UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to______________________
Commission file number 0-16730
MARKETING SERVICES GROUP, INC.
(Name of small business issuer in its charter)
Nevada 88-0085608
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
333 Seventh Avenue, 20th Floor
New York, New York 10001
------------------ -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (917) 339-7100
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)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its fiscal year ended June 30, 1999 are $82,241,894.
As of October 25, 1999, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $204,600,000.
As of October 25, 1999, there were 25,420,038 shares of the Registrant's common
stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
Introduction
- ------------
On October 8, 1999, Marketing Services Group, Inc. ("MSGI" or the "Company"),
filed with the Securities and Exchange Commission (the "Commission") its Annual
Report on Form 10-K for its fiscal year June 30, 1999 (the "1999 Form 10-K").
The information called for by items 10, 11, 12 and 13 of Part III of Form 10-K
was not included in the body of the 1999 Form 10K as filed, but was incorporated
by reference to the Company's Proxy Statement which was expected to be filed
with the Commission within the 120-day period. Because the Company is not in
fact filing its Proxy Statement with in such 120 day period, this Form 10-K/A
amends the 1999 Form 10-K by deleting therefrom the caption and first paragraph
and substituting therefore the following replacements for Items 3, 10, 11, 12
and 13.
Item 3- Legal Proceedings
- -------------------------
In June 1999, certain employees of SD&A voted against representation by the
International Longshore and Warehouse Union ("ILWU"). The ILWU has filed unfair
labor practices with the National Labor Relations Board ("NLRB") alleging that
the Company engaged in unlawful conduct prior to the vote. The NLRB has issued a
complaint seeking a bargaining order and injunctive relief compelling the
Company to recognize and bargain with the ILWU. The Company intends to
vigorously defend against these charges. An unfavorable finding will not have
any direct financial impact on the Company.
In September 1999, an action was commenced against the Company by Jason Lyons in
the Supreme Court of New York, Kings County alleging damages of $4.3 million in
connection with the Company's alleged failure to deliver warrants due the
plaintiff. The Company denies all liability and intends to vigorously defend
against this action.
The Company has been party to certain legal proceedings in the ordinary course
of its business. 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 10 - Executive Officers and Directors of the Registrant
- ------------------------------------------------------------
The Company's executive officers and directors and their positions with MSGI
are as follows:
Name Age Position
- ---- --- --------
Alan I. Annex 37 Director and Secretary
J. Jeremy Barbera 43 Chairman of the Board of Directors and
Chief Executive Officer
Robert M. Budlow 38 Vice President of MSGI and President of
Metro Direct
Cindy H. Hill 30 Chief Financial Officer
Edward E. Mullen 46 President and Director
S. James Coppersmith 67 Director
John T. Gerlach 68 Director
Seymour Jones 68 Director
Michael E. Pralle 43 Director
C. Anthony Wainwright 66 Director
<PAGE>
Mr. Annex has been a Director and Secretary of the Company since May 1997. Mr.
Annex is a member of the M&A Committee of the Board of Directors. He has been a
partner in the law firm of Camhy Karlinsky & Stein LLP since July 1995, where he
practices corporate and securities law. Camhy Karlinsky & Stein LLP is the
Company's legal counsel. From July 1994 to June 1995, Mr. Annex was Counsel to
said firm. Prior thereto he was associated with Proskauer Rose, LLP.
Mr. Barbera has been Chairman and Chief Executive Officer of the Company since
April 1997 and was President of the Company from April 1997 to May 1999 and was
a Director and Vice President of the Company from October 1996 to April 1997. He
has been Chief Executive Officer of Metro Direct since its formation in 1987.
Mr. Barbera is a member of the M&A Committee of the Board of Directors. Mr.
Barbera has eighteen years of experience in data management services, and over
twenty years of experience in the entertainment marketing area. Mr. Barbera is a
director of Greatergood.com.
Mr. Budlow has been Vice President of the Company since October 1996 and
President of Metro Direct since April 1997. Prior thereto, he was Executive Vice
President and Chief Operating Officer of Metro since 1990. He has thirteen years
of experience in database management services and subscription, membership and
donor renewal programs.
