Once copies have been completed, the record company's
distribution system stocks, sells or markets, takes orders for and delivers the
copies of the recording to distribution outlets. In many ways, distribution is
the most critical function in the record business, since distributors provide
the access to, and thereby control, the marketplace. Distribution can be divided
into two distinct categories: Traditional and Non-traditional.
Traditional outlets include small independent record stores, leased
departments of large retail stores, and large chain record stores.
Non-traditional outlets are also known as alternative distribution.
Independent retail outlets not served by traditional distributors, direct
response marketing and Internet sales comprise the bulk of non-traditional
sales. Non-traditional outlets are a rapidly growing area of distribution.
Promotion. Once the record is ready for market it must be promoted to
ensure sales upon distribution. The traditional and most effective means of
promoting recorded music is by radio airplay. Obtaining radio air play for a new
release is an extremely competitive process. As radio stations increasingly
focus on specific music formats, it is becoming easier for independent producers
to target the stations that are most likely to air a particular new recording.
In a number of markets, hiring independent regional promoters can be quite
effective in gaining airplay for a release. Public and college radio stations
are useful venues for promoting lesser-known artists. Music video air play on
MTV or VH-1, or other video stations or programs, is essential to the commercial
success of recording music artists and their records. Promoting urban
contemporary music may involve more-direct promotional efforts in urban
communities. For example, albums may be promoted at local dance clubs.
Songs that are aired on a major radio station are chosen by the program
director, often in conjunction with a format consultant. Once a recording is
aired, the amount of repeat play it receives depends on listener requests and
feedback, as well as actual sales data. Since listener response and sales depend
in large measure how often a release is aired, building a commercial hit depends
on an ongoing cycle of air play and sales. Nurturing this cycle requires
constant marketing attention and careful coordination with advertising, concert
schedules and other promotional activities. Other promotional tools include
print advertising, retail promotions and concert tours.
The key to finding an audience for new for new artists is to properly
coordinate all these promotional activities to maximize awareness and exposure.
Antra will, where possible, use its in-house expertise to direct, coordinate or
assist with the promotional activities of its artists in order to keep its costs
down. In conjunction with its first release with its distributor, Artemis,
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Antra will utilize the promotional and marketing personnel of Artemis and its
affiliates. By coordinating or providing assistance with these activities, to
the extent practicable, in-house, costs will be further kept under control.
Our joint venture with A&M and its termination
On April 1, 1998, Antra Music and A&M Records, a division of Polygram,
formed a joint venture called Wall Street Records LLC. A&M and Antra each owned
50% of the joint venture. The joint venture was intended to be a vehicle by
which Antra Music and A&M could produce, manufacture and distribute recordings
and related materials through Polygram's worldwide distribution channels.
However, A&M terminated the joint venture after Polygram merged with Seagrams.
A&M was to be responsible for significant periodic contributions
towards the joint venture's operating budget for expenses associated with new
recording albums produced by the joint venture's recording artists. The joint
venture was to cover significant costs of promotion and production that Antra
would otherwise have to bear alone.
In accordance with the agreement that terminated the joint venture:
o Antra transferred to A&M all of its interest in the joint venture's
limited liability company;
o A&M paid Antra $725,000;
o A&M transferred to us all of its rights in the former joint
venture's agreements with Kurupt and Baby S, but retained
exclusive ownership of all rights to recordings made prior to
the termination;
o A&M disclaimed any rights to several artists previously submitted
to the joint venture by Antra.
New Distribution Agreement
On July 29, 1999 Antra Music entered into a three-year distribution
agreement with Artemis Records. The distribution agreement replaces Antra's
former joint venture and enables it to retain exclusive ownership of all of its
master recordings. Artemis further distributes records though RED Distribution,
Inc., a division of Sony.
The distribution agreement makes Artemis the exclusive distributor of
one album by Kurupt and one other album by an Antra artist to be determined.
Artemis will advance funds for the manufacture of the first album to be produced
under this agreement. The advance will be repaid out of the proceeds of the sale
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of the record. To secure the repayment of these advances, Antra has granted
Artemis a security interest in inventory, production parts and components and
accounts receivable from Artemis under the agreement.
In general, Artemis will receive a distribution fee based upon a
percentage of total sales under the agreement, less returns, credits, rebates
and reserves. The percentage is reduced if net sales exceed $10,000,000 in any
given contract year. The percentage is further reduced if net sales exceed
$20,000,000 in any given contract year.
Under our distribution agreement, the distributor agreed to advance
funds for the manufacture of our records and to provide personnel for the
marketing and promotion of these records. While we have benefitted from these
terms, our percentage participation in revenues derived from these albums is
reduced by the degree to which the distributor advances additional funding.
Artemis will warehouse Antra's inventory of these records and will
fulfill orders and distribute these records through the industry's normal retail
channels in the United States. Artemis will also handle all returns of the
applicable records.
Recordstogo.com
On July 26, 1999, Antra Holdings and Teltran International Group Ltd.
announced a joint venture, Recordstogo.com. We are equal co-owners with Teltran
in this joint venture. We expect it to begin operations in Fall 1999.
Recordstogo.com will market records on its website and where visitors can:
o Buy records and CDs from a database of music titles ranging
from the early days of vinyl recordings to present-day CDs. At
first this database will contain approximately 360,000 titles,
although we expect it to grow significantly by year-end 1999;
o Download music in MP3 and other formats;
o Purchase "hard-to-find" records and CDs and sell used records and
CDs to others in our auction house;
o Buy music memorabilia and possibly other entertainment products,
including videos;
o Listen to interviews with musical artists from all generations; and
o Discuss music and the music industry in our interactive chat rooms.
Recording Agreements
Antra has recording agreements with four artists: Kurupt, The Spooks,
Baby S and El-Drex. These provide for initial terms of twelve months, with
additional twelve-month options exercisable by Antra. The Recording Agreement
provides that during the term of the agreements, Antra owns all right, title and
interest in all musical recordings recorded under the agreements. Antra's rights
under these agreements will survive even after they terminate. Under
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these agreements, Antra also has the right to use and publish each artist's name
and likeness in connection with video and commercial purposes. According to the
agreements, the artist receives a royalty for sales of recording albums and
singles in line with industry norms, which typically range from five to ten
percent.
