UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1996.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (no fee required) for the transition period from
____________________ to _____________________
Commission file number: Q-2549
BRIA Communications Corporation
(Name of Small Business Issuer in Its Charter)
New Jersey 22-1644111
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
147-17 Newport Avenue, Neponsit, New York 11964
(Address of Principal Executive Offices)
(718) 318-1535
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of each Exchange
Title of Each Class On Which Registered
Class A Common Stock ($0.001 Par Value) NONE
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 XX
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's total consolidated revenues for the year ended December 31,
1996, were $0.
The aggregate market value of the registrant's Class A Common Stock, $0.001
par value (the only class registered under the Exchange Act), held by
non-affiliates was approximately $616,123 based on the last sale price thereof
reported on the consolidated tape for February 2, 1998.
The number of shares outstanding of the issuer's Class A Common Stock
($0.001 par value), as of February 2, 1998 was 1,862,315.
Total Number of Sequentially Numbered Pages
Index to Exhibits on Page
<PAGE>
TABLE OF CONTENTS
PART I
Item 1. Description of Business...............................................3
Item 2. Description of Property ..............................................5
Item 3. Legal Proceedings.....................................................5
Item 4. Submission of Matters to a Vote of Security Holders...................6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters..............6
Item 6. Management's Discussion and Analysis of Plan of Operation.............7
Item 7. Financial Statements..................................................9
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................10
PART III
Item 9. Directors and Executive Officers.....................................10
Item 10. Executive Compensation...............................................11
Item 11. Security Ownership of Certain Beneficial Owners and Management.......12
Item 12. Certain Relationships and Related Transactions.......................13
Item 13. Exhibits, Lists and Reports on Form 8-K..............................15
SIGNATURES...........................................................16
INDEX TO EXHIBITS....................................................17
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS
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Business Development
Unless the context indicates otherwise, the term "Company" refers to BRIA
Communications Corporation, a New Jersey corporation, and its former
subsidiaries and predecessors. The Company was incorporated in New Jersey in
1959 under the name Metallurgical Industries, Inc. Until 1993, the Company was
engaged in the repair of aircraft turbine engine components and the purchasing,
processing and selling of specialty refractory metals. By August 1993,
competitive pressure from the aircraft turbine engine original equipment
manufacturers forced the Company to discontinue operations in that market.
Additionally, low levels of demand, surplus domestic capacity, and increased
competition from imports reduced the Company's profit margins in the specialty
refractory metals business to below the break-even level. As a result, the
Company began to downsize its existing operations and aggressively search for
new opportunities or replacements for its existing businesses.
In early 1994, the Company agreed to merge into MAXMusic, Inc., a Delaware
corporation ("MAXMusic"), pursuant to an Agreement and Plan of Merger dated July
11, 1994 ("Merger Agreement"). The Company began extensive restructuring and
reorganization in furtherance of the Merger Agreement. Upon the completion of
merger and recapitalization, the shareholders of MAXMusic would have exchanged
100% of their shares for a minimum of 80% of the Class A Common Stock of the
Company. On March 18, 1994, a petition was filed against the Company in the U.S.
Bankruptcy Court requesting an order for relief under Chapter 7 of Bankruptcy
Code (Case Number: 94-31635). This involuntary bankruptcy petition was filed by
three of the Company's major creditors with claims totaling approximately
$147,000. MAXMusic agreed to purchase the debts of the three creditors and the
original petitioners stipulated to an extension of time to answer the petition
until June 1, 1994. This information was disclosed in a report on Form 8-K filed
with the Securities and Exchange Commission on April 11, 1994. On June 28, 1994,
the Company reached a settlement with the petitioning creditors and a payment
was put in escrow to settle the debt. On July 27, 1994, the U.S. Bankruptcy
Court dismissed the petition pursuant to 11 U.S.C. Section 303(j) of the United
States Bankruptcy Code.
The Company ceased all active operations on June 30, 1994. Four
administrative employees remained on the payroll until September 30, 1994 to
facilitate the sale of the final Company assets in preparation for a planned
merger with MAXMusic. These employees focused their efforts on winding down
unsuccessful operations and settling debts with the Company's creditors. The
four employees were ultimately terminated on September 30, 1994. On November 8,
1994, MAXMusic exercised its option to rescind the Merger Agreement pursuant to
the Merger Agreement's terms. MAXMusic had signed promissory notes totaling over
$776,000 plus accrued interest that were due on July 31, 1994. These notes would
have been extinguished as part of the merger. However, since the merger was
rescinded, $287,000 worth of the notes, plus interest, became immediately due
with the remaining $489,250 worth of notes, plus accrued interest, becoming due
over a twelve month period. MAXMusic has since declared bankruptcy and the
Company does not anticipate receiving any portion of the money due under the
terms of the promissory notes.
In August 1994, the Company repaid its largest secured creditor, Midlantic
National Bank, in full. In September 1994, the Company settled with another
secured creditor, who was an officer and director of the Company, by selling him
the remaining equipment owned by the Company for $5,000. This settled a debt
totaling approximately $92,000 plus interest. The equipment had not been sold by
the Company after diligent efforts on its part for over a year.
In September 1994, the Company placed its two wholly-owned subsidiaries,
Intermet Resources, Inc. and Advanced Welding and Coating Services, Inc., into
Chapter 7 bankruptcy, Case Numbers 94-36556 and 94-36561, respectively. The
decision to file for bankruptcy stemmed from the fact that neither subsidiary
was profitable nor, in management's decision, had prospects of becoming
profitable. A trustee was appointed by the Court at a hearing before the U. S.
Bankruptcy Court in Trenton, New Jersey on December 7, 1994. The Chapter 7
filings were accepted and the assets of both corporations were liquidated. After
the Merger Agreement with MAXMusic was terminated and the two subsidiaries were
placed in bankruptcy, the Company was left with no consolidated operations.
<PAGE>
Effective December 8, 1995, the Company entered into a later-rescinded
Stock Exchange Agreement (the "Stock Exchange Agreement") with AltaChem Group,
Inc., a corporation formed under the laws of the Republic of Ireland
("AltaChem"), and the shareholders of AltaChem. AltaChem was a chemical company
which manufactured and marketed a one-component polyurethane foam compound and
related products used to dispense that chemical. The Company issued 1,081,209
restricted shares of Common Stock, giving those individuals an ownership
interest of approximately 75% of the Company's total Common Stock
then-outstanding.1 In conjunction with the planned acquisition of AltaChem, the
Company also appointed representatives of AltaChem to serve on the Company's
board of directors.
On May 8, 1996, the parties to the Stock Exchange Agreement mutually
rescinded the transaction from the beginning. The rescission was accomplished
pursuant to a rescission agreement which attempted to restore the parties to
their respective positions prior to the Stock Exchange Agreement. Pursuant to
the rescission, the shareholders of AltaChem agreed to return the shares of
Common Stock which they had obtained pursuant to the Stock Exchange Agreement.
The Company, in turn returned all shares of AltaChem which it had obtained and
released AltaChem from any claims to AltaChem's assets. The parties also
released one another from all claims potentially stemming from the Stock
Exchange Agreement and the rescission thereof.
The primary reason for the rescission was AltaChem's failure to deliver to
the Company audited financial statements and a schedule of assets within 180
days, as required by the Stock Exchange Agreement. This delinquency constituted
a material breach of the Stock Exchange Agreement. Moreover, AltaChem had
significantly underestimated the costs associated with becoming a publicly-owned
company and was incapable of acquiring the investment capital necessary to make
its operations successful. Accordingly, a determination was made that it would
be in the best interest of all parties to rescind the Stock Exchange Agreement.
On July 11, 1996, the Company entered into an agreement with CyberMalls,
Inc. ("CyberMalls"), a Utah corporation. Pursuant to the agreement, the Company
purchased CyberFootball, Inc., a Nevada corporation ("CFI"). CFI's business plan
involved the marketing and sale of football-related products via the Internet.
CFI was to develop a series of linked pages on the World Wide Web. CFI, through
its officers and through consultants retained by the Company, was to seek out
entities which marketed goods and services involving professional and college
football teams or other football-related products. CFI would then attempt to
sell space on these Internet pages which would be used to advertise and sell
related products and services. Pursuant to the agreement, CyberMalls was to
continue providing the computer programming, access to hardware and technical
support which CFI needed to maintain its product. This was an essential
component of the agreement because neither the Company nor CFI had the technical
expertise necessary to support its operations. In exchange for CFI and the
ongoing support of CyberMalls, the Company was required to issue 93,750 shares
of Common Stock, to execute an $11 million promissory note in favor of
CyberMalls and to provide other consideration contingent upon the future
profitability of CFI.
