<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
--- of 1934
For the quarterly period ended September 30, 1996
Transition report under Section 13 or 15(d) of the Securities Exchange Act
--- of 1934
For the transition period from to
--------- --------
Commission File Number 0-16545
MPTV, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 88-0222781
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3 Civic Plaza
Suite #210
Newport Beach, California 92660
(Address of Principal Executive Offices)
(714) 760-6747
(Registrant's Telephone Number, Including Area Code)
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of September 30, 1996,100,781,911 shares of Common Stock, $0.05 par
value per share, were outstanding.
- - --------------------------------------------------------------------------------
1
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2
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MPTV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
SEPTEMBER 30 DECEMBER 31,
ASSETS 1996 1995
------ ------------ -----------
Property held for timeshare development $16,336,361 $16,170,614
Cash 71,684 223,796
Construction deposits 385,000 220,000
Land held for sale 0 360,000
Other assets/prepaid expenses 437,567 112,503
Deferred financing costs 0 252,562
------------ -----------
$17,230,612 $17,339,475
------------ -----------
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
All inclusive trust deed and secured notes payable $10,644,215 $11,818,361
Accounts payable and accrued expenses 391,544 470,864
Notes payable 3,582,333 1,584,000
Accrued interest 1,862,295 1,923,653
Other accrued liabilities 855,595 1,156,945
Due to related parties 212,521 223,189
------------ -----------
17,548,503 17,177,012
------------ -----------
Common stock - par value $.05 per share;
authorized 100,000,000; issued 100,781,911
and 37,487,390 5,039,096 1,874,370
Additional paid-in capital 23,497,039 23,529,022
Accumulated deficit (28,815,526) (25,157,429)
Services to be rendered (38,500) (38,500)
Stock subscriptions receivable 0 (45,000)
------------ -----------
Total shareholders' equity (317,891) 162,463
------------ -----------
$17,230,612 $17,339,475
------------ -----------
------------ -----------
10Q\96-930Q.WK4-Page A
3
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MPTV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OCT. 22, 1992
(INCORPORATION)
TO NINE MONTHS ENDED THREE MONTHS ENDED
SEPT. 30, 1996 SEPTEMBER 30 SEPTEMBER 30
--------------- ------------------------- -----------------------
1996 1995 1996 1995
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue
Other $112,103 $0 $65,576 $0 $19,820
------------ ----------- ----------- ----------- -----------
Expenses:
Excess of expenses over revenues
from incidental operations 516,112 43,733 16,540 13,846 (12,308)
General and administrative 12,838,501 4,007,884 3,600,239 1,346,200 1,521,266
Interest 2,382,130 806,480 7,857 216,097 2,725
Commitment fee for timeshare financing 750,000 0 0 0 0
Provision for litigation settlements 628,863 0 0 0 0
Reorganization items 14,596 0 0 0 0
Provisions for write-off 13,346,879 0 0 0 0
------------ ----------- ----------- ----------- -----------
30,477,081 4,858,097 3,624,636 1,576,143 1,511,683
------------ ----------- ----------- ----------- -----------
Loss from operations (30,364,978) (4,858,097) (3,559,060) (1,576,143) (1,491,863)
Minority interest in loss of consolidated subsidiary 349,452 0 0 0 0
------------ ----------- ----------- ----------- -----------
Net loss before extraordinary item (30,015,526) (4,858,097) (3,559,060) (1,576,143) (1,491,863)
Extraordinary item - forgiveness of debt 1,200,000 1,200,000 0 0 0
------------ ----------- ----------- ----------- -----------
Net loss ($28,815,526) ($3,658,097) ($3,559,060) ($1,576,143) ($1,491,863)
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Loss per share before extraordinary item ($1.41) ($0.08) ($0.17) ($0.02) ($0.06)
Extraordinary item per share 0.06 0.02 0.00 0.00 0.00
------------ ----------- ----------- ----------- -----------
Net loss per share ($1.35) ($0.06) ($0.17) ($0.02) ($0.06)
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Weighted average number of shares outstanding 21,327,722 63,057,243 21,297,456 85,486,911 25,361,276
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
</TABLE>
4
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MPTV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
OCT. 22, 1992
(Incorporation)
TO NINE MONTHS ENDED
SEPT. 30, 1996 SEPT. 30
------------------- ------------------------------------
1996 1995
-------------- -------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss ($28,815,526) ($3,658,097) ($3,559,060)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Extraordinary item - cancellation of debt (1,200,000) (1,200,000) 0
Issuance of common stock for services 6,382,552 2,882,558 1,449,393
Depreciation and amortization 1,697,934 495,062 173,183
Minority interest (349,452) 0 0
Provision for loss on land held for sale 490,668 360,000 0
Notes payable issued for services 82,500 0 0
Common stock issued for loan fees 844,800 0 0
Provisions for write-offs of intangibles 13,346,879 0 0
Changes in assets and liabilities (1,140,381) (781,716) 1,158,998
--------------- ------------ -------------
Net Cash Used in Operating Activities (8,660,026) (1,902,193) (777,486)
--------------- ------------ -------------
Cash Flows From Investing Activities:
Construction deposits (385,000) (165,000) 0
Other assets 67,105 0 (1,243,783)
Pre-acquisition costs paid in connection
with purchase of real estate (35,365) 0 0
Purchase of furniture and equipment (87,103) 0 0
Cash received in connection with MPTV
merger 70,112 0 0
--------------- ------------ -------------
Net Cash Used in Investing Activities (370,251) (165,000) (1,243,783)
--------------- ------------ -------------
Cash Flows From Financing Activities:
Proceeds from issuance of notes payable 4,077,003 2,094,500 336,807
