SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 6, 1996
Princeton Media Group, Inc.
(Exact name of registrant as specified in its charter)
Ontario, Canada 0-16355 98-0082860
(State or other jurisdiction (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
214 Brazilian Ave., Suite 300, Palm Beach, Florida 33480
(Address of principal executive offices) (Zip Code)
(561) 659-0121
(Registrant's telephone number, including area code)
DeNovo Corporation
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On September 6, 1996, the Registrant's wholly-owned subsidiary, Firestone
Publishing, Inc. ("Firestone"), completed the purchase of substantially all the
assets of Dugent Publishing Corp., a Florida corporation ("Dugent" or the
"Seller") which publishes four lifestyle magazines. Firestone paid
$1,000,000 toward the purchase on July 18, 1996, and completed the purchase
on September 6, 1996 by paying an additional $2,023,054.79 and executing and
delivering a secured promissory note in the amount of $4,000,000. The purchased
assets consist of intellectual property including trademarks, fixed assets, and
contract rights. Additionally, net cash flow from operations of Dugent from
July 18, 1996 through September 6, 1996 was segregated in the accounting records
and included in the purchase of assets, as was the taxable income of Dugent for
that period. The $4,000,000 note will accrue interest at prime plus 2% from the
date of the note for one year, at which time accrued interest will be added to
principal and the balance will be amortized over 48 months. Payment pursuant to
the note is secured with a lien on the acquired assets.
The Seller was in the business of publishing, printing and selling four
periodical magazines. The Registrant, through its subsidiary, Firestone,
is continuing such use of the acquired assets.
The total consideration paid for the purchased assets was determined with
reference to the Seller's income statements for the past three years. There was
no prior relationship between any of the Seller and its affiliates, on the one
hand, and the Registrant and any of its affiliates, officers and directors, or
any associate of any officer or director, on the other hand.
The Registrant obtained the funds used to capitalize Firestone, for
purposes of making the first payment, through a short-term line of credit. The
funds for the second payment were obtained by the Registrant by way of sale of
convertible preferred stock pursuant to Regulation S, as well as an additional
short-term line of credit.
Item 7. Financial Statements and Exhibits.
This Amendment is being filed in order to provide the financial statements and
pro forma financial information included herein.
Pages
a) Financial Statements of Business Acquired
Audited Financial Statements
Report of Independent Accountants 3
Financial Statements
Balance Sheets 4
Income Statements 5
Statement of Changes in Retained Earnings 6
Statements of Cash Flows 7
Notes to Financial Statements 8-10
b) Pro Forma Financial Information 11
Princeton Media Group, Inc,.
Unaudited Pro Forma Condensed Consolidated
Statement of Operations,
For the Year Ended December 31, 1995 12
Princeton Media Group Inc.
Unaudited Pro Forma Condensed Consolidated
Income Statement
For the Eight Months Ended August 31, 1996 13
As the acquisition has been reported in the consolidated balance sheet of the
Registrant as of September 30, 1996, on Form 10-QSB, a pro forma consolidated
balance sheet is not presented in this filing.
The following exhibits are filed as a part of this report:
(c) Exhibits.
2.1 Asset Purchase Agreement dated Sept. 6, 1996, previously filed as an
Exhibit to Registrant's Form 8-K dated Sept. 6, 1996, filed Sept. 10, 1996, and
incorporated herein by reference.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Princeton Media Group, Inc.
Registrant
/S/ James J. McNamara
Date: November 18, 1996 By: James J. McNamara
Chairman of the Board
Report of Independent Accountants
To the Board of Directors and
Shareholders of Princeton Media Group, Inc.
We have audited the accompanying balance sheets of Dugent Publishing
Corporation (referred to as the "Acquired Business") as of December 31, 1995 and
1994, and the related statements of income, changes in retained earnings, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
our opinion on these financial statements based on our audit.
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 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 our audit provides reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the balance sheet of the Acquired Business of
December 31, 1995 and 1994, and the results of operations and cash flows for the
years then ended in conformity with generally accepted accounting principles.
