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, 1996
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
(Exact name of registrant as specified in its charter)
Nevada 88-0085608
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
400 Corporate Pointe, Suite 780
Culver City, California 90230
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 342-2800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(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
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. [ ]
As of September 16, 1996, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $ 16,066,000.
As of September 16, 1996, there were 3,194,659 shares of the Registrant's common
stock outstanding.
<PAGE>
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 April 25, 1995 merger between Alliance Media Corporation ("Alliance") and
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. Simultaneously, the former management and directors of
Sports-Tech resigned in favor of the merger with Alliance and its plan to build
a specialized marketing services company with a focus on providing direct
marketing, information and media services. The change in the Company's name was
approved at a special shareholders meeting held on August 22, 1995 to reflect
the new corporate vision and direction originating from the change in management
and board of directors associated with the merger with Alliance. 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
Initially, the Company intends to expand through the acquisition of
companies in the direct marketing, information and media services industry which
can provide core capabilities for the direct marketing process. 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. A key element of
the Company's growth strategy is to establish a complimentary group of companies
under a unified corporate architecture that is capable of servicing multiple
client needs in the new marketing and media environment. The Company believes
that technological innovation will continue to increase the effectiveness of
direct marketing.
Other than as described in this Annual Report on Form 10-K (this "Form 10-K")
the Company has no agreements to acquire any such companies and there can be no
assurance that the Company will be able to acquire such companies.
Stephen Dunn & Associates, Inc. ("SD&A")
SD&A was formed in 1983 and was acquired by the Company on April 25,
1995. For the twelve month period ended June 30, 1996 ("Fiscal 1996"), SD&A had
revenues of more than $15.8 million. Clients of SD&A include many of the larger
performing arts and cultural institutions, such as major symphonies, theatres
and musical arts companies, along with public broadcasting stations, advocacy
groups and educational institutions. SD&A's clients include over 150 of the
nation's leading institutions and universities, such as New York Philharmonic
Orchestra, American Conservatory Theater, Lincoln Center, Museum of Modern Art,
New York University, Duke University, National Audubon Society and Simon
Weisenthal Center. SD&A has its 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. 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 1993,
the Company acquired the business of High School Gridiron Report ("HSGR"). (See
Discontinued Operations). STI and HSGR supplied information services and
technology as well as academic, athletic and video data to high school, college
and professional coaches and student athletes. 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.
Prior to, and as a condition of the merger with Alliance, the Company was
required to divest its investments, except for an undeveloped parcel of land in
Laughlin, Nevada. In August, 1996 the land was sold. (See All-Comm Holdings,
Inc. herein for a description of this investment and the terms of its sale.)
Merger with Alliance Media Corporation:
On April 25, 1995, STI Merger Corporation ("Merger Sub"), a wholly
owned subsidiary of the Company, was merged (the "Merger") with and into
Alliance. 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 SD&A, which Alliance had acquired
effective April 25, 1995 pursuant to a Stock Purchase Agreement, dated as of
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, terms of the acquisition included
$1.5 million in cash plus a $4.5 million long term obligation and additional
contingent payments of up to $850,000 per year over the period ending June 30,
1998, of which, at the Company's option, 50% may be made with restricted common
shares of the Company. For Fiscal 1996, the $850,000 payment was earned and was
paid, half in cash and half in stock. These acquisition terms were revised
pursuant to the Company's private placement financing which occurred on June 7,
1996 (see "Private Placement of Preferred Stock") whereby the terms of the long
term obligations were revised. Of the remaining balance of $4.1 million,
approximately $2.0 million was repaid in June 1996. The balance of $2.1 million
is payable in 36 monthly principal payments of $58,333, plus interest at 8%,
starting September 19, 1996.
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, which 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 acquired, after allocating approximately $1
million to a covenant not to compete. 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 of the Company from the date of
acquisition, April 25, 1995.
Current Activities
Pending Acquisition of Metro Services Group, Inc.:
On May 30, 1996, the Company signed a letter of intent to acquire the
capital stock of Metro Services Group, Inc. ("Metro"). Metro is a private
company formed in 1987 and based in New York City, with offices in Michigan,
Illinois and California, and has annual sales in excess of $8 million. Metro
develops and markets a variety of database direct marketing products and
services to a wide range of commercial clients and tax-exempt organizations.
Metro provides information-based products and services to the direct marketing
industry through its four divisions: Metro Direct Marketing, which provides full
service direct marketing programs for consumers and business to business
clients, particularly in the financial services and publishing areas; MSGI
Computer Services which utilizes a combination of mainframe, PC platforms and
Internet servers for database development, data enhancement, response analysis
and predictive modeling capabilities; MetroArts develops and executes customer
acquisition campaigns for the performing arts, entertainment and cultural
institutions and Metro Non-Profit provides strategic planning, membership and
direct mail fundraising campaigns for non-profit institutions. The majority of
Metro's revenues are derived from a commercially driven client base. Terms of
the acquisition call for an exchange of stock, of approximately 2.0 million
shares of the Company's common stock for all of the outstanding stock of Metro.
Consummation of the acquisition is subject to a number of conditions, including
the negotiation of a definitive agreement. No assurance can be given that the
acquisition will be consummated.
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 were outstanding. All share and per
share data in this Annual Report reflect the effect of the reverse stock split.
Effective August 14, 1996, the Company's shareholders approved an increase in
the number of authorized shares of common stock from 6,250,000 to 36,250,000, to
facilitate its corporate strategy and growth plans.
Private Placements of Common Stock:
On May 31, 1995, the Company completed a private placement of 413,759
restricted shares of its common stock for a total of $1,108,875 ($1,018,675 net
after offering costs) in order to replenish cash resources which were depleted
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.
In March, 1996, the Company issued, in a private placement, 75,000
restricted shares of its common stock for an aggregate of $120,000 to four
individuals, including 12,500 shares to related parties, in order to meet
certain operating obligations.
Private Placements of Convertible Preferred Stock:
On May 9, 1996, the Company completed the private placement with an
institutional investor of 10,000 shares of Series A convertible preferred stock
for $750,000, $687,000 net after offering costs.
On June 7, 1996, the Company completed the private placements with
accredited investors of 6,200 shares of Series B redeemable convertible
preferred stock for $3,100,000. The preferred stock is preferred as to the
Company's assets over the common stock in the event of liquidation, dissolution
or winding-up of the Company, prior to distribution of assets to common
stockholders. The preferred stockholders are entitled to their original
investment, plus accrued, unpaid dividends or, if unavailable, a ratable
distribution of existing assets. The holders of the stock are entitled to
receive a dividend payable only on redemption or credited against conversion,
which shall accrue at the rate of 6% per annum. The convertible preferred stock
is convertible, in whole or in part, at any time and from time to time until the
second anniversary of the date of issuance, into common shares of the Company at
the lesser of the price paid divided by $1.25, or 80% of the average closing
sales price of the Company's common stock for the last five days prior to
conversion, and is subject to certain restrictions, including automatic
conversion on the second anniversary of its issuance. Under certain unlikely
conditions prior to conversion, the preferred stock may be redeemed. In
addition, the Company issued warrants to preferred shareholders for 3,100,000
shares of common stock exercisable at $2.50 for three years.
On June 7, 1996, the Company completed the private placements with
accredited investors of $1,000,000 of convertible notes and warrants for
3,000,000 shares of common stock.
Subsequent to June 30, 1996, the notes and warrants were rescinded
retroactive to June 7, 1996. In addition, on September 10, 1996, effective as of
June 7, 1996, the Company completed a private placement of 2,000 shares of
Series C redeemable convertible preferred stock with the same accredited
investors for $1,000,000. The Series C convertible preferred stock is preferred
as to the Company's assets over the common stock in the event of liquidation,
dissolution or winding-up of the Company, prior to distribution of assets to
common stockholders. The preferred shareholders are entitled to their original
investment, plus accrued unpaid dividends or, if available, a ratable
distribution of existing assets. The holders of the stock are entitled to
receive a dividend payable only on redemption or credited against conversion,
which shall accrue at the same rate of 8% per annum, increasing to 24% on
October 7, 1996, in the event that the shares are not registered. The Series C
convertible preferred stock is convertible, in whole or in part, at any time and
from time to time until the second anniversary of the date of issuance, into
common shares of the Company at the price paid divided by $6.00, and is subject
to certain restrictions, including automatic conversion on the second
anniversary of issuance. Under certain unlikely conditions prior to conversion,
the preferred stock may be redeemed. In addition, the Company issued warrants to
preferred shareholders for 3,000,000 shares of common stock exercisable at $3.00
for three years.
In connection with the June 7, 1996 transactions, payment of
approximately $2.0 million was made on long term obligations due to the seller
of the Company's operating subsidiary, Stephen Dunn & Associates, Inc. ("SD&A").
The Company used $812,500 to reacquire 10,000 shares of Series A convertible
preferred stock issued in the private placement on May 9, 1996. Of the proceeds,
$425,000 was used to prepay additional consideration to the seller of SD&A which
was contingent upon post-closing SD&A earnings. The remainder will be used for
general corporate purposes.
Termination of Other Business Matters:
As part of the Company's strategy to expand through the acquisition of
companies in the direct marketing, information and media services industry,
numerous negotiations occur, some of which may result in preliminary agreements.
In the course of the Company's due diligence, these agreements may be abandoned
or terminated for different reasons which may include non-substantiation of the
target company's financial condition, unsatisfactory analysis of the target
company's operations and/or financial projections, and numerous other matters.
From time to time, and in the ordinary course of business, the Company is likely
to enter into preliminary agreements which, upon further analysis or
negotiations, may become abandoned or terminated. Accordingly, in March 1996,
the Company terminated its agreement to acquire Bullseye Database Marketing,
Inc., (`Bullseye") when the Company determined that certain conditions would not
be satisfied in respect of its initial agreement dated December 20, 1995.
Similarly, in February 1996, the Company abandoned its negotiations to acquire
Forms Direct, Inc. ("FDI") in respect of its letter of intent dated September
28, 1995, and formally terminated all pending matters in August 1996.
In March 1996, the Company elected to terminate its negotiations in
respect of a February 6, 1996 loan commitment for a $2.0 million revolving
credit line.
Discontinued Operations
Sports-Tech International, Inc. and High School Gridiron Report:
On March 9, 1995, as a condition precedent to the merger with Alliance
Media, the Company sold Sports-Tech International, Inc. ("STI") to Dainichi
Electronics, Inc. for $800,000 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 Corporation ("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 operations of
High School Gridiron Report ("HSGR"). 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 have been accounted
for as discontinued operations and, accordingly, the consolidated financial
statements contained in this Annual Report have been reclassified to report
separately this segment's net assets, operating results, gain on disposition and
cash flows.
Warrant Exercise:
In July 1991, under the prior management, and in connection with the
acquisition of 57.7% of the outstanding common stock of STI from 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 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.
During the year ended June 30, 1995, as a condition precedent to
closing of the merger with Alliance Media, the Company sold all the common
shares of Florida Gaming stock it had acquired for $2,683,000 and recognized a
gain of $1,580,000.
Industry Overview
Advances in communications technology and the growing availability of
complex consumer data are causing marketers to use new information technologies
and media capabilities to more effectively target their customers and
efficiently service their needs. The use of direct marketing by businesses to
target and communicate with potential customers has been steadily 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. As a result, the analysis and management of databases that
contain such information will continue to be an important driver for a variety
of marketing programs. These programs utilize multiple forms of communications
such as direct mail, telemarketing, print, television, radio, video, CD-ROM,
on-line services, such as the Internet, and other interactive and multimedia
formats.
Over the next decade, these marketing methodologies will provide major
corporations with direct access to their customers and the most cost effective
and efficient means for targeting specific audiences and developing long term
customer relationships. The shift from mass marketing to personalized 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 and target potential customers declined while the costs of traditional
marketing increased significantly.
As technological innovation continues, the Company believes that more
companies will seek to integrate various direct marketing methodologies within a
wide-range of marketing and media campaigns. The ability to interact with
customers and accurately measure the response to the message is used for a
variety of purposes, including: prospecting for new customers, enhancing
existing customer relationships and evaluating the potential for new products
and services, and allows marketing campaigns to be continually refined to
further enhance their effectiveness. Numerous industry sources indicate that
such programs increase a company's ability to generate revenues, directly and
indirectly, from specific audiences across a wider market and through more
personalized access to consumers.
Industry Consolidation
The direct marketing and media services industries are highly
fragmented. Larger corporations have been steadily linking marketing and media
strategies to more effectively reach customers in an increasingly competitive
marketplace. The majority of service providers are specialized by industry and
type of service. They are generally small in size, offering limited or single
services that support the direct marketing process. Major corporations continue
to increase their use of direct marketing, information and media services as
technological advances occur. As such, merger and acquisition activity has
accelerated among service providers seeking economies of scale, market
penetration and complementary services that result from larger, stronger firms
which possess a greater ability to execute increasingly complex marketing and
media campaigns.