On February 25, 1997, both CFI and the Company received notice of
CyberMalls' decision to discontinue its operations. Pursuant to its agreement
with CyberMalls, CFI's further development and subsequent operations depended
solely on the services provided by the CyberMalls staff and CFI could not carry
out its business plan without the support of CyberMalls. CFI therefore
terminated its operations, which had not begun to generate revenue. The Company
was released from its obligation to deliver the consideration to be paid for CFI
pursuant to a subsequent settlement with CyberMalls. CyberMalls is the
wholly-owned subsidiary of Canton Financial Services Corporation, an entity
which may be deemed to be under the common control of Allen Wolfson, a potential
control person of the Company. For more information on this transaction, see
"Item 12 - Certain Relationships and Related Transactions" and "Item 9
Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a)of the Exchange Act."
On September 10, 1996, the Company acquired all outstanding capital stock
of Kingslawn Offset, Inc., a New York corporation and printing concern engaged
in the printing of full color catalogs, sales sheets, and other publications
("Kingslawn"). In exchange for the stock in Kingslawn, the Company issued 75,000
shares of Common Stock to Joseph Shimron, the sole shareholder of Kingslawn. The
Company also granted Mr. Shimron a $500,000 lien on the assets of Kingslawn and
subsequently appointed Mr. Shimron to the Company's board of directors. Mr.
Shimron resigned from the board of directors on November 26, 1997. The Company
acquired Kingslawn with the intent to expand Kingslawn's printing operations.
Subsequent to the end of 1996, the Company became aware that the financial
condition of Kingslawn was inferior to that which had been represented during
the negotiation of the acquisition. Kingslawn also failed to deliver certain
financial statements, certificates and corporate resolutions which were required
to be presented at or before closing. After repeated attempts to acquire such
documents, the Company unilaterally terminated the acquisition agreement
subsequent to the end of the fiscal year. The Company is currently investigating
its right to
-------- (1) As used throughout this Form 10-KSB, the term "Common Stock"
refers to the Company's Class A common stock, par value $0.001. All references
to quantities of shares have been adjusted to account for the 1-for-20 reverse
stock split effected by the Company on April 11, 1997.
<PAGE>
recover the consideration paid to acquire Kingslawn.
On January 9, 1997 and subsequent to the end of the fiscal quarter, the
Company signed a non-binding letter of intent to acquire all outstanding capital
stock of Live T.V. Corporation ("Live TV"), a Nevada corporation which
broadcasted live interactive audio and video programming via the Internet. The
Company subsequently terminated discussions with Live T.V.
Business of Issuer.
Since the Company terminated the acquisition agreement with Kingslawn, the
Company has been a dormant public company without any operations or significant
assets. The Company has no current revenue sources. The Company's current
business plan involves finding a suitable merger or acquisition candidate who
can provide the Company with a basis for successful operations. The Company's
management is in the process of prospecting for, interviewing and performing the
necessary due diligence to structure a successful merger or acquisition.
However, there can be no assurances that the Company will be able to negotiate a
corporate merger or acquisition or, if such a combination is achieved, that it
will be profitable, worthwhile or sustainable. The Company does not currently
produce any goods or provide any services, nor does the Company have any full or
part time employees, aside from its officers and directors.
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ITEM 2. DESCRIPTION OF PROPERTY
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The Company does not currently own any property and does not anticipate the
purchase of additional property in the near future.
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ITEM 3. LEGAL PROCEEDINGS
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Between November 1986 and March 1994, the Company leased a manufacturing
facility located at 1 Coldstream Way, Tinton Falls, New Jersey from Mid-Monmouth
Realty Association. Pursuant to the Lease Agreement, the Company leased
manufacturing, storage and office facilities. The Company and the Landlord
entered into a lease modification in October 1993 under which, among other
things, the parties modified the monthly lease payments and provided for a month
to month tenancy commencing December 31, 1993 and ending no later than March 31,
1994. The Company agreed to pay a portion of previously unpaid, accrued rent and
agreed to reimburse the landlord for costs which the landlord incurred in
performing an environmental study on the premises required by the New Jersey
Department of Environmental Protection, as well as cleanup and remediation costs
which the landlord subsequently incurred as a result of that study. The first
$100,000 of these obligations was to be secured and subordinate only to the
secured interest of Midlantic National Bank, taxes owed to the Internal Revenue
Service, and State of New Jersey taxes. Any liability in excess of $100,000 is
secured but subordinate to security interest of the same entities plus that of
former principals of the Company.
The Company was evicted on or about March 31, 1994. The landlord has
obtained a $351,005 judgment against the Company representing the Company's rent
payment obligation as of September 24, 1993. This judgment remains unpaid as of
the date this report was filed. The Landlord has also continued to bill the
Company for a variety of charges since the date of eviction, resulting in a
disagreement over the amount owed by the Company. The Company believes that
additional charges are not justified according to the terms of the lease
agreement because of the eviction and the natural termination of the modified
lease. For the year ended December 31, 1996, the Company has recorded an
obligation of $354,712 as compared to the Landlord's claim for $1,240,029,
resulting in an amount in dispute of approximately $887,317. The disputed amount
has not been included as a liability on the Company's financial statements as no
lawsuits have been filed to date regarding the disputed amount. However, the
Company believes that it is possible that an unfavorable outcome regarding the
disputed amount would be rendered. The landlord is also asserting that it is
owed an additional $376,097 as reimbursement for environmental testing and
cleanup costs the landlord has incurred, although the landlord has not detailed
the expenses it is claiming and no action to recover this amount has been
initiated by the landlord.
<PAGE>
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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The Company did not submit any matters to a vote of security holders during
the fourth quarter of the fiscal year ending December 31, 1996.
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
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The following table sets forth the prices of the Company's Class A Common
Stock on the OTC Bulletin Board for each quarter during fiscal years 1995 and
1996. The National Association of Securities Dealers was the source of the
information for these prices. The over-the-counter market quotations are based
on inter-dealer bid prices, without markup, markdown, or commission, and may not
necessarily represent actual transactions. The bid prices are as of the days
quoted and no adjustments to price have been made to account for the subsequent
1-for-20 reverse stock split effected by the Company on April 11, 1997 (see
below).
BID QUOTATION
Fiscal Year 1995 High Bid Price Low Bid Price
Quarter Ended 3/31/95 $1.87 $1.25
Quarter Ended 6/30/95 $1.50 $0.50
Quarter Ended 9/30/95 $1.50 $0.50
Quarter Ended 12/31/95 $1.00 $0.50
Fiscal Year 1996
Quarter Ended 3/31/96 $1.00 $0.69
Quarter Ended 6/30/96 $1.00 $0.50
Quarter Ended 9/30/96 $1.00 $0.50
Quarter Ended 12/31/96 $1.00 $0.12
Reverse Stock Split
On April 11, 1997, the Company effected a 1-for-20 reverse split of its
Common Stock. The reverse split affected both the outstanding shares and the
shares authorized for issuance by the Company, reducing the total authorized
shares of Common Stock to 10 million. All fractional shares resulting from the
reverse split were rounded up to the nearest whole share. All references to
quantities of Common Stock have been adjusted to account for the reverse split.
However, the high and low stock prices appearing in the table above have not
been adjusted to account for the reverse.
Shareholders
As of December 31, 1996, there were approximately 728 record holders of
Common Stock holding approximately 1,424,276 outstanding shares of Common Stock.
As of February 2, 1998, there were approximately 738 record holders of Common
Stock holding approximately 1,862,315 outstanding shares of Common Stock.
<PAGE>
Dividends
The Company has not declared a cash dividend on its Common Stock in the
past two years and does not anticipate doing so in the near future. The future
payment of dividends, if any, on the Common Stock is within the discretion of
the board of directors and will depend on the Company's earnings, capital
requirements, financial condition, and other relevant factors.
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ITEM 6. MANAGEMENT'S PLAN OF OPERATION.
