U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
| X | SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended November 30, 1995
OR
| | 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 0-18299
NEWS COMMUNICATIONS, INC.
(Name of small business issuer in its charter)
Nevada 13-3346991
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
174-15 Horace Harding Expressway, Fresh Meadows, New York 11365
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (718) 357-3380
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
(Title of class)
Redeemable Class C Redeemable Class D Units, each consisting of one share
Warrants Warrants of Common Stock, one Redeemable
(Title of class) (Title of Class) Class C Warrant and one
Redeemable Class D Warrant
(Title of Class)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were
$18,113,462.
As of March 29, 1996, 7,820,670 shares of Common Stock were
outstanding. The aggregate market value of shares of Common Stock (based on the
last sale price as reported by NASDAQ) held by non-affiliates of the issuer was
approximately $11,422,082.
DOCUMENTS INCORPORATED BY REFERENCE
None
Page 1 of 54 Pages
EXHIBIT INDEX - PAGE 47
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
News Communications, Inc., a Nevada corporation formed in 1986
(the Company ), has been primarily engaged, through various wholly owned and
partly-owned subsidiaries, in the publication and distribution of advertiser
supported, community oriented newspapers and related targeted audience
publications. The community newspapers are directed at specific geographic
communities and, for the most part, distributed free of charge to selected
residences and business establishments and street boxes in those communities.
Each publication focuses on the lifestyle, culture, arts, entertainment,
politics and social issues of particular interest to the group of communities at
which it is directed. Some of the papers publish different editions (with
variations in editorial content and advertising) which are distributed to each
community in the targeted group. The principal source of the Company's revenues
(92% for the fiscal year ended November 30, 1995) is the sale of advertising
space in its publications.
As used herein, unless the context requires otherwise, the
term Company refers to News Communications, Inc. together with its subsidiaries,
Access Network Corp. ("Access"), publisher of the Manhattan Spirit (formerly
called the West Side Spirit), Tribco Incorporated ("Tribco"), publisher of the
Queens Tribune and the Western Queens Tribune, Dan's Papers Inc. ("DPI"),
publisher of Dan's Papers and the Montauk Pioneer, Manhattan Publishing Corp.,
publisher of Our Town, Parkchester Publishing Co. Inc., publisher of the Bronx
Press Review, Riverdale Review, and Westchester Lifestyles, Nassau Community
Newspaper Group, Inc. ("NCNG"), publisher of Lynbrook USA, the Malverne Times,
the Rockville Centre News & Owl, the Valley Stream MAILeader, the Independent
Voice of Long Beach, Oceanside & Island Park, the Rockville Center-Oceanside
Beacon, the Baldwin Citizen, the East Rockaway Observer, six editions of Long
Island Market and Long Island Lifestyles (collectively, the "Nassau
Newspapers"), Manhattan File Publishing, Inc., publisher of Manhattan File,
Capitol Hill Publishing, Inc. ("Capitol Hill"), publisher of The Hill, Brooklyn
Newspaper Publishing, Inc., publisher of Brooklyn Skyline, and West Side
Newspaper Corp., publisher of Chelsea-Clinton News and the Westsider.
While the Company is also striving to expand the business of
its current publications through more intensive sales efforts, it believes that
the major opportunities for growth in community newspapers lie through
acquisitions of existing publications. Such acquisitions would afford the
Company an established presence in the marketing and circulation areas covered
by the acquired publications. As opposed to starting up new publications, an
acquisition policy also changes a competitor into an ally and, management
believes, offers a faster possible return on investment. On the other hand,
acquisitions may carry with them negative attributes of their predecessors, such
as duplicative staffing which may be costly and disruptive to eliminate and
policies, procedures and matters of corporate culture which could be
well-established but different from or contrary to those of the acquiring
entity. Acquisitions can also be costly to effectuate and may subject the
Company to large charges against earnings to amortize their good will, as has
been the Company's experience. Consequently, the Company also considers low-cost
methods to initiate new publications to complement its existing newspapers and
magazine.
The Company's business plan is to develop a regional group of
publications in the greater New York metropolitan area. The Company's management
intends to seek acquisition candidates and other expansion opportunities in the
New York region. The Company also desires to expand to other areas as resources
permit, including areas such as New Jersey, Connecticut, Massachusetts and
resort communities throughout the United States.
In furtherance of its business plan, the Company underwent
considerable expansion in 1994. This included the acquisition of community
newspapers in Nassau County (the suburban Long Island county just east of New
York City), Brooklyn and Manhattan.
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The Company also believes that it has developed the talent and
expertise to expand into media ventures other than community newspapers (e.g.,
electronic publishing on the Internet and radio and television). In addition, in
1995 the Company expanded by launching a new weekly supplement to its Nassau
publications, Long Island Lifestyles, and a new weekly door-to-door edition of
its Queens newspaper, the Bayside Trib at Home. In 1994, the Company launched
two new products - Manhattan File, a glossy magazine directed at the young urban
Manhattanite, and The Hill, a newspaper covering the United States Congress.
The Company's management believes that advertisers would be
receptive to the wide circulation at relatively low cost that could be offered
by a related group of publications providing a broad metropolitan area audience.
Because the marginal costs of adding editorial and advertising content are
generally significantly lower than the additional advertising revenues that
would be derived, management believes that it can offer potential new
advertisers low rates and still increase its operating profits. It also believes
the Company can take advantage of economies of scale, combination of operations
and other synergies not available to individual publications. In management's
opinion, businesses of the type that advertise in local newspapers such as those
published by the Company, such as merchants and other local businesses, are apt
to consider such newspapers favorably when compared to other advertising media
because of the ability of such newspapers to reach specifically targeted
audiences. The advertisers need not pay rates that are based on broader
audiences not of interest to them.
The Manhattan Spirit
Access publishes the Manhattan Spirit, a weekly free
circulation newspaper founded in 1985, which focuses on the news, lifestyle,
culture, arts, entertainment, politics and social issues of interest to the West
Side and lower Manhattan. Access editors and support staff, together with a
variety of contributing free-lance writers and columnists, write and edit all
material for each weekly issue of the Manhattan Spirit and perform all
composition, layout, and typesetting work. Printing is performed by outside
contractors. In addition, the Manhattan Spirit offers graphics and printing
services to its customers.
The Manhattan Spirit has won many awards, including, in the
past four fiscal years, New York State Bar Association awards for excellence in
journalism. Various national and international magazines have reprinted articles
from the Manhattan Spirit, including Glamour Magazine and Cosmopolitan
International, but this is not a significant source of revenue. Editorial
content includes columns by well-known columnists in the fields of food and
wine, movies and social advice. Other columnists and writers focus on finance,
theatre and topics of community interest.
The Manhattan Spirit is printed in a tabloid format with a
4-color front page. It is distributed Friday of each week by independent
contractors in bulk to locations throughout Manhattan. The principal places of
distribution are lobbies of luxury apartment buildings, restaurants, banks,
supermarkets and various other business establishments as well as in sidewalk
distribution boxes.
Our Town
Our Town, a 26-year-old weekly publication distributed in a
single edition predominantly on Manhattan's Upper East Side, was acquired by the
Company in May 1991. The Company believes it is the East Side's largest free
circulation weekly community newspaper. Almost all of its income derives from
display and classified advertising.
Our Town is published in a 4-color tabloid format. Delivery is
made by independent contractors to apartment house lobbies, banks, supermarkets
and sidewalk distribution boxes.
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Dan's Papers
Dan's Papers, published by DPI, focuses on the lifestyle,
culture, arts, entertainment, politics and social issues of interest to the
resort areas of the South and North Forks of Eastern Long Island, New York,
particularly the wealthy resort area known as the Hamptons. Its articles and
columns include humor, news, celebrity profiles, reviews of art gallery shows,
restaurants, concerts, nightclubs and movies, social satire, editorial cartoons,
local environmental and political issues, as well as a special section on real
estate. Dan's Papers is published in tabloid format (with a glossy cover for
approximately 17 summer and 9 other issues) on a weekly basis. It is distributed
each week to locations on Eastern Long Island, including art galleries, gift
shops, supermarkets, newspaper and card shops, restaurants and boutiques. There
is also weekly distribution in Manhattan. Management of the Company believes
that Dan's Papers has the largest circulation in Eastern Long Island of any
weekly publication.
DPI also publishes the Montauk Pioneer, which has been
designated by the Montauk Village Association as the official newspaper of the
community of Montauk.
Dan's Papers was first published in 1960 by Mr. Daniel
Rattiner, and is believed by the Company to be the first free resort newspaper
in the United States. The Company acquired its 80% interest in DPI (Mr. Rattiner
is the owner of the other 20%) in October 1988. Mr. Rattiner continues to be the
publisher and editor of Dan's Papers under an employment agreement with DPI
expiring in 1998, subject to earlier termination on certain conditions.
Queens Tribune
In May 1989, Tribco acquired, by way of merger, all the
outstanding stock of two companies which, together, published and distributed
the Queens Tribune, which now consists of nine free circulation editions and one
paid-circulation edition weekly community newspapers serving areas in Queens
County in New York City. Included in such editions are three editions of the
Western Queens Tribune, a five-year old weekly publication distributed in areas
in western Queens County not previously served by the Queens Tribune and the
Bayside Trib at Home, which covers the news, events and lifestyles in the
community of Bayside, Queens. It is distributed by hand, door-to-door in
Bayside, which is one of the most influential neighborhoods in Queens County.
The Queens Tribune was started in 1970 and is believed by the
Company to have the largest circulation of any weekly community newspaper in
Queens County. The format is a tabloid with four-color front and additional
pages. Editorial content focuses on local, borough-wide and occasionally
city-wide political and social issues. Features include community news and
activities of the week, crime reports, restaurant reviews and similar matters of
interest to the targeted circulation area. Substantially all of the articles and
columns are written by Tribco's editors and support staff. The Queens Tribune
has won numerous awards for journalistic excellence. Delivery is made by
independent contractors to heavy traffic locations, such as banks, supermarkets,
and sidewalk distribution boxes. Printing, graphics, consulting, distribution,
flyer and insert revenue are significant sources of income to the Queens Tribune
operation, providing approximately 9% of its revenues in the fiscal year ended
November 30, 1995.
The Bronx Press Review, Riverdale Review and Westchester Lifestyles
On December 18, 1992, the Company acquired Parkchester
Publishing Co. Inc., publisher of the Bronx Press Review. The Bronx Press Review
is a fifty-four year old paper which took on a Bronx-wide identity to fill a
vacuum left by the absorption of the daily Bronx Home News by the New York Post
in the late 1940s. It is a tabloid paper with a 4-color front and back page. The
Bronx Press Review has been designated by the New York City Council as the
official newspaper of Bronx County for the publication of he Concurrent
Resolutions of the Legislature.
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In the last quarter of 1993, the Company started the Riverdale
Review, which serves the affluent Riverdale area of the Bronx. It is also
publishing Westchester Lifestyles, a monthly supplement to reach in to the
Westchester advertising market.
The Riverdale Review is a community weekly covering the news,
events, people and lifestyles of the Riverdale community. It is distributed free
of charge throughout the affluent northwest Bronx community which it serves.
19,000 copies are distributed door-to-door to private homes, in bulk to the
lobbies and mailrooms of the 175 apartment buildings in the area, and through
street distribution boxes and other bulk distribution to high traffic businesses
and religious and educational institutions.
The Nassau Newspapers
On December 9, 1993, the Company, through NCNG, acquired the
assets of the eight Nassau Newspapers from a group of sellers for an aggregate
purchase price of approximately $320,000 in cash and 162,143 shares of Common
Stock, which will be issued on the three anniversary dates of the closing
beginning on December 9, 1996. The shares of Common Stock to be issued had an
aggregate market value of $709,375 but, because of the deferral of their
issuance and their nature as restricted securities, have been valued by the
Company at approximately $355,000 for financial accounting purposes. Mr. Barry
Manning has been employed by NCNG to continue as publisher of the Nassau
Newspapers.
Each of the Nassau Newspapers serves a community in Nassau
County, New York, a suburban county adjacent to Queens County in New York City.
The oldest of the Nassau Newspapers has been in continuous publication for 88
years. The group averages over 50 years of continuous weekly publication per
paper. Each of the Nassau Newspapers has been designated as the official
newspaper of its community. The Company has expanded into six additional Nassau
County communities with a shopper-type publication called the Long Island
Market.
Recently the Company has developed a new publication, Long
Island Lifestyles, which serves as a second section to its fourteen existing
Nassau publications and is also distributed by itself in heavily trafficked
areas. This new product offers moderately priced advertising to the central and
south Nassau marketplace.
Manhattan File
Manhattan File is a monthly (plus five special issues
annually), 4-color, perfect bound, glossy magazine that debuted in August 1994.
It targets 20-45 year-old young, affluent Manhattan residents who are fashion
and style conscious. With stories on the latest fashion trends for young men and
women, ideas on interior decorating, dining tips, profiles and interviews with
successful thirtysomethings and a comprehensive arts and entertainment guide for
the young and wealthy. Manhattan File fills a local niche that the Company
believes is not served by any other New York publication.
During the second week of each month, 50,000 complimentary
copies are distributed to the luxury buildings on the upper East Side, upper
West Side, SoHo and the West Village neighborhoods of Manhattan, as well as to
various restaurants, boutiques, salons, nightclubs, health clubs and in 75
signature distribution boxes throughout Manhattan. In all, there are more than
800 distribution sites where young people live or frequent.
National advertisers targeted are high-end fashion, jewelry,
liquor, tobacco, and automotive; on the local front, categories targeted include
health clubs, restaurants, boutiques, art auction houses, hotels and cultural
institutions. Well-known national advertisers have been joined by many local
advertisers including prestigious restaurants, auction houses and hotels.
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The Company owns 90% of the stock of Manhattan File Publishing, Inc. The
remaining 10% is owned by an employee.
Brooklyn Skyline
The Brooklyn Skyline, which was acquired by the Company in
August 1994, is published weekly in five editions which are distributed
door-to-door in Brooklyn's southern tier. Originally a tabloid shopper-type
publication, the Company is in the on-going process of converting the Brooklyn
Skyline to a community newspaper to complement its other publications. The
introduction of "Koch at the Movies," the News Communication Telephone Poll and
the Company's Citywide political page "NYConfidential" in addition to local news
coverage by newly hired Brooklyn reporters distinguish the Brooklyn Skyline from
its major competition, The Marketeer, an established door-to-door shopper. In
addition to its established display sales effort, the Company introduced a
classified advertising section. Additional revenue is also generated by the
occasional sale of distribution of circulars to accompany the door-to-door
distribution of Brooklyn Skyline. The Brooklyn Skyline operates out of an office
in the Mill Basin section of Brooklyn. It is printed on newsprint with the use
of spot color and is distributed by crews supervised and trained by the Company.
