SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the fiscal year ended June 30, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from to
Commission File No. 0-9311
CENTRAL CAPITAL VENTURE CORPORATION.
---------------------------------------------------------
(Name of small business issuer as specified in its charter)
NEVADA 87-0269260
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
310 Village Park, 2660 Townsgate Road, Westlake Village, California 91361
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (805) 494-4766
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001
par value.
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act 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 [] NO [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. [ ]
Expenses for the fiscal year ended December 31, 1999 totaled $(143,240) and for
the six month period ended June 30, 2000 totaled $(57,163).
As of June 30, 2000, the aggregate market value of the voting stock held by
non-affiliates of the registrant (based upon the average of the closing bid and
asked prices on such date) was approximately $-0-.
1
<PAGE>
As of June 30, 2000, the registrant had outstanding 2,685,224 shares of Common
Stock.
Exhibit index page number: 21
Total sequentially numbered pages in this document: 44
CENTRAL CAPITAL VENTURE CORPORATION
Form 10-K Report for the Six Month Period
Ended June 30, 2000
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business .................................................... 3
Item 2. Investments ................................................. 10
Item 3. Legal Proceedings ........................................... 12
Item 4. Submission of Matters to a Vote of Security Holders.......... 12
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters ............................... 12
Item 6. Selected Financial Data..................................... 13
Item 7. Management's Discussion and Analysis of Financial
Condition.................................................. 14
Item 8. Financial Statements and Supplementary Data.................. 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ..................... 16
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act ...... 16
Item 11. Executive Compensation ..................................... 19
Item 12. Security Ownership of Certain Beneficial Owners
and Management ........................................ 19
Item 13. Certain Relationships and Related Transactions ............. 21
2
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ...................................... 21
Signatures .......................................................... 22
RISKS
Pursuant to Section 64(b) of the Investment Company Act of 1940, we are
required to advise you annually that Central Capital Investment Corporation.
(the "Company") is engaged in a high-risk business. Investments in small
business concerns are extremely speculative. Most of such concerns are privately
held. Even if a public market for the securities of such concerns exists,
securities purchased by the Company are often restricted from sale or other
transfer for specified and significant periods of time. Thus, such investments
have little, if any, liquidity, and the Company and you, as its shareholders,
must bear significantly larger risks, including possible losses on such
investments, than otherwise would be the case with traditional investment
companies.
PART I
ITEM 1. BUSINESS
General
The Company was incorporated on January 15, 1949 in the state of Utah under the
name of Oil Securities Company, Inc. In July 1984, the Company changed its
domicile to the State of Nevada by merger. In July 1996, the Company merged with
Miller & Benson International, Ltd. ("M&B") and changed its name to Digital
Technologies Media Group, Inc. ("DTG"). The combined Company's name was changed
to Digital Technologies Media Group, Inc.
Voluntary Reorganization
On January 26, 1999, the Company filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code ("Code") BK. N SV 99-10944-GM in Woodland
Hills, California, (the "Petition"). The Petition sought to reorganize the
Company by satisfying all of the allowed claims of creditors, or rights to
payment, with securities issued by the Company to such creditors under the terms
of a plan of reorganization approved by the Bankruptcy Court, said plans Final
Order was approved on August 17, 2000, and was made effective May 8, 2000 (the
"Plan"). Unless the context indicates otherwise, the term "Company" refers to
the operations of Central Capital Venture Corporation following the confirmation
of the Third Amended Chapter 11 Reorganization Plan. Reference to the Company
after approval of the Plan is sometimes as the "Reorganized Debtor." See
"Business Combination."
A. The Company's Confirmed Chapter 11 Reorganization Plan
The Reorganized Company operates as a closed end mutual fund specifically
designed to engage in investments of startup companies, a Business Development
3
<PAGE>
Corporation. The Company notified the Securities and Exchange Commission that it
elected, pursuant to the provisions of Section 54(a) of the Investment Company
Act of 1940, as amended (the "Investment Company Act"), to be subject to the
provisions of Sections 55 through 65 of the Investment Company Act on June 19,
2000.
Following the Company's inceptive investment in DataNet Information Systems,
Inc. ("Data") the Company's first Investee company, it may be desirable for the
Company to make additional follow-on investments. If working capital is not
available for such purposes through public or private equity offerings of the
Company's securities or securities of Data, the Company may use its assets to
guarantee borrowings by it or Data.
B. The Business Activity Of The Company.
The Company has no independent investment advisor. The Company's investment
decisions are made by its officers, in accordance with the Company's established
investment policies and objectives, subject to oversight by its Board of
Directors. The Company focuses its' business operations on assisting small
corporations (defined in the Investment Company Act as companies with sales of
less than $50 million annually) in capital formation. The Company will service
two types of companies: "Investment Companies" and "Client Companies."
An Investment Company is defined as a company in which the Company has equity
position and which meets the Company's investment objective. An Investment
Company typically expects its common stock to be publicly traded at some point
in the near future. As part of its growth strategy, an Investment Company
expects with the Company's assistance, to prepare and file a registration
statement with the Securities and Exchange Commission to raise additional equity
capital for its growth.
A Client Company is defined as a company that contracts for the Company's
financing and/or selected services on a fee for services basis. The Company
supports its Client Companies by offering significant management assistance
through a complete range of management and business consulting services. The
Company, acts as a management incubator for new and development stage business,
and will seek to work with larger companies whose products and services have
better acceptance in the marketplace. The Company will consistently follow its
business plan by incorporating the following services: (1) Capital Formation
Services, (2) Merger and Acquisition Services, (3) Management Consulting
Services charged to the Investment Companies and client companies, (4) Corporate
Partnering, (5) and if available profit from the selective sale of the
Investment Companies securities it maintains in its portfolio.
CERTAIN NON-COMPLIANCE BY PORTFOLIO COMPANIES
Although the Company's agreements with its portfolio companies require those
companies to furnish the Company with periodic and/or annual financial
statements, certain of its portfolio companies fail to supply intentionally (or
are anticipated by the Company to fail to supply) the financial statements or to
otherwise comply with the covenants required of them. The Company will deal with
these failures on a case-by-case basis, and the exercise the business sense
associated with each remedy, utilizing the judgment of the Company's Board of
Directors, or the appropriate the legal requirement, for the action the Company
may take.
4
<PAGE>
C. Regulation of The Company, A Business Development Company.
The Company is a closed-end, non-diversified investment company that has elected
to be regulated as a Business Development Company under the 1940 Act and, as
such, is subject to regulation under that Act. Among other things, the 1940 Act
contains prohibitions and restrictions relating to transactions between the
Company and its affiliates, principal underwriters and affiliates of those
affiliates or underwriters and requires that a majority of the Company's
directors be persons other than "interested persons," as defined in the 1940
Act. In addition, the 1940 Act prohibits the Company from changing the nature of
its business so as to cease to be, or to withdraw its election as, a Business
Development Company unless so authorized by the vote of the holders of a
majority of its outstanding voting securities.
A Business Development Company is permitted, under specified conditions, to
issue multiple classes of indebtedness and one class of stock having rights as
to voting, liquidation and dividends which are senior to the Company's common
stock (collectively, "Senior Securities," as defined in the 1940 Act) if the
asset coverage, as defined in the 1940 Act, of any Senior Security is at least
200% immediately after each such issuance and certain other conditions are met.
Also, while Senior Securities constituting preferred stock are outstanding
(other than preferred stock), provision must be made to prohibit any
distributions to shareholders or the repurchase of such securities or shares
unless the applicable asset coverage ratios are met at the time of the
distribution or repurchase. The Company may also borrow amounts from banks
evidenced by notes not to be publicly distributed or for temporary purposes if
the borrowing does not exceed 5% of the value of its total assets. A loan is
presumed to be for temporary purposes if it is repaid within sixty days and is
not extended or renewed.
Under the 1940 Act, a Business Development Company may not acquire any asset,
other than assets of the type listed in Section 55(a) of the 1940 Act
("Qualifying Assets") unless, when the acquisition is made, such Qualifying
Assets represent at least 70% of its total assets. The principal categories of
Qualifying Assets relevant to the business of the Company are the following:
(1) Securities purchased in transactions not involving any public
offering from the issuer of such securities, which issuer is
an eligible portfolio company. An "eligible portfolio company"
is defined, in pertinent part, in the 1940 Act as any issuer
which:
(a) is organized under the laws of, and has its principal
place of business in, the United States;
(b) is not an investment company other than another SBIC that
is wholly-owned by the Company;
(c) and does not have any class of securities with respect to
which margin credit may be extended under federal law.
(2) Securities of any eligible portfolio company that is
controlled by the Business Development Company.
5
<PAGE>
(3) Securities received in exchange for or distributed on or with
respect to securities described in items (1) or (2) above, or
pursuant to the exercise of options, warrants or rights
relating to such securities.
(4) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of
investment.
In addition, a Business Development Company must have been organized
(and have its principal place of business) in the United States for the purpose
of making investments in the types of securities described in items (1) or (2)
above and, in order to count the securities as Qualifying Assets for the purpose
of the 70% test, the Business Development Company must either control the issuer
of the securities or make available to the issuer of the securities significant
managerial assistance. Making available significant managerial assistance means,
among other things, any arrangement whereby a Business Development Company,
through its directors, officers or employees, offers to provide, and, if
accepted, does so provide, significant guidance and counsel concerning the
management, operations or business objectives and policies of a portfolio
company;
The Investment Company Act prohibits or restricts the Company from investing in
certain types of companies, such as Broker/Dealers (with the exception that they
are wholly-owned subsidiaries of the BDC), insurance companies, investment
banking firms and investment companies (with exception to wholly owned Small
Business Investment Companies licensed by the Small Business Administration).