/S/ Holyfield Associates P.A.
HOLYFIELD ASSOCIATES P.A.
West Palm Beach, Florida
October 18, 1996
Acquired Business
Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
Current Assets
Cash $ 509,819 $ 446,788
Accounts receivable, net 782,979 463,734
Inventory 577,446 525,949
Other current assets - 3,183
Total current assets 1,870,224 1,439,654
Property and equipment, net 28,336 5,812
Other Assets 46,869 41,692
Total Assets $ 1,945,449 $ 1,487,158
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 417,461 $ 391,844
Current portion of long-term debt 248,443 255,592
Deferred revenue 206,255 178,495
Total current liabilities 872,159 825,931
Long-term debt - 248,443
Shareholders' equity
Capital Stock, no par value,
200 shares authorized, 143 shares
issued and outstanding 200 200
Retained earnings 1,073,090 412,584
Total shareholders' equity 1,073,290 412,784
Total liabilities and
shareholders' equity $ 1,945,449 $ 1,487,158
See accompanying notes to financial statements.
Acquired Business
Income Statements
For the Years Ended December 31, 1995 and 1994
1995 1994
Revenues:
Publication sales $ 8,102,508 $ 7,745,524
Cost of Sales:
Production Costs 4,945,098 4,967,455
Gross Profit 3,157,410 2,778,069
Expenses:
Selling, general and
administrative expenses 1,174,082 1,147,682
Depreciation 22,824 19,256
Total 1,196,906 1,166,938
Net income $ 1,960,504 $ 1,611,131
See accompanying notes to financial statements.
Acquired Business
Statement of Changes in Retained Earnings
For the Years Ended December 31, 1995 and 1994
Retained earnings - December 31, 1993 $ (431,180)
Net income 1,611,131
Dividends paid (767,367)
Retained earnings - December 31, 1994 412,584
Net income 1,960,504
Dividends paid (1,299,998)
Retained earnings - December 31, 1995 $ 1,073,090
See accompanying notes to financial statements.
Acquired Business
Statements of Cash Flows
For the Year Ended December 31, 1995 and 1994
Operating Activities 1995 1994
Net income $ 1,960,504 $ 1,611,131
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 22,824 19,256
Changes in assets and liabilities:
Accounts receivable (319,245) (55,787)
Inventory (48,314) (145,091)
Other assets (5,177) (37,292)
Accounts payable 25,617 13,362
Current portion of long-term debt (7,149) 7,909
Deferred revenue 27,760 -
Net cash provided by operating activities 1,656,820 1,413,488
Investing activities
Purchase of equipment (45,348) (15,383)
Net cash used in investing activities (45,348) (15,383)
Financing activities
Decreases in long-term debt (248,443) (255,592)
Dividends paid (1,299,998) (1,106,167)
Net cash used in financing activities (1,548,441) (1,361,759)
Increase in cash 63,031 36,346
Cash at the beginning of the year 446,788 410,903
Cash at the end of the year $ 509,819 $ 447,249
Supplemental information:
Interest Paid $ 36,862 $ 42,712
Income Taxes Paid None None
See accompanying notes to financial statements.
Acquired Business
Notes to Financial Statements
1. Significant Accounting Policies<PAGE>
Acquired Business
On September 6, 1996, Firestone Publishing Inc., a wholly-owned subsidiary of
Princeton Media Group Inc. (formerly DeNovo Corporation which changed its name
on October 29, 1996), acquired certain assets (property and equipment,
trademarks, and contract rights) of Dugent Publishing Corporation ("DPC") for $3
million in cash and a $4 million note given to the seller. DPC was engaged in
publishing special interest magazines.
Inventory
Inventory, consisting of paper used in the production of DPC's publications, is
valued at the lower of cost (on a FIFO basis) or market.
Property and Equipment
Machinery, furniture and equipment are stated at cost less accumulated
depreciation. Depreciation is provided at rates based on the estimated useful
lives using the straight-line method. Expenditures for maintenance and repairs
are charged to expense as incurred; replacements and major improvements are
capitalized.