Exclusive Production Recording Agreements
Antra currently has exclusive production recording agreements with
Kurupt. Kurupt has agreed to provide Antra with his exclusive personal services
as a phonograph-recording artist for a period of twelve (12) months. Antra has
the option to extend the contract by additional one-year options, subject to
certain terms and conditions. Antra is required by the agreement to seek
agreements with third-party record companies who will manufacture and distribute
the artist's recordings. Antra has the right to select the producer and musical
composition for any albums produced by the artist under the recording agreement.
Antra also has the exclusive right to the artist's name and likeness and owns
all right, title and interest in all recordings produced under the agreement.
Relationship with Artists
Our plan is to sign and develop new or emerging urban or hip-hop
oriented music artists and, to the extent practicable, sign established artists.
We intend to recruit new and emerging artists and to enter into exclusive,
long-term recording contracts (expected to cover an initial album, with options
to record four to seven additional albums, at Antra's discretion). Antra will
concentrate its resources on a small number of artists, developing a tailored
marketing and promotion plan for each. There can be no assurance that Antra will
be able to attract new and emerging music talent or established artists, or, if
Antra is able to attract such talent, that Antra will be able to develop that
talent successfully or in such a manner so as to commercially exploit.
If Antra develops commercially successful music artists, there can be
no assurance that Antra will be able to maintain its relationships with such
artists even if it has entered into exclusive recording contracts with them.
Furthermore, performing artists occasionally request releases form their
exclusive recording agreements. Among the reasons that may cause an artist to
engage in so-called "label jumping" are expectations of greater income, advances
or promotional support by a competing label. There can be no assurance that any
given artist developed by Antra will not determine to request a release form his
or her agreement with Antra. Because of the highly personal and creative nature
of the artist's contractual obligations to Antra, it is not feasible to force an
unwilling artist to perform the terms of his or her contract with Antra.
Copyrights
Antra's recorded music business, like that of other companies involved
in recorded music, will primarily rest on ownership and or control and
exploitation of musical works and sound recordings. Antra's music products,
including its commercial music, are and will be protected under applicable
domestic and international copyright laws.
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Although circumstances vary from case to case, rights and royalties
relating to a particular recording typically operate as follows: When a
recording is made, copyright in that recording vests either in the recording
artist (and is licensed to the record company) or in the record company itself,
depending on the terms of the agreement between them. Similarly, when a musical
composition is written, copyright in the composition vests either in the writer
(and is licensed to a music publishing company) or in a publishing company. A
public performance of a record will result in money being paid to the writer and
publisher. The rights to reproduce songs on sound carriers results in mechanical
royalties being payable by the record company to the recording artists for the
use of the recording. Antra operates in an industry which revenues are adversely
affected by the unauthorized reproduction of recordings for commercial sale,
commonly referred to as "piracy", and by home taping for personal use.
Potential publishing revenues may be derived from Antra's ownership
interest in musical compositions, written in whole or in part by artists.
Management anticipates securing an ownership position in the copyright to any
compositions written by its recording artists, where such rights are available
and have not been previously sold or assigned. Generally, revenues from
publishing are generated in the form of: (1) mechanical royalties, paid by the
record company to the publisher for the mechanical duplication of the copyright
to a particular composition (as distinct from the copying of the artist's
performance of that composition); (2) performance royalties, collected and paid
by performing rights entities such as ASCAP and BMI for the actual public
performance of the composition as represented by radio airplay, Musak, or as a
theme or jingle broadcast in synchronization with a visual image via television;
(3) sub-publishing revenues derived from copyright earnings in foreign
territories, and publishers in those territories acting as designated collection
agents for Antra; and (4) licensing fees derived from printed sheet music, uses
in synchronization with images as in video or film scores, computer games and
other software applications, and any other use involving the composition.
Competition
Antra will face intense competition for discretionary consumer spending
from numerous other record companies and other forms of entertainment offered by
film companies, video companies and others. Antra will compete directly with
other recorded music companies, including the major recorded music companies,
which distribute contemporary music, as well as with other record companies for
signing artists and acquiring music catalogs. Many of these competitors have
significantly longer operating histories, greater financial resources and larger
music catalogs than Antra. Antra's ability to compete successfully in the
recorded music business will be largely dependent upon its ability to sign and
retain artists who will prove to be successful and to introduce music products
which are accepted by consumers.
Employees/Independent Contractors
As of September 1, 1999, Antra had six employees, all of whom were
located at our Philadelphia offices. None of our employees is represented by a
labor union. We have not experienced any work stoppage and considers relations
with our employees to be good.
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As is customary in the music business, Antra also utilizes the services
of artists, performers, producers, engineers, roadies, booking agents and others
who are independent contractors. These independent contractors hire out their
services on an as needed basis and receive a set fee from Antra per assignment.
Independent contractors are utilized because the individuals providing these
services do so only on this basis, the services performed by these independent
contractors are less expensive than having full time employees perform these
services.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Certain statements in this Form 10-SB constitute forward-looking
statements or statements which may be deemed or construed to be forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. The words "forecast," "estimate," "project," "intend," "expect," "should,"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements involve and are subject to known and unknown
risks, uncertainties and other factors which could cause the Company's actual
results, performance (financial or operating) or achievements to differ from the
future results, performance (financial or operating) or achievements expressed
or implied by such forward-looking statements. Those factors are more fully
discussed in the Company's Form SB-2.
The following discussion and analysis should be read in conjunction
with the financial statements and related notes contained elsewhere in this
registration statement.
General
Prior to October 1998, we were essentially a development-stage company.
Therefore comparisons between 1998 and 1997 are of limited value.
During the balance of 1999 and early 2000 our Plan of Operation is to
release Kurupt's new album in November 1999 and 3 to 5 records in 2000. We plan
to continue to sign new artists, to produce and release additional records and
to operate our Recordstogo.com joint venture. We also plan to develop our
publishing business.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
(unaudited)
We had net income during the six months ended June 30, 1999 of 426,558,
compared to a net loss in the first six months of 1998 of $323,970. The increase
was primarily a result of the $725,000 payment we received as part of the
settlement of our joint venture with A&M.
Our net loss from operations for the six-month period in 1999 was
$298,442, which improved from the $323,970 net loss from operations we had in
the same period of 1998. Our revenue was $56,120 for the six months ended June
30, 1999 while we received no revenue in the comparable period of 1998.
Our operating expenses during the first half of 1999 were approximately
$354,562 compared to approximately $323,970 during the same period in the prior
year. However, a significant amount of overhead expenses were reimbursed in
1998. Factoring out these reimbursed expenses, there would have been a decrease
in operating expenses primarily as a result of reduced promotional costs.