The Investment Company Act also limits the type of assets that the Company may
acquire to qualifying assets and certain other assets necessary for its
operations (such as office furniture, equipment and facilities) if, at the time
of the acquisition, less than 70% of the value of the Company's assets consist
of qualifying assets. Qualifying assets include:
a. Securities of companies that were eligible portfolio companies at the
time that the Company acquired their securities,
b. Securities of bankrupt or insolvent companies that are not otherwise
eligible portfolio companies,
c. Securities acquired as follow-on investments in companies that were
eligible portfolio companies, provided that the Company has maintained
a substantial portion of its initial investment in those companies,
d. Securities received in exchange for or distributed on or with respect
to any of the foregoing, and,
e. Cash items, U.S. Government securities and Investment quality
short-term debt securities.
The Investment Company Act also places restrictions on the nature of the
transactions in which, and the persons from whom, securities can be purchased
for the securities to be considered as qualifying assets.
The Company thus may sell its portfolio securities at a price that is below the
prevailing net asset value per share only upon the approval of the holders of a
majority of its voting securities held by nonaffiliated persons, at its last
6
<PAGE>
annual meeting or within one year prior to the transactions. In addition, the
Company may from time to time repurchase its common stock subject to the
restrictions of the Investment Company Act and the corporate laws of the state
of its incorporation.
A Business Development Company may issue limited amounts of warrants, options
and rights to purchase its securities to its directors, officers and employees
(and provide loans to those persons for the exercise thereof) in connection with
an executive compensation plan, if certain conditions are met. These conditions
include the approval of:
a. A majority of the Company's voting securities, b. A majority of the
independent members of its Board of Directors, c. A majority of the
directors who have no financial interest in the
transaction.
The issuance of options warrants or rights to directors who are not also
officers or employees of the Company requires the prior approval of the
Securities and Exchange Commission. As defined in the Investment Company Act,
the term majority of the Company's outstanding voting securities mean the lesser
of the vote of:
1. 67% or more of the Company's common stock present at a meeting, if
holders of more that 50% of the outstanding common stock are present
or represented by proxy, or
2. More than 50% of the Company's outstanding common stock.
Under the Investment Company Act, as applied to a Business Development Company,
most transactions involving the Company and its affiliates (as well as
affiliates of those affiliates) require the prior approval of a majority of the
Company's independent directors and a majority of the directors having no
financial interest in such transactions.
Some transactions involving certain closely affiliated persons of the Company,
including its directors, officers, and employees require the prior approval of
the Securities and Exchange Commission. In general, (a) any person who owns,
controls or those holders with power to vote more than 5% of the Company's
outstanding common stock, (b) any director, executive officer or general partner
or that person, and (c) any person who directly or indirectly controls, is
controlled by, or is under common control with that person, must obtain the
prior approval of a majority of the Company's independent directors, and in some
situations, the prior approval of the Securities and Exchange Commission, before
engaging in certain transactions involving the Company or any company controlled
by the Company. The Investment Company Act generally does not restrict
transactions between the Company and its Investment Companies.
In accordance with Section 18-56(a) of the Investment Company Act, a majority of
the members of the Company's Board of Directors must not be interested persons
of the Company as that term is defined in Section 18-2(a)(19) of the Investment
Company Act. Generally, interested persons of the Company include all affiliated
persons of the Company and members of their immediate families, any interested
person of an Underwriter or of an Investment Advisor to the Company, any person
who has acted as legal counsel to the Company within the last two fiscal years,
or any broker or dealer, or any affiliate of a Broker/Dealer.
7
<PAGE>
It is likely that in some cases the Company may be deemed to be an affiliate of
the companies in which it invests by virtue of sharing control of those
companies, as a result of its stockholdings, the positions of its officers and
directors who also serve a directors and officers of such Investment Companies,
or for other reasons. Additional restriction on the ability of the Company to
sell or transfer securities of its Investment Companies could also be severely
limited by the nature of the insider trading rules imposed under the Investment
Company Act.
D. Risks of the Company
In addition to the above-described provisions of the Investment Company Act,
there are a number of other provisions of the federal securities laws that
affect the ongoing operations of the Company. Restrictions imposed by federal
and state securities laws, in addition to possible contractual provisions, may
affect adversely the ability of the Company to sell or otherwise to distribute
its portfolio securities.
Most, if not all securities, in which the Company acquires as venture capital
investments will be restricted securities within the meaning of the Securities
Act of 1933, as amended, and will not be permitted to be resold without
compliance of the Securities and Exchange Act. Thus, the Company will not be
permitted to resell portfolio securities unless a registration statement has
been declared effective, or unless the Company is able to rely on an available
exemption from such registration requirements. In most cases, the Company will
endeavor to obtain from its Investment Companies registration rights pursuant to
which the Company will be able to demand that an Investment Company register the
securities owned by the Company at the expense of the Investment Company. Even
if the Investment Companies bear this expense, however, the registration of the
securities owned by the Company is likely to be a time consuming process, and
the Company always bears the risk, because of these delays, that it will be
unable to resell such securities, or that it will not be able to obtain an
attractive price for the securities, Additionally, the Company may never be able
to distribute the securities of certain Investment Companies to stockholders in
certain states because the Investment Companies may not qualify for registration
in those states, pursuant to each individual state blue sky laws.
Sometimes the Company will not register portfolio securities for sale but will
seek to rely upon an exemption from registration. In most cases, the expenses
associated with seeking exemptive relief will be borne by the Company. The most
likely exemption available to the Company is section 4(1) of the Securities Act
of 1933, which in effect, exempts sales of securities not involving a
distribution of the securities. This exemption will likely be available to
permit a private sale of portfolio securities, and in some cases a public sale,
if the provisions of Rule 144 promulgated under the Securities Act of 1933 are
satisfied. In general, under Rule 144 affiliates may, in certain circumstances,
sell within any three-month period a number of shares not to exceed the greater
of (a) 1% of the then outstanding shares of common stock, or (b) the average
weekly trading volume of the common stock during the previous four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
provisions, notice requirements and the availability of public information about
the issuer. A person who is not deemed to have been an affiliate of the issuer
at any time during the three months preceding a sale and who also has
beneficially owned his shares for at least three years would be entitle to sell
such shares under Rule 144 without regard to the volume limitation, manner of
sale provisions, notice requirements or the availability of public information
requirement otherwise applicable.
8
<PAGE>
The Company may elect to distribute in-kind securities of Investment Companies
to its stockholders. Prior to any such distributions, the Company expects that
it will need to file, and cause the issuers of such distributed securities to
file, a registration statement or in the alternative, an information statement
which will permit the distribution of such securities and also permit
distributed stockholders of the Company to sell such distributed securities.
Notwithstanding the forgoing and the filing of a registration statement,
stockholders in certain states may not be eligible to receive certain in-kind
distributions due to state securities law restrictions.
E. Marketing
Since there was negative revenue during the six months ended June 30 2000, there
is no marketing of any product or service during the reporting periods.
F. Government and Other Regulation
The Company was solely engaged in bringing its books and records up to reporting
standards, and complying with the other basic requirements of the provisions of
Section 54(a) of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), specifically the provisions of Sections 55 through 65 of the
Investment Company Act and had no employees except that of part time and
occasional labor, and had no compliance issues with any federal and state
governmental agencies.
G. Business Combination
The Company did not engage in any business combination during the reporting
periods.
H. Employees
Currently, the Company has one employee; it's President Lewis I. Williams, IV,
who has elected not to accept a salary. During the period from January 1, 2000
until June 19, 2000 the Company had two employees and administrators; Ely J.
Mandell and David A. Kekich, who were also officers and directors of the
Predecessor Company (a Debtor in Possession), the Bankruptcy Court allowed both
administrators to service the Plan of Reorganization for the Company.
I. Competition
The Company is presently engaged as a Business Development Company, a closed end
mutual fund designed to invest in start-up venture capital situation the Company
is aware that there is at least twelve publicly traded Business Development
Company's all with greater resources than that of the Company, as well as a
multitude of private Venture Capital Funds all with greater resource, larger
deal flow, and more capitalization that that of the Company.
J. Facilities, Personnel
The Company's principal executive offices, consisting of approximately 1,500
square feet, are located at 310 Village Park, 2660 Townsgate Road, Westlake
Village, California 91361. The Company occupies these offices, and subleases a
portion of the office space to its Investee Company's pursuant to several
sublease agreements. Additionally, its past President personally guarantees the
9
<PAGE>
Company's office space; therefore it has entered into a sublease agreement with
Jande International, Holdings, LLC. (of which Mr. Ely Jay Mandell a major
shareholder of the Company, is a principal). The lease commenced July 2000 for a
term of two years at a monthly rate of $1,900, each sublease is herein
described: DataNet Information Systems, Inc. $500.00 per month, Digi Commerce
Corporation $500.00 per month, Jande International Holdings, Llc.$200.00 per
month. The Company believes that its office space is adequate for its current
needs.