Most advertising, marketing and media services 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 that support
marketing programs, direct mail creation, production, tracking and fulfillment,
telemarketing and the creation of electronic video and digital image processing
and distribution. Corporate marketing departments, advertising and other
agencies, often lack this type of technical expertise to create, manage and
control various aspects of the process. Consequently, as new communications
mediums and marketing methodologies are introduced into the marketplace, an
increasing number of different service providers are involved in developing and
executing marketing campaigns. Much of the consolidation is a result of
economies of scale, the ability to cross-sell products and services, and the
need to coordinate complex marketing programs, often within a single, reliable
environment.
Line of Business
The Company, through SD&A, 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
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 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 eight 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 that it strengthens the clients'
contact and prospect base, enhances the effectiveness of the clients' public
relations as a fundraising tool to develop valuable information-gathering
sources, and expands 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.
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 utilize additional mediums to provide fundraising
services for existing and potential clients that supports and creates new
telemarketing and telefundraising techniques. To achieve growth, the Company
utilizes an in-house marketing group which specifically targets potential
clients. New 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 Fiscal 1996, SD&A provided telemarketing,
telefundraising and consulting services to over 90 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. For Fiscal 1996, approximately 83% of SD&A's
revenues were derived from telemarketing and telefundraising and 17% 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 telemarketing/fundraising industry
is very competitive and highly fragmented. Most of SD&A's competitors are small,
single facility operations. As such, competition is derived primarily from the
in-house capabilities of the not-for-profit organizations.
Seasonality. Typically, telemarketing and telefundraising campaigns
are seasonal in nature with a substantial portion of revenues generated during
the 1st and 4th fiscal quarters.
All-Comm Holdings, Inc. (Previously, Bullhead Casino Corporation)
In 1979, under the prior management, the Company, through its
wholly-owned subsidiary, acquired 6.72 acres of undeveloped land on the Colorado
River in Laughlin, Nevada, for approximately $560,000. On August 16, 1996 the
land was sold to an independent third party, via a public auction, for $952,000
in cash, resulting in a net gain of approximately $114,000 over book value, as
adjusted for capitalized costs and assessments during the holding period.
Employees
At September 16, 1996, the Company and SD&A collectively have
approximately 1,100 employees, of whom approximately 1,000 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.
Small Business Issuer
The Company has determined that it is a "small business issuer" within
the meaning of Securities and Exchange Commission Regulation S-B and will make
filings with the Securities and Exchange Commission relating to and during
fiscal 1997 as a small business issuer.
<PAGE>
Item 2 - Properties
The Company, through All-Comm Holdings, Inc., owned 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 two 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.
<PAGE>
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:
Common Stock
Low Sales Price High Sales Price
Fiscal 1996
Fourth Quarter $2.13 $6.38
Third Quarter 3.00 4.44
Second Quarter 1.88 5.00
First Quarter 3.63 8.25
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
As of June 30, 1996, 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.
<PAGE>
Item 6 - Selected Consolidated Financial Data
The consolidated statement of operations data set forth below with
respect to the years ended June 30, 1996, 1995 and 1994, and the consolidated
balance sheet data at June 30, 1996 and 1995 are derived from, and are qualified
by reference to, the audited consolidated financial statements included
elsewhere in this Annual Report. The consolidated statement of operations data
for the years ended June 30, 1993 and 1992 and the consolidated balance sheet
data at June 30, 1994, 1993 and 1992, are derived from audited financial
statements not included in this Annual Report. 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>
As of and for the years ended June 30,
1996 1995 (1)(3) 1994 (3) 1993 (3) 1992 (3)
---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA: (2)
Sales $15,889,210 $3,630,828
Loss from operations (460,437) (1,255,924) $(844,417) $(1,992,500) $(1,515,754)
Gains from
sales of securities - 1,579,539 937,365 3,177,203 59,331
Interest expense and
loan commitment fee (505,128) (394,200) (7,165) (43,604) (24,292)
Income (loss) from
continuing operations (1,094,373) (130,859) 86,807 979,457 (1,060,460)
Net income (loss) (1,094,373) 110,397 (2,809,887) (1,115,338) (1,863,779)
Income (loss) per
common share: (4)
Continuing operations (.36) (0.07) 0.06 0.71 (1.03)
Net income (loss) (.36) 0.06 (1.91) (0.82) (1.81)
Weighted average common
shares and equivalents 3,068,278 1,807,540 1,468,747 1,373,160 1,032,442
BALANCE SHEET DATA: (2)
Working capital 1,650,725 577,809 (233,572) 818,792 921,603
Total assets 13,301,066 11,824,491 1,639,733 2,657,561 4,319,038
Long-term obligations,
net of current portion 1,516,667 3,000,000
Redeemable convertible
preferred stock 1,306,358
Stockholders' equity 6,944,536 5,164,532 665,917 2,119,618 2,649,157
</TABLE>
(1)Reflects operations of Alliance and SD&A for the period beginning with the
acquisition on April 25, 1995.
(2)See Description of Business and Management's Discussion and Analysis for
discussion of businesses discontinued and acquired - 1995.
(3)Certain of the above amounts have been restated to reflect discontinued
operations.
(4)Primary and fully diluted income (loss) per common share are the same in all
fiscal years except 1993. Fully diluted income per common share from continuing
operations and net loss in fiscal 1993 was $.70 and $(.79), respectively.
<PAGE>
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, 1996. This should be read
in conjunction with, the financial statements and notes thereto, included in
this Annual Report. As more fully described in Footnote 3 to the consolidated
financial statements, on April 25, 1995, the Company purchased 100% of the stock
of Alliance which had simultaneously acquired SD&A. 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
starting on April 25, 1995.
Also in the year ended June 30, 1995, ("Fiscal 1995"), the Company
discontinued the operations of Sports-Tech International, Inc. and High School
Gridiron Report. In Fiscal 1995, the Company sold Sports-Tech International and
closed the HSGR operation. The ultimate sale of STI resulted in a gain of
$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 operating in a completely new industry segment - direct marketing.
Results of Operations 1996 compared to 1995
Continuing Operations: Sales and cost of sales totaled $15,889,000 and
$10,882,000, respectively for the year ended June 30, 1996 ("Fiscal 1996") as
compared with $3,631,000 and $2,434,000 in Fiscal 1995. These increases are due
to the inclusion of SD&A operations for all of Fiscal 1996 as compared with the
66 day period from the date of acquisition, April 25, 1995 to June 30, 1995 in
Fiscal 1995. Net sales in Fiscal 1996 and 1995 from telemarketing and
telefundraising totaled $13,228,000 and $3,122,000, respectively, and sales from
off-site campaigns totaled $2,661,000 and $509,000, respectively.
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 38%, respectively, for
the current fiscal year, as compared to 30% and 48%, respectively, for the prior
fiscal year. The decrease in margins from the off-site campaigns was due to
Fiscal 1995 including only the period from acquisition to year end, as compared
to Fiscal 1996, which included the full year. During the shortened period for
Fiscal 1995, the Company serviced a large volume of campaigns, as compared with
the full year of Fiscal 1996 where the average volume was lower.
<PAGE>
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, in
Fiscal 1995, 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 identification and evaluation of potential acquisitions.
Selling, general and administrative expenses increased $2,724,000, to
$5,106,000 in Fiscal 1996, as compared with $2,382,000 in Fiscal 1995. The
increase was comprised of the following components: The inclusion of $3,640,000
of SD&A selling, general and administrative expenses for Fiscal 1996, compared
to $782,000 during the period from April 25, 1995 to June 30, 1995 in the prior
fiscal year, resulted in an increase of $2,858,000. Salary expenses associated
with the new management and employees who joined the Company upon resignation of
the prior management and its board of directors on April 25, 1995, attributed to
$107,000 of the increase. Legal expenses decreased $152,000 from $251,000 in the
prior year to $99,000 in the current year. Prior year expenses included
preparation and 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.
Current year expenses included finalization of issues related to prior
operations of the company, as well as efforts involved in the planning and
execution of the new corporate strategy, amendment of the Company's prior year
Registration Statement and preparation and filing of a special proxy statement
to increase the authorized number of shares of common stock of the Company.
Public relations increased by $63,000 due to efforts involved in implementing
the new corporate strategy. Professional fees have decreased $70,000 due to
prior year reporting requirements surrounding the acquisition of Alliance and
SD&A and the disposition of STI. The directors and officers insurance premium
decreased $76,000 due to additional coverage required in the prior year in
connection with the merger. Discounts given to induce the exercise of stock
options totaled $128,000 in the prior year, as compared with none in the current
fiscal year. In following the new corporate strategy, the Company incurred
$128,000 in expenses relating to investigation of acquisition candidates and
financing sources. The value attributable to warrants issued to consultants
during Fiscal 1996 totaled $37,000. As a condition precedent to the merger with
Alliance Media, the Company closed its Beverly Hills office in the prior year,
resulting in a loss on disposal of fixed assets of $30,000 and current year
decrease in depreciation of $13,000.
Related party charges decreased $6,000, to zero in the current fiscal
year. The decrease is due to non-recurring fees incurred in the prior year
relating to the sale of STI.
Amortization of intangible assets totaled $362,000 in the current
fiscal year, as compared to $65,000 in the prior fiscal year and related to the
amortization of the covenant-not-to-compete and goodwill, over five years and
forty years, respectively, acquired in the Alliance and SD&A transaction on
April 25, 1995.
A non-recurring net gain from sales of securities totaled $1,580,000 in
the prior fiscal year and resulted from the exercise by the Company of a common
stock purchase warrant held as an investment and subsequent liquidation of the
securities.
Interest expense increased $411,000 in the current fiscal year and
related primarily to the acquisition of $4,500,000 of debt in the Alliance and
SD&A acquisition on April 25, 1995.
Pretax income from SD&A operations totaled $1,363,000 in the current year
and corporate expenses totaled $2,317,000, including $851,000 in corporate
depreciation, amortization and interest expense.
In the current fiscal year, the income tax provision on continuing
operations totaled approximately $141,000 on losses from continuing operations
of $953,000. 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 gain on sale of, and loss from, discontinued
operations in the prior fiscal year relates to the STI and HSGR operations which
were either sold or closed in fiscal 1995, as a condition precedent to the
merger with Alliance Media. No amounts related to discontinued operations were
incurred in the current fiscal year.
Results of Operations 1995 compared to 1994
Continuing Operations: Sales and cost of sales totaled $3,631,000 and
$2,434,000, respectively for Fiscal 1995 as compared with no similar amounts
incurred in the fiscal year ended June 30, 1994 ("Fiscal 1994"). These increases
are due to the inclusion of SD&A operations from the date of acquisition, April
25, 1995. In Fiscal 1995, 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 increased $1,559,000 to
$2,382,000 in Fiscal 1995 as compared with $823,000 in Fiscal 1994. Of the
increase, $750,000 resulted from the inclusion of SD&A selling, general and
administrative expenses from the date of acquisition, April 25, 1995. Severance
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 Fiscal 1995 primarily due to an
obligation to file a registration statement required by prior management, due
diligence by the new management associated therewith and 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. Professional fees increased $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 $110,000 due to the
purchase of additional coverage. Discounts given to induce the exercise of stock
options totaled $128,000 in Fiscal 1995, an increase of $42,000 as compared with
Fiscal 1994. Miscellaneous other expenses increased $77,000 resulting from the
increased activity of the Company.
Related party charges decreased $15,000, to $6,000 in Fiscal 1995, as
compared with $21,000 in Fiscal 1994. The decrease was due to the termination of
a consulting agreement on October 1, 1993, offset by fees incurred in Fiscal
1995 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 $65,000 in Fiscal 1995 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.
The net gain from sales of securities totaled $1,580,000 in Fiscal 1995
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 $87,000 in Fiscal 1995 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.
In Fiscal 1995, 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,
as a condition precedent to the merger with Alliance Media. The loss from
discontinued operations totaled $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 $322,000
relates to the sale of STI and is addressed in Note 5 of the Notes to
Consolidated Financial Statements.
Capital Resources and Liquidity
The Company's cash and cash equivalents increased by $175,000, $799,000
and $310,000 in 1996, 1995 and 1994 respectively.
In 1996, the Company used $884,000 in cash for operating activities,
principally due to net losses incurred during the first full year following the
acquisition of SD&A. While the SD&A operations generated net income during the
year, legal, accounting, administrative and other expenditures at the corporate
offices incurred by management in implementing the new corporate strategy
approximated $1.4 million. These expenses included costs relating to the
obligations associated with the registration statement and other remaining
obligations associated with the activities of the prior management, as well as
identification and evaluation of potential acquisitions and financing sources.
The Company's management has liquidated all known remaining obligations arising
from the prior management and has taken steps to reduce corporate overhead
during 1997, principally in payroll reductions. Additional cash was used by an
increase in accounts receivable at SD&A of $613,000, due to increases in sales.
In 1996, the Company used $572,000 in investing activities. Payments
totaling $478,000 were made relating to the acquisition of Alliance and SD&A.
