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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ x ] Annual report pursuant to Section 13 or 15(D) of the Securities
Exchange Act of 1934 (Fee Required)
[ ] Transitional report pursuant to Section 13 or 15(D) of the Securities
Exchange Act of 1934 (No Fee Required)
COMMISSION FILE NUMBER: 0-16545
MPTV, Inc.
(Name of small business issuer in its charter)
Nevada 88-0222781
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
366 San Miguel Drive, Suite 210
Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
(949) 760-6747
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
(Title of each class)
None
Securities registered under Section 12(g) of the Exchange Act:
(Title of each class)
Common Stock, $.05 par value
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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ].
The issuer had no revenues for its fiscal year ended December 31,
1998.
As of July 28, 1999, 749,900,000 shares of Common Stock, $0.05 par
value per share, were outstanding. The aggregate market value, held by
non-affiliates, of shares of the Common Stock, based upon the average of the bid
and asked prices for such stock on that date, was approximately $7,448,897.
Transitional Small Businesss Disclosure Format: Yes [ ] No [X]
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PART I
ITEM 1.DESCRIPTION OF BUSINESS.
General
MPTV, Inc. ("MPTV" or the "Company") is engaged in the timeshare and
related entertainment industries. Through its wholly-owned subsidiary,
Consolidated Resort Enterprises, Inc. ("CRE"), the Company plans to develop
and market timeshare resort properties. The Company's principal asset is a
multi-million dollar resort property, called "Lake Tropicana", located in Las
Vegas, Nevada adjacent to the MGM Grand Hotel/Casino and Theme Park. MPTV has
interests in other properties in California, Florida and Hawaii, and intends to
develop additional other properties elsewhere. [The preceding sentence
constitutes a forward looking statement (hereinafter identified as "FLS").
Each of the forward looking statements in this Annual Report on Form 10-KSB 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 1 under "Forward Looking Statements".] The Company
plans to market its network of timeshare resorts in part through custom
infomercials created through its video and television marketing capabilities.
The resort timeshare industry is one of the fastest growing vacation
and real estate industries, according to the American Resort Development
Association ("ARDA"), an industry-wide trade association. With the entry of
major corporations such as Disney, the Marriott Corporation, Hilton
Corporation, Hyatt Corporation and Sheraton, the U.S. resort timeshare
industry now has the name recognition and capability to reach a vastly
larger number of potential purchasers.
Management believes that timeshare resorts appeal to the growing number
of family-oriented consumers, who seek value in resort accommodations with
access to activities for all ages. Interval ownership developers utilize a
variety of marketing resources to reach these potential purchasers.
Historically, most timeshare purchasers have initially been contacted through
telemarketing and other forms of direct marketing through in-person tours of
the resorts. Management's experience is that these methods generally involve
costs averaging 20-24% of the sales price of the respective timeshare unit.
The Company's strategy seeks to capitalize on the synergy between its
resort timeshare and video production and marketing capabilities to create a
network of interval ownership resorts throughout the western United States and
market them through nationally syndicated infomercials. Management believes
that this strategy will provide a large number of prospective purchasers with
access to the Company's entire resort network and expanding marketing
opportunities while maintaining or improving historical margins (FLS).
The Company plans to implement this strategy through the following
components:
- -Development and Marketing of Lake Tropicana Resort. The Company is
currently renovating the Lake Tropicana resort. Development of the resort
began in 1994; however, due to liquidity and other financial concerns, the
first phase of renovation has been delayed and has yet to be completed. See
Item 5 - "Management's Discussion and Analysis or Plan of Operation."
Management currently anticipates that phase one of the renovation will be
completed in September 2000, subject to obtaining required permits and
financing, and that the remainder of the renovation will occur in a number of
phases over a period of 12 months (FLS). The phases will include complete
renovation of all 176 living units and major common area improvements.
Marketing of timeshare units in Lake Tropicana commenced in July 1997, but was
suspended in December, 1997.
- -Acquisition of Additional Timeshare Resort Properties. Management
believes that providing prospective purchasers with a variety of timeshare
resort opportunities is critical to the cost-effective maximization of sales
opportunities.
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- -Use of Infomercials and Other Video Promotions to Expand Marketing
Opportunities. Management recognizes that a significant factor in sales of
timeshare units is the ability to reach a large number of prospective
purchasers in the most economical manner. MPTV currently intends to
merchandise specific vacation timeshare opportunities to designated television
markets through celebrity-hosted infomercials (FLS). These half-hour
infomercials will feature the Company's timeshare resort properties as well as
vacation packages offered by third parties, and will permit interested viewers
to call a 24-hour, toll-free number for further information. Management
believes that by targeting specific markets, featuring only one venue per show
and using contemporary direct response marketing methods, its infomercials
will be more economical and efficient than the traditional and time-consuming
marketing methods utilized by the majority of developers in the resort
timeshare industry (FLS). The Company has financed the production by a third
party of "Destination Paradise", an infomercial which has been test marketed
on national cable stations as well as approximately 20 broadcast markets.
Management considers the test market results to be positive, and intends to
proceed to broadcast "Destination Paradise" in additional markets (FLS).
CRE was organized by James Vellema, its principal shareholder, in
October 1992 to provide a vehicle through which to acquire the property known
as Lake Tropicana from Glen Ivy Resorts, Inc., a national timeshare development
company that was in a Chapter 7 bankruptcy proceeding. The Company acquired
the Lake Tropicana project in 1993 through a joint venture with an unaffiliated
third party in which CRE held the majority joint venture interest. In June
1993 the acquisition was complete, and Lake Tropicana was acquired subject to
its then existing financing. Subsequently, in February 1994, the Company
purchased the minority joint venture interest, and then owned 100% of Lake
Tropicana. In 1998, the Lake Tropicana property was in receivership by the
First Trust Deed holder. See Item 2 - "Description of Property," and Item 5 -
"Management Discussion and Analysis of Financial Condition and Results of
Operations."