As of June 30, 2000, the Company had no full-time employees. The Company has
from time to time engaged the services of part time employee and occasional
labor independent consultants as and when needed. The Company considers its
relations with employees to be satisfactory.
ITEM 2 - INVESTMENTS
For a complete financial description of the investments as of June 30, 2000 see
Page F-12 item 7
Initial Transactions By the Company.
The Company's initial Investee Company was DataNet Information Systems, Inc.
("Data"), the Company's second Investee Company; Digi Commerce Corporation was
formed upon Plan confirmation.
(i) Acquisition of Data
Data was the initial Investee Company of the Company. The Company had with
approval of the Bankruptcy Court, acquired 1,000,000 shares of Data common stock
(representing 100% of Data's total stock outstanding) from First Portland
Corporation (30% shareholder), Bernie Budney (55% shareholder) and Jande
International Holdings LLC (15% shareholder) by issuing such shareholders of
Data one share of the Company's Class A Preferred Stock for every ten shares of
Data common stock owned. The purchase of 100% of the Data common stock resulted
in Data's shareholders holding 100,000 shares of the Class A Preferred Stock of
the Company. The acquisition of Data also required a $100,000 capital
contribution from the Company, and a total capital contribution of $1,000,000
over a two-year period.
The Company intends to distribute thirty percent (30%), 300,000 shares of common
stock, of the Data securities owned by it to shareholders who are to receive
securities under the Third Amended Plan of Reorganization on a Pro Rata basis
based upon Units held. The Company had agreed to provide Data $1,000,000 (of
which $100,000 has already been paid) over a two year period for operational
purposes including marketing, sales and development. However since the Company
has been in operation for approximately eleven months, the sales of Data and
account receivables have declined approximately 30% due to various factors. The
Company is now negotiating with Data's management to reduce the Company's
required investment; until such time a new Business Plan is produced, (i) as to
exact use of proceeds, (ii) improvement of management and operational
techniques, (iii) improvement of collection techniques, (iv) and improvement of
sales.
The Class A Preferred Stock issued in exchange for Data common stock will not
be issued pursuant to Section 1145 of the Bankruptcy Code. It is anticipated
10
<PAGE>
that the Data Common Stock will be registered within one year of Plan
Confirmation. As defined by the Plan, "Class A Preferred Stock" means One
Hundred Thousand (100,000) shares of Class A Preferred Stock issued by the
Company. The Class A Preferred Stock shall be convertible into common stock of
Data held by the Company upon the earlier to occur: (i) January 19, 2001 (twelve
months from issuance). (ii) an investment totaling $1,000,000 is made in Data by
the Company, or (iii) a registration with the Securities and Exchange Commission
of Data's stock becomes effective. The Class A Preferred Stock shall be
convertible into Data common stock pursuant to the following formula: the
converted shares shall be equal to 3.4 million shares to be issued after
conversion. Twelve percent (12%) of the issued Data common shares (600,000
shares) shall be reserved for private placements and other stock issuances and
20% of the Data common shares (1,000,000 shares) will remain with the Company.
Thus, if all of the Preferred Class A Stock is converted to the Common Stock of
Data, the Company will retain 22.7% of the Data common stock (1,000,000 shares)
and Company's Creditors and Interest Holders will hold a total of 6% (300,000
shares) upon registration of the DataNet Common Stock. Therefore, upon
conversion control of Data will shift to the holders of the Class A Preferred
Stock.
Data owns the product and distribution rights to the Pocket MLS. The Pocket MLS
provides instant access to current, affordable and portable multiple-listing
real property information instantaneously whether the user is in the office, at
home or on the road. The current product is a very basic personal digital
assistant (PDA) called a "Reader" that realtors can use to search and view
current MLS information. There are approximately 5,600 Readers, 1,400 of which
are currently in the field. The Reader, along with the software, replaces the
traditional MLS printed catalogue and is updated on a daily basis. Data's
products include the Reader and a PCMCIA card burner and SCCI card which
together make up the "loader." The loader is attached to a personal computer
which is updated daily through its modem by Data's master server. DataNet owns
the Info Reader, DataNet Infopak and Infocard, the technology used for the
Pocket MLS and PCMCIA card, and United States patents are currently pending with
respect to such technology. DataNet has no reason to believe that its rights
with respect to this technology are subject to challenge.
Data's management team consists of Ely Jay Mandell and Bernie Budney. Bernie
Budney currently is Data's President; Ely Jay Mandell currently serves as Data's
Secretary/Director and Executive Vice President.
Data was formed December 1999 as a Nevada corporation. Data acquired its assets
from (i) the voluntary foreclosure on the assets of DataNet Enterprises, LLC and
(ii) the purchase of the assets of Millennium Information Systems Inc.
("Millennium"). DataNet Enterprises, LLC and Millennium were unrelated entities
pursuing the same business objectives. Millennium was a separate company from
DataNet Enterprises, LLC and was financially sound. Millennium was the
distributor of DataNet Enterprises, LLC in Western Canada.
The operating costs experienced by DataNet Enterprises, LLC have been reduced by
Data by over 50% as a result of restructuring of debt into equity and by
transferring its call center and computer operations center to Canada to take
advantage of the favorable exchange rates between the Canadian and United States
dollar and very competitive phone rates. The foreclosure on DataNet Enterprises,
LLC's assets was voluntary and at the request of Data to insure that Data
received clean title to the assets.
11
<PAGE>
(ii) Digi Commerce Corporation
Digi Commerce Corporation was formed under the laws of the State of Nevada on
May 8, 2000, as part of the Third Amended Plan of Reorganization. Digi is a
start-up E-commerce travel reservations World Wide Web design Assistance Company
with Internet Service Provider aspects. Digi according to its business plan will
provide web design and access assistance to merchants in a mall or portal type
of setting for specific travel destinations where Digi intends to open its
cafes. Digi has also assumed certain assets from the Reorganized Debtor under
the Third Amended Plan of Reorganization such as the digi-commerce.net and
digi-commerce.com, web sites, which will sell various products, including
sporting good products in accordance with the Fogdog Sports contract over the
Internet, and the Places to Stay.Com sales associate Contracts, as well as other
business assets and leases of the predecessor.
Digi has 20,000,000 authorized Shares of Common Stock and 10,000,000 authorized
Shares of Preferred Stock. 4,000,000 Shares of Common Stock, of Digi Commerce
Corporation, which constitutes 100% of issued Digi common stock, were issued to
the Company in exchange for $100,000 and transfer of some of the Predecessor
Company's assets excluding the Rights of Action. The Company intends to
distribute thirty percent (30%) of the Digi stock to parties who are to receive
securities under the Plan on a Pro Rata basis. The Digi Stock shall be
registered and will not be issued pursuant to Section 1145 of the Code. Ely Jay
Mandell currently serves as President and sole Director of Digi. Other officers
will be named upon full operation of Digi.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any legal proceedings, nor to its
knowledge, is any material litigation threatened against the Company or its
assets. The Company has never been named as a defendant in any material
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to shareholders during the second quarter of
the six month period ended June 30, 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is not traded on any market and has not traded for
the past nine years.
(a) Holders:
The approximate number of holders of record of Common Shares as of
June 30, 2000, was 194.
(b) Dividends:
The Company has not paid cash dividends on its common stock since its
inception. At the present time, the Company's anticipated working capital
12
<PAGE>
requirements are such that it intends to follow a policy of retaining any
earnings in order to finance the development of its business, however the
Company does intend on spinning off to shareholders portions of its portfolio
from time to time in the form of dividends.
ITEM 6. SELECTED FINANCIAL DATA.
See Summary of Financial Information for the periods ended June 30, 2000, 129
Days for the Predecessor Company ended May 8, 2000 and 365 Days for
the Predecessor Company ended December 31, 1999 on the following page:
CENTRAL CAPITAL VENTURE CORPORATION
SUMMARY OF FINANCIAL INFORMATION
Periods Ending,
------------------------------------------------
Company Predecessor Predecessor
June 30 127 Days 365 Days
2000 Ending Ending
5/8/2000 12/31/2000
STATEMENT OF OPERATIONS DATA
Total income .................... $0 $0 $0
Total expenses .................. $ 57,163 $ 118,258 $ 143,240
Net realized gains (losses) on
disposition of investments ...... $0 $0 $0
Net income (loss) ............... $ (57,163) $(118,258) $(143,240)
Earnings (loss) per share ....... $ (.02) $(.03) $(.04)
Weighted average number of shares
outstanding .................... 2,685,224 3,790,627 3,790,627
NET ASSET VALUE PER SHARE $1.03
BALANCE SHEET DATA
Current Assets ................. $ 27,851 704
Investment portfolio............. $1,509,928 0
Fixed Assets..................... $ 1,993
Total assets .................... $1,539,772 704
Current Liabilities ............. $ 25,776 127,293
Due to Related Party............. 7,227
Loan Payable- Related Party...... 1,000
Pre-petition liabilities ........ 565,549
Convertible preferred shares $1,309,928 -
Total Liabilities $1,335,705 701,069
Common stock (including
additional paid-in capital) .. $261,231 534,436
Accumulated deficit ......... $ (57,163) (1,234,801)
Total shareholders' equity .. $204,068 (700,365)
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read together with the
financial statements and notes thereto included elsewhere herein.
