<PAGE> 1
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 March 31, 1997
____ 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 July 10, 1997, 223,920,708 shares of Common Stock, $0.05 par
value per share, were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
- --------------------------------------------------------------------------------
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MPTV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
Property held for timeshare development $ 16,052,337 $ 16,098,289
Cash 15,959 35,341
Construction deposits 547,188 624,400
Other receivable 446,109 411,775
Other assets 109,515 81,656
Property and equipment 35,702 38,702
------------ ------------
$ 17,206,810 $ 17,290,163
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
All inclusive trust deed note payable $ 11,597,996 $ 11,597,996
Accounts payable and accrued expenses 620,884 404,734
Notes payable 5,445,082 5,180,582
Accrued interest 892,237 706,761
Other accrued liabilities 597,684 641,154
Due to related parties 287,342 201,371
------------ ------------
19,441,225 18,732,598
------------ ------------
Common stock - par value $.05 per share;
authorized 200,000,000; issued 176,929,818
and 162,406,691 8,841,441 8,120,335
Additional paid-in capital 23,279,343 22,365,449
Accumulated deficit (34,355,199) (31,928,219)
------------ ------------
Total Shareholders' equity (2,234,415) (1,442,435)
------------ ------------
$ 17,206,810 $ 17,290,163
============ ============
</TABLE>
<PAGE> 3
MPTV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OCT. 22, 1992
(Incorporation)
TO THREE MONTHS ENDED
MAR. 31, 1997 MARCH 31
------------- -------------------------------------
1997 1996
------------- -------------
<S> <C> <C> <C>
Revenue
Other $ 112,103 $ 1,336 $ 0
------------- ------------- -------------
Expenses
Excess of expenses over revenues
from incidental operations 468,894 5,548 (3,485)
General, administrative and consulting 9,831,525 2,010,751 1,000,908
Interest 1,873,409 412,017 297,759
Commitment fee for timeshare financing 750,000 0 0
Provision for litigation settlements 628,863 0 0
Reorganization items 14,596 0 0
Provisions for write-off 13,346,879 0 0
------------- ------------- -------------
26,914,166 2,428,316 1,295,182
------------- ------------- -------------
Net loss before minority interest (26,802,063) (2,426,980) (1,295,182)
Minority interest in loss of consolidated subsidiary 349,452 0 0
------------- ------------- -------------
Net loss $ (26,452,611) $ (2,426,980) $ (1,295,182)
============= ============= =============
Net loss per share $ (0.74) $ (0.01) $ (0.03)
============= ============= =============
Weighted average number of shares outstanding 35,915,145 165,717,046 41,170,552
============= ============= =============
</TABLE>
<PAGE> 4
MPTV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
OCT. 22, 1992
(Incorporation)
TO THREE MONTHS ENDED
MAR. 31, 1997 MARCH 31
------------ -----------------------------------
1997 1996
------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss $(26,452,611) $ (2,426,980) $ (1,295,182)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Issuance of common stock for services 4,585,882 1,385,000 1,085,888
Depreciation and amortization 1,456,794 76,500 253,922
Minority interest (349,452) 0 0
Provision for loss on land held for sale 130,668 0 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 (977,754) 431,598 (619,089)
------------ -----------------------------------
Net Cash Used in Operating Activities (7,332,294) (533,882) (574,461)
------------ -----------------------------------
Cash Flows From Investing Activities:
Construction deposits $ (325,000) $ 0 $ (105,000)
Other assets 67,105 0 0
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 (310,251) 0 (105,000)
------------ -----------------------------------
Cash Flows From Financing Activities:
Proceeds from issuance of notes payable 2,442,503 303,250 460,000
Proceeds from sale of common stock 3,985,879 250,000 0
Proceeds from collection of subscription
receivables 20,000 0 20,000
Advances from MPTV prior to merger 589,360 0 0
Principal repayments on notes payable (149,158) (38,750) (19,544)
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 7,647,336 514,500 460,456
------------ -----------------------------------
Net Increase (Decrease) in Cash 4,791 (19,382) (219,005)
Cash, beginning of period 0 35,341 223,796
------------ -----------------------------------
Cash, end of period $ 4,791 $ 15,959 $ 4,791
============ ===================================
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest $ 1,561,067 $ 226,541 $ 198,277
============ ===================================
Taxes $ 1,600 $ 0 $ 0
============ ===================================
</TABLE>
See note 3 for supplemental disclosure of non-cash investing and financing
activities.
