SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-KSB
(mark one)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-16355
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PRINCETON MEDIA GROUP, INC.
(Name of Small Business Issuer in its Charter)
Ontario, Canada 98-0082860
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
214 Brazilian Avenue, Suite 300, Palm Beach, Florida 33480
(Address of principal executive offices)
561/659-0121
(Issuer's telephone number.)
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Securities registered under Section 12(b) of the Act: None.
Securities registered under Section 12(g) of the Exchange Act as of December
31, 1997: Common Stock, no par value.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer 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 pursuant to Item 405 of
Regulation S-B 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. [ ]
State issuer's revenues for its most recent fiscal year: $15,572,990.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average closing bid and ask prices of such stock on March
27, 1998, was approximately $7,864,000.
The number of shares outstanding of the issuer's common stock, no par value,
as of March 30, 1998, was 3,700,912.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
PRINCETON MEDIA GROUP, INC.
FORM 10-KSB
For the Year Ended December 31, 1997
INDEX
HEADING PAGE
PART I
Item 1. Description of Business 4
Item 2. Description of Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters 8
Item 6. Management's Discussion and Analysis 9
Item 7. Financial Statements 12
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 12
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) 13
Item 10. Executive Compensation 15
Item 11. Security Ownership of Certain Beneficial Owners
and Management 16
Item 12. Certain Relationships and Related Transactions 16
Item 13. Exhibits and Reports on Form 8-K 17
SIGNATURES 17
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY OF PRIOR BUSINESSES
Princeton Media Group, Inc. (which on October 29, 1996, changed its name from
DeNovo Corporation and herein is referred to as "PMG" or the "Company") was
incorporated under the laws of the Province of Ontario, Canada in September
1986. Through 1994, the principal focus of the Company's activities was the
development of industrial waste heat recovery systems and wastepaper recycling
projects. In July, 1994, a subsidiary of DeNovo merged with Ampac International
Inc. ("Ampac"), the parent company of TeleConcepts International Inc.
("TeleConcepts" or "TCI"). During 1994, the Company divested itself of all
industrial waste heat recovery and wastepaper recycling projects to concentrate
on the development of TeleConcepts.
Through October, 1995, TCI was engaged in the design, manufacture, marketing and
distribution of telephones and telecommunications equipment. These products
were designed primarily for residential and small office use and sold typically
through mass merchandisers, catalog showrooms, department stores and telephone
operating companies. As a result of the downturn in the consumer electronics
industry during 1995, as well as TCI's inability to secure adequate financing,
management discontinued TCI's operations as of December 31, 1995. All of the
stock of TCI was sold to an investor involved in management of a party related
to PMG by common directorship on August 5, 1996.
CHANGE TO PUBLISHING, PRINTING, AND MEDIA INDUSTRY - 1996
In 1996 PMG changed its focus to the publishing, printing, and related media
industry by acquiring substantially all of the assets and operations of a
publishing and printing business for $7 million and substantially all of the
assets and operations of a second publishing business also for $7 million. Each
of the acquisitions was accomplished through formation of a wholly-owned
subsidiary corporation which purchased assets of ongoing publishing businesses.
PMG, through its wholly-owned subsidiaries, Princeton Publishing, Inc. and
Firestone Publishing, Inc. publishes approximately 25 well-established lifestyle
and special interest magazines which are distributed throughout the United
States and internationally. The magazines include "Oui," "Fitness Plus,"
"Karate International," and "Lady's Circle Patchwork Quilts." Each magazine
targets a niche market consisting of readers with an active interest in a
particular lifestyle or activity. This type of reader traditionally remains
loyal to particular magazine titles for several years. The magazines' combined
readership is approximately 2.4 million per month.
PMG, through Kingston Press, Inc., a wholly-owned subsidiary of Princeton
Publishing, Inc., leases and operates a 70,000 square foot printing facility
located in Sussex, Wisconsin, just outside of Milwaukee. The plant prints all
of PMG's own magazines and also performs printing services for unrelated third
parties. During 1996, the Company began an equipment upgrade process designed to
increase plant utilization from 50% to nearly 100% printing capacity. In 1997
PMG completed the transition of moving all the Firestone titles, which were
previously printed by an outside company, to in-house printing at an annual
savings of approximately $535,000. The Company began to realize the benefit of
this transition in the fourth quarter of 1997. The plant currently prints 9.4
million magazines, 13.8 million catalogues, and 44.8 million brochures per year.
Princeton Publishing's editorial offices are located in New York City, and
Firestone Publishing's editorial staff operates out of Miami Lakes, Florida.
PMG's executive offices are located in Palm Beach, Florida.
Princeton Trademarks, Inc., another subsidiary of Princeton Publishing, Inc.,
owns or licenses all trademarks relating to the magazines. Some of the
trademarks are registered with the United States Patent and Trademark Office,
and applications have been filed to register the remainder. The trademarks have
been in continuous use for periods ranging from three to over 20 years.
The Company's magazines are distributed in the United States, Canada and
internationally by major magazine distributors pursuant to distribution
agreements.
CURRENT PLANS
During 1998, management of the Company intends to pursue a plan of improvements
and new opportunities, including achieving operational efficiencies through
synergies of editorial and production staffs, introducing Internet web sites for
several magazine titles, increasing the operating capacity of the printing
facility to accommodate new PMG titles as well as outside assignments, and
pursuing several complementary media acquisitions. If some or all of these
goals are achieved, management anticipates that the Company will experience
significant growth in total assets and proportionate net revenue.
SETTLEMENT OF CONVERTIBLE DEBT AND EQUITY SECURITIES
As detailed in Note 10 of the financial statements, in March 1997, the Company
finalized the settlement with holders of convertible securities issued to fund
the initial acquisitions of publishing operations in 1996. All of the debt and
equity securities, consisting of convertible debentures with a face value of
$1,925,000 and Series D and E preferred stock with original face values of $1.2
and $1.8 million, respectively, were retired in the second quarter upon transfer
of 1.1 million shares into an escrow account for purposes of the settlement. At
the end of the third quarter the settlement was finalized, and substantially all
cash and shares of common stock have been distributed. Although substantially
all distributions were made prior to the end of the third quarter, about 100,000
shares were distributed in early 1998.
Management believes that the final settlement of the conversion of the
securities into common stock has brought significant benefit to the Company
through improvement of the debt to equity ratio and through elimination of the
uncertainty of potential dilution related to the conversion that existed before
the settlement.
MANAGEMENT ENHANCEMENT
Since inception of publishing operations, the Board of Directors has sought to
identify and recruit management personnel with employment backgrounds in larger
publishing companies to establish a management team consistent with the
company's expansion goals.
In September, 1997, the Company hired Hugo Barreca as the new Chief Financial
Officer. Mr. Barreca is responsible for the company's overall financial
planning and management. He also directs the company-wide consolidation of
current operations and implements the company's expansion program through
continued acquisitions of related business operations in publishing,
advertising, websites, and other related media.
CURRENT EVENTS AND STRATEGIC PLANNING
The Company intends to continue the operations of the businesses acquired during
1996 and to expand these operations into new areas of distribution, including
the establishment of Internet web sites for several of its well-known magazine
titles. The expansion of distribution channels for the Company's brand-name
magazine titles, combined with the Company's continuing program of cost
reduction through consolidation of its operations, is anticipated to
substantially increase the net revenues from the Company's operations.
Management of the Company believes that, with the exception of advertising
revenue as detailed below, the results of operations for 1996 and 1997 were
consistent with the expectations established during the due diligence
investigation completed prior to the purchases of the two businesses. Management
further anticipates that the implementation of its business plan during 1998,
which includes, among other things, production efficiencies, cost-saving
measures, new market exploration, increasing production capacity in the
printing plant, and acquisition of additional businesses, will realize a
substantial growth in assets as well as increases in revenues and profits.
Consolidation of Editorial Production
In March, 1998, the Company announced that in April, 1998, the entire editorial
staff and editorial production of the Company's magazines will begin operating
out of its Miami location. The consolidation of editorial staff, which should
be completed by the end of May, will eliminate duplicate functions and related
overhead, with additional savings expected from the centralization of editorial
staff, equipment, and production materials in a single facility. The
consolidation of editorial operations is expected to result in savings of
approximately $500,000 over a twelve-month period. Certain key officers and
employees will remain in the New York offices and will continue to manage the
marketing and expansion of the Company's trademarks and intellectual property in
new media applications, as well as the development of acquisitions for the
Company's corporate growth program.
Printing Plant
In February, 1998, the Company announced several agreements which had been
completed for printing during 1998 that would increase the production volume in
the Company's printing plant to 100% capacity. The Company completed the
contracts and agreements with five different third party publishers who own and
distribute reader response materials as well as lifestyle and niche market
periodicals, including "Hockey," "Italian Food & Wine," and "Girlfriends." The
printing agreements represent an annual total of over 15 million monthly and bi-
monthly magazine units together with approximately 600 million reader-response
units. Anticipated additional net revenues to the company are expected to be
approximately $1.5 million per year.
Advertising
During third quarter of 1997, the Company executed an agreement with a major
advertiser that should result in an increase in the Company's advertising
revenues by $1 million during the eighteen months which began September 15,
1997. Due to the delay between order date and on-sale-date of advertising, the
Company realized a partial benefit of the contract in the fourth quarter of 1997
and expects to commence full realization of this benefit in the first quarter of
1998. Additionally, the Company is pursuing other long-term advertising
contracts with other advertisers and anticipates the introduction of several new
accounts in early 1998.
Internet Websites
The Company has established Internet websites related to several of the
Company's existing publications. The Company is evaluating the expansion of the
existing web sites, and the introduction of new sites which would utilize the
text, graphics, advertisers, products and services of most of its approximately
25 publications, which together represent one of the largest individually-owned
groups of well-known, name brand leisure and special interest titles. Revenues
obtained from the web sites are derived from monthly memberships, subscriptions,
advertising pages, and mail order products. The Company intends to proceed
diligently with Internet development to ensure that websites produce a near-term
financial benefit to the Company.
Acquisitions
The Company has been and is currently in active negotiations for the acquisition
of several different businesses, including a group of magazine titles and
various media businesses which would complement the Company's current
operations.
In conjunction with the acquisition process, Princeton Media Group, Inc., has
executed an agreement with an investment banking firm which has expressed a
commitment to the Company to arrange up to $40 million in financing for such
acquisitions, including the financial restructuring of the Company. On behalf
of other unrelated clients, the California-based investment banking firm has
participated in capital transactions of more than $3 billion over the past seven
years. The firm is presently advising the Company regarding due diligence
matters, valuation, and negotiation of purchase agreements. It is expected that
financing will be accomplished principally through an offering of corporate
debt.
Offices and Employees
As of December 31, 1997, the Company had approximately 100 full-time employees,
of which there were approximately 25 and 15 in the editorial offices in New York
City and Miami respectively, approximately 55 in the printing plant in
Milwaukee, and 5 in the administrative offices in Palm Beach. As noted above,
in 1998 editorial production will be moved to the Miami office, reducing the New
York office personnel to several key officers and employees with a corresponding
increase in the staff located in Miami.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's executive offices are located at 214 Brazilian Avenue, Suite 300
Palm Beach, Florida 33480. This office space is approximately 800 square feet
shared with another company related by common directorship. The Company's other
leased facilities consist of editorial offices in New York City and Miami,
Florida, and a printing plant in Milwaukee, Wisconsin. The printing plant lease
expires August 31, 1999. The plant lease requires monthly base payments of
$20,400 with annual adjustments tied to the CPI. During 1996 the New York City
offices were rented on a month to month basis. In 1997 the Company executed a
lease extending from February 1, 1997 through January 13, 2001 on new office
space of approximately 5,000 square feet; this new lease requires annual rent
beginning at $65,000 escalating over five years up to $76,040 in the final year.
The New York office is located in the heart of the revitalized Flatiron District
and the Company anticipates subletting excess space in light of its reduced
staff. As of December 31, 1997, the Miami lease required monthly payments of
$5,285 through August 31, 2000, on office space of approximately 5,000 square
feet. Additional leasing expense in the Miami office will be $1,317 per month
beginning April 1, 1998 for an additional 960 square feet to accommodate the
additional staff.
All leased facilities are on well-traveled streets in commercial areas and are
in good condition. No significant improvements are planned for any of the
leased facilities. The Company maintains insurance required by each lease and
considers the amounts adequate. The Company purchased printing equipment
throughout 1997 which has increased the production capacity of the printing
plant. The Company has an option to purchase the land and building where the
plant is located for $1.8 million as adjusted for the consumer price index
increase since May, 1989.
Total rental expense for all facilities detailed above was $494,861 and $280,270
in 1997 and 1996 respectively.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings other than routine
litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common shares trade on the Nasdaq SmallCap Market under the
symbol "PMGIF."
The following table sets forth, for the periods indicated, the reported
high and low bid and asked price quotations for the Common Stock for the
periods indicated as reported by the Nasdaq SmallCap Market. Such quotations
reflect inter-dealer prices, but do not include retail mark-ups, mark-downs,
or commissions and may not necessarily represent actual transactions.
Common Stock
Sale
Period of Quotation High Low
1997
Fourth quarter $ 3.62 $ 1.62
Third quarter 4.56 2.62
Second quarter 6.44 2.93
First quarter 6.06 2.00
1996
Fourth quarter $ 6.88 $ 1.44
Third quarter 10.62 5.00
Second quarter 27.50 8.75
First quarter 22.50 8.75
Quotes in 1996 have been restated to adjust for the October 29, 1996 one-for-
twenty reverse split.
As of December 31, 1997, there were 3,361,623 shares of common stock
outstanding. As of the same date, there were 559 holders of record and
approximately 750 beneficial holders of the common stock. As of March 30, 1998
there were 581 holders of record.
The Company has not declared or paid any cash dividends on its Common Stock
since its incorporation and anticipates that, for the foreseeable future,
earnings, if any, will continue to be retained for use in the Company's business
and will continue to be used to fund its operations. The receipt of cash
dividends by United States shareholders from a Canadian corporation, such as the
Company, may be subject to Canadian withholding tax.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD-LOOKING STATEMENTS
Statements contained in this Form 10-KSB regarding the Company's
future prospects or profitability constitute forward-looking statements and as
such, must be considered with caution and with the understanding that various
factors could cause actual results to differ materially from those in such
forward-looking statements. Such factors include but are not limited to
changes in revenues from distribution, advertising and subscriptions,
changes in costs of materials and operations, and failure of pending or
anticipated acquisitions to be consummated.