Revenue Recognition
Sales of magazines (net of estimated returns) are recorded when each issue goes
on sale. The sale of magazine subscriptions are recorded as unearned revenue at
the gross subscription price at the time the order and payment are received.
Subscription revenue is then recognized over the term of the subscription.
Income Taxes
DPC elected to be treated as a small business under Subchapter S of the Internal
Revenue Code of 1986. Accordingly, all taxes are assessed at the shareholder
level and there is no provision for taxes in the historical financial
statements.
Use of Estimates
Management of DPC has made estimates and assumptions in the preparation of the
financial statements in conformity with generally accepted accounting principles
that affect the reported amounts of assets and liabilities and disclosures at
the dates of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
Advertising Costs
The costs of advertising are expensed as incurred. For the years ended December
31, 1995 and 1994, advertising costs included in selling, general and
administrative expenses were $17,022 and $4,290 respectively.
Acquired Business
Notes to Financial Statements
2. Accounts Receivable
Accounts receivable are recorded net of returns, credits, and allowances as
follows:
December 31
1995 1994
Accounts receivable $ 2,871,665 $ 1,550,844
Estimated returns and credits (2,088,686) (1,087,110)
Accounts receivable, net $ 782,979 $ 463,734
3. Property and Equipment
Property and equipment consist
of the following: December 31
1995 1994
Equipment, furniture and fixtures $ 145,537 $ 100,189
Less accumulated depreciation 117,201 94,377
$ 28,336 $ 5,812
DPC is depreciating machinery and equipment over seven years and furniture and
fixtures over five years.
4. Leases
DPC occupies a facility under a long-term lease. The lease is renewable and
provides for the payment of real estate taxes and certain other occupancy
expenses with escalations based on changes in the Consumer Price Index. Minimum
rental commitments under the noncancelable operating lease at December 31, 1995
is as follows:
Year ending December 31 Total
1996 $ 57,872
1997 57,872
1998 57,872
1999 57,872
2000 38,581
$ 270,069
Rental expense was $47,679 in 1995 and $59,538 in 1994.
Acquired Business
Notes to Financial Statements
5. Long-term debt
Long-term debt consists of the following:
December 31
1995 1994
Payable to former stockholder
for stock purchase $164,443 $276,035
Loan from distributor bearing interest
at prime plus 2% 84,000 228,000
Total 248,443 504,035
Less amounts due within one year 248,443 255,592
Long-term portion $ - $248,443
These obligations were paid in full in 1996.
6. Concentration of Credit Risk for Cash Held in Bank
The Company maintains cash balances in excess of the FDIC insurance limit. At
December 31, 1995, the uninsured cash balances were approximately $300,000. The
Company believes it mitigates the risk of loss by depositing its cash in major
banks. The Company routinely assesses the financial strength of its customers
and does not anticipate incurring losses in excess of established allowances.
7. Employee Benefits
The Company maintains an employee benefit plan under Section 401 - K of the
Internal Revenue Code. Eligible employees may contribute either 5% or 10% of
their compensation into the plan and the Company will match 5% of their
compensation. During 1995 and 1994 the Company contributed $23,776 and $13,112,
respectively in matching funds to the plan.
Item 7(b) Pro Forma Financial Information
On September 6, 1996, Princeton Media Group, Inc. (DeNovo Corporation until a
name change on October 29, 1996) acquired certain assets, and assumed no
liabilities, of Dugent Publishing Corporation ("DPC").
The accompanying unaudited pro forma consolidated income statement for the year
ended December 31, 1995 combines the historical consolidated income statement of
Princeton Media Group Inc. and the income statement of DPC as if the acquisition
had occurred on January 1, 1995.
The accompanying unaudited pro forma consolidated condensed income statement for
the eight months ended August 31, 1996 combines the historical consolidated
income of Princeton Media Group, Inc. and the income statement of DPC as if the
acquisition had occurred on January 1, 1996.