Following the acquisition in 1993 of Lake Tropicana, Mr. Vellema sought
to acquire a publicly registered corporation to provide greater access to
capital to facilitate the conversion of Lake Tropicana to timeshare and through
which to conduct a national timeshare development business. He located MPTV
during the fall of 1993.
MPTV, Inc. had been incorporated in the state of Nevada in October 1986
by persons who are unrelated to Mr. Vellema, under the name "United Shoppers of
network designed to offer a balanced program of family-oriented entertainment,
plus a variety of products that could be ordered through a tollfree telephone
number. The home shopping network was subsequently discontinued by its then
managers, but it retained certain assets related to the development and
production of television infomercials. The parties conducted negotiations
during the fall of 1993.
In December 1993 CRE completed a "reverse" merger in which the owners of
CRE exchanged their shares of CRE for 75% of the outstanding common stock of
MPTV and became the principal shareholders of MPTV. As a result, CRE became a
wholly-owned subsidiary of MPTV. In the merger, most officers and directors of
MPTV resigned (with the exception of one director).
From December 1993 until November 1994, MPTV restructured its operations
by divesting those aspects that were incompatible with a timeshare development
business. To assist in the restructuring, CRE filed a Chapter 11
reorganization petition. The reorganization proceeding was commenced in order
to position CRE to restructure the underlying financing for the Lake Tropicana
property which it had acquired subject to financing, and to pursue certain
claims against two of the junior mortgage holders on the property. The
proceeding was discharged when all claims were satisfied. During that time
management also negotiated a settlement of certain litigation with a former
principal stockholder of MPTV and negotiated to acquire a part interest in a
Palm Springs California timeshare conversion project and a timeshare
development project in Hawaii. See Item 3 - "Legal Proceedings".
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In November, 1997, the First Trust Deed holder of the Lake Tropicana
property forced the property into receivership as a result of late payments by
the Company. This was reflected in the 1998 financial statements as a
write-off of the property, as the Company ceased rental operations and
development of timeshare units for sale in early 1998. The property, its
improvements, and all related debt were written off in 1998, and are reflected
as such in these financial statements. Should the Company obtain new financing
in order to reacquire the property, these write-offs will be reversed. The
Company is seeking additional financing to complete development and marketing
of the Lake Tropicana project. See Item 5 - "Management's Discussion and
Analysis or Plan of Operation".
Timeshare Operations
Lake Tropicana Resort/Nevada
The Company's Lake Tropicana timeshare resort is located in Las Vegas,
Nevada. It currently consists of 176 apartment units located in 22 separate
buildings, and upon completion of renovation will feature swimming pools, a
tennis court, a spa and recreational center, waterfalls and lush landscaping
throughout the project (FLS). The 176 units are comprised of 96 two-bedroom
units averaging 880 square feet, 56 one-bedroom units averaging 660 square
feet and 25 studio units, with dividers, averaging 420 square feet. The
Company currently maintains insurance on Lake Tropicana that management
considers adequate for comparable properties in similar stages of development.
The units are presently rented as apartments on a monthly or weekly
basis, averaging a 90% occupancy of the available units. The Company intends
to continue the rental of apartments on an "as is" basis until all units have
been renovated and dedicated to the interval ownership concept.
The Lake Tropicana project is located on Harmon Avenue in Las Vegas,
Nevada, which management believes is currently the fastest growing tourist
destination in the United States. It is located near the billion-dollar MGM
Grand Hotel/Casino and the new Hard Rock Hotel, as well as other major hotels.
Despite the large number of hotels in Las Vegas, which continues to increase as
developers announce new major projects, there is a regular deficiency in the
number of available rooms for visitors. In addition, the increasing popularity
of Las Vegas as a family vacation destination creates a need for more spacious
accommodations with self-contained cooking and dining facilities. The high
exchange demand for a Las Vegas based timeshare creates a valuable resource out
of vacation ownership at the Lake Tropicana Resort.
The Lake Tropicana project is intended to appeal to family-oriented
visitors to Las Vegas. The planned renovation program 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).
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 of required permits and
financing, and that the remainder of the renovation will occur in a number of
phases over 12 months (FLS). See "- Governmental Regulation" and Item 2 -
"Description of Property". 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.
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A timeshare owners association has been incorporated and management
expects that it will provide the services required by its owners, including the
payment of master association assessments. The Company acts as the managing
agent for this association, and will receive a management fee for its
services. Timeshare owners will be required to pay annual assessments on their
units, thus providing funding for services and any required maintenance or
repairs.
Timeshare Resort Management
Through Continental Resort Services, Inc., a wholly-owned subsidiary
("CRS"), the Company intends to provide management and travel services at its
timeshare resorts. Such services will include housekeeping, maintenance,
reservations and accounting services, as well as various activities. For these
services, the Company will receive a management fee equal to approximately ten
percent of the gross annual assessment at each resort.