GENERAL
The Company, through its wholly-owned subsidiaries, Princeton and Firestone,
is engaged in the publishing, printing, and distribution of approximately 25
periodical consumer lifestyle magazines. The Princeton and Firestone editorial
staffs and offices are located in New York City and Miami, respectively. A
wholly-owned subsidiary of Princeton, Kingston Press, Inc., leases and
maintains a printing plant in Sussex, Wisconsin. The plant is used for the
printing of the Company's magazines and to perform printing work for third
parties on a contract basis. The Company's executive offices are located in
Palm Beach, Florida.
USE OF EBITDA
The following comparative discussion of the results of operations and financial
condition of Princeton Media Group, Inc. includes, among other factors, an
analysis of changes in the Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA") in order to help determine the operating performance of
the individual business units and of the company as a whole. EBITDA also
removes the effects of the significant amounts of amortization of intangible
assets and debt incurred in the two acquisitions completed during 1996 which now
total in excess of $18 million in assets.
In 1996 and 1997 the Company issued stock, options, and warrants in exchange for
the services of business consultants and investor relations professionals to
assist in informing the investing public of the establishment of the new
publishing operations as well as to assist in the settlement of convertible
securities issued to finance the acquisitions. The Company considers these
issuances of stock, which are non-cash payments for services unrelated to
evaluation of normal operations, to be charges to earnings after EBITDA.
Additionally, in 1996 the Company recognized a loss of $39,471 related to the
disposition of a wholly-owned subsidiary. This non-cash transaction unrelated
to normal operations has also been added to net loss after EBITDA in discussions
herein.
Financial analysts generally consider EBITDA to be an important measure of
comparative operating performance for the business of Princeton Media Group and,
when used in comparison to debt levels or the coverage of interest expense, as a
measure of liquidity. However, EBITDA should be considered in addition to, not
as a substitute for, operating income, net income, cash flow, and other measures
of financial performance and liquidity reported in accordance with generally
accepted accounting principles.
TRANSACTIONS AFFECTING COMPARABILITY OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The Company discontinued operations of its prior business as of December 31,
1995. Operations for the Company's new business of publishing and printing began
in the second quarter of 1996.
In comparing the year ended December 31, 1997 to the year ended December 31,
1996, it should be noted that the first of the two major publishing businesses
acquired in 1996 was purchased in March, 1996, and the second was purchased in
September, 1996, whereas both businesses have had operations for the entire year
of 1997. Increases in revenues, cost of goods sold, and operating expenses are
primarily due to the partial periods of operations during 1996 compared to
operations during the entire year of 1997, described as follows.
The first acquisition of a publishing and printing business (through Princeton
Publishing, Inc., a wholly-owned subsidiary) was on March 29, 1996. Results of
operations for the year ended December 31, 1997, included only three quarters in
1996 whereas there was a full year of operations in the year ended December 31,
1997. The second publishing business (through Firestone Publishing, Inc., a
wholly-owned subsidiary) was acquired on September 6, 1996. Results of
operations for the year ended December 31, 1996, included less than four months
in the 1996 amounts whereas there was a full year of operations in the year
ended December 31, 1997.
RESULTS OF OPERATIONS
During the year ended December 31, 1996, the Company completed a fundamental
change in its course of business through the purchase of two established
businesses in the publishing and printing industry and now focuses entirely on
publishing, printing and related media. In 1997 the Company concentrated on
establishing a base for expansion in the media industry by stabilizing its
equity structure through the settlement of the convertible securities used to
fund the purchases and by implementing a management consolidation plan including
bringing all printing of its own publications in-house to the Company's printing
plant and establishing a plan for centrally locating the editorial production
group. The two publishing groups which had operating histories of twenty-two
years and twenty-five years, respectively, and included one title continually
published for forty years and another for twenty-five years, are expected to
work with greater efficiency as a single, larger editorial group.
The year ended December 31, 1997, compared to the year ended December 31, 1996:
Revenues for the year ended December 31, 1997 amounted to $15,572,990 compared
to $8,542,695 for the year ended December 31, 1996, reflecting an increase of
$7,030,295. Revenues are almost entirely derived from magazine sales,
subscriptions, advertising, and outside printing. The increase in revenues
reflected for the year ended December 31, 1997 is a result of the Company's
acquisition of magazine publishing assets in March through September of 1996 and
the Company's continuing use of those assets in the same business.
Costs and expenses of revenues for the year ended December 31, 1997 were
$17,061,813 compared to $8,578,541 for the year ended December 31, 1996,
resulting in an increase of $8,483,272. In 1996 and 1997 the Company incurred
large costs for investor relations consultants to inform the investing public
and the general public that the Company had completed the acquisitions and had
established publishing and printing operations. Total expenses for investor
relations were $1,031,445 and $812,398 in 1997 and 1996 respectively. Of these
amounts $894,522 and $685,033 for 1997 and 1996 respectively were noncash
expense through the issuance of stock, options, and warrants.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1997, $968,826 in interest expense was
charged to operations, compared to $654,431 for the year ended December 31,
1996, reflecting an increase of $314,395. Interest expense is primarily related
to two promissory notes delivered by Princeton and Firestone in connection with
the purchases of the magazine publishing assets in March and September of 1996.
According to the terms of the Firestone note, accrued interest from September 6,
1996, through September 6, 1997, in the amount of $414,466 was added to
principal on September 6, 1997. Of the total interest expense of $968,826 in
1997, $673,812 was paid.
For the year ended December 31, 1997, EBITDA, as defined above, was $106,238.
For the year ended December 31, 1996, the Company reported an EBITDA of
$1,035,503. The Company attributes the changes in EBITDA to a number of factors.
Previous declines in revenue from advertising, due primarily to financial
difficulties experienced by existing advertisers, is being remedied by new
advertising contracts, now in place and being negotiated, to replace previous
advertisers. Declines in circulation are affecting many newsstand-based titles
as consolidation in the traditional newsstand wholesaler distribution network
occurs on a large scale.
The Company believes that its best current strategy is to continue to improve
its products so as to increase its market share, so that when the newsstand
distribution network regains vitality, the Company will be in a strong position
to benefit from the increased sales in the industry. In keeping with that
strategy, expenses have increased as the Company has invested in a
superstructure that will accommodate a more modern company of larger size.
Examples of these expenditures include the inauguration of an employee benefits
package which provides basic health and dental coverage, research costs
associated with due diligence analysis of potential acquisition targets,
investments in new computer equipment for editorial production, reorganized
management with certain higher wage opportunities in order to attract superior
professional staff, and consulting arrangements associated with investor
relations and potential acquisitions. The Board of Directors expects these
investments to generate positive results as the Company streamlines its
operations in 1998.
Net loss for the year ended December 31, 1997 was $2,570,032 which represents a
decrease of $1,312,666 from the net loss of $3,882,698 for the year ended
December 31, 1996. These losses also include nonrecurring consulting fees as
detailed above. The decrease in loss from operations is attributable to the
operations and revenue of the Company's subsidiaries, Princeton and Firestone.
Primarily, interest expense was accrued pursuant to two promissory notes
executed by Princeton Publishing, Inc., in the amount of $5 million and
Firestone Publishing, Inc., in the amount of $4 million, respectively, in
connection with the purchases of the magazine publishing assets.
Monthly interest payments of approximately $43,000 are due pursuant to the $5
million promissory note executed upon acquisition of the publishing assets
acquired March 29, 1996.
Interest on the $4 million promissory note executed upon acquisition of the
publishing assets acquired on September 6, 1996 was accrued for one year and on
September 6, 1997, accrued interest was added to principal in the amount of
$414,166. Monthly payments of approximately $113,000 of principal and interest
are due on a straight-line amortization schedule over forty-eight months with
the first payment paid on October 6, 1997. The Company anticipates that cash
flows from operations will be sufficient to pay all debt service obligations of
the two subsidiaries throughout the life of the loans.
Liquidity and capital resources are hereinafter discussed in three broad
categories: operating activities, investing activities and financing
activities.
Cash decreased $13,605 to $616,558 at December 31, 1997 from $630,163 at
December 31, 1996. Net cash used for operating activities was $748,037 during
the year ended December 31, 1997, compared to cash used by operating activities
of $781,492 during the year ended December 31, 1996. The decrease of $33,455 is
primarily attributable to establishment of continuing operations in connection
with the change in business of the Company in 1996 from telecommunications
equipment sales to magazine publishing and printing with only a partial year of
new operations in 1996.
During the year ended December 31, 1997, net cash used in investing activities
was $190,395 compared with $5,179,229 used in investing activities during the
year ended December 31, 1996. The decrease of $4,988,834 is due to purchase of
trademarks, copyrights and equipment for the Company's publishing operations in
1996, whereas in 1997 the Company had normalized capital expenditures for
computer and printing equipment.
During the year ended December 31, 1997, net cash provided by financing
activities was $924,827, representing a decrease of $5,652,198 from net cash
provided by financing activities of $6,577,025 during the year ended December
31, 1996. The decrease is a result primarily of the 1996 net proceeds from the
sales of the Company's securities in order to fund the Princeton and Firestone
subsidiaries and the purchases of the publishing, printing, and media assets,
whereas in 1997 the Company did not have extraordinary financing needs.
Additionally, in 1997 the Company received proceeds from sale of common stock of
$2,454,996 which, combined with distributions of common stock, was paid in
settlement of the convertible securities consisting of convertible debentures
and preferred stock. The convertible securities were issued in 1996 to fund
acquisitions of current assets and operations of the Company and final
settlement of the conversion occurred in September, 1997.
The Company intends to continue the operations of the businesses acquired during
1996 and to expand these operations into new areas of distribution, including
foreign magazine versions and the establishment of Internet web sites for
several of its well-known magazine titles. Broader marketing and sales of
brand-name magazine content is anticipated to increase substantially the
revenues from the Company's operations, compared with the results realized
during 1996 and 1997. Management of the Company believes that the results of
1996 and 1997 operations were consistent with the expectations established
during the due diligence investigation completed prior to the purchases of the
two businesses. Management anticipates that the further implementation
of its business plan during 1998, which includes, among other things, production
efficiencies, cost-saving measures, new market exploration, expansion of the
printing plant, and acquisition of additional businesses, will realize a
substantial growth in assets as well as increases in revenues and profits.
RECENT ACCOUNTING PRONOUNCEMENTS
See Summary of Significant Accounting Policies to the Company's Consolidated
Financial Statements for information relating to recent accounting
pronouncements.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included in this Annual Report following
Item 13:
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Consolidated Balance Sheets December 31, 1997 and 1996
Consolidated Statements of Operations and Accumulated Deficit
For the Years Ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On October 31, 1997, Coopers & Lybrand, LLP, ("C&L"), the independent auditors
of the Registrant, notified the Registrant that C&L declined to stand for
re-election.
The accountants' report of C&L on the financial statements of the Registrant for
the years ended December 31, 1996 and December 31, 1995 did not contain any
adverse opinion or disclaimer of opinion, and was not qualified or modified as
to uncertainty (other than a going concern modification relating to the report
for the year ended December 31, 1995), audit scope, or accounting principles.
C&L's decision not to stand for re-election was not approved or recommended by
the Registrant's Board of Directors, audit committee or similar committee of the
Board of Directors.
During the two years ended December 31, 1996 and the subsequent period through
October 31, 1997, (a) there were no disagreements with C&L on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to C&L's satisfaction
would have caused C&L to make reference in connection with its report to the
subject matter of the disagreement, and (b) C&L had not advised the Registrant
of any reportable events as defined in paragraphs (1) through (3)of Regulation
S-B Item 304(a)(1)(iv)(B).
Engagement of New Accountants
On November 7, 1997, the Registrant engaged the firm of Holyfield Associates,
P.A. ("Holyfield") as its new independent accountants. Holyfield was not
consulted regarding the application of accounting principles to a specific
completed or contemplated transaction; or the type of audit opinion to be
rendered with regard to the Registrant's financial statements; or any
disagreements or reportable events as such terms are used in Regulation S-B,
Item 304(a)(2).
The change in accountants from C&L to Holyfield was the subject of a report on
Form 8 - K dated October 31, 1997.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Information concerning the directors, executive officers and significant
employees as of March 20, 1998:
Year First Position
Elected With
Name Age Director Company
PRINCETON MEDIA GROUP, INC.
J. McNamara 49 1996 Chairman, Director, Chief Executive Officer,
Acting President, and Secretary
J. Leshinsky 44 1996 Director
R. Kendall 49 N/A Senior Vice President - Finance, Treasurer,
and Assistant Secretary
H. Barreca 46 N/A Chief Financial Officer
WHOLLY-OWNED SUBSIDIARIES OF PRINCETON MEDIA GROUP, INC.
H. McQueeney 59 N/A President - Princeton Publishing, Inc.
W. Weidenbaum 61 N/A President - Firestone Publishing, Inc.
Set forth is a biographical description of each director, executive officer
and significant employee of the Company and its wholly-owned subsidiaries:
James J. McNamara, Chairman of the Board, identified and secured the acquisition
of all publishing and printing assets purchased by Princeton Media Group, Inc.
He has been since June, 1993 the President and CEO of Celebrity Entertainment,
Inc., a company engaged in the development and management of destination resorts
and other related business interests. From 1991 through 1993 Mr. McNamara was
the President and CEO of Production Services International, Inc., a television
and motion picture development company which became a subsidiary of Celebrity in
1993. For over twenty-five years Mr. McNamara has developed and produced motion
pictures and television series. His film industry experience included
maintaining a corporate residence at Twentieth Century-Fox for five years.
He produced the major motion picture "Flipper" in 1995 for Universal Studios.
Previously Mr.McNamara owned and operated a chain of music stores and an
international concert promotion and talent representation company. He also
serves as a consultant to the chairman of Alliance Entertainment, Inc.
Joel Leshinsky is President and founder of The Production Team, Inc., a
television production and writing firm based in Fort Lauderdale, Florida. Prior
to founding the firm in 1993, Mr. Leshinsky was a self-employed television
producer and writer for approximately seven years.
Robert F. Kendall, CPA, joined PMG in December, 1995 as part of the due
diligence team on the initial publishing business acquisition. He oversees all
financial aspects of acquisitions, financial statements, audit supervision, and
the tax and compliance filings. From May, 1990 to April, 1996, Mr. Kendall
served as assistant controller at MIG Companies, a group of fifty companies
managing over $1.2 billion in assets. Prior affiliations include the
international accounting firm of Laventhol & Horwath and other<PAGE>
regional
accounting and auditing firms.
