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 December 31, 1998 and 1999.
[ ] 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
DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
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(Name of small business issuer as specified in its charter)
Delaware 87-0269260
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2660 Townsgate Road, Westlake Village, California 91361
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (805) 496-2186
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 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. [ ]
Revenues for the fiscal year ended December 31, 1998 totaled $-0-and for fiscal
year ended December 31, 1999 totaled $-0-.
As of December 31, 1999, 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-.
As of December 31, 1999, the registrant had outstanding 3,790,627 shares of
Common Stock.
Exhibit index page number: 16
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC
Form 10-K Report for the Fiscal Year
Ended December 31, 1998 and 1999
TABLE OF CONTENTS
Page
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PART I
Item 1. Business ....................................................... 1
Item 2. Properties ..................................................... 10
Item 3. Legal Proceedings .............................................. 11
Item 4. Submission of Matters to a Vote of Security Holders............. 11
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters .................................. 11
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................... 11
Item 7. Financial Statements and Supplementary Data .................... 13
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .......................... 13
PART III
Item 9. Directors and Executive Officers of the Registrant ............ 14
Item 10. Executive Compensation ........................................ 15
Item 11. Security Ownership of Certain Beneficial Owners
and Management ............................................... 15
Item 12. Certain Relationships and Related Transactions ................ 16
PART IV
Item 13. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ......................................... 16
Signature .............................................................. 17
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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. Unless the context indicates
otherwise, the term "Company" refers to the operations of DTG prior to and
following the combination of DTG and M&B. Reference to the Company after
approval of the Plan is sometimes as the "Reorganized Debtor." See "Business
Combination." The Company was engaged in limited business activities, in fiscal
years 1998 and 1999.
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 seeks 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 (the "Plan").
A. The Company's Proposed Plan
Currently, the Company has limited assets: an interest in office space and a
computer server as well as the following Web sites: "Digicommerce.com" and
"Digicommerce.net." Through the reorganization process, the Company intends to
further develop the Web sites. The Company's historical financial condition is
not relevant as the Company's Plan provides that the Company will conduct a
completely different type of business. The Reorganized Debtor, the Company,
shall operate as a closed end mutual fund specifically designed to engage in
investments of startup companies. The Company shall be engaged as a Business
Development Corporation pursuant to sections 54-65 of the Investment Company Act
by making an election. DataNet Information Systems, Inc ("Data") will be the
Company's initial investee company. This initial investment will occur before
Plan confirmation so the assets acquired from the purchase of Data are included
as assets of the Company.
B. Formation of a Business Development Corporation ("BDC").
Immediately following the distribution of its Units of Reorganized Debtor's
Securities pursuant to the Plan, the Reorganized Debtor will make a Business
Development Company election under the Investment Company Act which defines the
Company's business purpose, its venture capital investment activities and the
type of companies in which it may invest. This election will be made by the
filing of a form N54-A. See "Regulation of the Company - a Business Development
Company".
The Company shall obtain capital for its investments from investors through
private and public debt or equity offerings, as well as the proceeds of
liquidation of its own portfolio. Following the Company's inceptive investment
in Data, 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.
Additionally, leveraging can be accomplished through the private or public
issuance of debt securities or other senior securities, such as preferred stock.
Provisions of the Investment Company Act restrict such borrowing and issuances
of senior securities. The Company may borrow from banks or other financial
institutions and may issue senior securities representing indebtedness in
compliance with the asset coverage requirement of Section 80a-18 of the
Investment Company Act.
The Company's investment objective is to invest its assets and/or management
services in companies with gross sales of less the $500,000 annually and
selected situations (such as leveraged buyouts and established business
operations that would benefit from public ownership), which demonstrate
potential for long-term capital growth.
C. The Business Activity Of The Company.
The Company will focus 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.
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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, will act as an 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, and (4)
Corporate Partnering.
