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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ___________________
Commission file number 0-16730
ALL-COMM MEDIA CORPORATION
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(Exact name of registrant as specified in its charter)
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Nevada 88-0085608
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(State or other jurisdiction (I.R.S. Employer Identification No.]
of incorporation or organization)
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400 Corporate Pointe, Suite 780
Los Angeles, California 90230
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(Address of principal executive offices] (Zip Code)
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Registrant's telephone number, including area code: (310) 342-2800
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: None
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Common Stock, par value $.01 per share
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
As of October 10, 1995, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $7,992,000.
As of October 10, 1995, there were 3,016,293 shares of the Registrant's common
stock outstanding.
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PART I
ITEM 1 - BUSINESS
General
The business of All-Comm Media Corporation (the "Company" or "All-Comm
Media"), previously known as Sports-Tech, Inc., ("Sports-Tech") arises out of
the recent merger between Alliance Media Corporation ("Alliance") and a wholly
owned subsidiary of the Company, and the concurrent acquisition of Stephen Dunn
& Associates, Inc. (SD&A), a leading telemarketing and telefundraising company
that specializes in direct marketing services for the arts, educational and
other institutional tax-exempt organizations. The change in the Company's name
was approved at a special shareholders meeting held on August 22, 1995. It was
made to reflect the new corporate vision and direction and the change in
management and board of directors. On April 25, 1995, the former management
and directors of Sports-Tech resigned in favor of a merger with Alliance Media
Corporation and its plan to build a specialized direct marketing, information
and media services company with a focus on providing integrated marketing
services through a single source organization. The Company's shares are traded
on the NASDAQ Small Cap Market under the symbol "ALCM". The Company's
principal executive offices are located at 400 Corporate Pointe, Suite 780,
Culver City, CA 90230. Its telephone number is (310) 342-2800.
The Company's Strategy
The Company's strategy is to become a fully integrated direct
marketing and media services company. Direct marketing has become an
increasingly important advertising medium and an integral component of
marketing programs that combine multiple forms of communication, such as direct
mail, telemarketing, print, television, radio, electronic media, information
kiosks, CD-ROM and Internet World-Wide Web sites. Initially, the Company
intends to expand through the acquisition of companies in the direct marketing
and media services industry which can provide core capabilities for the direct
marketing process. The Company believes that technological innovation will
continue to increase the effectiveness of direct marketing. As such, potential
acquisitions may include providers of information-based products and direct
marketing services companies that would enable the Company to deliver effective
marketing programs through electronic, telephonic and print mediums. A key
element of the Company's growth strategy is to target companies with a
demonstrated record of earnings and/or market penetration in these areas. Also
of particular interest are businesses which potentially increase market entry,
access new channels of distribution and are capable of providing additional
direct marketing and information management services that may be used to create
customer lists with specific, identifiable attributes and to facilitate the
production and execution of specialized marketing programs that statistically
track and analyze market responses.
Stephen Dunn & Associates, Inc. ("SD&A")
SD&A, which was acquired on April 25, 1995, was formed in 1983 and had
revenues of more than $15 million for the twelve month period ended June 30,
1995. Clients of SD&A include many of the larger symphony, theatre and musical
arts companies, public broadcasting stations, universities and endowments, such
as New York Philharmonic Orchestra, American Conservatory Theater, Carnegie
Hall, Modern Museum of Art, New York University, Duke University, National
Audubon Society and Simon Weisenthal Center. SD&A has its
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headquarters in Los Angeles, California and operates a telemarketing calling
center in Berkeley, California.
History and Prior Activities
The Company was originally incorporated in Nevada in 1919 under the
name of Bristol Silver Mines Company and was engaged in the mining business
until 1971. The Company conducted minimal activity between 1971 and 1979, when
it sold substantially all of its assets. From 1979 until 1981, the Company did
not conduct any business. In 1981, it became a holding company named Bristol
Gaming Corporation (subsequently changed to Bristol Holdings, Inc.) which the
prior management utilized for making investments in the securities of companies
in the gaming industry. In conjunction with this activity, the Company
acquired undeveloped land in Nevada which was intended, and subsequently became
zoned, for the development of a gaming casino. Prior to, and as a condition of
the merger with Alliance, the Company was required to divest its securities
investments in the gaming industry, which have since been liquidated. The
Company still owns the undeveloped parcel of land in Laughlin, Nevada through
its wholly-owned subsidiary, Bullhead Casino Corporation (to be renamed
Laughlin Holdings, Inc.) and has been formally listed for sale. (See Bullhead
Casino Corporation ("Bullhead") herein for a description of this investment and
the terms of its listing for sale.)
During 1991, under the prior management, the Company acquired a 100%
interest in Sports-Tech International, Inc. ("STI") and changed its name to
Sports-Tech, Inc. In June 1993, the Company acquired the business of High
School Gridiron Report ("HSGR"). (See STI and HSGR for descriptions of
business and disposition.) In November, 1994, after a failed business
strategy, the prior management of the Company discontinued these operations
through the sale of STI and the cessation of the HSGR operation. STI and HSGR
supplied information technology and services as well as academic, athletic and
video data to high school, professional and college coaches and student
athletes.
Recent Developments
Merger with Alliance Media Corporation:
On April 25, 1995, STI Merger Corporation ("Merger Sub"), a wholly
owned subsidiary of Sports-Tech, Inc., was merged (the "Merger") with and into
Alliance Media Corporation. The Merger was effected pursuant to the terms of
an Acquisition Agreement, dated as of February 7, 1995, as amended. Pursuant
to the terms of the Acquisition Agreement, upon consummation of the Merger, the
then current members of the Board of Directors of the Company resigned and a
new Board was appointed, consisting of persons designated by Alliance. (See
Executive Officers and Directors of the Registrant and Significant Employees.)
As a result of the Merger, Alliance became a wholly owned subsidiary of the
Company and the former shareholders of Alliance received 1,025,000 shares of
the Company's common stock valued at $2,745,000 constituting approximately
39.6% of the Company's common stock (on a fully diluted basis, taking into
account shares issuable upon exercise of warrants delivered in payment of
various fees incurred in connection with the Merger). These shares have
registration rights commencing December 1, 1995.
The assets of Alliance acquired by the Company consisted primarily of:
(i) all of the issued and outstanding stock of Stephen Dunn & Associates, Inc.,
which Alliance had acquired effective April 25, 1995 pursuant to a Stock
Purchase Agreement, dated as of
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January 31, 1995, between Alliance and Mr. Stephen Dunn (the "Dunn Agreement");
(ii) a five-year covenant not to compete with the former owner of SD&A; and
(iii) the cash proceeds (net of certain payments, including the payment of $1.5
million required pursuant to the terms of the Dunn Agreement) of a private
placement of equity securities by Alliance, which securities, upon consummation
of the Merger, were converted into shares of the Company's common stock.
Pursuant to the terms of the Dunn Agreement, the purchase price for SD&A was
$1.5 million in cash plus $4.5 million in long term obligations, yielding prime
rate (9.0% at June 30, 1995) to be paid over a four-year period. Additional
contingent payments of up to $850,000 per year over the period ending June 30,
1998, may be required based on the achievement of defined results of operations
of SD&A after its acquisition. At the Company's option, up to one half of the
additional contingent payments may be made with restricted common shares of the
Company. The seller can demand registration of shares received commencing in
September, 1997. Alliance and SD&A entered into an operating covenants
agreement, dated April 25, 1995, relating to the operation of SD&A whereby, for
a limited period of time, Alliance has pledged the shares of SD&A to
collateralize its obligations under that agreement to insure for continuing
working capital of SD&A.
The assets of SD&A, upon its acquisition by Alliance (and
simultaneously obtained by the Company upon consummation of the merger),
consisted primarily of cash and cash equivalents, accounts receivable and
furniture, fixtures and equipment.
These acquisitions were accounted for using the purchase method. The
purchase price was allocated to assets acquired based on their estimated fair
value. This treatment resulted in approximately $6.3 million of costs in
excess of net assets required, after recording a covenant not to compete of
approximately $1.0 million. Such excess, which may increase for any further
contingent payments, is being amortized over the expected period of benefit of
40 years. The operating results of these acquisitions are included in the
consolidated results of operations from the date of acquisition, April 25,
1995.
Pending Acquisition of Forms Direct, Incorporated:
On September 28, 1995, the Company signed a non-binding letter of
intent to acquire Forms Direct, Incorporated ("FDI"). FDI is a private company
based in Frederick, Maryland, with annualized sales in excess of $20 million.
FDI provides direct mail services in the fields of sophisticated target
marketing and complex personalization. Terms of the acquisition call for cash,
notes and stock, as well as contingent payments based on operating profits and
performance. Consummation of the acquisition is subject to a number of
conditions, including the negotiation of a definitive agreement and completion
of financing arrangements. Accordingly, no assurance can be given that the
acquisition will be consummated. The acquisition is scheduled to close by
December 31, 1995. FDI is a full-service direct mail marketing company which
provides services for a variety of well known industrial and financial
companies and public sector tax-exempt organizations. Since the early 1980's
FDI has provided its customers with total full-service print to mail outsource
facilities management capability and continues to produce direct mail marketing
campaigns for Fortune 2000 companies and their advertising agencies, along with
affinity organizations and advocacy groups throughout the U.S. Located in
Frederick, Maryland, the production facility occupies approximately 80,000
square feet of light industrial space.
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Stock Split and Change in Authorized Common Shares:
Effective August 22, 1995, the Company's Board of Directors approved a
one-for-four reverse stock split of the Company's authorized and issued common
stock. Fractional shares were rounded up to whole shares. After the reverse
stock split, approximately 3,016,000 shares are outstanding. The Board also
approved the reduction in the number of authorized shares of common stock to
6,250,000, with a par value of $.01 per share, for the 25,000,000 common shares
previously authorized. All share and per share data in this Report on Form
10-K reflect the effect of the reverse stock split.
Private Placement of Common Stock:
On May 31, 1995, the Company completed a private placement of 413,759
restricted shares of its common stock at $2.68 per share, for a total of
$1,108,875 ($1,018,675 net after offering costs) in order to replenish cash
resources which were reduced prior to the merger with Alliance, as a result of
losses and dispositions of assets prior to the merger. (See Discontinued
Operations and Events Prior to the Merger with Alliance Media Corporation.)
These shares have registration rights commencing December 1, 1995.
Discontinued Operations and Events Prior to the Merger with Alliance Media
Corporation
Sports-Tech International, Inc. and High School Gridiron Report:
On December 7, 1994, the Company entered into a definitive agreement
for the sale of Sports-Tech International, Inc. ("STI") to Dainichi
Electronics, Inc. ("Dainichi"). The proposed purchase price for STI's
operations was $1,100,000, of which $300,000 was paid as of the agreement date.
Payments of $100,000 per month were due on the 7th of each month from January,
1995, through August, 1995, at which time the sale was to close. The agreement
also called for Dainichi to provide all working capital required by STI prior
to the closing in August.
By mutual agreement, the Company and Dainichi agreed to accelerate the
closing date for the sale of STI to March 9, 1995. Proceeds from the sale were
reduced to $800,000, a reduction of $300,000 on the original sales price, out
of which $80,000 was paid by the Company as a commission to the former
president of STI. The former president of STI also received $38,750 in common
stock, and warrants to purchase 2,500 shares of the Company's common stock at
$8 per share. The Company realized a gain on the sale of $322,000. STI was
acquired in 1992 from Florida Gaming for $1,400,000 in cash and 660,000 shares
of Sports-Tech, valued at $936,600. Acquisition costs totaled $342,000.
Concurrent with the sale of STI, the Company ceased the High School
Gridiron Report ("HSGR") operations. HSGR was acquired on June 11, 1993, in
exchange for 15,000 common shares of the Company, valued at $255,000,
forgiveness of a note receivable of $161,000 and assumption of liabilities
totaling $29,000.
The sale of STI and the closing of HSGR operations by the prior
management have been accounted for as discontinued operations and, accordingly,
the consolidated financial statements contained in this Report on Form 10-K
have been reclassified to report separately this segment's net assets,
operating results, gain on disposition and cash flows.
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Florida Gaming Corporation Warrant Exercise:
In July 1991, in connection with the acquisition of 57.7% of the
outstanding common stock of STI from Florida Gaming Corporation ("Florida
Gaming"), the Company also acquired, for $40,000, a warrant (the "FGC Warrant")
to acquire a number of shares, which at the time, represented 33% of the
outstanding common stock of Florida Gaming, for an aggregate exercise price of
$1,000,000.
On July 27, 1994, under the prior management of the Company, the
Company and the Department of Business and Professional Regulation, Division of
Pari-Mutuel Wagering of the State of Florida (the "Division") entered into a
consent order (the "Consent Order") which permitted the Company to acquire
shares in Florida Gaming through the exercise of its warrants. Florida Gaming
owns and operates a jai-alai fronton and Pari-Mutuel wagering facility located
in Fort Pierce, Florida. Pari-Mutuel wagering must be conducted in compliance
with the applicable Florida Statutes and regulations of the Division. Pursuant
to such applicable Florida statutes, a holder of 5% or more of the common stock
must be approved by the Division.
On July 28, 1994, the Company exercised the FGC Warrant, in full, and
received 651,752 shares of Florida Gaming common stock. The exercise price of
the FGC Warrant was financed with a $1,000,000 loan, and the shares of Florida
Gaming common stock were pledged to collateralize the repayment of the loan.
The parties to the loan included, among others, the Company's former chairman,
former president, a former director and a shareholder, who each provided
$200,000. The other lenders were non-affiliates. The lenders received the
repayment of the $1,000,000 loan with interest at 7.75%, totaling $9,000 and a
$300,000 commitment fee from the proceeds of the subsequent stock sale.
In fiscal 1995, the Company sold all the common shares of Florida
Gaming stock it had acquired and recognized a gain of $1,580,000.
Direct Marketing Industry Overview
Advances in communications technology and a growing availability of
complex consumer data are causing marketers to use the new information
technologies and media capabilities to more efficiently target their customers.
As a result, direct marketing has become an important advertising and selling
medium and is now incorporated as an integral component of many companies'
overall marketing programs. The use of direct marketing by businesses to
target and communicate with potential customers has steadily been increasing
due, in part, to the relative cost efficiency of direct marketing, as compared
to other advertising methods, as well as the rapid development of affordable
computer technology. Over the next decade, the impact of radio, television,
database and on-line or electronic marketing will have a significant effect on
marketing methodologies. Major corporations are beginning to invest in
distribution channels that provide direct access to their customers, providing
the most cost effective and efficient means for targeting specific audiences
and developing long term customer relationships. The shift from broadcasting
and mass marketing to personalized pointcasting and targeted marketing enables
advertising and marketing programs to be evaluated and adjusted through
measurable results. Prior to and during much of the 1970's, the costs
associated with selling products and services, either through mass marketing or
through personal sales calls, were relatively low, while the costs of database
development were prohibitive for all but the largest businesses. In the 1980's
the costs of developing and implementing computer technologies to analyze
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and target potential customers declined while the costs of traditional
marketing increased significantly. In addition, concerns have been raised
about the efficacy of traditional forms of marketing. Direct marketing remains
one of the few advertising media allowing an accurate measure of results
through a review of response rates thereby increasing the effectiveness of the
selling effort.