Since Antra did not commence income producing operations until the
second half of 1998, we do not believe that the data for the six months ended
June 30, 1998 are any indication of our future operations.
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Fiscal Year 1998 Compared to Fiscal Year 1997
Our revenue was approximately $20,000 for 1998 while we received no
revenue in 1997.
Our operating expenses during 1998 were approximately $1,415,107
compared to approximately $592,369 during the prior year. In both 1998 and 1997,
we incurred substantial expenses as Antra Music negotiated agreements and
arrangements with various artists. In 1998, we incurred expenses in setting up
our joint venture with A&M. The joint venture incurred expenses in connection
with the signing of the artist, Kurupt, and with the recording, production,
promotion and distribution of his album, Kuruption. All expenses were written
off as incurred, in accordance with industry practice.
Since Antra did not commence income producing operations until 1998, we
do not believe that either 1997 or 1998 are any indication of our future
operations.
Liquidity
Antra had a working capital deficit of $75,030 at December 31, 1998 and
working capital of $6,567,323 at June 30, 1999. The increase in working capital
resulted from payments received upon the termination of its joint venture with
A&M. In July 1999, Antra received $2,766,666 in gross proceeds from the sale of
secured convertible notes. Antra used net cash of $1,441,633 in its operating
activities for 1998 and $5,813,897 for the six months ended June 30, 1999. Antra
has used cash primarily to fund the recording, production, promotion and
distribution of its first record.
We require significant working capital to produce, manufacture, promote
and distribute our music. To date we have satisfied our working capital
requirements through borrowing including our borrowing through the private
placement in July 1999. We believe we will require additional working capital in
connection with our album to be released in November 1999 and our other album to
be released thereafter. We anticipate that we will receive additional funding by
exercising our option to require the investors in the July private placement to
lend additional amounts. Our option to require the loan of additional funds is
subject to certain conditions. If these conditions are not met we may be
compelled to seek funding elsewhere. There is no assurance we will be able to do
so.
Our need for working capital for our next two records has been reduced
by services and funding provided by our distributor under our distribution
agreement. Under this agreement, the distributor agreed to advance funds for the
manufacture of our records and to provide personnel for the marketing and
promotion of these records. While we have benefitted from these terms, our
percentage participation in revenues derived from these albums is reduced by the
degree to which the distributor advances additional funding. Unless our working
capital position improves, we may be compelled to rely on our relationship with
the distributor.
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Item 3. Description of Property.
Antra's executive offices are located at 1515 Locust Street,
Philadelphia, Pennsylvania 19102, where it subleases approximately 10,400 square
feet. This sublease expires on September 30, 2003. The annual base rental for
this space is approximately $104,000.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of the date
hereof regarding the ownership of Antra Holdings's common stock by: each person
we know owns 5% or more of our outstanding shares; each of our directors; and
all officers and directors of Antra Holdings as a group. Each owner of the
common stock has sole voting and investment power for all shares listed below,
except as otherwise indicated.
Some security holders have agreed that their ownership interest of
Antra's equity will be at all times less than 5.00% and that they will not
exercise or convert their warrants or convertible notes to the extent that their
equity ownership would exceed that limit. Because of their agreements, these
security holders are not included in the table below.
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of Percent
Title of Beneficial Beneficial of
Class Owner Ownership Class
- ----- ----- --------- -----
<S> <C> <C> <C>
Common Stock, Joseph Marrone 1,900,000 16.46%
par value $.001 Antra Holdings Group, Inc.
per share 1515 Locust Street
Philadelphia, Pennsylvania 19102
Teltran International Group, Ltd. 2,000,000 17.32%
One Penn Plaza, Suite 4632
New York, New York 10119
All directors and officers 1,900,000 16.46%
as a group (4 persons)
</TABLE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The following are the officers and directors of Antra Holdings:
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<TABLE>
<CAPTION>
Name Age Position
- ------------------------------ --------- ------------------------------------
<S> <C> <C>
Joseph M. Marrone, Jr. 34 Chairman of the Board,
Chief Executive Officer and Director
Thomas R. Kessler 61 Director
Arthur G. Rosenberg 61 Director
Henry Siegel 55 Director
</TABLE>
Joseph M. Marrone, Jr. formed Antra Music in 1997 and now devotes
substantially all of his time to Antra's business. He has been engaging in
private law practice in the Philadelphia area since 1993, although his practice
is no longer accepting new matters. He previously served as a City Solicitor for
the City of Philadelphia and worked as a campaign strategist for the current
Mayor, Ed Rendell, in the 1991 election. Mr. Marrone successfully negotiated the
release of Kurupt from his previous contract and has since managed Kurupt's
career. He has been a director of Antra Holdings since 1997.
Thomas R. Kessler has extensive experience in the banking and
securities businesses. From 1961 to 1993, Mr. Kessler held various positions at
Euro Canadian Bank, Continental Bank International, and Compass Bank & Trust
Company Ltd,. Since 1994, he has been a managing director of Montaque Securities
International Limited. Mr. Kessler received his law degree from Cleveland
Marshall College of Law, Cleveland State University. He has been a director of
Antra Holdings since 1998.
Arthur G. Rosenberg has been a principal of The Associated Companies, a
real estate development firm, since 1987 and became a principal of Millennium
Development Group LLC in 1998. Prior to that, Mr. Rosenberg was a practicing
lawyer in Huntington, New York and served as general counsel for ITT Levitt &
Sons, Inc., an international builder. Mr. Rosenberg currently serves on the
boards of directors of Mike's Original, Inc. and Phar Mor Inc. He has been a
director of Antra Holdings since 1997.
Henry Siegel is Chairman and Chief Executive Officer of Kaleidoscope
Media Group, Inc. He has held these positions since 1995. He has also been an
officer of Siegel Entertainment, Inc., which is now a subsidiary of
Kaleidoscope, since 1994. Mr. Siegel started his career at Grey Advertising
where he directed media operations. He pioneered the concept of barter
syndication, advertiser supported TV, for which the Advertising Age recognized
him as one of the 50 top television pioneers. He launched, in association with
MGM, the first monthly barter movie network and "Fame" TV. He has produced
Return to Titanic, and relaunched Baywatch, that has become the most watched
television program in the world. He has been a director of Antra Holdings since
1998.
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Directors are elected to serve until the next annual meeting of
stockholders of Antra Holdings or until their successors are elected and
qualified. There are no audit, compensation or other committees of the board of
directors.