The Company shall derive its income through management consulting fees charged
to the Investment Companies and client companies and profit from the selective
sale of the Investment Companies securities it maintains in its portfolio.
D. Regulation of The Company, A Business Development Company.
A Business Development Company is defined in the Investment Company Act as any
closed-end investment company which elects treatment as a Business Development
Company under the Investment Company Act and which is operated for the purpose
of making investments in eligible portfolio companies, follow-on investments in
formerly eligible portfolio companies and investments in certain bankrupt or
insolvent companies. An eligible portfolio company is basically a company that
does not have ready access to capital through conventional financial channels.
It is defined as any United States domiciled company which is not itself an
investment company and which (a) does not have a class of securities registered
on a national securities exchange or eligible, for margin purchase under Federal
Reserve Board rules or (b) is actively controlled by another BDC, either alone
or as part of a group acting together and has an affiliate of the Business
Development Company on its board of directors. In most instances, a portfolio
company must be a company to which the Business Development Company extends
significant managerial consulting assistance either through the exercise of
control or through an arrangement whereby the Business Development Company,
acting through it directors, officers and employees, provides significant
guidance and counsel concerning the management operations or business
objectives, and policies of the company.
The Investment Company Act prohibits or restricts the Company from investing in
certain types of companies, such as Broker/Dealers (which must be wholly-owned
by 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 shall be permitted by the Investment Company Act, under specified
conditions, to issue multiple classes of senior debt and a single class of
preferred stock provided its asset coverage, as defined in the Investment
Company Act is at least 200% after the issuance of the debt or the preferred
stock.
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
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.
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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 means 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.
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.
E. 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 with 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.
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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.
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.
F. Initial Transactions By Company.
The Company's initial Investee Company will be Data. Once the Data venture is
consummated, and all terms and conditions are met the Company will invest in
other companies. Digi Commerce Corporation will be the Company's second Investee
Company; Digi Commerce will be formed upon Plan confirmation.
(i) Acquisition of Data
Data is 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 will
result 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 Plan on a Pro Rata basis based upon Units held. The Company
has 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. Once Data has received a total of $1,000,000, the Company will
register the Data stock owned by it with the Securities and Exchange Commission.
The registration of Data stock also will include the common stock resulting from
the conversion of the Class A Preferred Stock. 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 that the Data Common Stock will
be registered within one year of Plan Confirmation.
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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) twelve (12) 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
68% of the total Data common shares (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 20% 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.
(ii) Data Business Operations and Assets.
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. Currently,
Data has contracts with 34 of the approximate 1,700 real estate boards
nationwide to supply MLS information to their members by way of the Pocket MLS.
Through Data's proprietary software and compression technology, a user of the
Pocket MLS is able to access the Real Estate Board's current MLS information
each night, and download multiple listing information so that the Reader can be
updated. Currently, the reader is supplied to realtors at no charge, and users
pay an update fee of $30.00 per month, usually by credit card.
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.
A major distinction exists between the ability to access multiple listing
services through the Internet in one's office or by a portable laptop (which is
exceedingly costly) and the Pocket MLS, which costs approximately $30 per month.
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While computer access to MLS information exists and has existed for a number of
years, both by desktop computers and laptop, this information source is not a
direct competitor of the Pocket MLS, which is a personal digital assistant
(PDA), a new technology. With the PDA, one is able to download the pertinent MLS
information once a day (in about a minute) and carry such information on the
PCMCIA card, which with DataNet's compression technology, holds a large amount
of information and allows one to complete a search in seconds (far faster than a
PC or laptop). A desktop computer is not portable, needs an expensive desktop
program such as Top Performer (tm), to store the MLS information, is slower than
the Pocket MLS and costs many times more than the Pocket MLS in terms of
hardware and downloading costs. A huge distinction exists between the market for
laptop/notebook computers and PDAs.