Chelsea-Clinton News and Westsider
The Chelsea-Clinton News and Westsider are the only paid
circulation weekly newspapers on the West Side of Manhattan. The Westsider, a
25-year-old community newspaper, covers the area from 59th- 125th Streets from
Riverside Drive to Central Park West. The Chelsea-Clinton News, a 56-year-old
community newspaper, covers the area from 14th-59th Streets from 5th Avenue to
11th Avenue. These two publications rely on revenue from display advertising,
classified advertising, subscriptions, newsstand sales, legal advertising and
from an in-house typesetting shop that brings in more than 20% of the annual
revenue. The Chelsea- Clinton News and Westsider were acquired by the Company in
October 1994.
The Hill
In September 1994, the Company embarked on its most ambitious
undertaking to date -- the publication of The Hill, a new weekly newspaper
devoted to the coverage of the United States Congress. Martin Tolchin, an
award-winning, forty year veteran of the New York Times signed a five year
contract to serve as publisher and editor and chief of The Hill. The paper,
which offers comprehensive coverage of every aspect of Congress and life in the
Capitol, is distributed free of charge to members of Congress and their staffs.
The Hill derives the largest portion of its revenue from the sale of display
advertising to companies wishing to influence the decisions of Congress.
Additional revenues come from classified advertising, local retail advertising,
subscriptions and the sale of the paper outside of the Capitol area. The Hill is
operated out of its own offices in Washington, D.C. It is printed on newsprint
in black ink and process four color. It is primarily distributed to
congressional office buildings and government agencies as well as to select
retail locations, hotels and street boxes.
Printing and Production
The printing of each of the Company's publications is
presently done by independent printing shops. The Company sends to the printer
completely composed, laid-out, typeset pages for photo-offset reproduction. In
each case, the printer is able to provide all of the necessary materials (i.e.,
paper, ink, etc.) for printing, and bills the Company for its services and
materials used. In some instances, the Company purchases its own paper rather
than that supplied by the printer. The Company believes that it obtains its
printing services at competitive prices, and if, for any reason, the
arrangements that it has with its printers should terminate, management believes
that similarly favorable arrangements could be had with several other printing
shops in or around New York City.
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Advertisers and Readers; Marketing Activities
Most of the Company's publications are weeklies primarily
distributed free of charge to their readers. The Bronx Press Review, the eight
Nassau Newspapers, the Westsider and Chelsea-Clinton News and one edition of the
Queens Tribune are paid circulation publications. The primary source of the
Company's revenue is through the sale of advertising space in the publications,
although several of the weekly publications also offer graphics and printing
services to outside service purchasers, including several school publications.
The advertising revenues of each of the Company's publications ar derived from a
wide variety of businesses and individuals reflecting the varied opportunities,
tastes and demands of the residents of each of the targeted distribution areas.
Currently, at least 85% of the advertising space in the Company's publications
represents multiple insertion advertising (where an advertising client runs an
advertisement in two or more issues of a publication). This percentage has
remained fairly stable for the Company's publications over the last four years.
On a year-to-year basis, the Company estimates that, over the last four fiscal
years, approximately two-thirds of its display advertising revenues have been
from advertisers who were advertisers in the prior year. No one advertising
client represents more than 5% of the Company's advertising revenues. Classified
advertising has been a growing area of revenues for the weekly publications, as
has been advertising directed to telephonic response.
The Company employs sales representatives who are compensated,
for the most part, with incentive-based compensation packages. The Company has
commenced supplementing the sales activities of the individual publications with
centralized group sales activities seeking advertisers for all or a combination
of the Company's publications. Management believes such a program is
particularly attractive to advertisers who seek audiences throughout the greater
New York metropolitan area, such as chain store and franchise operations.
Competition
The Company competes directly for advertising revenues with
newspapers and magazines which are sold to readers or are distributed free, as
well as other advertising media. The Company does not significantly compete,
however, with other publishers of newspapers or magazines for paid circulation
revenues as most of its publications are distributed free of charge to its
readers.
Those newspapers and magazines competing with the Manhattan
Spirit and Our Town for advertising and targeted at Manhattan or parts thereof
include, among others, the Resident, New York Press, New York Observer, New York
Magazine and The Village Voice. In order to compete with the lower advertising
rates of smaller publications in the Manhattan Spirit's market area, the Company
utilizes a split zone program whereby advertisers may purchase space in only
half of the Manhattan Spirit's copies at an appropriately reduced rate. During
the months from May through September, Dan's Papers serves the same market as
Hampton Magazine, a free circulation publication. Dan's Papers is aimed at the
same market as the East Hampton Star and the Southampton Press, which are sold
to readers and not distributed free of charge. The Montauk Pioneer is the only
paper that serves Montauk. The Queens Tribune competes with many publications,
including Newsday and the free circulation publications Queens Chronicle and
Queens Courier, both of which are somewhat smaller in circulation and
advertising revenue than the Queens Tribune. The Bronx Press Review competes
against community newspapers such as the Bronx Times Reporter and the Bronx
News.
The Riverdale Review is the only saturation circulation, free
distribution newspaper serving that affluent community. The Riverdale Press, a
paid circulation weekly, has a smaller circulation.
In addition to Newsday, the daily newspaper in Nassau County,
the Nassau Newspapers have several other weekly competitors in the south-west
section of the county. These include the South Shore Tribune, a free circulation
newspaper, a group of paid circulation newspapers published by Richner
Publications, and Pennysaver/This Week and Shoppers Guide, two free circulation
shopper publications. In addition, there is a free
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circulation television listing magazine entitled Prime Time.
Manhattan File is the only free distributed glossy magazines
targeting young people in Manhattan. Competitors include national magazines like
Vanity Fair, Details and Rolling Stone. Also, locally there is a small
competitive overlap for advertising with the free newspapers, The Village Voice
and The New York Press.
Although there is no competition for subscriptions or legal
revenue because there are no other paid circulation weeklies on the West Side,
the Chelsea-Clinton News and Westsider do compete for display and classified
advertising with other free weeklies on the West Side, including the Manhattan
Spirit and The Resident.
The Brooklyn Skyline is one of a number of free distribution
papers in Brooklyn. The Marketeer, an established door-to-door shopper, is its
primary competitor.
The Hill services the same market as Roll Call, an established newspaper
published twice weekly.
There are numerous other publications distributed in the
Company's circulation areas, some of which have resources substantially greater
than those of the Company, which compete for advertising against the Company's
publications. Management of the Company expects to be competitive because the
Company can offer customers the ability to focus its advertisements on a
specific market, thereby giving the customer a chance to control costs by
narrowing its advertising scope and eliminating waste. Management believes that,
over the years of publication, the Company's newspapers have developed a
favorable reputation and following. The Company also believes it can compete
favorably by offering advertisers the opportunity to choose from a menu of the
Company's publications, by offering advertisers more favorable rates as the
number of publications increases and by affording advertisers the ability to
pinpoint a specific group or geographic area or combination thereof. The major
barrier to the entry of new competitive publications is the need for sufficient
capital to start up and continue operations until a sufficient advertising base
is created.
Employees
As of November 30, 1995, the Company had 307 full- and
part-time employees, 55 of whom were editorial; 123 were engaged as display and
classified advertising sales personnel; 61 were engaged in production; and 63
were engaged in administrative and clerical activities. The Company also
maintains a roster of free-lance contractors. Management considers its relations
with the Company's employees to be satisfactory.
Seasonality
Dan's Papers and the Montauk Pioneer, which are resort area
newspapers, have significant seasonal variations in revenues. This seasonality
may cause operating results to vary significantly from quarter to quarter, with
the third fiscal quarter being the most significant in terms of revenues and
income.
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ITEM 2. DESCRIPTION OF PROPERTY.
The Company and its subsidiaries operate out of eight separate
locations. The Manhattan Spirit, Our Town, Chelsea-Clinton News and the
Westsider share 7,000 square foot premises at both 242 West 30th Street, New
York, New York, under a lease with an unaffiliated landlord which commenced in
1995 and terminates in January 2001, at an annual rental of $52,000 for the
first year, increasing over the term to $75,380 in the last year.
DPI leases from Mr. Daniel Rattiner, current 20% owner and
President of DPI, 1,910 square feet of office space in a building on Montauk
Highway, Bridgehampton, New York, at an annual rate of $38,200 (plus
cost-of-living increases) for a term of ten years terminating in October 1998.
The Company has an option to renew its lease for an additional five-year term.
Tribco has a ten year lease, which commenced on November 1,
1990, with an unaffiliated landlord to rent approximately 8,000 square feet of
office space and space for publication of the Queens Tribune in Fresh Meadows,
New York, for annual base rents ranging from $88,000 to $128,000. The lease is
renewable for five years at a $152,000 base annual rent. These premises also
serve as the Company's executive and financial offices.
Parkchester Publishing Co. Inc. has a five year lease for 2,500 square feet
of office space at 170 West 233rd Street, Bronx, New York, commencing June 1994,
at an annual rental of $34,200, increasing over the term to $38,500 in the last
year.
NCNG has a five year lease for 7,600 square feet of office
space at 216 East 2nd Street, Mineola, New York, commencing November 1994, at an
annual rental of $53,400, increasing over the term to $62,350 in the last year.
The Company has an option to renew its lease for an additional five years.
Manhattan File Publishing, Inc. has a five and one-half year
lease for 3,500 square feet of office space at 594 Broadway, New York, New York,
commencing March 1994, at an annual rental of $56,000.
Capitol Hill Publishing, Inc. has a five year lease for 3,735
square feet of office space at 733 15th Street, N.W., Washington, D.C.,
commencing August 1994, at an annual rental of $68,880.
Brooklyn Newspaper Publishing, Inc. has a three year lease for
2,500 square fee of office space at 2123 Utica Avenue, Brooklyn, New York,
commencing November 1994, at an annual rental of $18,000, increasing over the
term to $19,800 in the last year.
The Company believes that its present space is adequate for
current purposes and offers moderate expansion possibilities.
ITEM 3. LEGAL PROCEEDINGS.
An action entitled Jean Jee v. News Communications, Inc., was
instituted in the Supreme Court, New York County, in January 1991. The complaint
alleges libel claims against the Company in connection with an article printed
in the Manhattan Spirit which accused Ms. Jee, then principal of a Manhattan
public school, of running her own computer business out of the school, beating
special education students and having been suspended by the New York City Board
of Education. Promptly after the complaint was served, the Manhattan Spirit
printed a retraction concerning the suspension accusations. In fact, Ms. Jee had
taken a leave of absence. Ms. Jee is suing for $2,000,000 in compensatory
damages and unspecified punitive damages. The Company intends to vigorously
defend the suit and has filed an answer denying the material allegations of the
complaint and has served demands for document production. Ms. Jee's motion for a
protective order in connection with
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such demands was granted. Discovery has not yet commenced. Management believes,
although there can be no assurance, that, based upon the application of the
relevant law (as explained to management by counsel representing the Company) to
the facts known to it, the claims asserted in this action are without merit. It
is the policy of such counsel not to express opinions as to the outcome of
actions such as this.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters to a vote of
stockholders during the last quarter of the fiscal year ended November 30, 1995.
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PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is quoted on the National
Association of Securities Dealers Automated Quotation System (Nasdaq) Small Cap
Market under the symbol NCOME. The Units (symbol NCOMU), each consisting of one
share of Common Stock, one Redeemable Class C Warrant (symbol NCOMM) and one
Redeemable Class D Warrant (symbol NCOML), are also quoted on Nasdaq. The
securities constituting the Units became separately tradeable on February 12,
1993, but separate trading has not been established by any market maker. The
prices listed below are the high sales and low sale prices for the periods
reported.
The Company's Redeemable Class A Warrants, which were quoted
on Nasdaq under the symbol NCOMW, expired on March 29, 1996. None of the
Company's Redeemable Class B Warrants, which also expired on March 29, 1996,
were ever issued.
===============================================================================
Common Stock Units
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Quarter Ended High Low High Low
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February 28, 1994 4.25 2.00 7.00 2.00
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May 31, 1994 2.38 1.25 2.50 1.50
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August 31, 1994 3.50 2.00 5.00 2.00
- -------------------------------------------------------------------------------
November 30, 1994 3.00 1.88 3.00 1.75
- -------------------------------------------------------------------------------
February 28, 1995 3.06 1.94 4.00 2.00
- -------------------------------------------------------------------------------
May 31, 1995 2.75 1.88 2.75 2.25
- -------------------------------------------------------------------------------
August 31, 1995 2.94 2.00 4.25 4.25
- -------------------------------------------------------------------------------
November 30, 1995 3.00 2.37 3.25 2.50
===============================================================================
The Company estimates that at February 29, 1996 there were
approximately 2,100 beneficial owners of its Common Stock, approximately 650
beneficial owners of the Units, approximately 650 beneficial owners of the
Redeemable Class C Warrants and approximately 650 beneficial owners of the
Redeemable Class D Warrants. There were approximately 1,000 record owners of the
Company's Common Stock, approximately 80 record owners of the Units,
approximately 80 record holders of the Redeemable Class C Warrants and
approximately 80 record holders of the Redeemable Class D Warrants.
Dividend Policy
The Company has never declared or paid any cash dividends on
its Common Stock and does not intend to pay cash dividends on its Common Stock
in the foreseeable future. The Company intends to retain any earnings to finance
the growth of the Company. Also, applicable provisions of Nevada corporate law
may affect the ability of the Company to declare and pay dividends on the Common
Stock. Under Nevada law, dividends may be paid from a corporations excess of
assets over its liabilities including capital (based upon certain computations)
or, in case there shall be no such excess, out of its net profits for the
current fiscal year and the preceding fiscal year or out of its net profits for
the preceding fiscal year. There can be no assurance that, in the future, the
Company will have sufficient surplus available for payment of dividends.
Page 11
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The table on the following page sets forth, for the periods
indicated, certain information relating to each of the Company's publications
and to certain expenses incurred by the parent company, News Communications,
Inc. The numbers set forth below reflect the operations of the following
acquired or start-up publications from the dates indicated: Bronx Review --
December 1993; Nassau Newspapers -- December 1993; Brooklyn Skyline -- August
1994; Manhattan File -- August 1994; The Hill -- September 1994; Chelsea-Clinton
News and Westsider -- September 1994. For information with respect to the
Company's financial position and actual results of operations on a consolidated
basis, please refer to Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS
The following discussion compares results of operations for
the fiscal year ended November 30, 1995 to the fiscal year ended November 30,
1994. Brooklyn Skyline was acquired in August 1994, West Side was acquired in
September 1994 and The Hill and Manhattan File were started during 1994.
Therefore comparisons for these publications are not discussed as they would not
be meaningful.
In a year that was highlighted by a 34% increase in revenues
from $13,554,929 in 1994 to $18,113,462 in 1995, the Company started to apply
its successful publishing techniques to its new properties. We anticipate the
effect of these strategies to accrue to the Company's benefit in the near
future.