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The Company has not had any source of revenues during the last two fiscal
years. The Company was originally involved in the repair of aircraft turbines
and engine components and the purchasing, processing and selling of special
refractory metals. All active operations in such industries ceased in June 1994,
an event which significantly affected the Company's comparative operating
results. The Company then changed its focus to searching for suitable merger or
acquisition candidates. During 1996, the Company acquired two companies pursuant
to separate acquisition agreements, both of which ultimately proved
unsuccessful.
On July 11, 1996, the Company executed an agreement with CyberMalls, Inc.
("CyberMalls"), a wholly-owned subsidiary of Canton Financial Services
Corporation, a potential affiliate of the Company. Pursuant to that agreement,
the Company purchased CyberFootball, Inc., a Nevada corporation ("CFI"). CFI had
a business plan to market football- related products and services via the
Internet. According to the agreement, the Company, through its officers,
directors and retained consultants, was to seek out and contract with clients
interested in marketing products related to football. CyberMalls was obligated
to provide the computer programming and other technical assistance necessary to
advertise and sell such products over the Internet. On February 25, 1997, the
Company received notice of CyberMalls' decision to discontinue operations.
Because the Company lacked the expertise to effect CFI's business plan without
the assistance of CyberMalls, CFI's operations effectively terminated. The
Company did not deliver any of the consideration required in the agreement to
acquire CFI and was released from any obligation to do so pursuant to a
settlement executed between the Company and CyberMalls subsequent to the 1996
fiscal year. For more information on this transaction, see "Item 12 - Certain
Relationships and Related Transactions."
On September 10, 1996, the Company acquired 100% of the issued and
outstanding capital stock of Kingslawn Offset, Inc., a New York printing
concern. The Company acquired Kingslawn with the intention of expanding
Kingslawn's current printing operations by helping Kingslawn raise the capital
necessary to purchase additional equipment and increase production. However, the
Company later discovered that Kingslawn's financial condition was inferior to
what had been represented during the negotiation of the contract. Kingslawn also
failed to deliver documents necessary to complete the acquisition including
required financial statements, certificates and evidence of ownership. After
several months of attempted negotiations, the Company unilaterally terminated
the contract for breach of material conditions of the contract and is now
investigating its right to reclaim consideration paid for the acquisition.
Because the acquisition of Kingslawn never completed and has since been
terminated, the Company did not include Kingslawn in the financial statements
covered in this report.
The Company's current business plan involves the search for appropriate
business opportunities, including businesses which the Company can acquire as
operating subsidiaries. The Company is seeking to acquire assets which will
provide revenues for the Company. The Company does not currently have any
revenues from operations. The Company is conducting preliminary negotiations
with various entities and hopes that these negotiations will lead to successful
acquisitions or mergers by the Company. However, the Company has not entered
into any agreements with these entities and no assurances can be given that any
current negotiation will result in a favorable business opportunity.
Additionally, due to the Company's absence of cash flow, the Company will have
to tender shares of its Common Stock as consideration for any acquisition or
merger. Such an exchange of the Company's Common Stock would likely dilute the
existing ownership position of current shareholders to a significant degree. The
Company itself has no full time employees aside from its current officers and
directors and has no intention of adding additional employees unless and until
it can successfully complete a merger with or acquisition of another entity. The
Company does not have any current source of revenues and has no cash available
to meet current or potential liabilities. The Company has relied on issuing
shares of Common Stock to meet its obligations, compensate its officers and
attract the services of outside consultants. However, the Company can provide no
assurances that it will be able to continue to meet obligations in this manner.
On November 13, 1996, the Company filed a Form S-8 Registration Statement
under the Securities Act of 1933 to register shares to be issued pursuant to the
exercise of options granted under the Company's 1996 Stock Option Plan (the
"Plan"). Through the Plan, the Company registered 125,000 shares of its Class A
Common Stock with an aggregate
<PAGE>
value of $1,250,000 (based upon the trading value of the Common Stock on the
date when the Form S-8 was filed). The Plan was designed to provide compensation
and incentive bonuses to the Company's employees and consultants who, due to
current financial constraints of the Company, could not be adequately
compensated in cash. During 1996, the Company granted options to purchase 52,973
shares of Common Stock. All of these options were exercised during 1996.
Of the 52,973 shares of Common Stock which were issued pursuant to the
exercise of options under the Plan, approximately 25,000 were issued to
consultants which the Company had retained to assist in marketing CFI to
potential customers. An additional 1,500 shares were issued to the Company's
officers and directors, who accepted the Common Stock in lieu of other
compensation. The Company also issued 26,098 shares of Common Stock to Canton
Financial Services Corporation in exchange for financial consulting services
provided to the Company including assistance in locating potential merger or
acquisition candidates, general bookkeeping and record keeping, and
administrative services. During the first two quarters of 1997, the Company also
granted options to purchase an additional 61,539 shares of Common Stock to
Canton Financial. These options have since been exercised.
On December 2, 1996, the Company issued a total of 100,000 shares of Common
Stock to six entities pursuant to an exemption from registration provided by
Regulation S promulgated under the Securities Act of 1933. These shares were
issued to Oriental Investments Limited, a corporation organized under the laws
of Mauritius; The China Connection, a corporation organized under the laws of
the Isle of Man; Lexington Sales Corporation Ltd., a corporation organized under
the laws of the Isle of Man; Karston Electronics, Ltd. a corporation organized
under the laws of the British Virgin Islands; East West Trading Corporation, a
corporation organized under the laws of Nevis, West Indies and Sequoia
International, a corporation organized under the laws of Mauritius. The shares
were issued as consideration for consulting services previously performed by the
recipients of the shares, which services included introducing the Company to
business opportunities including potential acquisitions, joint ventures,
partnerships or other business alliances in China, England and Europe. For more
information on these transactions, see the Form 8-K filed by the Company on
March 27, 1997.
The financial statements attached to this Form 10-KSB reflect investment
securities in the amount of $585,489. Of this amount, approximately $532,076 is
attributable to an investment the Company made in Eurotronics Holdings
Incorporated, a Utah corporation. For more information on this transaction, see
"Item 12 - Certain Relationships and Related Transactions." The amount included
in the attached financial statements is equivalent to the number of shares owned
by the Company as of the end of the 1996 fiscal year multiplied by the trading
price for those securities. However, during 1997, the trading price for that
security dropped precipitously, resulting a much lower value in those
securities. Eurotronics Holdings Incorporated also effected a reverse stock
split during 1997 which had the effect of drastically reducing the number of
shares owned by the Company. As of the date of the filing of this Form 10-KSB,
the value of the Eurotronics investment securities is approximately $1,400, as
determined by multiplying the shares held by the Company by the most recent
trading price. This decline has resulted in a $584,089 decline in the assets of
the Company from that reported on the attached financial statements.
A former landlord of the Company has asserted a substantial claim against
the Company which could significantly impair the Company's future liquidity and
financial position. See "Item 3 - Legal Proceedings" for more information on
this matter. Mid-Monmouth Realty Associates, who leased a manufacturing facility
in New Jersey to the Company from 1986 to 1994, has submitted an invoice of
$1,618,124 covering rent, environmental cleanup costs, miscellaneous costs, late
fees and interest. This claim stems from a Modification of Lease Agreement
entered by and between the Company and Mid-Monmouth on October 29, 1993. Of the
total amount claimed, approximately $1,240,028 constitutes unpaid rent required
under the lease modification. The Company contends that only $354,712 in unpaid
rent is owed because the remainder of the charges were accrued after the Company
was evicted from the site and after the term provided in the lease modification.
The remaining $378,096 of the amount claimed by Mid-Monmouth constitutes
environmental cleanup costs which Mid-Monmouth claims to have incurred on the
property and which are the Company's obligation under the lease modification.
These costs apparently include the demolition of the building located on the
manufacturing site which occurred after the Company was evicted from the
leasehold, although the landlord has not detailed these costs to the Company.
Mid-Monmouth obtained a $351,005 judgment in 1993 representing the Company's
rental obligations as of September 24, 1993. Mid-Monmouth has not initiated a
proceeding to recover the additional amounts claimed and the Company believes it
has substantial grounds to defend against any suit potentially commenced by
Mid-Monnmouth to recover the amount presently asserted as due. However, an
unfavorable outcome of any such suit would substantially impair the Company's
financial position. This is especially true given the Company's absence of cash
flow and history of operating losses.