The only direct competition known to exist with respect to the Pocket MLS is a
new product that is supposed to be introduced some time in the year 2000 that is
based on the Palm Pilot PDA. This product will work off a desktop program and
will allow the user to transfer MLS data from the user's computer to the Palm
Pilot PDA (instead of printing out a report). The Palm Pilot PDA does not use a
PCMCIA card or compression technology, thus, this technology carries a limited
amount of data and its search capabilities are limited.
Data's management team consists of Ely J. Mandell (Ely J. Mandell is the current
President and CEO of the Company) and Bernie Budney. Bernie Budney is Data's
President; Ely J. Mandell serves as Data's Secretary/Director and Executive Vice
President.
(iii) History of Data
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.
DataNet Enterprises, LLC was run solely by David Noles, and Millennium was owned
and operated by Bernie Budney. While Bernie Budney will have an active
management position in Data, David Noles will not hold a management position and
will not be involved with Data. Data purchased the assets of DataNet
Enterprises, LLC but did not assume DataNet Enterprises, LLC's liabilities. Data
also purchased the assets of Millennium. At the time the Millennium assets were
purchased, Millennium was generating a positive cash flow and had no debt.
DataNet Enterprises, LLC and Data are two totally different companies. The only
similarity is that they were marketing the same product. DataNet Enterprises,
LLC had over $3,000,000 in debt and Data has only $740,000 in debt. It was
DataNet Enterprises, LLC's extensive debt that resulted in the liquidation of
its assets. DataNet Enterprises, LLC was unable to succeed because the debt it
was servicing was too high. The problems that DataNet Enterprises, LLC
encountered were twofold. First, it paid too much for its assets when it started
and it was undercapitalized. Second, DataNet Enterprises LLC did not offer good
customer service and did not aggressively pursue sales. The combination of these
problems caused not to be able to meet its commitments in a timely manner or not
at all.
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.
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(iv) Anticipated Investee Company/ Digi Commerce Inc.
As soon as practical after confirmation of the Plan, the Company intends to
incorporate Digi Commerce, Inc. under the laws of the State of Nevada. Digi will
be a start-up E-commerce travel reservations World Wide Web design Assistance
Company with Internet Service Provider aspects. Digi 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 will also
maintain, market and operate DIGI-commerce.net and DIGI-commerce.com, which will
sell various products, including sporting good products in accordance with the
Fogdog Sorts contract over the Internet.
Digi will have 20,000,000 authorized shares of common stock and 10,000,000
authorized shares of preferred stock. Upon formation, Digi shall issue 4,000,000
shares of common stock, which constitutes 100% of issued Digi common stock, to
the Company in exchange for a transfer of all of the 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 J. Mandell shall serve as President and sole
Director of Digi. Other officers will be named upon formation of Digi.
G. Amendment to Charter Documents of the Company and Other Matters
Amendments to Articles of Incorporation of Digital Technologies Media Group, Inc
On the Effective Date, the Board of Directors of the Company shall be authorized
to amend the Articles of Incorporation and Bylaws to accomplish the following:
(i) Change the Company's name to "Central Capital Venture Corporation," or
such other name as the Board of Directors determines;
(ii) Change the place of incorporation of the Company to Nevada or any
other state, which the Board of Directors determines;
(ii) Effect quasi-reorganization for accounting purposes;
(iii)Authorize 20,000,000 shares of no par value common stock;
(iv) Authorize 1,000,000 shares of no par value preferred stock. The Board
of Directors shall determine in their discretion the rights,
performances, privileges, and restrictions granted to or imposed on
any wholly unissued class of such shares or any wholly unissued series
of any class of such shares;
(v) Issue shares, warrants or other securities to carry out any
transaction contemplated in the Plan without solicitation of or notice
to shareholders;
(vii)Take all action necessary and appropriate to carry out the terms of
the Plan;
(viii)Amend the Company's Articles of Incorporation and/or bylaws to
provide the maximum indemnification or other protections to the
Company's officers and directors that is allowed under applicable law;
(ix) In accordance with Section 1123(a)(b) of the Code, include within its
charter a provision prohibiting the issuance of nonvoting equity
securities.