Item 6. Executive Compensation.
The following table sets forth information concerning compensation
paid or accrued by Antra Holdings or its subsidiaries for services rendered
during fiscal years 1998 and 1997 to our chief executive officer. No other
executive officer's compensation exceeded $100,000 during either of these fiscal
years.
Summary Compensation Table
Name and Principal Position Year Salary
- --------------------------- ---- ------
Joseph M.Marrone, Chairman and Chief Executive Officer 1998 $130,769
1997 $ 0
Employment Agreement
Antra Holdings entered into an employment agreement with Joseph M.
Marrone on March 12, 1998. The agreement expires on March 29, 2001, which will
be automatically renewed annually unless terminated by either party. Mr. Marrone
is required by the agreement to oversee, develop, produce and manage music
products for Antra Music and to participate and oversee all entertainment
projects of Antra Music. Mr. Marrone agreed to act as an executive of Antra
Music and Antra Holdings and to provide services to other affiliates of ours.
Mr. Marrone's base salary for the first year of his employment
agreement is $200,000. He may be awarded an increase in base salary or a bonus,
in either case solely at the discretion of the board of directors based upon a
review of Antra's performance in the prior year. He is also entitled to all
benefits generally offered to Antra's other executives, if any, and to an
automobile allowance. Since November 1998, all of Mr. Marrone's salary payments
and accruals ceased with his consent.
Item 7. Certain Relationships and Related Transactions.
Teltran
In April 1999, Antra Holdings and Teltran International Group Ltd.
exchanged shares of our respective companies. We thus now own 2,100,000 shares
of Teltran's common stock and Teltran owns 2,000,000 shares of our common stock.
As a result of the transaction Teltran may be deemed a principal stockholder of
our company. Teltran is a publicly traded company engaged in the
telecommunications business.
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We have entered into an agreement with Teltran that requires an
adjustment in the shares delivered in connection with the exchange described
above. On the first business day of the year 2000, if either Teltran's shares or
our shares are trading less than 20% below the market price of the other
company's shares, the company whose shares are trading lower must issue
additional shares to the other.
Antra Holdings and Teltran formed a corporation, Recordstogo.com. We
will have equal interest with Teltran in this joint venture corporation. We
expect it to begin operations in Fall 1999. The initial primary activity of
Recordstogo.com will be to market records on its website, where visitors can buy
records and CDs from a database of music titles ranging from the early days of
vinyl recordings to present-day CDs.
Secured Convertible Notes
On July 20, 1999, Antra sold $2,766,666 of secured convertible
notes. These notes bear interest at 10% per annum. The notes mature on July 20,
2002, unless accelerated to any date after July 20, 2000 at the option of the
holder of the note. Under limited conditions and at limited times, Antra
Holdings may redeem the notes.
The notes are convertible into shares of our common stock. The
conversion price is equal to 50% of the average of the closing bid prices for
shares of our common stock over the preceding 5 trading days, but is limited to
$3.25 per share. For example, if a note holder elects to convert $500,000 of
notes into shares and the average closing bid price of our common stock is
$6.25, the converting holder will receive 160,000 shares.
As security for our obligations under the notes, we deposited
1,000,000 of our Teltran shares with a collateral agent.
For two weeks following the effectiveness of the registration
statement filed with respect to these shares, Antra Holdings has the option to
require all of the noteholders to purchase additional notes (the "Put Option").
We can only exercise this option if the trading volume of our common stock is
more than 75,000 shares per day on each of the ten previous trading days. You
should be aware that the daily trading volume of our common stock has exceeded
75,000 shares only twice between since July 1998 and July 1999.
Antra Holdings paid an aggregate of $343,999 as cash commissions to
several placement agents in connection with the issuance of the notes. Some of
these placement agents also received warrants to purchase an aggregate of
1,146,666 shares of our common stock at $2.00 per share. If we exercise the Put
Option, these placement agents will receive $172,000 in cash and an additional
573,334 warrants.
Antra Holdings agreed to file a registration statement on Form SB-2
with the Securities and Exchange Commission by September 18, 1999 to register
the shares that can be acquired by the conversion of the notes and the exercise
of the warrants. Antra Holdings also
14
<PAGE>
agreed to file Form 10-SB with the commission so that it can become subject to
the periodic reporting requirements of the federal securities laws.
The conversion price of the notes and the exercise price of the
warrants were determined in arm's-length negotiations between representatives of
Antra Holdings and the investors. These prices are not based on Antra Holdings's
net worth or any other established valuation criteria.
Refinancing of Subordinated Convertible Notes
On July 31, 1999, Antra refinanced $1,000,000 of its outstanding
subordinated convertible notes. The new notes bear interest at 10% per annum and
mature on January 15, 2002. The notes may be prepaid, in whole or in part, at
any time without penalty.
The notes are convertible into shares of our common stock at the
same conversion price as the secured convertible notes described in the previous
section. These notes also have registration rights similar to those of the
secured convertible notes.
Item 8. Legal Proceedings.
Antra and some of its stockholders are defendants in a legal
action. Plaintiffs allege that Antra or the stockholders failed to convey
100,000 shares of Antra's common stock. Antra believes that it was incorrectly
named as a party to this lawsuit and denies any liability. Antra's motion to
dismiss the action was denied by the court. If the outcome of this case is
unfavorable, Antra's exposure would depend on the price of its stock. Assuming
$5 per share is the price of the stock, the liability could be approximately
$500,000. If treble damages were to be awarded, Antra's exposure could be
approximately $1,500,000.
Item 9. Market For Common Equity and Related Stockholder Matters.
Our common stock is currently quoted on the OTC Bulletin Board
under the symbol "RECD."
Set forth below are the high and low closing bid quotations for our
common stock for the periods indicated as reflected on the electronic bulletin
board. Such quotations reflect interdealer prices without retail mark-up,
mark-down or commissions, and may not reflect actual transactions.
15
<PAGE>
Period Ending High Low
------------- ---- ---
June 30, 1999 4.50 1.25
March 31, 1999 3.75 1.75
December 31, 1998 5.125 1.50
September 30, 1998 5.875 4.25
June 30, 1998 5.875 5.00
March 31, 1998 6.00 4.50
December 31, 1997 5.00 3.25
September 30, 1997 5.75 2.625
June 30, 1997 5.75 0.50
March 31, 1997 1.50 1.125
As of September 15, 1999, there were approximately 92 recordholders
of the our common stock, although we believe that there are more than five
hundred beneficial owners of our common stock. There are no shares of preferred
stock currently outstanding.