Companies use direct marketing for a variety of purposes, including:
prospecting for new customers, enhancing existing customer relationships and
evaluating the potential for new products and services. Direct marketing
allows companies to interact with customers and accurately measure the response
to the message. This ability to measure responses allows direct marketing
campaigns to be continually refined to further enhance their effectiveness.
Such programs enhance a company's ability to generate revenues, directly and
indirectly, from specific audiences across a wider market and through more
personalized access to consumers.
The Company believes that technological innovation will continue to
increase the effectiveness of direct marketing. As a result, direct marketing
has become an increasingly important driver for integrated marketing programs
that combine multiple forms of communications such as direct mail,
telemarketing, print, television, radio, video, CD-ROM, educational symposia
and other interactive and multimedia formats.
Industry Consolidation
Most advertising, marketing and public relations firms, along with
internal corporate marketing departments rely on outside vendors to execute
their requirements for implementing marketing programs. These vendors provide
specialized services, such as market data analysis, creation of private
databases, development and management of information systems supporting
marketing programs, direct mail production and tracking, fulfillment of
products, telemarketing support and the creation and distribution of video or
digital image processing and conversation. Agencies or corporate marketing
departments often lack this type of technical expertise and control over each
step of the process. Consequently, there are many different service providers
involved in a marketing campaign.
The direct marketing and media services industry is highly fragmented.
The majority of the participants are small regional firms, offering limited or
single services that support the direct marketing process. As postal,
production and operating costs (including technological enhancements) have
increased, and major corporations continue to increase their use of direct
marketing, merger and acquisition activity has accelerated, providing economies
of scale that result from larger, stronger firms which possess a greater
ability to execute increasingly complex marketing programs.
Line of Business
Stephen Dunn & Associates, Inc. provides a variety of telemarketing
and telefundraising services to clients in the tax-exempt sector. Since its
inception in 1983, SD&A has worked with over 150 tax-exempt organizations,
located in over thirty states, and has developed expertise in working with a
broad range of tax-exempt organizations, including those which support the
arts, such as theaters, operas, symphonies and ballets, as well as museums,
colleges and universities, public television stations and advocacy groups.
Campaigns are conducted either "on-site" at, or near, the client's premises or
"off-site" at
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SD&A's full service calling center, located in Berkeley, California (the
"Berkeley Calling Center" or "BCC").
SD&A's revenues are derived primarily from fees and commissions from
telemarketing campaigns and telefundraising efforts.
Telemarketing Campaigns. Telemarketing campaigns are highly focused
marketing efforts designed to sell ticket series or subscriptions to patrons
for multiple performances or a portion of a season of performances at live
theatres, symphonies, operas, ballets, musical theatres and similar performing
arts venues. The campaigns are tailored to fit the clients' specific needs,
generally range from 8 to 26 weeks, and may be conducted at or near the
clients' premises or at the Berkeley Calling Center. The design of each
campaign includes evaluating and segmenting the target population using
database analysis programs, often in combination with demographic and
psychographic screening programs, to estimate the sales potential of different
groups. Management believes that this approach to telemarketing campaigns is
an efficient means to generate sales revenue for its clients and will
strengthen the contact and prospect base of the clients, enhance the
effectiveness of the clients' public relations as a fundraising tool to develop
valuable information-gathering sources, and expand the database of potential
patrons.
Telefundraising Efforts. The telefundraising efforts fall into three
groups: Annual Fund Campaigns, capital campaigns through the SD&A's CapiTEL
program and Special Gift Campaigns. While colleges and universities were
generally the first organizations to use telemarketing for capital and
endowment campaigns, SD&A pioneered the application of these techniques to the
performing arts through its CapiTEL program. SD&A provides both program design
and management, including personalized direct mail and telefundraising
solicitation. Four different types of telefundraising phone/mail campaigns
are conducted: Annual Fund Campaigns to renew and acquire donors and increase
the level of giving; Membership Campaigns to renew and acquire members to
increase the client's membership base; CapiTEL Campaigns designed to solicit
three to five-year gifts, typically used for an institutional client's physical
"brick and mortar" projects; and Special Gift Campaigns seeking large donations
often conducted in conjunction with Annual Fund Campaigns.
Government Regulation. Telemarketing sales practices are regulated
both federally and at the state level. The federal Telephone Consumer
Protection Act of 1991 (the "TCPA") prohibits telemarketing firms from
initiating telephone solicitations to residential telephone subscribers before
8:00 a.m. or after 9:00 p.m., local time, and prohibits the use of automated
telephone dialing equipment to call certain telephone numbers. In addition the
TCPA requires telemarketing firms to maintain a list of residential customers
that have stated that they do not want to receive telephone solicitations and,
thereafter, to avoid making calls to such consumers' telephone numbers.
The federal Telemarketing and Consumer Fraud and Abuse Prevention Act
of 1994 (the "TCFAPA") broadly authorizes the Federal Trade Commission (the
"FTC") to issue regulations prohibiting misrepresentation in telemarketing
sales. In August, 1995, the FTC issued updated proposed telemarketing sales
rules. Generally, these rules prohibit misrepresentation regarding the cost,
terms, restrictions, performance or duration of products or services offered by
telephone solicitation and otherwise specifically address other perceived
telemarketing abuses in the offering of prizes and the sale of business
opportunities or investments. These operating procedures were already standard
for SD&A prior to enactment of this federal legislation.
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A number of states have enacted, or are considering, legislation to
regulate telemarketing. For example, telephone sales in certain states cannot
be final unless a written contract is delivered to, and signed by, the buyer
and may be canceled within three business days. At least one state also
prohibits telemarketers from requiring credit card payment, and several other
states require certain telemarketers to obtain licenses and post bonds. From
time to time, bills are introduced in Congress which, if enacted, would
regulate the use of credit information. SD&A cannot predict whether this
legislation will be enacted and what effect, if any, it would have on the
telemarketing industry. Many states regulate fundraising activities performed
by professional fund-raisers by requiring them to register and to submit
periodic activity reports.
Growth Strategies. Management anticipates future revenue growth
through assisting current clients to increase the size of existing subscription
sales and fundraising campaigns and through obtaining new clients within its
existing specializations, and in other areas, such as environmental
organizations, hospitals and national health causes. Several programs have
been implemented to increase the utilization of the telefundraising staff and
the BCC capabilities by existing clients utilizing only telemarketing services.
Finally, SD&A is investigating opportunities to provide fundraising services in
other tax-exempt areas and creating new telemarketing and telefundraising
techniques. To achieve growth, the Company utilizes an in-house marketing
group which specifically targets potential clients. Business is also solicited
through direct mail, telemarketing and attendance at trade shows and industry
conferences. While management believes that these strategies will increase
revenues, there can be no assurances that they will be effective.
Client Relationships. During the year ended June 30, 1995, SD&A
provided telemarketing, telefundraising and consulting services to over ninety
clients. SD&A generally operates under month-to-month contractual
relationships and is paid for its telemarketing services based on the type of
campaign. In the area of performing arts, for both fundraising and
subscription sales, SD&A is typically paid a percentage of the total amount
raised but, in other instances, the Company is compensated on an hourly basis.
Generally, SD&A is compensated for off-site campaigns at a given rate per
contract. For the year ended June 30, 1995, approximately 85% of SD&A's
revenues were derived from telemarketing and telefundraising and 15% from
off-site campaigns.
Competition. SD&A competes with other companies that provide similar
services, as well as from those providing direct mail, television, radio and
other advertising fundraising services. The fundraising industry is very
competitive and highly fragmented. Most of SD&A's competitors are small,
single facility operations, but SD&A faces its greatest competition from the
in-house capabilities of the not-for-profit organizations themselves.
Seasonality. Typically, telemarketing and telefundraising campaigns
are seasonal in nature with a substantial portion of revenues generated during
the 1st and 4th fiscal quarters.
Bullhead Casino Corporation (to be renamed Laughlin Holdings, Inc.)
In 1979, the Company, through its wholly-owned subsidiary, Bullhead,
acquired 6.72 acres of undeveloped land with 560 feet of Colorado River
frontage in Laughlin, Nevada, for approximately $560,000. The subject property
is zoned to accommodate a 900-room, 13-story hotel with a 116,000 square foot
casino and is part of a development project proposed
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by a local development association for a major hotel/convention center complex.
The Company's management has no present plans to develop or participate in the
development project and has decided to dispose of the property.
On October 6, 1995, the Company entered into an option agreement with
certain parties unrelated to the Company whereby, in consideration of payment
to the Company of $150,000, the option holder may purchase the land for
$2,000,000. The term of the option expires on April 8, 1996. Under certain
circumstances, the Company has the right to repurchase this option before its
expiration.
Bullhead is additionally subject to an agreement entered into at the
time of the acquisition of the Laughlin property to pay to two unaffiliated
individuals an amount equal to 5% each of the net profit from any sale of said
property, or if developed into a hotel/casino (which the Company does not
intend to do), 5% each of the equity in the property. Such interests were
received as consideration for the efforts of such individuals in connection
with the acquisition of such land.
Employees
At October 1, 1995, the Company and SD&A collectively have
approximately 1000 employees, of whom approximately 915 are part-time. None of
the Company's employees are covered by collective bargaining agreements and the
Company believes that its relations with its employees are good.
ITEM 2 - PROPERTIES
The Company, through Bullhead, owns the property identified in Item 1.
Also, the Company leases approximately 2,000 square feet of office space in
Culver City, California. The lease runs through April 30, 1998, and includes
an option to lease an adjacent 1,204 square feet at the same rate as the prior
lease. SD&A leases approximately 5,500 square feet of office space in Venice,
California from its founder and president, 5,500 square feet in Berkeley,
California, and 250 square feet in Patterson, New York. These leases range
from month to month to three years and include options to renew. The Company
believes its facilities are suitable and adequate for the purposes for which
they are used and are adequately maintained.
ITEM 3 - LEGAL PROCEEDINGS
The Company is party to minor legal proceedings. The outcome of these
legal proceedings are not expected to have a material adverse effect on the
consolidated financial condition, liquidity or expectations of the Company,
based on the Company's current understanding of the relevant facts and law.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of the Company previously traded on the NASDAQ
Small-Cap Market under the symbol SPTK. As approved by the shareholders on
August 22, 1995, the Company changed its name to All-Comm Media Corporation and
the symbol was changed to ALCM. The following table reflects the high and low
sales prices for the Company's common stock for the fiscal quarters indicated,
as furnished by the NASD, adjusted for the one-for-four reverse stock split:
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Common Stock
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Low Sales Price High Sales Price
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Fiscal 1995
Fourth Quarter $ 6.50 $ 9.50
Third Quarter 5.38 7.50
Second Quarter 3.50 5.75
First Quarter 3.00 5.50
Fiscal 1994
Fourth Quarter $ 2.50 $15.50
Third Quarter 14.00 23.50
Second Quarter 15.50 25.00
First Quarter 14.50 25.00
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Such over-the-counter market quotations reflect inter-dealer prices
adjusted for the one-for-four reverse split, effective August 22, 1995, without
retail mark-up, mark-down or commission and may not necessarily reflect actual
transactions.
As of July 10, 1995, there were approximately 900 registered holders
of record of the Company's common stock. (This number does not include
investors whose accounts are maintained by securities firms in "street name".)
The Company has never declared or paid any cash dividends on its
common stock. The Company currently intends to retain earnings for use in the
operation and expansion of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. Also, see Management's
Discussion and Analysis and the Long Term Debt footnote to the Consolidated
Financial Statements for a description of restrictions that limit the ability
of SD&A to pay dividends to the All-Comm Media Corporation.
11
<PAGE> 12
ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data set forth below with
respect to the years ended June 30, 1995, 1994 and 1993, and the consolidated
balance sheet data at June 30, 1995 and 1994 are derived from, and are
qualified by reference to, the audited consolidated financial statements
included elsewhere in this Report on Form 10-K. The consolidated statement of
operations data for the years ended June 30, 1992 and 1991 and the consolidated
balance sheet data at June 30, 1993, 1992 and 1991, are derived from audited
financial statements not included in this Report on Form 10-K. This data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and notes thereto appearing elsewhere in this Report on Form 10-K.
<TABLE>
<CAPTION>
As of and for the years ended June 30,
--------------------------------------------------------------------------------
1995(1) 1994 1993 1992 1991
---------- ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA: (2)(3)
Sales $ 3,630,828
Loss from operations (1,255,924) $ (844,417) $(1,992,500) $(1,515,754) $(914,432)
Gains (losses) from
sales of securities 1,579,539 937,365 3,177,203 59,331 (82,983)
Interest expense and
loan commitment fee (394,200) (7,165) (43,604) (24,292) (927)
Income (loss) from
continuing operations (130,859) 86,807 979,457 (1,060,460) (531,696)
Net income (loss) 110,397 (2,809,887) (1,115,338) (1,863,779) (531,696)
Income (loss) per
share: (4) (5)
Continuing operations (0.07) 0.06 0.71 (1.03) (0.61)
Net income (loss) 0.06 (1.91) (0.82) (1.81) (0.61)
Weighted average common
shares and equivalents 1,807,540 1,468,747 1,373,160 1,032,442 876,996
BALANCE SHEET DATA: (3)
Working capital (188,842) (233,572) 818,792 921,603 1,247,881
Total assets 11,824,491 1,639,733 2,657,561 4,319,038 3,596,380
Long-term obligation,
net of current portion 3,000,000
Stockholders' equity 5,164,532 665,917 2,119,618 2,649,157 2,984,398
</TABLE>
- ------------------------
(1) Reflects operations of Alliance and SD&A for the period beginning with
the acquisition on April 25, 1995 to June 30, 1995.
(2) The Company has not paid cash dividends during the five years ended
June 30, 1995.
(3) See Description of Business and Management's Discussion and Analysis
for discussion of businesses discontinued and acquired - 1995.
(4) Certain of the above amounts have been restated to reflect
discontinued operations as well as a one-for-four reverse stock split
effective August 22, 1995.
(5) Primary and fully diluted income (loss) per share are the same in all
fiscal years except 1993. Fully diluted income per share from
continuing operations and net loss in fiscal 1993 was $.70 and $(.79),
respectively.
12
<PAGE> 13
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity/cash flow of
the Company for the three year period ended June 30, 1995. This should be read
in conjunction with the financial statements and notes thereto, included in
this Report on Form 10-K. As more fully described in Footnote 3 to the
consolidated financial statements, on April 24, 1995, the Company purchased
100% of the stock of Alliance Media Corporation which had simultaneously
acquired Stephen Dunn & Associates, Inc. These acquisitions have been
reflected in the consolidated financial statements using the purchase method of
accounting. Accordingly, the Consolidated Statement of Operations and
Consolidated Statement of Cash Flows include the operations of Alliance and
SD&A from April 25, 1995 through June 30, 1995.