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H. The $310,000 Loan Transaction / The Company's Notes
Pursuant to Bankruptcy Court approval, the Company was authorized to borrow up
to $310,000 from several individuals and issue its notes to evidence the
indebtedness (the "Company's Certificates of Indebtedness"). The funds from the
Company's Certificates of Indebtedness will be used to fund the Data
transaction, the costs associated with acquisition of 1,000,000 shares of Data
common stock, the costs associated with reorganizing the Company including the
printing and mailing of the disclosure statement materials to all Creditors and
shareholders, as well as general working capital for the Company.
The net proceeds of the loan have been and are used to fund the cash payments
required under the Plan for Administrative Claims and the expenses associated
with printing and noticing the Plan and disclosure statement, fund the purchase
of Data and provide capital for post-confirmation operations.
The borrowings under the Company's Notes constitute administrative claims
against the bankruptcy estate. Under the terms of the borrowing, the Company
agreed not to encumber any property of the estate with liens or security
interests not in existence and, not to incur any indebtedness senior in priority
to the indebtedness represented by the Company's Notes.
The Company's Notes:
1. Carry an interest rate of 10% per annum;
2. The principal and interest accrued under the Note shall be due and payable
one year from issuance;
3. The Note shall inure to the benefit of and shall be binding on any successors
or assigns of the Company;
4. If the case is converted to Chapter 7, a Chapter 11 trustee is appointed or
the Company's Plan is not confirmed, the Note shall become immediately due and
payable;
5. The Note may not be transferred, absent registration under the Securities Act
of 1933 or absent an exception from such registration requirements;
6. The obligations represented by the Company's Note shall constitute a priority
claim pursuant to Section 364(b) of the Bankruptcy Code; and
7. On or after the Effective Date, holders of the Company's Notes may elect to
convert such Company's Notes to Units at a ratio of 1 Unit per dollar loaned.
I. Marketing
Since there was no revenue during the years ended December 31, 1998 and 1999,
there is no marketing of any product or service during the reporting periods.
J. Government and Other Regulation
The Company was inactive and had no employees and had no compliance issues with
any federal and state governmental agencies.
K. Business Combination
The Company did not engage in any business combination during the reporting
periods.
L. Events Leading to Chapter 11 Filing
Subsequent to July 30, 1996, the Company formed DTG Entertainment, Inc., (DTG) a
wholly owned subsidiary of the Company, to capitalize on the expanding
international television distribution market and to become part of rapidly
converging film, television, music, media and computer industries on the
internet. DTG purchased assets from Communication Services Inc. (CSI), which
consisted of various accounts receivable and film rights, for convertible
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preferred stock of the Company, which was simultaneously converted into common
stock of the Company. The Company through DTG, intended to develop, produce and
distribute a film library of television shows, made-for-television movies and
documentary series. The Company's business plan was to raise between $800,000
and $1,000,000, together with advances from DTG's licensees and loan proceeds,
to develop and distribute the DTG Library and to acquire, produce, distribute
and exploit a film library of feature-length motion pictures, documentaries,
educational films, and television series.
Arthur Newberger ("Newberger") was the President/CEO and Chairman of the Board
of Directors of DTG. Newberger provided an impressive resume to the Company's
board of directors. As a senior corporate officer for major agencies such as ICM
and Ashley Famous, Newberger represented that he was responsible for guiding the
careers of many leading artists and groups, including Neil Diamond, Stevie
Wonder, Linda Ronstadt and the Ice Capades.
