<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACTS OF 1934
Commission File No. 33-9030
MAGNAVISION CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-2741313
--------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
141 South Ave. Office# 4, Fanwood, NJ 07023
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 490-9910
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ] The aggregate market value of
the voting stock held by nonaffiliates of the registrant on October 31,2000 was
$1,207,160.
The number of shares of Registrant's Common Stock outstanding on October 15,
2000 was 1,185,792. Documents Incorporated by Reference: Form 8 K dated
September 25, 2000.
<PAGE>
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -September 30, 2000 and December 31, 1999.
Condensed Consolidated Statements of Operations - Three and nine months ended
September 30, 2000 and September 30, 1999.
Condensed Consolidated Statements of Shareholders' Deficiency - Period December
31, 1999 to September 30, 2000.
Condensed Consolidated Statements of Cash Flows - Nine months ended September
30, 2000 and September 30, 1999.
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
PART II. Other Information
Item 1. Litigation
Item 2. Properties
Item 6. Exhibits and Report on Form 8K
<PAGE>
ITEM 1. FINANCIAL INFORMATION
MAGNAVISION CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
ASSETS 2000 1999
(UNAUDITED)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents 2,442,772 230,017
Trade accounts and other receivables 18,809 382,045
Notes receivable from customer -- 441,271
Shareholder loans receivable -- 20,000
Escrow account 222,418 --
Prepaid expenses and other current assets 57,466 33,428
---------- ----------
Total Current Assets 2,741,465 1,106,761
PROPERTY AND EQUIPMENT
Property and equipment, at cost 3,528 3,175,990
Less: accumulated depreciation (1,212) (1,657,176)
---------- ----------
Net property and equipment 2,316 1,518,814
OTHER ASSETS
Prepaid lease expense 356,522 436,748
Deposits 849 1,990
---------- ----------
TOTAL ASSETS 3,101,152 3,064,313
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable 110 97,127
Accrued expenses 55,957 165,385
Accrued expenses for Private Cable sale 314,000 --
Deferred revenues -- 369,765
Current portion of long-term debt -- 1,794,000
Line of credit -- 250,000
Tern loans due to shareholders -- 105,468
---------- ----------
Total Current Liabilities 370,067 2,781,745
Security deposits payable -- 176,692
Commitments and contingencies
Series A Preferred Stock, $1 par value, 9,850,000
shares authorized; issued and outstanding,
3,643,392 shares at September 30, 2000
5,000,000 shares at December 31,1999,
net of unamortized discount and
excluding accumulated dividend 3,463,756 4,683,642
Series A Preferred Stock accumulated dividend 988,863 1,057,778
SHAREHOLDERS' DEFICIENCY
Series B Preferred Stock, $1 par value,
150,000 shares authorzed; issued 131,889 131,889
and outstanding, 131,889 shares at
September 30, 2000 and December 31, 2000
Common Stock, $0.08 par value - 10,000,000 shares
authorized; issued and outstanding,
1,185,792 shares at September 30, 2000 and
1,168,931 at December 31, 1999 94,862 93,513
Additional paid-in capital 3,963,990 3,911,617
Accumulated deficit (5,912,275) (9,772,563)
---------- ----------
Total Shareholders' Deficiency (1,721,534) (5,635,544)
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 3,101,152 3,064,313
========== ==========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-2
<PAGE>
MAGNAVISION CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30 September 30
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES
Gross revenues 678,157 2,083,214 362 537,951
Cost of sales 281,523 693,223 1,794 201,272
------- ------- ----- -------
GROSS PROFIT 396,634 1,389,991 (1,432) 336,679
OPERATING EXPENSES
Salaries 351,102 635,815 60,110 197,943
Depreciation 96,017 401,310 -- 106,359
General and administrative expenses 671,680 572,111 260,416 236,845
------- ------- ------- -------
TOTAL OPERATING EXPENSES 1,118,799 1,609,236 320,526 541,147
--------- --------- ------- -------
OPERATING LOSS (722,165) (219,245) (321,958) (204,468)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Gain on the sale of the Private Cable assets,
net of related expenses 5,244,748 -- 118,000 --
Interest expense (50,441) (181,536) -- (58,349)
Interest income 84,181 23,203 37,889 7,500
------ ------ ------ -----
Total other income (expense), net 5,278,488 (158,333) 155,889 (50,849)
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 4,556,323 (377,578) (166,069) (255,317)