<PAGE> 5
MPTV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
NUMBER ADDITIONAL TOTAL
OF COMMON PAID-IN TREASURY ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL STOCK DEFICIT EQUITY
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances January 1, 1997 162,406,691 $ 8,120,335 $ 22,365,449 $ 0 ($31,928,219) ($ 1,442,435)
Net loss for the three months
ended March 31, 1997 0 0 0 0 (2,426,980) (2,426,980)
Common stock issued for
services and compensation 3,783,829 189,191 1,195,809 0 0 1,385,000
Common stock sold 10,638,298 531,915 (281,915) 0 0 250,000
----------- ------------ ------------ ------------ ------------ ------------
BALANCES, MARCH 31, 1997 176,828,818 $ 8,841,441 $ 23,279,343 $ 0 ($34,355,199) ($ 2,234,415)
=========== ============ ============ ============ ============ ============
</TABLE>
<PAGE> 6
MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
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 March 31, 1997 and the results of operations
and cash flows for the three months ended March 31, 1997 and 1996,
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 three months March 31,
1997 are not necessarily indicative of results of operations to be expected for
the year ending December 31, 1997. Refer to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996 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 $34,355,199 since
its incorporation. The Company is in default on certain of its secured notes
payable, and thus may 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 tradable 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 the future issuances of common stock is unknown. The
successful refinancing of the Company's debt and the obtaining 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.
NOTE 2 - PROPERTY HELD FOR TIMESHARE DEVELOPMENT
During the three months ended March 31, 1997, the Company incurred
costs in the amount of $27,548, which were paid in cash, relating to its
development of the Lake Tropicana Apartments.
<PAGE> 7
MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NOTE 3 - FINANCING COMMITMENT
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 $6,600,000 (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.
There can be no assurance that any funds will be raised from the private debt
placement.
During the three months ended March 31, 1997, the Company issued
various notes aggregating $303,250 with interest at 10% per annum. Certain of
the notes are payable on demand; others are payable on various dates in 1997
and 1998. The Company used the proceeds from such notes to fund capital
improvements to the Lake Tropicana Apartments and to provide working capital
for operations.
NOTE 4 - STOCKHOLDERS' EQUITY
From time to time, the Board of Directors of the Company has
authorized the issuance of shares of the Company's Common Stock for services
rendered by the Company's consultants. During the three months ended March 31,
1997, the Company issued an aggregate of 3,783,829 shares of its common stock
for consideration valued at an average of $0.366 per share, with an aggregate
value of $1,385,000. The fair value was determined by management based on the
closing price of the Company's common stock as quoted on the OTC Bulletin
Board, less a discount for transferability restrictions.
The Financial Accounting Standards Board (the "FASB") 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 standards for the Company required by Statement No. 123
began on January 1, 1996.
The Company has issued no employee stock options for which the
exercise prices are below market. Accordingly, there would be no compensatory
effects which, on a pro forma basis, would have a material effect on the
accompanying financial statements.
<PAGE> 8
MPTV, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NOTE 5 - RELATED PARTY TRANSACTIONS
During the quarter ended March 31, 1997 the Company paid an officer
$75,000 as an advance on commission for future timeshare sales. Another
officer was paid a salary of $45,000. These payments were made pursuant to the
terms of the respective officer's Employment Agreement.
<PAGE> 9
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
Three Months Ended March 31, 1997 Compared to March 31, 1996
At March 31, 1997, MPTV was in the development stage, with no
significant operating revenues to date. Revenues from the sale of timeshare
units are expected in late 1997. [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 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
$5,548 during the first three months in 1997 from a positive $3,485 during the
first three months in 1996. During the three months ended March 31, 1996, the
Company significantly reduced certain expenses of CRE/Continental Resort
Services, consisting primarily of the operation of the Lake Tropicana
Apartments. The expenses reduced included advertising, certain salaries,
commissions and professional and consulting fees. Other expenses remained
consistent through the year.