Net Revenues
Total revenues from existing publications were up slightly
(3%). Dan's Papers had an increase in revenues (12%) as a result of its
continued dominance in its market area. There were decreases in revenues at the
Manhattan Spirit (5%) and Our Town (7%) primarily as a result of decline in
revenues associated with the electoral process in this off-election year. The
next fiscal year has normal election activity and should return these revenues
to their previous levels. The Queens Tribune had an increase in revenues (1%) in
spite of a significant decrease in election related revenues, due primarily to
the growth of its Bayside Trib at Home edition which was started up in the
latter part of the year. The Bronx Press Review revenues show a modest increase
(3%). The addition of Long Island Lifestyles, a four color lifestyle section
which is included in all existing Nassau publications has enabled advertisers to
make an effective regional buy and helped increase revenues for the Nassau
Newspapers (8%).
Income (Loss)-Publications
The unusually large increase of approximately 60% in the cost
of newsprint, which accounts for 60% -- 65% of printing costs, was the largest
factor causing a decrease in the income of existing publications. Income was
down for the Queens Tribune (18%), Dan's Papers (5%), Manhattan Spirit (34%) and
Our Town (34%) primarily as a result of the increase in the price of newsprint.
As a result of newsprint prices, the cost of printing the Company's newspapers
increased between 22% and 40%, which accounts for more than the entire decrease
in operating income. Dan's Papers decrease was offset by its increased revenues.
The Queens Tribune income also includes start-up costs relating to its new
Bayside Trib at Home edition. The increase in loss at Nassau Newspapers (59%)
resulted from the increase in printing costs as well as the increased costs
associated with the start-up of Long Island Lifestyles. In addition to the
effect of newsprint prices, the Bronx Press Review showed a loss as compared to
a small profit last year as a result of the prior year including a significant
gain on the sale of its building in 1994. Since year-end the price of newsprint
has fallen approximately 13% and additional reductions are anticipated.
Additionally, since the end of the fiscal year the Company has taken steps to
reduce expenses in its operating budget by approximately $1,200,000.
Parent Company Expenses
The increase in parent company expenses was primarily a result
of increased rent and personnel costs and professional fees required by the
recent corporate growth expansion.
Page 12
<PAGE>
<TABLE>
Year ended November 30,
1995 1994(1)
<S> <C> <C>
NET REVENUES
Existing Publications:
Queens Tribune.................................................$3,169,336 $3,148,418
Dan's Papers................................................... 3,261,060 2,921,469
Manhattan Spirit............................................... 1,712,280 1,802,405
Our Town....................................................... 1,552,499 1,678,349
Nassau Newspapers.............................................. 2,327,215 2,153,750
Bronx Press Review............................................. 925,314 899,647
----------- ----------
Total Revenues - Existing Publications 12,947,704 12,604,038
---------- ----------
Acquisitions and Start-ups:
The Hill....................................................... 1,645,501 216,962
Manhattan File................................................. 1,490,178 392,070
Brooklyn Skyline............................................... 1,054,169 206,323
Westside Publications.......................................... 975,910 135,536
--------- -----------
Total Revenues - Acquisitions and Start-ups: 5,165,758 950,891
--------- -----------
Total Revenues $18,113,462 $13,554,929
=========== ===========
INCOME (LOSS) PUBLICATIONS BEFORE GOODWILL
Existing Publications:
Queens Tribune................................................. $496,001 $605,903
Dan's Papers................................................... 679,379 713,290
Manhattan Spirit............................................... 79,307 120,878
Our Town....................................................... 157,246 239,520
Bronx Press Review............................................. (125,378) 1,756
Nassau Newspapers.............................................. (287,917) (181,459)
------------ -----------
Net Income - Existing Publications 998,638 1,499,888
----------- ----------
Acquisitions and Start-ups:
The Hill....................................................... (316,177) (387,887)
Manhattan File................................................. (373,628) (499,495)
Brooklyn Skyline............................................... (149,460) (59,825)
Westside Publications.......................................... (34,631) (16,310)
------------ -----------
Net (Loss) - Acquisitions and Start-ups: (873,896) (963,517)
------------ -----------
Net Income $124,742 $536,371
========== ==========
INCOME (LOSS) PUBLICATIONS AFTER GOODWILL(2)
Existing Publications:
Queens Tribune................................................. $389,133 $499,035
Dan's Papers................................................... 628,678 662,589
Manhattan Spirit............................................... 79,307 120,878
Our Town....................................................... 103,401 185,675
Bronx Press Review............................................. (139,626) (12,492)
Nassau Newspapers.............................................. (321,762) (212,436)
------------ -----------
Net Income - Existing Publications 739,131 1,243,249
----------- ---------
Acquisitions and Start-ups:
The Hill....................................................... (316,177) (387,887)
Manhattan File................................................. (376,828) (499,495)
Brooklyn Skyline............................................... (165,753) (61,865)
Westside Publications.......................................... (40,751) (20,091)
----------- -----------
Net (Loss) - Acquisitions and Start-ups: (899,509) (969,338)
----------- -----------
Net (Loss) Income ($160,378) $273,911
=========== ==========
PARENT COMPANY EXPENSES
Personnel, Rent, General and Administrative $1,519,968 $1,288,989
Interest (Income) Expense(3) 3,900 (37,196)
----------- -----------
Total Parent Company Expenses $1,523,868 $1,251,793
=========== ==========
NET (LOSS) BEFORE MINORITY INTEREST ($1,684,246) ($977,882)
============ ============
LESS: MINORITY INTEREST OF INCOME OF SUBSIDIARY 47,788 --
------------ ------------
NET (LOSS) ($1,732,034) ($977,884)
============ ============
- -----------------------------------------
(Footnotes to table are on following page)
Page 13
<PAGE>
<FN>
- -----------------------------
(Footnotes to table on preceding page)
(1) The results of operations for 1994 have been restated to reflect increased
expenses and loss. See Note ___ to the financial statements.
(2) Reflects expense for amortization of goodwill by publication as follows:
Year ended November 30,
1995 1994
---- ----
Queens Tribune.......... $106,868 $106,868
Dan's Papers............ 50,701 50,701
Our Town................ 53,845 53,845
Bronx Press Review...... 14,248 14,248
Nassau Newspapers....... 33,845 30,977
Brooklyn Skyline........ 16,293 2,040
Westside Publications... 6,120 3,781
Manhattan File.......... 3,200 ---
---------- ---------
$285,120 $262,460
(3) Net of interest income of $28,708 and $61,993 for the years ended November
30, 1995 and 1994, respectively.
</FN>
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1995, the Company had an excess of current assets
over current liabilities of approximately $2,376,000. Through November 30, 1995,
approximately $76,000 was used to repay the remaining notes and accrued interest
incurred with the acquisition of the Bronx Press Review and $24,000 was paid to
a former officer of Manhattan File. The remaining $24,000 is due to be paid by
April 29, 1996. During the year ended November 30, 1995, the Company obtained
$500,000 from bank loans. An additional $675,000 was obtained through April 17,
1996. The Chairman of the Board of the Company has personally guaranteed payment
of $175,000 to the bank.
For the year ended November 30, 1995, the Company had a cash
decrease of approximately $788,000 (a) resulting from operating activities, made
up of operating loss of ($1,732,034), increased by non-cash items such as
depreciation and amortization of $495,000, provision for loss on accounts
receivable of $396,000 and changes in balance sheet items such as increases in
accounts receivable ($1,527,000) and increases in accounts payable and accrued
expenses of approximately $261,000; (b) increased by investing activities such
as sale of marketable securities of $925,000 offset by capital expenditures of
($148,000); (c) increased by $418,000 provided by financing activities including
$500,000 from proceed of bank loans and proceeds of option & warrants exercises
($60,000) offset by repayment of notes payable ($100,000) and dividends on
Preferred Stock ($41,000).
The Company is currently seeking additional funding from bank loans
and/or sales of its securities in order to reduce its accounts payable balances.
Management believes that the Company's operations will generate positive cash
flow for the fiscal year ending November 30, 1996. Although there can be no
assurances to this effect, management is confident that it has available a
variety of funding and revenue sources to meet the Company's cash needs.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements listed on page F-1 are included in
this Report beginning on page F-2.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
Page 14
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
As of February 29, 1996, the Company's directors, executive officers
and other significant employees and their ages and positions are as follows:
Name of Individual Age Position with Company and Subsidiaries
Gary Ackerman 53 Director of the Company
Thomas Allon 33 Executive Vice President of the Company
Robert Berkowitz 47 Controller of the Company
Eric Breindel 40 Director of the Company
John Catsimatidis 47 Director of the Company
Jerry Finkelstein 80 Chairman of the Board, Director of the
Company and officer of subsidiaries
Joseph K. Fisher 49 Director of the Company
David Jaroslawicz 49 Director of the Company
William J. Kelleher, Jr. 47 Director of the Company
Andrew J. Maloney 64 Director of the Company
Christopher C. McGrath 59 Director and Treasurer of the Company;
Director of Access
Martin J. McLaughlin 57 Director and Secretary of the Company
and officer of a subsidiary
Daniel Rattiner 56 President, Publisher, Editor and
Director of DPI
Michael Schenkler 50 Director and President of the Company
and director and officer of
subsidiaries
Andrew J. Stein 51 Director of the Company
Arthur Tarlow 66 Director of the Company
Gary Ackerman has been a director of the Company since March 1990.
He has served in the United States House of Representatives as a Representative
from New York, since March 1983. From 1979 until 1983, Mr. Ackerman was a member
of the New York State Senate. From 1970 to 1979, Mr. Ackerman was the founder,
editor and publisher of the Queens Tribune.
Thomas Allon was elected Executive Vice President of the Company in
November 1994. He has been Publisher of the Manhattan Spirit and Our Town since
1992. From 1990 to 1991 he was Managing/Associate Publisher of the Manhattan
Spirit.
Robert Berkowitz has served as Controller of the Company since
December 1992. From November 1991 to November 1992, Mr. Berkowitz was a
financial and management consultant with Gobstein, Weingarten & Goldfarb, a
certified public accounting firm. From August 1989 to November 1991 he was the
Chief Accounting
Page 15
<PAGE>
Officer for Meringoff Equities, an owner and manager of commercial real estate.
From August 1980 to August 1989 he was Vice-President and Controller of the
Trump Group, a private investment company specializing in the acquisition and
operation of both public and private companies. From 1977 to 1980 he was with
the public accounting firm of Price Waterhouse.
Eric Breindel has been a director of the Company since October 1993. Since
1986, Mr. Breindel has been Editorial Page Editor of the New York Post. He also
writes for Commentary, The New Republic, The Wall Street Journal, as well as
other periodical. He is the recipient of numerous professional awards and honors
and appears regularly as a commentator on both television and radio news
programs. Mr. Breindel is a graduate of Harvard College and Harvard Law School.
John Catsimatidis has been a director of the Company since December
1991. Mr. Catsimatidis is also the Chairman of Red Apple Companies, Inc., a
holding company for supermarket chains in New York and Florida. Since July 1988,
Mr. Catsimatidis has served as Chairman of the Board, Chief Executive Officer,
Treasurer and director of Designcraft Industries, Inc., an American Stock
Exchange listed company. Mr. Catsimatidis is also currently the Chairman of the
Board, Chief Executive Officer, President and director of United Refining
Company, a refiner and retailer of petroleum products.
Jerry Finkelstein has been a director of the Company since December
1987 and became Chairman of the Board in August 1993. He served as publisher of
The New York Law Journal from 1960 to 1984. Mr. Finkelstein was Chairman of the
Board of Struthers Wells Corporation for more than 5 years prior to 1993 when he
resigned. Struthers Wells Corporation filed for protection under Chapter XI of
the United States Bankruptcy Code in February 1994. Mr. Finkelstein is a former
member of the Board of Directors of Rockefeller Center, Inc., Chicago Milwaukee
Corporation, Chicago Milwaukee Railroad Corporation and TPI Enterprise, Inc.
(formerly Telecom Plus International Inc.), a communications company. He is also
a former Commissioner of the Port Authority of New York and New Jersey.
William J. Kelleher, Jr. has been a director of the Company since
July 1994. Since November 1993, he has been General Counsel to Colonia Insurance
Company. Previously, from 1983, he was in private practice, specializing in
litigation in federal and state courts. From 1981 to 1983, he was Chief, Market
Integrity Section, of the United States Commodity Futures Trading Commission.
From 1979 to 1981, he was Chief Counsel to the New York State Senate Committee
on Investigations, Taxation and Government Operations. From 1978 to 1979, he was
Chief of Investigations for the District Attorney of Queens County, New York,
and from 1973 to 1978, he was an Assistant United States Attorney for the United
States Attorney's Office for the Southern District of New York.
Joseph K. Fisher has been a director of the Company since March
1990. He has served as President and Chief Executive Officer of Fisher &
Company, a New York-based marketing communications firm, since March 1988. From
1978 to 1988, he was Chairman and Chief Executive Officer of Fisher, Jackson,
Levy, Flaxman, an advertising company, and, from 1981 to 1987, he was President
of Steadman, Sheehan, Meara and Fisher, a public relations firm. Mr. Fisher has
been a director of International Thoroughbred Breeders, an American Stock
Exchange company, since 1986, and a director of the New York Drama League since
1987.
David Jaroslawicz has been a director of the Company since March
1990. He has been an attorney in private practice in New York and California for
more than the past five years. He is a member of the Bar of New York, California
and Florida.
Andrew J. Maloney has been a director of the Company since September
1993. He is a partner at the New York law firm of Brown & Wood. From 1986
until December 1992, Mr. Maloney was United States Attorney for the Eastern
District of New York. Mr. Maloney is a graduate of the United States
Military Academy at West Point and Fordham Law School.
Christopher C. McGrath has been a director and Treasurer of the
Company since December 1987.
Page 16
<PAGE>
He has been a government relations consultant since August 1988. Prior to that
time, from November 1986 through July 1988, he was Executive Director of the New
York State Petroleum Council, a subsidiary of the American Petroleum Institute,
a trade association representing major oil companies. Previously, he was
Director of Government Relations of the New York State Petroleum Council. He has
served as a director of Access since October 1987.
Martin J. McLaughlin has been a director of the Company since December
1990 and Secretary of the Company since April 1992. Mr. McLaughlin has been
a local government lobbyist since 1982 for corporate clients in various
industries, such as real estate and utilities. Mr. McLaughlin also performs
public relations work for various corporate clients.
Daniel Rattiner is Publisher and Editor of Dan's Papers, having held
these positions since he began the publication in 1960. He has also been
President and a director of DPI since its organization in October 1988.
Michael Schenkler has been a director of the Company since March
1990, became a Vice President in August 1990 and was elected President in
December 1991. He has been President and Publisher of the Queens Tribune since
1979. Prior to taking over the Queens Tribune full time in 1982, Mr. Schenkler
spent 15 years as an educator employed by the Board of Education of New York
City, where he served as a teacher, assistant principal and principal.