The State of New Jersey Department of Environmental Protection has sent the
Company notice that $14,601 in
<PAGE>
environmental oversight costs are immediately due and payable. This obligation
stems from environmental sampling that was done at the Company's former
manufacturing plant including samplings of storage and waste tanks, the former
settling pond, pipe discharges, below-ground surface soil and groundwater. The
State asserts that these oversight costs are the joint and several liability of
the Company and its former landlord. While no proceeding has commenced, the
State has indicated that it will seek recovery of the full amount from the
Company. Pursuant to the Lease Modification, the Company will be required to
reimburse any costs which the landlord pays to the State with regard to this
matter.
Events Subsequent to 1996 Fiscal Year
On April 9, 1997, the Company's board of directors ratified two separate
Offshore Securities Subscription Agreements executed between the Company and
twelve separate entities. Pursuant to the terms of the Agreements, the Company
issued an aggregate of 833,346 shares of Common Stock pursuant to an exemption
from registration provided by Regulation S.
Under the first of the agreements, the Company issued a total of 625,011
shares of its Common Stock to the following nine offshore entities: The China
Connection, a corporation of the Isle of Man; Consolidated Euro Holding Limited,
a Nevis West Indies corporation; East West Trading Corporation, a Nevis West
Indies corporation; Karston Electronics, Ltd., a British Virgin Islands
corporation; Lexington Sales Corporation, Ltd., a corporation of the Isle of
Man; Oriental Investments, Ltd., a corporation of the Republic of Mauritius;
Premier Sales Corporation, Ltd., a corporation of the Isle of Man; Sequoia
International, a corporation of the Republic of Mauritius; and Leeward
Consulting Group, a Nevis West Indies corporation. As consideration, the Company
received an aggregate of 375,000 shares of Homes For America Holdings, Inc., a
Nevada corporation. The Company acquired these shares as investment securities.
Under the second of the agreements, the Company issued a total of 208,345
shares of its Common Stock pursuant to Regulation S to the following three
offshore entities: Candlin Investments, Inc., a British corporation; Insignia
Financial Services Limited, a British corporation; and World Financial
Securities, Inc., a British corporation. As consideration, the Company received
an additional of 125,000 shares of Homes For America Holdings.
Subsequent to the end of the 1996 fiscal year, the Company became aware
that the State of New Jersey had suspended the Company's Certificate of
Incorporation for failure to file a required annual report with the State and
failure to pay the accompanying annual fees. The Company has requested the
documentation necessary to reinstate the Company with the State of New Jersey.
The Company is in the process of restoring its good standing with the State of
New Jersey.
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ITEM 7. FINANCIAL STATEMENTS
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See the audited financial statements attached hereto and numbered F-1
through F-13.
BRIA COMMUNICATIONS CORPORATION
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DECEMBER 31, 1996 AND 1995
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
BRIA Communications Corporation
We have audited the balance sheet of BRIA Communications Corporation as of
December 31, 1996 and the related statements of operations, stockholders' equity
(deficit),and cash flows for the years ended December 31, 1996 and 1995. 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Bria Communications Corporation as
of December 31, 1996 and the results of its operations and its cash flows for
the years ended December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency. Those conditions raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
<PAGE>
BRIA COMMUNICATIONS CORPORATION
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash ..................................................... $ 33
Total Current Assets ................................... 33
OTHER ASSETS:
Investment securities (Note 2) ........................... 585,489
Total Other Assets .................................... 585,489
$ 585,522
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable - officers and directors (Note 3) .............. $ 67,620
Accounts payable ............................................. 1,234,791
Other current liabilities .................................... 124,832
Total Current Liabilities .................................. 1,427,243
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock:
Class A, $.001 par value; shares authorized, 200,000,000;
shares issued and outstanding, 11,805,226 ............. $ 11,805
Class B $.001 par value; shares authorized, 220,000;
shares issued and outstanding, 213,440 (convertible
into Class A shares) .................................. 213
Capital in excess of par value ........................... 7,574,546
Accumulated deficit ...................................... ( 8,603,728)
Trade credits (Note 10) .................................. ( 5,601)
Net unrealized gain on securities available for sale ..... 181,044
Total stockholders' Equity (Deficit) ................... ( 841,721)
$ 585,522
See Accompanying notes
<PAGE>
BRIA COMMUNICATIONS CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
REVENUE .................................... $ -- $ 128
COST AND EXPENSES:
General and administrative ............... $ 781,410 $ 927,761
Environmental cleanup costs .............. 390,697 --
Interest ................................. 4,173 4,155
Loss on sale of investments .............. 10,268 --
$1,186,548 $ 931,916
LOSS BEFORE EXTRAORDINARY ITEMS $( 1,186,548) $( 931,788)
EXTRAORDINARY ITEMS:
Business acquisition costs (Note 6) -- $(137,215)
Gain from debt settlement (Note 4) -- 227,809
-- 90,594
NET LOSS ............................ $(1,186,548) $( 841,194)
NET LOSS PER COMMON SHARE:
(Loss) before extroardinary items . $( 14) $( 21)
Extraordinary items ............... -- 2
Net (loss) per common share ....... $( 14) $( 19)
Weighted average number of common
shares outstanding ............... 8,260,916 4,550,229
See accompanying notes
<PAGE>
BRIA COMMUNICATIONS CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................... $(1,186,549) $ (841,194)
Adjustments to reconcile net loss to net cash provided by operting activities:
Common stock issued for services ............... 283,036 935,796
Common stock issued for other expenses ......... 7,638 --
Expenses resulting from trade credit transaction 167,865 --
Gain from Debt settlement ...................... -- ( 227,809)
Loss on securities ............................. 10,268 --
(Increase) decrease in accounts receivable ..... 23 ( 239)
(Increase) decrease in other assets ............ -- 43,247
Increase (decrease) in accounts payable ........ 701,657 68,928
Increase (decrease) in accrued liabilities ..... ( 6,519) ( 1,497)
Total adjustments .............................. 1,164,184 818,426
Net cash (used) by operating activities .......... ( 22,365) ( 22,768)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities ............. ( 60,000) --
Net cash used by investing activities .......... ( 60,000) --
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock for cash ................. -- 105,000
Net cash provided by financing activities ...... -- 105,000
NET INCREASE (DECREASE) IN CASH .................. ( 82,365) 82,232
Cash, beginning .................................. 82,398 166
Cash, ending ..................................... $ 33 $ 82,398
SUPPLEMENTAL DISCLOSURES:
Interest expense ............................... $ 4,173 $ 4,155
Non cash financing activities:
Issuance of common stock for services ......... $ 283,036 $ 935,796
Issuance of common stock for expenses ......... $ 7,638 $ --
Issuance of common stock for debt ............. $ 208,268 $ 127,046
Issuance of common stock for investments ...... $ 26,068 $ 344,445
Issuance of common stock for other assets ..... $ -- $ 175,000
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
BRIA COMMUNICATIONS CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
YEARS ENDED DECEMBER 31, 1996 AND 1995
Net
Unrealized
Gain On Total
Capital In Securities Trade & Stockholders
Class A Class A Class B Class B Excess of Accumulated Available Media Equity
Shares Amount Shares Amount Par Deficit For Sale Credits (Deficit)
--------- --------- --------- --------- ---------- ------------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1994 8,299,800 $ 829,980 98,440 $ 9,844 $ 4,534,444 $(6,575,986) $ -- $ -- $(1,201,718)
Reverse stock split
1 for 40 ... (8,092,301) (809,230) -- -- 809,230 -- -- -- --
Reduction in par value
from $.10 to $.001 -- (20,542) -- (9,746) 30,288 -- -- -- 105,000
Additional shares issued for:
debt settlement 425,070 425 -- -- 126,621 -- -- -- 127,046
services .... 3,984,184 3,984 -- -- 931,812 -- -- -- 935,796
investments .. 1,111,110 1,111 -- -- 343,334 -- -- -- 344,445
other assets .. 700,000 700 -- -- 174,300 -- -- -- 175,000
Shares issued-
no consideration 20,000 20 115,000 115 (135) --
Changes in trade
and media credits ... -- -- -- -- -- -- -- (173,466) (173,466)
Net loss for the year -- -- -- -- $ (841,194) -- -- $ (841,194)
BALANCE,
December 31, 1995 $ 6,798,186 $ 6,798 213,440 $ 213 $ 7,054,544 $(7,417,180) $ -- (173,466) (529,091)
Shares issued for
rescinded merger ..... 1,500,000 1,500 -- -- -- -- -- -- 1,500
Additional shares issued
for debt settlement .... 761,219 761 -- -- 207,507 -- -- -- 208,268
Additional shares issued
for services .......... 2,547,006 2,547 -- -- 280,489 -- -- -- 283,036
Additional shares issued
for investments ...... 129,940 130 -- -- 25,938 -- -- -- 26,068
Additional shares issued
for other consideration . 68,875 69 -- -- 6,068 -- -- -- 6,137
Changes in unrealized gain
on available
for sale securities .... -- -- -- -- -- -- -- -- 181,044
Changes in trade
and media credits ...... -- -- -- -- -- -- -- 167,865 167,865
Net loss for the year -- -- -- -- -- (1,186,548) -- -- (1,186,548)
BALANCE,
December 31, 1996 .. 11,805,526 $ 11,805 213,440 213 $ 7,574,546 $(8,603,728) $ 181,044 $ (5,601) $ (841,721)
See accompanying notes
</TABLE>
<PAGE>
BRIA COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company is located in the United States and previously marketed various
powdered metals which it either processed or sold without processing. The
Company ceased all active operations on June 30, 1994. Since then the Company's
activity has been largely restricted to maintaining its corporate legal status,
negotiating creditor settlements and searching for mergers or acquisitions.