Marketing and Sale of Timeshare Units
The marketing of timeshare units typically involves a variety of
techniques designed to maximize the number of prospective purchasers who visit
the subject property. Salespersons contact prospective purchasers through
telephone sales, forms of direct marketing and referrals from current interval
unit owners. These persons are then offered tours of the timeshare properties,
usually in conjunction with discounted tour packages, where they view the
property and are shown targeted, sophisticated video presentations featuring
celebrity endorsements. The resort's sales staff then conducts informal
interviews of the prospective purchasers. Industry sources estimate that
approximately 12% to 14% of the persons attending these tours purchase
timeshare interests.
The Company currently intends to market timeshare interests in the Lake
Tropicana project through similar on-site presentations ("tours") as well as
Each tour will last approximately 90 minutes, and will combine viewing of the
project with a structured sales presentation. Management anticipates that
prospective buyers of the interval units will come from the large number of
visitors on packaged tours of Las Vegas. Prospective buyers will also be
solicited through booth locations in the Strip area of Las Vegas. The Company
will either enter into an arrangement with a timeshare sales
contractor or employ sales staff to provide sales services in Las Vegas with
respect to the timeshare interests. The Company also intends to enter into
other arrangements with brokers, or will employ sales staff, in California and
Illinois to provide sales services for the Lake Tropicana units, subject to
receipt of appropriate permits from the respective state agencies. To date,
however, no specific brokers have been selected. Management currently
anticipates that it will utilize similar marketing and sales methods at its
other timeshare resorts; however, no arrangements have yet been made.
The Company also intends to offer services to those timeshare owners who
wish to resell their interests. In the resort timeshare industry, resales
typically occur on an owner-to-owner basis and involve self-financing, and as a
result the market for timeshare interests is relatively illiquid. The Company
intends to provide financing from Stanford Investors Ltd. for resales of
timeshare interests at its resort properties, and believes that the
availability of such financing and the increased potential for resale will
allow each resort to maintain an active ownership base that will continue to
pay annual assessments (FLS).
Infomercial and Video Marketing and Production
The Company's infomercial and video production and marketing
capabilities are designed to provide a synergy to its timeshare resort
operations. Management believes that these video capabilities will enable the
Company to reach a larger number of prospective timeshare purchasers on a more
economical basis.
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- -Infomercial Production and Marketing. The Company intends to
merchandise specific vacation timeshare opportunities to designated television
markets through celebrity-hosted infomercials (FLS). These half-hour
infomercials (FLS) will feature on-site locations at the Company's timeshare
resort properties as well as vacation packages offered by third parties. A
third party has produced a pilot show, called "Destination Paradise", hosted
by Morgan Brittany and featuring resort destinations.
The "Destination Paradise" infomercials will feature travel packages,
which will be acquired by barter and discounted purchases. Management
anticipates that the packages will include room nights at the subject resorts,
tickets from advertised airlines and automobile rentals. In addition, items
such as show tickets, gaming privileges and other activities will constitute
"value added" items in each package. Interested viewers will be encouraged to
call a 24-hour, toll-free number for further information during and after each
program, and will then be presented with the marketing programs and promotions
utilized by the Company in its traditional marketing campaigns.
The Company intends to produce six "Destination Paradise" infomercials.
Management currently estimates that each episode of "Destination Paradise" will
involve a cost of $50,000 to $75,000 (FLS). MPTV has financed the production
of the first episode, and management anticipates that future episodes will be
financed from cash flow from operations. There can be no assurance that
sufficient financing or cash flow will exist to fund future episodes.
Management currently expects that the "Destination Paradise"
infomercials will be produced by an affiliated production company located in
Las Vegas.
- -Timeshare Resort Videos. In addition to the "Destination Paradise"
infomercials, the Company also intends to produce (through an unaffiliated
third party) videos for marketing presentations at its timeshare resorts and at
off-site sales offices (FLS). New owners of timeshare interests will also
receive a video featuring the resort in which they have purchased an interest.
Competition
MPTV will compete with other timeshare and interval unit projects in Las
Vegas, the island of Hawaii and the Palm Springs area, as well as with hotel
and resort accommodations. Many of such competitors are more established and
have greater name recognition and financial, marketing and other resources
than the Company. The Company intends to compete on the basis of the quality
of its timeshare resorts and its infomercial marketing strategy, in addition to
reputation, price, location, design, service and amenities.
Governmental Regulation
MPTV is subject to regulation with respect to both the proposed
renovation of the Lake Tropicana project and the sale of interval ownership
units in Lake Tropicana and its other timeshare resorts. The Company has
applied for all permits required for the renovation of the Lake Tropicana
project.
Permits are required in most states prior to commencing sales of
timeshare units. The Company currently intends to market timeshare units for
Lake Tropicana in Nevada and California. The requirements of the State of
Nevada have been met, pending the posting of bonds for the property owners
association assessments and planned renovation. The requirements of the State
of California have been substantially met, pending the posting of bonds and
issuance of the Nevada permit. The Company has received permission from the
State of Nevada to take reservations for sales under a preliminary permit
issued on June 13, 1997.
The Lake Tropicana project is also subject to certain federal and state
environmental laws and regulations, including those affecting the required
removal and mitigation of asbestos in the buildings. All construction plans
and estimates provide for full compliance with these regulations.
Employees
At December 31, 1998, the Company had 5 full-time employees. All of
these employees are engaged in, or directly support, the Company's activities
with respect to the Lake Tropicana project. The Company considers relations
with its employees to be good. None of the Company's employees is covered by a
collective bargaining agreement.