Andrew J. Stein has been a director of the Company since July 1994.
He is President of Benake Corporation, a management consulting firm. Prior to
assuming such position in 1993, Mr. Stein was actively involved in public
affairs. From 1986 to 1993, he was President of the Council, New York City. From
1978 to 1985, he was President of the Borough of Manhattan and from 1969 to
1977, he was a member of the New York State Assembly. He was also Chairman of
the New York City Commission on Public Information and Communication, and has
been a Trustee of the New York City Employees Retirement System and an ex
officio member of The Museum of The City of New York, The New York Public
Library, The Metropolitan Museum of Art and The Queens Borough Public Library.
Mr. Stein is a son of Mr. Finkelstein.
Arthur Tarlow has been a director of the Company since August 1993.
He is an attorney currently of counsel to Meyer, Suozzi, English & Klein, P.C.
of Mineola, New York, where he has been practicing for more than 10 years as a
specialist in taxation, estates and trusts. He is also a Certified Public
Accountant and has been a partner in the accounting firm of David Tarlow &
Company for more than 25 years. He is a member of the New York State Bar
Association, admitted to practice before the U.S. Tax Court, and a member of the
New York State Society of CPAs and the American Institute of Certified Public
Accountants.
The directors serve until the next annual meeting of stockholders or
until their respective successors are elected and qualified. Officers serve at
the discretion of the Board of Directors.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and information furnished by the reporting
person, during the fiscal year ended November 30, 1995, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with, except that the reports covering the
granting of options on August 17, 1995 under the Company's Non-Discretionary
Directors Stock Option Plan were filed late by each of the directors who
received such grants (see Item 10).
Page 17
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
Summary of Cash and Certain Other Compensation
The following table shows compensation paid by the Company and its
subsidiaries to certain of its executive officers (including the chief executive
officer) for the fiscal years ended November 30, 1995, 1994 and 1993.
<TABLE>
SUMMARY COMPENSATION TABLE
===================================================================================================================================
Annual Compensation Long-Term
Compensation
----------------------------------------------------------------------
Awards
-------------------
Other
Annual
Compensa-
Salary Bonus tion Options
Name and Principal Position Year ($) ($) ($) (#)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Michael Schenkler, President and Chief Exec- 1995 150,000 --- --- ---
utive Officer of the Company and officer of 1994 142,553 --- --- 67,500
subsidiaries 1993 142,553 --- --- 45,000
- -----------------------------------------------------------------------------------------------------------------------------------
Daniel Rattiner, Officer of Dan's Papers, Inc. 1995 127,813 61,169 15,000(1) ---
1994 124,016 39,367 15,000(1) ---
1993 120,4061 20,285 15,000(1) 35,000
- -----------------------------------------------------------------------------------------------------------------------------------
Jerry Finkelstein, Chairman of the Board of 1995 195,000 --- --- ---
the Company and officer of subsidiaries 1994 175,392 --- --- 217,500
1993 --- --- --- 310,000
===================================================================================================================================
<FN>
- --------------------------------------
(1) Mr. Rattiner is entitled to receive an aggregate of $15,000 per year for
discounted trade-sale merchandise from advertisers (who provide such
merchandise to Mr. Rattiner in lieu of paying the Company for
advertising).
</FN>
</TABLE>
<TABLE>
===================================================================================================================================
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise or
Options/SARs to Employees Base Price
Granted (#) in Fiscal Year ($/Sh) Expiration Date
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Michael Schenkler 10,000 1.9 2.69 8/17/00
- -----------------------------------------------------------------------------------------------------------------------------------
Jerry Finkelstein 350,000 47.3 2.00 6/22/00
10,000 1.9 2.69 8/17/00
===================================================================================================================================
</TABLE>
Page 18
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE YEAR-END OPTION VALUES
(November 30, 1995)
================================================================================================================================
Number of unexercised options Value of unexercised in-the-
at fiscal year-end(#) money options at fiscal year-
end($)
------------------------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Michael Schenkler 132,500 --- 73,885 ---
- --------------------------------------------------------------------------------------------------------------------------------
Jerry Finkelstein 687,500 --- 410,445 ---
- --------------------------------------------------------------------------------------------------------------------------------
Daniel Rattiner 35,000 --- 15,313 ---
================================================================================================================================
</TABLE>
Employment Contracts and Other Employment Agreements
Pursuant to an employment agreement entered into by the Company and
Michael Schenkler as of October 15, 1994, and terminating October 14, 1999, Mr.
Schenkler is employed as President of the Company and President of Tribco. Mr.
Schenkler earns a base salary of $150,000 per year (subject to cost-of-living
increases) and such annual bonuses as the Board of Directors of the Company may
determine in its sole discretion. The agreement requires Mr. Schenkler to
protect confidential information of the Company and restricts him from engaging
in certain competitive activities during the term of his employment and for one
year thereafter.
Pursuant to an employment agreement entered into by the Company and
Jerry Finkelstein as of August 20, 1993, and terminating on August 19, 1998, Mr.
Finkelstein is employed as Chairman of the Board of Directors of the Company
("Board") at an annual salary of $195,000. Mr. Finkelstein may also be paid
annual bonuses at the discretion of the Board, based upon such factors as the
Company's results of operations and transactions involving the Company which are
introduced to the Company by Mr. Finkelstein or in which he is otherwise
involved on behalf of the Company. At his request, the Company will also provide
Mr. Finkelstein with medical and other benefits and perquisites, including
reimbursement for expenses relating to maintenance of appropriate office space
for him, including rent and secretarial costs. Mr. Finkelstein may terminate the
agreement at any time on at least 10 days' notice to the Company. In the event
of his permanent disability or death, amounts of salary and bonuses shall
continue to paid to him or the legal representative of his estate until the end
of the term of the agreement. Under the agreement, Mr. Finkelstein is required
to devote such time to the affairs of the Company as he, in his sole judgment,
deems necessary and appropriate.
Pursuant to an employment agreement entered into by the Company and
Thomas Allon as of November 1, 1994, and terminating November 30, 1997, Mr.
Allon is employed as Executive Vice President of the Company. Mr. Allon earns a
base salary of $80,000 per year (subject to cost-of-living increases) and, for
fiscal years beginning December 1, 1994, is entitled to a bonus of 5% of the net
profits of the Company derived from the Company's publications Manhattan Spirit,
Our Town, Manhattan File, Chelsea-Clinton News and Westsider, but in no event
shall such bonus be less than $45,000 nor more than $70,000 for any fiscal year.
The agreement requires Mr. Allon to protect confidential information of the
Company and restricts him from engaging in certain competitive activities during
the term of his employment and for one year thereafter.
Pursuant to an employment agreement terminating in 1998, as amended,
as compensation for his services to DPI, Daniel Rattiner earns a base salary
from DPI of $100,000 per year, adjusted for increases in the consumer price
index after 1988, plus a bonus in each fiscal year based on net profits (as
defined) of DPI. Mr. Rattiner may terminate his employment at any time. Mr.
Rattiner has pledged to keep secret DPI's confidential matters and, in the event
he leaves the employ of DPI, not to compete with DPI for specific periods of
time, depending on the reasons for his separation.
Page 19
<PAGE>
The Company has no established compensation arrangements with its
directors. See Directors' and Officers' Options, below.
Directors' and Officers' Options
On August 17, 1993, the Board adopted a "Discretionary Directors and
Officers Stock Option Plan" (the "Discretionary Option Plan") pursuant to which,
as amended, the Board may award options to purchase an aggregate of 1,500,000
shares of Common Stock to directors and officers of the Company and its
subsidiaries which shall be exercisable at the market price on the date of grant
for periods, and under conditions, specified by the Board in such grants.
Options under the Discretionary Option Plan are non-qualified and non-incentive
options for purposes of income taxation and are not intended to qualify under
Section 422A of the Internal Revenue Code of 1986. During the fiscal year ended
November 30, 1995, the only grant made under the Discretionary Option Plan was a
grant to Mr. Finkelstein on June 22, 1995 of five-year options to purchase
350,000 shares of Common Stock exercisable at $2.00 per share
On August 17, 1993, the Board also adopted a "Non-Discretionary
Directors Stock Option Plan" (the "Non-Discretionary Option Plan") pursuant to
which each director is granted on August 17, 1993 and each anniversary thereof
on which he or she continues to be a director, a five-year option to purchase
10,000 shares of Common Stock at the market price on the date of grant. The
Non-Discretionary Plan also provides that any person becoming a director within
the six month after any August 17 will be granted an option for 10,000 shares on
the date he or she becomes a director. The Non-Discretionary Option Plan was
approved by the shareholders of the Company on July 15, 1994. Mr. Ackerman has
elected not to participate in the Non-Discretionary Option Plan. Pursuant to the
Non-Discretionary Option Plan, each person listed as a director of the Company
in Item 9, other than Mr. Ackerman, received, on August 17, 1995, a grant of an
option to purchase 10,000 shares of Common Stock exercisable at $2.69 per share.
Page 20
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding
ownership of the Company's Common Stock, as of March 29, 1996, by each person
known to the Company to own beneficially more than 5% of the outstanding Common
Stock, by each person who is a director of the Company, by each executive
officer of the Company listed in the tables in Item 10, and by all directors and
officers of the Company as a group.
Amount and Nature
of Beneficial Percent of
Beneficial Owner Ownership (1) Class
- ---------------- --------------- --------
Gary Ackerman 413,318 (2) 5.3%
218-14 Northern Boulevard
Bayside, N.Y. 11432
Eric Breindel 52,500 (3) *
210 South Street
New York, N.Y. 10022
John Catsimatidis 45,000 (3) *
832 11th Avenue
New York, N.Y. 10019
Jerry Finkelstein 1,479,503 (3) (4) 17.4%
150 East 58th Street
33rd Floor
New York, N.Y. 10158
Joseph K. Fisher 39,167 (3) *
301 East 57th Street
New York, N.Y. 10021
David Jaroslawicz 39,834 (3) *
150 Williams Street
New York, N.Y. 10038
William J. Kelleher, Jr. 20,050 (3) *
100 Merrick Road
Rockville Center, N.Y. 11570
Andrew J. Maloney 43,000 (3) *
1 World Trade Center
New York, N.Y. 10001
Christopher C. McGrath 39,167 (3) *
120 Washington Avenue
Albany, New York 12210
Martin J. McLaughlin 61,751 (3) *
36 West 44th Street
New York, N.Y. 10036
Daniel Rattiner 174,107 (3) (5) 2.2%
26 Three Mile Harbor
Hog Creek Road
East Hampton, N.Y. 11932
- -----------------------------
Continued on next page.
Page 21
<PAGE>
Michael Schenkler 445,186 (3) (6) 5.6%
174-15 Horace Harding
Expressway
Fresh Meadows, N.Y. 11365
Andrew J. Stein 170,000 (3) 2.1%
625 Madison Avenue
New York, N.Y. 10022
Arthur Tarlow 73,726 (3) *
1505 Kellum Place
Mineola, N.Y. 11501
All Directors and 3,180,476 (3) (7) 34.3%
Executive Officers as
a Group(16 persons)
J. Morton Davis(8) 1,656,030 21.2%
D.H. Blair Holdings, Inc.(8)
D.H. Blair Investment
Banking Corp.(8)
44 Wall Street
New York, N.Y. 10005
- -------------------------------------------
* Less than one percent.
(1) Based upon information furnished by the persons listed. Except as
otherwise indicated, the stockholders listed possess sole voting and
investment power with respect to the shares listed.
(2) Includes 5,334 shares owned by Mr. Ackerman's children for whom Mr.
Ackerman is custodian.
(3) Includes the following numbers of shares purchasable upon the exercise of
presently exercisable options: Mr. Allon - 61,666; Mr. Breindel - 52,500;
Mr. Catsimatidis - 45,000; Mr. Finkelstein - 687,500; Mr. Fisher - 39,167;
Mr. Jaroslawicz - 37,500; Mr. Kelleher - 20,000; Mr. Maloney - 43,000; Mr.
McGrath - 37,500; Mr. McLaughlin - 60,000; Mr. Rattiner - 35,000; Mr.
Schenkler - 132,500; Mr. Stein 120,000; Mr. Tarlow - 57,500.
(4) Includes (i) 29,834 shares owned by The Jerry Finkelstein Foundation,
Inc., of which Mr. Finkelstein is President, and (ii) 200,000 shares owned
by Mr. Finkelstein's wife.
(5) Includes (i) 500 shares owned by Mr. Rattiner's wife and (ii) 1,800 shares
issuable upon conversion of one share of the Company's 10% Preferred Stock.
(6) Includes 21,252 shares owned by Mr. Schenkler's wife as custodian for two
minor children of which Mr. Schenkler disclaims beneficial ownership,
including 9,000 shares that are issuable upon conversion of five shares of
the Company's 10% Non-Voting Preferred Stock.
(7) Includes shares issuable upon the exercise of the options referred to in
(3) above and 84,167 shares issuable to two executive officers upon
exercise of presently exercisable stock options.
Page 22
<PAGE>
(8) Includes (i) 1,522,515 shares of Common Stock owned by D.H. Blair
Investment Banking Corp. ("Blair Investment"), a wholly-owned subsidiary of
D.H. Blair Holdings, Inc. ("Blair Holdings"), of which J. Morton Davis is
sole shareholder and chairman, (ii) 61,915 shares owned by Rivkalex
Corporation ("Rivkalex"), a private corporation owned by Rosalind
Davidowitz, Mr. Davis's wife and (iii) 71,600 shares owned by Rosalind
Davidowitz. Mr. Davis, Blair Holdings and Blair Investment expressly
disclaim beneficial ownership of all securities held by Rivkalex and
Rosalind Davidowitz.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
DPI leases from Mr. Daniel Rattiner, former owner of Dan's Papers,
Ltd. and current 20% owner and President of DPI, 1,910 square feet of office
space at an annual rate of $38,200 (plus cost-of-living adjustments) in a
building on Montauk Highway, Bridgehampton, New York, for a term of ten years
terminating in October 1998 (plus a five-year option).
The Company has the option, in certain circumstances, to acquire Mr.
Rattiner's shares in DPI. Mr. Rattiner can require the Company to purchase his
20% interest in DPI at any time on or after October 13, 1993 for a price equal
to 20% of DPI's retained earnings (if any) plus the greater of $200,000 or 20%
of DPI's gross collected revenues (after deduction of advertising agency
commissions) for the full fiscal year prior to the year in which notice is
given; provided, however, that DPI's after-tax profits are at least equal to 7%
of the gross collected revenues (after deduction of advertising agency
commissions).