Proceeds from sale of common stock 4,199,064 213,185 1,742,064
Proceeds from collection of subscription
receivables 45,000 45,000 0
Advances from MPTV prior to merger 589,360 0 0
Principal repayments on notes payable (567,218) (437,604) (66,982)
Net advances from (to) affiliates, net (47,736) 0 0
Capital contribution received by joint venture 806,488 0 0
--------------- ------------ -------------
Net Cash Provided by Financing Activities $9,101,961 $1,915,081 $2,011,889
--------------- ------------ -------------
Net Increase (Decrease) in Cash $71,684 ($152,112) ($9,390)
Cash, beginning of period 0 223,796 14,243
--------------- ------------ -------------
Cash, end of period $71,684 $71,684 $4,853
--------------- ------------ -------------
--------------- ------------ -------------
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest $1,908,337 $545,547 $565,877
--------------- ------------ -------------
--------------- ------------ -------------
Taxes $1,600 $0 $0
--------------- ------------ -------------
--------------- ------------ -------------
See note 3 for supplemental disclosure of non-cash investing and financing activities.
</TABLE>
5
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MPTV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Number Additional Services Stock Total
of Common Paid-In to be Accumulated Subscription Stockholders'
Shares Stock Capital Rendered Deficit Receivable Equity
------ ------ ---------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1996 37,487,390 $1,874,370 $23,529,022 ($38,500) ($25,157,429) ($45,000) $162,463
Net loss for the nine months
ended September 30, 1996 0 0 0 0 (3,658,097) 0 (3,658,097)
Common stock issued for
services and compensation 58,527,854 2,926,393 (43,835) 0 0 45,000 2,927,558
Common stock issued for cash 4,500,000 225,000 (11,815) 0 0 0 213,185
Common stock issued to pay notes 266,667 13,333 23,667 0 0 0 37,000
----------- ---------- ----------- --------- ------------- -------- -----------
BALANCES, SEPTEMBER 30, 1996 100,781,911 $5,039,096 $23,497,039 ($38,500) ($28,815,526) $0 ($317,891)
----------- ---------- ----------- --------- ------------- -------- -----------
----------- ---------- ----------- --------- ------------- -------- -----------
</TABLE>
6
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MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NOTE 1 - BASIS OF PRESENTATION
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements include all adjustments consisting
of only normal recurring adjustments necessary for a fair presentation of the
Company's financial position at September 30, 1996 and the results of operations
and cash flows for the nine months ended September 30, 1996 and 1995,
respectively. Although the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information normally included in financial statements
prepared in accordance with generally accepted accounting principles has been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. Results of operations for the nine months ended September
30, 1996 are not necessarily indicative of results of operations to be expected
for the year ending December 31, 1996. Refer to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995 for additional information.
The accompanying condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern, which
contemplates, among other things, the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
development stage and has incurred cumulative net losses of $28,815,526 since
its incorporation. The Company is in default on certain of its secured notes
payable. In the event the Company does not refinance certain of its secured
notes payable, it will be subject to foreclosure proceedings on its Lake
Tropicana Apartments currently held for development as timeshare units. The
Company will also require capital for its timeshare development and marketing
activities, as well as capital for interest and administrative expenses.
Furthermore, freely tradeable shares of common stock have been improperly issued
without registration under Federal and state securities laws. Until resolved,
the impact of such issuances, if any, on the Company's ability to raise
additional capital through future issuances of common stock is unknown. The
successful refinancing of the Company's debt and the obtainment of additional
financing, the successful development of the Company's properties, the
successful completion of its marketing program and its transition, ultimately,
to the attainment of profitable operations are necessary for the Company to
continue operations for the foreseeable future. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
(See Note 6 for Subsequent Developments).
Management plans to refinance the Lake Tropicana Apartment debt and obtain
redevelopment and improvement funding necessary to enable the Company to prepare
the Lake Tropicana property for the marketing and sale of timeshare units. The
Company has entered into a firm underwriting agreement with J.E. Liss and
Company, Inc. (see Note 3) to provide
7
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MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
a private placement of 12% senior secured notes in the aggregate amount of
$6,800,000, with an additional $3,200,000 which may be available, on a best
efforts basis, for working and development capital. Furthermore, the Company
has negotiated a substantial reduction in the amount required to satisfy the
second trust deed note payable should the funds from the debt issuance be
received and applied to the first and second trust deed notes payable on or
before July 31, 1996. There are no assurances that management will be
successful in achieving its plans. The accompanying condensed consolidated
financial statements do not include any adjustments that may result from the
outcome of this uncertainty. (See Note 6 for Subsequent Developments).