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Forward Looking Statements
The forward looking statements contained in this Annual Report on Form
10-KSB, including those contained in Item 6 - "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 that raises substantial concerns about its ability to
continue as a going concern. The Company has incurred cumulative net losses of
$42,970,837 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
Company is currently attempting to raise funds through a private placement of
debt securities, there can be no assurances 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 (which shall, however, be subordinated to the first lien of
the Notes in the property which collateralizes the Notes), the Company's
ability to obtain additional financing will be adversely affected. If and to
the extent the Company incurs 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 freely tradeable 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. The Company
intends to prepare and file a registration statement with the Securities and
Exchange Commission to register these shares. There can be no assurance,
however, that such filing will provide an adequate remedy. Until resolved, the
impact of such issuances on the Company's ability to raise additional capital
through the future issuances of Common Stock is unknown.
In the year ended December 31, 1998, the Company issued a significant
number of shares of its Common Stock for cash and services rendered.
Management became aware in May 1996 that these issuances of Common Stock caused
the total number of issued and outstanding shares to exceed the 50,000,000
shares then authorized in the Company's 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 subsequently determined,
however, 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 indicated that the Company had recently issued shares of Common
Stock in excess of the currently authorized number of shares. Accordingly, the
Company's Board of Directors determined that it would be in the best interest
of the Company to increase the number of authorized shares of Common Stock to
500,000,000. The Company has filed definitive proxy material with the
Securities and Exchange Commission, and has solicited and received the consent
of its stockholders for such increase and the ratification of the excess
issued. However, the recipients of such excess shares may seek recovery of the
purchase price of the stock plus interest through a rescission offer, the
amount of which cannot be presently determined. There can be no assurance that
the ratification of such increase and the excess issuances will provide an
adequate remedy for the holders of such excess shares.
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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
Wednesday, 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, if the trading price
of the Common Stock was less than $5.00 per share, trading in the Common Stock
would also be 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 sell their securities in the
secondary 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 much
greater financial resources than the Company.
ITEM 2.DESCRIPTION OF PROPERTY.
The Company's principal executive offices are located in Newport Beach,
California. The facility is subject to a month-to-month lease. The Company
believes that this space is adequate for its immediate needs, and that it will
be able to obtain additional space as necessary.
MPTV's Lake Tropicana timeshare resort is located in Las Vegas, Nevada.
The resort currently consists of 176 apartment units located in 22 separate
buildings, and features swimming pools, a tennis court, a spa and recreational
center, waterfalls and lush landscaping throughout the project. In November,
1997, the First Trust Deed holder of the Lake Tropicana property forced the
property into receivership as a result of late payments by the Company. This
was reflected in the 1998 financial statements as a write-off of the property,
as the Company ceased rental operations and development of timeshare units for
sale in early 1998. The property, its improvements, and all related debt were
written off in 1998, and are reflected as such in these financial statements.
Should the Company obtain new financing in order to reacquire the property,
these write-offs will be reversed. Currently, the Company is attempting to
obtain new financing in order to reacquire the property, resume development and
begin sales of timeshare intervals.
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ITEM 3.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 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 per annum. 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 production 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
shall be exchanged by all parties with respect to all claims and counterclaims.
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. CI93-7554). 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 has appealed the judgment, and the appeal was denied. The Company
intends to vigorously pursue a negotiated settlement of this matter.
PART II
ITEM 4.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Until July 18, 1996, MPTV's Common Stock was traded under the symbol
"MPTV" in the Nasdaq SmallCap Market. Since that date, the Common Stock has
been traded on the OTC Bulletin Board.
The Company currently anticipates that all of its earnings will be
retained for use in the operation of its business, and the Company has no
present intention to pay any cash dividends on the Common Stock in the
foreseeable future.
During the year ended December 31, 1998, the Company issued an aggregate
of 5,500,000 shares of Common Stock to certain consultants, in consideration
for services rendered, 2,000,000 shares to investors for cash consideration and
65,000,000 shares to satisfy certain debt. Such issuances were deemed to be
exempt from registration under the Securities Act, in reliance upon Section
4(6) of the Securities Act as transactions by an issuer with accredited
investors. The recipients of securities in each such transaction represented
and warranted 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.
8
<PAGE> 10
ITEM 5.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read together with the
Consolidated Financial Statements and Notes thereto included elsewhere herein.
General
MPTV is engaged in the timeshare resort and related entertainment
industries. Through its wholly-owned subsidiary, CRE, the Company plans to
develop and market timeshare properties. MPTV's principal asset is a multi-
million dollar resort property, called "Lake Tropicana", located in Las Vegas,
Nevada adjacent to the new MGM Grand/Hotel/Casino and Theme Park. The Company
plans to market its network of timeshare resorts in part though custom
infomercials created through its video and television marketing capabilities
(FLS).
Results of Operations
Year Ended December 31, 1998 Compared to December 31, 1997
At December 31, 1998, MPTV was in the development stage, with no significant
operating revenues to date. Revenues from the sale of timeshare units are
expected in late 1999. [The preceding sentence contains a forward looking
statement (hereinafter defined as "FLS"). Each of the forward looking
statements in this report 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 section 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 these 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 decreased to $0 during
the year 1998 from a positive $83,958 during 1997. This was the result from
the First Trust Deed holder taking the Lake Tropicana property into
receivership in November 1997. No revenues or expenses were recorded for the
Lake Tropicana rental activities in 1998.
The Company's general, administrative and consulting expenses in the year ended
December 31, 1998 equaled $1,848,449, decrease from $4,294,723 for 1997. This
decrease was due to a significant decrease 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, and the suspension of operations concerning the development of
Lake Tropicana.
MPTV also incurred interest expense of $781,375 in 1998 as compared to
$1,240,599 in 1997. 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. In 1998, as Lake Tropicana went into receivership, interest
payments related to the mortgages on the property ceased. 1998 interest
consisted primarily of that related to notes payable.