General
The Company is the product of a reorganization of two previously unaffiliated
companies, Digital Technologies Group, Inc. ("DTG"), which was organized in
April 1995, and Miller & Benson International, Ltd. ("M&B"), which was
reincorporated in Delaware in January, 1992, subsequent to the confirmation of
its Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code. For
approximately nine years prior to July 1996, M&B had no operating business. In
July 1996, DTG and M&B completed a reorganization (the "Reorganization") in
which all of the then outstanding shares of common stock of DTG were exchanged
for 4,401,127 shares of the common stock of M&B. As a result of the
Reorganization, DTG became a wholly owned subsidiary of M&B. M&B changed its
name to "Digital Technologies Media Group, Inc." and the shareholders of DTG
immediately prior to the Reorganization became the owners of approximately 81.5%
of the outstanding shares of M&B common stock. The Reorganization has been
accounted for as a reverse acquisition as if DTG issued 4,401,127 shares of its
common stock to acquire the net assets of M&B at the time of the Reorganization.
Digital Technologies Media Group, Inc., a Delaware corporation, filed
bankruptcy caused by a voluntary Chapter 11 petition under the U.S. Bankruptcy
code on January 26, 1999.
During the fiscal year ended December 31, 1997, the Company ceased operations
and cancelled 2,320,000 shares of common stock to reverse an asset purchase of a
film entertainment library and related film contracts. The then president of the
Company resigned and by year-end, the existing corporate entity had no assets.
The Company remained dormant until it developed a business plan and then filed
for bankruptcy to confirm the plan. Pursuant to Bankruptcy Court Order on
January 19, 2000 the Company received $310,000 in borrowed funds to pay
administrative expenses and purchased one enterprise, DataNet Information
Systems, Inc. (a Nevada corporation).
Overview
History of Operations
Unless the context indicates otherwise, the term "Predecessor Company" refers
to the operations of DTG prior to Reorganization and "Company" refers to the
operations of Central Capital Venture Corporation following the Reorganization.
For further information regarding the Reorganization, see Note 2 of Notes to
Financial Statements.
The following discussion and analysis should be read in conjunction with our
financial statements and accompanying notes appearing elsewhere in the
Form10-KSB.
Results of Operations
We believe that period-to-period comparisons of our operating results are not
necessarily indicators of future performance. You should consider our prospects
14
<PAGE>
in light of the risks, expenses and difficulties frequently encountered by
companies experiencing rapid growth and, in particular, rapidly growing
companies that operate in evolving markets. We may not be able to successfully
address these risks and difficulties.
Comparisons of the Six months ended June 30 2000, Predecessor Company 129 Days
Ended May 8, 2000 and Predecessor Company 365 Days December 31, 1999
For the Predecessor Company in both periods there was no revenue, or gross
profit as the Company was inactive.
For the Predecessor Company the operating expenses decreased from $143,240 in
1999 for 365 days compared to $118,258 in May 8, 2000 for 129 days as a result
of the Chapter 11 bankruptcy filing. Approximately $71,024 was incurred for
accrued legal and administrative services to finalize pre-petition claims
(Liabilities) and a plan of reorganization, in the May 8 period. The balance of
the expenses was for rent $2,500 and other typical services related to
administrative costs. There were no taxes or interest paid. The net loss for the
reasons described was $143,240 in 1999 and $118,258 in May 8, 2000 for 129 days,
respectively. All tax losses will be carried forward in compliance with IRS
regulations.
As of May 8, 2000, the Company adopted fresh start reporting in accordance
with SOP 90-7. Fresh start reporting assumes that a new reporting entity has
been created and assets and liabilities should be reported at their fair values
as of the effective date (Note 3 of Notes to Financial Statements). The Company
had operating expenses of $57,163 for 54 days ending June 30 2000, mainly as a
result of the chapter 11 filing and the accrued administrative professional fees
associated with it, $42,702 was attributed to Professional fees, accrued from
the filing.
Liquidity and Capital Resources
The Company had a bank balance of $25,821 at June 30, 2000, and current
liabilities of $25,776..
The pre-petition liabilities totaling $565,549 as well as the $127,293 of
professional fees and post petition administrative claims were converted into
common stock under the plan of reorganization as of May 7 2000.
The $310,000 of Debtor Certificates raised by the Company in the course of the
Bankruptcy proceedings, were all converted at the option of the note holders
into common stock of the Company. The Company paid $100,000 for the working
capital infusion of DataNet Information Systems, Inc., $100,000 for the Capital
Stock of Digi Commerce Corporation and kept the balance of ($110,000) for
administrative expenses.
Liquidity and Capital Resources
Initially, the Registrant funded its operations in previous years through
borrowings from private investors, of which all but two investors subsequently
converted such loans into common stock of the Predecessor in connection with the
reverse acquisition in July 1996.
Since its inception, the Company has experienced losses from operations of
$750,061 for the period ended December 31, 1995 and $387,157 for the year ended
December 31, 1996. Accordingly, the Company requires additional sales and
15
<PAGE>
collections and/or it needs to raise additional capital to meet its operating
needs and to satisfy its outstanding liabilities.
In the event of unanticipated developments during the next few months, or to
satisfy future funding requirements, the Company may attempt to fund its
operations through a private offering of securities. Additional financing may
not be available when needed or on terms acceptable to the Company. If adequate
financing is not available, the Company may be required to delay, scale back or
eliminate certain of its proposed plans, or to sell either privately or through
a public offering securities consisting of Portfolio Securities, or a Private or
Public offering of its own Common or Preferred Stock.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Page
----
Auditors' Report F-1
Statement of Operations F-2
Statement of Assets and Liabilities F-3
Statement of Cash Flows F-4
Statement of Stockholders' Equity F-5
Notes to the Financial Statements F-6 - F-15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
At a meeting held on June 19, 2000, the Board of Directors of the Company
approved the engagement of Grant Thornton, as its independent auditors for the
six month period ending June 30, 2000 and in the subsequent interim period to
replace Oppenheim & Ostrick, CPA's. The full Board of Directors approved the
change in auditors on the same date.
The report of Oppenheim & Ostrick, CPA's, on the Company's financial
statements for the past fiscal year did not contain an adverse opinion or a
disclaimer of opinion and was not qualified (except that of a going concern)
or modified as to uncertainty, audit scope, or accounting principles.
In connection with the audit of the Company's financial statements for the
fiscal year ended December 31, 1999, and in the subsequent interim period, there
were no disagreements with Oppenheim & Ostrick, CPA's on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Oppenheim &
Ostrick, CPA's would have caused Oppenheim & Ostrick, CPA's to make reference to
the matter in their report.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors and Executive Officers
The following table sets forth in names, ages and positions of the directors
and executive officers of the Company as of June 30 2000. A summary of the
background and experience of each of these individuals is set forth after the
table.
16
<PAGE>
Name Age Position PERIOD OF SERVICE
Ely J. Mandell 44 President, Since November 1998
Chief Executive Office Resigned June 19, 2000
David A. Kekich 57 Secretary Since July 1996
Director Resigned June 19, 2000
Lewis I. Williams IV 50 President Since June 2000
Chief Executive Officer
Director
Bernie Budney 39 Executive Vice President Since June 2000
Director
Brad Bartilson 42 Secretary Since June 2000
Director
Rex Crim 57 Director Since June 2000
Ely J. Mandell, President, and Chief Executive Officer, still retains his
position as Managing Member of Jande International Holdings LLC, a private
Merchant Bank specializing in bankruptcy and reorganization investments. Since
January 1990, Mr. Mandell served as President of B.D. Brooke & Company, a
professional business development-consulting group, whose clients consist of
small public companies, (the predecessor of Jande International Holdings, LLC).
Mr. Mandell in this capacity had served on several Public Company Board of
Directors; from November 1998 until June 2000, Mr. Mandell was responsible for
all aspects of the registrants Bankruptcy proceeding, as well as formulating
its' Plan of Reorganization. From July 1996 until November 1996 Mr. Mandell was
Chief Financial Officer of the Registrant and was responsible for discovering
the financial fraud it's past Chief Executive Officer perpetrated on the
registrants creditors and shareholders, and directing the registrants
Independent Accountant, Legal Counsel, and Board of Directors to that fraud.
From August 1990 until March 1993, Mr. Mandell was secretary/director of
Conquest Ventures, Inc., a public company traded in the over-the-counter market.
From July 1992 until March 1993, Mr. Mandell was secretary/director of System
Controls, Inc., a public company traded on the Electronic Bulletin Board. Mr.
Mandell has also served as director of Electronic Publishing Technologies, a
public company traded on the Electronic Bulletin Board. Mr. Mandell attended
Arizona State University, and has obtained a degree from Merrill Lynch
Institute, Donald T. Regan School of Advanced Financial management and holds the
designation of Certified Financial Manager.
David A. Kekich has served as Secretary and a Director of the Company since
April 1995. Mr. Kekich is currently President and founder of Red Tree
International, a marketing and financial consulting company located in
Johnstown, Pennsylvania. From 1985 to 1992, Mr. Kekich was engaged in the public
securities markets as a result of his forming and registering three "blind pool"
companies. Mr. Kekich holds a Bachelor of Science Degree from Pennsylvania State
University and has been licensed in the insurance and real estate fields in the
State of California.