NOTE 2 - PROPERTY HELD FOR TIMESHARE DEVELOPMENT
During the nine months ended September 30, 1996, the Company incurred costs
amounting to $417,747, of which $59,867 was paid in cash, $154,072 in
capitalized interest, and $203,808 in common stock, related to its development
of the Lake Tropicana Apartments. Development of the Lake Tropicana Apartments
has recommenced in 1996, and capitalization of costs such as architectural fees,
interest and construction labor has resumed with the recommencement.
NOTE 3 - FINANCING ARRANGEMENTS
PROPOSED FINANCINGS
The Company has entered into a firm commitment underwriting agreement with
J.E. Liss and Company, Inc. for a private placement of 12% senior secured notes
in the aggregate principal amount of $6,800,000 (with an additional $3,200,000
in principal amount which may be sold on a best efforts basis). Proceeds from
the private placement will be used to refinance a portion of the Lake Tropicana
debt and for working and development capital. The Company has also negotiated a
substantial reduction in the amount required to satisfy the note secured by a
second trust deed in Lake Tropicana, should the funds be received from the
private debt placement and applied to the notes secured by the first and second
deeds of trust by July 31, 1996. There can be no assurance that any funds will
be raised from this private debt placement. On June 30, 1996 the Company
negotiated a reduction of the amount required to satisfy the note secured by a
second trust deed in Lake Tropicana. The reduction, totalling $1,200,000, and
presented as an extraordinary item in the financial statements, consists of
$315,957 of accrued interest and $884,043 in principal. This reduction was
granted in exchange for a warrant to purchase 5,000,000 shares of the Company's
Common Stock at $0.015625 per share. On July 26, 1996, the Company and the
holder of the second trust deed on the Lake
8
<PAGE>
MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Tropicana resort entered into a First Amendment to Restated Settlement and
Mutual Release Agreement (the "First Amendment"), extending until October 31,
1996 the deadline for refinancing of certain secured notes payable. The other
terms and conditions of the arrangement with the second trust deed holder,
including but not limited to the substantial reduction in the amount of the note
payable underlying the second trust deed, remain in effect.
On September 13, 1996, the Company announced that a lender has committed to
an interim loan of $7,600,000 to be secured by a First Deed of Trust on the Lake
Tropicana timeshare project. The lender is currently completing its final
inspection and due diligence in anticipation of preparation of the loan and
closing documents.
CONSUMMATED FINANCINGS
During the nine months ended September 30, 1996, the Company issued various
notes aggregating $2,094,500, with interest at 10% per annum. Certain of the
notes are due on demand, with the remainder due and payable on various dates in
1996 and 1997. The Company used such notes to fund capital improvements to the
Lake Tropicana Apartments and provide working capital for operations.
DEBT FORGIVENESS
On June 30, 1996, the Company negotiated a reduction of the amount required
to satisfy the note secured by a second trust deed in Lake Tropicana. The
reduction, totalling $1,200,000, and presented as an extraordinary item in the
financial statements, consists of $315,957 of accrued interest and $884,043 in
principal. This reduction was granted in exchange for a warrant to purchase
5,000,000 shares of the Company's Common Stock at $0.015625 per share. The
Company did not ascribe a value to the warrant as the exercise price of the
Warrant was not below the fair market value of the Company's Common Stock at the
date of grant.
NOTE 4 - STOCKHOLDERS' EQUITY
During the nine months ended September 30, 1996, the Company issued 266,667
shares of its Common Stock in satisfaction of notes payable in the aggregate
amount of $37,000.
From time to time, the Board of Directors have authorized certain shares of
its common stock to be issued for services rendered by the Company's
consultants. Agreements were entered into with certain individuals in exchange
for this stock. These agreements, lasting one year in duration, provide
services which include promotion of the Company and consultation
9
<PAGE>
MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
services for sales, marketing, and public relations. During the nine months
ended September 30, 1996, the Company issued 58,527,854 shares for consideration
valued at an average of $0.078 per share, with an aggregate value of $2,882,558.
The fair value was determined by management based on the closing price of the
Company's Common Stock as quoted by NASDAQ (prior to the delisting of the
Company's Common Stock) and on the OTC Bulletin Board (subsequent to such
delisting), less a discount for transferability restrictions.
Shares of the Company's freely tradable Common Stock have been improperly
issued without registration under Federal and state securities laws. In
addition to administrative remedies which may be pursued by governmental
agencies, the recipients of these shares of Common Stock may seek recovery of
the purchase price of the stock plus interest through a rescission offer, the
amount of which cannot be presently determined, and could have a material
adverse impact on the Company's financial liquidity. In September 1996, the
Company filed one registration statement to register a substantial portion of
these shares; management intends to file the remaining registration statements
subsequent to the filing of this Quarterly Report on Form 10-QSB to register the
remaining portion of these shares. There can be no assurances that the filings
of these registration statements will provide an adequate remedy. Until
resolved, the impact of such issuances, if any, on the Company's ability to
raise additional capital through the future issuances of Common Stock is
unknown.