Also in fiscal 1995, the Company discontinued the operations of
Sports-Tech International, Inc. and High School Gridiron Report. In December,
1994 the Company agreed to sell Sports-Tech International and closed the HSGR
operation. The ultimate sale of STI resulted in a gain of approximately
$322,000. The Consolidated Financial Statements have been reclassified to
report the net assets, operating results, gain on disposition and cash flows of
these operations as discontinued operations. With the disposition of the STI
operations, closure of the HSGR operations and the acquisition of Alliance, the
Company is now operating in a completely new industry segment - direct
marketing.
Results of Operations 1995 compared to 1994
Continuing Operations: Sales and cost of sales totaled approximately
$3,631,000 and $2,434,000, respectively for the year ended June 30, 1995 (the
"current fiscal year") as compared with no similar amounts incurred in the
fiscal year ended June 30, 1994 (the "prior fiscal year"). These increases are
due to the inclusion of SD&A operations from the date of acquisition, April 25,
1995. In this period, net sales from telemarketing and telefundraising totaled
$3,122,000 and sales from off-site campaigns totaled $509,000.
Cost of sales represents labor and telephone expenses directly related
to telemarketing, telefundraising and off-site campaign services. As a
percentage of relative net sales, gross profit relating to telemarketing and
telefundraising and off-site campaigns totaled 30% and 48%, respectively.
Selling, general and administrative expenses include all selling,
general and administrative expenses of SD&A and represent the expense of
central services the Company provides to manage its divisional operations, SD&A
and its discontinued operations, STI and HSGR, and include senior corporate
management, accounting and finance, general administration and legal services.
As a result of the Company's new direction, it now also includes expenses
relating to the identification and evaluation of potential acquisitions.
Corporate general and administrative expenses increased $1,559,000 to
$2,382,000 in the current fiscal year as compared with $823,000 in the prior
fiscal year.
Approximately $750,000 of the increase resulted from the inclusion of
SD&A selling, general and administrative expenses from the date of acquisition,
April 25, 1995. Severance
13
<PAGE> 14
payments made to the prior management totaled $105,000, and $135,000 of the
increase related to salary expenses associated with the new management and
employees who joined the Company upon resignation of the prior management and
board. Legal expenses increased $240,000 in the current fiscal year primarily
due to the filing of a registration statement required as part of a settlement
reached by prior management, maintenance of the Company's NASDAQ Small Cap
stock listing, preparation of a proxy statement regarding the Company's name
change, and planning and execution of the new corporate strategy. Accounting
and tax fees have increased approximately $100,000 due to reporting
requirements surrounding the acquisition of Alliance and SD&A and disposition
of STI. The directors and officers insurance premium increased approximately
$110,000 due to the purchase of additional coverage. Discounts given to induce
the exercise of stock options totaled approximately $128,000 in the current
year, an increase of $42,000 as compared with the prior fiscal year.
Miscellaneous other expenses increased approximately $77,000 resulting from the
increased activity of the Company.
Sales, cost of sales and selling, general and administrative expenses
will increase in fiscal 1996 as compared with fiscal 1995 due to the inclusion
of SD&A's operations for an entire year.
Related party charges decreased $15,000, to $6,000 in the current
fiscal year, as compared with $21,000 in the prior fiscal year. The decrease
is due to the termination of a consulting agreement on October 1, 1993, offset
by fees incurred in the current year relating to the sale of STI. The
consulting contract was canceled in 1993 because the business activities of the
Company no longer required the investment banking services provided.
Amortization of intangible assets totaled approximately $65,000 in the
current fiscal year and related to the amortization of the
covenant-not-to-compete and goodwill, over 5 years and 40 years, respectively,
acquired in the Alliance and SD&A transaction. This expense will increase in
fiscal 1996 as compared with the current year due to continued amortization of
these assets over an entire year.
The net gain from sales of securities totaled $1,580,000 in the
current fiscal year and resulted from the exercise by the Company of a common
stock purchase warrant held as an investment. In July, 1994, the Company
borrowed $1,000,000 to fund the exercise of the warrant. The loan was
collateralized by a pledge of the warrant shares pursuant to the terms of a
pledge agreement. The parties to the $1,000,000 loan included, among others,
the Company's former chairman, former president, a former director and a
shareholder, who each provided $200,000. The other lenders were
non-affiliates. The lenders received the repayment of the $1,000,000 loan,
interest at 7.75% totaling $9,000 and a $300,000 commitment fee from the
proceeds of the subsequent stock sales. The Company subsequently sold all
these securities and recognized a net gain of $1,580,000. The $300,000 loan
commitment fee was paid as an inducement to this group of investors to provide
the money necessary to exercise the covenant before its expiration on July 31,
1994. The Company's prior management had been unable to obtain the funds to
exercise the warrant at more favorable terms.
Interest expense increased approximately $87,000 in the current fiscal
year and related to the acquisition of $4,500,000 of debt in the Alliance and
SD&A acquisition as of April 25, 1995, and the borrowings made to exercise the
common stock purchase warrant previously discussed. Interest expense will
increase in fiscal 1996 as compared with the current year due to the inclusion
of this debt for an entire year.
14
<PAGE> 15
In the current year, the income tax provision on continuing operations
totaled $75,000 on losses from continuing operations of $56,000. The provision
resulted from state and local taxes incurred on taxable income at the
subsidiary level not reduced by losses incurred at other levels on which no tax
benefits were available.
Discontinued Operations: The loss from discontinued operations
relates to the STI and HSGR operations which were either sold or closed in
fiscal 1995. The loss from discontinued operations totaled approximately
$81,000 in fiscal 1995, as compared with almost $2,900,000 in fiscal 1994. The
decrease of $2,819,000 is due to the inclusion of the results of these
operations for a partial year, and lower losses due to reduced business
activity and non recurrence of the HSGR goodwill write off of $310,000 and a
contract termination settlement of $544,000.
The gain on the sale of discontinued operations which totaled
approximately $322,000 relates to the sale of STI and is addressed in Note 5 of
the Notes to Consolidated Financial Statements.
Results of Operations 1994 compared to 1993
Continuing Operations: Corporate, general and administrative expenses
decreased approximately $163,000 in fiscal 1994, as compared with fiscal 1993,
due to the reduced new business acquisition activities as follows: $26,000 due
to termination without replacement of a public relations firm; $50,000
decrease in pension expenses due to elimination of the pension plan benefit;
$30,000 decrease in rent due to reduction in space; $22,000 decrease in
salary, director fees and benefits; and decreases in miscellaneous other
expenses of $35,000.
Related party charges decreased by $63,000 in fiscal 1994 compared to
fiscal 1993 due to the termination of a consulting agreement on October 1,
1993, because the business activities no longer required the investment banking
services previously provided.
Litigation settlement and expense decreased approximately $924,000 in
fiscal 1994. The 1993 litigation expense related to the settlement agreement
reached in 1993 with certain shareholders and holders of convertible debentures
of an entity in which the Company held an equity investment.
Other income (expense) decreased by approximately $2,324,000 in fiscal
1994, primarily as a result of the net effects of the following: a reduction in
interest and other income, net, of approximately $51,000, decrease in gains in
sales of marketable equity securities of $2,240,000, decrease in dividends
received of $70,000 due to sale of the securities, $29,000 reduction of accrued
interest receivable owed by to the Company's former president and the early
payment of related note, and offset by a decrease in interest expense of
approximately $37,000 due to the pay off of a line of credit.
The credit tax provision of $13,600 in fiscal 1994 resulted from the
adoption of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". In fiscal 1993, the provision resulted from taxable income
from continuing operations.
15
<PAGE> 16
Discontinued Operations: The loss in fiscal 1994 increased
approximately $152,000 as compared to fiscal 1993. The increase is due to the
write-off totaling $310,000 of HSGR goodwill, determined not to be recoverable
from future cash flows and $544,000 contract termination fees paid to a
marketing company providing marketing services to STI, partially offset by a
reduction in other expenses resulting from decreased business operations.
Capital Resources and Liquidity
During fiscal 1994 and 1993, the Company used net cash in operations
of $2,186,000 and $4,101,000, respectively. Net investing activities of
discontinued operations in each of those years totaled approximately $42,000.
In 1994, approximately $106,000 was used to repurchase common shares of the
Company for the treasury and approximately $200,000 in cash and investments was
used to repay a note payable. In 1993, $131,000 of cash was used to acquire
HSGR and $700,000 was used to repay a bank loan.
Historically, the Company has financed these cash needs through the
following: Sales of equity investments which totaled $1,244,000 in 1994 and
$3,949,000 in 1993, proceeds from the exercise of stock options and issuances
of stock of $1,126,000 in 1994 and $331,000 in 1993 and new short term
borrowings of $500,000 in 1994 and $200,000 in 1993.
In fiscal 1995, the Company used net cash in operating activities of
approximately $2,128,000. Due to new and seasonal increases in sales, accounts
receivable relating to the SD&A operations have increased $378,000 since
acquisition. Trade accounts payable have decreased $147,000 due to payment of
liabilities assumed in the Alliance and SD&A acquisition. Cash used in
discontinued operations totaled $153,000. Additional cash was used to repay
$350,000 of related party borrowings, a $150,000 bank loan and a $350,000 line
of credit acquired with the SD&A acquisition. To finance these cash outflows,
the Company generated net cash proceeds totaling $1,600,000 from the exercise
of a common stock purchase warrant and $800,000 from the sale of Sports-Tech,
International. Additionally, a private placement of restricted common stock
yielded net proceeds of $1,000,000 and the exercise of stock options and
warrants yielded $207,000.
Capital expenditures relating to continuing operations totaled
approximately $44,000 in fiscal 1995 and resulted from the purchase of
furniture and equipment for the new corporate offices and SD&A. The Company
anticipates spending approximately $100,000 over the next year for equipment to
support expansion of SD&A's Berkeley Calling Center.
On April 25, 1995, Alliance and SD&A were acquired for issuance of
1,025,000 common shares valued at $2,745,000 and approximately $500,000 of
acquisition costs. Liabilities acquired totaled $6,694,000 including a
$4,500,000 note yielding prime rate (9.0% at June 30, 1995) to be paid over a
four year period. The obligations resulted from the acquisition of SD&A by
Alliance and is payable to the former owner and founder of SD&A. Payments due
in fiscal 1995 total $1,500,000. Additional contingent payments of up to
$850,000 per year over the three year period ending June 30, 1998 may be
required based on achievement of defined results of operations of SD&A after
its acquisition. At the Company's option, up to one half of the additional
contingent payments may be made with restricted common shares of the Company
subject to certain registration rights. All outstanding common shares of SD&A
are pledged to collateralize the notes. Also, with these obligations, an
operating covenant agreement requires that SD&A have a minimum level of working
capital and cash levels before dividends can be made to the Company.
16
<PAGE> 17
On October 12, 1995, the long term obligations were revised such that
the October 1, 1995 payment of $375,000 and interest payment due in the second
quarter of fiscal 1996 will be paid over a twelve month period commencing
January, 1996, together with interest at 10%. The deferred interest payment is
due earlier if the Company completes certain financing by December 31, 1995.
On October 6, 1995, the Company entered into an option agreement
whereby, in consideration of payment to the Company of $150,000, the option
holder may purchase, up to April 8, 1996 the Company's undeveloped land in
Laughlin, Nevada, for $2,000,000. The Company is also currently negotiating
with a lender to borrow approximately $1,500,000 using this land as collateral.
The Company believes that funds available from operations, from the
potential sale of or borrowing against the Laughlin, Nevada land, and the
ability to raise funds through a private placement of equity securities will be
adequate to finance its operations and meet interest and debt obligations in
fiscal 1996. Additional financing may be required thereafter to meet potential
contingent acquisition payments if defined results of operations are achieved,
as well as operating and debt payments. There can be no assurance, however,
that such capital will be available at terms acceptable to the Company, or at
all.
The Company has announced a non-binding letter of intent to purchase
Forms Direct, Inc., a direct mail services company. The Company is also
currently involved in acquisition discussions with other entities. The Company
expects these acquisitions will require cash payments, plus issuances of common
stock and notes payable to the sellers, as well as contingent payments based on
future operating profits and performance. Depending on market conditions, the
Company intends to finance the cash portions of the purchase prices of these
acquisitions, as well as to obtain additional working capital, through the
issuance of common or preferred stock and/or indebtedness. The Company intends
to finance additional acquisitions in a similar manner. Although the Company
believes that it will be successful in obtaining the financing necessary to
complete the acquisitions now contemplated, and those in the future, there can
be no assurances that such capital will be available at terms acceptable to the
Company, or at all, or that the acquisitions will be completed.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements required by this Item 8 are set
forth as indicated in the index following Item 14(a)(1).
ITEM 9 - CHANGES IN, AND DISAGREEMENTS WITH, ACCOUNTING AND FINANCIAL
DISCLOSURE
On July 18, 1995, the Company engaged Coopers & Lybrand L.L.P.
("Coopers & Lybrand") as the independent auditor for the Company and its
subsidiaries for the year ending June 30, 1995, replacing Arthur Andersen LLP
("Arthur Andersen"). The change in the Company's auditor on July 18, 1995 was
in conjunction with the relocation of the Company's corporate offices to Culver
City, California, the merger with Alliance and related acquisition of SD&A and
change in the Board of Directors and management of the Company.
17
<PAGE> 18
During the two fiscal years in the period ended June 30, 1994, and the
period preceding the change of auditors, there were no disagreements with
Arthur Andersen on any matters of accounting principles or practices, financial
statement disclosures or auditing scope or procedures, which disagreements, if
not resolved to Arthur Andersen's satisfaction, would have caused it to make
reference to the subject matter of the disagreement in connection with its
report.
Reference is made to the Form 8-KA report dated July 21, 1995, for
more information and exhibits thereto containing the accountants' letter.
18
<PAGE> 19
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Board of Directors is divided into three classes (I, II and III), with one
class being elected every year for a term of three years (subject to All-Comm
Media's By-Laws).
CLASS I DIRECTORS
BARRY PETERS (54), CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICE AND DIRECTOR.
Mr. Peters has served in this capacity since April 1995, prior to which, since
January 1994, he was Chairman of the Board and Chief Executive Officer of
Alliance Media Corporation, a private company formed for the purpose of
acquiring Stephen Dunn & Associates, Inc. From December 1992 to July 1993 he
was employed as a financial consultant at Wheat First Securities Corp., a
securities investment firm, and from August 1988 to December 1992, he was
Managing director of Vector Holdings L.P., a private investment company of
which Mr. Peters was the sole shareholder.
E. WILLIAM SAVAGE (52), PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR. Mr.
Savage has served in this capacity since April 1995. Prior to the merger,
since January 1994, he was President and Chief Operating officer of Alliance
Media Corporation. From 1989 to the present, Mr. Savage has served as
President and sole shareholder of Movie Theatre Associates, Inc., the corporate
general partner of Movie Theatre Investors, Ltd., a company which finances
multiplex movie theaters.