Lewis I. Williams 4th - President and Chief Executive Officer, has been a
Director and Chief Executive Officer of Arch-Will Enterprises, Incorporated
17
<PAGE>
alternatively ("AWE") since 1985. AWE is a minority owned holding company
committed to the establishment and development of an effective economic and/or
financial infrastructure within the disadvantaged and minority communities by
promoting and supporting a diverse range of minority owned, private sector
business development initiatives with AXXESS Paradigm Partners serving as (a) a
merchant banking operation providing management consulting, investment banking
and corporate finance advisory, and (b) as a financial, marketing and operations
management company providing development, distribution, and operations
management services on a contractual basis. Mr. Williams is also a Partner
serving as Chief Financial Officer for Corbis/NewCo, the first minority owned
insurance and financial services brokerage operation with nationwide and
international distribution and support capabilities. Mr. Williams has served as
an independent management and financial consultant to the manufacturing,
engineering services, and financial services industries. Past engagements have
included: corporate finance transaction advisory; management consulting;
designing and implementing cash management, managerial accounting, project
management and financial planning and control systems. Mr. Williams is
experienced in providing accounting and production management systems, strategic
planning services and structuring and securing equity and debt financing
facilities for middle market businesses. As a corporate finance generalist Mr.
Williams had primary responsibilities for the communications,
insurance/financial services, transportation and public utilities industrial
sectors. Past transaction related engagements have included: acquisitions,
determination of optimal capital structure, divestitures, mergers, and private
placements, re-capitalization and valuations. Mr. Williams, educational
background consists of an AB from Stanford University, a SM in Management from
the Massachusetts Institute of Technology, and a MA (Economics) and an ABD
(Accounting and Information Systems) from Northwestern University.
Bernie Budney - Executive Vice President, Director - Bernie Budney, had been the
President of Millennium Information Systems Inc. (formerly a division of Telus
Advertising Services, now DataNet Information Systems Inc., (an Investee of the
Company) since 1995. From 1993 until 1995 he was President of OK Tires &
Affordable Auto Center. Mr. Budney's educational credentials include an Honors
Economic Degree from the University of Alberta in 1984. He is also a member of
the Society of Registered Industrial Accountants, RIA Program.
Brad Bartilson - Director - has over 18 years of business experience in computer
technology, cultivated in an environment in which his team has patented
technologies and transferred the technology into products. Mr. Bartilson holds
nine Patents to his own credit in areas including thermal, power and
interconnect technologies. Mr. Bartilson is currently employed (since February,
2000) at Lightchip, Inc., as Senior Market Development Manager, and has
previously held management positions at Raytheon, Compaq, and Cray Research. His
educational background consists of a BSME degree from the University of
Wisconsin and a MSME degree from the University of Minnesota.
Rex Crim -Director -has had been a merchant and mortgage banker for 20 years.
Placing debt and equity for real estate and business transactions, Mr. Crim is
President of Texas Equity, Inc., a private merchant bank located in Dallas,
Texas. Mr. Crim has owned and operated his own mortgage banking firm and several
business ventures; and during the last five years he has focused on assisting
and consulting to small and new businesses, assisting them in raising capital,
going public and securing debt structured financing. Mr. Crim holds a BA Degree
in Business Administration from Southern Methodist University
18
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than ten percent shareholders are required by Exchange Act regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5 was
required for such persons, the Company believes that, other than as disclosed
below, during the six month period ending June 30 2000, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
NONE
ITEM 11. EXECUTIVE COMPENSATION
The Company had no employees except contract labor and part time employees
during the reporting periods. However, the Bankruptcy Court appointed Mr. Ely
Jay Mandell and Mr. David A. Kekich as Administrators of the Predecessor Company
or Debtor in Possession. Mr. Mandell and Mr. Kekich have each accrued the sum of
$3,500 per month from January 27, 1999 (a total of $53,967.74 through the period
ending May 8, 2000 including $39,064.51 paid through 12-31-99). The sums paid
were paid in stock in lieu of cash pursuant to the Plan of Reorganization,
215,871 Units to Jande International Holdings, LLC for Mr. Mandell's services
and 215,871 Units to Red Tree International, LLC for Mr. Kekich's services.
The Company intends to pay directors' fees of $500 each for each meeting of
the Board of Directors. The Company an employment contract with Lewis I
Williams, IV in which all payments in lieu of contractual rights have been
waived by the employee, and implemented a Year 2000 Stock Bonus Plan for
Employees and Consultants for 250,000 shares of stock none of which has yet to
be granted.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of the
Company on June 30, 2000 by each director and Named Executive Officer, by all
directors and executive officers as a group and by all persons known by the
Company to be the beneficial owners of more than five percent of the Company's
Common Stock.
Number of Shares Percent of
Name and Address Beneficially Held Ownership
---------------- ----------------- ----------
Brad Bartilson 68,000 (1) 2.53%
56 Floyd Road
Derry, NH 03038
David A. Kekich 312,587 (1)(4)(5)(6)(7) 11.64%
1533 Via Leon
Palos Verdes, Estates, CA 90274
19
<PAGE>
Ely Jay Mandell 374,788 (2)(1)(3) 13.95%
310 Village Park
2660 Townsgate Road
Westlake Village, CA 91361
Frank J. Nigro, III 400,000 (1) 14.87%
12 Dutch Village
Menands, NY 12204
Thomas Marshall Ward 151,735 (1) 5.651%
36 Pinehurst Circle
Little Rock, AR 72212
All directors and executive 28.12%(1)
officers (as a group, 3 persons)
---------------------------
(1) The Beneficial Owner owns and amount equivalent to his Common Shares, of
Class A Common Stock Purchase Warrants. If exercised the Beneficial Owner could
purchase Common Stock pursuant to the terms of the Warrants at $5.00 per share
until June 30, 2001. With exercise of the Class A Common Stock Purchase Warrant
the Holder receives one share of Common Stock of the Company and a Class B Stock
Purchase Warrant to Purchase if exercised a Share of the Common Stock at $10.00
per share by August 30, 2002.
(2) Mr. Mandell Indirectly owns 368,388 Common Shares and 368,388 Class A
Stock purchase warrants through Jande International Holdings, Llc. Jande
International Holdings, Llc. is a Limited liability Company controlled by Mr.
Ely J. Mandell, which he is Managing Member, and maintains a 33.3% ownership
interest, and 66.6% voting control.
(3) Mr. Mandell directly owns 6,400 Common Shares, and 6,400 Class A Stock
Purchase Warrants.
(4) Mr. Kekich directly owns 4,000 Common Shares, and 4,000 Class A Stock
Purchase Warrants.
(5) Mr. Kekich Indirectly owns 80,000 Common Shares and 80,000 Class A Stock
purchase warrants through Lions Holding Company. Lions Holding Company is a
Domestic Delaware Business Trust; controlled by J. C. Chisum, Trustee. Mr.
Kekich is President of Red Tree International, Llc and Lions Holding Company is
the majority owner (99%) of Red Tree International.
(6) Mr. Kekich Indirectly owns 9,916 Common Shares and 9,916 Class A Stock
purchase warrants through The Arkad Group, LLC. Mr. Kekich is President of Red
Tree International, Llc, The Arkad Group, LLC, is the predecessor Company to Red
Tree International, LLC.
(7) Mr. Kekich Indirectly owns 218,671 Common Shares and 218,671 Class A Stock
purchase warrants through Red Tree International, LLC. Mr. Kekich is President
of Red Tree International, Llc.
20
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements:
See Item 8 of Part II hereof.
(b) Reports on Form 8-K.
(a) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated 6/19/2000.
(b) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated 5/8/2000.
(c) Exhibits
Exhibit 99.1 Resignation of David A. Kekich
Exhibit 99.2 Resignation of Ely Jay Mandell
Exhibit 99.3 Resignation of Lewis I Williams, IV
Exhibit 27 Financial Data Schedule
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Central Capital Venture Corporation
Date: November 13, 2000 By: /s/ Rex E. Crim
------------------------
Rex E. Crim
Acting President
In accordance with the Exchange Act, 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/ Rex E. Crim Acting President, Chief Executive November 13, 2000
--------------- Officer and Director
Rex E. Crim
/s/ Brad Bartilson Secretary and Director November 13, 2000
-------------------
Brad Bartilson
22
<PAGE>
Grant Thornton LLP
Chartered Accountants
Canadian Member Firm of
Grant Thornton International
Central Capital Venture
Corporation
(formerly Digital Technologies Media
Group, Inc.)
Financial Statements
(Expressed in United States Dollars)
June 30, 2000
23
<PAGE>
Contents
Page
Auditors' Reports 1-2
Statement of Operations 3
Statement of Assets and Liabilities 4
Statement of Cash Flows 5
Statement of Stockholders' Equity 6
Notes to the Financial Statements 7-19
24
<PAGE>
Grant Thornton LLP
Chartered Accountants
Canadian Member Firm of
Grant Thornton International
Auditors' Report
To the Shareholders of
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
We have audited the statement of assets and liabilities of Central Capital
Venture Corporation (formerly Digital Technologies Media Group, Inc.) as at June
30, 2000 and the statements of operations, stockholders' equity and cash flows
and for the 129 day period ended May 8, 2000, and the 54 day period ended June
30, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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 statement
presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at June 30, 2000 and the
results of its operations and cash flows for the 129 day period ended May 8,
2000, and the 54 day period ended June 30, 2000, in conformity with accounting
principles generally accepted in the United States.
As discussed in Note 4 to the financial statements, the Company has emerged from
bankruptcy and applied fresh start accounting, effective May 8, 2000. As a
result, the Statement of Assets and Liabilities as of June 30, 2000, and the
related statements of operations, stockholders' equity and cash flows for the 54
day period ended June 30, 2000 are presented on a different basis than that for
the periods before fresh start, and therefore, are not comparable.