Under Newberger's direction, DTG's emphasis was to be the acquisition of
predominantly U.S. produced theatrical and television product -- product highly
sought after by both foreign and domestic buyers. Newberger claimed he could
secure exclusive distribution rights to quality material and could license such
material to its business contacts worldwide. In addition, DTG, through
Newberger, claimed to have been offered the opportunity to represent a
prestigious film library containing over 1,000 hours of family entertainment,
which was to include documentaries and nature-oriented series. The Company
raised $325,000 from private lenders to initiate its business plan. Newberger
promised lenders that their loans were fully secured and would be repaid by
solid receivables, escrowed in Marathon Bank. DTG's management at the time
claimed to have experienced no bad debt in the previous five years, and that any
uncollected receivables pursuant to the escrow would be replaced. Newberger also
represented that DTG possessed a close relationship with many cable, broadcast
and independent networks, including The Discovery Channel, a major worldwide
cable distributor. Newberger furthermore stated DTG was in negotiations with The
Discovery Channel regarding a co-production venture for a five day per week
series featuring stock investments. Newberger represented to his Board of
Directors, that DTG was developing a four-hour mini-series based on the history
of the Warner Bros. Studio for broadcast on a major U.S. television network. As
it turned out all of the above mention representations could not be
substantiated.
On July 30, 1996, Ely J. Mandell was hired by the Company, as its Chief
Financial Officer and a Director. Mr. Mandell's responsibilities included
liaison by and between the Company and the Company's auditor, J. Jay Shapiro,
CPA ("Shapiro"), and securities counsel, as well as instructing the Company's
bookkeeper in software utilization. On or about August 5, 1996, Shapiro produced
his initial audit of the Company for inclusion in the Company's Form 10 to be
filed with the Securities and Exchange Commission ("SEC"). It became apparent to
Ely J. Mandell after being presented with the Company's initial audit produced
by Shapiro, and comparing that with DTG's internal cash flow analysis that
something was amiss with the presentation of DTG's financial condition. After
extensive review and investigation, Ely J. Mandell immediately brought
allegations of financial misdeeds and fraud against Mr. Arthur Newberger, DTG's
President and CEO, to both the Company's Board of Directors and Shapiro.
Subsequently a board of directors meeting was called and Shapiro issued a
restated audit, which indicated a write down of $800,000 in receivables. Mr.
Mandell physically removed himself from the Company's offices on or about the
first week of September 1996 and formally resigned his position on November 14,
1996.
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Approximately seven months later, , Shapiro expressed his concerns in writing to
the Company regarding the Company's internal control system (April 30, 1997),
and requested that the Company immediately hire a qualified individual to serve
as chief financial officer. Shapiro also instructed the Company to distribute
the restated financial statements and its 1996 Form 10-KSB to certain
shareholders and debt holders together with a cover letter explaining the
reasons for restatements and the resulting financial impact. On May 13, 1997,
Shapiro also resigned. Shapiro had issued three separate opinions for his audit
of fiscal year 1995, writing the assets down a total of $3,708,881 due to the
alleged misrepresentations of Newberger and Shapiro's alleged auditing errors.
On November 8, 1997, Newberger resigned as a director, President and Chief
Executive Officer of the Company. The Board of Directors accepted his
resignation and on the same date appointed David A. Kekich, President, Chief
Executive Officer and Chief Financial Officer. Kekich voted to rescind the
acquisition of the CSI assets. On May 18, 1998, Newberger returned the 2,160,000
shares of the Company's stock held by CSI. The other DTG management team members
returned 160,000 shares held by them. The Company retired the 2,320,000 shares.
A meeting of the Company's Board of Directors was held October 21, 1998. As a
result of the meeting, Ely J. Mandell was again hired by the Board of Directors
as acting President of the Company for the purpose of reorganizing the Company
under Chapter 11 of the Bankruptcy Code. On January 26, 1999, the Company filed
its petition under Chapter 11 of the Bankruptcy Code.
M. Employees
Currently, the Company has two administrative employees, Ely J. Mandell and
David A. Kekich, who are also officers and directors. The Bankruptcy Court
allowed both administrators to service the Plan of Reorganization for the
Company (a Debtor in Possession).