Ms. Hill has been Chief Financial Officer of the Company since June 1, 1998, and
was Corporate Controller of the Company from January to May 1998. Prior thereto,
she was a manager in the Business Assurance Division of PricewaterhouseCoopers
LLP where she was employed for the previous six years. Ms. Hill is a Certified
Public Accountant.
Mr. Mullen has been President of the Company since May 15, 1999. Previously, Mr.
Mullen served as President and Chief Executive Officer of CMG Direct. Prior to
CMG Direct, Mr. Mullen was the founding President of the Massachusetts
Interactive Media Council, MIMC, and is credited for the accelerating growth of
the Internet industry in Massachusetts. He has held several board of directors
positions and has worked with non-profit organizations, including WGBH-TV's
Business Executive Council and Business & Education for Schools & Technology
(BEST).
Mr. Coppersmith has been a Director of the Company since June 1996. Mr.
Coppersmith is the chairman of the Compensation Committee and a member of the
Audit Committee of the Board of Directors. He was Chairman of the Board of
Trustees of Boston's Emerson College from 1994 until his term expired in
December 1997. Until his retirement in 1994, Mr. Coppersmith 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 B.J.'s Wholesale
Club, Sun America Asset Management Corporation and The Boston Stock Exchange.
Mr. Gerlach has been a Director of the Company since December 1997. Mr. Gerlach
is the chairman of the M&A Committee and a member of the Audit Committee and the
Compensation Committee of the Board of Directors. He is presently Senior
Executive Professor of the graduate business program and an associate professor
of finance at Sacred Heart University in Fairfield, CT. Previously, Mr. Gerlach
was a Director in Bear Stearns' corporate finance department, with
responsibility for mergers and financial restructuring projects; he was
President and Chief Operating Officer of Horn & Hardart, supervising restaurant
and mail order subsidiaries, including Hanover Direct; and he was the Founder
and President of Consumer Growth Capital, a venture capital firm. Mr. Gerlach
also serves as a director for Uno Restaurant Co.; SAFE Inc.; Cycergie (a French
company); Akona Corp.; the Board of Regents at St. John's University in
Collegeville, MN; and is a member of an advisory board for the College of
Business & Administration at Drexel University.
<PAGE>
Mr. Jones has been a Director of the Company since June 1996. Mr. Jones is the
chairman of the Audit Committee. Since September 1995, Mr. Jones has been a
professor of accounting at New York University. Prior thereto, from April 1974
to September 1995, Mr. Jones was a senior partner of the accounting firm of
PricewaterhouseCoopers L.L.P. Mr. Jones has over 35 years of accounting
experience and over ten years of experience as an arbitrator and as an expert
witness, particularly in the area of mergers and acquisitions. Mr. Jones also
functions as a consultant to Milberg Factors and CHF Industries and acts as an
expert witness in accounting matters. Mr. Jones also serves as a director for
Reliance Bank.
Mr. Pralle has been a Director of the Company since September 1999. Mr. Pralle
was also a director of the Company from May 1998 to April 1999. Mr. Pralle is
currently the President of GE Capital's Equity Capital Group, with
responsibility for making common equity, convertible preferred stock and debt
investments in private and public companies in the US, Europe and Asia. He
joined GE Capital in 1989 and, prior to his current appointment in 1996, was
most recently President, GE Capital Asia Pacific. Before joining GE Capital, Mr.
Pralle spent six years with management consultants, McKinsey & Co. in their
London and Hong Kong offices.
Mr. Wainwright has been a Director of the Company since August 1996 and was also
a Director of the Company from the acquisition of SD&A until May 1996. Mr.
Wainwright is a member of the Compensation Committee of the Board of Directors.
Mr. Wainwright is currently Vice Chairman of the advertising agency McKinney &
Silver and was Chairman of the advertising firm Harris Drury Cohen, Inc., from
1995 to 1997. From 1994 to 1995, he served as a senior executive with Cordient
PLC'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 Saatchi & Saatchi in New York. Mr. Wainwright
also serves as a director of Caribiner International, Gibson Greetings, Inc.,
Del Webb Corporation, American Woodmark Corporation, Danka P.L.C. and Advanced
Polymer Systems.