Hugo Barreca, Esq., joined the Company as Chief Financial Officer in September
1997. His twenty years of experience in the publishing industry includes senior
positions with Time Inc., the New York Times Magazine Group, and Gruner + Jahr
USA Publishing. His responsibilities have included strategic business planning,
financial planning and management, contract negotiations and purchasing, and
computer systems development including inventory database systems, financial
management systems, logistic models and telecommunications systems. Mr. Barreca
received an M.B.A. from New York University and a J. D. from Fordham School of
Law.
Henry McQueeney became President of Princeton Publishing, Inc. in April, 1996.
Prior to that time he served for 20 years as President of the corporations that
made up Kearny Publishing Group, the entity from which Princeton purchased its
first group of publishing assets in March, 1996.
Walter Weidenbaum became President of Firestone Publishing, Inc. upon its
formation in September, 1996, at the time of purchase of the assets of Dugent
Publishing Corp. Mr. Weidenbaum previously served as President of Dugent for
over 20 years.
Directors do not receive any cash remuneration for their services as such,
although they are reimbursed in accordance with the Company policy for their
expenses in connection with attending meetings of the Board. Directors serving
on committees of the Board receive no special compensation for such activities.
There are no family relationships between any of the Officers or Directors of
the Company.
Officers of the Company are elected by the Board of Directors at its first
meeting after each Annual Meeting of the Shareholders and serve a term of office
until the next Annual Meeting. Officers elected by the Board of Directors at
any other time serve a term of office until the next Annual Meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
During 1997, the following directors, officers or beneficial owners of more than
ten percent of any class of the Company's equity securities registered pursuant
to section 12 failed to file on a timely basis reports required by section 16(a)
of the Exchange Act:
No. of No. of Transactions Failure to File
Name Late Reports Not Reported Timely Required Form
UFH Endowment, Ltd. 0 0 1 (Form 3)
Russel Leventhal 1 0 0
James J. McNamara 1 1 0
Hugo Barreca 1 1 0
Joel Leshinsky 1 1 0
ITEM 10. EXECUTIVE COMPENSATION
The following tables set forth all compensation awarded to, earned by or paid to
the executive officers indicated during the years ended December 31, 1997 and
1996. None of such persons served the Company in any capacity during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Under-
Other Restricted Lying All Other
Name and Annual Stock Options/ LTIP Compen-
Principal Year Salary Bonus Compensation Awards SARs Payouts sation
Position ($) ($) ($) ($) (#) ($) ($)
James McNamara 1997 $150,000 - - - 1,200,000 - -
Chairman of Board 1996 - - - - - - -
Hugo Barreca 1997 $ 43,750(1) - - - - - -
Chief Financial 1996 - - - - - - -
Officer of PMG
Walter Weidenbaum 1997 $140,000 - - - - - -
President of 1996 $105,000(2) - - - - - -
Firestone Publish-
ing, Inc.
Henry M. McQueeney 1997 $100,000 $6,000 - - - - -
President of 1996 $ 75,000(3) - - - - - -
Princeton Publish-
ing, Inc.
</TABLE>
(1) Based on an annual salary of $150,000; term commenced 9/97.
(2) Based on an annual salary of $140,000; term commenced 4/96.
(3) Based on an annual salary of $100,000; term commenced 4/96.
<TABLE>
Option/SAR Grants in Last Fiscal Year
Individual Grants
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
James McNamara 1,200,000(1) 100% $3.00/Share(2) 1/15/08
Hugo Barreca - - - -
Walter
Weidenbaum - - - -
Henry
McQueeney - - - -
</TABLE>
(1) Options were granted pursuant to Employment Agreement with Mr. McNamara.
Options vest and become exercisable in ten equal increments over 10 years,
commencing January 16, 1998, subject to acceleration under certain conditions.
The first accelerating condition, namely, that the Company's adjusted net
income for four consecutive quarterly periods equal or exceed $1,000,000, or
the Company's net revenues for four consecutive quarterly periods exceed
$10,000,000, was met on March 31, 1997, thus accelerating the vesting and
exercisability of 400,000 of the options. The remaining 800,000 are subject
to accelerated vesting, to the extent not already vested, if and when the
Company's adjusted net income exceeds $2,000,000 for four consecutive
quarters, or the Company's net revenues for four consecutive quarterly periods
exceeds $17,000,000. Vesting and exercisability are also subject to
acceleration in the event of termination or non-renewal of employment by the
Company without cause, or termination by the Employee in certain events
including breach by the Company of the Employment Agreement and change in
control of the Company.
(2) Exercise price was reduced to $2.00 per share in January, 1998 per vote
of the Board of Directors.
<TABLE>
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Name Shares Number of Securities Value of
Acquired On Value Underlying Unexercised in the
exercise (#) Realized Options/SAR's at FY- Money Options/SAR's
End (#) at FY-End ($)
Exercisable/Unexercisable Exercisable/Unexercisable
James
McNamara 0 0 400,000/800,000 0/0
Hugo Barreca - - - -
Walter
Weidenbaum - - - -
Henry
McQueeney - - - -
</TABLE>
PRINCETON MEDIA GROUP, INC.
James J. McNamara, Chairman of the Board, is acting as President and CEO of PMG
until a president is elected. Mr. McNamara has an employment contract as
detailed in Form 10-Q, March 31, 1996 incorporated herein by reference
providing an annual salary of $150,000 and reimbursement of certain corporate
expenses. The contract provides for certain stock options, none of which have
been exercised.
Princeton Media Group, Inc. is a party to an employment contract with Hugo
Barreca, its Chief Financial Officer, providing for a one-year term which
commenced September 15, 1997. Mr. Barreca's annual salary pursuant to the
contract is $150,000.
The Company's wholly-owned subsidiaries have entered into employment contracts
as follows:
PRINCETON PUBLISHING, INC.
Princeton Publishing, Inc. is a party to an employment contract with Henry M.
McQueeney, its President, providing for a three-year term which commenced March
29, 1996. Mr. McQueeney's annual salary pursuant to the contract is $100,000.
FIRESTONE PUBLISHING, INC.
Firestone Publishing, Inc. is a party to an employment contract with Walter
Weidenbaum, its President, providing for a five-year term which commenced
September 6, 1996. Mr. Weidenbaum's annual salary pursuant to the contract is
$140,000.
Firestone Publishing, Inc. is a party to an employment contract with Steve
Rottenberg, its Vice President - Production, providing for a five-year term
which commenced September 6, 1996. Mr. Rottenberg's annual salary pursuant to
the contract is $75,000.
Firestone Publishing, Inc. is a party to an employment contract with Travis
Allen, its Vice President - Marketing, providing for a five-year term which
commenced September 6, 1996. Mr. Allen's annual salary pursuant to the
contract is $75,000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date hereof, certain information
with respect to the beneficial ownership of outstanding shares of the Company's
common stock by: (i) each person known by the Company to be the beneficial
owner of five percent or more of its outstanding common stock, (ii) each
director and named executive officer of the Company individually and (iii) all
executive officers and directors of the Company as a group.
Name and
Address of Amount and Percent
Beneficial Title of Nature of Of
Holder Class Ownership Class
James J. McNamara Common Stock 400,000(1) 9.9%
214 Brazilian Ave.
Suite 300
Palm Beach FL 33480
Hugo Barreca Common Stock 5,000(2) Less than 1%
12 West 27th St.
14th Fl.
New York NY 10001
Walter Weidenbaum Common Stock 1,390(2) Less than 1%
14411 Commerce Way
Suite 420
Miami Lakes, FL 33016
Henry M. McQueeney Common Stock 2,900(3) Less than 1%
12 West 27th St.
14th Fl.
New York NY 10001
Joel Leshinsky Common Stock 22,000(1) Less than 1%
3409 Heather Terrace
Lauder Hill, FL 33319
All Officers and Common Stock 439,290(4) 10.1%
Directors as a Group
(5 persons)
Allstate Communications, Inc. Common Stock 25,000(2) Less than 1%
9000 Sunset Blvd.
Suite 606
Los Angeles, CA 90069
Allstate Communications, Inc. Common Stock 31,000(2) 1%
Profit Sharing Plan
9000 Sunset Blvd.
Suite 606
Los Angeles, CA 90069
Russel Leventhal Common Stock 256,500(5) 7.0%
Profit Sharing Plan
9000 Sunset Blvd.
Suite 606
Los Angeles, CA 90069
(1) Beneficially owned pursuant to currently exercisable stock options.
(2) Directly owned.
(3) Includes 2,650 shares directly owned and 250 shares beneficially owned, the
holder of record of which is an Individual Retirement Account f/b/o
Mr. McQueeney's spouse.
(4) Includes 9,290 shares directly owned and 430,000 shares beneficially owned
pursuant to currently exercisable stock options.
(5) Includes 200,500 shares directly owned; 25,000 shares beneficially owned, of
which the direct owner is Allstate Communications, Inc. (these shares also
listed above); and 31,000 shares beneficially owned, of which the direct owner
is Allstate Communications, Inc. Profit Sharing Plan (these shares also listed
above).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1997, the Company had a note receivable due from a company related by common
directorship in the amount of $284,017 due upon demand with interest accruing at
prime beginning January 1, 1998 (prime was 8.5% as of December 31, 1997).
In 1996, the Company had a short-term note with the same company due upon demand
with interest accruing at prime (8.25% as of December 31, 1996). The note
balance and related accrued interest was $6,975 and $83, respectively, as of
December 31, 1996. The note was paid off in 1997. Interest expense on the note
was $9,059 during 1996.
In 1996 the related company purchased $1.4 million in Preferred Series E shares.
All of these shares were redeemed during 1997. Cumulative dividends paid on
these shares in conjunction with a conversion settlement amounted to $490,000
for the year ended December 31, 1997.
The Company shares corporate headquarters office space with the related company.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
2.1 Asset Purchase Agreement with Kearny Publishing Group dated March 29,
1996, filed as Exhibit 2.1 to the Company's Report on Form 8-K dated
March 29, 1996, File No. 0-16355, filed with the Securities and Exchange
Commission on April 12, 1996; incorporated herein by reference.
2.2 Asset Purchase and Sale Agreement with Dugent Publishing Corp. dated
July 18, 1996, filed as Exhibit 2.1 to the Company's Report on Form 8-K
dated July 18, 1996, File No. 0-16355, filed with the Securities and
Exchange Commission on August 1, 1996; incorporated herein by reference.
2.3 Asset Purchase Agreement with Dugent Publishing Corp. dated Sept. 6,
1996, filed as Exhibit 2.1 to the Company's Report on Form 8-K dated
Sept. 6, 1996, File No. 0-16355, filed with the Securities and Exchange
Commission on Sept. 11, 1996; incorporated herein by reference.
3.1 Articles of Incorporation, filed as Exhibit 3.1 to the Company's Form
10-KSB for fiscal year ended December 31, 1996, File No. 0-16355, filed
with the Securities and Exchange Commission on April 15, 1997; incorporated
herein by reference.
3.2 By-Law Number 1 of the Company, filed as Exhibit 3.2 to the Company's Form
10-KSB for fiscal year ended December 31, 1996, File No. 0-16355, filed
with the Securities and Exchange Commission on April 15, 1997; incorporated
herein by reference.
4.1 Designation of Series A, B, C, D and E Preferred Stock, included as part
of Exhibit 3.1, filed as Exhibit 3.1 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.1 Promissory Note payable to Kearny Publishing, Inc. dated March 29, 1996,
filed as Exhibit 10.1 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.2 Security Agreement in favor of Kearny Publishing, Inc. dated March 29,
1996, filed as Exhibit 10.2 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.3 Promissory Note payable to Dugent Publishing Corp. dated Sept. 6, 1996,
filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB
for the quarterly period ended Sept. 30, 1996, File No. 0-16355, filed
with the Securities and Exchange Commission on November 15, 1996;
incorporated herein by reference.
10.4 Security Agreement in favor of Dugent Publishing Corp. dated Sept. 6,
1996, filed as Exhibit 10.2 to the Company's Quarterly Report on Form
10-QSB for the quarterly period ended Sept. 30, 1996, File No. 0-16355,
filed with the Securities and Exchange Commission on November 15, 1996;
incorporated herein by reference.
10.5 Distribution Agreement with Curtis Circulation Company dated March 14,
1990, filed as Exhibit 10.5 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.6 Amendment to Distribution Agreement with Curtis Circulation Company
dated Nov. 20, 1990, filed as Exhibit 10.6 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.7 Amendment to Distribution Agreement with Curtis Circulation Company
dated Feb. 24, 1992, filed as Exhibit 10.7 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.8 Amendment to Distribution Agreement with Curtis Circulation Company
dated Aug. 5, 1992, filed as Exhibit 10.8 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.9 Amendment to Distribution Agreement with Curtis Circulation Company
dated Jan. 31, 1995, filed as Exhibit 10.9 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.10 Amendment to Distribution Agreement with Curtis Circulation Company
dated April 8, 1996, filed as Exhibit 10.10 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.11 Agreement with Flynt Distributing Company [now with Curtis Circulation
Company, as successor] dated Aug. 31, 1992, filed as Exhibit 10.11 to
the Company's Form 10-KSB for fiscal year ended December 31, 1996, File
No. 0-16355, filed with the Securities and Exchange Commission on April 15,
1997; incorporated herein by reference.
10.12 Loan and Security Agreement with Curtis Circulation Company dated June
28, 1996, filed as Exhibit 10.12 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated
herein by reference.
10.13 Licensing and Purchase Option Agreement with Michael DePasquale Jr.
Enterprises, Inc. dated July 6, 1990, filed as Exhibit 10.13 to the
Company's Form 10-KSB for fiscal year ended December 31, 1996, File No.
0-16355, filed with the Securities and Exchange Commission on April 15,
1997; incorporated herein by reference.
10.14 Lease of Wisconsin premises with Harvey Geipel, Lessor dated July 14,
1989, filed as Exhibit 10.14 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.15 Option from Harvey Geipel dated July 14, 1989, filed as Exhibit 10.15 to
the Company's Form 10-KSB for fiscal year ended December 31, 1996, File
No. 0-16355, filed with the Securities and Exchange Commission on April
15, 1997; incorporated herein by reference.
10.16 Assumption and Guarantee of Lease in favor of Harvey Geipel dated Dec.
30, 1996, filed as Exhibit 10.16 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.17 Distribution Agreement with Kable News Company, Inc. dated May 14, 1996,
filed as Exhibit 10.17 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.18 Cross-Guaranty with Dojo Publishing Inc. in favor of Kable News Company,
Inc. dated May 14, 1996, filed as Exhibit 10.18 to the Company's Form
10-KSB for fiscal year ended December 31, 1996, File No. 0-16355, filed
with the Securities and Exchange Commission on April 15, 1997; incorporated
herein by reference.