On April 19, 1996 The NASDAQ Stock Market, Inc., ("NASDAQ"), which manages
the NASDAQ SmallCap Market Exchange (the "Exchange") on which the Company's
Common Stock is listed and traded, informed management that the Company had
failed to meet certain listing maintenance requirements and had not filed its
Annual Report on Form 10-KSB for the year ended December 31, 1995 (the "1995
Form 10-KSB") within the required time frame. NASDAQ gave the Company until May
20,1996 to file the 1995 Form 10-KSB and to submit a plan detailing how the
Company intended to meet the listing maintenance requirements in the future
(although the Company satisfied the market float, number of marketmakers and
asset tests as of the date of the letter, it did not then meet the $1,000,000 in
stockholders' equity or $1.00 per share price criteria). The Company filed its
1995 Form 10-KSB within the above-referenced deadline, and submitted to NASDAQ a
plan that included a one-for-ten reverse stock split or the infusion of capital
from a financial transaction. The Company also filed its Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1996.
On June 12, 1996, the Company received a letter from NASDAQ indicating
that its Common Stock was scheduled to be delisted from the Exchange
effective with the close of business on Wednesday, June 26, 1996. The
Company requested that NASDAQ conduct an oral hearing to reconsider the
decision to delist the Common Stock; such hearing was held on July
10
<PAGE>
MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
12, 1996. The Company subsequently received a letter, dated July 17, 1996, from
NASDAQ, denying the Company's request and deleting the Common Stock from the
Exchange effective July 18, 1996. The Company has requested that the NASDAQ
Listing and Hearing Review Committee review the delisting decision, and such
review is currently underway. However, in the interim, the Company's Common
Stock has been delisted from the Exchange and is currently listed on the OTC
Bulletin Board. The Company has been informed by NASDAQ that it will receive
the results of the above-referenced review prior to the end of 1996.
In the nine months ended September 30, 1996, the Company has issued a
significant number of shares of its Common Stock for cash and services rendered.
Management has become aware in May 1996 that these issuances of its Common Stock
caused the total number of issued and outstanding shares to exceed the
50,000,000 shares then authorized in its Articles of Incorporation. The
Company's Board of Directors immediately approved an increase in the number of
shares authorized to 100,000,000, and received consents approving such increase
from holders of in excess of a majority of the then-outstanding shares of Common
Stock. The Company subsequently filed an amendment to its Articles of
Incorporation effecting such increase.
Management has subsequently determined that the above-referenced increase
was not sufficient to provide the Company with the required ability to raise
capital or compensate consultants and employees for services rendered to the
Company; in addition, the Company's transfer agent has indicated that the
Company has recently issued shares of Common Stock in excess of the currently
authorized number of shares. Accordingly, the Board of Directors determined
that it would be in the best interests of the Company to increase the number
of authorized shares of Common Stock to 200,000,000. The Board of Directors
is currently requesting approval from stockholders, via written consent, to
effect such increase, and believes that the increase will be approved (FLS).
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation" ("Statement No. 123"). Statement No. 123 is primarily a
disclosure standard for the Company because the Company will continue to
account for employee stock options under Accounting Principles Board Opinion
No. 25. The disclosure requirements for the Company required by Statement
No. 123 began January 1, 1996.
The Company has no employee stock options in which the exercise prices are
below market and, accordingly, there would be no compensatory effects which, on
a proforma basis, would have a material effect on the financial position or
results of operations.
11
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MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NOTE 5 - RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 1996, the Company paid an
officer $225,000 as an advance on commissions for future timeshare sales.
Another officer was paid a salary of $135,000. These payments were made
pursuant to the terms of the respective officer's employment agreement.
Advance commissions have been expensed in the financial statements.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read together with the
Condensed Consolidated Financial Statements and Notes thereto included elsewhere
herein.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SEPTEMBER 30, 1995
At September 30, 1996, MPTV was in the development stage, with no
significant operating revenues to date. Revenues from the sale of timeshare
units are expected in late 1996. The preceding sentence contains a forward
looking statement (hereinafter defined as "FLS"). Each of the forward looking
statements in this Quarterly Report on Form 10-QSB is subject to various
factors that could cause actual results to differ materially from the results
anticipated in such forward looking statement, as more fully discussed in this
Item 2 under "Forward Looking Statements". Revenue from rentals of the Lake
Tropicana Apartments are considered incidental to the business of development
and sale of timeshare intervals and thus are netted against related expenses in
the accompanying statements of operations for the periods presented therein.
Other revenues are unrelated to the business activities currently in
development.
Expenses in excess of revenues of incidental operations increased to
$43,733 during the first nine months in 1996 from $16,540 during the first nine
months in 1995. The Company's general and administrative expenses in the nine
months ended September 30, 1996 equalled $4,007,884, an increase from $3,600,239
for the comparable period in 1995, due to a significant increase in unexpired
consulting fee contracts which were entered into during the current period.