Item 10. Recent Sales of Unregistered Securities.
The following sets forth information relating to all unregistered securities of
the Company sold by it in the last 3 years. There were no reportable
transactions prior to June 1997.
On June 10, 1997, Opell, Inc. ("Opell"), a Nevada corporation,
issued 5,000,000 shares to the stockholders of Wall Street Records, Inc. ("Wall
Street"), a New Jersey corporation, in exchange for all of the outstanding
capital stock of Wall Street. Opell subsequently merged with a subsidiary
corporation formed in Delaware and the surviving entity changed its name to
Antra Holdings Group, Inc.
On July 11, 1997, the Company issued 2,500,000 shares to various
investors in a private placement transaction in accordance with Regulation 504
of the Securities Act of 1933 for $100,000.
Between January 9, 1998 and March 3, 1998, the Company issued
1,720,260 shares to various investors in a private placement transaction in
accordance with Regulation 504 of the Securities Act of 1933 for $860,130.
On October 2, 1998, the Company issued a Subordinated Convertible
Note in exchange for existing indebtedness in the amount of $807,240. The
Company believes the issuance of such note is exempt from the registration
requirements pursuant to Section 4(2) of the Securities Act.
In November 1998, the Company issued an additional Subordinated
Convertible Note in exchange for existing indebtedness in the amount of
$192,760. The Company believes the issuance of such note is exempt from the
registration requirements pursuant to Section 4(2) of the Securities Act.
16
<PAGE>
On July 20, 1999, the Company sold $2,766,666 of secured
convertible notes. The Company paid an aggregate of $343,999 as cash commissions
to several placement agents in connection with the issuance of the notes. Some
of these placement agents also received warrants to purchase an aggregate of
1,146,666 shares of our common stock at $2.00 per share. If the Company is able
to exercise a put option granted in connection with the foregoing transaction,
these placement agents will receive an additional $172,000 in cash and an
additional 573,334 warrants in a transaction exempt pursuant to Rule 504.
On July 31, 1999, the Company issued new notes to the holders of
its outstanding subordinated convertible notes.
.
Item 11. Description of Securities.
Antra Holdings is currently authorized to issue 50,000,000 shares
of common stock, $.001 par value and 5,000,000 shares of preferred stock, par
value $.001 per share.
Common Stock
Each share of common stock entitles the holder thereof to one vote
on all matters submitted to a vote of the stockholders. Since the holders of
common stock do not have cumulative voting rights, holders of more than 50% of
the outstanding shares can elect all of the directors of Antra Holdings and
holders of the remaining shares by themselves cannot elect any directors. The
holders of common stock do not have preemptive rights or rights to convert their
common stock into other securities. In the event of a liquidation, dissolution
or winding up of Antra Holdings, holders of the common stock have the right to a
ratable portion of the assets remaining after payment of liabilities. All of the
outstanding shares of common stock are duly authorized, validly issued, fully
paid and non-assessable.
The holders of shares of common stock are entitled to dividends
when and as declared by the board of directors from funds legally available
therefor. Antra Holdings has never declared or paid cash dividends on its common
stock. Antra Holdings intends to retain its net income, if any, to increase its
capital base and, accordingly, does not currently anticipate paying cash
dividends. Any decision on the future payment of dividends is solely at the
discretion of the board of directors and will depend on various factors
including the results of our operations and our financial condition.
Preferred Stock
Antra Holdings's certificate of incorporation authorizes the
issuance of "blank check" preferred stock with whatever designation, rights and
preferences as may be determined by the board of directors. Accordingly, the
board is empowered, without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of common stock. The
17
<PAGE>
preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of Antra. Although we
do not currently intend to issue any shares of preferred stock, there can be no
assurance that we will not do so.
Transfer Agent
The transfer agent for the Company's common stock is Standard
Register & Transfer Company, Inc., 12528 South 1840 East, Draper, Utah 84020.
Its telephone number is (801) 571-8844. Its fax number is (801) 571-2551.
Item 12. Indemnification of Directors and Officers.
Articles Sixth and Seventh of the Certificate of Incorporation of
the Company provides with respect to the indemnification of directors and
officers that the Company shall indemnify to the fullest extent permitted by
Sections 102(b)(7) and 145 of the Delaware General Corporation Law, as amended
from time to time, each person that such Sections grant the Company the power to
indemnify. Article Seventh of the Certificate of Incorporation of the Company
also provides that no director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of Delaware General Corporation Law, as
amended from time to time.
Item 13. Financial Statements
18
<PAGE>
Item 14. Changes in and Disagreements with Accountants.
None of the events described in Item 304 of Regulation S-B has
occurred within the past twenty-four months.
Item 15. Financial Statements and Exhibits.
(A) See Page F-1 below.
19
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONTENTS
Page #
Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the years
ended December 31, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Deficit for
the years ended December 31, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7 -- F-11
Consolidated Financial Statements:
Consolidated Balance Sheets at June 30, 1999 and 1998 F-12
Consolidated Statements of Operations for the six months
ended June 30, 1999 and 1998 F-13
Consolidated Statements of Stockholders' Equity for
the six months ended June 30, 1999 and 1998 F-14
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998 F-15
Notes to Consolidated Financial Statements F-16
F-1
<PAGE>
LIEBMAN GOLDBERG & DROGIN LLP [Letterhead]
The Board of Directors
Antra Holdings Group, Inc.