Section 16(A) Beneficial Ownership Reporting Compliance
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, 1999, 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, 1999, except that
Mr. Mullen made one late filing due to administrative timing errors with respect
to reporting the initial filing upon being appointed President and to the Board
of Directors.
<PAGE>
Item 11 - Executive Compensation:
- --------------------------------
The following table provides certain information concerning compensation of the
Company's Chief Executive Officer and any other executive officer of the Company
who received compensation in excess of $100,000 during the fiscal year ended
June 30, 1999:
SUMMARY COMPENSATION TABLE
Fiscal
Year Securities
Ended Annual Annual Underlying
Name and Principal Position June 30, Salary($) Bonus($) Options/SARs(#)
- --------------------------- ------- -------- ------- --------------
J. Jeremy Barbera(1)(2) 1999 298,077
Chairman of the Board, 1998 198,077 50,000
& CEO 1997 120,883 1,000,000
Robert N. Budlow(3) 1999 178,654
VP, MSGI and 1998 144,231
President, Metro Direct 1997 93,750
Cindy Hill 1999 110,096
CFO
Edward Mullen(4) 1999 33,649 400,000
President
(1)Mr. Barbera was appointed Chairman of the Board, Chief Executive Officer and
President effective March 31, 1997. Ed Mullen assumed the position of
President upon his appointment in May 1999. Prior thereto, commencing with
the October 1, 1996 acquisition of Metro, he was Vice President of MSGI and
President and CEO of Metro. Pursuant to an employment agreement dated May 27,
1997, his annual salary increased from $150,000 to $250,000 through May 31,
1998. As of June 30, 1997, Mr. Barbera's salary reflects earnings for the
nine months from the date of Metro's acquisition.
(2)During fiscal year end June 30, 1998, Mr. Barbera forgave all interest due
him on a note payable and forgave an increase in his annual salary from May
27, 1997 to December 31, 1997. In consideration for this, the Board of
Directors granted Mr. Barbera options to acquire 50,000 shares of Common
Stock at the then current fair market price.
(3)The annual salary for Mr. Budlow was $125,000 for 1997. Due to the
acquisition of Metro on October 1, 1996, his annual compensation only
reflects nine months of salary. During fiscal year end June 30, 1998, Mr.
Budlow forgave an increase in his salary from October 1, 1997 to December 31,
1997. As of January 1, 1998, his salary was increased in accordance with his
employment agreement.
(4)Due to the acquisition of CMG Direct Corporation on May 13, 1999, Mr.
Mullen's annual compensation only reflects a month and a half of salary.
<PAGE>
STOCK OPTION GRANTS
The table below provides information relating to stock options granted to the
Named Executive Officers during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN THE LAST FISCAL YEAR
Individual Grant
----------------
Number of % of Total Exercise
Securities Under- Options/SARs or Base
lying Options/ Granted to Employees Price ($ per Expiration Grant Date
Name SARs Granted(#) in Fiscal Year(2) share) Date Value
- ---- -------------- ---------------- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Ed Mullen (1) ..............400,000 41% $5.17 4/06 $8.25
</TABLE>
(1) Mr. Mullen's options are exercisable as follows: 133,000 options are
available for exercise immediately, and the remaining 267,000 options
become exercisable at a rate of 11,125 options monthly for a period 24
months beginning in June 1999.
(2) During the fiscal year ended June 30, 1999, all employees and all
non-employee Directors of the Company received options to purchase a total
of 969,200 shares of Common Stock.
AGGREGATE OPTIONS EXERCISED IN THE LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth information regarding the number and value of
securities underlying unexercised stock options held by the Named Executive
Officers as of June 30, 1999.
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-
Unexercised Money
Options/SARs Options/ SARs
at Fiscal at Fiscal
Number of Year End(#) Year End ($)(1)
Securities Value Exercisable/ Exercisable/
Name Exercised (#) Realized($) Unexercisable Unexercisable
- ---- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
J. Jeremy Barbera ............50,000 1,494,922 1,000,000/0 23,146,334/0
Robert Budlow .....................- - 40,000/15,000 923,120/346,170
Edward Mullen .....................- - 144,125/255,875 3,029,219/5,377,981
Cindy Hill ...................10,000 372,845 23,334/16,666 384,618/923,120
</TABLE>
(1) Fair market value of $26.188 per share at June 30, 1999 was used to
determine the value of in-the-money options.