This was principally comprised of $425,000 in cash paid to the former owner of
SD&A resulting from the achievement of defined results of operations for SD&A
for the year. Capital expenditures in 1996 of $95,000 were principally leasehold
improvements to increase the usable space at the offices of SD&A. SD&A is moving
its Berkeley Calling Center in August 1996 and anticipates that expenditures in
connection with the move will approximate $100,000. SD&A plans to expand its
calling capacity at the Berkeley Calling Center in the Fall of 1996 at an
anticipated cost of approximately $75,000. SD&A plans to finance a portion of
the expansion and moving costs through bank borrowings.
In 1996, the Company's financing activities provided $1,631,000. On
April 25, 1995, Alliance and SD&A were acquired for issuance of 1,025,000 common
shares valued at $2,745,000 and $500,000 of acquisition costs. Liabilities
acquired totaled $6,694,000 including a $4,500,000 note yielding prime to be
paid over a four year period. The obligations resulted from the acquisition of
SD&A by Alliance and are payable to the former owner and founder of SD&A.
Payments due in fiscal 1996 originally totaled $1,500,000 payable in quarterly
installments. 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.
SD&A achieved its defined results of operations during 1996 and $425,000 was
paid in cash and $425,000 accrued in stock, as of June 30, 1996. In October
1995, and in February 1996, the long term obligations due to the sole selling
shareholder of SD&A were restructured and the terms were further modified
whereby SD&A, by borrowing on its line of credit and from its former owner,
loaned the parent Company $500,000, payable June 30, 1996. The Company used
$250,000 of the loan to pay the former owner accrued interest from September 1,
1995 through a partial prepayment for June 1996. All other principal and
interest payments due monthly from January 31, 1996 to May 31, 1996 were
deferred until June 30, 1996.
In March 1996, the Company sold 75,000 shares of its common stock for
an aggregate of $120,000, of which 12,500 shares were sold to related parties,
in order to meet certain operating obligations arising from its acquisition of
SD&A.
On May 9, 1996, the Company completed a private placement with an
institutional investor of 10,000 shares of convertible preferred stock for
$750,000, $687,000 net after offering costs, which was redeemed out of net
proceeds of a subsequent private placement as described below.
On June 7, 1996, the Company completed a private placement with certain
accredited investors of 6,200 shares of Series B Redeemable Convertible
Preferred Stock for $3,100,000 and 2,000 shares of Series C Redeemable
Convertible Preferred Stock for $1,000,000. In addition, the Company issued
warrants to the Series B preferred shareholders to acquire a total of 3,100,000
shares of Common Stock at an exercise price of $2.50 per share for three years,
starting with and subject to the availability of shares following shareholder
authorization of additional common shares. The Company issued warrants to the
Series C preferred shareholders for 3,000,000 shares of Common Stock at an
exercise price of $3.00 per share for three years, starting with and subject to
the availability of shares following shareholder authorization of additional
common shares.
In connection with the June 7, 1996 transactions, payment of
approximately $2.0 million was made on long term obligations due to the former
owner of SD&A. The remaining $2.1 million of long term obligations are payable
in 36 monthly principal payments of $58,333 plus interest at 8%, starting
September 19, 1996. $812,500 was used to reacquire 10,000 shares of Series A
Convertible Preferred Stock issued in the private placement on May 9, 1996.
The Company has announced a letter of intent to purchase, for all
stock, Metro Services Group, Inc., a provider of information based products and
services to the direct marketing industry. The Company is also currently
involved in acquisition discussions with other entities which, if consummated,
would 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, if such funds are unavailable from operations.
Additional acquisitions, if consummated, may be financed 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.
The Company believes that funds available from operations and from the
August, 1996 sale of the Laughlin, Nevada land will be adequate to finance its
current operations and meet interest and debt obligations in its fiscal year
ending June 30, 1997. Thereafter, and in conjunction with the Company's
acquisition and growth strategy, additional financing may be required to meet
potential acquisition payment requirements. The Company believes that it has the
ability to raise funds through private placements or public offerings of debt
and/or equity securities to meet these requirements. There can be no assurance,
however, that such capital will be required or available at terms acceptable to
the Company, or at all.
Seasonality and Cyclicality: The business of SD&A tends to be seasonal, with
higher revenues and profits occurring in the fourth fiscal quarter, followed by
the first fiscal quarter. This is due to subscription renewal campaigns for
SD&A's tax exempt clients, which generally begin in the spring time and continue
during the summer months.
New Accounting Pronouncements
Adoption of the Financial and Accounting Standards Board ("FASB")
Statement of Financial Accounting No. 121, "Accounting for the Impairment of
Long-Lived Assets for Long-Lived Assets to be disposed of", which is effective
for financial statements for fiscal years beginning after December 15, 1995, is
not anticipated to have a material effect on the Company's consolidated
financial statements.
The FASB recently issued Statement of Financial Accounting No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), which is effective for
financial statements for fiscal years beginning after December 15, 1995. SFAS
123 establishes new financial accounting and reporting standards for stock-based
compensation plans. Entities will be allowed to measure compensation cost for
stock-based compensation under SFAS 123 or APB Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company elected to remain with the accounting in
APB Opinion No. 25 and will be required to make pro forma disclosure of net
income and earnings per share as if the provisions of SFAS 123 had been applied.
The Company will implement SFAS 123 in the first quarter of Fiscal 1997.
<PAGE>
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 Accountants on 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.
During the year 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.
<PAGE>
PART III
Item 10 - Directors and Executive Officers of the Registrant
The Company's executive officers, directors and significant employees
and their positions with the Company are as follows:
Name Age Position
Barry Peters................55 Chairman of the Board of Directors and
Chief Executive Officer
E. William Savage...........54 Director, President, Chief Operating
Officer, Secretary and Treasurer
S. James Coppersmith........63 Director
Seymour Jones...............65 Director
C. Anthony Wainwright.......63 Director
J. Jeremy Barbera...........40 Director and Vice President, All-Comm
Media and President and Chief
Executive Officer of Metro
Stephen Dunn................46 Vice President, All-Comm Media and
President and Chief Executive Officer
of SD&A
Robert M. Budlow............35 Vice President, All-Comm Media and
Executive Vice President and Chief
Operating Officer of Metro
Scott A. Anderson...........39 Chief Financial Officer
Thomas Scheir...............43 Vice President and Chief Operating
Officer of SD&A
Mr. Peters has been Chairman of the Board and Chief Executive Officer of the
Company since the acquisition of Alliance in April 1995 and has 26 years of
experience in business development and corporate finance. Prior thereto, Mr.
Peters served as Chairman and Chief Executive Officer of Alliance, which he
co-founded, since its formation in 1994. Prior to the formation of Alliance,
from 1972 to 1993, Mr. Peters served as the Managing Director of Vector
Holdings, Inc. and its predecessor companies, an investment concern which
specialized in sponsoring management groups for buyouts and restructurings of
companies including: ESB Ray-O-Vac Corp., Time, Inc., Avco/Embassy Pictures
Corp., Signal Companies, Inc., ITT Corporation, Borg-Warner Corporation and F.
Schumacher & Co., Inc.
Mr. Savage has been a Director and President, Chief Operating Officer,
Secretary, and Treasurer of the Company since the acquisition of Alliance
in April 1995 and has 27 years of executive business experience with
emphasis on operations, marketing and business development. Prior thereto,
he served as President of Alliance, which he co-founded, since its formation
in 1994. In addition, Mr. Savage has been serving since 1991 as a director
and as President of MovieTheatre Associates, Inc. and Movie Theatre Holdings,
Inc., a general partner and a limited partner, respectively, of Movie Theatre
Investors Ltd., an investment partnership that owns and operates movie
theatres.
Mr. Coppersmith has been a Director of the Company since June 1996. Since 1994,
Mr. Coppersmith has been Chairman of the Board of Trustees of Boston's Emerson
College. Until his retirement in 1994, he held various senior executive
positions with Metromedia Broadcasting where he managed its television
operations in Los Angeles, New York and Boston, and served as President and
General Manager of Boston's WCVB-TV, an ABC affiliate owned by The Hearst
Corporation. Mr. Coppersmith also serves as a director for WABAN, Inc., Sun
America Asset Management Corporation, Chyron Corporation, Uno Restaurant Corp.,
Kushner/Locke, Inc. and The Boston Stock Exchange.
Mr. Jones has been a Director of the Company since June 1996. From April 1974 to
September 1995, Mr. Jones was a senior partner of the accounting firm of Coopers
& Lybrand L.L.P. Mr. Jones has over 35 years of accounting experience and over
10 years of experience as an arbitrator and as an expert witness, particularly
in the area of mergers and acquisitions.
Mr. Wainwright has been a Director of the Company since August 1996 and also
served as a Director of the Company from the acquisition of Alliance until May
1996. Prior thereto, he was a director of Alliance. Mr. Wainwright also has been
Chairman and Chief Executive Officer of the advertising firm Harris Drury Cohen,
Inc. since 1995. Prior thereto, from 1994 to 1995, he served as a senior
executive with Cordiant P.L.C.'s Compton Partners, a unit of the advertising
firm Saatchi & Saatchi World Advertising, and, from 1989 to 1994, as Chairman
and Chief Executive Officer of Campbell Mithun Esty, a unit of the advertising
firm Saatchi & Saatchi World Advertising, in New York. Mr. Wainwright also
serves as a director of Gibson Greeting, Inc., Del Webb Corporation, American
Woodmark Corporation and Specialty Retail Group, Inc.
Mr. Barbera has been a Director and Vice President of the Company since
October 1996 and President and Chief Executive Officer of Metro since its
formation in 1987. Mr. Barbera has 15 years of experience in data management
services, and over 20 years of experience in the entertainment marketing area.
Mr. Dunn has been Vice President of the Company since September 1996 and has
also been President and Chief Executive Officer of SD&A, which he co-founded,
since its formation in 1983. Previously, Mr. Dunn served as a consultant for
the Los Angeles Olympic Organizing Committee for the Olympic Arts Festival,
as Director of Marketing for the New World Festival of the Arts, and as
Director of Marketing for the Berkeley Repertory Theater.
Mr. Budlow has been Vice President of the Company since October 1996 and
Executive Vice President and Chief Operating Officer of Metro since 1990. He
has 10 years of experience in database management services and subscription,
membership and donor renewal programs.
Mr. Anderson has been Chief Financial Officer of the Company since May 1996
and was Controller from May 1995 to May 1996 and a Director of the Company
from May 1996 to August 1996. Prior thereto, from December 1994 to April 1995,
he was associated with the accounting firm of Coopers & Lybrand L.L.P., and,
from 1988 to 1994, he was a manager in the assurance department of an affiliate
of the accounting firm of Deloitte & Touche, LLP. Mr. Anderson is a Certified
Public Accountant.
Mr. Scheir has been Vice President and Chief Operating Officer of SD&A since
September 1996. Prior thereto, from 1990 to September 1996, he was Chief
Financial Officer of SD&A, and from 1983 to 1990, he served as Business Manager
of SD&A. Prior to joining SD&A, Mr. Scheir was List Manager with the San
Francisco Symphony's marketing department.
Compliance with Section 16(A) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
on Forms 3, 4 and 5 with the Securities and Exchange Commission (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 reports on Form 5 for the fiscal year ended June 30,
1996, 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, 1996,
except that Messrs. Peters, Savage, Coogan and Wainwright each made one late
filing due to administrative timing errors on the part of the Company with
respect to stock options granted and Messrs. Jones and Coppersmith each made one
late filing due to administrative timing errors on the part of the Company with
respect to their election as directors of the Company. The Company has been
advised that Newark Sales Corp. and Saleslink Ltd. each intend to file one late
report on or about October 29, 1996 concerning one transaction, due to
administrative timing errors on the part of such stockholders.
<PAGE>
Item 11 - Executive Compensation
Summary Compensation Table
The following table (the "Summary Compensation Table") provides
information relating to compensation for the fiscal years ended June 30, 1996
and June 30, 1995 for the Chairman of the Board and Chief Executive Officer and
each of the other executive officers of the Company whose compensation is
required to be disclosed by the rules and regulations of the Commission during
such years as shown in the table (collectively, the "Named Executive Officers").
<TABLE>
Long-Term
Compensation Awards
Fiscal Year Annual Restricted Securities
Ended Compensation Stock Underlying
June 30,(1) Salary ($) Awards($) Options/SARs(#)
---------- ---------- --------- ---------------
<S> <C> <C> <C> <C>
Name and Principal Position
Barry Peters 1996 100,626 32,058 150,000
Chairman of the Board and 1995 26,442
Chief Executive Officer
E. William Savage 1996 100,626 32,058 150,000
President, Chief Operating 1995 26,442
Officer, Secretary and Treasurer
Stephen Dunn 1996 228,462 5,000
Vice President, All-Comm Media 1995 42,308
and President and Chief
Executive Officer of SD&A
Thomas Scheir 1996 128,461 12,500
Executive Vice President, SD&A 1995 21,635
</TABLE>
(1) Prior to the acquisition of Alliance in April, 1995 none of the Named
Executive Officers was an officer or employee of the Company. Therefore,
compensation for each of the Named Executive Officers is shown only for the
prior two fiscal years. In addition, because the acquisition of Alliance
took place in April, 1995, the compensation shown for each of the Named
Executive Officers for the fiscal year ended June 30, 1995 reflects only two
months of compensation in such fiscal year.