Taxes on Income
Effective January 1, 1993 the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. The cumulative effect of the
change in accounting principle is immaterial.
Net Income Per Share
Net income per share is based on the average number of shares outstanding during
each year retroactively adjusted to give effect to all stock splits.
Investment securities
Available-for-sale securities are stated at fair value, and unrealized holding
gains and losses, net of the related deferred tax effect, are reported as a
separate component of stockholders' equity.
Basis of Financial Statement Presentation
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has sustained
recurring losses and at December 31, 1996 the stockholders equity reflects a
deficit of $841,721. The Company's continued existence is dependent on its
ability to generate sufficient cash flow to cover operating expenses, settle its
obligations and develop an active business.
<PAGE>
BRIA COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
BRIA COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - INVESTMENT SECURITIES
Securities available-for-sale consist of the following:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Equity securities $404,445 $357,260 $176,216 $585,489
============ ============= =========== ===========
The fair value included an amount of $532,076 attributable to an investment the
Company made in Eurotronics Holdings Incorporated. During 1997 the trading value
for that security dropped precipitously resulting in a much lower value in those
securities. Eurotronics Holdings Incorporated also had a reverse stock split
during 1997 which had the effect of drastically reducing the number of shares
owned by the Company. As of February 20, 1998, the value of this security was
approximately $1,400, a loss in value of $530,676.
Proceeds from sales of securities were $24,202 in 1996 resulting in gross losses
of $10,268.
NOTE 3 - NOTES PAYABLE - OFFICERS AND DIRECTORS
Notes payable to officers and directors consists of the following:
December 31,
1996
Note payable, with interest at 8% $47,520
Note payable, with interest at 8.5% 20,100
$67,620
At December 31, 1996 the above notes payable to officers and directors were in
default.
NOTE 4 - GAIN FROM DEBT SETTLEMENT
During 1995, the Company settled debts largely through the issuance of Class A
common stock resulting in a gain of $227,809.
<PAGE>
BRIA COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
BRIA COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 5 - STOCK OPTIONS AND WARRANTS
During 1995, the Company granted Karston Electronics, Ltd. and East-West Trading
Corp. both options to purchase 250,000 of its Class A common stock at $.50 per
share. All the options expired in August, 1996.
During 1995, the Company granted its president, Richard Lifschutz, options to
purchase 5,000 shares per month of its Class A common stock at $.50 for 12
months ending in February, 1966 (60,000 shares). All the options expired in
March, 1996.
During 1996, the Company granted options to purchase 1,059,460 shares of Class A
common stock. All of these options were exercised during 1996.
Activity under the Company's plans was as follows:
Number of Option
Shares Price per share
Outstanding at December 31, 1994 -
Granted 560,000 $.50
---------
Outstanding at December 31, 1995 560,000
Expired 1996 560,000)
Granted 1996 1,059,460 $.15 - $.26
Exercised 1996 (1,059,460) $.15 - $.26
---------
Outstanding at December 31, 1996 --
<PAGE>
BRIA COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 6 - COMMON STOCK
During 1995, the Board of Directors approved a 1 for 40 reverse stock split of
the Class A common stock, and an increase in the authorized number of shares of
Class A common stock from 10,000,000 to 200,000,000 shares. A 1995 Special
Meeting of Shareholders approved a reduction in the par value per share of Class
A and Class B common stock from $.10 to $.001.
The details of the Company's Common Stock at December 31, 1996 are as follows:
Number of Shares
1996
Class A, $.001 par value:
Authorized 200,000,000
Issued and outstanding 11,805,226
Class B, $.001 par value:
Authorized 220,000
Issued and outstanding 213,440
<PAGE>
BRIA COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 6 - COMMON STOCK (Continued)
Class B shares are convertible into Class A shares on a forty-for-one basis and
each class has the same rights and privileges with the exception of voting.
On May 8, 1996, a Stock Exchange Agreement between the Company and AltaChem was
rescinded by all parties retroactive to its inception on December 3, 1995.
Pursuant to the cancellation agreement, all shares of common stock previously
exchanged are to be returned. At December 31, 1996, 18,749,796 shares of the
Company's Class A common stock had not been returned. The Company has notified
its stock transfer agent that these shares are not outstanding and are to be
canceled upon receipt of the certificate, accordingly, a stop transaction order
has been placed on the shares by the agent. These shares are not included in the
total of outstanding shares in the financial statements. Direct costs associated
with this 1995 business acquisition effort in the amount of $137,215 appear in
the statements of operations as an extraordinary item.
NOTE 7 - INCOME TAXES
At December 31, 1996, the Company had a federal net operating loss (NOL)
carryforward totaling approximately $4,085,000 that may be offset against future
taxable income in varying amounts through 2011. In addition, the Company has
certain tax credit carryforwards of approximately $131,000 which expire in
varying amounts between 2000 and 2005. The Company has approximately $7,000,000
of capital loss carryover that expires in 1999. Loss carryovers of approximately
$6,500,000 and tax credits of Approximately $122,000 were lost during 1994 when
the Company's subsidiaries were dissolved pursuant to Chapter 7 bankruptcy. No
benefit has been reported in the financial statements, however, because the
Company believes there is at least a 50% chance that the carryforwards will
expire unused. Accordingly, the tax benefit of the loss carryforward has been
offset by a valuation allowance of the same amount. The expected tax benefit
resulting from applying federal statutory tax rates to the pretax loss differs
from amounts reported in the financial statements because of the increase in
valuation allowance. Certain provisions of the tax law may limit the net
operating loss, capital loss and credit carryovers in the event of a significant
change in ownership of the Company.
NOTE 8 - PROFIT SHARING PLANS
The Company's profit-sharing plan and 401K plan were terminated and the assets
were distributed in 1995 and 1994 to the entitled beneficiaries. The Company
made no employer contributions to the plans in 1995.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company leased manufacturing, storage and office facilities under an
operating lease. The lease agreement stated that tenancy was from month to month
after December 31, 1993, terminable by either party on 30 days prior notice but
no later than March 31, 1994. The Company was evicted on or about March 31,
1994. The Company believes that additional charges after that date are not
justified according to the terms of the lease agreement. The landlord has billed
the Company for a variety of charges since that date resulting in a disagreement
over the amount owed by the Company. As of December 31, 1995, the Company has
recorded an obligation of $354,711 as compared to the landlord's claim of
$1,474,228, resulting in an amount in dispute of approximately $1,119,517. This
disputed amount does not appear as an obligation on the Company's financial
statements. No law suits have been filed to date regarding the disputed amount,
however, the landlord received a judgment in its favor in 1993 in the amount of
$351,005 representing the Company's obligation at September 24, 1993. The
Company believes that the possibility of an unfavorable outcome regarding this
disputed amount is reasonably possible but not probable.