Page 23
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
Incorporated Exhibit
Exhibit by Reference No. in
Number Description from Document (1) Document
- ------- ----------- -------------- --------
<S> <C> <C> <C>
3.1 Articles of Incorporation of the A 3.1
Company (formerly known as Applied
Resources, Inc.), filed
with the Secretary of State of the
State of Nevada on May 20, 1986.
3.1.1 Certificate of Amendment of the A 3.1.1
Articles of Incorporation of the Company,
filed with the Secretary of State of the
State of Nevada on December 8, 1987.
3.1.2 Certificate of Amendment of the Articles of B 3.1.2
Incorporation of the Company, filed with the
Secretary of State of Nevada on August 16, 1990.
3.2 By-Laws of the Company. B 3.2
4.1 Form of Common Stock Certificate. B 4.1
4.2 Form of 10% Preferred Stock B 4.2
Certificate.
4.2.1 Resolution of Board of Directors fixing B 4.2.1
the terms of the 10% Convertible Preferred Stock.
4.2.2 Resolution of Board of Directors fixing the J 4.2.2
terms of the 8% Convertible Preferred Stock.
4.2.3 Resolution of the Board of Directors fixing the J 4.2.3
terms of the 12% Convertible Preferred Stock.
4.2.4 Certificate of Amendment of Certificate J 4.2.4
of Designation of 8% Convertible Preferred
Stock.
4.7.1 Revised form of Warrant Agreement related J 4.7.1
to Class C Warrants and Class D Warrants.
- -------------------------------
See Notes at end of Item 13.
Page 24
<PAGE>
Incorporated Exhibit
Exhibit by Reference No. in
Number Description from Document Document
4.8 Form of Class C Warrant. J 4.8
4.9 Form of Class D Warrant. J 4.9
10.1.1 1987 Stock Option Plan, as amended. *
10.2.1 Discretionary Directors and Officers J 10.2.1
Stock Option Plan.
10.2.2 Non-Discretionary Directors Stock J 10.2.2
Option Plan.
10.4 Shareholders' Agreement, dated as of D 2.1
October 13, 1988, between Daniel Rattiner
and the Company.
10.4.1 Asset Purchase Agreement, dated as D 2.2
of October 13, 1988, between Dan's Papers,
Ltd. and DP Acquisition Corp.
10.4.3 Agreement of Lease, dated October D 2.4
31, 1988, between Daniel Rattiner and
DP Acquisition Corp., as to building
known as Dan's Papers, Ltd., located
on Montauk Highway, Bridgehampton,
New York.
10.7.3.1 Employment Agreement, dated as of K 10.7.3.1
October 14, 1994, between Michael Schenkler
and the Company.
10.7.3.2 Employment Agreement dated as of K 10.7.3.2
November 1, 1994, between Thomas Allon and
the Company.
10.13 Letter Agreement, dated June 15, 1990, between B 10.21
Dan's Papers Inc. and Dan's Papers, Ltd.
10.17 Lease for space at 174-15 Horace Harding B 10.25
Expressway, Fresh Meadows, New York.
10.19.3 Stock Option Agreement dated May 22, 1991, H 10.3
between the Company and Edward Kayatt.
10.25.1 Form of Agreement dated December 18, J 10.25.1
1992, between the Company and Myron
Garfinkle.
Page 25
<PAGE>
10.25.2 Form of Promissory Note dated December J 10.25.2
18, 1992, in principal amount of
$79,000 issued by Company to Myron
Garfinkle.
10.25.3 Stock Pledge Agreement dated December J 10.25.3
18, 1992, between Myron Garfinkle and
the Company.
10.26 Acquisition Agreement and Employment J 10.26
Agreement between Long Island News Group,
Inc. and Barry Manning and MB Publishing,
Inc. and Barry Manning and David Manning
and Long Island Community Newspaper Group,
Inc. and the Company.
11 Statement re computation of per share *
earnings.
22 Subsidiaries of the Company. *
</TABLE>
(b) Reports on Form 8-K.
None
Notes:
(1) The Commission file number assigned to the Company's Registration
Statement on Form S-18, filed with the Commission on May 29, 1986, was
33-6126. The Company's first registration of a class of equity
securities under the Securities Exchange Act of 1934 became effective
on February 21, 1990. The Commission file number assigned to the
Company at that time was 0-18299. The Commission file number assigned
to the Company's Registration Statement on Form S-1, as declared
effective by the Commission on September 19, 1990, was 33-35484. The
Commission file number assigned to the Company's Registration Statement
on Form S-1, as declared effective by the Commission on October 9,
1992, was 33-46467.
A Annual Report of the Company on Form 10-K for the year ended November 30,
1987.
B Registration Statement of the Company on Form S-1, No. 33-35484.
D Current Report of the Company on Form 8-K relating to events occurring on
October 31, 1988.
H Current Report of the Company on Form 8-K relating to events occurring on
May 22, 1991.
J Registration Statement of the Company on Form S-1, No. 33-46467.
K Annual Report of the Company on Form 10-KSB for the year ended November 30,
1994.
* Filed herewith.
Page 26
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Page to Page
Report of Independent Auditors ................................ F-2
Consolidated Balance Sheet as of November 30, 1995............. F-3 - F-4
Consolidated Statements of Operations for the years ended
November 30, 1995 and 1994...................................... F-5
Consolidated Statements of Stockholders' Equity................. F-6
Consolidated Statements of Cash Flows for the years ended
November 30, 1995 and 1994...................................... F-7 - F-8
Notes to Consolidated Financial Statements...................... F-9 - F-18
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
News Communications, Inc.
Fresh Meadows, New York
We have audited the accompanying consolidated balance sheet of
News Communications, Inc. and its subsidiaries as of November 30, 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the two fiscal years in the period ended November 30, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of News Communications, Inc. and its subsidiaries as of November 30,
1995, and the consolidated results of their operations and their cash flows for
each of the two fiscal years in the period ended November 30, 1995, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 19 to the consolidated financial statements, the Company has
suffered recurring losses from operations, and has recurring negative cash flows
from operating activities that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 19. The consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
As discussed in Note 18 to the consolidated financial
statements, the Company restated its consolidated financial statements as of and
for the year ended November 30, 1994.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
March 27, 1996
F-2
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1995.
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Current Assets:
Cash $ 54,474
Accounts Receivable - [Less: Allowance for Doubtful
Accounts of $1,424,877] 4,730,681
Due from Related Parties 119,233
Other Current Assets 78,070
---------------
Total Current Assets 4,982,458
Property and Equipment - At Cost - [Net of Accumulated
Depreciation and Amortization of $679,633] 657,436
---------------
Other Assets:
Goodwill - Net 3,665,990
Other Assets 154,179
Total Other Assets 3,820,169
Total Assets $ 9,460,063
===============
</TABLE>
See Notes to the Consolidated Financial Statements.
F-3
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1995.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 1,583,962
Accrued Expenses 146,801
Accrued Payroll and Payroll Taxes 322,152
Notes Payable 524,000
Due to Related Party 29,182
---------------
Total Current Liabilities 2,606,097
Commitments and Contingencies --
Minority Interest 47,788
Stockholders' Equity:
Preferred Stock, $1.00 Par Value; 500,000 Shares Authorized:
10% Convertible Preferred Stock, 1,250 Shares Authorized;
32 Issued and Outstanding, $500 Per Share Per Annum
Cumulative Dividends, $160,000 Liquidation Value 32
8% Convertible Preferred Stock, 500 Shares Authorized,
217 Issued and Outstanding, $80 Per Share Per Annum
Cumulative Dividends, $217,000 Liquidation Value 217
12% Convertible Preferred Stock, 200 Shares Authorized,
200 Shares Issued and Outstanding, $120 Per Share Per
Annum Cumulative Dividends, $200,000 Liquidation Value 200
Common Stock, $.01 Par Value; Authorized 100,000,000
Shares; 7,957,665 Shares Issued 79,576
Paid-in Capital - Preferred Stock 519,873
Paid-in-Capital - Common Stock 13,723,456
Retained Earnings [Deficit] (7,108,447)
Totals 7,214,907
Less: Treasury Stock [151,000 Common Shares] - At Cost 408,729
---------------
Total Stockholders' Equity 6,806,178
Total Liabilities and Stockholders' Equity $ 9,460,063
===============
</TABLE>
See Notes to the Consolidated Financial Statements.
F-4
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
Years ended
November 30,
1 9 9 5 1 9 9 4
------- -------
[Restated]
<S> <C> <C>
Net Revenues $ 18,113,462 $ 13,554,929
--------------- ---------------
Operating Expenses:
Direct Mechanical Costs 6,606,636 4,841,549
Salaries, Benefits and Outside Labor Costs 9,511,879 7,011,739
Rent, Occupancy and Utilities 870,949 587,871
Provision for Doubtful Accounts 396,000 376,000
General and Administrative 2,408,344 1,847,492
--------------- ---------------
Total Operating Expenses 19,793,808 14,664,651
--------------- ---------------
Loss from Operations (1,680,346) (1,109,722)
--------------- ---------------
Other Income [Expense]:
Interest [Expense] (32,608) (24,797)
Interest Income 28,708 61,993
Other Income -- 94,642
--------------- ---------------
Total Other [Expense] Income (3,900) 131,838
--------------- ---------------
Loss Before Income Taxes and Minority Interest (1,684,246) (977,884)
Provision for Income Taxes -- --
--------------- ---------------
Net Loss Before Minority Interest (1,684,246) (977,884)
Less: Minority Interest of Income of Subsidiary 47,788 --
--------------- ---------------
Net Loss $ (1,732,034) $ (977,884)
=============== ===============
Loss Per Common Share $ (.22) $ (.13)
=============== ===============
Weighted Average Number of Common Shares Outstanding 7,804,043 7,580,203
=============== ===============
</TABLE>
See Notes to the Consolidated Financial Statements.
F-5
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
<TABLE>
Paid-in Paid-in
Preferred Capital Common Capital Retained Total
Stock Preferred Preferred Stock Common Common Earnings Treasury Stockholders'
[Shares] Stock Stock [Shares] Stock Stock [Deficit] Stock Equity
------ ----- ----- ------ ----- ----- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance:
November 30, 1993 450 $450 $523,501 6,974,009 $69,740 $11,180,986 $(4,283,809) $(408,729) $7,082,139
Conversion from
Preferred Stock
to Common (1) (1) (3,628) 1,800 18 3,611 -- -- --
Stock Issued in
Connection With
Exercise of C and D
Warrants -- -- -- 807,887 8,079 1,943,268 -- -- 1,951,347
Stock Issued for
Acquisitions -- -- -- 122,123 1,221 143,535 -- -- 144,756
Stock Issuable for
Acquisitions -- -- -- -- -- 354,687 -- -- 354,687
Stock Issued in
Connection with
Exercise of Options -- -- -- 3,333 33 6,217 -- -- 6,250
Stock Issued as
Preferred Dividend -- -- -- 6,624 66 15,934 (16,000) -- --
Dividend on Preferred
Stock -- -- -- -- -- -- (41,360) -- (41,360)
Net Loss, As Restated -- -- -- -- -- -- (977,884) -- (977,884)
-------- ------- -------- --------- -------- ---------- ----------- ------------ -----------
Balance:
November 30, 1994 449 449 519,873 7,915,776 79,157 13,648,238 (5,319,053) (408,729) 8,519,935
Stock Issued in
Connection with
Exercise of C
Warrants -- -- -- 24,561 246 46,891 -- -- 47,137
Stock Issued in
Connection with
Exercise of Options -- -- -- 10,000 100 12,400 -- -- 12,500
Stock Issued as
Preferred Dividends -- -- -- 7,328 73 15,927 (16,000) -- --
Dividend on Preferred
Stock -- -- -- -- -- -- (41,360) -- (41,360)
Net Loss -- -- -- -- -- -- (1,732,034) -- (1,732,034)
-------- ------ -------- --------- ------- ----------- ----------- --------- ----------
Balance:
November 30, 1995 449 $449 $519,873 7,957,665 $79,576 $13,723,456 $(7,108,447) $(408,729) $6,806,178
======== ====== ========= ========= ======= =========== ============ ========= ==========
</TABLE>
See Notes to the Consolidated Financial Statements.
F-6
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
Years ended
November 30,
1 9 9 5 1 9 9 4
------- -------
[Restated]
<S> <C> <C>
Operating Activities:
Net Loss $ (1,732,034) $ (977,884)
--------------- ---------------
Adjustments to Reconcile Net Loss to Net
Cash [Used for] Operating Activities:
Depreciation and Amortization 494,606 413,062
Provision for Losses on Accounts Receivable 396,000 376,000
Expense Related to Exercise of Options -- 5,250
Gain on Sale of Building -- (94,642)
Minority Interest 47,788 --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (1,526,791) (1,982,551)
Other Current Assets 84,138 (87,113)
Other Assets 8,850 (106,344)
Related Party Receivable (39,112) --
Increase [Decrease] in:
Accounts Payable and Accrued Expenses 69,395 998,312
Accrued Payroll and Payroll Taxes 191,284 (7,494)
Other Current Liabilities (6,440) (66,024)
Related Party Payable 29,182 --
--------------- ---------------
Total Adjustments (251,100) (551,544)
--------------- ---------------
Net Cash - Operating Activities - Forward (1,983,134) (1,529,428)
--------------- ---------------
Investing Activities:
Capital Expenditures (148,409) (422,193)
Proceeds from Sale of Building -- 100,000
Investment in Marketable Securities -- (924,633)
Sale of Marketable Securities 924,633 --
Purchase of Nassau Newspapers -- (319,906)
Purchase of West Side -- (194,898)
Purchase of Brooklyn -- (32,750)
Purchase of Bronx Press Review -- (25,676)
--------------- ---------------
Net Cash - Investing Activities - Forward 776,224 (1,820,056)
--------------- ---------------
Financing Activities:
Principal Payments Long-Term Debt -- (470,250)
Proceeds from Exercise of Stock Options 12,500 1,000
Proceeds from Exercise of Warrants and Underwriter Option 47,137 1,951,347
Principal Payments on Notes Payable (99,750) (81,254)
Dividend on Preferred Stock (41,360) (41,360)
Proceeds from Notes Payable 500,000 --
--------------- ---------------
Net Cash - Financing Activities - Forward $ 418,527 $ 1,359,483
</TABLE>
See Notes to the Consolidated Financial Statements.
F-7
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
Years ended
November 30,
1 9 9 5 1 9 9 4
------- -------
[Restated]
<S> <C> <C>
Net Cash - Operating Activities - Forwarded $ (1,983,134) $ (1,529,428)
Net Cash - Investing Activities - Forwarded 776,224 (1,820,056)
Net Cash - Financing Activities - Forwarded 418,527 1,359,483
--------------- ---------------
Net [Decrease] in Cash (788,383) (1,990,001)
Cash - Beginning of Years 842,857 2,832,858
--------------- ---------------
Cash - End of Years $ 54,474 $ 842,857
=============== ===============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
Interest $ 19,704 $ 8,240
Income Taxes $ -- $ --
Supplemental Schedule of Non-Cash Investing and Financing Activities:
See Note 5 to financial statements relating to acquisitions consummated in
December 1993, August 1994 and September 1994 and Notes 11 and 14 relating to
capital transactions.