CLASS II DIRECTORS
WILLIAM E. CHAIKIN (75), DIRECTOR, since April 1995, has been a general partner
of fund of Feature Films I & II since 1983. The principal business of the
partnership is the acquisition and distribution of feature films to theaters,
television, cable and home video. Mr. Chaikin also served, from 1984 to 1995,
as a director and member of the audit and compensation committees of Caesars
World, Inc.
C. ANTHONY WAINWRIGHT (62), DIRECTOR, since April 1995, has been Chairman and
Chief Executive Officer of the advertising firm Harris Drury Cohen, Inc. since
June 1995. From October 1989 to June, 1995 he was a senior executive with
Cordient PLC's Compton Partners, Saatchi & Saatchi. He is presently a director
of Gibson Greetings, Inc., Del Webb Corporation, American Woodmark Corporation
and Specialty Retail Group, Inc.
CLASS III DIRECTOR
H. WILLIAM COOGAN, JR. (41), DIRECTOR , since April 1995. From June 1992 to
June 1995, Mr. Coogan was Managing Director-Head of Corporate Finance of Libra
Investments, Inc., a specialty investment banking firm. Since August 1991, Mr.
Coogan has also served as Chairman, Chief Investment Officer and a director of
Southern Title Insurance Corp. (an insurance company) and Chairman, Chief
Executive Officer and director of Southern Capital Corporation (an investment
and merchant banking firm). From August, 1990 to April, 1991 he was Managing
Director - Head of Corporate Finance for Wheat First Butcher & Singer Capital
Markets, an investment banking firm and, from September 1982 to July 1990 was
Director-Investment Banking at The First Boston Corporation and a Management
Partner of C.S. First Boston, the holding company for The First Boston
Corporation.
19
<PAGE> 20
OTHER SIGNIFICANT EMPLOYEES
MARTIN S. MCDERMUT (44), VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, since June
1995. From 1990 to 1993, Mr. McDermut was a partner with Coopers & Lybrand.
Prior to joining the Company, he was Vice President and Chief Financial Officer
for Pet Metro, Inc. from January 1994 to June 1995. Pet Metro, Inc. filed for
voluntary bankruptcy protection in April 1995.
STEPHEN DUNN (45), PRESIDENT, STEPHEN DUNN & ASSOCIATES, INC. Mr. Dunn has
served as President of Stephen Dunn & Associates, Inc. since its founding in
1983.
THOMAS SCHEIR (42), CHIEF FINANCIAL OFFICER, STEPHEN DUNN & ASSOCIATES, INC.
Mr. Scheir has served in this capacity for the last five years.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership on Forms 3, 4 and 5 with the Commission and the NASDAQ National
Market. Officers, directors and greater than ten percent stockholders are
required by the Commission's regulations to furnish the Company with copies of
all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it
has received and written representations from certain reporting persons that
they were not required to file Form 5 for the fiscal year ended June 30, 1995,
the Company believes that all its officers, directors and greater than ten
percent beneficial owners complied with all filing requirements applicable to
them with respect to transactions during the fiscal year ended June 30, 1995.
20
<PAGE> 21
ITEM 11 - EXECUTIVE COMPENSATION
The following table sets forth compensation accrued for the Chief Executive
Officer of All-Comm Media and the two most highly paid former executive
officers (the "Named Executives"), for the three fiscal years ended June 30,
1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------------------------- ------------------------
AWARDS PAYOUTS
------ -------
Other Annual Stock Option
Name and Fiscal Compensation Awards LTIP All Other
Principal Position(1) Year Salary Bonus(2) (3) (in shares)(4) Payout Compensation
- ---------------------- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Barry Peters(2) 1995 $26,442 - - - - -
Chairman of the Board
and Chief Executive
Officer
Neil Rosenstein(6) 1995 95,000 - - - - -
Former Chairman of 1994 95,000 - - - - -
the Board and Chief 1993 95,000 - - 18,750 - -
Executive Officer
Louis R. Napoliello(7) 1995 90,000 - - - - $118,750(5)
Former President and 1994 135,000 - - - - -
Chief Operating Officer 1993 135,000 - - - - -
of STI
</TABLE>
(1) Reflects the primary capacity served during fiscal 1995.
(2) Reflects information since appointment as executive officer on April
25, 1995.
(3) The Named Executives each received certain prerequisites, the value of
which did not exceed the lessor of $50,000 or 10% of such Named
Executive's annual salary and bonus in the three years ended June 30,
1995.
(4) Represents the number of shares subject to Options granted during the
respective fiscal year.
(5) In connection with the sale of Sports-Tech International, Mr.
Napoliello received a cash payment of $80,000, 5,000 restricted shares
of the Company's common stock valued at $38,750 and warrants to
purchase 2,500 shares of the Company's common stock at $8.00 per
share.
(6) Reflects information from July 1, 1994 to his resignation on April 24,
1995.
(7) Reflects information from July 1, 1994 to the sale of STI on March 9,
1995.
Option Grants: No stock options were granted in the last completed fiscal year
to the Named Executive Officers.
Option Exercises and Fiscal Year-End Values: Shown below is information with
respect to the exercise of stock options to purchase Common Stock of All-Comm
Media during the last fiscal year by each of the Named Executives and the value
of unexercised options held by each of them as of the end of the last fiscal
year.
21
<PAGE> 22
AGGREGATED OPTION EXERCISES IN 1995 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End (#) at Fiscal Year End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Barry Peters - - - -
Neil Rosenstein - - 24,475/0 $21,875/0
Louis R. Napoliello - - 6,667/0 8,333/0
</TABLE>
Director Compensation: Current Directors who are not salaried employees of the
Company are presently entitled to receive directors' fees of $2,500 per
meeting. Prior Directors who were not also salaried employees of the Company
were entitled to receive an annual fee of $1,000. Members of the Audit and
Compensation Committees receive no fees for their committee services. All
directors receive reimbursement of their out-of-pocket expenses incurred to
attend meetings of the Board of Directors.
For the fiscal year ended June 30, 1995, outside Directors, Messrs. Chaikin,
Coogan and Wainwright, received aggregate fees of $5,000 each.
Employment Agreements: Neil Rosenstein had an employment agreement with the
Company pursuant to which he agreed to serve as Chief Executive Officer of the
Company through June 30, 1995. The agreement, as modified, provided for an
annual salary of $95,000 for fiscal 1994. Effective January 1, 1994, Mr.
Rosenstein deferred receiving his salary for the remainder of that fiscal year.
As of June 30, 1994, $70,000 had been deferred, of which all has subsequently
been paid. Mr. Rosenstein resigned as an officer and director of the Company
on April 24, 1995.
Subject to execution of definitive agreements, on October 16, 1995, the Board
of Directors of the Company authorized the Company to enter into three-year
employment arrangements with Messrs. Peters and Savage. Such agreements will
provide for annual compensation in the amount of $125,000 each, with annual
increases based on the consumer price index, plus an annual bonus for fiscal
1996 of up to $50,000 each, based on the overall qualitative and quantitative
performance (to be determined) of the Company. Also, the agreement will
provide for severance payments of $500,000 each, in the event of a change in
control (to be determined) or termination without cause.
Compensation Committee Interlocks and Insider Participation: The current
Compensation Committee consists of three non-employee directors, Messrs.
Chaikin, Coogan and Wainwright. Prior to the merger with Alliance Media
Corporation, compensation of executive officers of the Company was determined
by the Board of Directors of the Company. No other officer or employee of the
Company, other than Mr. Neil Rosenstein, Former President, Chief Executive
Officer and Director of the Company and Mr. Arnold Rosenstein, who was formerly
an officer of the Company, participated in the deliberation of the Board of
Directors of the Company concerning executive compensation. None of the
executive officers of All-Comm Media serves as a director of another
corporation in a case where an executive officer of such other corporation
serves as a director of All-Comm Media.
22
<PAGE> 23
Compensation Committee Report on Executive Compensation: The compensation of
the Named Executives, as well as other executive officers of the Company, is
determined by the Compensation Committee of the Board of Directors. The
compensation of such persons consists primarily of salary, bonuses and short-
and long-term incentive plans, whereby the Company has aligned the executive
officers' financial interests with the financial interests of the Stockholders
of the Company.
As determined by the Compensation Committee, an executive officer's total
compensation package is comprised of three components; (1) base salary, (2)
bonuses, and (3) stock options.
In determining the base salary and certain bonus arrangements for the executive
officers, the Compensation Committee considers a number of factors, including
the executive's level of responsibility, achievements, and present and future
value to the Company relative to comparable positions at other companies in the
industry.
In addition to base salary, executive officers may be eligible to receive
annual bonuses, which will be determined based upon the Company's meeting of
specific economic targets, which may be set forth in such officer's employment
agreement, if any, and at the discretion of the Board of Directors. In
determining bonuses within its discretion, the Board, acting upon the
recommendation of the Compensation Committee, will consider the overall
operating performance of the Company during the period, as well as the position
and responsibility of the executive and the executive's service and
contributions to the Company during the year.
In addition to salary and bonus, executives may also be granted stock options
including options under the 1991 Plan. Stock options are intended to assist in
encouraging executive officers as well as other key management employees to
acquire a proprietary interest in the Company through ownership of its Common
Stock. The Company views stock options as yet another method to bring together
the interests of management and stockholders on a long-term basis. Strong
financial performance by the Company over time can be expected to lead to stock
price appreciation, enabling the Company's executives to participate in such
appreciation, should it be realized.
In considering which employees, including executive officers, are to receive
stock option grants, as well as the number of options to be granted, the
Compensation Committee considers the employee's position and responsibility,
the service and accomplishments of such employee, the employee's present and
future value to the Company, as well as the anticipated length of the
employee's future service to the Company. In considering grants of options to
directors, the Compensation Committee considers such person's experience,
professional associations, accomplishments and future value to the Company. No
stock options were issued in fiscal 1995.
Additional information concerning the salary, bonus and stock option grants for
the Company's executive officers can be found in the tables appearing herein.
In fulfilling its responsibilities, the Compensation Committee's goal is to
closely ally the interest of management and the stockholders. The Compensation
Committee, therefore, believes that the short- and long-term financial
performance of the Company should be a key determinant of overall executive
compensation.
23
<PAGE> 24
Performance Graph: The graph below provides a comparison of All-Comm Media's
cumulative total stockholder return with the NASDAQ Stock Market, NASDAQ
Computer and Data Processing (Computer Integrated System Design) Index and a
new Peer Group.
The graph assumes the investment of $100 on June 30, 1990 in All-Comm Media
Stock, the NASDAQ Stock Index, NASDAQ Computer and Data Processing (Computer
Integrated Systems Design) and the Peer Group common stock (with the exception
of Dimac, Inc., which began trading in August 1994, and Sitel Corporation,
which began trading in June 1995) and reinvestment of stock and cash dividends.
The returns of each company in the Peer Group have been weighted annually for
their market capitalization at June 30th of each year.
Until the former management of the Company disposed of Sports-Tech
International, Inc. and ceased the operations of High School Gridiron Report in
March, 1995, the Company competed with companies in the computer integrated
systems design industry. Establishments in this industry primarily engage in
developing or modifying computer software and packaging, or bundling, the
software with purchased computer hardware (computers and computer peripheral
equipment) to create and market an integrated system for specific applications.
On April 25, 1995, the Company merged with Alliance Media Corporation and
Stephen Dunn & Associates, Inc. ("SD&A"). Upon consummation of the merger,
members of the board of directors of the Company resigned and a new Board was
appointed. Through SD&A, the Company now operates in one industry segment,
providing telemarketing, telefundraising and direct marketing services for the
arts, educational and other institutional tax- exempt organizations. The
Company's mission is to create a growth-oriented direct marketing and media
services company through acquisition and internal growth. It now competes in
the direct marketing industry. Its peer group consists of Dimac Corporation,
Dimark, Inc., Sitel Corp., Acxiom Corp., Fair-Isaac & Company and LCS
Industries, Inc.
24
<PAGE> 25
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
ALL-COMM MEDIA, NASDAQ STOCK MARKET, NASDAQ COMPUTER AND
DATA PROCESSING (COMPUTER INTEGRATED SYSTEM DESIGN)
AND A PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
June 30
-------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
All-Comm Media Value $100 $ 53 $ 94 $200 $ 52 $ 91
NASDAQ Stock Market 100 106 127 160 162 215
NASDAQ Computer and Data
Processing Index 100 106 146 186 186 306
Peer Group 100 89 126 238 349 683
</TABLE>
ITEM 12 - SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of September 30, 1995, information concerning
the ownership of shares of Common Stock by (i) each beneficial owner of more
than five percent of the outstanding shares of Common Stock ("Beneficial
Holder"), (ii) each director of All-Comm Media, (iii) each Named Executive, and
(iv) all directors and executive officers of All-Comm Media as a group, and the
percentage ownership of such outstanding Common Stock.
25
<PAGE> 26
OWNERSHIP OF ALL-COMM MEDIA COMMON STOCK
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of
Holder and Name of Named Executive, Beneficial Ownership of Percent
Director or Identity of Group (3) Common Stock (2) of Class (2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Named Executives:
- -----------------
Barry Peters (1) 210,381 6.98%
E. William Savage (2) 200,588 6.65%
Directors, other than Mr. Peters and Mr. Savage:
- -----------------------------------------------
William E. Chaikin 3,408 *
H. William Coogan, Jr. 3,408 *
C. Anthony Wainwright 3,408 *
All Directors, Executive Officers and Significant
Employees as a group (6 persons) 458,116 15.19%
</TABLE>
* less than 1%
(1) Includes 10,250 shares owned by his daughters, of which Mr. Peters
disclaims beneficial ownership.
(2) Includes 15,627 shares owned by his brother, of which Mr. Savage
disclaims beneficial ownership.
(3) Each person has an address in care of the Company.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Former Company Counsel: Robert L. McDonald, Sr., a former director of the
Company, is a senior partner of McDonald, Carano, Wilson, McCune, Bergin,
Frankovich & Hicks ("McDonald Carano"), former general counsel to the Company.
The total amount of fees paid by the Company for services rendered by McDonald
Carano for the fiscal year ended June 30, 1995 did not exceed 5% of the firm's
total revenues. Additionally, Mr. A.J. Hicks, a partner in McDonald Carano,
previously served as Assistant Secretary to the Company and to its
subsidiaries.
Investment Banking Services: Marshall S. Geller, a former director of the
Company and former chairman of its Executive Committee was a Senior Managing
Director of Golenberg & Geller, Inc., a private merchant banking firm. Prior
management of the Company retained Golenberg & Geller, Inc. during the 1995
fiscal year to perform investment banking and financial advisory services. The
amount of fees paid by the Company for services rendered by Mr. Geller's firm
for the fiscal year ended June 30, 1995 was $5,700. At that time, the Company
also retained Golenberg & Geller, Inc. and Whale Securities Co., L.P. ("Whale")
to perform investment banking and financial advisory services in connection
with the merger of the company with Alliance Media Corporation. The finders'
fee paid in connection with the merger with Alliance was $200,000, which was
divided as follows: $100,000 to Golenberg & Geller, Inc.; $50,000 to Whale;
and $50,000 to Millennium Capital Corp., one of the co-finders in the
Transaction ("Millennium"). In addition, each of Mr. Geller, Mr. Golenberg,
26
<PAGE> 27
Whale and Millennium received 9,375 shares of the Company's Common Stock and a
three-year warrant for 6,250 shares of the Common Stock at a price of $8.00 in
further payment for their services.