The Company's general, administrative and consulting expenses in the
three months ended March 31, 1997 equalled $2,010,751, a substantial increase
from $1,000,908 for the comparable period in 1996. This increase was due to a
significant increase in financing fees (incurred as a result of the Company's
attempts to locate and obtain financing for the development of its Lake
Tropicana Resort), commissions and marketing expenditures.
MPTV also incurred interest expense of $412,017 in the first quarter
of 1997 as compared to $297,759 in the first quarter of 1996. 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 ceased to be under active development
for accounting purposes in April 1995. The increase is primarily due to the
significant amount of notes payable issued throughout 1996.
Liquidity and Capital Resources
The Company's consolidated financial statements at March 31, 1997 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 asset 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
<PAGE> 10
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. Due to liquidity and other
financial concerns, phase one of the renovation was delayed. Management
currently anticipates completion of this phase in September 1997, subject to
obtaining the required financing (see below)(FLS). After completing phase one
of the renovation, the Company plans to commence phases two and three, which
will 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 incurrence of unsecured debt. The Company has
deposited a portion of these funds with the holder of one of its deeds of
trust, to be held in trust for the development of the Lake Tropicana project.
The Company has also 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 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. 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 completed the
process of complying with applicable regulations to sell interval units in Lake
Tropicana in Nevada, except for the posting of bonds to activate the public
permit.
The Company has entered into a firm commitment underwriting agreement
with J.E. Liss and Co., 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). There can
be no assurance that any funds will be raised from the private debt placement.
Shares of the Company's freely tradable Common Stock may 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. Management intends to
file the necessary registration statement to register these shares. There can
be no assurances that the filing 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.
<PAGE> 11
Subsequent to March 31, 1997, the Company has issued a significant
number of shares of its Common Stock for cash and services rendered.
Management has become aware that these subsequent issuances of its Common Stock
may have caused the total number of issued and outstanding shares to exceed the
200,000,000 shares currently authorized in its Articles of Incorporation.
Management intends to request approval from its stockholders to increase the
number of shares authorized to 500,000,000.
During the three months ended March 31, 1997, the Company had a net
negative cash flow of $19,382. This net negative cash flow was comprised of
positive cash flow of $514,500 from financing activities offset by negative
cash flows of $533,882 from operating activities. Such financing activities
consisted primarily of proceeds from the issuance of notes payable and stock.
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.
MPTV has suffered recurring losses from operations and shows a need
for additional funding, which raises substantial concerns about its ability to
continue as a going concern. The Company has incurred cumulative net losses of
$34,355,199 since its inception, and is also in default on certain of its
secured and unsecured notes payable. In the event that the Company cannot
refinance or renegotiate these notes, it may be subject to collection actions
and foreclosure proceedings on its property currently being held for timeshare
development. MPTV requires capital to conduct its timeshare unit development
and marketing activities, and for operating expenses, interest and note
obligations. The Company's ability to continue as a going concern is dependent
upon its ability to obtain outside financing through the issuance of either
equity or debt securities and, ultimately, upon future development of
profitability through sales of timeshare units at Lake Tropicana. While the
Company is currently attempting to raise funds through a private placement of
debt securities, there can be no assurance that such private placement will be
successfully consummated or, if so, that it will meet all future capital
requirements of the Company. If additional funds are required, the Company may
offer additional or other securities for sale or attempt to secure financing
from banks or other financial institutions. If significant indebtedness is
then outstanding, the Company's ability to obtain additional financing will be
adversely affected. If and to the extent the Company incurs additional
indebtedness, debt service requirements will have a negative effect on
earnings. Further, if the Company is unable to service its indebtedness and to
renew or refinance such obligations on a continuing basis, its ability to
operate profitably will be materially threatened. No assurance can be given
that the Company will be able to obtain additional funds from any source on
satisfactory terms, if at all.
The availability of equity and debt financing to the Company is also
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 Common Stock may 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 position and liquidity. Management intends to prepare and
file the necessary registration statement to register these shares. There can
be no assurances that the filing
<PAGE> 12
of these registration statements will provide an adequate remedy. Until
resolved, the impact of such issuance, if any, on the Company's ability to
raise additional capital through the future issuances of Common Stock is
unknown.