</TABLE>
See Notes to the Consolidated Financial Statements.
F-8
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
[1] Organization and Industry Segment
News Communications, Inc. [the "Company"] was incorporated in the State of
Nevada and is primarily engaged, through various wholly-owned and one eighty
percent owned subsidiary, and one 90% owned subsidiary, in the publication and
distribution of advertiser supported, community oriented newspapers and a
magazine. The Company's subsidiaries are Access Network Corp. ["Access"],
Manhattan Publishing Corp. ["MPC"], Tribco Incorporated ["Tribco"], Dan's
Papers, Inc. ["DPI"], Parkchester Publishing Co., Inc. ["Bronx Press Review"],
Nassau Community Newspaper Group, Inc. ["Nassau Newspapers"], Manhattan File
Publishing, Inc, ["Manhattan File"], Capitol Hill Publishing, Inc. ["Capitol
Hill"], Brooklyn Newspaper Publishing, Inc. ["Brooklyn"] and West Side Newspaper
Corp. ["West Side"]. The Company functions primarily in one industry segment,
that is the news publication business.
[2] Summary of Significant Accounting Policies
Consolidation - The consolidated financial statements of the Company include the
accounts of the parent company and its wholly-owned and majority owned
subsidiaries. All material intercompany transactions have been eliminated.
Property and Equipment - All expenditures for betterments and additions are
capitalized. Expenditures for normal repairs and maintenance are charged against
income as incurred. Depreciation and amortization are provided for financial
reporting purposes on the basis of the various estimated useful lives of the
assets, using the straight-line method as follows:
Years
Transportation Equipment 5
Furniture, Fixtures and Office Equipment 5 - 10
Leasehold Improvements Shorter of Useful Life of
Asset or Length of Lease
Accounts Receivable - The Company uses the allowance method based on a
percentage of accounts receivable to provide for uncollectible trade
receivables.
Goodwill - Goodwill represents the excess of the cost of acquired assets over
their fair values at dates of acquisition and is being amortized over ten to
twenty years on a straight-line basis. The Company's policy is to record an
impairment loss against the net unamortized cost of goodwill in the period when
it is determined that the carrying amount of the asset may not be recoverable.
At each balance sheet date, the Company evaluates the realizability of goodwill
for each subsidiary having a material goodwill balance. This determination is
based on an evaluation of such factors as the occurrence of a significant event,
a significant change in the environment in which the business operates or if the
expected future non-discounted net income of the subsidiary would become less
than the carrying amount of the goodwill asset. Based upon its most recent
analysis, the Company believes that no impairment of goodwill exists at November
30, 1995.
Revenue Recognition - Revenues are earned as the advertisements are run, in
accordance with customer agreements.
Covenant not to Compete - Included in other assets is a covenant not to compete
with an initial cost of $127,400, which is being amortized over five years on a
straight-line basis. At November 30, 1995 accumulated amortization amounted to
$102,470. Amortization expense amounted to $25,480 for each of the years ended
November 30, 1995 and 1994 [See Note 4].
Seasonality - One of the Company's publications [which generated approximately
18% of revenues in fiscal 1995 and 21% of revenues in fiscal 1994] is a resort
area newspaper, which has most of its revenue generated during the summer.
F-9
<PAGE>
Concentration of Customers - The majority of the Company's customers are located
in four of the boroughs of New York City, in Nassau County and on Eastern Long
Island.
F-10
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
- -------------------------------------------------------------------------------
[2] Summary of Significant Accounting Policies [Continued]
Concentrations of Credit Risk - Financial instruments that potentially subject
the Company to concentrations of credit risk are cash and accounts receivable
arising from its normal business activities. The Company routinely assesses the
financial strength of its customers and, based upon factors surrounding the
credit risk of its customers, establishes an allowance for uncollectible
accounts and, as a consequence, believes that its accounts receivable credit
risk exposure beyond such allowances is limited. The Company places its cash
with high credit quality financial institutions. The Company has not experienced
any losses with financial institutions. The amount on deposit in any one
institution that exceeds federally insured limits is subject to credit risk. As
of November 30, 1995, the Company had approximately $68,285 with financial
institutions subject to a credit risk beyond the insured amount.
Cash and Cash Equivalents - The Company considers highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents. There
were no cash equivalents at November 30, 1995.
[3] Property and Equipment and Depreciation and Amortization
Major classes of property and equipment as of November 30, 1995 are as follows:
Leasehold Improvements $ 323,581
Computer Equipment 415,049
Machinery and Equipment 226,072
Furniture and Fixtures and Office Equipment 230,594
Distribution Boxes 109,787
Automobiles 31,986
-------------
Total - At Cost 1,337,069
Less: Accumulated Depreciation 679,633
Property and Equipment - Net $ 657,436
=============
Depreciation and amortization expense for the years ended November 30, 1995 and
1994 amounted to $179,477 and $123,503, respectively.
[4] Intangible Assets
A breakdown of intangible assets is as follows:
Amortization
Period Accumulated
Years Cost Amortization Net
November 30, 1995:
Goodwill 10-20 $5,101,219 $1,435,229 $3,665,990
---------- ---------- ===========
Covenant Not-to-Compete 5 $ 127,400 $ 102,470 $ 24,930
---------- ---------- ===========
Organization Costs 15 $ 67,933 $ 6,148 $ 61,785
---------- ---------- ============
Covenant not-to-compete and organization costs are included in the caption
"Other Assets" on the balance sheet [See Note 2].
Amortization expense of $315,129 and $289,559 was recognized for the years ended
November 30, 1995 and 1994, respectively.
F-11
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
- -------------------------------------------------------------------------------
[5] Acquisitions
On December 9, 1993, the Company, through its wholly-owned subsidiary, Nassau
Newspapers, acquired certain assets of Long Island News Group ["LING"] and MB
Publishing Co. ["MB"] publishers of eight paid weekly newspapers in Nassau
County, New York for $300,000 in cash and stock valued by the Company at
approximately $355,000. The stock is scheduled to be issued to the seller as
follows:
Date Shares
December 9, 1996 103,857
December 9, 1997 21,714
December 9, 1998 36,572
-----------
Total 162,143
On August 18, 1994, the Company acquired through its wholly owned subsidiary,
Brooklyn, certain assets of Brooklyn Skyline Publications, Inc. ["Brooklyn
Skyline"] for cash and stock valued at approximately $104,000.
On September 27, 1994, the Company acquired through its wholly owned subsidiary,
West Side, certain assets of Enlightenment Press, Inc. ["Enlightenment"], the
publisher of the Chelsea Clinton News and the West Side, for cash and stock
valued at approximately $246,000.
The results of operations of the above publications are included in the
consolidated statement of operations for the year ended November 30, 1994, for
the periods from the dates of purchase to such year end.
The following proforma combined results of operations are adjusted for the
amortization of goodwill purchased in connection with the acquisitions as though
they had occurred on December 1, 1993:
Year Ended
November 30,
1 9 9 4
Net Revenues $ 15,999,000
Net Loss $ (364,000)
Net Loss Per share $ (.05)
The proforma financial information is not necessarily indicative either of the
results of operations that would have occurred had the mergers been effected
December 1, 1993, or of the future results of operations.
Certain former owners of the publications purchased have entered into employment
contracts with the Company [See Note 12].
[6] Compensated Absences
The Company has incurred a liability for employees' compensation for future
absences. The Company has not accrued a liability because the amount cannot be
reasonably estimated.
F-12
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
- -------------------------------------------------------------------------------
[7] Notes Payable
Short-term notes payable at November 30, 1995 consisted of the following:
Promissory note due on July 2, 1996
at the Bank's prime rate
plus 1 1/2%. Prime rate at
November 30, 1995 was 8.75%. $ 500,000
Unsecured promissory note dated
March 9, 1995. The Company
defaulted on this note during fiscal
1995. Interest is at 12% per annum
for the unpaid principal balance in default. 24,000
-----------------
Total $ 524,000
=================
On March 9, 1995, the Company entered into a settlement agreement with a former
minority owner of the Manhattan File. The agreement required the Company to pay
$48,000 and sign a promissory note. The Company is in default and the former
owner has filed a summons against the Company for the outstanding balance due.
Interest expense related to the above notes for the year ended November 30, 1995
amounted to approximately $24,000.
[8] Related Parties
Certain Company office facilities are leased from an officer of a subsidiary of
the Company. Rental expense amounted to approximately $48,000 and $46,000 for
the years ended November 30, 1995 and 1994, respectively. The lease commitment
is adjusted annually based on the consumer price index as of November. The lease
term is for ten years with a renewal option of five years.
At November 30, 1995, interest bearing advances and loans due from related
parties amounted to $119,233. Interest income earned on such amounts as
reflected in the statement of operations for the year ended November 30, 1995,
amounted to approximately $11,143.
At November 30, 1995, amounts owed to an officer of the Company for a bonus and
expenses amounted to $29,182.
[9] Leases
The Company leases all operating facilities under operating leases expiring
through January 2001. Rent expense under operating leases was approximately
$464,000 and $280,000 for years ending November 30, 1995 and 1994, respectively.
The future minimum payments under non-cancelable operating leases consisted of
the following at November 30, 1995 [including amounts in Note 8]:
Fiscal Year Ending Operating
November 30, Leases
1996 $ 440,385
1997 446,236
1998 451,929
1999 335,763
2000 201,742
Thereafter 12,564
-------------
Total Minimum Lease Payments $ 1,888,619
=============
The operating leases also provide for cost escalation payments and payments for
maintenance and real estate taxes. The Company has options to renew certain
leases for additional five-year terms.
F-13
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
- -------------------------------------------------------------------------------
[10] Treasury Stock
Treasury stock is shown at cost and consists of 151,000 shares of Common Stock.
[11] Preferred Stock
[A] The 10% Convertible Preferred Stock is redeemable at the option of the
Company, under certain circumstances.
In September 1994, the Company distributed 6,624 shares of its Common Stock in
payment of a $500 dividend per share due holders as of September 19, 1994 on
each of 32 shares of 10% Convertible Preferred Stock. As a result, Common Stock
at par was increased by $66, additional paid-in capital - Common Stock was
increased by $15,934 and retained earnings was decreased by $16,000.
In September 1995, the Company distributed 7,300 shares of its Common Stock in
payment of a $500 dividend per share due holders as of September 19, 1995 on
each of 32 shares of 10% Convertible Preferred Stock. As a result, Common Stock
at par was increased by $73, additional paid-in capital - Common Stock was
increased by $15,927 and retained earnings was decreased by $16,000. At November
30, 1995, the cumulative dividends amounted to $2,667 or $83 per each
outstanding 10% Convertible Preferred Stock.
[B] Issuance of Preferred Shares - On May 20, 1992, the Company issued 100
shares of its 8% Convertible Preferred Stock and 200 shares of its 12%
Convertible Preferred Stock, in exchange for an aggregate of $300,000. On July
15, 1992, an additional 117 shares of 8% Convertible Preferred Stock were issued
for $117,000. During the years ended November 30, 1995 and 1994, cash dividends
totaling $41,360 each year were paid to the holders of the 8% Convertible
Preferred Stock and the 12% Convertible Preferred Stock. At November 30, 1995,
the 8% Cumulative Preferred Stock dividend amounted to $4,328 or $20 per share
and the 12% Cumulative Preferred Stock dividend amounted to $5,984 or $30 per
share. The 8% and 12% Preferred Stock may be redeemed, in whole or in part, at
the option of the Company for a redemption price equal to the liquidation
preference of $1,000 per share plus accrued and unpaid dividends. The holders of
the 8% and 12% Convertible Preferred Stock may convert each share, at any time,
into shares of common stock. The number of shares of common stock into which
each share of preferred stock may be converted shall be obtained by dividing
$1,000 by a conversion price, subject to adjustments. The conversion price shall
be 70% of the closing bid price for the common stock. The 8% and 12% Convertible
Preferred Stock have no voting rights except if the Company is in default of
four consecutive dividend payments, then holders are entitled to vote.
[C] Conversion of Preferred Stock - During 1994, one share of 10% Convertible
Preferred Stock was converted to 1,800 shares of Common Stock.
[12] Commitments and Contingencies
In connection with the acquisition of "Our Town", the newspaper published by
MPC, the Company granted the seller a five year option to purchase up to 100,000
shares of its Common Stock at an exercise price of $2.81 per share [the average
of the closing bid and asked prices on May 21, 1991].
A subsidiary of the Company has indemnified two former employees and a director
from and against legal fees and adverse judgments arising in connection with
certain legal actions, except such adverse judgments as may be based on claims
that allege or involve wrongful conduct by said former employees and director.
The Company has an employment agreement expiring in 1998 with the President of
DPI. The agreement stipulates an annual salary of $100,000 per year, adjusted
for increases in the consumer
F-14
<PAGE>
price index, plus a bonus in each fiscal year based on net profits [as defined]
of DPI, and fringe benefits totaling approximately $25,000 annually.
F-15
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
- -------------------------------------------------------------------------------
[12] Commitments and Contingencies [Continued]
The President of DPI has the option ["put"] to require the Company to buy his
shares of DPI on or after October 13, 1993 for a price equal to 20% of the
retained earnings [if any] of DPI plus the greater of $200,000 or 20% of gross
collected revenues [net of agency commissions] for the full fiscal year prior to
exercise of the option. The option may be exercised only if the after tax profit
[for the fiscal year preceding exercise] is at least equal to seven percent of
gross revenues [net of agency commissions] for such fiscal year. The put option,
by its terms, is exercisable at November 30, 1995. Should the option be
exercised, the Company estimates it would be required to pay approximately
$726,000 for the shares. The option is related to the 1988 acquisition of DPI by
the Company. As such, if the option is exercised the Company will record the
cost as additional goodwill to be amortized over the remaining useful life of
that asset [November 1999].
The Company has an employment contract, through October 14, 1999, with its
President. The contract stipulates an annual base salary of $150,000 plus
bonuses as determined by the board of directors.
In August 1993, the Chairman of the Board entered into a five year employment
agreement with the Company. The agreement calls for an annual salary of $195,000
and certain other benefits. Stock options for 300,000 shares of the Company's
Common Stock at an exercise price of approximately $2.38 per share expiring on
August 31, 1998 were awarded to the chairman in connection with the agreement
[See Note 14B]. At his request, the Company will also provide the Chairman of
the Board with medical and other benefits and perquisites, including
reimbursement for expenses relating to maintenance of appropriate office space
for him, including rent and secretarial costs. The Chairman of the Board may
terminate the agreement at any time on at least 10 days' notice to the Company.