Florida Gaming Corporation Loan: On July 15, 1994, in order to fund the
exercise price of the warrant which the Company owned to acquire shares of
Florida Gaming Corporation ("FGC"), the prior management of the Company entered
into a loan agreement (the "FGC Loan") for $1,000,000 with a group of lenders
(the "Lenders"), which included Messrs. Marshall Geller (former director),
Arnold Rosenstein (former president), and Neil Rosenstein (former Chairman of
the Board and Chief Executive Officer) (the "Affiliate Lenders"). The Company
borrowed the $1,000,000 available under the Loan Agreement on July 22, 1994.
Borrowings were secured by a pledge of the common stock of FGC issuable upon
exercise of the warrant. Each of the Affiliated Lenders lent the Company 20%
of the total FGC Loan, i.e., $200,000.
Pursuant to the terms of the FGC Loan, borrowings bore interest at "prime
rate." In addition, the Company was obligated to pay the Lenders, pro rata, a
commitment fee of $300,000, and to pay their attorneys' fees and other expenses
incurred in connection with the extension of the FGC Loan. The FGC Loan,
including interest of $9,000 and the commitment fee, was repaid by September
21, 1994.
During the period from July 1994 to March 1995, the Company sold the FGC common
stock.
Bullhead Mortgage Loan: On June 9, 1994, under the former management, Bullhead
Casino Corporation (which has since been renamed All-Comm Holdings, Inc.), a
wholly-owned subsidiary of the Company ("Bullhead"), borrowed $350,000 from the
Company's former chief executive officer and its president, evidenced by a
promissory note and secured by a mortgage on its parcel of land in Laughlin,
Nevada. Bullhead loaned the funds borrowed to the Company. The note was due
July 31, 1995 with interest at the rate of 7.75% per annum, but was repaid in
October 1994.
Purchase of Property and Equipment: In April 1995, prior to the merger with
Alliance, the Company's former chairman purchased property and equipment owned
by the Company having a cost of $160,000 and net book value of $6,000 for
$11,000 cash.
27
<PAGE> 28
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PRIOR TO MERGER
(a) (1) Financial statements - see "Index to Financial Statements and
Financial Statement Schedules" on page F-1.
(2) Financial statement schedules - see "Index to Financial Statements
and Financial Statement Schedules" on page F-1.
(3) Exhibits:
3 (i) Amended and Restated Articles of Incorporation (B)
3 (ii) Certificate of Amendment to the Amended and Restated
Articles of Incorporation of the Company (B)
3 (iii) Certificate of Amendment to the Articles of
Incorporation (A)
3 (iv) By-Laws (B)
10.1 1991 Stock Option Agreement (C)
10.2 Operating Covenants Agreement, dated April 25, 1995, between
Alliance Media Corporation and Mr. Stephen Dunn (D)
10.3 Pledge Agreement, dated as of April 25, 1995, between
Alliance Media Corporation and Mr. Stephen Dunn (D)
10.4 Option Agreement (A)
11. Statement re: computation of per share earnings
22.1 List of Company's subsidiaries (A)
27 Financial Data Schedule (A)
(A) Incorporated herein.
(B) Incorporated by reference from the Company's Registration Statement
on Form S-4, Registration Statement No. 33-45192.
(C) Incorporated by reference to the Company's Registration Statement
on Form S-8, Registration Statement 33-43520.
(D) Incorporated herein by reference to Form 8-K Current Report of
All-Comm Media Corporation dated April 25, 1995.
(b) Reports on Form 8-K.
On April 20, 1995, the Company filed a Memorandum regarding the amendment
to the Acquisition Agreement with Alliance Media Corporation, dated
February 7, 1995.
On April 25, 1995, the Company filed the Amendment No. 1 to the
Acquisition Agreement with Alliance Media Corporation; the Merger
Agreement, dated April 21, 1995, between STI Merger Corporation and
Alliance Media Corporation; the Stock Purchase Agreement, dated as of
January 3, 1995, between Alliance Media Corporation and Mr. Stephen Dunn;
Operating Covenants Agreement, dated April 21, 1995, between
28
<PAGE> 29
Alliance Media Corporation and Mr. Stephen Dunn; and the Pledge Agreement,
dated April 25, 1995, between Alliance Media Corporation and Mr. Stephen
Dunn.
On May 26, 1995, the Company filed an amendment to the Form 8-K dated
March 9, 1995, incorporating by reference the required financial
statements regarding the sale of Sports-Tech International, Inc. included
in the March 31, 1995 Form 10-Q.
On June 12, 1995, the company filed a notification of the completion of a
private placement on May 31, 1995.
On June 26, 1995, the Company filed an amendment to the Form 8-K dated
April 25, 1995, submitting the required financial statements and pro forma
information regarding the acquisition of Alliance Media Corporation and
Stephen Dunn & Associates, Inc.
On July 21, 1995, and as amended on August 9, 1995, the Company disclosed
the change in the Company's accountants.
On August 23, 1995, the Company disclosed a one-for-four reverse stock
split and the change in the Company's name.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
29
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALL-COMM MEDIA CORPORATION.
(Registrant)
BY /s/ Barry Peters
-----------------------------------------------
Barry Peters
Chairman of the Board and Chief Executive Officer
Date: October 12, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Barry Peters Chairman of the Board and October 12, 1995
- --------------------- Chief Executive Officer
Barry Peters
/s/ E. William Savage President and October 12, 1995
- ------------------------ Chief Operating Officer
E. William Savage
/s/ Martin S. McDermut Vice President and October 12, 1995
- ---------------------- Chief Financial and Accounting Officer
Martin S. McDermut
/s/ William E. Chaikin. Director October 12, 1995
- -----------------------
William E. Chaikin.
/s/ H. William Coogan, Jr. Director October 12, 1995
- --------------------------
H. William Coogan, Jr.
/s/ C. Anthony Wainwright Director October 12, 1995
- -------------------------
C. Anthony Wainwright
</TABLE>
The foregoing constitute all of the Board of Directors.
30
<PAGE> 31
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
[Items 8 and 14(a)]
<TABLE>
<CAPTION>
(1) FINANCIAL STATEMENTS: Page
----
<S> <C> <C>
Report of Independent Public Accountants 32
Consolidated Balance Sheets
June 30, 1995 and 1994 33
Consolidated Statements of Operations
Years Ended June 30, 1995, 1994 and 1993 34
Consolidated Statements of Stockholders' Equity
Years Ended June 30, 1995, 1994 and 1993 35
Consolidated Statements of Cash Flows
Years Ended June 30, 1995, 1994 and 1993 36-37
Notes to Consolidated Financial Statements 38-51
(2) FINANCIAL STATEMENT SCHEDULES:
I. Condensed Financial Information of the Registrant 50-52
</TABLE>
All other financial statement schedules are omitted because of the
absence of the conditions under which they are required or because the
required information is given in the consolidated financial statements
or the notes thereto.
31
<PAGE> 32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Stockholders of
All-Comm Media Corporation
We have audited the accompanying consolidated financial statements and the
financial statement schedule of All-Comm Media Corporation and Subsidiaries,
listed in Items 8 and 14(a) of this Form 10-K/A-2. These financial statements
and financial statement schedule are the responsibility of All-Comm Media
Corporation's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of All-Comm Media
Corporation and Subsidiaries as of June 30, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1995, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included herein.
/s/ COOPERS & LYBRAND L.L.P.
Los Angeles, California
July 23, 1996
32
<PAGE> 33
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 1,217,772 $ 419,149
Accounts receivable, net of allowance for
doubtful accounts of $40,552 in 1995 2,067,977
Other current assets 116,468 34,894
Net assets of discontinued operations 286,201
----------- -----------
Total current assets 3,402,217 740,244
Property and equipment at cost, net 344,154 67,596
Land held for sale at cost 766,651 756,125
Intangible assets at cost, net 7,272,769
Other assets 38,700 75,768
----------- -----------
Total assets $11,824,491 $ 1,639,733
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Note payable to bank $ 49,694 $ 150,000
Note payable other 72,000 144,000
Trade accounts payable 365,638 4,474
Accrued salaries and wages 641,507 57,003
Other accrued expenses 683,954 268,339
Income taxes payable 94,565
Current portion of long term obligations to related party 1,500,000
Related party payables 183,701 350,000
----------- -----------
Total current liabilities 3,591,059 973,816
Long term obligations to related party less current portion 3,000,000
Other liabilities 68,900
----------- -----------
Total liabilities 6,659,959 973,816
=========== ===========
Commitments and contingencies
Stockholders' equity:
Class B convertible preferred stock - authorized
50,000 shares of $.01 par value; none issued
Common stock - authorized 6,250,000 shares of $.01
par value; 3,028,092 and 1,436,833 shares issued,
respectively 30,281 14,368
Additional paid-in capital 10,300,847 5,928,542
Accumulated deficit (5,031,127) (5,141,524)
Less 11,800 shares of common stock in treasury,
at cost (135,469) (135,469)
----------- -----------
Total stockholders' equity 5,164,532 665,917
----------- -----------
Total liabilities and stockholders' equity $11,824,491 $ 1,639,733
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
33
<PAGE> 34
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
Sales $ 3,630,828
Cost of sales 2,434,011
-----------
Gross profit 1,196,817
Operating Expenses:
Selling, general and administrative (2,381,912) $ (823,417) $ (984,628)
Service fees of related parties (5,728) (21,000) (84,000)
Amortization of intangible assets (65,101)
Litigation settlement and expenses (923,872)
----------- ------------ -----------
Loss from operations (1,255,924) (844,417) (1,992,500)
----------- ----------- -----------
Other income (expense):
Gain from sales of securities 1,579,539 937,365 3,177,203
Loan commitment fee (300,000)
Dividends 7,237 77,030
Interest income 13,679 26,263
Interest expense (94,200) (7,165) (43,604)
Other, net 1,047 (19,813) 5,147
----------- ------------ -----------
Total 1,200,065 917,624 3,242,039
----------- ------------ -----------
Income (loss) from continuing operations
before income taxes (55,859) 73,207 1,249,539
Credit (provision) for income taxes (75,000) 13,600 (270,082)
----------- ----------- -----------
Income (loss) from continuing operations
before discontinued operations (130,859) 86,807 979,457
Gain on sale of discontinued operations 322,387
Loss from discontinued operations, net of
income tax benefit of $649,482 in 1993 (81,131) (2,896,694) (2,094,795)
----------- ------------ -----------
Net income (loss) $ 110,397 $(2,809,887) $(1,115,338)
=========== ============ ============
Income (loss) per share:
From continuing operations $(.07) $.06 $ .71
From discontinued operations .13 (1.97) (1.52)
----------- ------------ -----------
Income (loss) per share $.06 $(1.91) $ (.81)
=========== ============ ===========
Weighted average common and common
equivalent shares outstanding 1,807,540 1,468,747 1,373,160
=========== ============ ===========
</TABLE>
Primary and fully diluted income (loss) per share are the same in fiscal years
1995 and 1994. Fully diluted income (loss) per share from continuing
operations, discontinued operations and net loss in fiscal 1993 was $.70,
$(1.49) and $(.79), respectively.
See Notes to Consolidated Financial Statements.
34
<PAGE> 35
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------------ Paid-in Accumulated -------------------- Receivable
Shares Amount Capital Deficit Shares Amount for Shares Totals
---------- --------- ------------ ------------ -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance June 30, 1992 1,197,559 $ 11,976 $ 4,161,719 $(1,216,299) (20,550) $(108,239) $(200,000) $ 2,649,157
Issuance of treasury
shares for HSGR
acquisition 175,980 15,000 79,020 255,000
Shares issued upon
exercise of stock
options 54,633 546 330,253 330,799
Net loss (1,115,338) (1,115,338)
--------- -------- ----------- ----------- ------- --------- --------- -----------
Balance June 30, 1993 1,252,192 12,522 4,667,952 (2,331,637) (5,550) (29,219) (200,000) 2,119,618
Issuance of restricted
shares for litigation
settlement 25,000 250 249,750 250,000
Purchase of shares - cash (6,250) (106,250) (106,250)
Receivable paid - at
discount (66,667) 200,000 133,333
Shares issued upon
exercise of stock
options and warrants 159,641 1,596 991,173 992,769
Discounts granted on
exercise of options 86,334 86,334
Net loss (2,809,887) (2,809,887)
--------- -------- ----------- ----------- ------- --------- --------- -----------
Balance June 30, 1994 1,436,833 14,368 5,928,542 (5,141,524) (11,800) (135,469) -- 665,917
Issuance of restricted
shares for litigation
settlement 37,500 375 149,625 150,000
Issuance of restricted
shares for merger
with Alliance Media
Corporation 1,025,000 10,250 2,734,750 2,745,000
Issuance of restricted
shares as finders fees 42,500 425 138,325 138,750
Private placement of
shares - cash 413,759 4,138 1,014,537 1,018,675
Shares issued upon
exercise of stock
options and warrants 72,500 725 207,193 207,918
Discounts granted on
exercise of options 127,875 127,875
Net income 110,397 110,397
--------- -------- ----------- ----------- ------- --------- --------- -----------
Balance June 30, 1995 3,028,092 $30,281 $10,300,847 $(5,031,127) (11,800) $(135,469) $ -- $ 5,164,532
========= ======== =========== =========== ======= ========= ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
35
<PAGE> 36
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net income (loss) $110,397 $(2,809,887) $(1,115,338)
Adjustments to reconcile loss to net cash used
in operating activities:
Gains from sales of securities (1,579,539) (937,365) (3,177,203)
Gain on sale of STI (322,387)
Depreciation 52,348 39,306 37,515
Amortization 65,101
Deferred income tax (13,600) (324,400)
Loss on disposal of assets 30,319
Discount on exercise of options 127,875 86,334
Issuance of stock and note for consultant
termination settlement 394,000
Changes in assets and liabilities net of effects from
acquisition:
Accounts receivable (377,631)
Income tax refund receivable 55,000 496,504
Other current assets (16,844) (3,778) 1,294
Other assets 20,519 61,959 (40,083)
Trade accounts payable (147,360) 1,689 2,785
Accrued expenses and other current liabilities 6,757 3,784 (310,323)
Income taxes payable 55,000
Discontinued operations, net (152,662) 936,564 327,777
---------- ---------- ----------
Net cash used in operating activities (2,128,107) (2,185,994) (4,101,472)
---------- ---------- ----------
Investing activities:
Proceeds from sales of investments in securities 2,682,811 1,244,090 3,949,470
Purchase of investment in securities (1,063,272)
Proceeds from sale of STI 800,000
Proceeds from sales of fixed assets 11,000
Acquisition of Alliance Media Corporation, net
of cash acquired of $567,269 259,088
Acquisition of High School Gridiron Report (131,000)
Purchase of property and equipment (43,905) (6,653) (4,971)
Land development costs (10,526)
Investing activities of discontinued operations, net (42,271) (41,507)
---------- ---------- ----------
Net cash provided by investing activities 2,635,196 1,195,166 3,771,992
---------- ---------- ----------
Financing activities:
Proceeds from (repayments of) bank loans (513,059) 150,000 (700,000)
Proceeds from issuances of common stock 1,226,593 992,769 330,799
Proceeds from note payable other 1,000,000 200,000
Repayments of note payable other (1,072,000) (200,000)
Related party borrowing (repayment) (350,000) 350,000
Repurchases of common stock (106,250)
Proceeds from receivable for shares 133,333
Financing activities of discontinued operations (19,350) (17,130)
---------- ---------- ----------
Net cash provided by (used in) financing activities 291,534 1,300,502 (186,331)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 798,623 309,674 (515,811)
Cash and cash equivalents at beginning of year 419,149 109,475 625,286
---------- ---------- ----------
Cash and cash equivalents at end of year $1,217,772 $ 419,149 $ 109,475
========== ========== ==========
</TABLE>
36
<PAGE> 37
<TABLE>
<S> <C> <C> <C>
Supplemental disclosures of cash flow data:
Cash paid (received) during the year for:
Interest $ 60,422 $ 20,771 $ 57,627
Financing charge $300,000
Federal income tax paid (refunded) $ 15,000 $ (55,000) $ (675,920)
</TABLE>
Supplemental schedule of non cash investing and financing activities:
In 1995, the Company purchased all of the capital stock of Alliance Media
Corporation for 1,025,000 shares of common stock valued at $2,745,000.