Edmonton, Canada
November 9, 2000 except as to Note 14 Signed "Grant Thornton LLP"
which is as of November 29, 2000 Chartered Accountants
2400 Scotia Place 1
10060 Jasper Avenue
Edmonton, Alberta
T5J 3R8
Tel: (780) 422-7114
Fax: (780) 426-3208
e-mail: [email protected]
1
25
<PAGE>
REPORT OF OPPENHEIM & OSTRICK, CPA'S
INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
Digital Technologies Media Group, Inc.
We have audited the accompanying balance sheet of Digital Technologies Media
Group, Inc. as of December 31, 1998 and 1999 and the related statements of
income, shareholder's equity, and cash flows for each of the two years ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 statement
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 financial position of Digital Technologies Media Group,
Inc. as of December 31, 1998 and 1999 and the result of its operations,
shareholder's equity and its cash flows for the year ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
Signed "Oppenheim & Ostrick"
Culver City, California
April 4, 2000
2
26
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Statement of Operations
(Expressed in United States Dollars)
Reorganized Company Predecessor Company
------------------- -------------------
<TABLE>
<S> <C> <C> <C>
54 Days Ended 129 Days Ended Year Ended
June 30, May 8, December 31,
2000 2000 1999
-------------------------------------------------------------------------------------------
Expenses
Advertising and promotion $ - $ 1,597 $ -
Administrative (not reallocated) - - 143,240
Depreciation 221 - -
Lease payments 250 1,250 -
Professional fees 42,702 71,024 -
Rent 2,400 2,500 -
Repairs 1,516 - -
Salaries and benefits 1,861 30,865 -
Stationary and office 3,767 2,460 -
Telephone 146 929 -
Travel 4,300 7,633 -
--------- --------------- ----------
57,163 118,258 143,240
--------- --------------- ----------
Net loss $ (57,163) $ (118,258) $ (143,240)
========= =============== ==========
-------------------------------------------------------------------------------------------
Loss per share basic and diluted $ (0.021) * *
=========
Weighted average shares, basic
and diluted 2,685,224 * *
=========
</TABLE>
* Per share amounts are not meaningful due to reorganization (see Note 2)
See accompanying notes to the financial statements.
3
27
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Statement of Assets and Liabilities
(Expressed in United States Dollars)
Reorganized Predecessor
Company Company
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------
Assets
Investments (Note 6) $ 1,509,928 $ -
Fixed assets, net of accumulated
depreciation of $221 1,993 -
Deposits 2,030 630
Cash and cash equivalents 25,821 74
------------------ -------------
$ 1,539,772 $ 704
================== =============
--------------------------------------------------------------------------------
Liabilities
Pre-petition liabilities $ - $ 565,549
Loan payable - related party
(Note 10) - 1,000
Due to related party - 7,227
Payables and accruals 25,776 127,293
------------------ -------------
25,776 701,069
------------------ -------------
Convertible preferred shares (Note 8) 1,309,928 -
------------------ -------------
Stockholders' equity (deficiency)
Capital stock (Note 8) 26,850 25,732
Additional paid-in capital 234,381 508,704
Deficit (57,163) (1,234,801)
------------------ -------------
204,068 (700,365)
------------------ -------------
$ 1,539,772 $ 704
================== =============
--------------------------------------------------------------------------------
On behalf of the Board
Signed "Rex Crim" Signed "Brad Bartilson"
Director Director
See accompanying notes to the financial statements.
4
28
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Statement of Cash Flows
(Expressed in United States Dollars)
Reorganized Company Predecessor Company
------------------- -------------------
54 Days Ended 129 Days Ended Year Ended
June 30, May 8, December 31,
2000 2000 1999
--------------------------------------------------------------------------------
Cash flows from operating activities
Net loss $ (57,163) $ (118,258) $ (143,240)
Adjustment to reconcile net loss from
continuing operations to net cash used
in operating activities
Depreciation 221 - -
Increase (decrease) in:
Deposits (1,861) 460 (500)
Payables and accruals 2,991 99,798 130,676
----------- ------------- -----------
Net cash used in operating activities (55,812) (18,000) (13,064)
----------- ------------- -----------
Cash flows from financing activities
Loans payable - pre-petition debt - 310,000 5,000
Advances from related party - (8,227) 1,000
----------- ------------- -----------
Net cash provided from financing activities - 301,773 6,000
----------- ------------- -----------
Cash flows from investing activities
Purchase of fixed assets (1,571) (643) -
Purchase of investments (200,000) - -
----------- ------------- -----------
Net cash used in investing activities (201,571) (643) -
----------- ------------- -----------
Net (decrease) increase in cash and
cash equivalents (257,383) 283,130 (7,064)
Cash and cash equivalents
Beginning of period 283,204 74 7,138
----------- ------------- -----------
End of period $ 25,821 $ 283,204 $ 74
=========== ============= ===========
--------------------------------------------------------------------------------
Supplemental schedule of non-cash
investing and financing activities:
Issuance of new capital stock $ 1,588,558 $ - $ -
Cancellation of indebtedness (Note 4) 1,079,854 - -
--------------------------------------------------------------------------------
See accompanying notes to the financial statements.
5
29
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Statement of Stockholders' Equity
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Common
------ Additional
Number of Paid-In
Shares Amount Capital Deficit Total
---------- --------- ----------- ------------ -----------
Balance, December 31, 1999 3,790,627 $ 25,732 $ 508,704 $(1,234,801) $ (700,365)
Net loss - - - (118,258) (118,258)
---------- --------- ----------- ----------- ----------
Balance May 8, 2000 3,790,627 25,732 508,704 (1,353,059) (818,623)
Adjustments on adoption of fresh
start reporting (Note 3) (3,790,627) (25,732) (274,323) 1,353,059 1,053,004
Common stock issued for services
January 1, 1999 to May 8, 2000 817,224 8,172 - - 8,172
Common stock issued for
extinguishment of debt 1,834,449 18,344 - - 18,344
Conversion of common stock 33,551 334 - - 334
Net loss - - - (57,163) (57,163)
---------- --------- ----------- ----------- ----------
Balance, June 30, 2000 2,685,224 $ 26,850 $ 234,381 $ (57,163) $ 204,068
========== ========= =========== =========== ==========
</TABLE>
6
30
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
1. Nature of operations
On May 8, 2000 the articles of incorporation were amended to change the
Company's name to Central Capital Venture Corporation and the place of
incorporation to the State of Nevada. The Company also elected to become a
"Business Development Company" (BDC) as defined in the Small Business Investment
Incentive Act of 1980, which is an amendment to the Investment Company Act of
1940. This change resulted in the Company becoming a specialized type of
investment company which plans to derive its income through management
consulting fees and profit from the selective sales of the companies contained
in its investment portfolio.
--------------------------------------------------------------------------------
2. Summary of significant accounting policies
Basis of presentation
The Company's accounting and reporting policies conform to generally accepted
accounting principles and industry practice in the United States. The amounts
reported in these financial statements are in United States dollars.
The Company's plan of reorganization was confirmed April 26, 2000 with the
effective date being May 8, 2000 (see Note 3). In accordance with the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code",
("SOP 90-7") the Company adopted fresh start reporting as of May 8, 2000. (See
Note 3 - Fresh Start Reporting). Accordingly, the financial results of the
pre-reorganization Company (the "Predecessor Company") (prior to May 8, 2000)
and the results of the post-reorganization Company (the "Reorganized Company")
(May 8, 2000 through June 30, 2000) are not prepared on a comparable basis.
Use of estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the amounts of revenues and expenses for the reported period. Actual results
could differ from those estimates.
Cash and cash equivalents
Consistent with the reporting requirements of a BDC, cash and cash equivalents
consist only of demand deposits in banks and cash on hand. Financial statement
account categories such as investments, which relate to the Company's activity
as a BDC, are included as operating activities in the statement of cash flows.
7
31
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
2. Summary of significant accounting policies (cont'd)
Financial instruments
The Company's financial instruments consist of cash, investments, and payables
and accruals. The fair value of the investments was determined using the
Appraisal method as described in this note and therefore approximate the
investments carrying value
Investment valuation
The investment valuation method adopted provides for the Company's Board of
Directors to be responsible for the valuation of the Company's investments (and
all other assets) based on recommendations of a Valuation Committee of the
Board. This committee consists of those persons designated annually by
resolution of the Board of Directors at its annual meetings. The Company's Board
of Directors shall be responsible for the periodic valuation of the Company's
portfolio.
These investments are recorded using the cost method. The cost method is based
on the original cost to the Company plus all additional loans and funds advances
on behalf of the investee company. Such method is to be applied in the early
stages of an investee's development until significant positive or adverse events
occur subsequent to the date of the original investment at which time the Board
of Directors will value the investments on the basis of an appraisal on market
information and reflect the change in value in the financial statements of the
Company at that time, depending on each individual circumstance.
Loss per share
The Company reports loss per share in accordance with the provisions of SFAS No.
128, Earnings Per Share. SFAS No. 128 requires presentation of basic and diluted
earnings per share in conjunction with the disclosure of the methodology used in
computing such earnings per share. Basic loss per share excludes dilution and is
computed by dividing income available to common shares by the weighted average
common shares outstanding during the period. Diluted loss per share takes into
account the potential dilution that could occur if securities or other contracts
to issue common stock were exercised and converted into common stock.