<PAGE>
COMPENSATION OF DIRECTORS
Commencing July 1, 1998, Directors who are not employees of the Company will
receive an annual retainer fee of $10,000, $1,000 for each Board Meeting
attended, $500 for each standing committee meeting attended and $500 for each
standing committee meeting for the Chairman of such Committee. Such Directors
will also be reimbursed for their reasonable expenses for attending board and
committee meetings, and will receive an annual grant of options to acquire
10,000 shares of common stock for each fiscal year of service, at an exercise
price equal to the fair market value on the date of grant. 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. Mr. Annex has indicated that since his firm acts as
counsel to the Company he would waive that described cash and stock retainer.
Mr. Pralle has indicated that since his Company is a large shareholder of the
Company he would waive that described cash and stock retainer.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
The Company has entered into employment agreements with each of its named
executives.
Mr. Barbera was appointed to the position of Chairman of the Board, Chief
Executive Officer and President of MSGI by the Board, effective March 31, 1997.
Ed Mullen assumed the position of President upon his appointment in May 1999.
Mr. Barbera had previously served as President and CEO of Metro under an
employment contract dated October 1, 1996. Under the contract, Mr. Barbera's
base salary was $150,000 for the first year of employment. On May 27, 1997, the
Company amended and restated Mr. Barbera's employment contract, based on the
additional responsibilities he assumed on March 31, 1997. Under the terms of the
amended contract, Mr. Barbera's employment term is for three years beginning May
27, 1997, and is automatically renewable for an additional three year period,
unless the Company or Mr. Barbera gives written notice; his amended annual base
salary for the first year of the amended employment term is $250,000, $300,000
for the second year and $350,000 for the third year. Mr. Barbera is also
eligible to receive raises and bonuses in each year of the employment contract,
at the determination of the Compensation Committee of the Board of Directors of
the Company, based on earnings and other targeted criteria. On May 27, 1997, Mr.
Barbera was granted options to acquire 1,000,000 shares of Common Stock of the
Company; 333,334 exercisable at $2.625 per share, 333,333 exercisable at $3.00
per share and 333,333 exercisable at $3.50 per share. One third of the options
in each tranche vest immediately and one third of each tranche will become
available on each of the next two anniversary dates. In a separate agreement,
Mr. Barbera forgave the increase in his annual salary from May 27, 1997 to
December 31, 1997. If Mr. Barbera is terminated without cause (as defined in the
agreement), then MSGI shall pay him a lump sum payment equal to one year of his
salary at the then base rate.
Mr. Barbera has agreed in his employment agreement (i) not to compete with MSGI
or its subsidiaries, or to be associated with any other similar business during
the employment term, except that he may own up to 5% of the outstanding common
stock of certain corporations, as described more fully in the employment
agreement, and (ii) upon termination of employment with MSGI and its
subsidiaries, not to solicit or encourage certain clients of MSGI or its
subsidiaries to cease doing business with MSGI and its subsidiaries and not to
do business with any other similar business for a period of three years from the
date of such termination.
Mr. Budlow entered into an employment agreement effective October 1, 1996,
providing for his employment as Executive Vice President of MSGI & President of
Metro. The 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 Mr. Budlow gives written notice. The base salary during the
Employment Term is $125,000 for the first year, $165,000 for the second year and
$200,000 for the third year. Mr. Budlow is 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
agreement also provides for the granting to Mr. Budlow of options to acquire
Common Stock if and as determined by the Option Plan Committee. If Mr. Budlow is
terminated without cause (as defined in the agreement), then MSGI shall pay him
a lump sum payment equal to one year of his salary at the then base rate.
Mr. Budlow has agreed in his employment agreement (i) not to compete with Metro
or to be associated with any other similar business during the Employment Term,
except that he may own up to 5% of the outstanding common stock of certain
corporations, as described more fully in his 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.
<PAGE>
Ms. Hill entered into an employment agreement effective January 1, 1999,
providing for employment as Chief Financial Officer of the Company. The
agreement provides for a two year term expiring on December 31, 2000 (the
"Employment Term"). The base salary during the Employment Term is $125,000 for
the first year and $150,000 for the second year. Ms. Hill is 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 Ms. Hill of options
to acquire Common Stock if and as determined by the Compensation Committee. If
Ms. Hill is terminated without cause (as defined in the agreement), then MSGI
shall pay her a lump sum payment equal to 6 months of her salary at the then
base rate.