In October 1996, the Company acquired Metro. Based on their current
arrangements with the Company, if Messrs. Jeremy Barbera, Vice President of the
Company and President and Chief Executive Officer of Metro, and Robert Budlow,
Vice President of the Company and Executive Vice President of Metro, had been
executive officers of the company at the beginning of fiscal 1996, they would
have been among the most highly compensated executive officers of the Company
for such fiscal year. Based on their current arrangements with the Company, the
Company expects that Messrs. Barbera and Budlow will be among the Company's most
highly compensated executive officers for fiscal 1997. See "Executive
Compensation--Employment Contracts."
Stock Option Grants
The table below provides information relating to stock options granted
to the Named Executive Officers during the fiscal year ended June 30, 1996.
<TABLE>
Individual Grants(1)
------------------------------------------------------------- Potential Realizable
Number of % of Total Value at Assumed Annual
Securities Options/SARs Rates of Stock
Underlying Granted to Exercise or Price Appreciation for
Options/SARs Employees in Base Price($) Expiration Option Term (2)
Granted (#) Fiscal Year(3) (per share(4)) Date 5% 10%
----------- -------------- -------------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Name
Barry Peters................. 150,000 29% $2.00 12/01/02 $122,130 $284,615
E. William Savage............ 150,000 29% 2.00 12/01/02 122,130 284,615
Stephen Dunn................. 5,000 1% 3.38 01/08/99 2,660 5,586
Thomas Scheir................ 12,500 2% 2.00 12/01/02 10,178 23,718
</TABLE>
(1) Since June 30, 1996 through the date hereof, options currently exercisable
for 300,000 shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), have been granted to each of Mr. Peters and Mr.
Savage. No other additional options have been granted during this period to
any of the Named Executive Officers.
(2) Potential realizable value was calculated using an assumed annual compounded
growth rate over the term of the option of 5% and 10%, respectively. Use of
this model should not be viewed in any way as a forecast of the future
performance of the Common Stock, which will be determined by future events
and unknown factors.
(3) During the fiscal year ended June 30, 1996, all employees and all
non-employee Directors of the Company received stock options for a total of
525,003 shares of Common Stock.
(4) Exercise price is the closing sales price of the Common Stock as reported on
The Nasdaq SmallCap MarketSM on the date of the grant.
The following table sets forth information regarding the number and
value of securities underlying unexercised stock options held by the Named
Executive Officers as of June 30, 1996.
<TABLE>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at Fiscal SARs at Fiscal Year
Year End (#) End ($) (1)
------------ -----------
Name Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C>
Barry Peters............................ 150,000/0 506,250/0
E. William Savage....................... 150,000/0 506,250/0
Stephen Dunn............................ 5,000/0 10,000/0
Thomas Scheir........................... 12,500/0 42,188/0
</TABLE>
(1) Fair market value of $5.375 per share at June 30, 1996 was used to
determine the value of in-the-money options.
Compensation of Directors
Directors who are not employees of the Company currently receive an
annual retainer fee of $10,000 for serving on the Company's board of directors
(the "Board of Directors") and an annual retainer fee of $1,500 for serving as a
member of any committee thereof. Such Directors will also be reimbursed for
their reasonable expenses for attending board and committee meetings. Any
Director who is also an employee of the Company is not entitled to any
compensation or reimbursement of expenses for serving as a Director of the
Company or a member of any committee thereof.
Options Issuable to Directors
Pursuant to a resolution of the Board of Directors, in April of each
year commencing in April 1996, each Director who is not an employee of the
Company and who is then serving as a Director is granted options exercisable for
15,000 shares of Common Stock at an exercise price equal to the market price of
the Common Stock prevailing on the date such options are granted.
Employment Contracts
Effective as of July 1, 1995, the Company entered into a separate
employment agreement with each of Mr. Barry Peters and Mr. E. William Savage
providing for Mr. Peters' employment as Chairman of the Board and Chief
Executive Officer of the Company and for Mr. Savage's employment as President of
the Company, respectively. Each such agreement provides for an initial term of
employment of three years expiring on June 30, 1998 and is renewable for an
additional three-year term at the discretion of the employee covered thereby,
subject to termination as provided therein. The base salary for Mr. Peters
during the term of his employment agreement is $137,500 for the first year,
$195,000 for the second year and $270,500 for the third year. The base salary
for Mr. Savage during the term of his employment agreement is $125,000 for the
first year, $175,000 for the second year and $245,000 for the third year. In
addition, pursuant to the terms of the relevant employment agreement, each of
Mr. Peters and Mr. Savage has options to acquire 300,000 shares of Common Stock
at an exercise price of $2.50 per share for the first 150,000 shares and $3.00
per share for the remaining 150,000 shares, which exercise prices were set
pursuant to a resolution of the Board of Directors on September 26, 1996. At the
end of each year or as otherwise may be deemed appropriate in the sole
discretion of the Board of Directors, each of Mr. Peters and Mr. Savage may be
paid a bonus, payable in whole or part in Common Stock at the election of the
employee. In addition, each year the Board of Directors may grant to each of Mr.
Peters and Mr. Savage such number of options to purchase shares of Common Stock
at such prices as the Board of Directors may determine from time to time to be
appropriate. During the first year of his employment, Mr. Peters elected to
receive less than the full amount of cash salary due to him under his employment
agreement and was paid a total of $100,626 in cash and $32,058 in the form of
16,029 shares of Common Stock. During the second year of Mr. Peters' employment
up to and including September 30, 1996, Mr. Peters again elected to receive less
than the full amount of cash salary due to him under his employment agreement
and was paid a total of $18,750 in cash. Similarly, during the first year of his
employment, Mr. Savage elected to receive less than the full amount of cash
salary due to him under his employment agreement and was paid a total of
$100,626 in cash and $32,058 in the form of 16,029 shares of Common Stock.
During the second year of Mr. Savage's employment up to and including September
30, 1996, Mr. Savage again elected to receive less than the full amount of cash
salary due to him under his employment agreement and was paid a total of $18,750
in cash. Each of Mr. Peters and Mr. Savage has agreed in his respective
employment agreement not to compete with the Company or engage in any business
similar to that of the Company during the term of such employment agreement. In
the event Mr. Peters or Mr. Savage, as the case may be, is terminated for other
than good cause, or if Mr. Peters or Mr. Savage, as the case may be, resigns for
"good reason" (as defined below), then Mr. Peters or Mr. Savage, as the case may
be, will be entitled to receive severance pay in an amount equal to (i) one
year's base salary then in effect, payable in accordance with normal payroll
practices for the remainder of the term, plus (ii) the amount determined under
clause (i) but payable in a lump sum on the effective date of such termination.
For purposes of each of Mr. Peters' and Mr. Savage's respective
employment agreement, "good reason" includes a Change in Control of the Company
(as defined therein), which is deemed to occur if (a) after a merger or
consolidation, the Company is not the surviving corporation and the Company's
stockholders do not continue to own at least 80% of the Company's assets, (b)
there is a sale of substantially all of the assets of the Company, (c) the
stockholders approve a plan for the liquidation or dissolution of the Company,
(d) any person becomes a 30% or more beneficial owner of the outstanding Common
Stock, or (e) the employee ceases to be a Director for any reason, other than
his voluntary resignation or voluntary election not to stand for re-election as
a Director.
Effective as of April 25, 1995, SD&A entered into a separate employment
agreement with each of Mr. Stephen Dunn and Mr. Thomas Scheir, providing for Mr.
Dunn's employment as President of SD&A and Mr. Scheir's employment as Chief
Financial Officer of SD&A, respectively. Each such agreement provides for an
initial term expiring on April 25, 1997, and is renewable for an additional
one-year term at the discretion of the employee covered thereby, subject to
termination as provided therein. The base salary for Mr. Dunn during the term of
his employment agreement is $225,000 for the first year, $250,000 for the second
year and $275,000 for the third year. The base salary for Mr. Scheir during the
term of his employment is $125,000 for the first year, $150,000 for the second
year and $175,000 for the third year. At the end of each year, in the sole
discretion of the board of directors of SD&A, each of Mr. Dunn and Mr. Scheir
may be paid a cash bonus. The agreements also provide for other fringe benefits
as may be approved by the board of directors of SD&A. Each of Mr. Dunn and Mr.
Scheir has agreed in his respective employment agreement not to (i) own, become
employed by, or become a partner of any similar business during the term of his
employment agreement, except that each may own 1% or less of any similar
business or (ii) compete with SD&A for a period of three years after the
termination of his employment.
Effective as of October 1, 1996, Metro entered into a separate
employment agreement with each of Mr. Jeremy Barbera, Mr. Robert Budlow and Ms.
Janet Sautkulis providing for Mr. Barbera's employment as President and Chief
Executive Officer of Metro, Mr. Budlow's employment as Executive Vice President
and Chief Operating Officer of Metro and Ms. Sautkulis' employment as Executive
Vice President and General Manager of Metro, respectively. Each such agreement
provides for an initial term expiring on September 30, 1999 (the "Employment
Term") and is renewable for an additional three-year term unless Metro or the
employee gives written notice to the other party, at least sixty (60) days prior
to the expiration of the Employment Term, of its intention not to renew the
employment agreement. The base salary for Mr. Barbera during the Employment Term
is $150,000 for the first year, $200,000 for the second year and $250,000 for
the third year. Pursuant to the relevant employment agreement, the base salary
for each of Mr. Budlow and Ms. Sautkulis during the Employment Term is $125,000
for the first year, $165,000 for the second year and $200,000 for the third
year. Pursuant to the terms of the relevant agreement, during each year of the
Employment Terms, Mr. Barbera, Mr. Budlow and Ms. Sautkulis are each eligible to
receive raises and bonuses based upon the achievement of earnings and other
targeted criteria if and as determined by the Compensation Committee of the
Board of Directors. The agreements also provide for the granting to Mr. Barbera,
Mr. Budlow and Ms. Sautkulis of options to acquire Common Stock if and as
determined by the Option Plan Committee. Each of Mr. Barbera, Mr. Budlow and Ms.
Sautkulis has agreed in his or her respective employment agreement (i) not to
compete with Metro or to be associated with any other similar business during
the Employment Term, except that Mr. Barbera, Mr. Budlow and Ms. Sautkulis may
each own up to 5% of the outstanding common stock of certain corporations, as
described more fully in the relevant employment agreement, and (ii) upon
termination of employment with Metro, not to solicit or encourage certain
clients of Metro (as more fully described in the relevant employment agreement),
to cease doing business with Metro, and not to do business with any other
similar business, for a period of three years from the date of such termination.
Metro has the right to terminate the employment of Mr. Barbera, Mr. Budlow or
Ms. Sautkulis, as the case may be, "for cause" (as defined below), after giving
notice to such employee, in which event such employee will be entitled only to
receive his or her salary at the rate provided above to the date on which
termination takes effect, plus any compensation which is accrued but unpaid on
the date of termination. In the event of a disposition after October 1, 1996 of
the properties and business of Metro by merger, consolidation, sale of assets,
sale of stock, or otherwise, Metro has the right to assign each employment
agreement and all of Metro's rights and obligations thereunder to the acquiring
or surviving corporation. If, for any reason, such employment agreements are not
assigned to, or assumed by, such acquiring or surviving corporation, the
employee covered thereby may terminate such employment agreement by giving
written notice thereof within six months of the date of any such acquisition or
disposition, and upon such termination, or, if the employment agreement is
terminated by Metro without cause, such employee will be entitled to receive
severance pay consisting of a single lump sum distribution (with no present
value adjustment) equal to the base salary as provided above for the year then
in effect for a period of one year, notwithstanding that such one-year period
might extend beyond the Employment Term.
For purposes of each of Mr. Barbera's, Mr. Budlow's and Ms. Santkulis'
respective employment contract, "for cause" includes circumstances whereby the
relevant employee shall (i) be convicted of a felony crime; (ii) commit any act
or omit to take any action in bad faith and to the detriment of Metro; (iii)
commit an act of moral turpitude to the detriment of Metro; (iv) commit an act
of fraud against Metro; or (v) materially breach any term of the employment
agreement and fail to correct the breach within 10 days after written notice
thereof; provided that in the case of clauses (ii), (iii) or (iv) above, such
determination must be made by the Board of Directors after a meeting at which
such employee shall have been given an opportunity to explain such actions.
Consulting Agreements
On April 15, 1996, the Company entered into an agreement with Mr.
Seymour Jones to retain his services as a financial consultant and advisor to
the Company on a non-exclusive basis for a period of one year. Effective July
1996, the agreement was terminated. Notwithstanding such termination, pursuant
to the terms of such agreement, in August 1996 Mr. Jones purchased from the
Company, for $2,500 in the aggregate, warrants exercisable for 50,000 shares of
Common Stock at an exercise price of $2.50 per share for the first 25,000
shares, $3.00 per share for the next 15,000 shares and $3.50 per share for the
remaining 10,000 shares. The warrants are currently exercisable and expire on
April 15, 2000.