Calculating the fully diluted loss per share produces immaterial differences or
anti-dilutive results in the period.
--------------------------------------------------------------------------------
3. Chapter 11 Proceedings
Petition for relief
The Company was organized January 15, 1949 in the State of Utah under the name
of Oil Securities Company Inc.. In July 1984, the original Company was merged
into Oil Securities Inc., a Nevada Company, formed for the sole purpose of
8
32
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
3. Chapter 11 proceedings (continued)
effecting the merger. Thereafter, when its oil and gas business failed, the
Company filed a Chapter 11 case. The Company emerged from Chapter 11 in or about
1990. On July 30, 1996, the Company merged into Miller & Benson International,
Ltd., a dormant Delaware Public Holding Company, which then changed its name to
Digital Technologies Media Group, Inc., to facilitate its new business. The new
business of the Company was to capitalize on the growth in the distribution of
multimedia programming. The Company is a public company whose stock is not
currently listed for trading.
Digital Technologies Media Group, Inc. was organized in April 1995, as a
Delaware Company for the purpose of funding the development of television
programming and to interface with new technologies. In May 1995, the Company
acquired certain rights and accounts receivables to distribute the film assets
of Communication Services International (CSI) for convertible debt, which was
then converted into common stock in 1995. In 1996, the Company's relationship
with CSI fell apart over the creditability of the acquired film operation. In
1997, the President of CSI resigned and the Board rescinded the common stock
shares of CSI and four other employees. According to management by the end of
December 31, 1997, the CSI transaction was rescinded and all of its assets and
liabilities were removed from the Company's books. Also at the end of December
1997, the Company had no assets and was not a going concern. The Company filed a
Chapter 11 petition (Debtor-in-Possession) with the Bankruptcy court effective
January 26, 1999.
The bankruptcy court approved the Company's purchase of Datanet Information
Systems Inc. On February 9, 2000, the Company also received $310,000 by issuing
Debtor Certificates of Indebtedness. This allowed for the Company to operate for
the interim period up to June 30, 2000.
Plan of reorganization
On April 26, 2000, the Bankruptcy Court entered an order confirming
reorganization under the third Amended Plan. The effective date of the third
Amended Plan was May 8, 2000 and Digital Technologies Media Group, Inc. amended
its articles of in Company to reflect the following changes. The Company was
renamed Central Capital Venture and the place of incorporation became Nevada.
The confirmed Amended Plan provided for the following:
Secured claims
The Company's $28,900 of secured debt (secured by liens on property of the
estate) was exchanged for two units of the Company's stock for each dollar
owed in full and complete satisfaction of their allowed claims for fees.
Each unit consist of one share of common stock and one Class A warrant
(Note 9) which entitles the holder to purchase one additional common share.
9
33
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
3. Chapter 11 proceedings (continued)
Administrative expenses
The Company's $204,306 of administrative claims owed for services rendered
by a law firm and two other individuals was exchanged for four units of the
Company's stock for each dollar owed in full and complete satisfaction of
their allowed claims for fees. Each unit consist of one share of common
stock and one Class A warrant which entitles the holder to purchase one
additional common share.
Holders of Debtor's Certificates of Indebtedness
The Company's $310,000 of Debtor's Certificates of Indebtedness shall be
paid pursuant to terms of the Debtor's Certificate of Indebtedness or in
exchange for four units of the Company's stock for each dollar owed in full
and complete satisfaction of their allowed claims for fees. Each unit
consist of one share of common stock and one Class A warrant which entitles
the holder to purchase one additional common share.
General unsecured claims
The Company's $536,649 of unsecured claims was exchanged for one unit of
the Company's stock for each dollar owed in full and complete satisfaction
of their allowed claims for fees. Each unit consist of one share of common
stock and one Class A warrant which entitles the holder to purchase one
additional common share.
Common stock
The holders of 3,654,102 shares of common stock in the predecessor Company
received a pro-rata distribution of 33,551 shares of the Company's stock.
Each unit consist of one share of common stock and one Class A warrant
which entitles the holder to purchase one additional common share.
Additionally the Amended Plan proposes that after the registration of Datanet
Information Systems Inc. and Digi Commerce Company with the Securities and
Exchange Commission, the Reorganized Company will distribute, on a pro-rata
basis, 30% of its interest in these securities to the creditors as defined in
the Amended Plan.
--------------------------------------------------------------------------------
4. Fresh start reporting
As of May 8, 2000, the Company adopted fresh start reporting in accordance with
SOP 90-7. Fresh start reporting assumes that a new reporting entity has been
created and assets and liabilities should be reported at their fair values as of
the Effective date.
10
34
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
4. Fresh start reporting (cont'd)
The reorganization value at May 8, 2000, was determined based upon the Company's
estimate of the fair value of its assets as defined in the plan of
reorganization which does not assume any sale activity. Accordingly, the
reorganization value approximates the fair value of its assets before
considering liabilities, which must be assumed and extinguished pursuant to the
terms of the reorganization plan, as amended, and represents the Company's
estimates of the amount a buyer would pay for the assets after the
restructuring.
The Company's emergence from Chapter 11 proceedings and the adoption of fresh
start reporting resulted in the following adjustments to the Company's Statement
of Assets and Liabilities.
<TABLE>
<S> <C> <C> <C> <C>
Predecessor Fresh Start Reorganized
Company Adjustments Company
May 8, 2000 Debit Credit May 8, 2000
Assets ----------- ---------- ---------- -----------
Cash $ 283,204 $ - $ - $ 283,204
Deposits 170 - - 170
Investments - 1,309,928 (3) - 1,309,928
Office equipment 643 - - 643
------------ ---------- ---------- -----------
$ 284,017 $1,309,928 $ - $ 1,593,945
Liabilities ============ ========== ========== ===========
Payables and accruals $ 22,786 $ - $ - $ 22,786
Liabilities subject to compromise 1,079,855 1,079,855 (1) - -
Convertible preferred stock - - 1,309,928(3) 1,309,928
Stockholders' equity (deficiency)
Common stock 25,732 25,732 (2) 26,850(3) 26,850
Paid-in capital 508,704 508,704 (2) 234,381(3) 234,381
Deficit (1,353,060) - 1,353,060(2) -
------------ ---------- ---------- -----------
$ 284,017 $1,614,291 $2,924,219 $ 1,593,945
============ ========== ========== ===========
</TABLE>
11
35
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
4. Fresh start reporting (cont'd)
(1) To record the discharge of debt and other liabilities.
Administrative expenses - legal and management fees $ 204,306
Debtor's certificates of indebtedness 310,000
Secured claims 28,900
General unsecured claims 536,649
---------------
$ 1,079,855
===============
(2) To eliminate the Predecessor Company's deficit.
(3) To record the issuance of 2,685,224 shares of new common stock (par
value $0.01 per
share) at the reorganization value.
--------------------------------------------------------------------------------
5. Fiscal year change
During the year the Company changed its fiscal year-end from December 31 to June
30. Accordingly, the financial statements include the results of operations for
the transition period, which are not necessarily indicative of operations for a
full year.
--------------------------------------------------------------------------------
6. Investments
Datanet Information Systems Inc.
(A Nevada company) (100% owned) $ 1,409,928
Digi Commerce Company (100% owned) 100,000
-----------------
$ 1,509,928
=================
Under the Amended Plan described in Note 3, the Bankruptcy Court has approved
the Company's acquisition of 1,000,000 shares of common stock of Datanet
Information Systems Inc., ("Data"), which represents 100% of its outstanding
shares of stock in exchange for 100,000 shares of Class A preferred stock. The
acquisition was settled for cash consideration of $100,000, funded from the
Debtor's Certificates of Indebtedness described in Note 3, and the issuance of
100,000 shares of Class A preferred stock. (Note 8)
Given the extent of the non-monetary consideration to acquire the shares of Data
and the lack of a public market for such consideration, management and the Board
of Directors determined that the appropriate cost basis of its investment in
Data to be the book value of the net assets of Data at the date of acquisition
(which approximates fair value) plus cash consideration paid of $100,000.
12
36
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
6. Investments (cont'd)
Realization of this valuation in subsequent periods is subject to the ability of
Data to develop and maintain a significant customer base that will attract
additional investors in Data and will allow the Company to develop a strategy to
realize on its investment. The outcome of these matters is highly uncertain. The
inability to achieve these or other factors could negatively impact on future
valuations of Data and such impact could be material. The transaction has been
recorded as follows:
Cost of Data stock (see above) $ 1,409,928
Less: cash consideration 100,000
------------------
Allocated to Class A preferred stock issued $ 1,309,928
==================
--------------------------------------------------------------------------------
7. Authorized capital stock
Effective May 8, 2000, the articles of incorporation were revised to reflect the
following authorized capital stock.
Preferred stock
The Company is authorized to issue 1,000,000 shares of preferred stock.