In the event of his permanent disability or death, amounts of salary and bonuses
shall continue to be paid to him or the legal representative of his estate until
the end of the term of the agreement. Under the agreement, the Chairman of the
Board is required to devote such time to the affairs of the Company as he, in
his sole judgment, deems necessary and appropriate.
In November 1994, the Executive Vice-President of the Company entered into a
three year employment agreement with the Company at an annual salary of $80,000
[subject to cost-of-living increases] plus a bonus based on 5% of the net
profits of the Company derived from [for fiscal years beginning December 1,
1994] Access, MPC, Manhattan File and West Side. Such bonus is to be no less
than $45,000, nor more than $70,000.
The President of Nassau Newspapers has an employment agreement expiring in
December 1996. The agreement stipulates an annual salary of $99,000, plus a
bonus based upon the net profits [as defined] of Nassau Newspapers.
The Publisher of Brooklyn has an employment agreement expiring in August 1999.
The agreement stipulates an annual salary of $60,000, plus increases and bonuses
based upon the net profits [as defined] of Brooklyn.
Certain holders of options, warrants and stock of the Company have received
registration rights with respect to the securities held by or issuable to them.
These registration rights could result in substantial future expense to the
Company and could adversely affect any future equity or debt financing.
F-16
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
- -------------------------------------------------------------------------------
[13] Legal Proceedings
An action entitled Jean Jee v. News Communications, Inc., was instituted in the
Supreme Court, New York County, in January 1991. The complaint alleges libel
claims against the Company in connection with an article printed in the
Manhattan Spirit which accused Mr. Jee, then principal of a Manhattan public
school of running her own computer business out of the school, beating special
education students and having been suspended by the New York City Board of
Education. Promptly after the complaint was served, the Manhattan Spirit printed
a retraction concerning the suspension accusations. In fact, Ms. Jee had taken a
leave of absence. Ms. Jee is suing for $2,000,000 in compensatory damages and
unspecified punitive damages. The Company intends to vigorously defend the suit
and has filed an answer denying the material allegations of the complaint and
has served demands for document production. Ms. Jee's motion for a protective
order in connection with such demands was granted. Discovery has not yet
commenced. Management believes, although there can be no assurance, that, based
upon the application of the relevant law [as explained to management by counsel
representing the Company] to the facts known to it, the claims asserted in this
action are without merit.
The Company is also subject to various other claims and lawsuits arising in the
normal course of business. The amount of liability, if any, beyond amounts
accrued for such claims cannot be estimated.
[14] Stock Options and Warrants
[A] Stock Option Plan - The Company has a Stock Option Plan pursuant to which it
has reserved authorized, but unissued, shares of Common Stock for issuance of
both Qualified Incentive Stock Options and Non-Qualified Stock Options to
employees, officers and directors of the Company. The option price will be the
fair market value [110% of the fair market value for Qualified Incentive Stock
Options granted to a holder of 10% or more of the Company's Common Stock] as
defined by the plan. Generally, options may be exercised commencing two years
from the date of grant and terminating ten years from the date of grant. The
following is a summary of transactions:
Shares under Option
November 30,
1 9 9 5 1 9 9 4
------- -------
Outstanding - Beginning of Periods 136,166 106,666
Granted During Period 40,501 62,000
Exercised -- --
Terminated During Period (15,000) 32,500
----------- ------------
Outstanding - End of Periods [1] 161,667 136,166
=========== ============
[1] With an exercise price per share ranging from $2.00 to $9.00, giving effect
to the one-for-ten reverse stock split, which occurred on May 12, 1992.
At November 30, 1995 and 1994, there were 4,999 and 30,500 shares, respectively,
reserved for future grants.
On December 15, 1995, the stockholders approved an amendment to the Stock Option
Plan to increase the number of shares of Common Stock available for issuance
pursuant to the Plan from 166,666 shares to 366,666 shares. The Company granted
17,500 shares on July 5, 1995 subject to the December 15, 1995 approval.
F-17
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
- ------------------------------------------------------------------------------
[14] Stock Options and Warrants [Continued]
[B] Directors and Officers Stock Option Plan - On August 17, 1993, the Board of
Directors [the "Board"] adopted a Discretionary Directors and Officers Stock
Option Plan as amended [the "Discretionary Option Plan"] pursuant to which the
Board may award options to purchase an aggregate of 1,500,000 shares of Common
Stock to directors and officers of the Company and its subsidiaries which shall
be exercisable at the market price on the date of grant for periods, and under
conditions, specified by the Board in such grants. Options under the
Discretionary Option Plan are non-qualified and non-incentive options for
purposes of income taxation and are not intended to qualify under Section 422A
of the Internal Revenue Code of 1986. During the year ended November 30, 1995,
the Board granted the Chairman of the Board options to purchase up to 350,000
shares of common stock under the Discretionary Option Plan, which are
exercisable until June 22, 2000 at $2.00 per share. During the year ended
November 30, 1994, the Board granted officers and directors options to purchase
up to 455,500 shares of Common Stock under the Discretionary Option Plan, which
are exercisable until August 31, 1999, at prices ranging from $2.00 to $2.63 per
share [the last sale price on the date of the grant].
On August 17, 1993, the Board also adopted a Non-Discretionary Directors Stock
Option Plan [the "Non-Discretionary Option Plan"] pursuant to which each
director will be granted, on August 17, 1993 and each anniversary thereof on
which he or she continues to be a director, a five-year option to purchase
10,000 shares of Common Stock at the market price on the date of the grant. The
Non-Discretionary Plan also provides that any person becoming a director within
the six months after any August 17 will be granted an option for 10,000 shares
on the date he or she becomes a director. Pursuant to the Non-Discretionary
Option Plan, certain Company directors received options to purchase 10,000
shares of Common Stock at $2.69 per share on August 17, 1995. Pursuant to the
Non-Discretionary Option Plan, the Company's directors each received options to
purchase 10,000 shares of Common Stock at $2.63 per share on August 17, 1994.
[C] Warrants - At November 30, 1995, the Company had outstanding Redeemable
Class A Warrants to purchase 2,250,000 shares of the Company's Common Stock at
approximately $3.75 per share. The Warrants became exercisable September 19,
1990 and expired on March 29, 1996. The Company's Redeemable Class B Warrants,
which also expired on March 29, 1996, were never issued. During the year ended
November 30, 1995, 24,561 redeemable Class C Warrants were exercised. The net
proceeds of these transactions was $47,137. In January 1994 the underwriter of
the Company's October 1992 public offering exercised its unit option. The net
proceeds to the company as a result of these transactions was approximately
$1,951,000. At November 30, 1995, there remained outstanding 805,880 redeemable
Class C Warrants and 853,935 redeemable Class D Warrants. Each Class C Warrant
which entitles the holder to purchase one share of the Company's Common Stock at
$2.00 per share, became exercisable October 9, 1993 and expire October 9, 1996.
Each Class D Warrant which entitles the holder to purchase one share of the
Company's Common Stock at $3.00 per share, became exercisable October 9, 1993
and expire October 9, 1996. The Class D Warrants are redeemable by the Company
under certain conditions. Additionally, 85,000 non-redeemable warrants which
expire October 9, 1997 were outstanding at November 30, 1995.
[15] Income Taxes
The Company has net operating loss carryforwards of approximately $4,380,000
which expire through the year 2011. As a result of these carryforwards, the
Company has a deferred tax asset of approximately $1,752,000, which has been
offset by a valuation account of $1,752,000, resulting in a net deferred asset
of $-0-. Future tax benefits related to this loss have not been recognized
because its realization is not assured. No amount of current or deferred federal
or state income tax is presented.
F-18
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
- -------------------------------------------------------------------------------
[15] Income Taxes [Continued]
As of November 30, 1995, the approximate amount of the net operating loss income
tax carryforwards and their expiration dates are as follows:
Expiring in Years Ending Net Operating Loss
November 30, Carryforwards
2000 $ 25,000
2001 145,000
2003 585,000
2004 950,000
2005 370,000
2006 365,000
2007 340,000
2011 1,600,000
--------------
Total $ 4,380,000
==============
[16] Loss Per Share
Loss per share amounts are computed based on the weighted average number of
shares outstanding. Options, warrants and Convertible Preferred Stock are
assumed converted if dilutive.
[17] New Authoritative Accounting Pronouncements
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long- Lived Assets to Be Disposed of," in March of
1995. SFAS No. 121 established accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 is effective for
financial statements issued for fiscal years beginning after December 15, 1995.
The Company does not expect that SFAS No. 121 will have a material impact on its
consolidated financial statements.
The FASB has also issued SFAS No. 123, "Accounting for Stock-Based
Compensation," in October 1995. SFAS No. 123 uses a fair value based method of
accounting for stock options and similar equity instruments as contrasted to the
intrinsic valued based method of accounting prescribed by Accounting Principles
Board ["APB"] Opinion No. 25, "Accounting for Stock Issued to Employees." The
Company has not decided if it will adopt SFAS No. 123 or continue to apply APB
Opinion No. 25 for financial reporting purposes. SFAS No. 123 will have to be
adopted for financial note disclosure purposes in any event. The accounting
requirements of SFAS No. 123 are effective for transactions entered into in
fiscal years that begin after December 15, 1995; the disclosure requirements of
SFAS No. 123 are effective for financial statements for fiscal years beginning
after December 15, 1995.
On December 30, 1994, the American Institute of Certified Public Accountants
issued Statement of Position ["SOP"] 94-6, "Disclosure of Certain Significant
Risks and Uncertainties," the provisions of which are effective for financial
statements issued for fiscal years ending after December 15, 1995. In general,
SOP 94-6 requires disclosures about the nature of a company's operations and the
use of estimates in the preparation of financial statements. The Company does
not anticipate a significant expansion of its consolidated financial statement
note disclosure as a result of SOP 94-6.
F-19
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
- -------------------------------------------------------------------------------
[18] Restatement of Consolidated Financial Statements
The accompanying consolidated financial statements have been restated to correct
errors of unrecorded printing and other expenses, and the non-elimination of
intercompany revenue and accounts receivable. The effect of the restatement was
to increase the net loss for November 30, 1994 by $414,533 [$.05 per share].
[19] Going Concern
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, and assumes that the
Company will continue as a going concern, which contemplates the recoverability
of recorded asset amounts and the proper classification of liabilities. However,
the Company has suffered recurring losses from operations and recurring negative
cash flows from operating activities.
As more fully discussed in Notes 20 and 21, the Company has secured additional
bank financing since November 30, 1995. Additionally, since the end of the
fiscal year, the Company has begun the implementation of its plans to
substantially reduce its operating expenses. Management believes that these
actions provide the opportunity for the Company to continue as a going concern.
The ability of the Company to continue is dependent on the success of these
plans. The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
[20] Subsequent Events
On March 5, 1996, the Company entered into a settlement agreement with a
supplier for the balance due of $198,386. On March 5, 1996, the Company paid
$50,000 and signed a noninterest bearing nonnegotiable promissory note with the
supplier for the balance of $148,385. The note is due in 30 day monthly payments
from the date of the note. The first two payments are for $25,000, the third
payment is for $50,000, the fourth payment is for $25,000 and the fifth payment
is for $23,385. The first payment was made on April 4, 1996. If the Company
defaults in payments, then the entire unpaid balance along with interest at the
rate of 9% from the date of default is immediately due.
During January, February and March 1996, the Company borrowed an aggregate of
$600,000 from a bank in increments of $100,000.
[21] Subsequent Events [Unaudited] Subsequent to the Date of the Report of the
Independent Auditors
On April 2, 1996, a promissory note was signed for the then outstanding
indebtedness to bank of $1,175,000 [See Note 7] and is due on July 2, 1996 at
the bank's prime rate plus 2%. The promissory note is secured by all of the
Company's accounts receivable and $175,000 is guaranteed by the Chairman of the
Board of the Company.
[22] Minority Interests
The Company's consolidated financial statements include 100% of the assets and
liabilities of companies that are less than 100% owned. Since the Company is the
majority stockholder of these companies, the ownership interests of the other
stockholders represents minority interest. The Company has allocated one
subsidiaries portion of net income to the minority interest resulting in an
increase in the Company's net loss by $47,788 [See Note 1].
F-20
<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.
NEWS COMMUNICATIONS, INC.
Date: April 16, 1996 By: s/ Michael Schenkler
------------------------
Michael Schenkler, 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.
s/ Michael Schenkler Director, President and April 16, 1996
Michael Schenkler Principal Executive Officer
s/ Gary Ackerman Director April 16, 1996
Gary Ackerman
s/ Eric Breindel Director April 16, 1996
Eric Breindel
s/ John Catsimatidis Director April 16, 1996
John Catsimatidis
s/ Jerry Finkelstein Director, Chairman of April 16, 1996
Jerry Finkelstein the Board
s/ Joseph Fisher Director April 16, 1996
Joseph Fisher
s/David Jaroslawicz Director April 16, 1996
David Jaroslawicz
s/William J. Kelleher Director April 16, 1996
William J. Kelleher
s/Andrew Maloney Director April 16, 1996
Andrew Maloney
s/Christopher C. McGrath Director April 16, 1996
Christopher C. McGrath
s/Martin J. McLaughlin Director April 16, 1996
Martin J. McLaughlin
s/ Andrew J. Stein Director April 16, 1996
Andrew J. Stein
s/ Arthur Tarlow Director April 16, 1996
Arthur Tarlow
s/ Robert Berkowitz Controller, Chief Financial April 16, 1996
Robert Berkowitz and Accounting Officer
Page 46
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
10.1.1 1987 Stock Option Plan, as amended. 48
11 Statement re computation of per share earnings. 53
22 Subsidiaries of the Company. 54
27 Financial Data Schedule 61
Page 47
<PAGE>
EXHIBIT 10.1.1
NEWS COMMUNICATIONS, INC.
1987 Stock Option Plan, As Amended
1. Name and Purpose. The purpose of this Plan, which shall be
known as the "News Communications 1987 Stock Option Plan" (the "Plan") is to
advance the interests of News Communications, Inc. (the "Company") by providing
material incentive for the continued services of those key employees and
directors (including Non-Employee Directors) of the Company and its Subsidiaries
who make significant contributions toward the Company's success and development,
by encouraging those key employees and directors (including Non-Employee
Directors) to increase their proprietary interest in the Company, and by
attracting new, able executives to employment with the Company and its
Subsidiaries.
2. Definitions. For purposes of this Plan, the following terms, when
capitalized, shall have the meaning designated herein unless a different
meaning is plainly required by the context. Where applicable, the masculine
pronoun shall mean or include the feminine and the singular shall include
the plural.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Effective Date" shall mean the date on which this Plan shall have
been approved by the directors and stockholders of the Company.