10.19 Licensing Agreement with Casey Lee Klinger d/b/a KNC, Inc. dated July
27, 1992, filed as Exhibit 10.19 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated
herein by reference.
10.20 Service Agreement with Clark Distribution Systems, Inc. dated April 19,
1996, filed as second Exhibit 10.19 [two consecutive exhibits were
erroneously numbered 10.19 in said filing] to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.21 Assignment by Quiltco Corp. dated June 28, 1996, filed as Exhibit 10.20
to the Company's Form 10-KSB for fiscal year ended December 31, 1996, File
No. 0-16355, filed with the Securities and Exchange Commission on April
15, 1997; incorporated herein by reference.
10.22 License Agreement with Grand International Communications dated April
28, 1992, filed as Exhibit 10.21 to the Company's Form 10-KSB
for fiscal year ended December 31, 1996, File No. 0-16355, filed with the
Securities and Exchange Commission on April 15, 1997; incorporated herein
by reference.
10.23 Employment Agreement with Walter Weidenbaum dated September 6, 1996,
filed as Exhibit 10.22 to the Company's Form 10-KSB for fiscal year ended
December 31, 1996, File No. 0-16355, filed with the Securities and Exchange
Commission on April 15, 1997; incorporated herein by reference.
10.24 Employment Agreement with Steven Rottenberg dated September 6, 1996,
filed as Exhibit 10.23 to the Company's Form 10-KSB for fiscal year ended
December 31, 1996, File No. 0-16355, filed with the Securities and Exchange
Commission on April 15, 1997; incorporated herein by reference.
10.25 Employment Agreement with Travis Allen dated September 6, 1996, filed as
Exhibit 10.24 to the Company's Form 10-KSB for fiscal year ended December
31, 1996, File No. 0-16355, filed with the Securities and Exchange
Commission on April 15, 1997; incorporated herein by reference.
10.26 Severance Agreement with Michael D. Herman dated December 17, 1996, filed
as Exhibit 10.25 to the Company's Form 10-KSB for fiscal year ended
December 31, 1996, File No. 0-16355, filed with the Securities and Exchange
Commission on April 15, 1997; incorporated herein by reference.
10.27 Severance Agreement with David Critchfield dated December 17, 1996, filed
as Exhibit 10.27 to the Company's Form 10-KSB/A for fiscal year ended
December 31, 1997, File No. 0-16355, filed with the Securities and Exchange
Commission on July 31, 1997; incorporated herein by reference.
10.28 Employment Agreement between the Company and James J. McNamara dated
January 1, 1997; filed as Exhibit 10.1 to the Company's Form 10-QSB for
the quarterly period ended March 31, 1997, File No. 0-16355, filed with the
Securities and Exchange Commission on May 20, 1997; incorporated herein by
reference.
10.29 Common Stock Purchase Option granted by the Company to James J. McNamara
dated January 16, 1997; filed as Exhibit 10.2 to the Company's Form 10-QSB
for the quarterly period ended March 31, 1997, File No. 0-16355, filed with
the Securities and Exchange Commission on May 20, 1997; incorporated herein
by reference.
10.30 Service Agreement with Clark Distribution Systems, Inc. dated May 23,
1997; filed as Exhibit 10.1 to the Company's Form 10-QSB for the quarterly
period ended June 30, 1997, File No. 0-16355, filed with the Securities
and Exchange Commission on August 15, 1997; incorporated herein by
reference.
10.31 Properties Purchase Agreement with Paradise Magazine, Inc. dated
March 17, 1997; filed as Exhibit 10.2 to the Company's Form 10-QSB for the
quarterly period ended June 30, 1997, File No. 0-16355, filed with the
Securities and Exchange Commission on August 15, 1997; incorporated herein
by reference.
10.32 Letter Agreement with Kable Distribution Services dated April 10,
1997; filed as Exhibit 10.3 to the Company's Form 10-QSB for the quarterly
period ended June 30, 1997, File No. 0-16355, filed with the Securities
and Exchange Commission on August 15, 1997; incorporated herein by
reference.
10.33 Lease with 12 West 27th Street Associates dated January 23, 1997;
filed as Exhibit 10.4 to the Company's Form 10-QSB for the quarterly
period ended June 30, 1997, File No. 0-16355, filed with the Securities
and Exchange Commission on August 15, 1997; incorporated herein by
reference.
10.34 Guaranty in favor of 12 West 27th Street Associates dated January
23, 1997; filed as Exhibit 10.5 to the Company's Form 10-QSB for the
quarterly period ended June 30, 1997, File No. 0-16355, filed with the
Securities and Exchange Commission on August 15, 1997; incorporated herein
by reference.
10.35 Employment Agreement with Hugo Barreca dated September 15, 1997; filed as
Exhibit 10.1 to the Company's Form 10-QSB for the quarterly period ended
September 30, 1997, File No. 0-16355, filed with the Securities and
Exchange Commission on November 14, 1997; incorporated herein by
reference.
10.36 Distribution Agreement with Curtis Circulation Company dated April 22,
1983.
10.37 Amendment to Distribution Agreement with Curtis Circulation Company dated
March 6, 1989.
10.38 Amendment to Distribution Agreement with Curtis Circulation Company dated
February 3, 1994.
10.39 Lease Agreement with Dolphin Lakes Partnership [now with Nationalwide
Finance Corporation, as successor] dated July 20, 1995.
10.40 Addendum to Lease with Nationalwide Finance Corporation dated February 10,
1998.
(b) The following report on Form 8-K was filed during the quarter ended
December 31, 1997 by the Company:
Date Date
of Report Filed Items Reported Financial Statements Filed
10/31/97 11/7/97 Accountant's Decision Not None
to Stand for Re-Election;
Engagement of New Accountants
(Item 4)
SIGNATURES
In accordance with Section 13 and 15 (d) of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: March 30, 1998
PRINCETON MEDIA GROUP, INC.
/s/ James J. McNamara
By: James J. McNamara,
Chairman of the Board and
Acting Chief Executive Officer
/s/ Joel Leshinsky,
By: Joel Leshinsky, Director
/s/ Robert F. Kendall
By: Robert F. Kendall, CPA
Senior Vice President - Finance/
Treasurer
/s/ Hugo Barreca
By: Hugo Barreca,
Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Princeton Media Group, Inc.
We have audited the accompanying consolidated balance sheets of Princeton Media
Group, Inc. and Subsidiaries (the "Company") as of December 31, 1997, and 1996
and the related consolidated statements of operations and accumulated deficit,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 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 consolidated financial position of
Princeton Media Group, Inc. and Subsidiaries as of December 31, 1997, and 1996
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Holyfield Associates, P.A.
Certified Public Accountants
West Palm Beach, Florida
March 27, 1998
<TABLE>
PRINCETON MEDIA GROUP, INC.
Consolidated Balance Sheets
December 31, 1997 and 1996
1997 1996
<S> <C> <C>
Assets
Current assets
Cash $ 616,558 $ 630,163
Accounts receivable, net 2,501,038 2,535,668
Marketable securities 17,080 -
Inventories 535,984 656,025
Deferred income tax benefit - 271,300
Prepaid expenses 35,014 145,911
Total current assets 3,705,674 4,239,067
Property and equipment, net 1,705,060 1,756,212
Deposits 36,619 49,330
Due from related party 284,017 -
Deferred acquisition costs 578,644 -
Trademarks, copyrights and other intangibles, net 12,180,262 12,094,863
Total assets $ 18,490,276 $ 18,139,472
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 1,929,692 $ 788,109
Accrued expenses 363,279 1,413,711
Current portion of long-term debt 1,010,110 212,753
Borrowing under line of credit 618,333 -
Due to related party - 6,975
Deferred revenue 790,658 469,867
Accrued interest 60,331 193,562
Total current liabilities 4,772,403 3,084,977
Long-term debt, less current portion 8,250,007 8,809,905
Convertible debentures payable - 1,925,000
Deferred taxes - 166,900
Shareholders' equity:
Series A Preference Shares 28,923 28,923
Series C Preference Shares 739,696 739,696
Series D Preference Shares - 1,005,000
Series E Preference Shares - 1,549,484
Common Stock 19,671,389 12,197,802
Deficit (14,972,142) (11,368,215)
Total shareholders' equity 5,467,866 4,152,690
Total liabilities and shareholders' equity $18,490,276 $ 18,139,472
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
PRINCETON MEDIA GROUP, INC.
Consolidated Statements of Operations and Accumulated Deficit
For the Years Ended December 31, 1997 and 1996
1997 1996
<S> <C> <C>
Revenues:
Distribution, circulation, and other income $ 11,398,054 $ 5,423,890
Advertising income 3,000,838 2,193,924
Printing income 1,174,098 924,881
Net revenues 15,572,990 8,542,695
Costs and operating expenses:
Cost of sales 10,999,454 4,965,804
Selling and administrative 6,062,359 3,612,737
Loss from operations ( 1,488,823) ( 35,846)
Interest income (expense)
Interest income 22,407 -
Convertible debentures - ( 74,715)
Other long-term debt (991,233) ( 579,716)
Total interest income (expense) (968,826) ( 654,431)
Loss before income taxes (2,457,649) ( 690,277)
Provision for income taxes 112,383 ( 104,400)
Loss from continuing operations before writeoff of debt discount and issue costs (2,570,032) ( 585,877)
Writeoff of debt discount and issue costs (Note 18) - (3,257,350)
Loss from continuing operations (2,570,032) (3,843,227)
Loss from discontinued operations - ( 39,471)
Net loss (2,570,032) (3,882,698)
Accumulated deficit - beginning of the year (11,368,215) (5,959,517)
Deemed dividend on convertible preferred stock (Note 18) (1,033,895) (1,526,000)
Accumulated deficit - end of the year $ (14,972,142) $(11,368,215)
Basic and diluted loss per share:
Continuing operations $ ( 1.67) $ ( 10.09)
Discontinued operations $ - $ ( .07)
Net loss per share $ ( 1.67) $ ( 10.16)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
PRINCETON MEDIA GROUP, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,570,032) $(3,882,698)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 310,182 203,489
Amortization 372,030 182,827
Interest on convertible debentures - 74,715
Write-off of debt issue costs and debt
discount on convertible debentures (Note 18) - 3,257,350
Bad debt expense allowance - 35,000
Gain on discontinued operations - ( 440,110)
Stock issued and options and warrants granted
for consulting services 912,848 685,033
Net income (loss) after adjustments ( 974,972) 115,606
Changes in assets and liabilities
exclusive of assets and liabilities acquired:
(Increase) decrease in:
Accounts receivable 34,630 (2,143,138)
Marketable securities ( 17,080) -
Inventories 120,041 ( 656,025)
Due from related party ( 606,452) -
Deferred costs, acquisitions ( 236,800) -
Income tax benefit 271,300 ( 271,300)
Prepaid expenses 110,897 ( 145,911)
Deposits 12,711 ( 49,330)
Increase (decrease) in:
Accounts payable 1,141,583 490,142
Accrued expenses ( 771,588) 1,073,727
Due to related party - 6,975
Deferred revenue 20,791 469,867
Accrued interest 313,802 160,995
Long-term deferred taxes ( 166,900) 166,900
Net cash used in operating activities ( 748,037) ( 781,492)
Cash flows from investing activities:
Capital expenditures ( 190,395) ( 134,841)
Cash paid for acquisition of trademarks,
copyrights, equipment, and related
receivables and payables - (5,044,388)
Net cash used in investing activities ( 190,395) (5,179,229)
Cash flows from financing activities:
Proceeds from issuance of common stock 2,454,996 -
Payments in settlement of convertible securities (2,454,996) -
Proceeds from exercise of stock options 584,565 75,000
Proceeds from notes payable 1,120,000 -
Payments on notes payable ( 779,738) -
Proceeds from issuance of preferred stock, net - 2,740,000
Proceeds from issuance of
convertible debentures - 3,762,025
Net cash provided by financing activities 924,827 6,577,025
Net increase (decrease) in cash ( 13,605) 616,304
Cash, beginning of period 630,163 13,859
Cash, end of period $ 616,558 $ 630,163
Supplemental cash flow information:
Interest paid $ 673,812 $ 409,747
Income taxes paid $ 7,983 -
Noncash Investing and Financing Activities:
Printing equipment acquired for note $ 77,000 $ -
Trademark acquired for advertising credit
of $300,000 and accrued expense of $100,000 $ 400,000 $ -
Accrued interest on note reclassed as principal $ 414,466 $ -
Equipment acquired for capital leases $ 24,064 $ 27,263
Fair value of common stock issued <PAGE>
and options and warrants granted -
Upon conversion of convertible debt $ 4,723,474 $3,142,765
For capital acquisitions $ 341,844 -
For franchise rights $ 25,000 -
On disposal of subsidiary $ - $ 330,975
</TABLE>
In addition to the above, in 1997, the Company paid accrued severance expense
with stock valued at $380,635.
In 1996, the Company (a) purchased equipment appraised and valued by the parties
to the sale at $1,814,000 and trademarks and copyrights valued at $5,186,000 for
$2,000,000 in cash and a long-term note of $5,000,000; (b) purchased trademarks
and copyrights valued at $107,390 for $32,390 in cash and an installment loan
payable of $75,000; and (c) purchased equipment valued at $75,000, accounts
receivable of $429,170, accounts payable and accrued expenses of $439,676 and
trademarks and copyrights of $6,935,506 for $3,000,000 in cash and a long-term
note of $4,000,000.
See accompanying notes to consolidated financial statements.
PRINCETON MEDIA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Princeton Media Group, Inc. ("the Company") operates a publishing and printing
business that owns, publishes, and prints approximately twenty-five periodicals
that have national and international distribution. Through several subsidiaries
the Company has editorial staff in New York City and Miami Lakes, Florida, and a
printing plant in the Milwaukee, Wisconsin area. All printing and publishing
operations were acquired in 1996 through two purchases of substantially all of
the assets and operations of existing businesses.
The Company was incorporated in Ontario, Canada, in September, 1986, as DeNovo
Corporation and operated several other businesses which were discontinued in
1995 and in prior years. In October 1996 the Company changed its name to
Princeton Media Group, Inc. in order to reflect its new focus in the publishing,
printing, and related media industries. The Company's common stock is publicly
traded on the Nasdaq SmallCap market under the symbol "PMGIF."