We have audited the accompanying consolidated balance sheets of Antra Holdings
Group, Inc. as of December 31, 1998 and 1997, and the related consolidated
statement of operations and stockholders' deficit, and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit 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 audit provides 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 Antra Holdings
Group, Inc. as of December 31, 1998 and 1997 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
May 26, 1999
Garden City, New York
F-2
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
Assets
<TABLE>
<CAPTION>
December 31,
------------
Current Assets: 1998 1997
----------- -----------
<S> <C> <C>
Cash in bank $ 13,121 $ 16,576
Prepaid expenses 22,377 65,632
----------- -----------
Total current assets 35,498 82,208
Property and Equipment, Net 67,777 37,048
Other Assets:
Security deposits 13,024 2,670
Other 987 987
Goodwill 5,000 5,000
----------- -----------
Total assets $ 122,286 $ 127,913
=========== ===========
Liabilities and Stockholders' Deficit
Current Liabilities:
Accrued expenses payable $ 109,633 $ --
Payroll taxes payable 895 894
----------- -----------
Total current liabilities 110,528 894
----------- -----------
Long-Term Liabilities:
Loan payable 388,505 575,000
Loan payable - subordinated 807,240 --
Officer loan payable 21,334 22,333
----------- -----------
Total long-term liabilities 1,217,079 597,333
----------- -----------
Total liabilities 1,327,607 598,227
----------- -----------
Commitments and Contingencies
Stockholders' Deficit:
Common stock, par value $.001; 50,000,000 shares
authorized 9,544,210 shares issued and outstanding 9,544 7,824
Additional paid in capital 989,656 131,276
Deficit (2,204,521) (609,414)
----------- -----------
Total stockholders' deficit (1,205,321) (470,314)
----------- -----------
Total liabilities and stockholders' deficit $ 122,286 $ 127,913
=========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended
December 31,
------------
1998 1997
----------- -----------
Income:
<S> <C> <C>
Show income $ 20,000 $ --
----------- -----------
Expenses:
Recording and production expenses 476,199 190,060
Studio expenses 14,163 27,317
Bodyguards 32,750 --
Publicity and promotion 342,302 41,732
Contributions 16,320 --
Professional fees 246,210 114,228
Consulting expenses 159,765 89,850
Salaries 331,239 11,575
Payroll taxes 24,055 1,216
Rent 29,623 5,917
Auto expenses 208,279 26,764
Insurance expense 40,530 --
Travel and entertainment 298,728 24,472
Telephone 53,423 20,164
Office 49,329 15,797
Miscellaneous expenses 32,040 7,263
Registration expense 18,950 --
Repairs and maintenance 2,143 8,352
Dues and subscriptions 434 3,187
Postage and delivery 24,608 3,305
Depreciation expense 10,939 1,170
Reimbursed overhead (996,922) --
----------- -----------
Total expenses 1,415,107 592,369
----------- -----------
Net operating loss (1,395,107) (592,369)
Other (income) expense:
Loss on investment in Joint Venture 200,000 --
----------- -----------
Net loss for the year $(1,595,107) $ (592,369)
=========== ===========
Net loss per share of common stock based
upon 9,268,030 and 2,130,593 weighted average
shares, respectively $ (0.17) $ (0.28)
=========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Additional Total
Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Deficit
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance -
January 1, 1997 324,210 $ 324 $ 17,776 $ (17,045) $ 1,055
June 1, 1997 Reverse
Acquisition 5,000,000 5,000 -- -- 5,000
Shares purchased 2,500,000 2,500 113,500 -- 116,000
Net loss for the year -- -- -- (592,369) (592,369)
----------- ----------- ----------- ----------- -----------
Balance -
December 31, 1997 7,824,210 $ 7,824 $ 131,276 $ (609,414) $ (470,314)
Shares issued as
repayment of loans 1,720,000 1,720 858,380 -- 860,100
Net loss for the year -- -- -- (1,595,107) (1,595,107)
----------- ----------- ----------- ----------- -----------
Balance -
December 31, 1998 9,544,210 $ 9,544 $ 989,656 $(2,204,521) $(1,205,321)
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended
December 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,595,107) $ (592,369)
----------- -----------
Adjustments to Reconcile Net Loss to
Net Cash (Used in) Operating Activities:
Depreciation 10,939 1,170
Changes in Assets and Liabilities:
Decrease (Increase) in prepaid expenses 43,255 (65,632)
(Increase) in other assets (10,354) (11,657)
Increase in accrued expenses 109,633 --
Increase in payroll taxes payable 1 894
----------- -----------
Total adjustments 153,474 (75,225)
----------- -----------
Net cash (used in) operating activities (1,441,633) (667,594)
----------- -----------
Cash Flows from Investing Activities:
Acquisition of property and equipment (41,668) (38,218)
----------- -----------
Cash Flows from Financing Activities:
Borrowings from stockholders' and
related parties (net of repayment) 619,746 597,333
Capital contributions -- 124,000
Issuance of stock for notes payable 860,100 --
----------- -----------
Net cash provided by financing activities 1,479,846 721,333
----------- -----------
Net (decrease) increase in cash (3,455) 15,521
Cash - beginning of year 16,576 1,055
----------- -----------
Cash - end of year $ 13,121 $ 16,576
=========== ===========
Supplemental Disclosures:
Income tax $ -- $ --
=========== ===========
Interest paid $ -- $ --
=========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 1 - Operations:
- --------------------
Opell, Inc., now known as Antra Holdings Group, Inc. ("the Company"),
was formed as a Nevada Corporation and through June 1997 was not
engaged in any business activity and had nominal assets. On June 10,
1997, the Company acquired all the shares of Wall Street Records,
Inc. a New Jersey Corporation ("the Subsidiary"). The Subsidiary was
formed on March 20, 1997 to engage in various aspects of the music
business, including the production and distribution of recorded
music. In connection with the acquisition of the Subsidiary, the
Company issued 5,000,000 shares of its Common Stock to stockholders
of the Subsidiary, who then owned a majority of the outstanding
shares of the Company. The acquisition was treated as a purchase and
as a reverse acquisition so that the historical financials of the
Subsidiary represent the financials of the Company. Subsequent to
December 31, 1997, the Company reincorporated in Delaware and in
April 1998, the Company changed its name to Antra Holdings Group,
Inc. and the Subsidiary changed its name to Antra Music Group, Inc.
The Subsidiary's activities, consisted of negotiating agreements and
arrangements with artists, and thereby incurred substantial expenses.
In April 1998, the Subsidiary and A & M Records formed an LLC
(Limited Liability Corporation) (the "Joint Venture") for the purpose
of promoting, recording and distributing records or videos of certain
of the Subsidiary's recording artists. The Joint Venture released its
first recording in October 1998. Revenues were recognized in 1998.
All expenses, incurred in 1998, were written off as incurred, since
the Company's recording artist had no history of producing profitable
albums, and in such circumstances, the recording industry anticipates
marginal success for albums. Subsequent to 1998, as discussed in
Notes 7 and 8, the joint venture was terminated.
Note 2 - Summary of Significant Accounting Policies:
- ----------------------------------------------------
Principles of Consolidation:
----------------------------
The consolidated financial statements include the accounts of the
company and its wholly-owned subsidiary. Intercompany balances and
transactions have been eliminated.
Property and Equipment:
-----------------------
Property and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation is computed on a
straight-line basis over the estimated useful lives of the related
assets, which range from five to seven years. Leasehold improvements
are amortized over the shorter of the lease term or the useful life
of the asset.