Additionally, 37,500 shares of common stock valued at $100,000 were issued as
finders fee. Other direct costs of the acquisition totaled approximately
$400,000. In conjunction with the acquisition, net assets acquired and
liabilities assumed, less payments prior to year end, were:
<TABLE>
<S> <C>
Working capital, other than cash $ 601,729
Property and equipment (326,320)
Costs in excess of net assets of
companies acquired (7,337,870)
Other assets (23,451)
Long term debt 4,500,000
Common stock issued 2,845,000
----------
$ 259,088
===========
</TABLE>
Five thousand shares of common stock valued at $38,750 were issued as a
commission on the sale of STI during 1995.
The Company issued 37,500 shares of common stock valued at $150,000 in 1995 in
settlement of a 1994 liability for early termination of a consulting agreement.
See Notes to Consolidated Financial Statements.
37
<PAGE> 38
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL:
All-Comm Media Corporation ("The Company") was formerly known as
Sports-Tech, Inc.. The name change was approved at a Special Meeting
of Shareholders held on August 22, 1995. On April 25, 1995, the
Company, through a wholly-owned subsidiary, was merged with Alliance
Media Corporation ("Alliance") and its wholly-owned subsidiary,
Stephen Dunn & Associates, Inc. ("SD&A"). The shareholders of
Alliance received 1,025,000 shares of the Company's common stock.
Upon consummation of the merger, the members of the board of directors
of the Company resigned and a new board was appointed. Through SD&A,
the Company currently operates in one industry segment, providing
telemarketing and telefundraising to not-for-profit arts and other
organizations. The Company's mission is to create a growth-oriented
direct marketing and media services company through acquisitions and
internal growth. The Company also currently owns approximately seven
acres of undeveloped land in Laughlin, Nevada.
Prior to the merger with Alliance, the Company's principal activities
were the investigation of non-gaming acquisitions. In fiscal 1992,
the Company acquired a 100% interest in Sports-Tech International
("STI"), and in fiscal 1993 acquired 100% of the assets and certain
liabilities of High School Gridiron Report ("HSGR"). STI was engaged
in the development, acquisition, integration and sale of advanced
computer software, computer equipment and computer aided video systems
used by sports programs at the professional, collegiate and high
school levels. HSGR provided academic and video data to aid in
pre-qualifying high school athletes to colleges and universities. In
fiscal 1995, the Company discontinued the operations of STI and HSGR.
The Company believes that funds available from operations, from the
potential sale of or borrowing against the Laughlin, Nevada, land and
the ability to raise funds through a private placement of equity
securities will be adequate to finance its operations and meet
interest and debt obligations in fiscal 1996. Additional financing
may be required thereafter to meet potential contingent acquisition
payments if defined results of operations are achieved, as well as
operating requirements and debt payments. There can be no assurance,
however, that such capital will be available at terms acceptable to
the Company, or at all.
2. SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation:
The consolidated financial statements include the accounts of All-Comm
Media Corporation and its wholly-owned subsidiaries, Bullhead Casino
Corporation ("Bullhead"), B H Acquisitions, Inc. ("B H"), Sports-Tech
International, Inc. ("STI") and High School Gridiron Report, Inc.
("HSGR"), Alliance Media Corporation ("Alliance"), Stephen Dunn &
Associates, Inc. ("SD&A") and BRST Mining Company. All material
intercompany accounts and transactions are eliminated in
consolidation.
Cash and Cash Equivalents/Statement of Cash Flows:
Highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents.
38
<PAGE> 39
Land held for Sale:
The cost of acquiring, improving and planning the development of land
is capitalized. Costs related to development are written off when
such plans are abandoned. Interest cost is capitalized in periods in
which activities specifically related to the development of the land
take place.
Property and Equipment:
Property and equipment is recorded at cost less accumulated
depreciation. Maintenance and repairs are expensed as incurred. The
cost and related accumulated depreciation and amortization of property
and equipment sold or retired are removed from the accounts and
resulting gains or losses are included in current operations.
Depreciation and amortization are provided on a straight line basis
over the useful lives of the assets involved, limited as to leasehold
improvements by the term of the lease, as follows:
<TABLE>
<S> <C>
Equipment 5 years
Furniture and fixtures 2 to 5 years
Leasehold improvements 3 to 5 years
</TABLE>
Intangible Assets:
Excess of cost over net assets acquired in connection with the
Alliance and SD&A acquisitions are being amortized over the period of
expected benefit of 40 years. Covenants not to compete are stated at
cost and are amortized over the period of expected benefit of five
years. For each of its investments, the Company assesses the
recoverability of its goodwill, by determining whether the
amortization of the goodwill balance over its remaining life can be
recovered through projected undiscounted future cash flows over the
remaining amortization period. If projected future cash flows
indicate that unamortized goodwill will not be recovered, an
adjustment will be made to reduce the net goodwill to an amount
consistent with projected future cash flows discounted at the
Company's incremental borrowing rate. Cash flow projections are based
on trends of historical performance and management's estimate of
future performance, giving consideration to existing and anticipated
competitive and economic conditions.
Revenue recognition:
Sales represent fees earned by SD&A which are recorded when pledged
cash is received for on-site campaigns and when services are provided
for off-site campaigns.
Income taxes:
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates and laws applicable to the years
in which the differences are expected to reverse. Valuation
allowances, if any, are established when necessary to reduce deferred
tax assets to the amount that is more likely than not to be realized.
Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of temporary cash
investments and trade receivables. The Company restricts investment
of temporary cash investments to financial institutions with high
credit standing. Credit risk on trade receivables is minimized as a
result of the large and diverse nature of the Company's customer base.
Earnings (loss) per share:
Earnings (loss) per share is computed based on the weighted average
number of common shares outstanding and common share equivalents
attributable to the effects, if dilutive, of the assumed exercise of
outstanding stock options.
39
<PAGE> 40
Reclassifications:
Certain accounts in the 1994 and 1993 consolidated financial
statements and notes have been reclassified to conform to the 1995
presentation.
3. ACQUISITION OF ALLIANCE MEDIA CORPORATION AND STEPHEN DUNN & ASSOCIATES,
INC.:
On April 25, 1995, the Company, through a statutory merger, acquired
all of the outstanding common shares of Alliance. The purchase price
was approximately $2,745,000, consisting of issuance of 1,025,000
restricted common shares of the Company to former shareholders of
Alliance valued at $2.68 per common share. These shares have
registration rights as of December 1, 1995. Direct costs of the
acquisition approximated $500,000. Pursuant to the terms of the merger
agreement, upon consummation of the merger the then current members of
the Company's board of directors resigned, and a new board consisting
of six persons designated by Alliance was appointed.
The assets of Alliance acquired by the Company consisted primarily of
(i) all the issued and outstanding stock of Stephen Dunn & Associates,
Inc. ("SD&A"), which Alliance had acquired simultaneously with the
merger, (ii) a five year covenant not to compete with the former owner
of SD&A, and (iii) the cash proceeds of $1,509,750 (net of certain
payments, including the payment of $1.5 million made pursuant to the
acquisition of SD&A) of a private placement of equity securities of
Alliance, which securities, upon consummation of the merger, were
converted into the Company's common stock. The purchase price of SD&A
paid by Alliance was $1.5 million in cash, plus $4.5 million in
long-term obligations, yielding prime rate (9.0% at June 30, 1995),
payable over four years. Additional contingent payments of up to
$850,000 per year over the period ending June 30, 1998 may be required
based on the achievement of defined results of operations of SD&A after
its acquisition. At the Company's option, up to one half of the
additional contingent payments may be made with restricted common
shares of the Company. These additional shares have demand
registration rights commencing in September 1997. Alliance and SD&A
have entered into an operating covenant agreement relating to the
operations of SD&A and Alliance has pledged all of the common shares of
SD&A acquired to collateralize its obligations under that agreement.
The assets of SD&A acquired by Alliance (and therefore by the Company
upon consummation of the merger) consisted primarily of cash and cash
equivalents, accounts receivable and furniture, fixtures and equipment.
These acquisitions were accounted for using the purchase method. The
purchase price was allocated to assets acquired based on their
estimated fair value. This treatment resulted in approximately $6.3
million of costs in excess of net assets required, after recording a
covenant not to compete of approximately $1.0 million. Such excess,
which may increase for any further contingent payments, is being
amortized over the expected period of benefit of 40 years.
The operating results of these acquisitions are included in the
consolidated results of operations from the date of acquisition. The
following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Alliance and SD&A had been
acquired as of the beginning of the period presented, after including
the impact of certain adjustments, such as: amortization of
intangibles, increased interest on the acquisition debt, and adjustment
of officer salary for new contract.
40
<PAGE> 41
<TABLE>
<CAPTION>
Unaudited
--------------------------------
1995 1994
---- ----
<S> <C> <C>
Net sales $15,013,000 $12,685,000
Income (loss) from continuing operations (113,911) 235,965
Income (loss) from continuing operations
per common share $(.06) $0.16
</TABLE>
The unaudited pro forma information is provided for informational
purposes only. It is based on historical information and is not
necessarily indicative of the actual results that would have occurred
nor is it necessarily indicative of future results of operations of the
combined entities.
4. ACQUISITION OF HIGH SCHOOL GRIDIRON REPORT:
In June, 1993, the Company, through its wholly-owned subsidiary, HSGR,
a Nevada corporation, acquired substantially all the assets, and
assumed certain liabilities, of High School Gridiron Report in exchange
for 15,000 shares of the Company's treasury stock, valued at $17.00,
the NASDAQ closing market value on June 11, 1993.
This acquisition was accounted for as a purchase. HSGR assumed $29,000
in liabilities and acquired $40,000 in fixtures and equipment net,
$10,000 in other assets, software, net and purchased goodwill of
$365,000 that was being amortized over five years. In the fourth
quarter of fiscal 1994, it was determined that the unamortized goodwill
totaling $310,000 would not be recovered from future cash flows of the
related operations and the balance was written off.
5. DISCONTINUED OPERATIONS:
On December 7, 1994, the Company entered into a definitive agreement
for the sale of the Company's subsidiary, STI. The proposed purchase
price for STI's operations was $1,100,000 of which $300,000 was paid as
of the agreement date.
By mutual agreement, the closing date was accelerated to March 8, 1995,
and the purchase price reduced to $800,000, a reduction of $300,000 on
the original sales price, out of which $80,000 was paid as a commission
to STI's former president. The former president of STI also received
$38,750 in common stock and warrants to purchase 2,500 shares of the
Company's common stock at $8.00 per share in connection with this
transaction. The Company realized a gain on the sale of $322,387. No
tax is allocable to this gain.
Concurrent with the closing of sale of STI, all operations of HSGR were
ceased and all unrecoverable assets were written off, which amounted to
approximately $22,000. Accordingly, STI and HSGR are reported as
discontinued operations at June 30, 1995, and the consolidated
financial statements have been reclassified to report separately the
net assets, operating results, gain on disposition and cash flows of
these operations.
Revenues of these discontinued operations for fiscal 1995, 1994 and
1993 were $1,147,829, $1,743,090 and $2,315,327, respectively.
Net assets relating to these discontinued operations at June 30, 1994,
primarily working capital and plant and equipment and certain
liabilities, have been reclassified to net assets of discontinued
operations and are stated at the lower of cost or estimated net
realizable value.
41
<PAGE> 42
6. PROPERTY AND EQUIPMENT:
Property and equipment of continuing operations at June 30, 1995 and
1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
Office furnishings and equipment $ 246,157 $ 168,896
Leasehold improvements 131,447 72,352
--------- ---------
377,604 241,248
Less accumulated depreciation and
amortization (33,450) (173,652)
--------- ---------
$ 344,154 $ 67,596
========= =========
</TABLE>
7. LAND HELD FOR SALE:
The Company, through its wholly owned subsidiary, Bullhead, owns
approximately seven acres of undeveloped land in Laughlin, Nevada,
which had a carrying value of $766,651 and $756,125 as of June 30,
1995 and 1994, respectively. During fiscal 1995, the Company
capitalized costs of $10,526 for its share of costs incurred by area
property owners for development design fees. Bullhead is additionally
subject to an agreement entered into at the time of the acquisition of
the Laughlin property to pay to two unaffiliated individuals an amount
equal to 5% each of the net profit from any sale of said property or,
if developed into a hotel/casino (which the Company does not intend to
do), 5% each of the equity in the property. Such interests were
received as consideration for the efforts of such individuals in
connection with the acquisition of such land.
8. INTANGIBLE ASSETS:
Intangible assets at June 30, 1995, consist of the following:
<TABLE>
<S> <C>
Covenant not to compete $1,000,000
Excess of cost over acquired
net tangible assets of Alliance and SD&A 6,337,870
----------
7,337,870
Less accumulated amortization (65,101)
----------
$7,272,769
==========
</TABLE>
9. NOTES PAYABLE TO BANK:
At June 30, 1995, SD&A has a note payable outstanding totaling $49,694
and an unused $350,000 line of credit from a bank. The note payable
requires monthly principal repayment of $6,529 plus interest. The note
payable and the line of credit bear interest at the bank's prime rate
(9% at June 30, 1995), plus 1.75% and 1.25%, respectively.
No amounts have been borrowed against the line of credit since the
acquisition of SD&A. The line is collateralized by substantially all
of SD&A's assets and is personally guaranteed by SD&A's President.
Also, the line of credit contains financial covenants, including
current ratio and working capital, debt and net worth, capital
expenditure limits and cash flows.