N. Competition
The Company is presently engaged Research and Development of Internet e-commerce
sites and has affiliate sites in operation. The company is aware that there is a
multitude of competition all with greater resources than that of the Company.
O. Take Required Actions
Without shareholder approval, the Board of Directors of Company shall be
authorized to take any and all action necessary or appropriate to effectuate any
amendments to the Company's Certificate of Incorporation and/or Bylaws called
for under the Plan and the Board of Directors and officers of the Company shall
be authorized to execute, verify, acknowledge, file and publish any and all
instruments or documents that may be required to accomplish the Plan.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal executive offices, consisting of approximately 850
square feet, are located at 2660 Townsgate Road, Suite 725, Westlake Village,
California 91361. The Company occupies these offices pursuant to a sublease with
Jande International, Holdings, LLC., (of which Mr. Ely Jay Mandell President and
Officer of the Company, is a principal). The sublease commenced January 1999 for
a term of one year at a monthly rate of $500, since January 2000, the Company
has maintained said sublease on a month-to-month basis. The Company believes
that its office space is adequate for its current needs.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any nonbankruptcy legal proceedings,
nor to its knowledge, is any material litigation threatened against the Company
or its assets.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to shareholders during the fourth quarter of the
fiscal year ended December 31, 1999.
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
March 30, 2000, was 3,378.
(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
requirements are such that it intends to follow a policy of retaining any
earnings in order to finance the development of its business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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.
Unless the context indicates otherwise, the term "Company" refers to the
operations of DTG prior to and following the Reorganization. For further
information regarding the Reorganization, see Note 7 of Notes to Consolidated
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.
Overview
History of Operations
Digital Technologies Media Group, Inc., a Delaware corporation, is the Company
(a Debtor in possession) in a Chapter 11 bankruptcy court case. On January 26,
1999, the Company filed bankruptcy caused by a voluntary Chapter 11 petition
under the U.S. Bankruptcy code.
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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. The Company purchased one enterprise,
DataNet Information Systems, Inc. (a Nevada corporation), which was acquired
pursuant to Bankruptcy Court approval on January 19, 2000. The Company intends
to operate as a Business Development Company, which is essentially a closed-end
Mutual fund specifically designed to engage in investments of start up
companies. Recently, pursuant to Bankruptcy Court Order, the Company received
$310,000 in borrowed funds to purchase DataNet Information Systems, Inc. and to
pay administrative expenses.
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
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 Years Ended December 31, 1999 and December 31, 1998
In both years there was no revenue, or gross profit as the Company was inactive.
The operating expenses increased to $143,240 in 1999 from $16,632 in 1998 as a
result of the Chapter 11 bankruptcy filing. Approximately $127,000 was incurred
for accrued legal and administrative services to finalize prepetition claims
(Liabilities) and a plan of reorganization. The balance of the expenses was for
rent $6,000 and other typical services related to administrative costs. There
were no taxes or interest paid. The net loss for the reasons described were
$143,240 and $16,632 in 1999 and 1998, respectively. All tax losses will be
carried forward in compliance with IRS regulations.
Liquidity and Capital Resources
The Liquidity of the company is dependent upon the confirmation of the plan of
reorganization. The Company had a bank balance of $74 at December 31, 1999. The
current liabilities of $135,520 will be part of the plan of reorganization,
except for $7,227 of which most of the accrued expense is to a related party for
rent, equipment and travel expenses.
The prepetition liabilities totaling $565,549 as well as the $127,293 of
professional fees and post petition administrative claims will be converted into
common stock under the plan of reorganization subject to final approval of the
Bankruptcy Court.
The Company has a going concern issue that may be eliminated as a result of
borrowing $310,000, which was received by April 4, 2000. The Company paid
$100,000 for the working capital infusion of DataNet Information Systems, Inc.,
and is keeping the rest ($210,000) for administrative expenses. The $310,000 of
notes payable can be converted into common stock at the option of the note
holders. The Company believes that the above facts support that it does not have
a going concern issue.