Summary of Significant Accounting Policies
(A) Basis of Consolidation
The consolidated financial statements include the accounts of Princeton Media
Group, Inc. ("PMG") and its wholly-owned subsidiaries, Princeton Publishing,
Inc., Firestone Publishing, Inc., and Teleconcepts, Inc. (sold in 1996, Note 3).
All significant intercompany transactions and balances have been eliminated.
(B) Cash and Cash Equivalents
Cash and cash equivalents are all cash balances and highly liquid investments
with original maturities of three months or less.
(C) Accounts Receivable
Accounts receivable are recorded net of estimated returns of periodicals,
credits and allowances. Because retail sellers of magazines retain the right to
return magazines for a number of months after the date the periodical is
"off-sale," the allowance for returns is normally a high percentage of the gross
receivables in the magazine publishing industry. The Company has established an
allowance for doubtful accounts for advertising accounts receivable based on
estimates of management. The allowance is periodically
adjusted to reflect the percentage of accounts deemed by management to be
uncollectible.
(D) Inventories
Inventories, including paper, direct art and editorial expenses related to
publications in process but not yet on sale, and other materials used in the
production of the Company's publications, are valued at the lower of cost (on a
FIFO basis) or market.
(E) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided at rates based on the estimated useful lives of the
assets using the straight-line method. Expenditures for maintenance and repairs
are charged to expense as incurred; additions, replacements and major
improvements are capitalized.
(F) Trademarks, Copyrights, and Other Intangibles
Trademarks and copyrights acquired are recorded at their estimated fair values
as of the date of acquisition. Trademarks and copyrights are amortized using
the straight-line method over a period of 35 years. Organization costs are
amortized using the straight line method over 60 months and franchise rights are
amortized using the straight-line method over 10 years.
The Company periodically evaluates whether there has been an impairment in the
carrying values of intangibles. Any impairment is recognized when the sum of
expected undiscounted cash flows derived from the acquired businesses is less
than its carrying value. If such an impairment were to occur, the amount of the
impairment would be recognized in operating results and would be based on the
excess of the unamortized trademarks and copyrights over the fair value of the
acquired business.
(G) Revenue Recognition
Revenues from commercial printing are recognized at the time the printing of a
customer order is completed. Any billings in advance of that time are recorded
as deferred revenue. The sale of magazine subscriptions are recorded as
deferred 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. Sales of magazines (net of estimated returns) are recorded
when each issue is placed on sale.
(H) Income Taxes
The Company uses the liability method of accounting for deferred income taxes.
Under this method, deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities using tax rates in effect for the year in which the differences are
expected to reverse.
(I) Use of Estimates
Management of the Company has made estimates and assumptions in the preparation
of the accompanying consolidated 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
periods. Actual results could differ from these estimates.
(J) Net Loss Per Share
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings per Share." This statement
requires the presentation of basic and diluted earnings per share and replaced
the presentation of primary and fully diluted earnings per share prescribed by
APB Opinion 15. The Company has computed basic and diluted (loss) per share
using the weighted average number of common shares outstanding, since common
stock options and warrants, and the effect of assuming the conversion of the
outstanding convertible securities were antidilutive in both years.
The following table sets forth the computation of basic and diluted loss per
share:
1997 1996
Loss from continuing operations $(2,570,032) $(3,843,227)
Less: preferred stock dividends (1,077,897) (1,645,354)
Loss to common stockholders (3,647,929) (5,488,581)
Weighted average common shares outstanding 2,186,595 543,900
Basic and diluted (loss) per share from
continuing operations $( 1.67) $( 10.09)
(K) Recent Accounting Pronouncements
In 1997, the FASB issued Statements No. 130, "Reporting Comprehensive Income,"
and No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which are effective for fiscal years beginning after December 15,
1997. These Statements will have no effect on the Company's financial position
or results of operations.
(L) Concentrations of Credit Risk and Fair Value
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and accounts receivable. The Company
maintains significant cash deposits primarily in one financial institution. The
Company performs periodic evaluations of the relative credit rating of this
institution as part of its investment strategy. The Company has no significant
concentration of credit risk as accounts receivable are due from a large number
of customers. The Company currently distributes its periodicals primarily
through three distributors. In addition, the Company continues to evaluate
other distributor relationships.
2. Acquisitions
On March 17, 1997, the Company purchased a magazine for $300,000 worth of
advertising space at standard rates in the Company's publications and $100,000
to be paid from advertising revenues received in excess of $10,000 per issue of
the acquired magazine with the balance due, if any, to be paid upon publication
of the August 1998 issue.
During 1996 the Company acquired substantially all of the assets and operations
of a publishing and printing business for $7 million and substantially all of
the assets and operations of a second publishing business also for $7 million.
Each of the acquisitions was accomplished through a wholly-owned subsidiary
corporation which purchased the assets and operations.
First Publishing Acquisition
On January 30, 1996, the Company formed a wholly-owned acquisition subsidiary,
Princeton Publishing, Inc. ("Princeton"), with 100 shares of common stock and
capitalized with $1 million cash financed through the issuance of debt
securities of PMG. On March 29, 1996, Princeton purchased from a group of
corporations (collectively, the "First Seller") substantially all of its assets
and major contracts.
The acquired assets consisted of intellectual property, fixed assets, and
contract rights. Trademarks acquired were the titles of periodical magazines,
primarily targeted to the adult sports, entertainment, and lifestyle
marketplace. The fixed assets included furniture, fixtures and equipment,
chiefly, printing equipment. The contracts were magazine distribution contracts
and leases to real property in New York City and Sussex, Wisconsin.
The First Seller was in the business of publishing, printing and selling
periodical magazines. The Company, through its subsidiary, Princeton, is
continuing such use of the acquired assets. Princeton paid $1 million in cash at
the closing and issued two promissory notes for the remainder of the purchase
price. The first note was in the principal amount of $1 million and was paid on
June 28, 1996 with interest at the rate of 10.25% per annum. The second note is
in the principal amount of $5 million and is collateralized by a security
interest in all the purchased assets (see Note 6).
On the date of closing, Princeton transferred all purchased intellectual
property including trademarks to Princeton Trademarks, Inc., a newly-formed
Delaware corporation, in exchange for 100 shares in Princeton Trademarks, Inc.,
resulting in Princeton Trademarks becoming a wholly-owned subsidiary of
Princeton. Also on the same date, Princeton transferred all equipment and other
fixed assets located in Sussex, Wisconsin, to Kingston Press, Inc., a
newly-formed Delaware corporation, in exchange for 100 shares in Kingston Press,
Inc. resulting in that company also becoming a wholly-owned subsidiary
of Princeton.
Second Publishing Acquisition
On July 15, 1996, the Company formed another wholly-owned acquisition
subsidiary, Firestone Publishing, Inc. ("Firestone"), with 100 shares of common
stock and capitalized with $1 million cash which was financed through the
issuance of debt securities of PMG. On July 18, 1996, Firestone paid $1 million
for an option to purchase substantially all of the assets and operations of a
publishing company (the "Second Seller.") The agreement provided for a
consulting fee due to Firestone in the amount of the net cash resulting from
operations (which resulted in a fee of $11,118) from July 18 until the closing
to occur upon payment of an additional $2 million and interest at prime plus 2%.
On September 6, 1996, Firestone purchased from the Second Seller substantially
all of its assets and major contracts through payment of the $2 million and
accrued interest of $23,054 and the issuance of a promissory note in the amount
of $4 million, which is collateralized by the assets acquired (see Note 6).
The acquired assets consisted of intellectual property, fixed assets, contract
rights, receivables, and payables generated from operations between July 18 and
September 6, 1996. Trademarks acquired were the titles of periodical magazines,
primarily targeted to the lifestyle marketplace. The fixed assets included
furniture, fixtures and equipment, chiefly, computer equipment. The contracts
purchased were magazine distribution contracts and a lease to real property in
Miami, Florida.
The Second Seller was in the business of publishing and selling periodical
magazines. The Company, through its subsidiary, Firestone, is continuing such
use of the acquired assets.
The acquisitions described above have been accounted for using the purchase
method; accordingly, (1) the purchase price was allocated to net assets acquired
based on their estimated fair values, and (2) the results of operations are
included in the Company's consolidated results of operations since the dates of
acquisition.
The following unaudited information presents on a pro forma basis, the
acquisitions and the disposition (Note 3) as if they had occurred at the
beginning of the year ended December 31, 1996:
Net sales $18,115,354
Net loss $(2,411,537)
Net loss per common share $ (7.46)
The pro forma information is presented for comparative purposes only and is not
necessarily indicative of the operating results that would have occurred had
these acquisitions been consummated at the beginning of the periods presented,
nor is it necessarily indicative of future operating results.
3. Disposal of Subsidiary and Settlement of Related Liabilities
Effective as of December 31, 1995 the Company discontinued operations of its
wholly-owned subsidiary, Teleconcepts, Inc. ("TCI"). On August 5, 1996, 100% of
the stock of TCI was sold to a third party, who is an officer in a company whose
chairman is also the chairman of PMG. As part of the sale of Teleconcepts,
Inc., 32,500 shares of PMG stock having a then market value of $269,100 were
issued to the third party. At the time of the sale, Teleconcepts, Inc. had an
accumulated deficit of $763,393 and PMG realized a gain of $432,417 on the
disposition of the subsidiary and $7,693 on related forgiveness of debt.
In conjunction with the sale of Teleconcepts, Inc., the Company settled certain
of the Teleconcepts, Inc. liabilities through the issuance of 16,500 shares of
PMG common stock with a fair market value of $61,876. The Company recognized a
gain of $161,012 upon the settlement, which is included in the above noted gain
on the disposition of the subsidiary. Combined with severance costs associated
with the disposition of $479,581 and miscellaneous items, the Company had a net
loss on disposition of the discontinued operations of $39,471.
4. Accounts Receivable
Accounts receivable at December 31, 1997 and 1996 consisted of the following:
1997 1996
Accounts receivable, gross $7,796,879 $5,890,609
Less: allowance for returns and
distribution expenses 5,260,841 3,319,941
Less: allowance for doubtful accounts 35,000 35,000
Total accounts receivable, net $2,501,038 $2,535,668
5. Inventories
Inventories at December 31, 1997, and 1996 consisted of the following:
1997 1996
Paper $ 214,081 $ 481,151
Ink 18,911 10,277
Work in process 302,992 164,597
Total inventories $ 535,984 $ 656,025
6. Property and equipment
Property and equipment as of December 31, 1997 and 1996 consisted of the
following assets, all depreciated between 5 and 7 years:
1997 1996
Printing equipment $1,973,202 $1,824,311
Computer equipment 134,725 103,106
Office furniture and equipment 110,804 32,284
Total property and equipment, cost 2,218,731 1,959,701
Less accumulated depreciation (513,671) ( 203,489)
Total property and equipment, net $1,705,060 $1,756,212
7. Trademarks, copyrights and other intangibles
Trademarks, copyrights and other intangibles at December 31, 1997, and 1996
consisted of the following:
1997 1996
Trademarks and copyrights $12,643,592 $12,233,303
Organizational costs 34,387 34,387
Franchise rights 57,140 10,000
Total intangible assets, cost 12,735,119 12,277,690
Less accumulated amortization ( 554,857) (182,827)
Trademarks, copyrights, and
other intangibles, net $12,180,262 $12,094,863
8. Line of Credit
The Company has a line of credit with a distributor for working capital of up to
$500,000 which could be drawn down in multiples of $10,000 from June 28, 1996
for a one year period. Any draws bear interest at prime plus 2% and are payable
with equal monthly payments of principal and interest over a one year period for
each new draw. The line of credit was amended with a provision for a one-time
draw of $500,000 with monthly payments of interest only due on or before October
1, 1998. As of December 31, 1997, the balance was $118,333 on the original line
and $500,000 on the amendment portion.
9. Long-Term Debt
The Company entered into a promissory note agreement on March 29, 1996 with an
individual and a group of corporations (collectively, the "First Seller") in
conjunction with the purchase of substantially all of the assets and operations
of the First Seller's business (see Note 2). The promissory note is in the
amount of $5 million payable over 10 years, with interest payments only for the
first three years, 30-year amortized payments for the next seven years, with a
final payment of all outstanding principal and interest due on March 28, 2006.
The interest rate on this note is prime plus 2% (10.50% at December 31, 1997),
maximum 12%, adjustable two times per year.
The Company entered into a promissory note agreement on September 6, 1996 with a
corporation (the "Second Seller") in conjunction with the purchase of
substantially all of the assets and operations of the Second Seller's business
(see Note 2). The promissory note is in the amount of $4 million with interest
at the rate of prime plus 2% per annum (10.50% at December 31, 1997). Interest
accrued with no payment due until September 6, 1997, at which time accrued
interest of $414,466 was added to principal and fixed payments of principal and
interest became due monthly through September 5, 2000.
These notes are collateralized by substantially all of the assets acquired in
each of the purchases (see Note 2).
Long-term debt at December 31, 1997, and 1996 consists of the following:
1997 1996
Note payable - First Seller $5,000,000 $5,000,000
Note payable - Second Seller 4,188,996 4,000,000
Note payable - equipment 35,645 -
Capital lease obligations 35,476 22,658
Total debt 9,260,117 9,022,658
Less current portion (1,010,110) ( 212,753)
Total long-term debt $8,250,007 $8,809,905
The aggregate scheduled maturities of long-term debt in subsequent years are
as follows:
1998 $1,010,110
1999 1,091,140
2000 1,221,550
2001 1,005,985
2002 33,756
Thereafter 4,897,576
Total debt $9,260,117
10. 8% Convertible Debentures
During 1996, the Company initiated private placements of senior secured
convertible debentures to non-U.S. persons under Regulation S issued by the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
A summary of such financings during 1996 follows:
Number of Debentures
Common Shares Outstanding
Original Issued on at December 31,
Principal Conversion 1996 1997
Group I $3,081,800 491,271 None None
Group II 444,200 19,351 $ 345,000 None
Group III 1,580,000 - 1,580,000 None
Total $5,106,000 510,622 1,925,000 None
The proceeds from all the debentures sold were $3,762,025 net of $1,343,975 in
investment brokerage commissions, discounts and related fees. The debentures
were due in two years from the dates of issue, and they were convertible at any
time beginning 45 days after issue into common shares at a conversion price
equal to the lower of:
(a) 65%, 85% or 90% (for Groups I, II, and III, respectively) of the average
closing bid price of the common stock for the five business days immediately
preceding the conversion date, or
(b) 65%, 85%, or 90% (for Groups I, II, and III, respectively) of the average
of the closing bid price of the common stock for the five business days
immediately preceding the date of subscription to the debenture.