On April 17, 1996, the Company entered into an agreement with Mr. S.
James Coppersmith to retain his services as a financial consultant and advisor
to the Company on a non-exclusive basis for a period of one year. Effective July
1996, the agreement was terminated. Notwithstanding such termination, pursuant
to the terms of such agreement, in September 1996 Mr. Coppersmith purchased from
the Company, for $2,500 in the aggregate, warrants exercisable for 50,000 shares
of Common Stock at an exercise price of $2.50 per share for the first 25,000
shares, $3.00 per share for the next 15,000 shares and $3.50 per share for the
remaining 10,000 shares. The warrants are currently exercisable and expire on
May 15, 2000.
On June 3, 1996, the Company entered into an agreement with Mr. C.
Anthony Wainwright to retain his services as a financial consultant and advisor
to the Company on a non-exclusive basis for a period of two years. As
compensation for such services, Mr. Wainwright is entitled to receive the sum of
$1,000 per month for the term of the agreement plus all out-of-pocket expenses
incurred by Mr. Wainwright in the performance of such services, provided that
prior authorization from the Company shall have been received with respect to
any such expense. In addition, pursuant to the terms of such agreement, Mr.
Wainwright has the right, which right, as of the date hereof, has not been
exercised, to purchase from the Company, for $2,500 in the aggregate warrants
exercisable for 50,000 shares of Common Stock at an exercise price of $4.00 per
share for the first 25,000 shares, $4.50 per share for the next 15,000 shares
and $5.00 per share for the remaining 10,000 shares. The warrants may be
exercised over a four-year period commencing June 3, 1996. The agreement is only
assignable without the prior written consent of the other party in the event of
a sale of all or substantially all of the business of the party desiring to
assign the agreement. The agreement also provides for indemnification of Mr.
Wainwright and his affiliates (and their respective directors, officers,
stockholders, general and limited partners, employees, agents and controlling
persons and the successors and assigns of all of the foregoing) by the Company
for any losses or claims arising out of the rendering of the services called for
in the agreement, other than for negligence or willful misconduct.
Compensation Committee Interlocks and Insider Participation
The Board of Directors has established a compensation committee (the
"Compensation Committee"), comprised of Messrs. Coppersmith and Wainwright, each
of whom are independent Directors and are not eligible to receive options or
other rights under any employee stock or other benefit plan for so long as such
Director is a member of the Compensation Committee (other than the right of each
such Director to receive options exercisable for 15,000 shares of Common Stock
granted in April of each year, if such Director is then serving in such
capacity, pursuant to a resolution adopted by the Board of Directors). The
functions of the Compensation Committee are to formulate the Company's policy on
compensation of executive officers, to review and approve annual salaries and
bonuses for all officers, to review, approve and recommend to the Board of
Directors the terms and conditions of all employee benefit plans or changes
thereto, and to administer the Company's stock option plans. None of the
executive officers of the Company serves as a director of another corporation
where an executive officer of such other corporation serves as a director of the
Company.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of October 10, 1996 by: (i) each
Director and each of the Named Executive Officers; (ii) all executive officers
and Directors of the Company as a group; and (iii) each person known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock.
Amount and Nature of Common
Stock Beneficially Owned
Name and Address of Beneficial Holder(1) Number Percent
- ---------------------------------------- ------ -------
Directors and executive officers:
Barry Peters (2) 676,536 12.2%
E. William Savage (3) 672,868 12.1
S. James Coppersmith (4) 50,000 1.0
Seymour Jones (4) 50,000 1.0
C. Anthony Wainwright (5) 68,408 1.3
J. Jeremy Barbera (6) 1,199,924 23.0
Stephen Dunn (7) 138,716 2.7
Thomas Scheir (8) 12,875 *
All Directors and executive officers
as a group (10 persons) 3,511,444 55.5
5% Stockholders(9):
Naomi Bodner (10) 2,011,500 28.3
Laura Huberfeld (10) 2,011,500 28.3
Newark Sales Corp. (11) 1,583,333 23.7
Saleslink Ltd. (11) 1,583,333 23.7
Robert Budlow (12) 599,962 11.6
Seth Antine (13) 360,000 6.6
Irwin Gross (14) 270,000 5.0
- -------------
*Less than 1%
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
All share amounts reflect beneficial ownership determined pursuant to Rule
13d-3 under the Exchange Act. All information with respect to beneficial
ownership has been furnished by the respective Director, executive officer
or stockholder, as the case may be. Except as otherwise noted, each person
has an address in care of the Company.
(2) Includes 450,000 beneficially owned shares of Common Stock issuable
upon the exercise of currently exercisable options and 31,375 beneficially
owned shares of Common Stock owned by family members with respect to which
Mr. Peters disclaims beneficial ownership.
(3) Includes 450,000 beneficially owned shares of Common Stock issuable upon
the exercise of currently exercisable options and 21,878 beneficially
owned shares of Common Stock owned by family members with respect to which
Mr. Savage disclaims beneficial ownership.
(4) Includes 50,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(5) Includes 15,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable options and 50,000 beneficially owned
shares of Common Stock issuable upon the exercise of a contractual right to
purchase warrants exercisable for such Common Stock pursuant to Mr.
Wainwright's consulting agreement with the Company.
(6) Includes 111,524 beneficially owned shares of Common Stock issuable upon
conversion of a convertible promissory note of the Company in the aggregate
face amount of $600,000 issued to Mr. Barbera in connection with the
Company's acquisition of Metro.
(7) Includes 5,000 beneficially owned shares of Common Stock issuable upon
exercise of currently exercisable warrants.
(8) Includes 12,500 beneficially owned shares of Common Stock issuable upon
exercise of currently exercisable options.
(9) The address for each of the 5% Stockholders is as follows: c/o Broad
Capital Associates, Inc., 152 West 57th Street, New York, New York 10019,
except for Mr. Budlow, whose address is in care of the Company.
(10) Prior to the Offering, 1,000,000 of this 5% Stockholder's total number of
beneficially owned shares of Common Stock are issuable upon exercise of
currently exercisable warrants and 800,000 beneficially owned shares of
Common Stock are issuable upon conversion of shares of the Company's Series
B Convertible Preferred Stock, par value $.01 per share (the "Series B
Preferred Stock"), subject in each case to this 5% Stockholder's sole
investment power. The remaining 211,500 beneficially owned shares of Common
Stock are owned by Naomi Bodner/Laura Huberfeld Partnership (the
"Bodner/Huberfeld Partnership") and are subject to a shared investment
power. Each of Naomi Bodner and Laura Huberfeld disclaims beneficial
ownership of the shares of Common Stock beneficially owned by the other and
the shares of Common Stock beneficially owned by the Bodner/Huberfeld
Partnership.
(11) 83,333 of this 5% Stockholder's total number of beneficially owned shares
of Common Stock are issuable upon conversion of shares of Series C
Preferred Stock and 1,500,000 beneficially owned shares of Common Stock
issuable upon exercise of currently exercisable warrants.
(12) Includes 55,762 beneficially owned shares of Common Stock issuable upon
conversion of a convertible promissory note of the Company in the aggregate
face amount of $300,000 issued to Mr. Budlow in connection with the
Company's acquisition of Metro.
(13) 200,000 of this 5% Stockholder's total number of beneficially owned shares
of Common Stock issuable upon exercise of currently exercisable warrants,
and 160,000 beneficially owned shares of Common Stock are issuable upon
conversion of shares of Series B Preferred Stock.
(14) 150,000 of this 5% stockholder's total number of beneficially owned shares
of Common Stock are issuable upon exercise of currently exercisable
warrants, and 120,000 beneficially owned shares of Common Stock are
issuable upon conversion of shares of Series B Preferred Stock.
Item 13 - Certain Relationships and Related Transactions
Transactions Under Current Management After Alliance acquisition
Transactions with Mr. Dunn. In connection with the acquisition of SD&A
on April 25, 1995, Alliance issued promissory notes in an aggregate principal
amount of $4.5 million to Mr. Dunn. Interest on such notes was payable monthly
at a rate equal to the prime rate of Bank of America, N.T. & S.A., as in effect
from time to time, subject to a maximum of 10% and a minimum of 8%. Principal
payments were due quarterly, and originally $1.5 million was due in quarterly
installments during fiscal 1996. All of the outstanding common shares of SD&A
were initially pledged to collateralize such notes but were released in June
1996. In connection with such notes, an operating covenants agreement between
the Company and Mr. Dunn included, 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 could be made to the
parent company. In June 1996, the operating covenants agreement was terminated.
Prior to October 1995, the Company made all principal payments when
due. Each of the principal payments due October 1, 1995, January 1, 1996 and
April 1, 1996 were deferred as they became due and thereafter from time to time.
In June 1996, principal payments of approximately $2.0 million were made and the
remaining obligations were restructured such that the remaining $2.1 minion is
now payable in installments of $58,333 per month, plus interest at 8%, starting
September 19, 1996.
SD&A leases its corporate business premises from Mr. Dunn. 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.
Total rent paid by SD&A to Mr. Dunn during 1996 and from the date of acquisition
to June 30, 1995 was approximately $138,000 and $26,000, respectively.
Bank Credit Line. Mr. Dunn is currently a guarantor of SD&A's credit
line. If such credit line is replaced with another credit facility, the
Company does not currently expect that Mr. Dunn would be a guarantor of such
replacement credit facility.
Indebtedness of Management. Subsequent to the close of the Company's
fiscal year ended June 30, 1996, in October 1996 the Company consummated its
acquisition of Metro. In February 1996, Mr. Barbera, then a shareholder of
Metro, borrowed $50,000 from Metro. Interest on such indebtedness accrues at a
rate of 6% per annum. The principal of such indebtedness, together with accrued
interest thereon, is repayable in four equal quarterly installment starting
March 31, 1998.
Transactions with Certain 10% Stockholders. Also subsequent to the
close of the Company's fiscal year ended June 30, 1996, the Company filed a
registration statement on Form SB-2 with the Commission with respect to a
proposed public offering of Common Stock. In connection therewith, as
consideration for their agreement to certain lock-up arrangements for a period
of nine months from the date of the prospectus relating to such proposed public
offering with respect to shares of Common Stock issuable upon the conversion of
shares of Series B Preferred Stock or upon the exercise of warrants issued in
connection with such Series B Preferred Stock, upon consummation of such
proposed public offering, the Company will issue warrants exercisable for
400,000, 400,000 and 46,800 shares of Common Stock to Naomi Bodner, in her
individual capacity, Laura Huberfeld, in her individual capacity, and the
Bodner/Huberfeld Partnership, respectively. As of October 10, 1996, each of Ms.
Bodner and Ms. Huberfeld is a beneficial holder of more than 10% of the Common
Stock.
<PAGE>
Transactions Under Former Management Prior to Alliance Acquisition
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 and
1994 fiscal years to perform investment banking and financial advisory services.
The fees paid by the Company for services rendered by Mr. Geller's firm for the
fiscal years ended June 30, 1995 and 1994 were $5,700 and $21,000, respectively.
During the 1995 fiscal year, 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 acquisition by the Company of
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, 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 "Affiliated 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, or $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.
Mortgage Loan to Subsidiary: On June 9, 1994, under the former
management of the Company, All-Comm Holdings, Inc. (formerly named Bullhead
Casino Corporation), a wholly-owned subsidiary of the Company, 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. All-Comm Holdings, Inc. loaned the borrowed funds 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
acquisition of Alliance, the Company's former chairman purchased, for $11,000,
property and equipment owned by the Company having a cost of $160,000 and a net
book value of $6,000.
Indebtedness of Former Management. Pursuant to the terms of his
employment agreement with the Company, which has expired, Arnold Rosenstein was
issued 25,000 shares of Common Stock in exchange for a promissory note in the
principal amount of $0.2 million. The promissory note accrued interest at 10.5%
per annum payable at maturity on November 1, 1994. On January 21, 1994, Mr.
Rosenstein paid $133,333, per resolutions of the Company's Board of Directors,
for the early retirement of the $0.2 million note receivable for shares issued
to him. The $66,667 allowance was charged to additional paid-in capital in the
1994 fiscal year. Also, on December 31, 1993, accrued interest of $87,500 was
discounted to $58,334 and paid to the Company.
<PAGE>
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(A)(1) Financial statements - see "Index to Financial Statements and
Financial Statement Schedules" on page 41.
(2) Financial statement schedule - see "Index to Financial Statements and
Financial Statement Schedule" on page 41.
(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 Articles of Incorporation (e)
3 (iv) By-Laws (b)
3 (v) Certificate of Amendment of Articles of Incorporation (h)
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 (e)
10.5 Amendment to Option Agreement (f)
10.6 Memorandums of Understanding (f)
10.7 Sample Series B Convertible Preferred Stock Subscription
Agreement (g)
10.8 Sample Private Placement Purchase Agreement for
Convertible Notes (g)
10.9 Letter from Seller of SD&A agreeing to long-term
obligation payment and restructuring (g)
10.10 Sample Convertible Notes Rescission Letter (h)
10.11 Sample Series C Convertible Preferred Stock Subscription
Agreement (h)
11. Statement re: computation of per share earnings (a)
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
(e) Incorporated by reference to the Company's Report on Form 10-K
for the fiscal year ended June 30, 1995
(f) Incorporated by reference to the Company's Report on Form 10-Q for the
quarter ended March 31, 1996
(g) Incorporated by reference to the Company's Report on Form 8-K dated
June 7, 1996
(h) Incorporated by reference to the Company's Report on Form 10-K for
the fiscal year ended June 30, 1996
(B) Reports on Form 8-K.