--------- --------- --------- ---------
PROVISION FOR INCOME TAXES 313,864 5,371 (390,000) 402
------- ----- --------- ---
NET INCOME (LOSS) 4,242,459 (382,949) 223,931 (255,719)
--------- --------- ------- ---------
Preferred shareholders dividend requirement 245,748 300,000 72,874 100,000
Accretion of preferred stock 136,423 69,447 16,869 23,149
------- ------ ------ ------
Net income (loss) to common shareholders 3,860,288 (752,396) 134,188 (378,868)
========= ========= ======= =========
Net income (loss) per common share basic: $3.28 ($0.65) $0.11 ($0.33)
Net income (loss) per common share diluted: $1.69 ($0.65) $0.06 ($0.33)
Weighted average common shares used to compute
net income (loss) per common share:
Basic 1,177,062 1,156,748 1,185,792 1,161,413
Diluted 2,288,063 1,156,748 2,258,718 1,161,413
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
F-3
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIENCY
For the period December 31, 1999 to September 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Series B Common Additional Total
Preferred Stock Stock Paid in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Deficiency
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,1999 131,889 131,889 1,168,931 93,513 3,911,617 (9,772,563) (5,635,544)
Issuance of common stock, from the
exercise of stock options 16,861 1,349 32,373 -- 33,722
Accretion of preferred stock (136,423) (136,423)
Deferred Compensation 20,000 -- 20,000
Net income 4,242,459 4,242,459
Series A Preferred Stock
accumulated dividend (245,748) (245,748)
---------------------------------------------------------------------------------------------
Balance, September 30, 2000 131,889 131,889 1,185,792 94,862 3,963,990 (5,912,275) (1,721,534)
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
F-4
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) 4,242,459 (382,949)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Gain on sale of private cable assets (5,244,748) --
Depreciation 96,017 401,310
Deferred Compersation 20,000
Amortization of channel lease prepayments 80,226 80,226
Changes in Assets and Liabilities:
(Increase) decrease in trade accounts and
other receivables 363,236 (102,922)
Increase (decrease) in prepaid expenses and other current assets (24,038) 1
Decrease in accounts payable (97,017) (107,470)
Decrease in accrued expenses (109,428) (36,153)
Increase in accrued expenses for Private Cable sale 314,000 --
Decrease (increase) in security deposits payable (176,692) 4,389
Payment of note receivable from customer 441,271 467,000
Decrease (increase) other assets and deposits 1,141 (30,978)
(Decrease) increase in deferred revenues (369,765) 40,144
------------------------------
Net cash provided by (used in) operating activities (463,338) 332,598
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment purchases -- (120,353)
Proceeds from the private cable sale 6,631,877 --
Estabisment of an escrow account (222,418) --
Processed from the sale equipment 33,651 --
------------------------------
Net cash provided by (used in) investing activities 6,443,110 (120,353)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock,
from the exercise of stock options 33,722 16,154
(Repayments) Issuance of line of credit (250,000) 250,000
Repayments of long term debt (1,794,000) (548,357)
Repayment of shareholder loan receivable 20,000 5,298
Repayment of loans due to shareholders (105,468) --
Redemption of Series A Preferred Stock (1,356,608) --
Payment of accumulated dividends (314,663) --
------------------------------
Net cash used in financing activities (3,767,017) (276,905)
Net increase (decrease) in cash and cash equivdents 2,212,755 (64,660)
--------- --------
Cash and cash equivalents beginning of period 230,017 227,091
Cash and cash equivalents end of period 2,442,772 162,431
========= =======
Non cash items:
Series A Preferred Stock Accumulated dividend $245,748 --
Accretion of preferred stock $136,423 $69,447
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-5
<PAGE>
NOTES TO SEPTEMBER 31, 2000 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS:
1. Summary of Significant Accounting Policies
The accompanying condensed consolidated financial statements include the
accounts of Magnavision Corporation ("the Parent") and its wholly owned
subsidiaries, (collectively the "Company"), the most significant of which are
Magnavision Corporation (New Jersey), Magnavision Private Cable, Inc. and
Magnavision Wireless Cable, Inc. In the opinion of management, all adjustments
necessary for a fair presentation of financial statements have been included.