In March 1997, the Company reached an agreement (the "Agreement") with the
holders of all of its outstanding convertible debentures, convertible preferred
Series D and preferred Series E stockholders (Note 13) to convert their holdings
to common stock. In April the Company issued 1,105,700 shares into escrow per
the Agreement. A portion of the shares were sold in the second and third
quarters and funds were paid to the securities holders. In the third quarter of
1997, a final settlement agreement was reached in which convertible securities
holders accepted shares of common stock in settlement of the conversion of the
securities.
The Agreement granted preferred shareholders warrants at exercise prices ranging
from $4.85 to $8.85 to purchase 183,710 shares of the Company's common stock.
The estimated value of these warrants of $507,012 was accounted for as a
dividend to these shareholders in 1997.
11. Commitments
The Company leases facilities and equipment with minimum payments as of December
31, 1997, as follows:
Facilities Equipment Total
1998 $ 488,239 $ 11,028 $ 499,267
1999 347,989 9,124 357,113
2000 115,162 7,219 122,381
2001 75,797 5,105 80,902
2002 6,337 1,498 7,835
Thereafter - - -
Total $1,033,524 $33,974 $1,067,498
The Company's leased facilities consist of editorial offices in New York City
and Miami, Florida, and a printing plant in Milwaukee, Wisconsin, and a
corporate apartment in New York City. The plant lease expires August 31, 1999.
The plant lease requires monthly base payments of $20,400 with annual
adjustments tied to the CPI. During 1996 the New York City offices were rented
on a month to month basis. In 1997, the Company executed a lease extending from
February 1, 1997 through January 13, 2001 on new office space; this new lease
requires annual rent beginning at $65,000 escalating over five years up to
$76,040 in the final year and is included in the amounts scheduled above. The
Miami lease requires monthly payments of $5,285 plus 10.47% of landlord's
operating expenses through August 31, 2000.
Rental expense was $494,861 and $280,270 in 1997 and 1996 respectively.
12. Income Taxes
In 1997, the Company provided a full valuation allowance against the deferred
tax assets established in 1997 and 1996 since it was more likely than not that
the deferred tax asset would not be realized. The provision for income taxes
(benefit) for 1997 and 1996 consist of:
1997 1996
Current:
Alternative minimum tax and franchise taxes $ 7,983 $ -
Deferred:
U.S. Federal 86,600 (86,600)
State and local 17,800 (17,800)
Total deferred 104,400 (104,400)
Total provision for income taxes (benefit) $ 112,383 $(104,400)
Current taxes in 1997 were amounts actually paid and the provision for deferred
is the reversal of the prior year estimated benefit.
The components of deferred tax assets and liabilities in the balance sheet at
December 31, 1997 and 1996 relate to the following:
1997 1996
Deferred tax assets:
Reserve for returns $ 743,100 $298,400
Valuation of inventories 114,600 69,900
Allowance for doubtful accounts 13,300 13,300
Net operating loss carryforward 200,500 11,400
Valuation allowance (632,600) (121,700)
Total deferred income tax benefit 438,900 271,300
Long-term deferred tax liabilities:
Depreciation of properties 167,600 76,400
Amortization of intangibles 271,300 90,500
Total long-term deferred tax liabilities 438,900 166,900
Tax assets and liabilities, net $ - $104,400
Deferred tax assets and liabilities in the consolidated balance sheet are
classified based on the related asset or liability creating the deferred tax.
Reconciliations of the differences between income taxes computed at Federal
statutory tax rates and consolidated provisions for income taxes are as follows:
1997 1996
Loss before income taxes, writeoff of
debt discount and issue costs
and discontinued operations: $(2,457,649) $(690,277)
Income taxes computed at statutory rates:
Federal benefit expected at 34% $( 835,600) $(234,700)
State tax provisions, net of federal benefits ( 98,300) ( 27,600)
Other reconciling items-
Non-deductible items 12,700 4,400
Canadian expenses 514,700 31,800
Alternative minimum tax and franchise taxes 7,983 -
Valuation allowance 510,900 121,700
Provision (benefit) for income taxes $ 112,383 $(104,400)
At December 31, 1997, the Company has available a net operating loss
carryforward of approximately $83,000, expiring in the year 2012. There is no
net operating loss carryover for years prior to 1996 since the net operating
losses pertained to the operations of the subsidiary disposed of in 1996.
13. Capital Stock
A summary of capital stock as of December 31, 1997 is as follows:
Convertible Preferred
Common Series A Series C
Par value None None None
Shares authorized Unlimited Unlimited 1,100,000
Issued and outstanding 3,480,787 32,500 1,100,000
Liquidation preference 3rd 1st 2nd
Liquidation preference per share - $1.24 $.80
Total liquidation value - $40,300 $880,000
Total cumulative dividends in arrears - $ - $216,333
Per share arrearage $ - $ .20
(A) Preferred Stock:
The rights, privileges, restrictions and conditions of each series to be issued
are fixed from time to time by the directors.
Series A:
These shares are redeemable at the option of the Company at any time at a price
of $1.24 per share ($40,300 in total) and convertible at the option of the
holder at any time into common shares of the Company at a price equivalent to
$1.24 per 1/200th of a common share, (the 32,500 Series A shares are convertible
to 163 shares of common stock).
Series B:
No shares have been issued and management does not intend to issue shares in the
future.
Series C:
These preference shares were redeemable at the option of the Company until
January 31, 1998 under certain conditions pertaining to the trading prices of
the Company's common shares, and convertible at the option of the holder at any
time into common shares of the Company on the basis of 200 Series C shares for
one common share (5,500 shares). The conversion ratio is subject to adjustment
under certain conditions, including conditions relating to trading prices and
subsequent share issues. Holders of Series C preference shares are entitled to
receive a cumulative dividend of $.04 per share annually, payable in cash or
common shares of the Company. Dividends in arrears totaled $216,333 and
$172,333 at December 31, 1997 and 1996, respectively.
Series D and E:
These were entirely converted or redeemed in 1997. Management does not plan any
further issuances.
(B) Common Stock:
On October 24, 1996, at the annual meeting of the Company, shareholders approved
a one-for-twenty reverse split. On the same date shareholders approved a name
change from DeNovo Corporation to Princeton Media Group, Inc. to reflect the
Company's new 100% focus in the publishing, printing, and media industry. On
October 29, 1996, the reverse split took effect and common stock commenced
trading on the Nasdaq SmallCap Market under the symbol "PMGIF." All numbers of
common shares and related per share amounts have been adjusted for the split.
(C) Options and Warrants
Options and warrants issued during 1997 and 1996 are as follows:
1997 1996
Exercise Exercise
Shares Price* Shares Price*
Outstanding at
Beginning of year 68,689 $119.56 68,689 $119.56
Granted
Consultants 462,500 $ 2.77 20,000 $ 10.00
Settlement of convertible securities 183,700 $ 6.85 - -
Total granted 646,200 $ 3.93 20,000 $ 10.00
Exercised (265,000) $ 2.21 ( 7,500) $ 10.00
Expired ( 61,251) $100.20 (12,500) $ 10.00
Outstanding and
exercisable at year end 388,638 $ 10.37 68,689 $119.56
* Weighted average
In 1997, total fair value of options and warrants granted as consulting fees was
$315,325. At December 31, 1997, the exercise prices of outstanding options and
warrants ranged from $2.00 to $5.00 except warrants granted in conjunction with
the settlement of convertible debentures (Note 10) which ranged from $4.85 to
$8.85. The weighted average remaining contractual life of options and warrants
outstanding and exercisable at year end in 1997 was 1.6 years.
Black-Scholes option-pricing model assumptions used in determining fair
value - 1997:
Risk-free interest rate 6.00% -
Dividend yield 0% -
Stock volatility 100.00% -
Expected option life 1 to 2 years Less than 1 year
There were no stock options or warrants granted to employees in 1997 or 1996
except as detailed in Item D below.
(D) Employee Stock Grants and Options
In 1997 employees were granted compensation awards of stock valued at $16,233.
During 1997 in conjunction with an employment contract the Company granted stock
options to the Chairman of the Board and CEO to purchase 1,200,000 shares at
$3.00 with 120,000 shares vesting every year for ten years beginning January 16,
1998. The vesting will be accelerated based upon the Company achieving certain
revenue goals. The first level was achieved in 1997 whereby the first 400,000
options became vested.
The Company accounts for its stock-based compensation in accordance with APB
Opinion No. 25. Had the Company's stock-based compensation been determined by
the fair value method of SFAS 123, "Accounting for Stock-Based Compensation,"
the Company's net loss and loss per share would have been the following pro
forma amounts:
Pro forma net loss - 1997 $( 3,390,032)
Pro forma loss per share - 1997 $( 2.04)
Black-Scholes option-pricing model assumptions used in determining fair value:
Risk-free interest rate 5.50%
Dividend yield 0%
Stock volatility 100.00%
Expected option life 5 years
Fair value $ 2.05
(E) Changes in Equity
Changes in equity for the years ended December 31, 1997 and 1996 were as
follows:
Preferred Stock Series A and Series C:
Series A Series C
Shares Amount Shares Amount
Balance at January 1, 1996 32,500 $28,923 1,100,000 $739,696
Changes - none - - - -
Balance at December 31, 1996 32,500 28,923 1,100,000 739,696
Changes - none - - - -
Balance at December 31, 1997 32,500 $28,923 1,100,000 $739,696
Preferred Stock Series D and Series E:
Series D Series E
Shares Amount Shares Amount
Balance at January 1, 1996 - - - -
Issuance 1,200 $1,005,000 1,800 $1,735,000
Conversion to common shares - - ( 100) ( 83,750)
Redemption of Series E ( 66) (101,766)
Balance at December 31, 1996 1,200 $1,005,000 1,634 $1,549,484
Settlement (1,200) ( 1,005,000) (1,634) (1,549,484)
Balance at December 31, 1997 - $ - - $ -
Common shares:
Shares Amount
Balance at January 1, 1996 222,471 $ 4,258,755
Common shares issued -
To consultants 51,401 653,160
To settle liabilities (Note 3) 49,000 330,975
On exercise of options 7,500 106,875
On conversion of debentures including
"deemed" dividend on convertible preferred
shares of $1,526,000 (Note 18) 510,622 6,662,521
On conversion of Preferred Series E 24,975 185,516
Balance at December 31, 1996 865,969 12,197,802
Common shares issued -
To consultants, in legal settlement,
and in employee stock option plan 132,325 911,067
To consultants in capital acquisitions 103,500 341,844
For accrued severance 120,000 380,625
For franchise rights 5,000 25,000
On settlement of convertible preferred stock
and conversion of debentures 1,869,829 4,723,474
Proceeds on exercise of stock options 265,000 584,565
Dividend - warrants (Note 10) - 507,012
Balance at December 31, 1997 3,361,623 $19,671,389
14. Related Party Loans, Investment and Transactions
At December 31, 1997, the Company had a note receivable due from a company
related by common directorship in the amount of $284,017 due upon demand with
interest accruing at prime beginning January 1, 1998 (prime was 8.5% as of
December 31, 1997).
In 1996, the Company had a short-term note due upon demand to with interest
accruing at prime (8.25% as of December 31, 1996). The note balance and related
accrued interest was $6,975 and $83, respectively, as of December 31, 1996. The
note was paid off in 1997. Interest expense on the note was $9,059 during 1996.
In 1996 the related company purchased $1.4 million of Preferred Series E shares.
All of these shares were redeemed during 1997. Cumulative dividends paid on
these shares in conjunction with a conversion settlement amounted to $490,000
for the year ended December 31, 1997.
The Company shares corporate headquarters office space with the related company.
15. Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash,
accounts receivable, accounts payable and short-term borrowings approximate fair
value due to the short-term maturity of these financial instruments. The
carrying amount reported for long-term debt approximates fair value since the
underlying instrument bears interest at a variable rate that reprices
frequently.
16. 401(K) Plan
Firestone Publishing, Inc., has a 401(K) plan in which the Company contributes a
5% matching contribution for employees who contribute either 5% or 10% of their
gross wages to the plan. The plan was established by the previous owner of the
operations and was continued as a requirement of the acquisition agreement. In
connection with the required match, the Company's contribution was $33,357 in
1997 and $11,027 in 1996.
17. Nonmonetary Transactions
In 1997 and 1996 the Company incurred significant costs for investor
relationship consultants to inform the investing public and the general public
that the Company had made certain acquisitions and had established publishing
and printing operations and to facilitate the Company's settlement of
convertible securities. Total expenses for investor relations was $1,031,445
and $812,398 in 1997 and 1996, respectively. Of these amounts $912,848
(including $1,781 accrued for stock issued in 1998) and $685,033 in 1997 and
1996, respectively, were noncash expenses through the issuance of stock,
options, and warrants.
18. Write-off of Debt Discount and Issue Costs
In March 1997, at a meeting of the Emerging Issues Task Force (EITF), the SEC
expressed its views on the accounting for convertible debt with a nondetachable
conversion feature and convertible preferred stock where the conversion feature
is "in the money" (that is, a conversion discount) at the date the security is
issued (EITF Topic D-60).
The SEC stated that the conversion discount should be valued and recognized at
the date of issue as additional paid-in capital. The value is to be determined
by the difference between the conversion price and the quoted market price of
the common stock into which the security is convertible, multiplied by the
number of shares into which the security may be converted.
For debt securities, the value of the conversion discount and any related issue
costs should be charged to interest expense from the date of issue to the date
the security first becomes convertible. If the stated maturity of such debt is
not substantive, the conversion discount and related issue costs should be
amortized over this relatively short period. Further, if the security is
converted before the discount or issue costs are fully amortized, the
unamortized portions of the discount or costs should be charged to interest
expense in the period of conversion, rather than to additional paid-in capital
as was generally accepted accounting practice.
Change in Method
In 1996, upon issue of the 8% convertible debt securities, the Company had
recognized the value of the discount (in the manner prescribed by the SEC) and
was amortizing the discount and related issue costs over the term of the debt
using the interest method. Upon conversion of the debt, the Company had charged
shareholders' equity for any remaining unamortized discount and costs.
As a consequence of the above, in April 1997, the Company revised its method of
accounting for the conversion discount and issue costs to conform with the SEC's
position and wrote off all of the remaining discount and costs to the 1996
statement of operations. Also, the Company charged to 1996 operations the
discount and cost originally charged to shareholders' equity on the conversion
of debt during 1996. This resulted in a noncash writeoff of debt discount and
debt issue costs of $3,257,350 in 1996.