During the year ended December 31, 1998, the Company had a positive net cash
flow of $23,488. This net positive cash flow was comprised of positive cash
flow of $1,613,500 from financing activities, and negative cash flow of
$1,590,012 from operating activities. A substantial portion of the operating
activities consisted of the write-off of the Lake Tropicana property and its
related debt. Should the Company obtain financing to reacquire the property
from receivership, this write-off will be reversed.
Liquidity and Capital Resources
The Company's consolidated financial statements at December 31, 1998 and for
the year 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.
9
<PAGE> 11
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. Due to liquidity and other financial concerns, phase one of the
renovation was delayed. Provided the Company reacquires the property from
receivership in the first half of 1999, management anticipates completion of
this phase in the latter part of 1999, 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 have prepared 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 release from receivership. 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 end-loan financing of timeshare receivables,
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.
10
<PAGE> 12
ITEM 6.FINANCIAL STATEMENTS.
MPTV, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
with
INDEPENDENT AUDITORS' REPORT THEREON
<PAGE> 13
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditor's Report 2
Consolidated Financial Statements:
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Consolidated Statement of Stockholders' Deficit 6
Notes to Consolidated Financial Statements 7-14
<PAGE> 14
To the Board of Directors
MPTV, Inc.
We have audited the accompanying consolidated balance sheet of MPTV, Inc.
("MPTV"), and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, shareholders' deficit and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of MPTV's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MPTV, Inc. and
subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year ended December 31, 1998.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. Prior financial statements
of MPTV, Inc. and subsidiaries included explanatory paragraphs that raised
substantial doubt about the Company's ability to continue as a going concern.
In addition, these financial statements contained paragraphs explaining the
improper issuance of stock and MPTV's failure to maintain NASDAQ SmallCap
listing requirements. As discussed in the notes to the consolidated financial
statements, MPTV has incurred cumulative net losses of $43,564,171 since its
inception. In addition and as discussed in the notes to the consolidated
financial statements, shares of 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 government
agencies, the recipients of these shares of common stock may seek recovery of
the purchase price of the stock plus interest through a recission offer, the
amount of which cannot be presently determined. Accordigly, no provision for
any recission offer that may occur has been reflected in the accompanying
consolidated financial statements. MPTV has also failed to meet certain listing
maintenance requirements established by NASDAQ Stock Market, Inc. ("NASDAQ"),
and has had its stock delisted from the NASDAQ SmallCap market exchange.
Furthermore, MPTV is in default on certain of its debt obligations and requires
significant additional amounts of capital for its timeshare development and
marketing activities to resume. MPTV also requires continual capital infusions
to pay for operating expenses, interest, and note payable obligations. These
factors raise substantial doubt about MPTV's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
Sarna & Company
Westlake Village, California
February 3, 2000
<PAGE> 15
MPTV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $ 42,791
Property and Equipment 27,627
Other receivables 264,186
Due from related parties 197,423
Total Assets $ 532,027
LIABILITIES AND SHAREHOLDERS' DEFICIT
Liabilities
Notes payable $ 7,349,082
Accrued interest 1,581,684
Other accrued liabilities 684,475
Accounts payable and accrued expenses 766,202
Due to related parties 78,971
Total Liabilities $10,460,414
Shareholders' deficit:
Common stock - par value $.05 per share;
500,000,000 shares authorized,
385,210,422 issued $19,260,521
Additional paid-in capital 14,375,263
Accumulated deficit (43,564,171)
Total Shareholders' Deficit $(9,928,387)
Total Liabilities and shareholders' deficit $ 532,027
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 16
MPTV, Inc. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 0
Expenses
General, administrative, and consulting $ 1,848,449
Interest 781,375
Write-off of timeshare property 2,725,589
Write-off of related timeshare assets 593,334
Total Expenses $ 5,948,747
Net loss $ (5,948,747)
Net loss per share $ (0.02)
Weighted average number of shares
outstanding 304,565,565
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 17
MPTV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities:
Net loss $ (5,948,747)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Issuance of comon stock for services 20,000
Depreciaton and amortization 12,000
Write-off of Lake Tropicana property and
related trust deed notes payable 2,725,589
Write-off of related timeshare assets 593,334
Changes in assets and liabilities 1,007,812
Net Cash Used in Operating Activities $ (1,590,012)
Cash Flows From Financing Activities:
Proceeds from issuance of notes payable $ 1,598,500
Proceeds from sale of common stock 835,000
Principal repayments on notes payable (820,000)
Net Cash Provided by Financing Activities $ 1,613,500
Net Increase in Cash $ 23,488
Cash, beginning of period 19,303
Cash, end of period $ 42,791
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 18
MPTV, Inc. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number Additional Total
of Common Paid-In Accumulated Stockholders'
Shares Stock Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balances January 1, 1998 223,920,708 $11,196,036 $21,584,748 $ (37,615,424) $ (4,834,640)
Notes payable converted 88,789,714 4,439,485 (3,939,485) 0 500,000
Payment of notes payable 65,000,000 3,250,000 (2,925,000) 0 325,000
Payment of operating expenses 5,500,000 275,000 (255,000) 0 20,000
Sale of stock 2,000,000 100,000 (90,000) 0 10,000
Net Loss for the year ended
December 31, 1998 0 0 0 (5,948,747) (5,948,747)
Balances, December 31, 1998 385,210,422 $19,260,521 $14,375,263 $ (43,564,171) $ (9,928,387)
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 19
MPTV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of MPTV, Inc.,
Continentsl Resort Services, Inc. and Consolidated Resort Enterprises, Inc.