Subsequent to March 31, 1997, the Company has issued a significant
number of shares of its Common Stock for cash and services rendered. Management
has become aware that these subsequent issuances of its Common Stock may have
caused the total number of issued and outstanding shares to exceed 200,000,000
shares currently authorized in its Articles of Incorporation. Management
intends to request approval from its stockholders to increase the number of
shares authorized to 500,000,000.
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 was formerly 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 within the required time frame.
NASDAQ gave the Company until May 20, 1996 to file such Annual Report and to
submit a plan detailing how the Company intended to meet the listing
maintenance requirements in the future. The Company filed the Annual Report
and submitted the required plan. On June 12, 1996, the Company received a
letter from NASDAQ informing the Company that its Common Stock was scheduled to
be delisted from the Exchange effective with the close of business on June 26,
1996 for failure to meet certain continuing listing requirements. Although the
Company currently satisfies the market float, number of market makers and asset
requirements, it does not meet the net worth or share price criteria. The
Company requested that NASDAQ conduct an oral hearing to reconsider the
decision to delist the Common Stock, and such hearing was held on July 12, 1996
(the delisting was stayed pending the outcome of the hearing). Management
subsequently received a letter, dated July 17, 1996, from NASDAQ, informing the
Company that its securities were to be deleted from the Exchange effective July
18, 1996. The Company has requested that the NASDAQ Listing and Review
Committee review this decision, but the request will not operate as a stay to
the deletion of the Common Stock. In the meantime, the Common Stock is listed
and traded on the OTC Bulletin Board. There can be no assurance as to the
outcome of the pending review.
As a result of such delisting, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the market
value of, the Common Stock. In addition, subsequent to such delisting, trading
in the Common Stock is also subject to the requirements of Rule 15c2-6 and/or
Rule 15g-9 promulgated under the Exchange Act. Under such Rules,
broker/dealers who recommend such low-priced securities to persons other than
established customers and accredited investors must satisfy special sales
practice requirements, including a requirement that they make an individualized
written suitability determination for the purchase and receive the purchaser's
written consent prior to the transaction. The Securities Enforcement Remedies
and Penny Stock Reform Act of 1990 also requires additional disclosure in
connection with any trades involving a stock defined as a "penny stock"
(generally, according to recent regulations adopted by the Securities and
Exchange Commission, any non-NASDAQ equity security that has a market price of
less than $5.00 per share, subject to certain exemptions), including the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith. Such
requirements could severely limit the market liquidity of the Common Stock and
the ability of purchasers of the Company's Common Stock to sell their
securities in the open market.
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.
<PAGE> 13
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, Chief Executive Officer and a 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 entered into a settlement agreement effective March 1,
1996 (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. The Company is
currently in default with respect to the May, June, July and August payments.
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 an 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
its 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 exchanged by all
parties with respect to all claims and counterclaims.
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: August 4, 1997 REGISTRANT:
MPTV, Inc.
By: /s/ JAMES C. VELLEMA
-------------------------------------------
James C. Vellema
Chairman
(Principal Financial and Accounting Officer)
Date: August 4, 1997 By: /s/ HURLEY C. REED
-------------------------------------------
Hurley C. Reed
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS AT MARCH 31, 1997 AND FOR THE THREE MONTHS THEN
ENDED, AS CONTAINED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB FOR THE
PERIOD ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 15,959
<SECURITIES> 0
<RECEIVABLES> 446,109
<ALLOWANCES> 0
<INVENTORY> 16,052,337<F1>
<CURRENT-ASSETS> 0
<PP&E> 35,702
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,206,810
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 8,841,441
<OTHER-SE> 23,279,343
<TOTAL-LIABILITY-AND-EQUITY> 17,206,810
<SALES> 0
<TOTAL-REVENUES> 1,336
<CGS> 0
<TOTAL-COSTS> 5,548
<OTHER-EXPENSES> 2,010,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 412,017
<INCOME-PRETAX> (2,426,980)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,426,980)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,426,980)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
<FN>
<F1>Represents property held for timeshare development.
</FN>
</TABLE>