A pro forma consolidated balance sheet is not presented in this filing as the
effect of the acquisition is already reflected in the consolidated balance sheet
of Princeton Media Group, Inc. and Subsidiaries as of September 30, 1996 in Form
10-QSB.
The unaudited pro forma consolidated statements are not intended to reflect the
results of operations which would have actually resulted had the acquisition
been effective on the dates indicated or the results of operations which may be
obtained in the future.
Adjustments in both pro forma statements are as follows:
(a) To reflect pro forma depreciation on assets of $75,000 on a straight-
line basis over five years.
(b) To reflect pro forma amortization on intangible assets of $6,247,997 on
a straight-line basis over fifteen years.
(c) To reflect interest expense on a $4 million note at "prime plus 2%."
The prime interest rate was 8-1/2 % from January 1st through February 1, 1995,
9% through July 7, 1995, 8-3/4 % through December 20, 1995, and 8-1/2 % from
December 20, 1995 through August 31, 1996.
(d) To reflect federal and state income tax expense, net of federal benefit
for deduction of state income tax expense.
<TABLE>
Princeton Media Group, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995<PAGE>
Princeton Pro Forma
Media Acquired Adjustments Pro Forma
Group Inc. Business Dr. (Cr.) Consolidated
<S> <C> <C> <C> <C>
Revenues $ 482,847 $ 8,102,508 $ - $ 8,585,355
Cost of sales 517,168 4,945,098 5,462,266
Inventory writedown 99,149 - - 99,149
Gross profit (loss) (133,470) 3,157,410 - 3,023,940
Expenses:
Selling, general and
administrative expenses 1,405,591 1,174,082 - 2,579,673
Acquisition and consulting
expenses 1,873,750 - - 1,873,750
Depreciation 43,854 22,824 (a) (7,824) 58,854
Amortization of trademarks
and copyrights - - (b) 178,514 178,514
Total 3,323,195 1,196,906 170,690 4,690,791
Income (loss) from operations (3,456,665) 1,960,504 (170,690) (1,666,851)
Loss on disposal of assets 67,735 67,735
Interest and other, net 49,089 - (c) 428,603 477,692
Net Income (loss) (3,573,489) 1,960,504 (599,293) (2,212,278)
Pro forma provision for
income taxes - (d) 423,587 423,587
Pro forma net income (loss) $ (3,573,489) $ 1,960,504 $ (1,022,880) $ (2,635,865)
Pro forma net income
(loss) per share $ (1.07) $ (0.78)
Weighted average number
of shares outstanding 3,393,849 3,393,849
See accompanying notes to pro forma financial statements.
</TABLE>
<TABLE>
Princeton Media Group, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Income Statement
For the Eight Months Ended August 31, 1996
Princeton Pro Forma
Media Acquired Adjustments Pro Forma
Group Inc. Businesses Dr. (Cr.) Consolidated
<S> <C> <C> <C> <C>
Revenues $ 3,699,455 $ 7,336,828 $ - $11,036,283
Cost of sales 1,878,802 5,053,828 - 6,932,630
Gross profit 1,820,653 2,283,000 - 4,103,653
Expenses:
Selling, general and
administrative expenses 1,409,608 876,294 - 2,285,902
Depreciation - - (a) 10,000 10,000
Amortization of trademarks
and copyrights - (b) 119,009 119,009
Total 1,409,608 876,294 129,009 2,414,911
Income (loss) from operations 411,045 1,406,706 (129,009) 1,688,742
Gain on disposition of
subsidiary 415,257 415,257
Interest expense (525,676) - (c)(274,180) (799,856)
Net Income (loss) 300,626 1,406,706 (403,189) 1,304,143
Pro forma provision for
income taxes - (d)(265,802) (265,802)
Pro forma net income (loss) $ 300,626 $ 1,406,706 $ (668,991) $ 1,038,341
Pro forma net income
per share $ .76 $ 2.61
Weighted average number
of shares outstanding 396,246 396,246
See accompanying notes to pro forma financial statements.
</TABLE>