(collectively referred to as "MPTV" or as "The Company"). All material
intercompany balances have been eliminated. Certain limited reclassification
and format changes have been made to prior year's amounts to conform to the
current year presentation.
The consolidated financial statements are presented in accordance with
generally accepted accounting principals which require management to make
estimates regarding asset valuations and their realization, the outcome of
litigation and other matters that affect the reported amounts and disclosure of
contingencies in the financial statements. Estimates, by their nature, are
based on judgement and available information. As such, actual results could
differ materially from those estimates.
The consolidated financial statements of MPTV have been prepared assuming
that MPTV 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. MPTV has incurred cumulative net losses of
$43,564,171 since its inception in October 1992. MPTV is in default on
certain of its secured and unsecured notes payable. In the event that MPTV can
not refinance or renegotiate the notes, it may be subject to foreclosure
proceedings on its property currently being held for timeshare development.
The company requires capital for its contemplated timeshare development and
marketing activities to take place. MPTV also requires capital for operating
expenses and interest and note obligations. In addition MPTV has at certain
times, issued shares of its common stock without proper registration under
Federal and state securities laws. 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 obtainment of additional
financing, the successful development of the company's contemplated 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. The ability to successfully resolve these
factors raise substantial doubt about the company's ability to continue as a
going concern.
The consolidated financial statements of MPTV do not include any adjustments
that may result from the outcome of these aforementioned uncertainties.
7
<PAGE> 20
MPTV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PRO FORMA COMPENSATION EXPENSE
MPTV accounts for costs of stock-based compensation in accordance with APB
No. 25 Accounting for Stock Issued to Employees rather than the fair value
based method in SFAS No. 123 Accounting for Stock Based Compensation. No
grants of stock options were issued, by MPTV and accordingly no Pro Forma
compensation expense is reported.
Improper Issuances of Common Stock
Shares of freely tradable common stock have been issued without proper
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. Accordingly, no provision for any
rescission offer that may occur has been reflected in the accompanying
consolidated financial statements. Management of MPTV intends to eventually
file the necessary registration statements to register these shares. There
can be no assurances that the filings of these registration statements will
provide an adequate remedy.
Property and Equipment
Property and equipment are being depreciated on a straight-line basis over
five to seven years. Expenditures for maintenance and repairs are charged
to operations, as incurred, while betterments are capitalized.
Revenue Recognition
The Company plans to recognize revenues from sales of timeshare units upon
the execution of a contract and receipt of a down payment of at least 10%,
and when proceeds are assured and all conditions precedent to closing have
been performed by the parties. Costs applicable to the sale of Timeshare
Property will be allocated to individual intervals on the basis of their
relative sales value.
Incidental rental revenues will be recognized as earned.
8
<PAGE> 21
MPTV, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes
The Company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" Under
Statement 109, a liability method is used whereby deferred tax assets and
liabilities are determined based on temporary differences between bases
used for financial reporting and income tax reporting purposes. Income
taxes are provided based on tax rates in effect at the time such temporary
differences are expected to reverse. A valuation allowance is provided for
certain deferred tax assets if it is more likely than not, that the Company
will not realize the tax assets through future operations.
Fair Value of Financial Instruments
Financial Accounting Standards Statement No. 107, "Disclosures About Fair
Value of Financial Instruments," requires the Company to disclose, when
reasonably attainable, the fair values of its assets and liabilities which
are deemed to be financial instruments. The Company's financial instruments
consist primarily of its secured and unsecured notes payable and certain
investments. Management has determined that it is not practicable to estimate
fair value of its secured and unsecured notes payable because of the complexity
of the debt arrangements and the lack of an active market with which to obtain
reasonable comparables for the terms and interest rates of such debt.
Per Share Information
The Company computes per share information by dividing the net loss for the
period presented by the weighted average shares outstanding during such
period. The effect of common stock equivalents would be antidilutive for all
periods and is not included in the net loss per share calculations.
Recently Issued Accounting Pronouncements
Recently issued accounting pronouncements will have no significant impact on
the Company and its reporting methods.
9
<PAGE> 22
MPTV, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 2 - PROPERTY HELD FOR TIMESHARE DEVELOPMENT
In November, 1997, the First Trust Deed Holder of the Lake Tropicana
property, the company's primary asset, forced the property into
receivership as a result of late payments by MPTV. This foreclosure
is reflected in the financial statements as of a write-off of the
property. The company has ceased rental operations and development
of timeshare units for sale. The property, its improvements, and all
related debt were written off and are reflected as such in these
financial statements.
Note 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1998:
<TABLE>
<S> <C>
Property and equipment $ 108,879
Less accumulated depreciation <81,252>
Net Property and equipment $ 27,627
</TABLE>
Note 4 - NOTES PAYABLE - STOCKHOLDERS
Notes payable to stockholders' at December 31, 1998 consists of numerous
unsecured loans that accrue annual interest at rates that vary between
8% and 12% per annum. These notes mature monthly throughout 1999 and are
in a continual state of extension and renegotiation.
Note 5 - ACCRUED INTEREST
Accrued interest consists of interest owing on notes payable as of
December 31, 1998.