On June 30, 1996, the Company negotiated a reduction of the amount required
to satisfy the note secured by a second trust deed in Lake Tropicana. The
reduction, totalling $1,200,000, and presented as an extraordinary item in the
financial statements, consists of $315,957 of accrued interest and $884,043 in
principal. This reduction was granted in exchange for a warrant to purchase
5,000,000 shares of the Company's Common Stock at $0.015625 per share. Due in
part to this debt reduction, the Company had a net loss of $3,658,097 for the
nine months ended September 30, 1996 compared to a net loss of $3,559,060 for
the comparable period in 1995. Net loss per share was $0.06 for the nine months
ended September 30, 1996 compared to a net loss per share of $0.17 per share for
the nine months ended September 30, 1995, due primarily to a significant
increase in the weighted average number of shares outstanding.
MPTV also incurred interest expense of $806,480 in the first nine months of
1996 as compared to $7,857 in the first nine months of 1995. Interest costs
incurred for the development of Lake Tropicana timeshares were capitalized to
property held from timeshare development during periods of active development
based on qualifying assets. The project
13
<PAGE>
ceased to be under active development for accounting purposes in April 1995, but
active development has subsequently resumed. During the periods ended September
30, 1996 and 1995, the capitalized interest totalled approximately $154,072 and
$240,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated financial statements at September 30, 1996 and
for the period then ended have been presented on the basis that the Company is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Continuation of the Company as
a going concern is dependent upon the Company raising additional financing and
achieving and sustaining profitable operations. Because of the uncertainties
regarding the Company's ability to achieve these goals, no assurance can be
given that the Company will be able to continue in existence. Based on the
Company's interest in Lake Tropicana, and the potential to raise additional
debt and/or equity financing (see below), management believes that there will
be sufficient capital available to complete existing contracts and projects
(FLS). The financial statements do not include any adjustments relating to the
recoverability of recorded assets amounts or the amounts of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The planned renovation program for the Lake Tropicana project is intended
to appeal to family-oriented visitors to Las Vegas and includes major common
area improvements such as landscaping, parking and a decorative security wall,
as well as construction of a reception area and activity center and installation
of a new roof and porches, the rebuilding of the main pool and construction of
two additional pools and a tennis court (FLS). The Company also anticipates
undertaking a complete renovation of the timeshare units, including kitchens,
bathroom fixtures, air conditioning, wall and floor coverings and complete
furniture and fixture packages (FLS). Management currently estimates that
timeshare unit renovations will cost approximately $38,000 per unit, while
common area renovations will require an additional $1,000,000 (FLS). The entire
renovation project will require six phases and approximately $7,000,000 to
$8,000,000 to complete (FLS), of which approximately $1,000,000 (excluding
capitalized interest paid in cash of $1,400,000) has been expended to date. In
April 1994, the Company commenced phase one of the project, which involved
renovation of the first 16 timeshare units and the construction of a sales
facility, and management currently anticipates completion of this phase in
Early 1997, subject to obtaining the required financing (see below), (FLS).
Phases two and three include the renovation of approximately one-half of the 176
timeshare units. Architects retained by the Company are currently preparing
plans for the purpose of soliciting fixed bids for remaining phases of the
renovations.
Funds for phase one of the renovation and project carrying costs have been
derived from equity private placements conducted by the Company, issuances of
common stock to vendors and the incurrence of unsecured debt. The Company has
received a commitment to refinance the existing notes secured by first and
second deeds of trust on the project (see below), which financing would provide
partial releases of condominiums. These release provisions facilitate
14
<PAGE>
the phasing of the Lake Tropicana project for conveyance to timeshare
purchasers. The Company then intends to utilize the proceeds from timeshare
sales (derived from the $100 million end-loan financing of timeshare
receivables, for which the Company has received a letter of commitment, subject
to the completion of definitive documents and due diligence procedures, from
Stanford Investors, Ltd.) plus cash flow from operations, to fund the remainder
of the renovations (FLS). However, there can be no assurance the Company will
receive financing adequate to complete renovations. In the event that the
Company does not receive financing, it would be unable to complete the
renovation of Lake Tropicana, which would seriously impair the Company's ability
to sell timeshare units in the project. If the Company is unable to sell
timeshare units in Lake Tropicana, the potential value of Lake Tropicana as a
rental property would be substantially lower than the potential value if sold in
timeshare intervals, and such value would also be substantially lower than the
carrying value of the project as reflected in the historical financial
statements. Furthermore, sales of timeshare units require registration or other
regulatory compliance in the State of Nevada and certain other states where such
units may be sold.
The Company has entered into a firm commitment underwriting agreement with
J.E. Liss and Company, Inc. for a private placement of 12% senior secured notes
in the aggregate principal amount of $6,800,000 (with an additional $3,200,000
in principal amount which may be sold on a best efforts basis). Proceeds from
the private placement will be used to refinance a portion of the Lake Tropicana
debt and for working and development capital (FLS). The Company has also
negotiated a substantial reduction in the amount required to satisfy the note
secured by a second trust deed on Lake Tropicana, should the funds be received
from the private debt placement and applied to the notes secured by the first
and second deeds of trust by July 31, 1996. There can be no assurance that any
funds will be raised from the private debt placement.