(c) "Fair Market Value" of the Company's common shares on a certain
date shall mean, if the Company's common shares are listed on Nasdaq, the
last sale price as quoted by the Nasdaq System on the trading day
immediately prior to the date specified, or if the Company's common shares
are not quoted on Nasdaq on such date, on the next preceding date on which
the common shares are traded. If the Company's common shares are not listed
on Nasdaq, then "Fair Market Value" of the common shares on a certain date
shall be that value which the Board determines, in good faith, to be the
fair market value of the common shares on such date.
(d) "Key Employee" shall mean any employee of the Company and its
Subsidiaries (as defined in subparagraph 2(j) below) who, in the opinion of the
Board, has demonstrated a capacity for contributing in a substantial measure to
the success of the Company and its Subsidiaries.
(e) "Non-Employee Director" shall mean a member of the Board who is not
also an employee of the Company or its Subsidiaries.
(f) "Non-Qualified Stock Options" shall mean those options, granted by the
Company, pursuant to this Plan, which do not qualify for favorable tax treatment
under Section 422A of the Internal Revenue Code of 1986 (the "Code" ).
(g) "Participant" shall mean a Key Employee or Participating Director
selected by the Board (under subparagraph 3(a) below) to receive options,
whether Qualified Incentive Stock Options or Non-Qualified Stock Options,
granted under this Plan.
(h) "Participating Director" shall mean any director of the Company and its
Subsidiaries who, in the unanimous opinion of all of the disinterested
directors, had demonstrated a capacity for contributing in a substantial measure
to the success of the Company and its Subsidiaries.
(i) "Qualified Incentive Stock Options" shall mean those options, granted
by the Company pursuant to this Plan, which qualify for favorable tax treatment
under Section 422A of the
Page 48
<PAGE>
Code.
(j) "Subsidiary" shall mean an affiliated employer during any period that
50% or more of its common stock or, in the case of a partnership, 50% or more of
the capital interest thereof, is owned directly or indirectly by the Company, or
during any period that it is a member with the Company in a controlled group of
corporations, or is otherwise under common control with the Company within the
meaning of Section 414(b) and (c) of the Code.
3. Administration; Selection of Participants.
(a) The Plan shall be administered by the Board, which shall select the
Participants from among the Key Employees and Participating Directors and shall
grant to the Participants stock options under, and in accordance with, the
provisions of the Plan.
(b) Subject to the express provisions of this Plan, the Board shall have
authority to adopt regulations and procedures which are consistent with the
terms of this Plan; to adopt and amend such stock option agreements as they deem
advisable; and to determine the terms and provisions of such stock option
agreements, including the number of shares with respect to which options are
granted to a Participant, the option price for such shares, and the date or
dates when the option or parts of it may be exercised -- which terms shall
comply with any applicable requirements of paragraph 5 below. The Board shall
have authority to construe and interpret such stock option agreements; to impose
such limitations and restrictions as are deemed necessary or advisable by
counsel for the Company so that compliance with the federal securities laws and
with the securities laws of the various states may be assured; and to make all
other determinations necessary or advisable for administering this Plan. All
decisions and interpretations made by the Board shall be binding and conclusive
on all Participants, their legal representatives and beneficiaries.
4. Shares Subject to the Plan.
(a) The shares to be issued and delivered by the Company upon exercise of
options granted under this Plan (whether Qualified Incentive Stock Options or
Non-Qualified Stock Options) are the Company's Common Shares, par value $.01 per
share, which may be either authorized but unissued shares, or treasury shares,
in the discretion of the Board.
(b) The aggregate number of the Company's common shares which may be issued
under this Plan shall not exceed 366,666; subject, however, to the adjustment
provided in Paragraph 10 in the event of stock splits, certain stock dividends,
exchanges of shares, or the like, occurring after the Effective Date. No stock
option may be granted under this Plan which could cause such maximum limit to be
exceeded.
(c) Shares covered by an option which is no longer exercisable with respect
to such shares shall again be available for issuance in connection with other
options granted under this Plan.
5. Terms of Options. Options granted under the Plan shall be evidenced by
stock option agreements authorized by the Board and executed by a duly
authorized officer of the Company. Such stock option agreements shall contain
such terms as the Board shall determine, subject to the following limitations
and requirements:
(a) Option price: The option price per common share shall be not less than
100% of the Fair Market Value of the common shares on the date of grant of such
option; provided, however, that the option price of any Qualified Incentive
Stock Options granted to any stockholder of the Company who owns at least 10% of
the Company's common shares shall not be less than 110% of such Fair Market
Value.
Page 49
<PAGE>
(b) Period within which option may be exercised: Each option granted under
this Plan shall terminate (become non-exercisable) after the expiration of ten
years from the date of grant of such option; provided, however, that Qualified
Incentive Stock Options granted to any stockholder of the Company who owns, at
the time of grant, at least 10% of the Company's common shares, shall terminate
after the expiration of five years from the date of grant of such option.
(c) Termination of option by reason of termination of employment: Upon
termination of the employment with or directorship in the Company and its
Subsidiaries of a Participant granted options under the Plan, all options
granted under this Plan to such Participant which are not exercisable on the
date of such termination shall immediately terminate, and any remaining
exercisable options shall terminate if not exercised before the expiration of
the applicable period specified below, or at such earlier time as may be
applicable under subparagraph 5(b) above:
(i) No later than thirty (30) days following such termination of employment
or directorship, if such termination was not a result of death or retirement of
the Participant.
(ii) No later than three months following such termination of employment or
directorship, if such termination was because of death, or because of retirement
under the provisions of any retirement plan of the Company or any Subsidiary, or
with the consent of the Company.
Whether time spent on leave of absence granted by the Company or any
Subsidiary shall constitute continued employment or continued status as a
director for purposes of this Plan, shall be determined by the Board in its sole
discretion.
Notwithstanding the foregoing, the Board may, in its sole discretion,
impose more restrictive conditions on the exercise of an option granted under
the Plan, including, without limitation, providing for no exercise of any option
after termination of a Participant's employment or directorship; however, any
and all such conditions shall be specified in the stock option agreement
limiting and defining such option.
(d) Non-transferability: No option under this Plan shall be assignable or
transferable except, in the event of the death of a Participant, by his will or
by the laws of descent and distribution. In the event of the death of a
Participant, the representative or representatives of his estate, or the person
or persons who acquired (by bequest or inheritance) the rights to exercise his
stock options granted under the Plan, may exercise any of the unexercised
options or part thereof prior to the expiration of the applicable exercise
period, as specified in subparagraphs 5(b) and 5(c) above, or in the stock
option agreement relating to such options. No transfer of an option by a
participant by will or by laws of descent and distribution shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of the will and such other evidence as the Company may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of such option.
(e) More than one option granted to a Participant: More than one option,
and more than one form of option, may be granted to a Participant under this
Plan.
(f) Partial exercise: Unless otherwise provided in the stock option
agreement, any exercise of an option granted under this Plan may be made in
whole or in part.
(g) Limitation on Amount of Qualified Incentive Stock Options: The
aggregate fair market value (determined at the time the option is granted) with
respect to which Qualified Incentive Stock Options become exercisable by a
Participant for the first time during any calendar year (including all such
plans of the Company and its Subsidiaries) shall not exceed $100,000.
6. Period of Granting Options. No option shall be granted under this Plan
Page 50
<PAGE>
subsequent to ten years after the Effective Date.
7. No Effect Upon Employment Status. The fact that an employee has been
designated a Key Employee or selected as a Participant shall not limit or
otherwise qualify the right of his employer to terminate his employment at any
time.
8. Method of Exercise. Any option granted under this Plan may be exercised
by written notice to the Board, signed by the Participant, or by such other
person as is entitled to exercise such option. The notice of exercise shall
state the number of shares in respect of which the option is being exercised,
and shall be accompanied by the payment, in cash, and/or, as provided below, in
the common shares of the Company, of the full option price for such shares. At
the written request of the Participant and upon approval by the Board, shares
acquired pursuant to the exercise of any option may be paid for at the time of
exercise by the surrender of common shares of the Company held by or for the
account of the Participant at the time of exercise (for Qualified incentive
Stock Options only to the extent permitted by subsection (c)(4) of Section 422A
of the Code, without liability to the Company). In such case, the fair market
value of the surrendered shares shall be determined by the Board as of the date
of exercise in the same manner as such value is determined upon the grant of an
option. A certificate or certificates for the common shares of the Company
purchased through the exercise of an option shall be issued in regular course
after the exercise of the option and payment therefor. The Company shall be
afforded reasonable opportunity after exercise of any option to comply with any
requirements for stock exchange listing, for registration under applicable
securities or other laws and for compliance with other laws and regulations, if
any, before issuance of the shares being purchased on such exercise. During the
option period, no person entitled to exercise any option granted under this Plan
shall have any of the rights or privileges of a shareholder with respect to any
shares issuable upon exercise of such option until certificates representing
such shares shall have been issued and delivered. The exercise of any option
shall be contingent upon receipt from the Participant of a representation that,
at the time of such exercise, it is his or her then present intention to acquire
the shares being purchased for investment and not for distribution (unless the
Plan has been duly registered under the Securities Act of 1933 and the Company
has waived the requirement that such representation be made).
9. Implied Consent of Participants. Every Participant, by his acceptance of
an option under this Plan, shall be deemed to have consented to be bound, on his
own behalf and on behalf of his heirs, assigns, and legal representatives, by
all of the terms and conditions of this Plan.
10. Share Adjustments. In the event there is any change in the Company's
common shares resulting from stock splits, stock dividends of more than 5% in
any year, combinations or exchanges of shares, or other similar capital
adjustments, equitable proportionate adjustments shall be made by the Board in
(1) the number of shares available for option under this Plan, (2) the number of
shares subject to options granted under this Plan, and (3) the option price of
optioned shares.
11. Merger, Consolidation, or Sale of Assets. In the event the Company
shall consolidate with, merge into, or transfer all or substantially all of its
assets to another corporation or corporations (herein referred to as "successor
employer corporation"), such successor employer corporation may obligate itself
to continue this Plan and to assume all obligations under the Plan (for
Qualified Incentive Stock Options, in a manner consistent with the provisions of
Section 425(a) of the Code, or the provisions of that Section as it may be
hereafter ~mended or as it may be replaced by any other section or sections of
the Code of like intent or purpose). In the event that such successor employer
corporation does not obligate itself to continue this Plan as above provided,
this Plan shall terminate upon such consolidation, merger or transfer, and any
option previously granted hereunder shall terminate. If practical, the Company
shall give each Participant (20) days prior notice of any possible transaction
which might terminate this Plan and the options previously granted hereunder.
12. Company Responsibility. All expenses of this Plan, including the cost
of maintaining records, shall be borne by the Company. The Company shall have no
responsibility or liability
Page 51
<PAGE>
for any act or thing done or left undone with respect to the price, time,
quality, or other conditions and circumstances of the purchase of shares under
the terms of the Plan, so long as the Company acts in good faith.
13. Law Governing. With respect to Qualified Incentive Stock Options, the
Plan is intended to comply with the provisions of Section 422A of the Code. Any
provisions of the Plan which conflict with the provisions of Section 422A shall
be deemed to be hereby amended so as to comply therewith.
14. Securities Laws. The Committee shall take all necessary or appropriate
actions to ensure that all option grants and all exercises thereof under this
Plan are in full compliance with all federal and state securities laws.
15. Amendment and Termination. The Board may terminate this Plan at any
time, and may amend the Plan at any time or from time to time, without obtaining
any approval of the Company's stockholders; except that the Plan may not be
amended (1) except with the approval of the holders of a majority of the
outstanding shares of the Company's capital stock entitled to vote present at a
meeting at which a quorum is present, to increase the aggregate number of shares
issuable under the Plan (excepting proportionate adjustments made under
paragraph 10 to give effect to stock splits, etc.); (2) to change the option
price of optioned shares (excepting proportionate adjustments made under
paragraph 10); (3) to change the requirement that the option price per common
share not be less than 100% of the Fair Market Value of the common shares on the
date the option is granted (or less than 110% in the case of 10% stockholders
being issued Qualified Incentive Stock Options); (4) to extend the time within
which options may be granted or the time within which a granted option may be
exercised; (5) to change, without the consent of the Participant, any option
previously granted to him under the Plan; or (6) if such amendment would result
in a material increase in the cost of the Plan to the Company. If the Plan is
terminated, any unexercised option shall continue to be exercisable in
accordance with its terms, except as provided in paragraph 11 above.
Page 52
<PAGE>
EXHIBIT 11
Statement re Computation of Per Share Earnings
<TABLE>
November 30,
1995 1994
---- ----
<S> <C> <C>
[Restated]
Fully Diluted:
Average Shares Outstanding Disregarding Dilutive 7,804,043 7,580,203
Convertible Preferred Stock
Assuming Conversion at beginning of Year of:
10% Convertible Preferred Stock 57,600 57,600
8% Convertible Preferred Stock 103,333 103,333
12% Convertible Preferred Stock 95,238 95,238
--------- ---------
Shares Outstanding 8,060,214 7,836,374
========= =========
Loss Available to Common Stockholders for Fully Diluted
Calculations $(1,754,013) $ (977,884)
============ =============
Per Share Amount:
Net Loss $ (.22) $ (.12)
=============== ===============
</TABLE>
This calculation is submitted in accordance with Securities Exchange Act of
1934 Release No. 9083 although it is contrary to para 48 of APB No. 15 because
it produced an antidilutive result.
Page 53
<PAGE>
EXHIBIT 22
Subsidiaries of the Company
All of the following subsidiaries of the Small Business Issuer
are New York corporations and wholly-owned, except as indicated otherwise:
Access Network Corp.
Dan's Papers Inc.*
Manhattan Publishing Corp.
Media Venture Group, Inc.
Parkchester Publishing Co. Inc.
Tribco Incorporated
Nassau Community Newspaper Group, Inc.
Manhattan File Publishing, Inc.**
Capitol Hill Publishing, Inc.
Brooklyn Newspaper Publishing, Inc.
West Side Newspaper Corp.
- --------
* = 80%-owned.
** = 90%-owned.
<PAGE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<CASH> 54,474
<SECURITIES> 0
<RECEIVABLES> 6,155,558
<ALLOWANCES> 1,424,877
<INVENTORY> 0
<CURRENT-ASSETS> 4,982,458
<PP&E> 1,337,069
<DEPRECIATION> 679,333
<TOTAL-ASSETS> 9,460,063
<CURRENT-LIABILITIES> 2,606,097
<BONDS> 0
<COMMON> 79,576
0
449
<OTHER-SE> 6,726,153
<TOTAL-LIABILITY-AND-EQUITY> 9,460,063
<SALES> 0
<TOTAL-REVENUES> 18,113,462
<CGS> 0
<TOTAL-COSTS> 19,397,808
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 396,000
<INTEREST-EXPENSE> 32,608
<INCOME-PRETAX> (1,684,246)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,684,246)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,732,034)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> 0
</TABLE>