Deemed Dividend
For convertible preferred securities issued with a conversion discount, the SEC
stated that the fair value of the discount is equivalent to a dividend and
accordingly should be recognized as a return to the preferred shareholders over
the minimum period in which the preferred shareholders can realize that return
which in the Company's case was the date of issuance to the first date the
securities became convertible.
In the 1996 financial statements, the Company reflected this "deemed" preferred
stock dividend amounting to $1,526,000 in connection with the issuance of Series
D and E preferred shares.
These noncash dividends represent the discount on the conversion price of the
shares of common stock issuable on conversion of the preferred and only affects
the loss per share calculation. The dividend is based on the difference between
the conversion price and the quoted market price of the common stock on the
dates the preferred shares were issued times the number of common shares
issuable.
In 1997 the Company recognized total deemed dividends in conjunction with the
settlement in the amount of $1,033,895 consisting of the valuations on warrants
of $507,012 detailed in Note 10 and $526,883 in additional dividends in the
final settlement of Series D and Series E shareholders.
EXHIBIT 10.36
[THIS AGREEMENT NOW BETWEEN CURTIS CIRCULATION COMPANY AND FIRESTONE PUBLISHING,
INC., AS ASSIGNEE OF DUGENT PUBLISHING CORP.]
CURTIS CIRCULATION COMPANY
DISTRIBUTION AGREEMENT
DATED APRIL 22, 1983
Between Curtis Circulation Company, 21 Henderson Drive, West Caldwell, New
Jersey 07006 (hereinafter called "Curtis") and Dugent Publishing Corp., 2355
Salzedo Street, Suite 204, Coral Gables, Florida 33134 (hereinafter called
"Publisher").
1. Curtis shall be the exclusive distributor in the United States, Canada and
overseas of all present and future publications published by Publisher, its
subsidiaries or affiliates at any time during the term of this agreement,
(hereinafter called "Publications").
2. The initial Publications to be distributed under this agreement, the
initial issues thereof to be so distributed and the frequency of publication
(monthly, bi-monthly or annual, etc.) are as follows:
GENT MONTHLY
CAVALIER MONTHLY
NUGGET BI-MONTHLY
DUDE TEMP'LY SUSPENDED
3. Publisher warrants and represents to Curtis the following:
(a) Publisher is the owner of (i) each of the titles to the Publications
covered by this distribution agreement, (ii) the logos and/or (iii) trademarks
to be used in connection with such Publications and there are no liens or
encumbrances on those titles, logos and trademarks;
(b) Publisher has the ability and authority to deliver to Curtis without liens
or encumbrances, sufficient copies of each issue of the Publications covered by
this agreement in salable condition to comply with the terms contained herein;
(c) Publisher has the full right, power and authority to enter into this
agreement and neither the execution or delivery of this agreement nor the
consummation of the transactions contemplated by this agreement shall constitute
or result in a breach of any agreement to which the Publisher is a party.
(d) Upon completion and delivery of each issue of each Publication covered by
this agreement, Publisher will own or control to the fullest extent permitted by
applicable law all rights of whatsoever kind and character in and to: (i) the
title of the Publication, (ii) its logo, (iii) trademark, (iv) copyright for
each issue and (v) the material contained in each issue, without any mortgages,
liens or encumbrances of any kind and without rights being in other persons not
party hereto;
(e) Upon completion and delivery of each issue of the Publications covered by
this agreement, nothing contained in each of such issues will be grounds for an
action either to prevent distribution thereof or for damages by reason of the
fact that the material contained therein is libelous, slanderous, obscene,
invades any right of privacy, a violation of any copyright or other personal or
property rights or for any other reason whatsoever; and
(f) Publisher will regularly issue each issue of the Publications covered by
this agreement during the term of this agreement and any renewal thereof and
will cause its printer(s) to send to Curtis written notice confirming that all
copies of the respective issues of each Publication have been printed and
shipped to Curtis' customers in accordance with the galleys prepared by Curtis
pursuant to paragraph 7 (hereinafter such notice shall be referred to as "Notice
of Completion of Shipment").
4. If Publisher desires to change the frequency of publishing issues of any
Publications, it shall notify Curtis at least 60 days before the proposed
shipping date of any affected issue. Publisher will supply to Curtis a schedule
of shipping and on-sale dates for each issue of the Publication at least six (6)
months in advance of the on-sale date and at such times thereafter as requested.
5. The colophon of the Curtis Circulation Company shall be printed on the
cover of each magazine distributed by Curtis hereunder. The Publication's code
number assigned by Curtis shall also appear on each cover. The print order for
distributions hereunder will be mutually agreed upon by Curtis and Publisher,
providing, however, that if Publisher and Curtis do not agree, then Curtis shall
not be required to advance to Publisher any money on only those additional
copies of the print order that Curtis does not agree to under Paragraph 11
hereof. Publisher hereby authorizes Curtis to adjust claims made by any of
Curtis' customers for delivery shortages or damages to copies of the issues of
the Publications and agrees to pay to Curtis on demand all such shortages and
damage allowances granted by Curtis to its customers and wholesalers.
6. Publisher shall be responsible for shipping and traffic costs (including,
without limitation, import and other duties) incurred, other than in-house costs
of Curtis' traffic department, to ship copies of the Publications to all
customers of Curtis located throughout the world.
7. Individual shipments to Curtis' customers and wholesalers shall be
specified on a galley which, with the Publisher's cooperation, Curtis shall
supply to the Publisher sufficiently in advance so that shipments can be
prepared and shipped to arrive at customers' and wholesalers' warehouses
approximately ten (10) days prior to the Publications' on-sale dates. Any cost
incurred for reshipping copies at Publisher's request while a Publication is on
sale will be borne by Publisher. All copies of Publication shall be fully
returnable. Publisher will accept whole copies, front covers, headings, Curtis'
certification or wholesalers' affidavit statements as the basis for the
adjustment of unsold copies covered by such acceptance. Should publisher require
whole copy returns, notice of the quantities and full return address must be
supplied to Curtis at least fifteen (15) days prior to off-sale date. Curtis
will use it; best efforts to comply with Publisher's request for whole copy
returns, for which Publisher shall pay Curtis the actual charge made by its
customers and wholesalers, and pay all freight, shipping and other charges
incurred by Curtis (or Curtis' agents) in connection therewith. Publisher shall
bear the risk of loss for all copies of Publications until the time they are
received by Curtis' customers and during any time they are being returned or
reshipped at Publisher's instructions. Publisher shall keep all returned whole
copies from entering the stream of commerce for at least 180 days after off-sale
date, except to fill subscriptions and mail order requests, or such other sale
as is mutually agreed upon.
8. Publisher authorizes Curtis to offer on Publisher's behalf, a Retail
Display Allowance ("RDA") to any retailer which engages in the sale of
Publications and agrees to be bound by the terms of Publisher's RDA program.
Publisher further warrants that it will give notice at least once a year to
retailers of the availability of this allowance. Publisher hereby authorizes
Curtis to charge against the account of Publisher, Curtis' expense for
administering this plan and a Retail Display Allowance of $.15 of the cover
price of each copy of the monthly Publications to the extent that uch Retail
Display Allowance shall become payable by Curtis.
9. Publisher shall pay Curtis for its distribution services (a) 6% of cover
price of each copy of each Issue of the three titles: Gent, Cavalier, Nugget and
each of their specials and (b) 7% of cover price on all new title Publications
sold through primary wholesalers (the "distribution fee"). Curtis' distribution
fee for sale through Curtis' Specialty Sales Operation (sales to retail accounts
and secondary wholesalers) will be the difference between the amount per copy
remitted to Publisher for sales to primary wholesalers and the price per copy
charged accounts serviced by the Specialty Sales Operation, as provided on
Attachment A.
10. For all copies distributed in certain wholesaler areas as listed on
Attachment "B" and other such areas as may be so classified from time to time by
Curtis, Curtis will bill Publisher and Publisher shall pay to Curtis such
additional amounts per copy as shown on the attachment hereto.
Payment to Publisher for copies of Publications sold other than in the United
States will be paid by Curtis to Publisher in United States funds at the
exchange rate Curtis is charged by its banks.
11. Curtis shall advance to Publisher, providing Publisher does not then owe
Curtis any monies under this agreement, the following amounts at the following
times with respect to each issue of each Publication distributed hereunder:
(a) FIRST ADVANCE: An amount equal to the printer's bill and the shipper's
bill.
(b) SECOND ADVANCE: 75% of Curtis' ENS less any previous advance(s) and
Curtis' distribution fee paid 60 days after on sale if a monthly frequency; 90
days after on sale if a bi-monthly frequency or less.
(c) THIRD ADVANCE: 100% of Curtis ENS less any previous advance(s) and Curtis'
distribution fees paid 70 lays after off sale if a monthly frequency; 90 days
after off sale if a bi-monthly frequency or less.
12. A. Final Settlement for each issue of each Publication distributed hereunder
shall be made 180 days after off-sale date; but Publisher agrees to accept
returns thereafter until 360 days after off-sale date and hereby authorizes
Curtis to (i) charge such returns against any other open or subsequent issues Of
Publications or (ii) bill the amount of such returns to Publisher for payment
within five (5) days.
B. The balance due to Publisher, or overadvances due to Curtis, as the case
may be, as of Final Settlement, shall be determined by multiplying the price per
copy charged by Curtis to its customers and wholesalers by the number of copies
sold and not returned and subtracting therefrom to the extent same have not been
previously paid, (i) the fees of Curtis for distribution, (ii) all other costs,
expenses and charges for which Publisher is responsible under the terms of this
agreement, and (iii) all other costs, expenses, and charges incurred by Curtis
on behalf of Publisher.
C. Publisher's suggested price per copy to Curtis' customers and wholesalers
will be the cover price less those discounts as described on Attachment A and B.
Any exceptions shall be mutually agreed upon.
D. (i) The fees of Curtis for distribution, (ii) all other costs, expenses
and charges for which Publisher is responsible under the terms of this agreement
and (iii) all other costs, experses and charges incurred by Curtis on behalf of
Publisher, shall be paid by Publisher to Curtis within five (5) days after
notification by Curtis or at the option of Curtis may be deducted from any
advances or payments due Publisher on any issue of any Publication distributed
hereunder.
E. Regardless of (i) the Curtis' on-going method for accounting for copies
received, copies unsold and copies sold, (ii) the basis for any advances made by
Curtis to Publisher, be it upon draw, copies shipped, estimated net sales or
otherwise, or (iii) any other provision in this agreement, the obligation of
Curtis to make payment to Publisher shall be basel solely upon the calculation
made upon Final Settlement pursuant to subparagraph B of this Paragraph 12.
F. The Final Settlement for each issue of each Publication shall be shown by
a written statement prepared by Curtis, setting forth the totals of all items
debited and credited and the resultant balance and Publisher agrees to accept
such statement as an account stated and the items therein enumerated as true and
correct, except as to any specific item or items to which Publisher may object
in writing within forty-five (45) days from the date of the mailing of such
statements.
13. In the event a retailer, wholesaler or other customer of Curtis shall take
advantage of any federal or state insolvency statute or shall cease its business
operation with the effect that such retailer, wholesaler or other customer shall
not return its unsold copies of the Publication(s); Curtis shall use the average
net sale of the Publication(s) as reported by such retailer, distributor or
customer for the twelve (12) months (or lesser period if applicable) prior to
those months for which such retailer, wholesaler or customer shall not have
submitted unsold copies of the Publication(s). This average shall be used in
determining and computing the net sales of the Publication(s) shipped to such
retailer, wholesaler or customer for said months.
14. If for any reason, Curtis makes an overadvance or overpayment to
Publisher, on any one or more issues of any Publications it distributes for
Publisher, such overadvance or overpayment, at the option of Curtis, shall (i)
be deducted by Curtis from any subsequent advances or payments due on any issue
of any Publication which Curtis distributes for Publisher or (ii) be paid to
Curtis within five (5) days after Curtis' demand for payment. In any event, any
and all such overadvances and overpayments shall promptly be remitted by
Publisher to Curtis upon termination of this agreement or at such time as Curtis
shall have discontinued distributing any Publication or issue for Publisher for
any reason whatsoever.
15. At no cost to Publisher, Curtis shall give such space as it deems
reasonable in its house magazine and/or bulletins for the promotion of the
Publications. However, the cost of all special promotions authorized by
Publisher shall be borne by Publisher. Publisher agrees that in all trade press
advertising pertaining to single copy circulation, it will include a phrase
substantially as follows: "Exclusively (Internationally) distributed by Curtis
Circulation Company, West Caldwell, New Jersey".
16. Publisher shall indemnify and hold harmless Curtis, its parent,
subsidiary or affiliated corporations, their officers, agents, representatives
or any of its customers, wholesalers, and their respective retailers against any
loss, damages, fines, judgments, expenditures or claims including counsel fees,
legal expenses and other costs, actually incurred by them or any of them
in connection with the distribution of any Publications, or any issue thereof,
or any promotional material provided by Publisher, when same is questioned or
objected to by public authorities, or other authorities, or in defending or
settling any claim, civil action or criminal prosecution against them or any :)f
them arising out of the use of the title of said Publication or the contents and
printed matter, including advertisements, pictures or
photographs contained in the covers or any page of said Publication, or in any
supplementary or other proceeding or action. Should any such event occur, and
Publisher will be given both prompt notice of such event and a reasonable
opportunity to approve selection of counsel and fee arrangements or arrange for
same itself, provided such selection by Publisher is acceptable to
Curtis and such acceptance will not be unreasonably withheld by Curtis, and if
Publisher does not make arrangements for indemnification satisfactory to Curtis
then Curtis may retain a reasonable reserve from any monies payable to Publisher
hereunder as security for this indemnity provision. Publisher will name Curtis
as an additional named insured under any publisher's liability insurance carried
by Publisher, if any, and will deliver a certificate of such insurance to
Curtis.
17. (a) Curtis shall not take title to any of the copies of any of the issues
of any of the Publications covered by this agreement and, for all purposes
covered by this agreement, the parties mutually understand and agree that Curtis
is acting as an agent for the sale of such copies of such Issues of such
Publications on behalf of Publisher as its principal, except as specified at
subparagraph (b) of this paragraph.
(b) All monies paid by, or due and owing from Curtis' customers and
wholesalers for copies of Publications not returned to Curtis, are and shall at
all times belong to and remain the absolute property of Curtis, it being
distinctly understood and agreed by the parties that the obligation of Curtis to
rake any remittances to Publisher under the terms of this agreement is that of
the obligation of a debtor to a creditor only. Curtis alone shall bill its
wholesalers and customers for such monies and Curtis alone shall have the right
to demand payment or institute legal proceedings for collection thereof.