On May 28, 1996, the Company filed a Memorandum regarding the resignation
of two directors.
On June 7, 1996, the Company filed a notification of the completion of a
private placement on June 7, 1996.
(C) Reference is made to Item 14(a)(3) above.
(D) Reference is made to Item 14(a)(2) above.
<PAGE>
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: September 18, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Barry Peters Chairman of the Board and September 18, 1996
Barry Peters Chief Executive Officer
/s/ E. William Savage Director, President and September 18, 1996
E. William Savage Chief Operating Officer
/s/ Scott Anderson Chief Financial and September 18, 1996
Scott Anderson Accounting Officer
/s/ S. James Coppersmith Director September 18, 1996
S. James Coppersmith
/s/ Seymour Jones Director September 18, 1996
Seymour Jones
/s/ C. Anthony Wainwright Director September 18, 1996
C. Anthony Wainwright
The foregoing constitute all of the Board of Directors.
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
[Items 8 and 14(a)]
(1) FINANCIAL STATEMENTS: Page
Report of Independent Public Accountants 42
Consolidated Balance Sheets
June 30, 1996 and 1995 43
Consolidated Statements of Operations
Years Ended June 30, 1996, 1995 and 1994 44
Consolidated Statements of Stockholders' Equity
Years Ended June 30, 1996, 1995 and 1994 45
Consolidated Statements of Cash Flows
Years Ended June 30, 1996, 1995 and 1994 46-47
Notes to Consolidated Financial Statements 48-59
(2) FINANCIAL STATEMENT SCHEDULE:
I. Condensed Financial Information of the Registrant
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.
<PAGE>
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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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 audits provide 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, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1996, 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, present fairly, in all material respects, the information
required to be included herein.
/s/ COOPERS & LYBRAND L.L.P.
Los Angeles, California
September 19, 1996, except
for Note 19 as to which the
date is December 17, 1996
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - JUNE 30, 1996 AND 1995
1996 1995
---- ----
(as restated)
ASSETS
Current assets:
Cash and cash equivalents $1,393,044 $ 1,217,772
Accounts receivable, net of allowance
for doubtful accounts of $34,906 and
$40,552 in 1996 and 1995, respectively 2,681,748 2,067,977
Land held for sale at cost 921,465 766,651
Other current assets 107,658 116,468
----------- -----------
Total current assets 5,103,915 4,168,868
Property and equipment at cost, net 299,045 344,154
Intangible assets at cost, net 7,851,060 7,272,769
Other assets 47,046 38,700
----------- -----------
Total assets $13,301,066 $11,824,491
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings $ 500,000
Note payable to bank $ 49,694
Note payable other 72,000
Trade accounts payable 470,706 365,638
Accrued salaries and wages 706,039 641,507
Other accrued expenses 758,112 683,954
Income taxes payable 10,000 94,565
Current portion of long term
obligations to related party 583,333 1,500,000
Related party payable 425,000 183,701
----------- -----------
Total current liabilities 3,453,190 3,591,059
Long term obligations to related party
less current portion 1,516,667 3,000,000
Other liabilities 80,315 68,900
----------- -----------
Total liabilities 5,050,172 6,659,959
----------- -----------
Commitments and contingencies:
Redeemable convertible preferred stock -
of $.01 par value; shares issued and
outstanding: 6,200 shares of Series B
(none in 1995) ($3,112,130 involuntary
liquidation preference); 2,000 shares
of Series C (none in 1995)($1,005,360
involuntary liquidation preference) 1,306,358
-----------
Stockholders' equity:
Convertible preferred stock - $.01 par
value; 50,000 shares authorized,
8,200 redeemable shares issued and
outstanding - -
Common stock - authorized 6,250,000
shares of $.01 par value at June 30,
1996, increased on August 14, 1996
to 36,250,000; 3,198,534 and 3,028,092
shares issued, respectively 31,985 30,281
Additional paid-in capital 13,173,520 10,300,847
Accumulated deficit (6,125,500) (5,031,127)
Less 11,800 shares of common stock
in treasury, at cost (135,469) (135,469)
----------- -----------
Total stockholders' equity 6,944,536 5,164,532
----------- -----------
Total liabilities and
stockholders' equity $13,301,066 $11,824,491
=========== ===========
See Notes to Consolidated Financial Statements.
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
1996 1995 1994
---------- ---------- ----------
(as restated)
Sales $15,889,210 $3,630,828
Cost of sales 10,882,437 2,434,011
---------- ----------
Gross profit 5,006,773 1,196,817
Operating Expenses:
Selling, general and administrative (5,105,673) (2,381,912) $ (823,417)
Service fees of related parties (5,728) (21,000)
Amortization of intangible assets (361,537) (65,101)
---------- ---------- ----------
Loss from operations (460,437) (1,255,924) (844,417)
---------- ---------- ----------
Other income (expense):
Gain from sales of securities 1,579,539 937,365
Loan commitment fee (300,000)
Dividends 7,237
Interest income 12,276 13,679
Interest expense (505,128) (94,200) (7,165)
Other, net 1,047 (19,813)
---------- ---------- ----------
Total (492,852) 1,200,065 917,624
---------- ---------- ----------
Income (loss)from continuing
operations before income
taxes (953,289) (55,859) 73,207
Credit (provision) for income
taxes (141,084) (75,000) 13,600
---------- ---------- ----------
Income (loss) from continuing
operations before discontinued
operations (1,094,373) (130,859) 86,807
Gain on sale of discontinued
operations 322,387
Loss from discontinued operations (81,131) (2,896,694)
---------- ---------- ----------
Net income (loss) $(1,094,373) $ 110,397 $(2,809,887)
========== ========== ==========
Income (loss) per common share:
From continuing operations $(.36) $(.07) $ .06
From discontinued operations .13 (1.97)
----- ----- -----
Income (loss) per common share $(.36) $ .06 $(1.91)
===== ===== ======
Weighted average common and common
equivalent shares outstanding 3,068,278 1,807,540 1,468,747
========= ========= =========
Primary and fully diluted income (loss) per common share are the same in
fiscal years 1996, 1995 and 1994.
See Notes to Consolidated Financial Statements.
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(as restated)
<TABLE>
Convertible Additional
Preferred Stock Common Stock Paid-in Accumulated Treasury Stock Receivable
Shares Amount Shares Amount Capital Deficit Shares Amount for Shares Totals
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 Corp. 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
Issuance of common
shares as compensation
to employees, directors
and consultants 95,442 954 218,974 219,928
Sale of shares (including
12,500 to related parties) 75,000 750 119,250 120,000
Sale of Series A
Preferred Stock 10,000 $100 686,669 686,769
Repurchase of Series A
Preferred Stock (10,000) (100) (812,400) (812,500)
Warrants issued with
Preferred Stock 2,672,522 2,672,522
Warrants issued to con-
sultants and creditors 82,626 82,626
Accretion of redeemable
convertible preferred
stock (94,968) (94,968)
Net loss (1,094,373) (1,094,373)
-------------------------------------------------------------------------------------------------------
Balance June 30, 1996 $ 3,198,534 $31,985 $13,173,520 $(6,125,500)(11,800)$(135,469) $ -- $6,944,536
=======================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
1996 1995 1994
---------- ---------- ----------
(as restated)
<S> <C> <C> <C>
Operating activities:
Net income (loss) $(1,094,373) $110,397 $(2,809,887)
Adjustments to reconcile loss to net cash used in
operating activities:
Gains from sales of securities (1,579,539) (937,365)
Gain on sale of STI (322,387)
Depreciation 139,881 52,348 39,306
Amortization 361,537 65,101
Deferred income tax (13,600)
Loss on disposal of assets 30,319
Discount on exercise of options 127,875 86,334
Stock issuances to employees, directors and consultants 193,677
Warrant issuances to consultants and creditors 82,626
Accrued interest on redeemable convertible preferred stock 17,490
Issuance of stock and note for consultant termination
settlement 394,000
Changes in assets and liabilities net of effects from
acquisition:
Accounts receivable (613,771) (377,631)
Income tax refund receivable 55,000
Other current assets 38,710 (16,844) (3,778)
Other assets (8,346) 20,519 61,959
Trade accounts payable 105,068 (147,360) 1,689
Accrued expenses and other current liabilities (21,674) 6,757 3,784
Income taxes payable (84,565) 55,000
Discontinued operations, net (152,662) 936,564
--------- --------- ---------
Net cash used in operating activities (883,740) (2,128,107) (2,185,994)
--------- --------- ---------
Investing activities:
Proceeds from sales of investments in securities 2,682,811 1,244,090
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
Payments relating to acquisition of Alliance & SD&A (477,704)
Purchase of property and equipment (94,772) (43,905) (6,653)
Land development costs (10,526)
Investing activities of discontinued operations, net (42,271)
--------- --------- ---------
Net cash provided by (used in) investing activities (572,476) 2,635,196 1,195,166
--------- --------- ---------
Financing activities:
Repurchase of preferred stock (812,500)
Proceeds from issuances of common stock 120,000 1,226,593 992,769
Proceeds from issuances of preferred stock and warrants 4,570,682
Proceeds from land option 150,000
Proceeds from bank loans 500,000 150,000
Repayments of bank loans (49,694) (513,059)
Proceeds from note payable other 1,000,000
Repayments of note payable other (72,000) (1,072,000) (200,000)
Related party borrowing (repayment) (2,775,000) (350,000) 350,000
Repurchase of common stock (106,250)
Proceeds from receivable for shares 133,333
Financing activities of discontinued operations (19,350)
---------- ---------- ---------
Net cash provided by financing activities 1,631,488 291,534 1,300,502
---------- ---------- ---------
Net increase in cash and cash equivalents 175,272 798,623 309,674
Cash and cash equivalents at beginning of year 1,217,772 419,149 109,475
---------- ---------- ---------
Cash and cash equivalents at end of year $1,393,044 $1,217,772 $ 419,149
========== ========== =========
Supplemental disclosures of cash flow data:
Cash paid (received) during the year for:
Interest $455,276 $60,422 $ 20,771
Financing charge $300,000
Income tax paid (refunded) $155,025 $15,000 $ (55,000)
</TABLE>
Supplemental schedule of non cash investing and financing activities:
In Fiscal 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
$500,000. In conjunction with the acquisition, net assets acquired and
liabilities assumed, less payments prior to year end, were:
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
==========
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 Fiscal
1995 in settlement of a 1994 liability for early termination of a consulting
agreement.
In October, 1995, in accordance with the acquisition agreement between Alliance
Media Corporation and the former owner of SD&A, the purchase price was increased
by $85,699.
In October, 1995, the Company issued 6,250 shares of common stock in settlement
of a liability of $26,250.
In November, 1995, a special county bond measure, with principal totaling
$154,814, was assessed on the Company's land and was recorded as a land
improvement, offset by a liability in accrued other expenses.
In April, 1996, the Company issued 89,192 shares of common stock in settlement
of liabilities to employees, directors and consultants of $193,678.
During the year ended June 30, 1996, the Company issued warrants to consultants
and creditors valued at $82,626.
Accrued and unpaid interest on shares of redeemable convertible preferred stock
during fiscal 1996 totaled $17,490.
On June 30, 1996, intangible assets were increased by $425,000 for accrued
restricted common stock payable to the former owner of SD&A as an additional
payment resulting from SD&A achievement of defined results of operations. See
Note 3.
See Notes to Consolidated Financial Statements.
<PAGE>
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
Stockholders 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
principally in the United States. The Company's mission is to create a
growth-oriented direct marketing and media services company through
acquisitions and internal growth. The Company also owned approximately
seven acres of undeveloped land in Laughlin, Nevada, which was sold on
August 16, 1996.
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 and from the
August, 1996 sale of the Laughlin, Nevada land will be adequate to
finance its current operations and meet interest and debt obligations
in its fiscal year ending June 30, 1997. Thereafter, and in conjunction
with the Company's acquisition and growth strategy, additional
financing may be required to meet potential acquisition payment
requirements. The Company believes that it has the ability to raise
funds through private placements or public offerings of debt and/or
equity securities to meet these requirements. There can be no
assurance, however, that such capital will be required or 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, All-Comm Holdings,
Inc. (formerly, Bullhead Casino Corporation), All-Comm Acquisition
Corporation (formerly, BH Acquisitions, Inc.), Sports-Tech
International, Inc. ("STI") (sold during fiscal year 1995), High School
Gridiron Report, Inc. ("HSGR") (dissolved during fiscal year 1996),
Alliance Media Corporation ("Alliance"), Stephen Dunn & Associates,
Inc. ("SD&A") and BRST Mining Company (dissolved during fiscal year
1996). STI and HSGR are presented as discontinued operations in the
consolidated financial statements. All material intercompany accounts
and transactions are eliminated in consolidation.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The
estimates and assumptions made in the preparation of the consolidated
financial statements relate to the assessment of the carrying value of
assets and liabilities. Actual results could differ from those
estimates.