Liquidity and Capital Resources
Initially, the Company funded its operations through borrowings from private
investors, of which all but two investors subsequently converted such loans into
common stock of the Company in connection with the reverse acquisition in July
1996.
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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. The Company has negative working capital of approximately
$654,000. Accordingly, the Company requires additional sales and collections
and/or it needs to raise additional capital to meet its operating needs and to
satisfy its outstanding liabilities. If the Company is unable to acquire
additional cash resources, either from current operations or new financing, it
may be unable to continue as a going concern. The report of the Company's
independent auditor indicates that the Company has minimal cash available to
meet its future operating requirements and that, therefore, there is a
substantial doubt regarding the Company's ability to continue as a going
concern.
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, to relinquish rights to certain of its
products, or to license or sublicense to third parties the right to distribute
programs the Company would otherwise seek to develop itself. If the Company is
required to take such action, there can be no assurance that the Company will be
able to continue to operate as a going concern.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included as a separate section following
the signature page to this Form 10-KSB and are incorporated herein by reference:
DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Oppenheim & Ostrick, CPA's, Independent Auditors F-2
Balance Sheet as of December 31, 1998 and 1999 F-3
Statement of Income for the Years Ended December 31, 1998
(Unaudited) and 1999 F-4
Statement of Stockholders' Equity for the Years Ended
December 31, 1998 (Unaudited) and 1999 F-5
Statement of Cash Flows the Years Ended December 31,
1998 (Unaudited) and 1999 F-6
Notes to Financial Statements F-7 - F-12
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been disagreements with the Company's former accountants, Jay J.
Shapiro respecting accounting and financial disclosure which the present
officers of the Company believe were materially incorrect, and due to the
misrepresentation by previous management. A copy of the letter of Jay .J.
Shapiro is attached hereto as an Exhibit. Pursuant to the Disclosure Statement
Describing the Third Amended Chapter 11 Plan, the Company may pursue a claim for
relief against Jay J. Shapiro.
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PART III
ITEM 9. 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 March 31, 2000. A summary of the
background and experience of each of these individuals is set forth after the
table.
Name Age Position
---- --- --------
Ely J. Mandell 44 President, Chief Executive Office
and Director
David A. Kekich 56 Secretary and Director
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 these capacities has served on several Public Company Board of
Directors; 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.
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 fiscal year ending December 31, 1999, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
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ITEM 10. EXECUTIVE COMPENSATION
The Company had no employees during the reporting periods. However, the
Bankruptcy Court appointed Mr. Ely J. Mandell and Mr. David A. Kekich as
Administrators of the 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 has no employment contracts but has 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 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of the
Company on December 31, 1999 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
---------------- ----------------- ----------
David A. Kekich 1,225,000(1)(4) 33.5%
Arkad Group, LLC
247 Shekomeko Blvd.
Johnstown, PA 15905
B. D. Brooke & Co. 745,000(2)(4) 20.3%
955 So. Virginia, #116
Reno, Nevada 89502
Madera International, Inc. 500,000(5) 13.6%
23548 Calabasas Road, Suite 205
Calabasas, CA 91302
All directors and executive 1,970,000(1)(2)(4) 53.9%
officers (as a group, 2 persons)
---------------------------
(1) Mr. Kekich, an officer and director of the Company, is Manager and a
minority Member of the Arkad Group, LLC, which beneficially owns 1,080,000
shares of the Company's common stock.
(2) The shares of B. D. Brooke and Co., are held by Mr. Ely J. Mandell, as
custodian for his three minor children, and he disclaims any direct or indirect
beneficial ownership of such shares. Jande International Holdings, LLC, is the
successor to B. D. Brooke & Company, in which Mr. Mandell is the Managing
Member, and maintains a 20% ownership interest, and 80% voting control.