On July 26, 1996, the Company and the holder of the second trust deed on
the Lake Tropicana resort entered into a First Amendment to Restated Settlement
and Mutual Release Agreement (the "First Amendment"), extending until October
31, 1996 the deadline for refinancing of certain secured notes payable. The
other terms and conditions of the arrangement with the second trust deed holder,
including but not limited to the substantial reduction in the amount of the note
payable underlying the second trust deed, remain in effect.
On November 10, 1995, the Company entered into a partnership agreement with
Robert V. Jones Corp., a Nevada corporation ("RJC"), to aid in obtaining a loan
from a financial institution for the refinancing and renovation of lake
Tropicana. The partnership agreement is subject to certain terms and
conditions, one of which is the consummation of the refinancing. Upon
consummation, (RJC), acting as the limited partner, is to contribute $1,000,000
to the partnership, representing a 20% interest in the partnership. The
Company, acting as the general partner, is to contribute all of its rights,
title and interest in, and to, the Lake Tropicana Apartments and all of its
rights, title and interest in, and to, any development plans and documents, as
defined. Such investment by the Company will represent an 80% interest in the
15
<PAGE>
partnership. Profits and losses of the partnership are generally allocated in
accordance with ownership interest, subject to certain priorities and
allocations, as defined. As of September 30, 1996, the conditions precedent to
the completion of the partnership agreement had not yet occurred, and there can
be no assurance that the partnership will be formed or that the parties will
consummate the transactions contemplated by the partnership agreement.
Shares of the Company's freely tradable Common Stock have been improperly
issued without registration under Federal and state securities laws. In
addition to administrative remedies which may be pursued by governmental
agencies, the recipients of these shares of Common Stock may seek recovery of
the purchase price of the stock plus interest through a rescission offer, the
amount of which cannot be presently determined, and could have a material
adverse impact on the Company's financial liquidity. In September 1996, the
Company filed one registration statement to register a substantial portion of
these shares; management intends to file the remaining registration statements
subsequent to the filing of this Quarterly Report on Form 10-QSB to register the
remaining portion of these shares. There can be no assurances that the filings
of these registration statements will provide an adequate remedy. Until
resolved, the impact of such issuances, if any, on the Company's ability to
raise additional capital through the future issuances of Common Stock is
unknown.
On April 19, 1996 The NASDAQ Stock Market, Inc., ("NASDAQ"), which manages
the NASDAQ SmallCap Market Exchange (the "Exchange") on which the Company's
Common Stock is listed and traded, informed management that the Company had
failed to meet certain listing maintenance requirements and had not filed its
Annual Report on Form 10-KSB for the year ended December 31, 1995 (the "1995
Form 10-KSB") within the required time frame. NASDAQ gave the Company until May
20,1996 to file the 1995 Form 10-KSB and to submit a plan detailing how the
Company intended to meet the listing maintenance requirements in the future
(although the Company satisfied the market float, number of marketmakers and
asset tests as of the date of the letter, it did not then meet the $1,000,000 in
stockholders' equity or $1.00 per share price criteria). The Company filed its
1995 Form 10-KSB within the above-referenced deadline, and submitted to NASDAQ a
plan that included a one-for-ten reverse stock split or the infusion of capital
from a financial transaction. The Company also filed its Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1996.
On June 12, 1996, the Company received a letter from NASDAQ indicating
that its Common Stock was scheduled to be delisted from the Exchange
effective with the close of business on Wednesday, June 26, 1996. The
Company requested that NASDAQ conduct an oral hearing to reconsider the
decision to delist the Common Stock; such hearing was held on July 12, 1996.
The Company subsequently received a letter, dated July 17, 1996, from NASDAQ,
denying the Company's request and deleting the Common Stock from the Exchange
effective July 18, 1996. The Company has requested that the NASDAQ Listing
and Hearing Review Committee review the delisting decision, and such review
is currently underway. However, in the interim, the Company's Common Stock
has been delisted from the Exchange and is currently listed on the OTC
Bulletin Board. The Company has been informed by NASDAQ that it will receive
the
16
<PAGE>
results of the above-referenced review prior to the end of 1996.
In the nine months ended September 30, 1996, the Company has issued a
significant number of shares of its Common Stock for cash and services rendered.
Management has become aware in May 1996 that these issuances of its Common Stock
caused the total number of issued and outstanding shares to exceed the
50,000,000 shares then authorized in its Articles of Incorporation. The
Company's Board of Directors immediately approved an increase in the number of
shares authorized to 100,000,000, and received consents approving such increase
from holders of in excess of a majority of the then-outstanding shares of Common
Stock. The Company subsequently filed an amendment to its Articles of
Incorporation effecting such increase.