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.
Available-for-sale Investments:
Pursuant to SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities", the Company's marketable equity securities are
accounted for at market value (Note 16). The fair market value of
short- and long-term investments is determined based on quoted market
prices for those investments.
Land held for Sale:
The cost of acquiring, improving and planning the development of land
was capitalized. Costs related to development were written off when
such plans are abandoned. Interest cost was capitalized in periods in
which activities specifically related to the development of the land
took place. The land was valued at lower of cost or market. The land
was sold on August 16, 1996. See Note 6.
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:
Equipment 5 years
Furniture and fixtures..................2 to 7 years
Computer equipment and software.........3 to 5 years
Leasehold improvements.....over the useful life of the
assets or term of the lease,
whichever is shorter
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 by SD&A's clients 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:
Primary earnings (loss) per common and common equivalent share and
earnings per common and common equivalent share assuming full dilution
are 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 and
warrants, and the conversion of all redeemable convertible preferred
stock.
Reclassifications:
Certain prior year items have been reclassified to conform with
current year 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, 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 had 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.
These acquisition terms were revised pursuant to the Company private
placement financing which occurred on June 7, 1996 (see "Private
Placements of Convertible Preferred Stock") whereby the long term
obligations were revised and approximately $2.0 million was paid in
June, 1996. The balance of $2.1 million is payable in 36 monthly
principal payments of $58,333, plus interest at 8%, starting September
19, 1996.
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 initially 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. The excess was increased by $850,000 on June 30, 1996, due to
achievement of defined results of operations of SD&A for the year ended
June 30, 1996. Such excess, which may increase for any further
contingent payments, is being amortized over the remainder of 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.
Unaudited
1995 1994
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 $(.04) $0.10
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. 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 due to net operating loss carryforwards.
Concurrent with the closing of sale of STI, all operations of HSGR
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 and 1994 were $1,147,829 and $1,743,090, respectively.
5. PROPERTY AND EQUIPMENT
Property and equipment of continuing operations at June 30, 1996 and
1995 consisted of the following:
1996 1995
Office furnishings and equipment $302,607 $246,157
Leasehold improvements 169,771 131,447
-------- --------
472,378 377,604
Less accumulated depreciation
and amortization (173,333) (33,450)
-------- --------
$299,045 $344,154
======== ========
6. LAND HELD FOR SALE:
The Company, through its wholly owned subsidiary, All-Comm Holdings,
Inc., owned approximately seven acres of undeveloped land in Laughlin,
Nevada, which had a carrying value of $921,465 and $766,651 as of June
30, 1996 and 1995, respectively. During fiscal 1996, a bond measure was
passed by Clark County, Nevada authorities, resulting in a special
assessment to fund improvements which would benefit the land. The
principal balance assessed to the Company totaled $154,814 plus
interest at 6.4% and was payable in semi-annual installments over
twenty years. The principal was capitalized by the Company in fiscal
1996. During fiscal 1995, the Company capitalized costs of $10,526 for
its share of costs incurred by area property owners for development
design fees. On August 16, 1996, the land was sold to, and liability
assumed by, an independent third party, via auction, for $952,000 in
cash, resulting in a net gain of approximately $114,000.
7. INTANGIBLE ASSETS:
Intangible assets at June 30, 1996 and 1995, consist of the following:
1996 1995
Covenant not to compete $1,000,000 $1,000,000
Goodwill 7,277,698 6,337,870
---------- ----------
8,277,698 7,337,870
Less accumulated amortization (426,638) (65,101)
---------- ----------
$7,851,060 $7,272,769
========== ==========
The increase in intangible assets during 1996 was principally due to
recording of a contingent payment of $850,000 due to the former owner
of SD&A subsequent to the achievement of defined results of operations
of SD&A during the year ended June 30, 1996.
8. SHORT TERM BORROWINGS AND NOTE PAYABLE TO BANK:
At June 30, 1995, SD&A had an unused $350,000 line of credit from a
bank. During fiscal 1996, the line was increased to $500,000 and was
fully used at June 30, 1996. The line bears interest at prime plus 1/2%
(8.75% at June 30, 1996), is collateralized by substantially all of
SD&A's assets and is personally guaranteed by SD&A's President. The
line of credit also contains certain financial covenants, including
current ratio, working capital, debt and net worth, capital
expenditure, and cash flow requirements.
At June 30, 1995, SD&A had a note payable outstanding totaling $49,694,
which bore interest at the bank's prime rate plus 1.75%. The note
payable required monthly principal repayments of $6,529 plus interest
and was paid in full during 1996.
9. OTHER ACCRUED EXPENSES:
Accrued expenses at June 30, 1996 and 1995 consisted of the following:
1996 1995
-------- --------
Accrued professional fees $290,897 $287,550
Accrued taxes and licenses 116,300
Other 467,215 280,104
-------- --------
Total $758,112 $683,954
======== ========
10. LONG TERM OBLIGATIONS TO RELATED PARTY:
In connection with the acquisition of SD&A on April 25, 1995, Alliance
issued promissory notes totaling $4,500,000 to SD&A's current President
and former sole shareholder. The notes bore interest at prime rate, not
to exceed 10% or drop below 8%, and were payable monthly. Principal
payments were due quarterly, and originally $1,500,000 was due in
quarterly installments during fiscal 1996. All the outstanding common
shares of SD&A were initially pledged to collateralize these notes but
were released in June 1996. In connection with these notes, an
operating covenant agreement included, 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. In June 1996 the operating
covenant agreement was terminated.
During 1996 the July 1, 1996 principal payment of $375,000 was made and
the long term obligations were restructured to defer principal payments
due October 1, 1995, January 1, 1996 and April 1, 1996, until June
1996. In June, 1996, principal payments of $2,025,000 were made and the
remaining obligations of $2,100,000 are now payable at $58,333 per
month, plus interest at 8%, starting September 19, 1996.
11. 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 and 1994, severance
payments totaling approximately $60,000 and $40,000, respectively, were
fully 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.
12. 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:
1997 $324,978
1998 310,968
1999 199,609
2000 130,858
2001 130,858
----------
$1,097,271
==========
Rent expense for continuing operations was approximately $297,000,
$89,000 and $56,000, for fiscal years ended 1996, 1995 and 1994,
respectively. Total rent paid by SD&A to its former owner during 1996
and from the date of acquisition to June 30, 1995 was approximately
$138,000 and $26,000, respectively.
Litigation: 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.
13. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
On June 7, 1996, the Company completed the private placements with
accredited investors of 6,200 shares of Series B redeemable convertible
preferred stock for $3,100,000. The preferred stock is preferred as to
the Company's assets over the common stock in the event of liquidation,
dissolution or winding-up of the Company, prior to distribution of
assets to common stockholders. The preferred stockholders are entitled
to their original investment, plus accrued, unpaid dividends or, if
unavailable, a ratable distribution of existing assets. The holders of
the stock are entitled to receive a dividend payable only on redemption
or credited against conversion, which shall accrue at the rate of 6%
per annum. The convertible preferred stock is convertible, in whole or
in part, at any time and from time to time until the second anniversary
of the date of issuance, into common shares of the company at the
lesser of the price paid divided by $1.25, or 80% of the average
closing sales price of the Company's common stock for the last five
days prior to conversion, and is subject to certain restrictions,
including automatic conversion on the second anniversary of issuance.
Under certain unlikely conditions prior to conversion, the preferred
stock may be redeemed. In addition, the Company issued warrants to
preferred shareholders for 3,100,000 shares of common stock exercisable
at $2.50 for three years.
On June 7, 1996, the Company completed the private placements with
accredited investors of $1,000,000 of convertible notes and warrants
for 3,000,000 shares of common stock. Subsequent to year end, the notes
and warrants were rescinded retroactive to June 7, 1996 and replaced
with 2,000 shares of Series C redeemable convertible preferred stock
for $1,000,000. The Series C redeemable convertible preferred stock is
preferred as to the Company's assets over the common stock in the event
of liquidation, dissolution or winding-up of the Company, prior to
distribution of assets to common stockholders. The preferred
shareholders are entitled to their original investment, plus accrued
unpaid dividends or, if available, a ratable distribution of existing
assets. The holders of the stock are entitled to receive a dividend
payable only on redemption or credited against conversion, which shall
accrue at the same rate of 8% per annum. The Series C redeemable
convertible preferred stock is convertible, in whole or in part, at any
time and from time to time until the second anniversary of the date of
issuance, into common shares of the Company at the price paid divided
by $6.00, and is subject to certain restrictions, including automatic
conversion on the second anniversary of issuance. Under certain
unlikely conditions prior to conversion, the preferred stock may be
redeemed. In addition, the Company issued warrants to preferred
shareholders for 3,000,000 shares of common stock exercisable at $3.00
for three years.
The Company allocated the net proceeds received on the sales of each
series of preferred shares and warrants based on the relative fair
values of the securities at the time of issuance.
14. STOCKHOLDERS' EQUITY:
Preferred Stock: On May 9, 1996, the Company completed the private
placement with an institutional investor of 10,000 shares of Series A
convertible preferred stock for $750,000, $687,000 net after offering
costs. The convertible preferred stock was convertible into common
shares of the Company at the lesser of the price paid divided by $2.50,
or 80% of the closing bid price of the Company's common stock for the
five trading days immediately prior to the conversion date, and was
subject to certain restrictions.
In connection with the June 7, 1996 transactions, as described above,
the Company reacquired the 10,000 shares of Series A convertible
preferred stock for $800,000 plus fees of $12,500.
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.
Effective August 14, 1996, the shareholders and Board of Directors
approved an increase in the number of authorized shares of common
stock, from 6,250,000 to 36,250,000.
During 1996, the Company issued 95,441 shares of restricted common
stock as compensation to various employees, directors and consultants.
In March 1996, the Company sold 75,000 restricted shares of its common
stock for $120,000 to four individuals, including 12,500 shares to
related parties.
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.
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, 1996, the Company has the following outstanding
warrants to purchase 6,370,577 shares of common stock:
<TABLE>
Date Shares of Common Exercise Price Per
Date Issued Exercisable Stock upon Exercise Share of Common Stock
<S> <C> <C> <C>
April 1995 April 1995 33,750 $6.00-8.00
May 1995 May 1995 11,827 $6.00
October 1995 October 1995 30,000 $2.50
January 1996 January 1996 32,500 $3.375-8.00
February 1996 February 1996 15,000 $3.00-4.00
April 1996 April 1996 22,500 $1.60
May 1996 May 1996 100,000 $4.50
June 1996 June 1996 25,000 $4.50
June 1996 August 1996 6,100,000 $2.50-$3.00
---------
Total as of June 30, 1996 6,370,577
=========
</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. In
November, 1995, the Board of Directors increased the number of
available shares by 600,000. 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.
The following summarizes the stock option transactions under the 1991
Plan for the three fiscal years ended June 30, 1996:
Number Option Price
of Shares Per Share
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
Granted 525,003 $2.00 to $3.00
Canceled (91,004) $6.00 to $22.00
-------
Outstanding at June 30, 1996 524,807
=======
All the outstanding options under the 1991 Plan are exercisable and
expire as follows: fiscal 1998 - 2,084, fiscal 2000 - 5,000 and fiscal
2003 - 517,723. All options granted in fiscal years 1996, 1995 and 1994
were issued at fair market value. At June 30, 1996, 179,504 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
three fiscal years ended June 30, 1996:
Number Option Price
of Shares Per Share
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 $3.00 to $16.00
Exercised (12,500) $3.00
Canceled (28,875) $6.00 to $16.00
-------
Outstanding at June 30, 1995 32,416
Canceled (30,166) $4.50 to $6.00
-------
Outstanding at June 30, 1996 2,250
=======
All the outstanding options under these agreements are exercisable and
expire in fiscal 1999. 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).
15. INCOME TAXES:
Income tax expense (benefit) from continuing operations is as follows:
Years Ended June 30,
1996 1995 1994
---- ---- ----
Current:
Federal ($13,600)
State & Local $141,084 $75,000
-------- ------- --------
Deferred
Total $141,084 $75,000 ($13,600)
======== ======= ========
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:
1996 1995 1994
---- ---- ----
Statutory rate (34)% (34)% 34%
Increase (decrease) in tax rate
resulting from:
Loss limitations and valuation
allowance 34 34
Utilization of loss carryforwards (53)
State income taxes 15 134
-- --- --
Effective rate 15% 134% (19)%
== === ==
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.
1996 1995
---- ----
Deferred tax assets:
Net operating loss carryforwards $691,100 $374,000
Amortization of intangibles 142,300 133,000
Other 95,900 158,800
-------- --------
Total deferred tax assets 929,300 665,800
Valuation allowance (789,800) (364,400)
-------- --------
Net deferred tax assets 139,500 301,400
-------- --------
Deferred tax liabilities:
Cash to accrual adjustment (139,500) (262,500)
Other (38,900)
-------- --------
Total deferred tax liabilities (139,500) (301,400)
-------- --------
Total deferred taxes, net $ - $ -
======== ========
The Company has a net operating loss of approximately $2,032,000
available which expires from 2008 through 2011. These losses can only
be offset with future income.