The preferred stock may be issued from time to time in one or more series, or
divided into additional classes and such classes into one or more series. The
terms of a class or series, including all rights and preferences, shall be as
specified in the resolution or resolutions adopted by the Board of Directors
designating such class or series, which resolution or resolutions the Board of
Directors is hereby expressly authorized to adopt. Such resolution or
resolutions with respect to a class or series shall specify all such of the
rights or preferences of such class or series as the Board of Directors shall
determine, including the following, if applicable:
a) the number of shares to constitute such class or series and the
distinctive designation thereof;
b) the dividend or manner for determining the dividend payable with respect to
the shares of such class or series and the date or dates from which dividends
shall accrue, whether such dividend shall be cumulative, and if cumulative, the
date or dates from which dividends shall accumulate and whether the shares in
such class or series shall be entitled to preference or priority over any other
class or series or stock of the Company with respect to payment of dividends;
c) the terms and conditions, including price or a manner for determining the
price of redemption, if any, of such class or series;
13
37
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
7. Authorized capital stock (cont'd)
d) the terms and conditions of a retirement fund or sinking fund, if any, of the
shares of such class or series;
e) the amount which the shares of such class or series shall be entitled to
receive, if any, in the event of any liquidation, dissolution or winding up of
the Company and whether such shares shall be entitled to a preference or
priority over share of another class or series with respect to amounts received
in connection with any liquidation, dissolution or winding up of the Company;
f) whether the shares of such class or series shall be convertible into, or
exchangeable for shares of stock of any other class or classes or any other
series of the same or any other class or classes or stock, of the Company and
the terms and conditions of any such conversion or exchange;
g) the voting rights, if any of shares of stock of such class or series in
addition to those granted herein;
h) the status as to reissuance or sale of shares of such class or series
redeemed, purchased or otherwise reacquired, or surrendered to the Company upon
conversion;
i) the conditions and restrictions, if any, of the payment of dividend of the
making of other distributions on or the purchase, redemption or other
acquisition by the Company or any subsidiary, of any other class or series of
stock of the Company ranking junior to such shares as to dividends or upon
liquidation;
j) the conditions, if any, on the creation of indebtedness of the Company,
or any subsidiary; and
k) such other preferences, rights, restrictions and qualifications and the Board
of Directors may determine.
Common stock
The Company is authorized to issue 20,000,000 shares of common stock.
Except as otherwise provided in any resolution or resolutions adopted by the
Board of Directors, the common stock shall:
a) have the exclusive voting power of the Company;
b) entitle the holders thereof to one vote per share at all meetings of
the stockholders of the Company;
14
38
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
7. Authorized capital stock (cont'd)
c) entitle the holders to share ratably, without preference over any other
shares of the Company, in all assets of the Company in the event of any
dissolution, liquidation or winding up of the Company; and
d) entitle the record holder thereof on such record dates as are determined,
from time to time, by the Board of Directors to receive such dividends, if any,
as to when declared by the Board of Directors.
--------------------------------------------------------------------------------
8. Issued capital stock
According to the Amended Plan, on the effective date, all outstanding
instruments and securities representing interests in the Company were deemed
cancelled.
Preferred stock
Pursuant to the Amended Plan, one hundred thousand shares of preferred stock
(with a par value of $100 and a stated value of $2,500,000) were issued by the
Company pursuant to its Certificate of Incorporation, and designated Class A
preferred stock with no voting powers, preferences, and relative participating
optional other rights, if any, or the qualifications, limitations or
restriction, set forth in such Certificate of Incorporation, and in addition
those following:
Designation. The preferred stock shall be designated Class (or Series) A
----------- preferred stock (the "Class A preferred stock").
Dividends. The holders of the shares of the Class A preferred stock shall not
--------- be entitled to receive dividends.
Conversion. The Class A preferred stock shall be convertible into common stock
---------- of DataNet Information Systems, Inc. ("Data") a wholly owned
subsidiary of the Company, upon the earlier to occur:
i) January 19, 2001 (twelve months from issuance).
ii) an investment totalling one million dollars($1,000,000) is made in Data
by the Company, or
iii) a registration with the Securities and Exchange Commission of Data's
stock becomes effective. The Class A preferred stock shall be
convertible into Data common stock pursuant to the following formula:
the converted shares shall be equal to 3,400,000 shares of the total
Data common stock to be issued after conversion.
15
39
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
8. Issued capital stock (cont'd)
Voting right. The Class A preferred stock has no voting rights of the Company,
------------
however one designee on the holder of the Preferred A shares shall hold a
position a Board member of the Company until conversion, as well as one designee
on the holder shall have the right to attend all meetings of the Board of
Directors of the Company in reference to Data.
Stock splits. The Class A preferred stock will be treated in the same manner as
------------
all issued Data common stock, in relation to any stock splits.
As described in Note 6, the 100,000 shares of Class A preferred stock were
issued in exchange for the acquisition of Data stock and recorded at an amount
of $1,309,928.
The 100,000 shares of Class A preferred stock will be convertible into 3,400,000
common shares of Data stock by January 19, 2001 or earlier subject to the above
noted conditions. The conversion will result in a dilution of the Company's
position in Data, from 100% of the common stock in Data to 22.7%.
Common stock
All of the following transactions occurred in accordance with Fresh Start
Reporting (see Note 3).
1. On May 8, 2000, 2,651,673 units of common stock were issued in return for the
extinguishment of the liabilities of the Company.
2. On May 8, 2000, 33,551 units of common stock were distributed to common
interest holders in satisfaction of all rights, interest and claims of such
interest holders.
--------------------------------------------------------------------------------
9. Warrants
One Class A warrant (2,685,224 in total) was issued for each new common share
issued under the Amended Plan. The Class A warrants shall allow the warrant
holder to purchase one share of common stock of the Company at a price of $5.00
per share at any time up to May 8, 2001. Upon the exercise of the Class A
warrants, the warrant holder also shall receive one Class B warrant to purchase
the Company's common stock. The terms of the Class B warrants were set by the
Board of Directors with an exercise price of $10 and an exercisable date of
August 1, 2000.
--------------------------------------------------------------------------------
16
40
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
10. Related party transactions
During the period before fresh start reporting the $1,000 loan payable was
converted into a Debtor's Certificate for Indebtedness in exchange for raising
$310,000 of Debtor's Certificates. The related party is one of the individuals
who was approved by the Bankruptcy Court to provide administrative services for
$3,500 per month until the plan was confirmed on May 8, 2000.
The other individual who also earns $3,500 monthly for administrative services
on behalf of his company entered into a rent and equipment lease totalling $750
per month with a year's terms and then payments month to month. As a result of
the Company's acquisition of Data the above related party, Jande International
Holdings LLC, owns 15% of Data common stock before the exchange into the
Company's Class A preferred stock as described earlier.
Both individuals as a result of their administrative duties providing debtor in
possession's services to the Company received 7.8% each in common stock in
exchange for the Bankruptcy Court approved accrued compensation.
Rent paid to a related party covering utilities and telephone for the six month
period ended June 30, 2000 was $4,900 (year ended December 31, 1999 - $6,000).
An office equipment lease was also provided totalling $1,500 (1999 - $1,750).
--------------------------------------------------------------------------------
11. Stockholders' deficiency
With fresh start reporting, the Predecessor Company's stockholders' deficiency
was eliminated (see Note 3 - Fresh Start Reporting). As at June 30, 2000,
2,685,224 new common stock shares with a par value of $0.01 were issued in
accordance with the Amended Plan.
--------------------------------------------------------------------------------
12. Income taxes
The Company accounts for income taxes using the liability method, as provided by
Statement of Financial Accounting Standards 109, Accounting for Income Taxes
("SFAS 109"). Differences between the tax bases of assets and liabilities and
their financial statement amounts are reflected as deferred income taxes based
on enacted tax rates. There was no income tax (benefit) for the period ended
June 30, 2000 .
The Company's ability to use its net operating losses to offset future taxable
income is subject to restrictions enacted in the United States Internal Revenue
Code of 1986 as amended (the "Code"). These restrictions could limit the
Company's future use of its net operating losses if certain stock ownership
changes described in the Code occur.
At June 30, 2000 the company had a net loss of $ 57,163.
17
41
<PAGE>
--------------------------------------------------------------------------------
Central Capital Venture Corporation
(formerly Digital Technologies Media Group, Inc.)
Notes to the Financial Statements
(Expressed in United States Dollars)
June 30, 2000
--------------------------------------------------------------------------------
13. Prior year financial statements
The prior year financial statements were audited by another firm of public
accountants who expressed an opinion without reservation on those statements in
their report dated April 4, 2000.
The accompanying financial statements for the year ended December 31, 1999 were
prepared assuming that the Company would continue as a going concern. As further
discussed in Note 2 to the financial statements, the Company filed a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code on January 19, 1999. The reorganization plan was not confirmed by the
Bankruptcy Court until April 26, 2000 with the effective date being May 8, 2000.
The financial statements for the year ended December 31, 1999 does not include
any adjustments that resulted from the outcome of the confirmation.
--------------------------------------------------------------------------------
14. Subsequent event
Subsequent to the year end, a dispute has arisen between the Directors and a
former Director over the operations of Datanet Information Systems, Inc. As no
legal actions have been filed against the Company at this time, the outcome of
this dispute and its impact, if any, on these financial statements cannot be
determined.
--------------------------------------------------------------------------------
15. Supplemental financial information
The following is the financial information for the prior six month comparative
period:
Six Months
Ended
June 30, 1999
Expenses -------------
Advertising and promotion $ 370
Lease payments 750
Professional fees 1,320
Rent 3,500
Salaries and benefits 36,129
Stationary and office 948
Telephone 269
Travel 963
------------
44,249
------------
Net loss $ (44,249)
============
18
42