Such adjustments consisted only of normal recurring items. The condensed
consolidated financial statements for the quarters ending September 31, 2000 and
September 31, 1999 are unaudited and should be read in conjunction with the
Company's consolidated annual financial statements and notes thereto for the
year ending December 31, 1999.
2. Announcement of Agreement to Merge
Magnavision Corp. and Blue Acquisition Corp., a wholly owned subsidiary of
IPWireless, Inc. based in San Bruno, CA, signed a definitive agreement for Blue
Acquisition Corp. to merge with and into Magnavision Corporation. All
outstanding common and preferred stock of Magnavision shall be exchanged in the
transaction for cash and/or securities as described below.
This agreement was entered into on September 12, 2000 and has been approved by
the majority shareholders of Magnavision and by the Board of Directors of
Magnavision, Blue Acquisition Corp. and IPWireless. The agreement is contingent
upon Magnavision meeting certain conditions at closing. According to the
agreement, each share of Magnavision Class A and Class B Preferred Stock
outstanding at the time of closing will receive $1.00 plus any accumulated
dividends then due. Each share of Magnavision Common Stock outstanding will
receive approximately $5.78 per share. Shareholders who hold less than 1% of the
fully diluted shares of Magnavision common stock (36,507 or fewer shares) will
receive their consideration entirely in cash. Common shareholders holding more
than 1% of the fully diluted shares will receive approximately 80% of their
consideration in cash and 20% of their consideration in the form of notes.
Warrant and option holders will receive approximately $5.78 less an amount equal
to the cost of exercising the warrant or option. Warrant and option holders who
hold in excess of 1% of the Company's fully diluted common stock will receive
approximately 20% of the share consideration in the form of notes and the
remainder in cash. In addition, the agreement has provisions for holders of
Magnavision Common Stock, warrants and options to receive additional
consideration based upon the Company achieving certain objectives.
The merger is expected to close in the fourth quarter of 2000.
3. Sale of the Private Cable Assets
<PAGE>
The sale of the Private Cable assets was completed on March 30, 2000 and was
based on the Asset Purchase Agreement between Lamont Television System Inc. and
the Company dated as of February 29, 2000 to purchase the Private Cable service
contracts and related fixed assets of the Company. The purchase price was $7.5
million and was decreased for documentation and system corrections and other
closing adjustments totaling $420,415. The Company also paid the investment
banker fee of $300,000, and established accruals for severance and retention of
$255,000, of which $118,000 was reversed at the end of the third quarter of 2000
as it was determined to be excess, and, legal and other fees of $75,000. The
Company accrued Federal and State taxes of $700,000 related to the Private Cable
sale, of which $386,000 was reversed at the end of the third quarter of 2000 as
it was determined to be excess. The Private Cable Assets sold had a book value,
net of depreciation, of $1,347,099. As part of the sale the Company established
an escrow account for $222,418 to cover certain contingencies pursuant to the
agreement for a period of nine months. The gain on the sale to the Company
before taxes and any effect of the escrow account was $5,244,748.