10
<PAGE> 23
MPTV, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 6 - RELATED PARTY TRANSACTIONS
A summary of related party transactions at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Due From:
Advances receivable officer/shareholder,
unsecured, accruing no interest, due
upon demand $ 180,000
Advances related entities, accruing no
interest, due upon demand 17,423
Total due from related parties $ 197,423
Due to:
Note payable related entities,
unsecured, payable upon demand $ 78,971
</TABLE>
Note 7 - STOCKHOLDERS' EQUITY
Common Stock
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. During the year ended December 31, 1998 the company issued
5,500,000 shares of stock, at a value of $275,000, for services rendered
by the Company's consultants. Notes payable with an aggregate value of
$4,439,485 were converted to stock during the period. The company issued
65,000,000 shares in payment of notes payable, averaging $0.005 per share.
Stock Options and Warrants
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 accompanying
financial statements.
11
<PAGE> 24
MPTV, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 8 - PROVISION FOR INCOME TAXES
The provision for income taxes for the year ended December 31, 1998,
represents the minimum state income tax expense of the Company, which is
not considered significant.
A reconciliation of estimated federal income taxes to the provision for
income taxes is as follows:
<TABLE>
<S> <C>
Federal Benefit $15,039,793
State benefit, net 0
Less change in valuation account
for realization of benefit ($15,039,793)
Total provision for
income taxes $ 0
</TABLE>
Because of the "change in ownership" provisions of the Tax Reform Act of
1986, the utilization of the Company's net operating loss carry forwards
prior to the merger on December 20, 1993 are subject to annual limitation
of approximately $2,000,000. In addition, the Company experienced a
substantial change in ownership due to issuances of its common stock.
As a result, the Company will experience an additional limitation of its
annual utilization of net operating losses. Net operating loss carry
forwards for Federal and state tax reporting purposes are approximately
$45,000,000.
Note 9 - COMMITMENTS AND CONTINGENCIES
Operating Leases
The company has sublet new administrative office space for a one year
period beginning June 3, 1998. Monthly rent under this lease is $2,145.
This lease requires no other payments.
12
<PAGE> 25
MPTV, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Litigation
In 1998, and in prior years, the company has been the defendant in certain
lawsuits. In 1995, the founder and former officer, director and principal
(the "Plaintiff")of MPTV filed a Complaint against the Company to enforce a
settlement. In exchange MPTV issued 328,800 shares of its common stock,
subject to certain registration rights. The Company had not registered such
shares. In February 1996, the Company settled, with the Plaintiff agreeing
to pay $600,000 in damages. The Company recorded a provision for loss
totaling $256,000 relating to this settlement in the 1995 consolidated
statement of operations. The Company has reflected the entire $600,000
settlement obligation in other accrued liabilities on the consolidated balance
sheet at December 31, 1998. This obligation has not been paid.
In March 1996, the Company received an unfavorable judgment in litigation
with a former consultant related to a compensation dispute. The judgment
provides for the Company to pay the former consultant approximately $282,000.
The Company filed a motion for a rehearing and received an Order from the
Court denying said motion. Management has recorded a provision for loss
totaling $112,000 relating to this settlement in the 1995 consolidated
statement of operations. The Company has reflected the entire $282,000
settlement obligation in other accrued liabilities and accrued expenses on
the consolidated balance sheet at December 31, 1998.
Additional pending lawsuit amounts totaling approximately $100,000 are
included in accrued liabilities at December 31, 1998.
Management feels that other pending lawsuits are without merit and therefore
no reserves for their possible outcomes have been established.
Consulting Agreements
The company has entered into a variety of consulting agreements which have
terms for up to a year, certain of which are renewable. The agreements
provide for the delivery of assorted services relating to the reacquisition
and financing of the Lake Tropicana timeshare project as well as other
management issues. Certain of the agreements require the monthly payment
of consulting fees in the form of cash or stock.
13
<PAGE> 26
MPTV, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 10 - SUBSEQUENT EVENTS
Subsequent to December 31, 1998, the Company has issued a significant
number of shares of its common stock for cash and services rendered.
In June, 1999, the company entered into an agreement with All Star Resorts,
Inc. (a Nevada Corporation) in a joint venture to form Lake Trop, LLC, a
Nevada Limited Liability Company. The purpose of Lake Trop, LLC is to
release the Lake Tropicana property from receivership, and construct and
develop the Lake Tropicana property in Las Vegas. MPTV, Inc. and its
subsidiaries issued 170,000,000 shares of stock with an aggregate value of
$1,750,000 as its initial investment in Lake Trop, and provided an additional
$500,000 cash investment.
In August, 1999, the Company's board of directors elected to reduce the par
value of the Company's common stock to $0.01, and to increase authorized
shares to 950,000,000. This was done to more accurately reflect the Company's
equity position after several years of issuing stock below par, and to provide
for the future raising of capital through issuance of common stock.
Year 2000 Compliance
The Year 2000 issue is the result of computer programs having been written
using two digits (rather than four) to define years. Computers or other
equipment with date-sensitive software may recognize "00" as 1900 rather
than 2000. This could result in system failures or miscalculations. If the
Company or significant customers, suppliers or other third parties fail to
correct Year 2000 issues, the Company's ability to operate could be affected.
The following disclosure is pursuant to the Year 2000 Readiness and
Disclosure Act.
MPTV'S Year 2000 program is designed to minimize the possibility of Year
2000 interruptions. Any such interruption may have a material adverse impact
on the Company's future operating results. The Company established procedures
to identify and assess systems and processes vulnerable to Year 2000 problems.
The Company also developed procedures to monitor levels of compliance within
its stated goals of compliance.
In each area of vulnerability, various testing and readiness methodologies
are being used to identify and correct suspect systems, processes or supplier
interfaces. The Company has met its Year 2000 compliance goals prior to
December 31, 1999.