F-7
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 2 - Summary of Significant Accounting Policies (Continued):
- ----------------------------------------------------------------
Development Stage Activities and Operations:
--------------------------------------------
Prior to October 1998, the Company was a development stage activity.
Since the Company now has continuing business revenues, financial
information does not include losses accumulated during the
development stage period not part of the financial statement period.
Going Concern:
--------------
As shown in the accompanying financial statements, the Company
incurred a net loss of $1,595,107 during the year ended December 31,
1998, and as of that date, the Company's current liabilities exceeded
its current assets by $75,030. Also, the uncertainty of future record
sales and the previously discussed factors, create an uncertainty
about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
Loan Payable - Subordinated:
----------------------------
As of December 31, 1998 the Company received loans from Millport
Limited amounting to $1,195,745. Of this amount, the Company has
agreed to subordinate $807,240 to Coastal Provinces Ltd., a company
managed by Millport Limited.
Income Taxes:
-------------
At December 31, 1998, the Company has an operating loss carryforward
of approximately $2,200,000 after limitations based on changes in
ownership.
Earnings Per Common Share:
--------------------------
Earnings per common share are computed on the basis of the weighted
average number of common shares outstanding during the period.
In 1998, the Company issued 1,250,000 shares and 470,260 shares
respectively of common stock as repayment of $860,100 loans
previously received.
F-8
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 2 - Summary of Significant Accounting Policies (Continued):
- ----------------------------------------------------------------
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 amounts.
Fair Value of Financial Instruments:
------------------------------------
SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments", requires disclosure of the fair value information,
whether or not recognized in the balance sheet, where it is
practicable to estimate that value. The carrying value of cash, cash
equivalents and accounts receivable approximates fair value.
Impairment of Long-Lived Assets:
--------------------------------
The Company has not completed it's evaluation of the adoption of SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." However, management believes
any such effect will not be material.
Accounting Pronouncements:
--------------------------
The Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income", which is effective for
financial statements with fiscal years beginning after December 15,
1997. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of
general-purpose financial statements. The Company does not expect
adoption of SFAS No. 130 to have a material effect, if any, on its
financial position or results of operations.
The FASB issued SFAS 131, "Disclosure about Segments of an Enterprise
and Related Information", issued by FASB, which is effective for
financial statements with fiscal years beginning after December 31,
1998. This statement establishes standards for the way that public
entities report selected information about operating segments,
products, and services, geographic areas, and major customers in
interim and annual financial reports. The Company does not expect
adoption of SFAS No. 131 to have a material effect, if any, on its
financial position or results of operations.
F-9
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 3 - Prepaid Recording Costs:
- ---------------------------------
In accordance with FASB Statement No. 50, "Financial Reporting in the
Record and Music Industry", advances to artists and producers are
capitalized as an asset when the current popularity and past
performance of the artist or producer provides a sound basis for
estimating the probable future recoupment of such advances from
earnings otherwise payable to the artist or producer. Any portion of
such advances not deemed to be recoupable from future royalties is
reserved at the balance sheet date. All other significant advances
which do not meet the above criteria are fully reserved when paid.
The Company in anticipation of completion of record production makes
various advances and payments on behalf of the recording artist.
These payments are prepaid and will be expensed when the record
production is completed and the record issued.
Note 4 - Loan Payable:
- ----------------------
During the period July 15, 1997 to December 31, 1998, the Company
received various loans totaling $2,055,845. Additionally, in 1998,
1,720,000 shares of common stock were issued as repayment of $860,100
of these loans.
The president of the company has made various loans to the Company
amounting to $21,334. At the present time, there is no repayment
schedule.
Note 5 - Stockholders' Deficit:
- -------------------------------
The Company has 50,000,000 shares of common stock, par value $.001
authorized. During the year, the Company issued 1,720,000 shares of
common stock to various investors.
Note 6 - Commitments and Contingencies:
- ---------------------------------------
The Company and certain stockholders are defendants in a legal
action, whereby plaintiffs allege the failure of the Company or those
stockholders to convey 100,000 shares of the Company's common stock.
Attorneys for the Company filed a motion to dismiss the action on
behalf of the Company. Should there be an unfavorable decision, the
Company's liability at a current stock market value of $5 per share
could be between $500,000 and $1,500,000 (assuming treble damages).
The Company denies any liability.
F-10
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 6 - Commitments and Contingencies (Continued):
- ---------------------------------------------------
The Company subleases office space expiring September 30, 2003. The
annual rental commitments are as follows:
1999 $ 75,429
2000 107,942
2001 120,947
2002 127,449
2003 101,439
--------
$533,206
========
Note 7 - Investment in Joint Venture:
- -------------------------------------
On March 13, 1998, the Company formed Wall St. Records, LLC, a
Delaware limited liability corporation. The Company contributed
$200,000 of capital in accordance with the limited liability company
agreement.
In April 1998, the Subsidiary and A & M Records formed an LLC
(Limited Liability Corporation) (the "Joint Venture") for the purpose
of promoting, recording and distributing records or videos of certain
of the Subsidiary's recording artists. The Joint Venture released its
first recording in October 1998. Revenues were recognized in 1998.
All expenses, incurred in 1998, were written off as incurred, since
the company's recording artist had no history of producing profitable
albums, and in such circumstances, the recording industry anticipates
marginal success for albums.
As of December 31, 1998, the Company has realized a loss on its
investment in the joint venture of $200,000, representing its entire
investment.
Note 8 - Subsequent Events:
- ---------------------------
In April 7, 1999, the Company agreed to terminate the joint venture
agreement with A & M Records in exchange for the future rights to the
artists that were assigned to the LLC, release of all liability and
debt incurred by the LLC and payment of $725,000. The Company has
released all claims to any revenue or profits of the LLC that may
arise from the release of recording of the artists while assigned to
the LLC.