Also the May 8, 1997 Exchange Agreement and the Company's Certificate of
Incorporation, as amended, required the payment of 25% of the net proceeds of
the Private Cable sale be used to retire a portion of the Company's Series A
Preferred Stock and related accumulated preferred stock dividend. The Company
redeemed 1,356,608 shares of Series A Preferred Stock for $1,356,608 and also
paid $314,663 of accumulated dividends. The Company also accelerated the
accretion of $79,536 related to the redeemed Series A Preferred Stock.
As part of the Private Cable sale the Company vested 5,000 unvested options
relating to the retention of an officer who was terminated as a result of the
sale.
4. Repayment of Debt
The Company repaid both its term loan and outstanding line of credit with BSB
Bank and Trust Co. totaling $2,044,000 principal plus interest then due from the
proceeds of the Private Cable sale. The 146,176 warrants issued to BSB Bank &
Trust Co. as part of the original loan transaction remain outstanding to
purchase the Company's common stock at an exercise price of $2.00 per option.
The Company also repaid the outstanding notes due to shareholders totaling
$105,468 plus accrued interest from the proceeds of the sale.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All of the Company's current revenues were derived from its private cable
operations that were sold on March 30, 2000. The wireless channel capacity
operations have not commenced, therefore, no revenue has been derived from the
wireless operation.
The Registrant and its wholly owned subsidiary, Magnavision Private Cable, Inc.,
began service in February 1992 to various colleges and senior living center
facilities in the New
<PAGE>
York/New Jersey area utilizing direct satellite technology. This involved the
use of antennas, which were installed at the facility and then separately wired
on a room-by-room basis. The majority of the facilities using the Company's
private cable service were in New Jersey and New York, but the Company's market
area reaches from North Carolina to Massachusetts and west to Wisconsin.
Each installation was comprised of a number of billing outlets. A billing outlet
represented a hookup for a television. The Company collected revenue from each
television online. For the most part, the colleges were on a nine-month billing
cycle starting in September and ending in June of the subsequent year. The
nursing homes and hospitals were on a 12-month billing cycle.
Nine Months Ending September 30, 2000 compared to Nine Months Ending September
30, 1999
During the nine months ending September 30, 2000, the Company sold its Private
Cable assets to Lamont Television Systems Inc. The transaction was effective as
of February 29, 2000.
For the nine months ending September 30, 2000, gross profits decreased $993,357
from the nine months ending September 30, 1999. The decrease in gross profit was
primarily the result of reflecting two months of operations in the year 2000 due
to the sale of the Private Cable assets as of February 29, 2000, verses nine
months of operations in 1999.
Total operating expenses decreased $490,437 in the nine months ending September
30, 2000 when compared to the nine months ending September 30, 1999. Salaries
accounted for $284,713 of the decrease representing a savings for staff expenses
due to a reduction of the work force after the Private Cable sale in the second
quarter of 2000. Depreciation was $305,293 less than the nine months ending
September 30, 1999 as only two months of deprecation were expensed during 2000
due to the effective date of the Private Cable assets sold as February 29, 2000,
as compared to a full nine months of deprecation in 1999. General and
administrative expenses increased $99,569 when compared to the nine months
ending September 30, 1999 due to the costs related to the merger agreement, the
loss incurred on the sale of equipment no longer required for the operation of
the business, and the buyout of the Company's leased car and increased
professional fees in 2000.
For the nine months ending September 30, 2000 other income, net increased
$5,436,821 over nine months ending September 30, 1999. The gain on the sale of
the Private Cable assets represented $5,244,748 of the increase and was based on
the Asset Purchase Agreement between Lamont Television System Inc. and the
Company dated as of February 29, 2000 to purchase the service contracts and
related fixed assets of the Company. The purchase price of $7.5 million was
decreased for documentation and system corrections and other closing adjustments
totaling $420,415. The Company also paid an investment banker fee of $300,000
and established accruals for severance and
<PAGE>
retention of $255,000, of which $118,000 was reversed at the end of the third
quarter of 2000 as it was determined to be excess, and legal and other fees of
$75,000. The Private Cable Assets sold had a book value, net of depreciation, of
$1,347,099. The Company accrued State taxes of $700,000 related to the Private
Cable sale, of which $386,000 was reversed at the end of the third quarter of
2000 as it was determined to be excess.