Additionally, the Company is obligated under its lease agreement to reimburse
the landlord for all costs of environmental clean-up. The Company executed two
security agreements with the landlord as the secured party for the costs of
clean-up. The first $100,000 is subordinate only to the security interest of the
bank debt, if any, taxes owed to Internal Revenue Service, and State of New
Jersey taxes. Any liability in excess of $100,000 is secured but subordinate to
the security interest of the same entities plus that of Ira and Lawrence
Friedman. During 1996, the landlord billed the Company $390,697 for
environmental clean-up costs which the landlord claims to have incurred. The
Company has recognized this obligation in its financial statements although
supporting documentation has not been furnished by the landlord. The Company had
insurance policies which it believes should cover approximately $100,000 of the
clean-up costs, however, the insurance company has denied any liability.
NOTE 10 - RELATED PARTY TRANSACTIONS
Richard Lifschutz, the Company's president and director, is compensated pursuant
to an agreement dated March 1, 1995. From March 1995 until June 1996 the
agreement provided for Mr. Lifschutz to receive 5,000 shares of the Company's
Class A common stock per month for services rendered as well as options to
purchase 5,000 additional shares per month at an option price of $.50 per share.
None of these options were exercise and they expired in June, 1996. On July 5,
1996, the agreement was amended to provide for the monthly issuance of 10,000
shares per month. The Company discontinued this compensation plan in November
1996.
Richard Lifschutz, is also a media and barter broker with "ITEX" barter network.
During 1995, the Company acquired media and barter credits in exchange for
shares of its Class A common stock. Mr. Lifschutz, as a broker, negotiated the
transactions. The media credits were exchanged for trade credits during 1996.
The value for outstanding trade credits acquired in exchange for shares is
considered prospective and unrealized at December 31, 1996 and is therefore
deducted from the stockholders' equity. Canton Financial Services has served as
a consultant to the Company pursuant to a May 16, 1995 consulting agreement. The
Company has the option of either paying in cash or in shares of the Company's
Class A common stock. Canton Financial may be deemed to an affiliate of the
Company because of being under the potential common control of Allen Wolfson,
who is the indirect beneficial owner of a majority of the Company's Class B
Common Stock. Pursuant to the Company's Articles of Incorporation the holders of
the class B Common Stock are entitled to elect a simple majority of Company's
directors. Allen Wolfson is a potential control person of CyberAmerica
Corporation, which is the parent of Canton Financial Services.
NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company estimates that the fair value of all financial instruments at
December 31, 1996 does not differ materially from the aggregate carrying values
of its financial instruments recorded in the accompanying balance sheet.
NOTE 12 - SUBSEQUENT EVENTS
On September 10, 1996, the Company acquired all outstanding capital stock of
Kingslawn Offset, Inc. in exchange for shares of the Company. The Company
unilaterally terminated the acquisition subsequent to the end of the year
because Kingslawn failed to deliver certain documents which were required at or
before closing. This termination was treated as though the transaction were
rescinded from inception.
On April 11, 1997, the Company effected a l for 20 reverse split of its Class A
Common Stock reducing the authorized common stock to 10 million.
[THIS SPACE LEFT INTENTIONALLY BLANK]
<PAGE>
- --------------------------------------------------------------------------------
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
On January 11, 1995, the Company relieved its independent accountant,
Broza, Block & Rubino ("Broza") of its duties. Broza had been the Company's
independent accountant for over ten years. The Company filed a Form 8-K on
January 16, 1995, and a Form 8-K/A on February 6, 1995 and also on March 8,
1995. The February 6, 1995 Form 8- K/A was filed to respond to Rule
304(a)(1)(iv) of Regulation S-B which was not done in the January 16, 1995
report. The March 8, 1995 Form 8-K/A was filed because the Company had then just
received Broza's response to the original Form 8-K.
Neither of Broza's reports on the financial statements for the two years
prior to Broza's discharge contained an adverse opinion or disclaimer of
opinion, nor was either modified as to uncertainty, audit scope or accounting
principles. However, the financial statements included in the Company's 1993
10-KSB report, prepared by Broza, included a single sentence expressing its
doubt as to the Company's ability to continue as a going concern.
The decision to change accountants was recommended by the board of
directors and stemmed from a change in the location of the Company's
headquarters. There were no disagreements between Broza and the Company on any
matter of accounting principles, financial statement disclosure or auditing
scope or procedure during the two most recent fiscal years and any subsequent
period.
The Company retained Andersen, Andersen & Strong of Salt Lake City, Utah on
August 28, 1995 to perform the Company's audit for the fiscal years ending
December 31, 1994 and 1995. Andersen, Andersen, & Strong also conducted the
audit for the fiscal year ending December 31, 1996 which accompanies this
report. There were no consultations with the newly engaged accountant during the
last two fiscal years or subsequent interim period regarding any of the
information in Item 304(a)(2)(i) or 304(a)(2)(ii).
PART III
- --------------------------------------------------------------------------------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- --------------------------------------------------------------------------------
Directors, Executive Officers and Control Persons
Name Age Position(s) and Office(s)
Richard Lifschutz 50 Director, President
Isaac Lifschutz 25 Director, Secretary, Treasurer
Allen Wolfson 52 Control Person
Richard Lifschutz works as a business consultant in several industries and
was appointed the Company's president and one of its directors on March 1, 1995.
During the last five years, Mr. Lifschutz has been involved with Lev-Ari
Communications in public relations, advertising and film and video production.
Additionally, Mr. Lifschutz is a member of the Screen Actors Guild and also
works as a consultant to movie production companies and has appeared in several
productions as an actor.
Isaac Lifschutz was appointed as treasurer, secretary and director on June
27, 1996. He is the son of Richard Lifschutz, the Company's president and
director. Mr. Lifschutz is a student attending Yeshiva University receiving a
Rabbinical Ordination. Mr. Lifschutz has been attending school for most of his
adult life and is preparing to go to law school in the near future.
Allen Wolfson has never been named as an officer or director of the
Company, but may be deemed to have had significant influence and "control" (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934) over the affairs
<PAGE>
of the Company by virtue of his indirect, beneficial ownership of
approximately 53.8% of the Company's Class B Common Stock, which class has the
right to elect a simple majority of the Company's directors. Allen Wolfson is
the sole shareholder of A-Z Professional Consultants, Inc., a Utah corporation
which owns 53.8% of the Company's Class B Common Stock. Allen Wolfson may be
deemed to control the Company by virtue of his indirect ownership of a majority
of the class of equity securities entitled to elect a majority of the Company's
board of directors. Mr. Wolfson is also disclosed to be a control person of
CyberAmerica Corporation, a publicly traded company and parent to Canton
Financial Services, which has served as a consultant to the Company since 1994.
Canton Financial Services may be deemed to be an affiliate of the Company by
virtue of this potential common control. For more information on Canton
Financial Services, see "Item 12 - Certain Relationships and Related
Transactions."
Mr. Wolfson obtained a B.S. in Marketing from the University of Southern
Florida in 1968 and in 1970 he graduated with an M.A. in Distributive Vocational
Education. Mr. Wolfson has worked 59 credit hours toward an M.B.A. from Troy
State University in Montgomery, Alabama. He has also been a licensed general
contractor and a real estate agent and developer. Mr. Wolfson has been the sole
owner of A-Z Professional Consultants, Inc. since April 11, 1990 and has been a
professional consultant for various public and private companies for 20 years.
In 1986, Mr. Wolfson was convicted of violating 18 U.S.C. ss.371; 18 U.S.C.
ss.ss.1001 and 1002; and 18 U.S.C. ss.ss.1014 and 1002 in the U.S. District
Court for the Middle District of Florida, Tampa Division (the "Florida Court").
Mr. Wolfson was on probation for these offenses until May 1995. In February
1995, a complaint was filed with the Florida Court alleging that Mr. Wolfson had
violated the terms of the probation. The Florida Court changed the jurisdiction
of the matter to the U.S. District Court for the District of Utah, Central
Division (the "Utah Court"). The Utah Court heard the matter in August 1995 and
on October 20, 1995, the Court ruled that a violation of the original terms of
the probation had occurred. This finding effectively revoked Mr. Wolfson's
probation. The Utah Court judge signed a written order containing new terms of
probation, including a term which prohibits Mr. Wolfson from engaging in
directly in any transaction, including the purchase and sale of stock, in
connection with stock promotion or any stock offering. Mr. Wolfson filed an
objection seeking clarification of the probation terms but the Court has not
responded to this objection. There is currently pending a motion for the early
termination of Mr. Wolfson's probation and supervised release.