Management has subsequently determined that the above-referenced increase
was not sufficient to provide the Company with the required ability to raise
capital or compensate consultants and employees for services rendered to the
Company; in addition, the Company's transfer agent has indicated that the
Company has recently issued shares of Common Stock in excess of the currently
authorized number of shares. Accordingly, the Board of Directors determined
that it would be in the best interests of the Company to increase the number of
authorized shares of Common Stock to 200,000,000. The Board of Directors is
currently requesting approval from stockholders, via written consent, to effect
such increase, and believes that the increase will be approved (FLS).
Other assets increased by $325,064 during the first nine months of 1996.
This was largely due to advances to an officer, which have since been
substantially repaid, and loans made to Z-TV, a third party with a strategic
relationship with the Company, in the amount of $182,049. This amount, which is
evidenced by notes receivable from Z-TV, is to be used primarily for production
of sales materials used in the eventual marketing of timeshare intervals.
During the nine months ended September 30, 1996, the Company had a net
negative cash flow of $152,112. This net negative cash flow was comprised of
positive cash flow of $1,915,081 from financing activities offset by negative
cash flows of $165,000 from investing activities and $1,902,193 from operating
activities. Such financing activities consisted primarily of proceeds from the
issuance of notes payable.
FORWARD LOOKING STATEMENTS
The forward looking statements contained in the Quarterly Report on Form
10-QSB, including those contained in Item 2 - "Management's Discussion and
Analysis or Plan of Operation", are subject to various risks, uncertainties and
other factors that could cause actual results to differ materially from the
results anticipated in such forward looking statements. Included among the
important risks, uncertainties and other factors are those hereinafter
discussed.
17
<PAGE>
Few of the forward looking statements in this Quarterly Report on Form 10-
QSB deal with matters that are within the unilateral control of the Company. A
significant factor that may affect the actual results of the Company is the
Company's's need for additional liquidity, which in turn will depend on the
ability to obtain additional financing. The availability of equity and debt
financing to the Company is affected by, among other things, domestic and world
economic conditions and the competition for funds as well as the Company's
perceived ability to service such obligations should such financing be
consummated. Rising interest rates might affect the feasibility of debt
financing that is offered. Potential investors and lenders will be influenced
by their evaluations of the Company and its prospects and comparisons with
alternative investment opportunities. There can be no assurance that the
Company will be able to obtain financing on acceptable terms, if at all.
Shares of the Company's freely tradable Common Stock have been improperly
issued without registration under Federal and state securities laws. In
addition to administrative remedies which may be pursued by governmental
agencies, the recipients of these shares of Common Stock may seek recovery of
the purchase price of the stock plus interest through a rescission offer, the
amount of which cannot be presently determined, and could have a material
adverse impact on the Company's financial liquidity. In September 1996, the
Company filed one registration statement to register a substantial portion of
these shares; management intends to file the remaining registration statements
subsequent to the filing of this Quarterly Report on Form 10-QSB to register the
remaining portion of these shares. There can be no assurances that the filings
of these registration statements will provide an adequate remedy. Until
resolved, the impact of such issuances, if any, on the Company's ability to
raise additional capital through the future issuances of Common Stock is
unknown.
On April 19, 1996 The NASDAQ Stock Market, Inc., ("NASDAQ"), which manages
the NASDAQ SmallCap Market Exchange (the "Exchange") on which the Company's
Common Stock is listed and traded, informed management that the Company had
failed to meet certain listing maintenance requirements and had not filed its
Annual Report on Form 10-KSB for the year ended December 31, 1995 (the "1995
Form 10-KSB") within the required time frame. NASDAQ gave the Company until May
20,1996 to file the 1995 Form 10-KSB and to submit a plan detailing how the
Company intended to meet the listing maintenance requirements in the future
(although the Company satisfied the market float, number of marketmakers and
asset tests as of the date of the letter, it did not then meet the $1,000,000 in
stockholders' equity or $1.00 per share price criteria). The Company filed its
1995 Form 10-KSB within the above-referenced deadline, and submitted to NASDAQ a
plan that included a one-for-ten reverse stock split or the infusion of capital
from a financial transaction. The Company also filed its Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1996.
On June 12, 1996, the Company received a letter from NASDAQ indicating
that its Common Stock was scheduled to be delisted from the Exchange
effective with the close of business on Wednesday, June 26, 1996. The
Company requested that NASDAQ conduct an oral hearing to reconsider the
decision to delist the Common Stock; such hearing was held on July 12, 1996.
18
<PAGE>
The Company subsequently received a letter, dated July 17, 1996, from NASDAQ,
denying the Company's request and deleting the Common Stock from the Exchange
effective July 18, 1996. The Company has requested that the NASDAQ Listing and
Hearing Review Committee review the delisting decision, and such review is
currently underway. However, in the interim, the Company's Common Stock has
been delisted from the Exchange and is currently listed on the OTC Bulletin
Board. The Company has been informed by NASDAQ that it will receive the results
of the above-referenced review prior to the end of 1996.
In the nine months ended September 30, 1996, the Company has issued a
significant number of shares of its Common Stock for cash and services rendered.