F-11
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
June 30,
Assets
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash in bank $ 206,072 $ 82,816
Investment in Joint Venture -- 200,000
Investment 6,000,000 --
Prepaid recording costs 387,090 202,637
----------- -----------
6,593,162 485,453
Property and Equipment, Net 86,066 60,606
Other Assets:
Security deposits 13,024 1,531
Other 987 987
Goodwill 5,000 5,000
----------- -----------
Total assets $ 6,698,239 $ 553,577
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accrued expenses payable $ 24,678 $ --
Payroll taxes payable 1,161 50,397
----------- -----------
Total current liabilities 25,839 50,397
----------- -----------
Long-Term Liabilities:
Loan payable 429,829 416,030
Loan payable - subordinated 1,000,000 --
Officer loan payable 21,334 21,334
----------- -----------
Total long-term liabilities 1,451,163 437,364
----------- -----------
Total liabilities 1,477,002 487,761
----------- -----------
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $.001; 50,000,000 shares
authorized, 11,544,210 and 9,544,210 shares
issued and outstanding, respectively 11,544 9,544
Additional paid in capital 6,987,656 989,656
Accumulated Deficit (1,777,963) (933,384)
----------- -----------
Total stockholders' equity 5,221,237 65,816
----------- -----------
Total liabilities and stockholders' equity $ 6,698,239 $ 553,577
=========== ===========
</TABLE>
F-12
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Income:
Show fees $ 10,044 $ --
Royalties 46,076 --
--------- ---------
56,120 --
--------- ---------
Expenses:
Recording and production expenses 12,748 54,705
Studio expenses 3,022 7,288
Publicity and promotion 28,207 99,341
Professional fees 104,484 155,145
Consulting expenses 22,625 102,065
Salaries 52,640 118,925
Payroll taxes 5,568 8,652
Rent 37,417 8,323
Equipment lease 15,495
Auto expenses 18,075 105,242
Travel and entertainment 51,387 164,183
Telephone 30,330 18,701
Office 3,095 9,676
Miscellaneous expenses 6,813 2,996
Insurance expense 38,769 13,149
Interest expense 773 --
Repairs and maintenance 7,515 1,078
Dues and subscriptions 568 334
Postage and delivery 5,432 7,382
Depreciation expense 8,947 5,260
Registration Expense -- 15,040
Reimbursed overhead (99,348) (573,515)
--------- ---------
Total expenses 354,562 323,970
--------- ---------
Net loss from operations (298,442) (323,970)
Other Income:
Settlement of Joint Venture 725,000 --
--------- ---------
Net income (loss ) $ 426,558 $(323,970)
========= =========
Net income (loss) per share of common stock based
upon 10,527,635 and 8,987,008 weighted average shares,
respectively $ 0.04 $ (0.04)
========= =========
</TABLE>
F-13
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss ) $ 426,558 $ (323,970)
----------- -----------
Adjustments to Reconcile Net income (loss) to
Net Cash (Used in) Operating Activities:
Depreciation 8,947 5,260
Changes in Assets and Liabilities:
(Increase) in prepaid expenses (364,713) (137,005)
Decrease (Increase) in investment in Joint Venture 200,000 (200,000)
(Increase) in investment (6,000,000) --
Decrease in other assets -- 1,139
(Decrease) in accrued expenses payable (84,955) --
Increase in payroll taxes payable 266 49,503
----------- -----------
Total adjustments (6,240,455) (281,103)
----------- -----------
Net cash (used in) operating activities (5,813,897) (605,073)
----------- -----------
Cash Flows from Investing Activities:
Acquisition of property and equipment (27,236) (28,818)
----------- -----------
Cash Flows from Financing Activities:
Borrowings (Repayments) from/to stockholders' and
related parties 234,084 (159,969)
Investment in Joint Venture (200,000) --
Investment 6,000,000 --
Capital Contributions -- 860,100
----------- -----------
Net cash provided by financing activities 6,034,084 700,131
----------- -----------
Net increase in cash 192,951 66,240
Cash - January 1 13,121 16,576
----------- -----------
Cash - June 30, $ 206,072 $ 82,816
=========== ===========
</TABLE>
F-14
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the six months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1998 7,824,210 $ 7,824 $ 131,276 $ (609,414) $ (470,314)
Shares purchased 1,720,000 1,720 858,380 -- 860,100
Net loss for the period (323,970) (323,970)
---------- ----------- ----------- ----------- -----------
Balance - June 30, 1998 9,544,210 $ 9,544 $ 989,656 $ (933,384) $ 65,816
========== =========== =========== =========== ===========
Balance -January 1, 1999 9,544,210 $ 9,544 $ 989,656 $(2,204,521) $(1,205,321)
Investment 2,000,000 2,000 5,998,000 6,000,000
Net income for the period 426,558 426,558
---------- ----------- ----------- ----------- -----------
Balance - June 30, 1999 11,544,210 $ 11,544 $ 6,987,656 $(1,777,963) $ 5,221,237
========== =========== =========== =========== ===========
</TABLE>
F-15
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
Note 1 - Basis of Presentation:
- -------------------------------
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The results of operations for the six month period ended June 30,
1999 are not necessarily indicative of the results to be expected for
the full year.
Note 2 - Material Events:
- -------------------------
During the six months ended June 30, 1999, the following events
occurred:
a. The Company issued 2,000,000 shares of its common stock as an
investment to a related party whereby each owns 50% of a joint
venture.
F-16
<PAGE>
(B) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation*
3.2 By-laws*
10.1 Employment Agreement between Joseph M. Marrone and
Registrant*
10.2 Distribution Agreement between Sheridan Square Entertainment,
L.L.C. d/b/a Artemis Records and the Registrant*
10.3 Form of Subscription Agreement for Secured Convertible Notes
and Common Stock Purchase Warrants*
10.4 Form of Secured Convertible Notes*
10.5 Form of Common Stock Purchase Warrants*
10.6 Form of Security Agreement*
21.1 Subsidiary List
23 Consent of Leibman Goldberg & Drogin LLP
27 Financial Data Schedule
* Filed as an exhibit to the Company's Registration Statement on Form SB-2,
filed with the Securities and Exchange Commission on September 16, 1999
20
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, hereunto duly authorized.
Date: September 16, 1999
ANTRA HOLDINGS GROUP, INC.
By: /s/ Joseph M. Marrone, Jr.
---------------------------
Joseph M. Marrone, Jr.
Chairman of the Board and
Chief Executive Officer
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Corporation Jurisdiction where organized
Antra Music Group, Inc. New Jersey
Antra Publishing, Inc. Pennsylvania
<PAGE>
Exhibit 23.1
Liebman Goldberg & Drogin, LLP
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We hereby consent to the inclusion of our report dated May 26, 1999
with respect to Antra Holdings Group, Inc. for the year ended December 31, 1998
in this Registration Statement on Form 10-SB.
/s/ Liebman Goldberg & Drogin, LLP
----------------------------------
Liebman Goldberg & Drogin, LLP
Garden City, New York
September 15, 1999