42
<PAGE> 43
In June, 1994, the Company borrowed $150,000 from a bank. The loan was
collateralized by a $150,000 certificate of deposit and bore interest
at 7.25% and was repaid in July, 1994.
10. OTHER ACCRUED EXPENSES:
Accrued expenses at June 30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accrued professional fees $287,550 $256,071
Accrued taxes and licenses 116,300
Other 280,104 12,268
-------- --------
Total $683,954 $268,339
======== ========
</TABLE>
11. LONG TERM OBLIGATIONS TO RELATED PARTY:
In connection with the acquisition of SD&A, Alliance issued promissory
notes totaling $4,500,000 to SD&A's current President and former sole
shareholder. The notes bear interest at prime rate (9% at June 30,
1995) not to exceed 10% or drop below 8% and are payable monthly.
Principal payments are due quarterly, and originally matured as
follows: 1996 - $1,500,000; 1997 - $1,500,000; 1998 - $1,000,000;
1999 - $500,000. All the outstanding common shares of SD&A are pledged
to collateralize these notes. In connection with these notes, an
operating covenant agreement includes, among other things, provisions
requiring that SD&A have a minimum level of working capital and cash
levels, subject to periodic increases based on sales, before dividend
payments can be made to the parent company. Net restricted assets of
SD&A, after "push down" of costs in excess of net assets acquired,
totaled approximately $6,650,000 at June 30, 1995.
12. EMPLOYMENT CONTRACTS:
Subject to execution of definitive agreements, the Company has entered
into three-year employment arrangements with current officers of the
Company. The arrangements provide for annual base salaries, base
increases, cash and option bonuses which are payable if specified
management goals are achieved, and certain termination benefits. The
aggregate liability in the event of termination by the Company without
cause of these employees is approximately $1,000,000.
The Company also had employment contracts with certain members of the
prior management of the Company. In fiscal 1995, 1994 and 1993,
severance payments totaling approximately $60,000, $40,000 and
$165,000, respectively, were paid under the contracts. A contract with
a prior key member of management also required the issuance of 25,000
shares of the Company's common stock in exchange for a $200,000
non-recourse promissory note receivable.
The note receivable was due on November 1, 1994, along with accrued
interest at 10.5% per annum. In fiscal 1994, the Company's Board of
Directors approved discounting the interest receivable and note
receivable by one third. The discount of the interest receivable of
$29,166 was charged against operations and the $66,667 discount of the
note receivable was charged to additional paid in capital.
43
<PAGE> 44
13. COMMITMENTS AND CONTINGENCIES:
Leases: SD&A leases its corporate business premises from its former
owner. The lease requires monthly rental payments of $11,805 through
January 1, 1999, with an option to renew. SD&A incurs all costs of
insurance, maintenance and utilities. Also, the Company leases its
corporate office space, copier, phones and automobiles under long term
leases.
Future minimum rental commitments under all non-cancelable leases, as
of fiscal years ending June 30, are as follows:
<TABLE>
<S> <C>
1996 $256,144
1997 188,874
1998 178,924
1999 69,048
--------
$692,990
========
</TABLE>
Rent expense for continuing operations was approximately $89,000,
$56,000 and $81,000 for fiscal years ended 1995, 1994 and 1993. Total
rent paid by SD&A to its former owner from the date of acquisition to
June 30, 1995 was approximately $26,000.
Litigation: In 1990, the Company, along with a company in which the
Company held an equity investment (the "Investee") and certain officers
and directors of the Investee (including certain officers and directors
who are or were also officers and directors of the Company), were named
defendants in consolidated class action and derivative action suits
brought by certain shareholders and holders of convertible debentures of
the Investee in 1990. On February 26, 1993, without admitting any
wrongdoing, the parties in the litigation matter executed a settlement
agreement. This settlement agreement was approved by the United States
District Court, District of Nevada, on May 28, 1993 and became effective
on June 26, 1993. Pursuant to the terms of the settlement agreement,
the Company paid $600,000 on June 10, 1993 towards the total cost of the
settlement. Additionally, a $200,000 note collateralized by 10,000
common shares of the Investee's stock was delivered to their attorneys
as escrow agent. On January 31, 1994, the Company settled the $200,000
note by signing over the 10,000 common shares collateralizing the note,
valued at $133,750, and paying $67,877, which included interest of
$1,627. Expenses incurred in fiscal 1993 relating to this matter
totaled $923,872, including legal fees of $123,872.
Pursuant to a Settlement and Release Agreement dated June 17, 1994 with
Membership Development, Inc. ("MDI"), a non-affiliated direct marketing
company that was providing marketing services to Sports-Tech
International, in fiscal 1994 the Company issued 25,000 shares of
Sports-Tech stock valued at $250,000, executed an unsecured non-interest
bearing promissory note for $144,000 and in fiscal 1995 issued an
additional 37,500 shares of stock valued at $150,000. In May 1995, MDI
exercised their right to require the Company to file a registration
statement registering these securities for sale. A registration
statement was filed but has not yet been declared effective. The entire
$544,000 of consideration was expensed in fiscal 1994 and is included in
discontinued operations.
The Company is party to various minor legal proceedings. The outcome of
these legal proceedings are not expected to have a material adverse
effect on the financial condition or operation of the Company based on
the Company's current understanding of the relevant facts and law.
44
<PAGE> 45
14. STOCKHOLDERS' EQUITY:
Common Stock: The Board of Directors approved a one-for-four reverse
stock split of the Company's authorized and issued common stock,
effective August 22, 1995. The Board also approved reducing the number
of authorized shares of common stock to 6,250,000 with a par value of
$.01 per share, from the 25,000,000 common shares previously
authorized. Accordingly, all share and per share data, as appropriate,
reflect the effect of the reverse split.
In May 1995, the Company completed a private placement of 413,759
shares of restricted common stock, at $2.68 per share. These shares
have registration rights as of December 1, 1995. Net proceeds from
this offering totaled $1,018,675.
As discussed in Note 3, in connection with the acquisition of Alliance
and SD&A, the Company issued 1,025,000 restricted common shares to the
former shareholders of Alliance. These shares have registration rights
as of December 1, 1995. Also in connection with the acquisition, the
Company issued 37,500 common shares valued at $100,000 and warrants to
purchase 43,077 common shares at $6.00-to-$8.00 per share to investment
banking firms, a shareholder, a director and a law firm which
represented the Company. These warrants expire between April 25, 1998
and April 25, 2000.
In connection with the sale of Sports-Tech International, Inc., the
Company approved issuance of 5,000 common shares valued at $38,750 and
warrants to purchase 2,500 shares at $8.00 through April 25, 1995 to
its former president.
On July 26, 1991, the Company sold warrants to purchase up to 62,500
shares of the Company's common stock to a private investor for $250 in
cash, exercisable at $6.00 per share through July 31, 1996. This
investor was subsequently elected to the Company's Board of Directors.
On January 31, 1994, this Director exercised warrants to purchase
25,000 shares of common stock at $4.00 per share (reduced by Board of
Directors Resolution from $6.00 to $4.00) by paying $100,000 to the
Company. On June 9, 1994, this Director sold, in a private
transaction, 18,750 of these warrants to another shareholder of the
Company. In May, 1995, the Board of Directors approved the temporary
reduction of the exercise price of these warrants from $6.00 to $2.68
and, on May 31, 1995, these 37,500 warrants were exercised for $100,500
in cash payments.
As of June 30, 1995, the Company has the following outstanding warrants
to purchase 45,577 shares of common stock:
<TABLE>
<CAPTION>
Exercise Price
Shares of Common Per Share of
Date Issued Stock upon Exercise Common Stock
----------- ------------------- --------------
<S> <C> <C>
April 1995 33,750 $6-8.00
May 1995 11,827 $6
------
Total as of June 30, 1995 45,577
======
</TABLE>
Stock Options: In 1991, the Company adopted a non-qualified stock
option plan (the 1991 Plan) for key employees, officers, directors and
consultants to purchase up to 250,000 shares of common stock. The Plan
is administered by the Board of Directors which has the authority to
determine which officers and key employees of the Company will be
granted options, the option price and exercisability of the options.
In no event shall an option expire more than ten years after the grant.
45
<PAGE> 46
The following summarizes the stock option transactions under the 1991
Plan for the two fiscal years ended June 30, 1995 and 1994:
<TABLE>
<CAPTION>
Number Option Price
of Shares Per Share
----------- ---------------
<S> <C> <C>
Outstanding at June 30, 1993 193,617 $6.00 to $16.00
Granted 3,000 $22.00
Exercised (70,058) $6.00 to $16.00
Canceled (18,667) $6.00 to $16.00
-------
Outstanding at June 30, 1994 107,892 $6.00 to $22.00
-------
Granted 8,750 $5.24 to $7.00
Exercised (22,500) $2.68 to $5.24
Canceled (3,334) $6.00
-------
Outstanding at June 30, 1995 90,808 $6.00 to $22.00
=======
</TABLE>
All the outstanding options under the 1991 Plan are exercisable and
expire as follows: fiscal 1996 - 85,808 and fiscal 2000 - 5,000. All
options granted in fiscal years 1995, 1994 and 1993 were issued at fair
market value. At June 30, 1995, 13,501 options were available for
grant. In May, 1995, a $128,000 discount was given to a former
director of the Company to exercise 18,750 options and was recognized
as compensation expense.
In addition to the 1991 Plan, the Company has other option agreements
with former officers, directors, employees and owners of an acquired
Company.
The following summarizes transactions outside the 1991 Plan for the two
fiscal years ended June 30, 1995 and 1994:
<TABLE>
<CAPTION>
Number Option Price
of Shares Per Share
---------- -----------
<S> <C> <C>
Outstanding at June 30, 1993 143,250 $ 3.00 to $16.00
Granted 18,000 $15.52 to $16.00
Exercised (64,584) $ 4.00 to $ 8.00
Canceled (22,875) $ 7.24 to $15.52
-------
Outstanding at June 30, 1994 73,791
-------
Exercised (12,500) $ 3.00
Canceled (28,875) $ 6.00 to $16.00
-------
Outstanding at June 30, 1995 32,416
=======
</TABLE>
All the outstanding options under these agreements are exercisable and
expire as follows: fiscal 1996 - 30,166, fiscal 1999 - 2,250. A
one-third discount, totaling $86,334 was given to non-affiliates when
36,083 options were exercised in January 1994 and was recognized as
compensation expense.
Common Stock in Treasury: The Company has purchased 26,800 shares of
its common stock for a total cost of $214,579 (or an average of $8.00
per share). In connection with the acquisition of the High School
Gridiron Report assets, 15,000 shares were issued from the treasury
stock. The remaining treasury shares have a total cost of $135,469 (or
an average of $11.48 per share).
46
<PAGE> 47
15. INCOME TAXES:
A reconciliation of the Federal statutory income tax rate to the
effective income tax rate based on pre-tax income (loss) from
continuing operations follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory rate (34)% 34% 34%
Increase (decrease) in tax rate
resulting from:
Loss limitations and valuation
allowance 38 19
Utilization of loss carryforwards (53)
State income taxes 130
Benefit from stock options (11)
Dividend income (1)
----- ----- -----
Effective rate 134% (19)% (22)%
===== ===== =====
</TABLE>
Effective July 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes". The adoption of SFAS 109 resulted in
an income tax benefit of $13,600 in fiscal year 1994.
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 374,000 $ 1,541,000
Amortization of intangibles 133,000
Other 158,800 156,000
---------- -----------
Total deferred tax assets 665,800 1,697,000
Valuation allowance (364,400) (1,697,000)
---------- -----------
Net deferred tax assets 301,400
----------
Deferred tax liabilities:
Cash to accrual adjustment (262,500)
Other (38,900)
----------
Total deferred tax liabilities (301,400)
---------- ----------
Total deferred taxes, net $ - $ -
=========== ===========
</TABLE>
The Company has a net operating loss of $1,069,000 available which
expires from 2007 through 2010. These losses can only be offset with
future income.
For the year ended June 30, 1993, in accordance with Accounting
Principles Bulletin No. 11 "Accounting for Income Taxes", the tax
effects of timing differences generating deferred income tax and the
current provision credited to operations are summarized below:
<TABLE>
<S> <C>
Sales of investments in common stock $(228,000)
Deductible (96,400)
Current provision (55,000)
----------
Total $(379,400)
==========
</TABLE>
47
<PAGE> 48
16. GAINS FROM SALE OF SECURITIES:
In July, 1994, the Company borrowed $1,000,000 to fund the exercise by
the Company of a common stock purchase warrant. The loan was
collateralized by a pledge of the warrant shares pursuant to the terms
of a pledge agreement. The parties to the $1,000,000 loan included,
among others, the Company's former chairman, former president, a former
director and a shareholder, who each provided $200,000. The other
lenders were non-affiliates. The lenders received the repayment of the
$1,000,000 loan, interest at 7.75% totaling $9,493 and a $300,000
commitment fee from the proceeds of the subsequent stock sales. The
Company subsequently sold all these securities and recognized a gain of
$1,580,000.
During the fiscal years ended June 30, 1994 and 1993, the Company
realized gains from the sale of an issue of marketable equity
securities of $937,365 and $3,177,203, respectively. The Company
accounted for its investment in marketable equity securities under the
cost method.
17. RELATED PARTY TRANSACTIONS:
A former director of the Company is the senior managing director of a
private merchant banking firm which was paid approximately $5,700,
$21,000 and $84,000 for investment advisory services in 1995, 1994 and
1993, respectively. In connection with the acquisition of Alliance, a
finders fee totaling $100,000 was paid to the merchant banking firm in
fiscal 1995, along with the former director and the other principal
owner of the merchant banking firm each receiving 9,375 restricted
common shares of the Company valued at $2.67 per share and warrants to
purchase 6,250 common shares at $8.00 per share.
On June 9, 1994, Bullhead borrowed $350,000 from the Company's former
chief executive officer and its former president and pledged its equity
interest in the Laughlin land as security for repayment of the loan.
The note was due July 31, 1995 with interest at the rate of 7.25% (the
Bank of America Nevada prime rate at the time of execution). The
promissory note and interest of $8,695 were repaid in advance on
October 4, 1994.
A former director of the Company, and another person serving as
secretary in 1993, were each partners in different law firms that
provided legal services for which the Company recognized expenses
aggregating approximately $31,000, $11,000, and $21,000 in 1995, 1994
and 1993, respectively.
In April 1995, the former chairman of the Company purchased property
and equipment owned by the Company with a cost of $160,109 and net
book value of $5,870 for a discounted appraised value of $11,000 in
cash.
Also see footnotes 3, 5, 12, 13 and 14 for additional related party
transactions.
18. SUBSEQUENT EVENTS (UNAUDITED):
On September 28, 1995, the Company signed a letter of intent to
acquire Forms Direct, Incorporated ("FDI"). FDI, a private company
based in Frederick, Maryland, provides high quality direct mail
services in the fields of sophisticated target marketing and complex
personalization, with annual sales of over $20 million. Terms of the
acquisition call for cash, notes and stock, as well as contingent
payments based on operating profits and performance. Consummation of
the acquisition is subject to a number of conditions, including the
negotiation of a definitive agreement, additional investigation and
obtaining adequate financing, and is expected to be completed by
December 31, 1995.