Management has become aware in May 1996 that these issuances of its Common Stock
caused the total number of issued and outstanding shares to exceed the
50,000,000 shares then authorized in its Articles of Incorporation. The
Company's Board of Directors immediately approved an increase in the number of
shares authorized to 100,000,000, and received consents approving such increase
from holders of in excess of a majority of the then-outstanding shares of Common
Stock. The Company subsequently filed an amendment to its Articles of
Incorporation effecting such increase.
Management has subsequently determined that the above-referenced increase
was not sufficient to provide the Company with the required ability to raise
capital or compensate consultants and employees for services rendered to the
Company; in addition, the Company's transfer agent has indicated that the
Company has recently issued shares of Common Stock in excess of the currently
authorized number of shares. Accordingly, the Board of Directors determined
that it would be in the best interests of the Company to increase the number of
authorized shares of Common Stock to 200,000,000. The Board of Directors is
currently requesting approval from stockholders, via written consent, to effect
such increase, and believes that the increase will be approved (FLS).
The Company's timeshare resorts do not provide an exclusive solution for
potential purchasers, and such purchasers may choose alternative timeshare
resorts or vacation destinations. Many of the Company's competitors have
greater financial resources than the Company.
19
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 14, 1994, Albert C. Gannaway, Jr., the founder and former officer,
director and principal stockholder of the Company, and Gannaway Productions,
Ltd. (collectively, "Gannaway") filed a Complaint in the Superior Court of
Orange County, California against the Company and Messrs. Rasmussen (the
Company's former Chairman and Chief Executive Officer and a current Director)
and Vellema. The Complaint sought to enforce the terms of a settlement
agreement allegedly entered into by the Company and Gannaway in 1993 to resolve
certain asserted or potential claims by Gannaway that (i) he was entitled to
additional shares of the Company's Common Stock to be received pursuant to an
option or, in the alternative, a lower option price; (ii) the Company was
indebted to Gannaway for prior loans, cost advances or wages in excess of the
amounts shown on the Company's books and records; and (iii) certain duplicating
or other equipment being used by the Company belonged to Gannaway, and demanded
damages for an alleged breach of video distribution agreements, an accounting
under said agreements and rescission of the distribution agreements.
The parties have entered into a settlement agreement to be effective
beginning March 1, 1995 (the "Settlement Agreement"). Pursuant to the terms of
the Settlement Agreement, Gannaway will receive the sum of $600,000 to be paid
over the term of four years beginning with an initial payment of $25,000 to be
paid on March 1, 1996; $15,000 on April 1, 1996; $15,000 on May 1,1996; $15,000
on June 1, 1996; $35,000 on July 1, 1996; and $35,000 on August 1, 1996. From
August 1, 1996 to August 1, 1999, Gannaway will receive (i) monthly payments
equal to $65.00 per timeshare interval sold in the preceding month and (ii)
semi-annual payments in the amount calculated by amortizing the remaining
balance of $460,000 over the term at 12% interest. The entire balance will be
due and payable on or before August 1, 1999. the Settlement Agreement also
provides that MPTV will transfer its video productions assets in Florida and the
Club Carib weeks to Gannaway, and the litigation will be conditionally dismissed
with prejudice (provided that the court retains jurisdiction to enter final
judgment upon default). Mutual general releases will be exchanges by all
parties with respect to all claims and counterclaims. Gannaway has started the
operations in Florida as of March 1, 1996. [UPDATE]
On January 8, 1996, the Circuit Court of the Ninth Judicial District in
Orange County, Florida, entered a final judgment in the amount of $282,433.36
against the Company in the matter known as Neely v. MPTV, Inc., Successor to
United Shoppers of America, Inc. (Case No. CI 93-7554). The case was filed in
December, 1993 by a former consultant to the Company's predecessor, and
contained claims for breach of contract and recovery of unpaid wages. The
Company is appealing the judgment. [UPDATE]
ITEM 2. CHANGES IN SECURITIES
During the three months ended Sptember 30, 1996, the Company issued an
aggregate of 20,696,666 shares of common stock to certain consultants, in
consideration for services rendered; 3,300,000 shares to two accredited
investors; and 100,000 shares to extinguish a note payable. Such certain
issuances were deemed to be exempt from registration under the Securities
Act of 1933, as amended, in reliance upon Section 4(6) of the Act as
transactions by an issuer with accrdited investors. The recipients of
securities in each such transaction represented their status as accredited
investors, and that they intended to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution
thereof. All recipients had adequate access to information about the
Company.
20
<PAGE>
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Not Applicable
(b) Not Applicable
21
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Quarterly Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: November 19, 1996 REGISTRANT:
MPTV, Inc.
By:/s/ JAMES C. VELLEMA
----------------------------------
James C. Vellema
Chairman
(Principal Financial and Accounting
Officer)
Date: November 19, 1996 By:/s/ HURLEY C. REED
----------------------------------
Hurley C. Reed
President
22
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<PERIOD-START> JAN-01-1996
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<SECURITIES> 0
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