14
<PAGE> 27
PART III.
ITEM 7.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
The following table provides certain information regarding the Company's
directors and executive officers at December 31, 1998:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
James C. Vellema 60 Chairman of the Board, Chief Executive
Officer, and Chief Financial Officer
Hurley C. Reed 62 President, Chief Operating Officer
and a director
</TABLE>
James C. Vellema has served as Chairman of the Board and Chief Executive
Officer of MPTV since November 1994, and as Chief Financial Officer since
December 1993. He served as President and a Director of the Company from
December 1993 through October 1994. He also serves as the President and a
Director of CRE, which he founded in October 1992. From July 1989 to October
1992, Mr. Vellema served as President and a founder of Tamarack Holdings/
Reefshare, which developed and marketed timeshare intervals in certain resort
properties. From 1978 to 1989, he served as a business consultant in the areas
of product development and association management for Glen Ivy Financial Group,
Inc., a developer of 12 resort projects in the Western United States and
Hawaii. From 1972 to 1978, Mr. Vellema was the President of Donner Financial
Inc., a company involved in non-hotel timeshare development and sales.
Hurley C. Reed has served as President and Chief Operating Officer of
MPTV since November 1994, and as a Director of MPTV since December 1993. From
December 1993 through October 1994, he served as Executive Vice President of
the Company. Since August 1993, Mr. Reed has also served as the Executive
Vice-President of CRE, where he has been responsible for financial controls and
development functions. From 1987 to 1993, Mr. Reed served in various executive
management positions at Glen Ivy Financial Group, Inc. Mr. Reed initiated and
developed the Glen Ivy Management Company which controlled 22 resorts and 30
associations with an annual budget of $25 million serving 50,000 timeshare
owners. Mr. Reed's last position at Glen Ivy was Executive Vice-President and
Chief Operating Officer. For the period 1984 to 1986 Mr. Reed was Eastern
Regional Director for North American Companies and was responsible for five
major resorts in the Eastern United States. From 1966 to 1984, Mr. Reed served
as a senior executive with Owens Illinois, where he was involved in the
development of a headquarters building and a large scale high-value woodlands
portfolio. In 1976 Mr. Reed was promoted to Chief Executive Officer at Owens.
Mr. Reed received his MBA degree from the University of Illinois.
There are no family relationships among the officers or directors.
There are no understandings or agreements between the directors and officers,
other than in their capacity as such, pursuant to which such persons were named
as an officer or director. All directors will serve until the next annual
meeting of the stockholders or until their respective successors have been
elected and shall qualify.
Compliance with Section 16 of the Securities Exchange Act
Section 16 of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and holders of 10% or more of the Company's
Common Stock to file reports of ownership (Form 3) and changes in ownership
(Forms 4 and 5) with the Securities and Exchange Commission ("SEC") and to
furnish the Company with copies of all such reports filed with the SEC. The
Company does not have any information which indicates that any director,
executive officer or 10% shareholder of the Company during the year ended
December 31, 1998, did not timely report transactions as required under the
Securities Exchange Act of 1934.
<PAGE> 28
ITEM 8.EXECUTIVE COMPENSATION.
The following table sets forth information concerning compensation for
the Company's fiscal year ended December 31, 1998, awarded to, earned by or
paid to the individuals serving as Chief Executive Officer of the Company
during such year and to certain other executive officers of the Company
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Name and Principal Positions Year Salary
<S> <C> <C>
James C. Vellema, 1998 $325,000(2)
Chairman of the Board and Chief 1997 $325,000(3)
Executive and Financial Officer(1)
Hurley C. Reed, 1998 $200,000(5)
President (4) 1997 $175,000
</TABLE>
______________________
(1)Mr. Vellema became Chairman and Chief Executive Officer of MPTV in
November 1994.
(2)Includes approximately $300,000 of accrued salary pursuant to Mr.
Vellema's employment agreement; excludes approximately $26,000 paid to
Mr. Vellema's spouse under a consulting agreement.
(3)Includes approximately $100,000 of accrued salary pursuant to Mr.
Vellema's employment agreement; excludes approximately $26,000 paid to
Mr. Vellema's spouse under a consulting agreement.
(4)Mr. Reed became President of the Company in November 1994.
(5)Includes approximately $150,000 of accrued salary pursuant to Mr. Reed's
employment agreement.
Option Grants in Last Fiscal Year
No options were granted to any of the Named Executive Officers in the
year ended December 31, 1998.
ITEM 9.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CRS acts as the managing agent for the timeshare owners association
incorporated at the Company's Lake Tropicana timeshare resort. CRS will
receive a management fee for such services equal to approximately ten percent
of the gross annual assessment at the resort; however, no such fee was paid
during the year ended December 31, 1998. Management also anticipates
providing similar services to, and receiving similar fees from, other resorts.
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 12 or 15(d) of the Securities
Exchange Act of 1934, the Registrant certifies that it has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Newport Beach, State of California on the 4th day of
February, 2000.
REGISTRANT:
MPTV, INC.
By: /s/ JAMES C. VELLEMA
James C. Vellema
Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James C. Vellema and Hurley C. Reed, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments to this Report, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agent, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons in the capacities
and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ JAMES C. VELLEMA Chief Executive Officer, Chief Financial March 9, 1999
James C. Vellema Officer (Principal Executive Officer and
Principal Financial and Accounting
Officer) and Chairman of the Board
/s/ HURLEY C. REED President and a Director March 9, 1999
Hurley C. Reed
</TABLE>