Interest expense decreased $131,095 in the nine months ending September 30, 2000
when compared to the nine months ending September 30, 1999 due to lower loan
balances and the payoff of the Company's debt in 2000. Interest income increased
$60,978 in the nine months ending September 30, 2000 compared to the nine months
ending September 30, 1999 because of increased investment of the cash from the
Private Cable sale in the 2000.
Third Quarter 2000 Compared to Third Quarter 1999
For the third quarter 2000, gross profits decreased $338,111 from the third
quarter 1999. This decrease was due to the sale of the private cable assets in
the first quarter 2000 that resulted in almost no operating income in the third
quarter of 2000.
Total operating expenses decreased $220,621 in the third quarter 2000 when
compared to the third quarter 1999. Depreciation accounted for $106,359 of the
decrease and was due to the sale of the Private Cable assets sold in the first
quarter 2000. Salaries decreased $137,833, which is a result of the reduction of
the Companies' staff to two full time employees after the sale of the Private
Cable assets. General and administrative expenses were $23,571 more in 2000 when
compared to the third quarter 1999 due to the sale of the Private Cable assets.
Other income, net increased $206,738 in the third quarter of 2000 when compared
to the third quarter of 1999. The increase was due to the reversal of part of
the severance accrual of $118,000 and the no interest expense in 2000 because
the Company had repaid its outstanding loans on March 31, 2000. Also, interest
income on the funds invested from the Private Cable sale accounted for $30,389
of the increase in the third quarter of 2000.
Provision for income tax decreased $390,402 due to the Company adjusting the tax
accrual for the Private Cable sale.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ending September 30, 2000, the total cash and cash
equivalents increased $2,212,755. At September 30, 2000, the Company had
investments in a Repurchase Agreements, Commercial Paper, and held a Business
Money Market Account. The increase in cash was substantially due to the proceeds
received from the sale of the Private Cable system.
<PAGE>
The cash used in operating activities was $463,338 and included an accrual for
State taxes relating to the Private Cable sale in the amount of $314,000. There
were also decreases in the amount of deferred revenues of $369,765, trade
accounts and other receivables of $363,236, and security deposit payable of
$176,692 related to the Private Cable sale. The Company also received payment on
a customer's note receivable of $441,271 during the third quarter of 2000.
The cash provided by investing activities of $6,443,110 and was primarily due to
the sale of the Private Cable assets, which totaled $6,631,877 in the first nine
months of 2000. This was offset by the establishment of an escrow account for
unforeseen contingences of $222,418 as part of the Private Cable sale.
Cash used in the financing activities was $3,767,017. The Company repaid its
term loan of $1,794,000 and line of credit of $250,000 to BSB Bank & Trust Co.
The Company also repaid the outstanding notes to shareholders totaling $105,468
plus accrued interest from the proceeds of the sale. In addition, the May 8,
1997 Exchange Agreement and the Company's Certificate of Incorporation, as
amended, required the payment of 25% of the net proceeds of the Private Cable
sale be used to retire a portion of the Company's Series A Preferred Stock and
related accumulated preferred stock dividend. The Company redeemed 1,356,608
shares of Series A Preferred Stock for $1,356,608 and also paid $314,663 of
accumulated dividends on the Series A Preferred Stock. Also, during the second
quarter of 2000 option holders exercised options to purchase 16,861 shares of
common stock for $33,722 at $2.00 per share.
As a result of the Private Cable asset sale the Company has reduced its staff
from 11 employees at December 31, 1999 to two full time employees and expects to
use part-time clerical help as needed. The Company allowed its lease in Wall,
New Jersey to expire and relocated to less expensive space in Fanwood, New
Jersey effective June 1, 2000.