(4) In March 2000 the Company's current Board of Directors withdrew the 1996
Employee and Consultant Stock Bonus Plan, and rescinded all issuances of stock
of said plan, including the Form S-8 share issuance. Mr. Mandell owned, in his
own name, 145,000 shares of the Company's common stock, pursuant to that plan,
and Mr. Kekich owned, in his own name, 145,000 shares of the Company's Common
Stock, pursuant to that plan all of which shares were cancelled in March 2000.
(5) Madera International, Inc., transferred all of the stock beneficially owned
by it to Gateway Industries Limited, on March 29, 1997.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 1, 1995, Digital Technologies Group, Inc. ("DTG") a wholly owned
subsidiary of the Registrant, acquired from Communications Services
International ("CSI"), a foreign corporation, certain assets including film
distribution rights to several television series and some film contracts in
exchange for a $3,000,000 Promissory Note, secured by the assets purchased and
guaranteed by Mr. Kekich, an officer and director of DTG. In conjunction with
the acquisition of assets from CSI, Arthur Newberger, an officer and minority
shareholder of CSI (later suspected to be the only shareholder of CSI), became
President and Chief Executive Officer of DTG. In November 1995, the $3,000,000
Promissory Note was converted into preferred stock of DTG. Upon the acquisition
by the Registrant of DTG, in July 1996, CSI received 2,160,000 shares of the
Registrant's common stock in exchange for the DTG Common Stock and Mr. Newberger
became President and Chief Executive Officer of the Registrant. Other than this
one transaction, the Registrant has not had any further business or financial
relationships with CSI. In July 1996,Mr. Newberger organized CSI Ventures, S.A.
("CSIV") and transferred his minority ownership in CSI to CSIV. In December
1996, CSIV acquired the 2,160,000 shares of the Registrant owned by CSI in
exchange for CSIV's ownership in CSI. In November 1997 Mr. Newberger had his
2,160,000 shares cancelled by the Company and the film contracts and film
library reverted to his former company.
Ely J. Mandell had been a director and Chief Financial Officer of the Company
from June 1996 until he resigned in November 1996"). It became apparent to Mr.
Mandell after being presented with the Company's initial audit produced by J.
Jay Shapiro & Company Independent Auditors, and comparing that with DTG's
internal cash flow analysis given to him by Arthur Newberger, that something was
amiss with the presentation of DTG's financial condition. After extensive review
and investigation, Ely J. Mandell immediately brought allegations of financial
misdeeds against Arthur Newberger, DTG's President and CEO, to both the
Company's Board of Directors and J. Jay Shapiro & Company Independent Auditors
to the Registrant. Subsequently, a board meeting was called and Jay J. Shapiro &
Company issued a restated audit, which indicated a write down of $800,000 in
receivables, Ely J. Mandell was then forced to resign by Mr. Newberger. As part
of a severance pay package, Mr. Mandell was issued 145,000 shares of the
Company's Common Stock valued at $.08 per share. Mr. Kekich and Mr. Mandell were
also appointed and served as administrators of the Company as Debtor in
Possession in the Bankruptcy Proceeding.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(1) Financial statements are attached hereto starting on page F-2 hereof.
(2) Letter from Jay J. Shapiro, C.P.A addressed to the previous management of
the registrant, dated April 30, 1997
(3) Letter of resignation of Jay J. Shapiro, C.P.A, a professional corporation,
dated May 13, 1997
(4) Consent of John Holt Smith, Esq. to "Legal Matters", dated June 13, 2000.
Reports on Form 8-K.
Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 4, 1999.
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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.
DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
Date: June 15, 2000 By: /s/ Ely J. Mandell
------------------------
Ely J. Mandell
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/ Ely J. Mandell President, Chief Executive June 15, 2000
--------------- Officer and Director
Ely J. Mandell
/s/ David A. Kekich Secretary and Director June 15, 2000
-------------------
David Kekich
17