Ms. Hill has agreed in her employment agreement (i) not to compete with MSGI or
to be associated with any other similar business during the Employment Term,
except that she may own up to 5% of the outstanding common stock of certain
corporations, as described more fully in her employment agreement, and (ii) upon
termination of employment with MSGI, not to solicit or encourage certain clients
of MSGI (as more fully described in the relevant employment agreement), to cease
doing business with MSGI, and not to do business with any other similar
business, for a period of three years from the date of such termination.
Mr. Mullen entered into an employment agreement effective May 13, 1999,
providing for employment as President of MSGI and certain subsidiaries. The
agreement provides for an initial term expiring on May 30, 2003 (the "Employment
Term") and is renewable for an additional four-year term unless MSGI or Mr.
Mullen gives written notice. The base salary during the Employment Term is an
annual rate of $275,000 through June 30, 1999, $300,000 for the period July 1,
1999 through December 31, 1999, $350,000 for the period January 1, 2000 through
June 30, 2000. Thereafter during the Employment Term the base salary shall be
further increased by 10% of the then current base salary on each July 1st,
commencing July 1, 2000 and by $27,500 on each Janaury 1, commencing on January
1, 2001. Mr. Mullen is eligible to receive annual bonuses of up to 75% of the
base salary in effect based upon the achievement of earnings and other targeted
criteria if and as determined by the Compensation Committee of the Board of
Directors. At Mr. Mullen's election, the bonus may be paid half in cash and half
in common stock of MSGI. The agreement also provides for the granting to Mr.
Mullen of 400,000 options to purchase shares of Common Stock at an exercise
price of $5.17 per share. The options vest at a rate of 133,000 immediately and
the remaining 267,000 options at a rate of 11,124 options per month for 24 equal
monthly installments beginning with June 1999. In addition, Mr. Mullen may be
eligible for further granting of stock options on to acquire Common Stock if and
as determined by the Compensation Committee. If Mr. Mullen is terminated without
cause (as defined in the agreement) due to a change in control of MSGI or Mr.
Mullen electively terminates for good reason (as defined in the agreement), then
MSGI shall pay him a lump sum payment equal to 24 months of his salary at the
then base rate plus two times the historical bonus earned, or shall pay him
$300,000 if the date of termination occurs prior to June 30, 2001.
Mr. Mullen has agreed in his employment agreement (i) not to compete with MSGI
or to be associated with any other similar business during the Employment Term,
except that he may own up to 5% of the outstanding Common Stock of certain
corporations, as described more fully in his employment agreement, and (ii) upon
termination of employment with MSGI, not to solicit or encourage certain clients
of MSGI (as more fully described in the employment agreement) to cease doing
business with MSGI, and not to do business with any other similar business, for
a period of one year from the date of such termination.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPAITON
The members of the Compensation Committee are S. James Coppersmith, C. Anthony
Wainwright, and John Gerlach. Mr. Coppersmith is Chairman of the Committee.
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 25, 1999 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 Named Executive Officers:
J. Jeremy Barbera(2)............................ 2,182,400 8.3%
Robert M. Budlow(3)............................. 479,200 1.9%
Cindy Hill(4)................................... 26,334 *
Edward Mullen(5)................................ 210,875 *
Alan I. Annex(6)................................ 59,600 *
S. James Coppersmith(7)......................... 96,000 *
Seymour Jones(8)................................ 81,000 *
C. Anthony Wainwright(9)........................ 108,408 *
John Gerlach(10)................................ 46,000 *
Michael Pralle.................................. - *
All Directors and Executive Officers
as a group (10 persons)........................ 3,289,817 12.6%
5% Stockholders:
General Electric Capital Corporation(11)........ 4,340,622 17.1%
CMGI Inc.(12)................................... 2,321,084 9.1%
- -------------
* 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 1,000,000 beneficially owned shares of Common Stock issuable upon
the exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999
(3) Includes 55,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999.