48
<PAGE> 49
On October 6, 1995, the Company entered into an option agreement with
certain parties unrelated to the Company whereby, in consideration of
payment to the Company of $150,000, the option holder may purchase the
land for $2.0 million. The term of the option expires on April 8,
1996. Under certain circumstances, the Company has the right to
repurchase this option before its expiration.
On October 12, 1995 the long term obligations to related party were
revised such that the October 1, 1995 payment of $375,000 and interest
payment due in the second quarter of fiscal 1996 will be paid over a
twelve month period commencing January, 1996 together with interest at
10%. The deferred interest payment is due earlier if the Company
completes certain financing by December 31, 1995.
49
<PAGE> 50
SCHEDULE I
ALL-COMM MEDIA CORPORATION
CONDENSED BALANCE SHEET
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 479,045
Other current assets 93,781
---------
Total current assets 572,826
---------
Property and equipment, at cost 26,992
Accumulated depreciation 3,175
----------
Net property and equipment 23,817
Investments in and advances to subsidiaries 5,136,786
Other assets 9,355
----------
Total assets $5,742,784
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable other $ 72,000
Trade accounts payable 167,838
Accrued salaries and wages 75,366
Other accrued expenses 263,048
---------
Total current liabilities 578,252
---------
Stockholders' equity:
Common stock 30,281
Additional paid-in capital 10,300,847
Treasury shares, at cost (135,469)
Accumulated deficit (5,031,127)
----------
Total stockholders' equity 5,164,532
----------
Total liabilities and stockholders' equity $5,742,784
==========
</TABLE>
50
<PAGE> 51
SCHEDULE I
ALL-COMM MEDIA CORPORATION
CONDENSED STATEMENT OF OPERATIONS
Year Ended June 30, 1995
<TABLE>
<S> <C>
Income:
Gains from sales of securities $1,579,539
Equity in net losses of subsidiaries (18,320)
-----------
Total 1,561,219
-----------
Costs and expenses:
General and administrative 1,390,186
Service fees charged by related parties 5,728
Depreciation 2,956
-----------
Total 1,398,870
-----------
Income from operations 162,349
-----------
Other income (expense):
Loan commitment fee (300,000)
Interest income 15,446
Interest expense (8,972)
Other, net 318
-----------
Subtotal (293,208)
-----------
Loss from continuing operations before income taxes (130,859)
Loss from discontinued operations:
Gain on sale of discontinued operations 322,387
Loss from discontinued operations (81,131)
-----------
Net income $110,397
===========
</TABLE>
51
<PAGE> 52
SCHEDULE I
ALL-COMM MEDIA CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
Year Ended June 30, 1995
<TABLE>
<S> <C>
Operating activities:
Net cash flows used by operating activities ($2,485,237)
-----------
Investing activities:
Proceeds from sales of investments in securities 2,682,811
Purchase of investment in securities (1,063,272)
Proceeds from sale of STI 800,000
Acquisition of Alliance Media Corporation (308,181)
Investments in and advances to subsidiaries (36,048)
Purchase of property and equipment 19,613
-----------
Net cash provided by investing activities 2,094,923
-----------
Financing activities:
Proceeds from issuances of common stock 1,226,593
Proceeds from note payable other 1,000,000
Repayments of note payable other (1,072,000)
Repayments of other notes payable (350,000)
-----------
Net cash provided by financing activities 804,593
-----------
Net increase in cash and cash equivalents 414,279
Cash and cash equivalents at beginning of year 64,766
-----------
Cash and cash equivalents at end of year $ 479,045
===========
</TABLE>
52
<PAGE> 53
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-K/A-2 to be signed on its behalf by the
undersigned, thereunto duly authorized.
All-Comm Media Corporation
----------------------------------
(Registrant)
By: /s/ Barry Peters
----------------------------------
Chairman of the Board and
Chief Executive Officer
Date: July 24, 1996
53
<PAGE> 1
Exhibit 3(iii)
CERTIFICATE PURSUANT TO
NEVADA REVISED STATUTES SECTION 78.207
OF SPORTS-TECH, INC.
The undersigned officers, as designated below after their signatures, of
Sports-Tech, Inc., a Nevada corporation (the "Corporation"), in compliance
with the provisions of Section 78.207 of the Nevada Revised Statutes, and
being authorized and directed so to do, do hereby certify that:
(1) Pursuant to Section 78.207 of the Nevada Revised Statutes, the Board of
Directors of the Corporation has adopted a resolution whereby it has
approved the reduction of the current number of authorized shares of common
stock and, concomitantly, the reduction of the current number of issued and
outstanding shares of common stock (the "Change").
(2) The current number of authorized shares of common stock of the corporation
is 25,000,000 shares with a par value of $.01 per share. The current
number of authorized shares of preferred stock of the Corporation is 50,000
shares with a par value of $.01 per share.
(3) The authorized number of shares of common stock of the Corporation after
the Change will be 6,250,000 shares with a par value of $.01 per share.
The authorized number of shares of preferred stock of the Corporation will
not be affected by the Change.
(4) One share of common stock of the Corporation will be issued after the
Change in exchange for each four shares of common stock of the Corporation
currently issued.
(5) Each shareholder who would have received a fractional share will receive
such additional fraction of a share as is necessary to increase the
fractional share which the shareholder would have received to one full
share of common stock of the Corporation.
(6) The Change will be effective at 4:00 p.m. P.D.T., on August 22, 1995.
Dated this 21st day of August, 1995.
/s/ Martin S. McDermut
Vice President
/s/ Anne Corrigan
Asst. Secretary
<PAGE> 2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
SPORTS-TECH, INC.
We the undersigned Martin S. McDermut, Vice President and E. William Savage,
Sec'y of Sports-Tech, Inc. do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 7th day of July, 1995, adopted a resolution to amend the
original articles as follows:
Article I is hereby amended to read as follows:
The name of the corporation is ALL-COMM MEDIA CORPORATION.
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 12,065,170; that the
said change(s) and amendment have been consented to and approved by a majority
vote of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ Martin S. McDermut
Martin S. McDermut, Vice President
/s/ E. William Savage
E. William Savage, Secretary
State of California
County of Los Angeles } ss.
On August 22, 1995 personally appeared before me, a Notary Public, Martin S.
McDermut and E. William Savage, who acknowledged that they executed the above
instrument.
/s/ Melanie A. Colbert
Signature of Notary
<PAGE> 1
Exhibit 10.4
OPTION AGREEMENT
AGREEMENT, dated as of October 1, 1995, between All-Comm Media
Corporation, a Nevada corporation, having an address at 400 Corporate Pointe,
Suite 780, Culver City, California 90230 ("All-Comm"); Joseph LaRocca, an
individual ("JL"); Augustus LaRocca, an individual ("AL"); Gerald Yellin, an
individual having an address at c/o Bear, Stearns & Co., Inc., 245 Park Avenue,
New York, New York 10167 (individually, and as Agent (the "Agent") for JL and
AL, collectively (the "Optionees")).
W I T N E S S E T H
WHEREAS, All-Comm is the owner of a certain parcel of land (the
"Land") in Laughlin, Nevada, as more particularly described on Exhibit A hereto
and wishes to grant the Optionees an option to acquire the Land, and the
Optionees wish to acquire such option, upon the terms and conditions described
herein;
WHEREAS, the Optionees have agreed to have Agent act as their agent
with respect to this Agreement.
IT IS AGREED:
1. All-Comm represents and warrants to the Optionees that it is the
sole record and beneficial owner of the Land, free and clear of any mortgage,
lien, security interest, encumbrance, restriction, violation, assessment or
adverse claim of any nature whatsoever (collectively "Liens") other than (i)
easements, permits, liens, and other restrictions or limitations on the use of
property or irregularities in title thereto, in each case which do not,
individually or in the aggregate, materially detract from the value of such
property or impair the use of such property by All-Comm in the operation of its
business and (ii) for current taxes and other assessments or governmental
charges or levies on property not yet due and delinquent (collectively
"Permitted Liens"); that it has the full right and power to sell the Land to
the Optionee; and that the execution, delivery and performance of this
Agreement by All-Comm does not and will not conflict with, violate or result in
a breach of any terms or conditions of, or constitute a default under, any
contract, agreement, or other instrument or obligation or any law, regulation,
ordinance, or decree to which All-Comm is a party or by which All-Comm may be
bound or affected.
2. Upon the terms and subject to the conditions set forth in this
Agreement, Seller hereby grants the Optionees an option (the "Option"),
exercisable from the date hereof through April 8, 1996 (the "Exercise Period"),
to acquire the Land at an exercise price of $2,000,000 (the "Exercise Price")
and the Optionees hereby accept the Option from All-Comm.
In consideration for the granting of the Option, the Optionees have
paid All-Comm $150,000 by check, receipt of which is hereby acknowledged. If
the Option is not exercised, or terminated as provided in this Agreement, prior
to the end of the Exercise Period, the Option shall be null and void and of no
force or effect. In consideration for the acceptance of the Option, All-Comm
will issue the Optionees a warrant (the "Warrant") to acquire 30,000 shares of
common stock, par value $0.01 per share, of All-Comm ("Common Stock"), at an
exercise price of $2.50 per share, which warrant shall be exercisable for a
period of four years from the date hereof.
3. During the term of the Option, All-Comm shall hold the Land free
and clear of any and all Liens other than Permitted Liens and upon the exercise
of the Option and payment of the Exercise Price, All-Comm shall deliver title
to the Land to the Optionees free and clear of any and all Liens other than
Permitted Liens.
<PAGE> 2
4. The Optionees represent and warrant to All-Comm that the
execution, delivery and performance of this Agreement by the Optionees do not
and will not conflict with, violate or result in a breach of any terms or
conditions of, or constitute a default under, any contract, agreement or other
instrument or obligation or any law, regulation, ordinance or decree to which
any of the Optionees is a party or by which any of the Optionees may be bound
or affected. The Optionees each agree that the Agent is authorized to act on
behalf of each of them and that All-Comm may rely upon the instructions of the
Agent without independent investigation.
5. If All-Comm desires, during the Exercise Period, to have the
right, in its sole discretion, to cancel the Option (the "Call") by paying the
Optionees $150,000 (the "Call Price"), All-Comm shall pay the Optionees the sum
of $15,000 (the "Call Fee"). Once the Call Fee has been paid, All-Comm may
exercise the Call by delivering a notice to the Agent indicating its election
to terminate the Option and shall tender payment of the Call Price to the
Optionees. Upon such payment, the Option shall he null and void and of no force
or effect and the Optionees shall execute an acknowledgment to such effect.
6. If All-Comm does not exercise the Call, the Optionee may, during
the last 10 days of the Exercise Period, in their sole discretion, require that
All-Comm buy back the Option (the "Put") by paying the Optionee $165,000 (the
"Put Price"). In such case the Agent shall deliver a notice (the "Put Notice")
to All-Comm indicating the election of the Optionees to sell the Option back to
All-Comm. Within twenty (20) days of the receipt of the Put Notice All-Comm
shall tender payment of the Put Price to the Optionees. Upon such exercise the
Option shall be null and void and of no force or effect and the Optionees shall
be entitled to receive solely the buy back price described in this Section 6.
7. In the case of the Call or the Put, the Agent shall direct
All-Comm as to the distribution of any cash or shares of Common Stock to the
Optionees.
8. As security for the payment of the Put Price, All-Comm shall grant
the Optionees a security interest in the Land in the form of the delivery of a
mortgage in favor of the Agent (the "Mortgage") in the amount of $150,000 in
recordable form which shall be delivered by All-Comm to the Optionees within
twenty (20) days of the date hereof. The Agent shall only record the Mortgage
in the event All-Comm shall fail to pay the Put Price within twenty-five (25)
days of the receipt of the Put Notice. Upon payment of the required
termination payment described in Section 5 or payment of the Put Price, the
Mortgage shall be returned to All-Comm.
9. The Optionees represent and warrant that they are familiar with
the business, financial condition and future prospects of All-Comm and have
been granted the opportunity to ask questions of the officers and directors of
All-Comm concerning All-Comm and the terms and conditions of this Agreement and
to obtain any additional information which All-Comm deemed necessary to
determine the merits, risks and consequences of purchasing the Option and
acquiring shares of Common Stock. All-Comm has not and shall under no
circumstances be deemed to have made any representation or warranty to or for
the benefit of the Optionees as to the value of the Land, the value of the
shares of Common Stock, or All-Comm's business prospects. The Optionees
understand that except as provided in Section 11, any shares of Common Stock
issued to the Optionees shall be restricted securities within the meaning of
the Securities Exchange Act of 1934, as amended.
10. This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof, supersedes all existing agreements
between the parties concerning such subject matter, and may he modified only by
a written instrument duly executed by each party.
11. On or before December 1, 1995, All-Comm shall file with the
Securities and Exchange Commission a shelf registration statement promulgated
under Rule 415 of the Securities Act of 1933, as amended (the "Act"), to permit
the resale of all of the Registrable Securities (as defined below) by the
holders thereof on the Nasdaq Stock Market or in privately negotiated
transactions (the "Registration Statement"). The Company will use its best
efforts to have the Registration Statement declared effective under the Act as
soon as possible after the filing thereof and to keep the Shelf Registration
Statement continuously effective through December 31, 1996. The Company will
pay all of the expenses
<PAGE> 3
relating to the Shelf Registration Statement, other than brokerage discounts,
commissions, fees or disbursements in respect of the transfer of any of the
Registrable Securities by a holder thereof. The Registrable Securities shall
mean the shares of Common Stock issued to the Optionees upon exercise of the
Warrant (together with any and all shares of Common Stock issued with respect
to such shares by way of a stock dividend or stock split or any capital stock
issued with respect to such shares in connection with a combination of shares,
recapitalization, merger, consolidation or reorganization).
12. Any waiver, by either Party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. This Agreement shall be binding upon and inure to the benefit of
the Optionees and their heirs and personal representatives, and shall be
binding upon and inure to the benefit of All-Comm and its successors and
permitted assigns.
13. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given at the address of such party set forth at the beginning of this
Agreement (or to such other address as the party shall have furnished in
writing or in accordance with the provisions of this Section 13). In the case
of a notice to All-Comm, a copy of such notice (which copy shall not constitute
notice) shall be delivered to Camhy Karlinsky & Stein LLP, 1740 Broadway, New
York, New York 10019-4315, Attn. Alan I. Annex, Esq. Notice to the estate of
any of the Optionees shall be sufficient if addressed to such Optionees as
provided in this Section 13. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
14. Any dispute, controversy or claim arising out of or relating to
this Agreement, or the breach, termination or invalidity thereof, shall be
settled by arbitration in accordance with the rules of the American Arbitration
Association as then in effect. The arbitration shall take place in New York,
New York, under the rules of The American Arbitration Association then in
effect. Judgment upon the reward rendered by the arbitrators may be entered in
any court having jurisdiction thereof. Expenses of the arbitration shall be
shared equally by the parties.
15. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. It shall be governed by, and cons