For the nine months ending September 30, 1999 total cash decreased by $64,660.
The net cash provided by operating activities was $332,598 and is primarily due
to the repayment of the note receivable from a customer.
Cash used in investing activities for the nine months ended September 30,1999
was $120,353 and was related to the purchases of cable equipment to increase the
outlet count.
Cash flow used in financing activities was $276,905 for the nine-month period
ending September 30, 1999 which represented $250,000 of proceeds received from
BSB Bank & Trust Company under the Line of Credit offset by payments of $548,357
made under long-term debt agreements.
Since the inception of its cable service in 1992, the Company has experienced
operating losses and negative cash flows. In addition, at September 30, 2000,
the Company had a shareholder deficit.
<PAGE>
The Company's capital commitments at September 30, 2000 include capital to
construct facilities at the Department of Education of the Archdiocese of New
York (the "Archdiocese"). On December 31, 2002 the Company will be required to
redeem its Series A Preferred Stock and any related accumulated dividends due.
To meet its long-term commitments, Magnavision and Blue Acquisition Corp., a
wholly owned subsidiary of IPWireless, Inc. based in San Bruno, CA, have signed
a definitive agreement for Blue Acquisition Corp. to merge with and into
Magnavision Corporation. All outstanding common and preferred stock of
Magnavision shall be exchanged in the transaction for cash and/or securities as
described in Note 2. This agreement was entered into on September 12, 2000 and
is contingent upon Magnavision meeting certain conditions at closing. In
addition, the agreement has provisions for holders of Magnavision Common Stock,
warrants and options to receive additional consideration based upon the Company
achieving certain objectives. The merger is expected to close in the fourth
quarter of 2000.
No assurances can be given that the Company will successfully accomplish the
merger with IPWireless. If the Company is unable to effect the merger to meet
its long-term commitments, the Company will explore various strategic
alternatives relating to its Channel Lease Agreement with the Archdiocese
including potential strategic alliances, joint ventures or a sale or other
disposition of the Company's rights under such agreement. However, no assurances
can be given that the Company will successfully accomplish any strategic
alternative related to the Channel Lease Agreement.
Certain statements under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act").
Such forward looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements of the Company, or industry
results expressed or implied by such forward looking statements. Such factors
include among others, general economic and business conditions, which will,
among other things, impact demand for the Company's services; changes in public
taste, trends and demographic changes; cable companies, which may affect the
Company's ability to generate revenues; political, social and economic
conditions and laws, rules and regulations, which may affect the Company's
results of operations; changes in business strategy or development plans;
quality of management; availability of qualified personnel; changes in, or the
failure to comply with, government regulations; and other factors.
<PAGE>
INFLATION
Management believes that inflation and changing prices will have a minimal
effect on operations.
The above should be read in conjunction with the Company's unaudited condensed
consolidated financial statements included elsewhere herein.
PART II OTHER INFORMATION
Item 1. Litigation
PATRICK MASTRORILLI vs. MAGNAVISION CORPORATION
On June 21, 1999, the Company received a complaint filed in the Superior Court
of New Jersey Legal Division in an action entitled Patrick Mastrorilli vs.
Magnavision Corporation. This litigation relates to a former director and
officer's claim for alleged future commissions due him on contracts and current
renewals placed by him. Discovery has started in this matter and the Company can
make no predictions as to its final outcome at this time.
Item 2. Properties
The Registrant's principal offices are located at 141 South Ave., Fanwood, New
Jersey, 07076, where it occupies approximately 500 square feet under a lease
agreement that expires in January 2001.
Item 6. Exhibits and Reports on Form 8K
a) Exhibits
None
b) Reports on Form 8K incorporated by reference
The Company filed a Form 8K on September 25, 2000 relating to an
agreement to merger.
Pursuant to the Requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 13, 2000 /S/
Jeffrey Haertlein
Principal Accounting Officer