No income taxes are allocable to the gain on sale of discontinued
operations during 1995 due to utilization of net operating loss
carryforwards.
16. GAINS FROM SALES 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 year 1994, the Company realized gains from the sale
of an issue of marketable equity securities of $937,365. 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 and
$21,000 for investment advisory services in 1995 and 1994,
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, the Company 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 and $11,000 in 1995 and 1994,
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, 10, 11, 12, 13 and 15 for additional related
party transactions.
18. NEW ACCOUNTING PRONOUNCEMENTS:
Adoption of the Financial and Accounting Standards Board ("FASB")
Statement of Financial Accounting No. 121, "Accounting for the
Impairment of Long-Lived Assets for Long-Lived Assets to be disposed
of", which is effective for financial statements for fiscal years
beginning after December 15, 1995, is not anticipated to have a
material effect on the Company's consolidated financial statements.
The FASB recently issued Statement of Financial Accounting No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), which is
effective for financial statements for fiscal years beginning after
December 15, 1995. SFAS 123 establishes new financial accounting and
reporting standards for stock-based compensation plans. Entities will
be allowed to measure compensation cost for stock-based compensation
under SFAS 123 or APB Opinion No. 25, "Accounting for Stock Issued to
Employees". The Company elected to remain with the accounting in APB
Opinion No. 25 and will be required to make pro forma disclosure of net
income and earnings per share as if the provisions of SFAS 123 had been
applied. The Company will implement SFAS 123 in the first quarter of
Fiscal 1997.
19. SUBSEQUENT EVENTS:
Effective as of October 1, 1996, the Company acquired Metro Services
Group, Inc. ("Metro") pursuant to a merger agreement. In exchange for
all of the then outstanding shares of Metro, the Company issued
1,814,000 shares of its Common Stock valued at $7,256,000 and
promissory notes (the "Notes") totaling $1,000,000. The Notes shall be
due and payable, together with interest thereon at the rate of 6% per
annum, on June 30, 1998, subject to earlier repayment, at the option of
the holder, upon completion by the Company of a public offering of its
equity securities. The Notes are convertible on or before maturity, at
the option of the holder, into shares of Common Stock at an exchange
rate of $5.38 per share. Metro develops and markets information-based
services, used primarily in direct marketing by a variety of commercial
and not-for-profit organizations, principally in the United States.
On October 17, 1996, the Company filed a Form SB-2 registration
statement (the "Registration Statement") with the Securities and
Exchange Commission. The Registration Statement relates to an
underwritten public offering (the "Underwritten Offering") of 2,100,000
shares of Common Stock, of which 1,750,000 shares are being offered by
the Company and 350,000 are being offered by certain stockholders of
the Company. It also relates to the sale of 1,381,056 shares (the
"Delayed Shares") of Common Stock by certain selling stockholders on a
delayed basis pursuant to Rule 415 of the Securities Act of 1933, as
amended, none of whom are members of, or affiliated with, the Board or
management. Of such Delayed Shares, 1,291,588 shares will be subject to
"lock up" provisions that prohibit resale of such shares for a period
of nine months from the date of consummation of the Underwritten
Offering.
In connection with the Company's filing on Form SB-2, the Convertible
Preferred Stock in the accompanying financial statements has been
reclassified in accordance with the Securities and Exchange
Commission's requirements. Accordingly, the Redeemable Convertible
Preferred Stock is no longer presented as part of stockholders' equity
and its initial carrying value is being increased to its redemption
value by periodic accretions against paid in capital. In conjunction
with this, previously recorded dividends of $17,490 have been
reclassified as interest and the previously reported net loss of
$1,076,883 increased to $1,094,373. There was no impact on earnings per
share, as the dividends had previously increased the net loss
attributable to common stockholders to $1,094,373.
The Company and certain of its securityholders have agreed, on December
23, 1996, to effect a recapitalization of the Company's capital stock,
whereby: (i) the Company's Series B Convertible Preferred Stock, par
value $.01 per share (the "Series B Preferred Stock"), will be
converted, in accordance with its terms without the payment of
additional consideration, into 2,480,000 shares of Common Stock; (ii)
the Company's Series C Convertible Preferred Stock, par value $.01 per
share (the "Series C Preferred Stock"), will be repurchased for
promissory notes in an aggregate principal amount of $1.0 million,
which promissory notes will bear interest at a rate of 8% per annum and
will be repayable on demand at any time from and after the date of the
consummation of an underwritten public offering by the Company of
Common Stock, but in any event such notes will mature June 7, 1998;
(iii) all accrued interest on the Series B Preferred Stock and the
Series C Preferred Stock will be converted into 88,840 shares of Common
Stock; (iv) warrants related to the Series C Preferred Stock, currently
exercisable for 3,000,000 shares of Common Stock, will be exchanged for
600,000 shares of Common Stock; (v) agreements with certain of the
Company's securityholders to issue, upon consummation of the
Underwritten Offering, warrants exercisable for 1,038,503 shares of
Common Stock in consideration for such securityholders' agreement to
certain lock-up arrangements will be rescinded at no cost to the
Company; and (vi) options held by two of the Company's principal
executive officers to purchase 300,000 shares of common stock will be
cancelled at no cost to the Company. Upon conversion of the Series B
Preferred Stock and accumulated interest thereon into Common Stock on
December 23, 1996, the Company incurred a non-cash, non-recurring
dividend for the difference between the conversion price and the market
price of the Common Stock, estimated to be $8.5 million. This dividend
will not impact net income (loss), but will impact net income (loss)
attributable to common stockholders in the calculation of earnings per
share.
In connection with the Underwritten Offering, the Company will incur a
non-recurring non-cash charge estimated to be $75,000 in the fiscal
quarter in which the Underwritten Offering is consummated, as a result
of the issuance by the Company of warrants exercisable for an aggregate
of up to 160,414 shares of Common Stock to certain stockholders of the
Company as consideration for the agreement of such stockholders to
certain lock-up arrangements.
<PAGE>
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/ J. Jeremy Barbera
Chairman of the Board and
Chief Executive Officer
By: /s/ Scott Anderson
Chief Financial and Accounting Officer
Date: June 17, 1997
<PAGE>
SCHEDULE I
ALL-COMM MEDIA CORPORATION
CONDENSED BALANCE SHEET
June 30, 1996 and 1995
ASSETS 1996 1995
------ ---- ----
Current assets:
Cash and cash equivalents $ 976,644 $479,045
Other current assets 54,077 93,781
--------- --------
Total current assets 1,030,721 572,826
--------- --------
Property and equipment, at cost 29,942 26,992
Accumulated depreciation 11,641 3,175
--------- --------
Net property and equipment 18,301 23,817
Investments in and advances
to subsidiaries 8,008,734 5,136,786
Other assets 23,595 9,355
--------- ---------
Total assets $9,081,351 $5,742,784
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 259,327 $ 167,838
Accrued salaries and wages 77,025 75,366
Other accrued expenses 476,615 335,048
--------- ---------
Total current liabilities 812,967 578,252
Other liabilities 17,490
--------- ---------
Total liabilities 830,457 578,252
--------- ---------
Redeemable convertible preferred stock 1,306,358
Stockholders' equity:
Common stock 31,985 30,281
Additional paid-in capital 13,173,520 10,300,847
Treasury shares, at cost (135,469) (135,469)
Accumulated deficit (6,125,500) (5,031,127)
--------- ---------
Total stockholders' equity 6,944,536 5,164,532
--------- ---------
Total liabilities and stockholders'
equity $9,081,351 $5,742,784
========== ==========
<PAGE>
SCHEDULE I
ALL-COMM MEDIA CORPORATION
CONDENSED STATEMENT OF OPERATIONS
Years Ended June 30, 1996 and 1995
1996 1995
---- ----
Income:
Gains from sales of securities $1,579,539
Equity in earnings (losses) of subsidiaries $ 499,033 (18,320)
---------- ----------
Total 499,033 1,561,219
---------- ----------
Costs and expenses:
General and administrative 1,455,537 1,386,471
Depreciation and amortization 57,811 12,399
---------- ----------
Total 1,513,348 1,398,870
---------- ----------
Income (loss) from operations (1,014,315) 162,349
---------- ----------
Other income (expense):
Loan commitment fee (300,000)
Interest income 10,081 15,446
Interest expense (90,139) (8,972)
Other 318
---------- ----------
Subtotal (80,058) (293,208)
---------- ----------
Loss from continuing operations before
discontinued operations (1,094,373) (130,859)
Loss from discontinued operations:
Gain on sale of discontinued operations 322,387
Loss from discontinued operations (81,131)
---------- ----------
Net income (loss) $(1,094,373) $ 110,397
========== ==========
<PAGE>
SCHEDULE I
ALL-COMM MEDIA CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
Years Ended June 30, 1996 and 1995
1996 1995
---- ----
Operating activities:
Net cash flows used by operating activities ($1,108,968) ($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 (2,346,665) (36,048)
Purchase of property and equipment (2,950) 19,613
---------- ----------
Net cash provided (used) by
investing activities (2,349,615) 2,094,923
---------- ----------
Financing activities:
Proceeds from issuances of common stock 120,000 1,226,593
Proceeds from issuances of redeemable
preferred stock 4,570,682
Repurchase of preferred stock (812,500)
Proceeds from land option 150,000
Proceeds from note payable other 1,000,000
Repayments of note payable other (72,000) (1,422,000)
---------- ---------
Net cash provided by financing activities 3,956,182 804,593
---------- ---------
Net increase in cash and cash equivalents 497,599 414,279
Cash and cash equivalents at beginning of year 479,045 64,766
---------- ---------
Cash and cash equivalents at end of year $ 976,644 $ 479,045
========== =========
Exhibit 11
STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
Fiscal Year
-----------
1996 1995 1994
--------------------------------------------
<S> <C> <C> <C>
Net income per share was calculated as follows:
Income (loss) from continuing operations before discontinued
operations ($1,094,373) ($130,859) $ 86,807
Income (loss) from discontinued operations $241,256 ($2,896,694)
Net income (loss) ($1,094,373) $110,397 ($2,809,887)
Primary:
Weighted average common shares outstanding 3,068,278 1,804,827 1,334,034
Incremental shares under stock options and warrants
computed under the treasury stock method using
the average market price of the issuer's common
stock during the periods 280,758 2,713 134,713
Incremental shares under convertible preferred stock 220,556
Weighted average common and common equivalent shares
outstanding 3,068,278 1,807,540 1,468,747
Income (loss) per common share from continuing
operations ($.36) ($.07) $.06
Income (loss) per common share from discontinued
operations $.13 ($1.97)
Net income (loss) per common share ($.36) $.06 ($1.91)
Fully diluted:
Weighted average common shares outstanding 3,068,278 1,804,827 1,334,034
Incremental shares under stock options and warrants
computed under the treasury stock method using
the marketprice of the issuer's common stock
at the end of the periods if higher than the
average market price 420,652 13,565 134,713
Incremental shares under convertible preferred stock 220,556
Weighted average common and common equivalent shares
outstanding 3,068,278 1,818,392 1,468,747
Income (loss) per common share from continuing
operations ($.36) ($.07) $.06
Income (loss) per common share from discontinued
operations $.13 ($1.97)
Net income (loss) per common share ($.36) $.06 ($1.91)
</TABLE>
Exhibit 22.1
SUBSIDIARIES OF SPORTS-TECH, INC.
All-Comm Acquisition Corporation (100%)
All-Comm Holdings, Inc. (100%)
Alliance Media Corporation (100%)
Stephen Dunn & Associates, Inc. (100%)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ALL-COMM MEDIA CORPORATION AS OF AND FOR
THE YEAR ENDED JUNE 30, 1996 INCLUDED IN THIS REPORT ON FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-1-1995
<PERIOD-END> Jun-30-1996
<CASH> 1,393,044
<SECURITIES> 0
<RECEIVABLES> 2,716,654
<ALLOWANCES> (34,906)
<INVENTORY> 0
<CURRENT-ASSETS> 5,103,915
<PP&E> 472,378
<DEPRECIATION> (173,333)
<TOTAL-ASSETS> 13,301,066
<CURRENT-LIABILITIES> 3,453,190
<BONDS> 1,596,982
1,306,358
0
<COMMON> 31,985
<OTHER-SE> 6,944,536
<TOTAL-LIABILITY-AND-EQUITY> 13,301,066
<SALES> 15,889,210
<TOTAL-REVENUES> 15,889,210
<CGS> 10,882,437
<TOTAL-COSTS> 10,882,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 505,128
<INCOME-PRETAX> (953,289)
<INCOME-TAX> 141,084
<INCOME-CONTINUING> (1,094,373)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,094,373)
<EPS-PRIMARY> $(.36)
<EPS-DILUTED> $(.36)
</TABLE>