Compliance with Section 16(a) of the Exchange Act
The Company is aware that Richard Lifschutz, the Company's chief executive
officer and director, Isaac Lifschutz, the Company's secretary, treasurer and a
director, and Joseph Shimron, the Company's former director, each failed to
timely file Form 4 as required by Section 16(a) of the Securities Exchange Act
of 1934 for the 500 shares that were issued to each of them on November 8, 1996.
- --------------------------------------------------------------------------------
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Executive Compensation
No compensation in excess of $100,000 was awarded to, earned by, or paid to
any executive officer of the Company during the 1996 fiscal year.
The following table provides summary information for each of the last three
fiscal years concerning cash and non- cash compensation paid or accrued by the
Company to or on behalf of Richard Lifschutz who serves as the Company's chief
executive officer:
[THIS SPACE LEFT INTENTIONALLY BLANK]
<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation Awards Long Term Compensation
Name and Principal Year Salary Bonus Other Restricted Options/ LTIP Other
Position ($) ($) Annual Stock SARs(#) Payout
Comp. Awards
- --------------------------------------------------------------------------------
Richard Lifschutz, ... 1996 -0- $5,000o -0- $ 8,993* -0- -0- -0-
President and ....... 1995 -0- -0- -0- $22,348+ -0- -0- -0-
Chief Executive Officer
James Tilton, ....... 1995 -0- -0- -0- -0- -0- -0- -0-
Former Chief
Executive Officer
- -------------------------------------------------
* Pursuant to the terms of a March 31, 1995 agreement, the Company issued Mr.
Lifschutz 5,000 restricted shares of Common Stock per month from the period of
March 31, 1995 to July 31, 1996 as consideration for his services as the
Company's president, chief executive officer and director. In August 1996, this
amount was increased to 10,000 shares of stock per month. The Company
discontinued this compensation to Mr. Lifschutz on or about November 1996. The
Company issued a total of 3,288 shares (as adjusted for the April 11, 1997
1-for-20 reverse stock split) to Mr. Lifschutz during 1996. The shares were
valued at 50% of the closing bid and asked prices for the Common Stock on the 10
days preceding the date of issuance, the discount reflecting the one year
holding period imposed on the Common Stock.
o This dollar figure represents 500 shares of Common Stock which were issued to
Mr. Lifschutz on November 8, 1996 pursuant to a Registration Statement on Form
S-8. The shares were valued at the market price of the Common Stock on the date
of issuance. + Pursuant to the terms of a March 31, 1995 agreement, the Company
issued Mr. Lifschutz 5,000 restricted shares of Common Stock per month from the
period of March 31, 1995 to December 31, 1995. The Company issued a total of
4,049 shares (as adjusted for the April 11, 1997 1-for-20 reverse stock split)
of Common Stock to Mr. Lifschutz during 1995. The shares were valued at 25% of
the closing bid and asked prices for the Common Stock on the 10 days preceding
the date of issuance, the discount reflecting the two year holding period
imposed on the Common Stock.
Compensation Of Directors
Richard Lifschutz, the Company's president, chief executive officer and
director is compensated pursuant to a Letter Agreement dated March 1, 1995. From
March 1995 until June 1996, the Agreement provided for Mr. Lifschutz to receive
5,000 restricted shares of Common Stock per month for services rendered on
behalf of the Company. On July 5, 1996, the Agreement was amended to provide for
the monthly issuance of 10,000 restricted shares to Mr. Lifschutz. The Agreement
also entitles Mr. Lifschutz to receive additional compensation, as a finder's
fee, for business opportunities that Mr. Lifschutz introduces to the Company.
The Company discontinued this compensation plan on or about November 1996.
The Company does not have any formal compensation arrangements with any of
its other directors. Instead, the Company has issued restricted shares of Common
Stock to directors on an ad hoc basis based upon the services performed by those
individuals as directors. During the 1996 fiscal year, the Company issued 2,500
shares of Common Stock to other directors.
- --------------------------------------------------------------------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
On February 2, 1998, there were 1,862,315 shares of the Company's Class A
Common Stock $0.001 par value and 213,438 shares of its Class B Common Stock
$0.001 par value, issued and outstanding. The Company's Class A Common Stock is
publicly traded on the OTC Bulletin Board. The Company's Class B Common Stock is
not publicly traded and is owned exclusively by the two entities listed below.
The following table sets forth information concerning the stock ownership as of
February 2, 1998 with respect to: (i) each person who is know to the Company to
be the beneficial owner of more than 5 percent of each class of the Company's
Class A and Class B Common Stock; (ii) all directors; (iii) each of the
executive officers; and (iv) directors and executive officers of the Company as
a group. For more information on the Company's Class A Common Stock and Class B
Common Stock, see "Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters."
<PAGE>
Amount Nature
Title of Class Name and Address of of Beneficial
Beneficial Owner Ownership Percent of Class
CLASS A COMMON STOCK
Class A Allen Wolfson 124,146+ 6.6%
Common Stock 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Class A Richard Lifschutz 10,475 0.6%
Common Stock 147-17 Newport Avenue
Neponsit, NY 11964
Class A Isaac Lifschutz 3,250 0.1%
Common Stock 147-17 Newport Avenue
Neponsit, NY 11964
Class A Officers and Directors as a Group 13,725 0.7%
Common Stock
CLASS B COMMON STOCK
Class B Ira L. Friedman 98,438 46.1%
Common Stock 10 Bingham Hill Circle
Rumson, New Jersey 07760
Class B A-Z Professional Consultants, Inc. 115,000 53.8%
Common Stock 268 West 400 South, Suite 300
Salt Lake City, UT 84101
- --------------------------------------------
+ Of this total, 80,838 shares are held of record by A-Z Professional
Consultants, Inc., a Utah corporation of which Mr. Wolfson is the sole
shareholder. The remaining 43,308 shares are held of record by Canton Financial
Services Corporation. These latter shares may be deemed to be beneficially owned
by Mr. Wolfson by virtue of his potential control of the parent corporation of
Canton Financial Services. Mr. Wolfson disclaims beneficial ownership of these
latter 43,308 shares.
Changes in Control
The Company is conducting preliminary negotiations with various entities
with the objective of effecting a merger or acquisition. Due to the Company's
limited cash position, the Company will have to tender a controlling interest of
its Common Stock as consideration for any acquisition or merger which the
Company ultimately effects. However, the Company has not yet entered into any
agreements with these entities and is aware of no current arrangements which may
result in a change of control or change in management of the Company.
- --------------------------------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
Transactions Involving by James Tilton, Jane Zheng, Aster De Schrijver &
AltaChem
In May 1995, the Company began negotiations with AltaChem Group, Inc.,
Ireland ("AltaChem") and the shareholders of AltaChem. To facilitate this
anticipated acquisition, the Company appointed Aster De Schrijver, James Tilton
and Jane Zheng as directors on August 3, 1995. At that time, Mr. De Schrijver
owned, directly or indirectly, 100% of the issued and outstanding capital stock
of AltaChem. James Tilton helped introduce the Company to AltaChem and performed
services related to the proposed acquisition. Jane Zheng is the wife of Mr.
Tilton. De Schrijver, Tilton and Zheng were appointed as directors because of
their familiarity with the operations of AltaChem, and because of Mr. De
Schrijver's and Mr. Tilton's controlling interest in the capital stock of the
Company to be issued pursuant to the proposed transaction by and between the
parties.
On December 8, 1995, the Company entered a Stock Exchange Agreement with
AltaChem, De Schrijver and Tilton.
<PAGE>
Pursuant to the Stock Exchange Agreement, the Company acquired 100% of the
capital stock of AltaChem. As consideration, the Company issued a quantity of
Common Stock sufficient to give Tilton and De Schrijver 75% of the total
outstanding shares of Common Stock. The Stock Exchange Agreement required
AltaChem to deliver audited financial statements and a schedule of assets to the
Company within 180 days. AltaChem failed to provide these materials within the
required time period and indicated to the Company that it was not capable of
delivering the financial statements in the immediate future. Accordingly, on May
8, 1996, the parties to the Agreement signed a Rescission of Stock Exchange
Agreement and Release of All Claims (the "Rescission Agreement"). The Rescission
Agreement unwound the Stock Exchange Agreement from the beginning. Mr. De
Schrijver and Mr. Tilton were required to return their shares of Common Stock to
the Company, and the Company was required to return AltaChem's Common Stock. All
parties to the Stock Exchange Agreement agreed to release each other from all
potential claims they may have had as a result of that Agreement.