(4) Includes 23,334 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999.
<PAGE>
(5) Includes 210,875 beneficially owned shares of Common Stock issuable upon
the exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999.
(6) Includes 58,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999.
(7) Includes 46,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999 and 50,000 beneficially owned shares
of Common Stock issuable upon the exercise of currently exercisable
warrants.
(8) Includes 56,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999 and 25,000 beneficially owned shares
of Common Stock issuable upon the exercise of currently exercisable
warrants.
(9) Includes 105,000 beneficially owned shares of Common Stock issuable upon
the exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999 and 50,000 beneficially owned shares
of Common Stock issuable upon the exercise of currently exercisable
warrants.
(10) Includes 42,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of September 30, 1999.
(11) The address for the 5% Stockholder is as follows: 120 Long Ridge Road,
Stamford, Connecticut 06927.
(12) The address for the 5% Stockholder is as follows: 100 Brickstone Square,
Andover, MA 01810.
<PAGE>
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
Transactions with Mr. Barbera: On December 2, 1998, MSGI loaned Mr. Barbera
$100,000 pursuant to a promissory note. The note bore interest at the rate
earned on the Company's money market fund. Principal and interest were payable
in full in a lump sum. In April 1999, the promissory note, including accrued
interest was repaid.
Transactions with Mr. Annex: Mr. Annex, Secretary and a Director of the Company,
is a partner in the law firm of Camhy Karlinsky & Stein LLP, which provides
legal services to the Company. The Company incurred expenses aggregating
approximately $94,000 during fiscal 1999. Mr. Annex has informed the Company
that such fees did not represent more than 5% of such firm's revenues for its
fiscal years ending during such periods. The Company believes that the fees for
services provided by the law firm were at least as favorable to the Company as
the fees for such services from unaffiliated third parties.
Transactions with 5% Stockholders:
Transactions with GE Capital: In connection with the acquisition of CMG Direct
Corporation, the Company entered into a promissory note agreement with GE
Capital in the amount of $10,000,000. The note is payable in full on November
17, 1999 and accrues interest at the rate of 12% per annum. Interest is payable
in arrears on August 17, 1999 and on the maturity date. Concurrent with issuance
of the promissory note, the original outstanding warrant which was issued in
connection with GE Capital's purchase of redeemable convertible preferred stock
was amended. Upon an occurrence of a Qualified Secondary Offering, as defined in
the agreement, the Original Warrant was fixed at 200,000 shares with an exercise
price of $.01 per share. The amendment changed the amount and exercise price per
share to 300,000 shares with an exercise price of one-third of the secondary
offering price upon an occurrence of a Qualified Secondary Offering. In August
1999, the warrant was amended a second time to amend the definition of a
Qualified Secondary Offering to include a Qualified Private Placement, as
defined, and to change the time frame for the completion of a Qualified
Secondary Offering or Private Placement from December 31, 1999 to on or after
December 20, 1999 through April 30, 2000.
In August 1999, the promissory note was amended to extend the maturity date to
October 15, 2000 with interest to be paid quarterly and provides for certain
increases in the interest rate based on the time the principal remains
outstanding. In addition, in the event the Company completes a private placement
as defined on or before December 20, 1999, then the maturity date of the
promissory note is subject to acceleration. During September 1999, the Company
completed a private placement of common stock for net proceeds of approximately
$30.8 million. In accordance with the amendment, $5,000,000, net of discount is
included in current liabilities and the remaining balance is due on July 1,
2000.
Transactions with CMGI, Inc.: On May 13, 1999, MSGI acquired all of the
outstanding capital stock of CMG Direct Corporation, a wholly-owned subsidiary
of CMGI, Inc. Total consideration for the acquisition was $33,029,237 which
included $13,464,857 in cash and an aggregate of 2,321,084 shares of common
stock of MSGI valued at $19,334,621.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-K/A to be signed on its behalf
by the undersigned hereunto duly authorized.
MARKETING SERVICES GROUP, INC.
By: /s/ Jeremy Barbera
------------------
Name : J. Jeremy Barbera
Title : Chief Executive Officer
By: /s/ Cindy H. Hill
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Name : Cindy H. Hill
Title : Chief Financial Officer
Date: October 28, 1999