On December 20, 1995, the Company entered Stock Exchange Agreements with
OMAP Holdings Incorporated ("OMAP"), Tianrong Building Material Holdings, Ltd.
("TBMH"), and Eurotronics Holdings Incorporated ("Eurotronics"), each of which
was under the common control of Aster De Schrijver, James Tilton and Jane Zheng.
The purpose of each Stock Exchange Agreement was to transfer, in a tax-free
exchange, a quantity of Common Stock as determined by dividing $300,000 by the
closing bid price for the Company's Common Stock on the date of the agreements
in exchange for a similarly determined quantity of the common stock of OMAP,
TBMH and Eurotronics. All stock transferred pursuant to these Agreements was
restricted. The Company valued the stock received in each of these transactions
at $114,815 on its financial statements for the year ended December 31, 1995.
For more information on these transactions, see the Company's Form 10-KSB for
the fiscal year ended December 31, 1995.
On December 21, 1995, the Company sold an additional 14,517 shares of
Common Stock to OMAP for $90,000. On January 15, 1996, the Company purchased
2,858 shares of OMAP for $10,000. On January 30, 1996, the Company purchased an
additional 6,154 shares of OMAP for $20,000. Finally, on February 9, 1996, the
Company purchased 8,572 shares of OMAP for $30,000.
Transactions Involving Canton Financial Services and Affiliated Entities
Canton Financial Services has served as a consultant to the Company since
1994, assisting the Company in locating potential merger or acquisition
candidates and in providing general bookkeeping and record keeping and
administrative services. Canton Financial has accepted the Company's Common
Stock in lieu of cash compensation in exchange for its services on behalf of the
Company pursuant to a May 16, 1995 consulting agreement. During the 1996 fiscal
year, the Company issued a total of 40,729 shares of Common Stock to Canton
Financial. Canton Financial may be deemed to be an affiliate of the Company by
virtue of being under the potential common control of Allen Wolfson, who is the
indirect beneficial owner of a majority of the Company's Class B Common Stock.
Pursuant to the Company's Articles of Incorporation, the holders of the Class B
Common Stock are entitled to elect a simple majority of the Company's directors.
Allen Wolfson is disclosed to be a potential control person of CyberAmerica
Corporation, a public Nevada corporation which is the parent of Canton Financial
Services.
On July 11, 1996, the Company executed an agreement with CyberMalls, Inc.,
a wholly-owned subsidiary of Canton Financial. Pursuant to that agreement, the
Company purchased CyberFootball, Inc., a Nevada corporation ("CFI"). CFI had a
business plan to market football-related products and services over the
Internet. According to the agreement, the Company was to find clients interested
in marketing products related to football. CyberMalls was obligated to provide
the related computer programming, art work and technical assistance. In exchange
for CFI and the ongoing support of CyberMalls, the Company was required to issue
39,750 million shares of Common Stock, to execute an $11 million promissory note
in favor of CyberMalls and to provide other consideration contingent upon the
future profitability of CFI. On February 25, 1997, the Company received notice
of CyberMalls' decision to discontinue operations. Because the Company lacked
the expertise to effect CFI's business without the assistance of CyberMalls,
CFI's operations effectively terminated. The Company did not deliver any of the
consideration required in the agreement to acquire CFI and was released from any
obligation to do so pursuant to a settlement executed between the Company and
CyberMalls subsequent to the 1996 fiscal year.
<PAGE>
- --------------------------------------------------------------------------------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) Index to Exhibits. Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits beginning on page 17 of this
Form 10-KSB, which is herein incorporated by reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the fourth
quarter of 1996. On March 27, 1997 and subsequent to the end of the fourth
quarter, the Company filed a Form 8-K disclosing its sale of 100,000 shares of
Common Stock pursuant to the exemption from registration provided under
Regulation S.
<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, this day of March 1998.
BRIA Communications Corporation
/s/ Richard Lifschutz
--------------------------------
Richard Lifschutz
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/ Richard Lifschutz
- --------------------- President and Director March 20, 1998
Richard Lifschutz
/s/ Isaac Lifschutz
- --------------------- Secretary, Treasurer and Director March 20, 1998
Isaac Lifschutz
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3a * Certificate of Incorporation of the Company
(incorporated herein by reference from Exhibit
3(a)(i) from the Form 8-K filed by the Company on
June 28, 1996).
3b * By-Laws of the Company (incorporated herein by
reference from Exhibit 3(a)(ii) from the Form 8-K
filed by the Company on June 28, 1996).
MATERIAL CONTRACTS
10 (i)(a) * Letter of agreement dated March 1, 1995
between the Company and Richard Lifschutz
(incorporated herein by reference from exhibit of
like number from the Company's Annual Report on
Form 10-KSB filed by the Company on December 28,
1995).
10 (i)(b) * Consulting Agreement dated August 4, 1995, but made
effective March 1, 1995, between the Company and
East-West Trading Corporation (incorporated herein
by reference from exhibit of like number from the
Company's Annual Report on Form 10-KSB filed by the
Company on December 28, 1995).
10 (i)(c) * Consulting Agreement dated August 4, 1995, but made
effective March 1, 1995, between the Company and
Karston Electronics, Ltd. (incorporated herein by
reference from exhibit of like number from the
Company's Annual Report on Form 10-KSB filed by the
Company on December 28, 1995).
10 (i)(d) * Consulting Agreement dated May 16, 1995, but made
effective February 18, 1995, between the Company
and Canton Financial Services Corporation
(incorporated herein by reference from exhibit of
like number from the Company's Annual Report on
Form 10-KSB filed by the Company on December 28,
1995).
10 (i)(e) * Stock Exchange Agreement of December 8, 1995
between the Company and AltaChem Group, Inc.
(incorporated herein by reference from the
Company's 8-K dated May 8, 1996).
10 (i)(f) * Purchase Agreement between the Company and
CyberMalls, Inc. dated July 11, 1996 (incorporated
herein by reference from exhibit of like number
from the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995).
10 (i)(g) * Financial Consulting Agreement between
CyberFootball and Canton Financial Services,
Corporation dated August 31, 1996 (incorporated
herein by reference from exhibit of like number
from the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995).
10 (i)(h) * Agreement for Exchange of Stock between the Company
and Kingslawn Offset, Inc. dated September 10, 1996
(incorporated herein by reference from exhibit of
like number from the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
10 (i)(i) * Stock Exchange Agreement of December 20, 1995
between the Company and OMAP Holdings Incorporated
(incorporated herein by reference from exhibit of
like number from the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
10 (i)(j) * Stock Exchange Agreement of December 20, 1995
between the Company Eurotronics Holdings
Incorporated (incorporated herein by reference from
exhibit
<PAGE>
of like number from the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
10 (i)(k) * Stock Exchange Agreement of December 20, 1995
between the Company and Tianrong Building Material
Holdings, Ltd. (incorporated herein by reference
from exhibit of like number from the Company's
Annual Report on Form 10-KSB for the year ended
December 31, 1995).
10 (i)(l) * Stock Purchase Agreement dated January 15, 1996
betweeen the Company and OMAP Holdings
Incorporated, a Nevada corporation (incorporated
herein by reference from exhibit of like number
from the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995).
10 (i)(m) * Stock Purchase Agreement dated January 30, 1996
between the Company and OMAP Holdings Incorporated
(incorporated herein by reference from exhibit of
like number from the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
10 (i)(n) * Stock Purchase Agreement dated February 9, 1996
between the Company and OMAP Holdings Incorporated
(incorporated herein by reference from exhibit of
like number from the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
10 (i)(o) * Stock Purchase Agreement dates September 28, 1995
between the Company and Tianrong Building Material
Holdings, Ltd (incorporated herein by reference
from exhibit of like number from the Company's
Annual Report on Form 10-KSB for the year ended
December 31, 1995).
o These exhibits appear in the manually signed original Reports for
the periods indicated by each item and are hereby incorporated by
this reference.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S DECEMBER 31,
1996 ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000065231
<NAME> BRIA Communications Corp.
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<PERIOD-START> JAN-01-1996
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