18. The term of this agreement shall be for six (6) years commencing the last
day of the month that the last of the titles provided for in Attachment A go on
sale. This agreement shall be renewable for additional three (3) year terms
automatically, unless advance written notice is given by either party to the
other at least ninety (90) days prior to the commencement of the following
renewable term. Provided, however, (a) that this agreement may be terminated by
Curtis at any time in its entirety or with respect to any particular issue of
any Publication, upon notice to Publisher should any issue of any Publication,
in the sole judgment of Curtis, be deemed to be libelous, obscene or indecent,
or contain any facts or statements which are untrue or Publisher fails to abide
by the specific terms of this agreement, copy allotment, payment of its shipping
costs or frequency of issue or (b) that any ninety (90) day notice not to renew
given by Publisher shall not be operative if at the end of the then existing
term, or renewal-term, Publisher shall owe any monies to Curtis.
In the event that this agreement is not renewed, Curtis has the right to
withhold any or all advances (as described in Paragraph 11) on the last issues
of any Publications to be distributed under this agreement. Such withholding
shall be limited in amount and time to that amount and time necessary for Curtis
to determine whether there exists any overpayments for prior issues of
Publications distributed and all other costs, expenses or charges incurred by
Curtis on behalf of Publisher, and in no event shall be beyond the Final
Settlement date of the last issue of any Publications distributed hereunder.
19. Publisher agrees not to assign this contract or any part thereof, without
first obtaining the consent of Curtis to such assignment. Publisher agrees that
any assignment of an advance or payment hereunder shall be made only on a form,
satisfactory to Curtis, which shall include the executed acknowledgment of any
assignee that, among other things, such assignee shall be subject to all rights
that Curtis shall have against the Publisher.
20. Curtis shall have the unqualified right to refuse to distribute any titles
published by Publishers not listed in Attachment A, in which event, Publisher
shall be free to distribute said title through other means of distribution.
21. For purposes of this agreement, the "On-Sale" date shall mean the date a
Publication is placed on sale to the public and the "Off-Sale" date shall mean
the date that Publisher and Curtis agree that a Publication should be removed
from such sale.
22. Notwithstanding anything contained in this agreement, Curtis shall not be
obligated to make any payments hereunder, and shall consider it to be a material
breach of this agreement, unless all copies of each issue of the Publication are
printed and shipped by Publisher's printer(s) to Curtis' customers in accordance
with the galleys prepared by Curtis pursuant to Paragraph 7 on the date provided
in the Notice of Completion of Shipment sent to Curtis by Publisher's
printer(s).
23. This agreement sets forth the understanding of the parties with respect to
the distribution of Publications and may not be amended except in writing signed
by the parties and shall be binding upon the parties, their respective
successors and assignees; and, in particular, this agreement shall be binding
for its terms upon any transferees, successors or assigns of Publisher who shall
publish any of the Publications, it being the intent of the parties that this
agreement run with and apply to all Publications. This agreement is to be signed
in two counterparts, both of which shall be deemed to be originals.
/S/ /S/
DUGENT PUBLISHING CORP (PUBLISHER) CURTIS CIRCULATION COMPANY
EXHIBIT 10.37
[THIS AGREEMENT NOW BETWEEN CURTIS CIRCULATION COMPANY AND FIRESTONE PUBLISHING,
INC., AS ASSIGNEE OF DUGENT PUBLISHING CORP.]
CURTIS CIRCULATION COMPANY
Joseph M. Walsh, President
March 6, 1989
Mr. Walter Weidenbaum
282 Lagoon West
Lido Beach, NY 11561
Dear Walter:
This letter will serve as an Amendment to the Distribution Agreement ("DA"),
which is dated April 22, 1983, between Curtis Circulation Company ("Curtis") and
Dugent Publishing Corp. ("Dugent").
The following terms are agreed to and understood by the parties as the only
changes to the aforementioned DA:
(I) Paragraph 9 (a) is amended to read as 5-1/4% of cover price of each copy
of each issue of the three titles: GENT, CAVALIER and NUGGET
(II) Paragraph 9 (b) is amended to read as 7% of cover price on all new title
Publications and all specials including those of GENT, CAVALIER and NUGGET
(III) The term of the DA is to be extended six (6) years from its present
expiration date of July 1, 1989.
This Amendment shall become effective on July 1, 1989.
Please acknowledge the acceptance of the terms of this Amendment and intent to
be legally bound hereby by signing the three enclosed copies of this letter and
returning two to me for inclusion in our contract files.
Very truly yours,
CURTIS CIRCULATION
/S/
JOSEPH M. WALSH
Acknowledged and agreed to with intent to be legally bound hereby this 7th day
of March, 1989.
DUGENT PUBLISHING CORP.
/S/
By: Walter Weidenbaum, Sec'y
EXHIBIT 10.38
[THIS AGREEMENT NOW BETWEEN CURTIS CIRCULATION COMPANY AND FIRESTONE PUBLISHING,
INC., AS ASSIGNEE OF DUGENT PUBLISHING CORP.]
CURTIS CIRCULATION COMPANY
February 3, 1994
Mr. Walter Weidenbaum
Dugent Publishing Corp.
2600 Douglas Road
Suite 600
Coral Gables, Florida 33134
Dear Walter:
Pursuant to our discussion, the Distribution Agreement between CURTIS
CIRCULATION COMPANY ("CURTIS") and DUGENT PUBLISHING CORP. ("DUGENT") dated
April 22, 1983, as amended, is herein further amended as follows:
Paragraph 11 (a) is replaced with the following: "FIRST ADVANCE: 22.5% of
CURTIS'S billing to its customers less CURTIS'S distribution fee paid after
CURTIS receives notification from Publisher's printer of completion of shipment.
In the event that the aggregate net sale percentage for all titles should fall
below 30%, CURTIS reserves the right to use 75% of the unit sales of the average
of the last three complete issues in order to calculate the first advance.
This Amendment shall become effective on March 1, 1994.
Please acknowledge the acceptance of the terms of this Amendment and intent to
be legally bound hereby by signing the enclosed letter and returning it to me
for inclusion in our contract files.
Sincerely,
Gerald A. Steinberg
Vice President
Finance and Operations
Acknowledged and agreed:
DUGENT PUBLISHING CORP.
By:/s/
2/4/94
EXHIBIT 10.39
[THIS AGREEMENT NOW BETWEEN NATIONALWIDE FINANCE CORPORATION, AS SUCCESSOR TO
DOLPHIN LAKES PARTNERSHIP, AND FIRESTONE PUBLISHING, INC., AS ASSIGNEE OF
DUGENT PUBLISHING CORP.]
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into this 20th day of
July, 1995, by and between Dolphin Lakes Partnership ("Landlord"), whose address
for purposes of this Lease is 6969 West 20th Avenue, Hialeah, Florida 33014, and
Dugent Publishing Corp. ("Tenant"), whose address until the commencement of the
term of this Lease is 2600 Douglas Road, Suite 600, Coral Gables, FL 33134 and
after commencement of the term of this Lease shall be the Premises.
In consideration of the payments of rents and other charges provided for in this
Lease, the covenants and conditions set forth below, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Landlord
and Tenant hereby covenant and agree as follows:
1. PREMISES: Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, on the terms and conditions set forth below, those certain premises
(the "Premises") consisting of approximately 3,617 square feet (a common area of
factor of 15% was used) of floor space (the "Rentable Area") in the building
known as the "SHULA BUILDING" (the "Building") located on Lot 5, Block 1, Miami
Lakes Industrial Park Section Ten as recorded in Plat Book 118, at Page 33, of
the Public Records of Dade County, Florida, such Premises being more
particularly described in the floor plan attached as Exhibit "A" to this Lease.
The foregoing Rentable Area figure is agreed to by the parties, subject to
verification by the architect/space planner.
2. TERM: This Lease shall be for a term (the "Term") of five years commencing on
September 1,1995, and ending on August 31, 2000, unless sooner terminated or
extended as provided herein.
If the Landlord is unable to deliver possession of the Premises on the
commencement date by reason of the holding over of any prior tenant or for any
other reason, an abatement or diminution of the "Rent" (consisting of the "Base
Rent" and "Additional Rent" as such terms are defined below) shall be allowed
until possession is delivered to Tenant, but nothing here will operate to extend
the initial term of this Lease beyond the agreed expiration date, and such
abatement in Rent shall be the full extent of Landlord's liability to Tenant for
any loss or damage to Tenant on account of any delay in obtaining possession of
the Premises. There will not be any delay in the commencement of the Term of
this Lease or any delay in the payment of Rent if Tenant fails to occupy the
Premises when ready for occupancy, or if Tenant causes delay in preparing the
Premises for occupancy by failing to promptly approve plans, make material or
color selections, or make any other decisions or take actions necessary for the
preparation of the Premises for occupancy. The Premises will be deemed completed
and ready for occupancy by Tenant when Landlord's Supervising Architect
certifies that the work required of Landlord, pursuant to the space plan
attached as Exhibit "A" has been substantially completed in accordance with the
approved plans and specifications and the Landlord's building standard
materials. The Landlord's responsibility for improvements is defined by and
limited to those items specified in Exhibit "A." Any additional improvements
desired by Tenants, not specifically agreed to in writing by the parties, will
be the Tenant's responsibility and effected at the Tenant's expense.
The Tenant's taking possession of the Premises will be conclusive evidence that
the Premises were in good and satisfactory condition when possession was taken.
This Lease does not grant any right to light or air over or about the Premises
or the Building.
If Tenant, with Landlord's prior consent, occupies the Premises before
commencement of the Term, all provisions of this Lease will be in full force and
effect with respect to such occupancy, commencing upon the occupancy, and Rent
for the period must be paid by Tenant at the same rate specified for the Term.
3. RENT: Tenant agrees to pay Landlord a total "Base Rent" of Two Hundred and
Sixty Thousand Four Hundred and Twenty Four Dollars ($260,424) in advance in
monthly installments of Four Thousand Eight Hundred and Twenty Two Dollars and
Sixty Seven Cents ($4,822.67) without any offset or deduction whatsoever, in
lawful money of the United States of America, at Landlord's address above
specified or elsewhere as specified from time to time by Landlord's written
notice to Tenant. Landlord hereby acknowledges payment by Tenant of the sum of
Five Thousand One Hundred and Thirty Six Dollars and Fourteen Cents ($5,136.14)
representing of the first monthly installment of Base Rent, plus sales tax, for
(he first month of the term of the Lease. The balance of the total Base Rent is
payable in equal monthly installments as specified above, in advance, on the
first day beginning on the eighth month of the Term. The Rent for months two
through seven (six months) is abated. If the Term of this Lease commences on any
day other than the first of the month, Tenant will pay Landlord Rent for the
commencement month on a prorated basis (such proration to be based on the actual
number of days in the commencement month), and the first month's installment of
Base Rent paid by Tenant, if any, upon execution of this Lease will be credited
to the next full month's installment of Base Rent due. Rent for any partial
month of occupancy at the end of the Term will be prorated based on the actual
number of days in the partial month.
In addition to Base Rent, Tenant agrees to pay to Landlord, each month, a sum
equal to any sales tax, tax on rentals, and any other charges, taxes and/or
impositions now in existence or subsequently imposed, based upon the rental or
the amount of Rent, and any other charges so levied. Tenant is not required to
pay any part of any federal or state income taxes imposed upon Landlord.
The Landlord acknowledges payment by Tenant of the sum of Twenty Eight Thousand
Two Hundred and Five Dollars ($28,285) for the cost of additional improvements
to the Premises in accordance with the Architect's floor plan (Exhibit "A") and
Building Standards (Exhibit "C").
Tenant must pay Landlord interest at the maximum legal rate on any Rent due that
remains unpaid for five (5) days after its due date.
4. DELETED.
5. ADDITIONAL RENT: In addition to the Base Rent, Tenant shall, during each
lease year, pay to Landlord as "Additional Rent," "Tenant's proportionate share"
of "Operating Expenses," less the "Base Amount". As used here the terms:
(a) "Tenant's proportionate share" means the percentage that the Rentable Area
leased by the Tenant bears to the total Rentable Area contained in the Building,
which share is agreed to be ten and four tenths percent (10.4%).
(b) "Base Amount" means a sum equal to the aggregate Operating Expenses
estimated by the Landlord for the Building's last year of operation,
(c) "Operating Expenses" means all expenses, costs and disbursements of every
kind that the Landlord pays or become obligated to pay because of its ownership,
maintenance or operation of the Building, computed on an accrual basis. By way
of explanation and clarification, but not limitation, Operating Expenses
include:
(i) Wages and salaries of all employees engaged in operation and maintenance of
the Building, social security taxes, unemployment taxes or insurance, and any
other taxes which may be levied on such wages and salaries, the cost of
disability and hospitalization insurance, pension or retirement benefits, or any
other fringe benefits for such employee.
(ii) All supplies and materials used in operation and maintenance of the
Building;
(iii) Cost of all utilities including water, sewer, electricity, gas and fuel
oil used by the Building and not charged directly to another tenant;
(iv) Cost of customary building management, janitorial services, trash and
garbage removal, service and maintenance of all systems and equipment including,
but not limited to, elevators, plumbing, heating, air conditioning, ventilating,
lighting, electrical, telephone, security and fire alarms, fire pumps, fire
extinguishers and devices, guard service, painting, window cleaning and
landscaping and gardening;
(v) Cost of rent abatement, casualty and liability insurance applicable to the
Building and Landlord's personal property used in connection with the Building;
and,
(vi) Taxes, including all impositions, taxes, assessments (special or
otherwise), and other governmental liens or charges of any and every kind,
nature and sort whatsoever, ordinary and extraordinary, foreseen and unforeseen,
and substitutes thereof (excepting only income taxes) attributable in any manner
to the Building or the land on which the Building is located and any fixtures or
other facilities located there or used in conjunction therewith.
Landlord will notify Tenant, within a reasonable time after the end of each
calendar year during the Term, of the amount that Landlord estimates (as
evidenced by budgets prepared by or on behalf of Landlord) will be the amount of
Tenant's proportionate share of the Operating Expenses, less the Base Amount,
for the then current calendar year and Tenant will pay that sum in advance to
Landlord in equal monthly installments during that calendar year, on the first
day of each remaining month in that calendar year, commencing on the first day
of the first month following Tenant's receipt of the notification.
Within sixty (60) days following the end of each calendar year during the Term,
Landlord will submit to Tenant a statement showing the actual amount which
should have been paid by Tenant as Additional Rent, for the previous calendar
year, the amount actually paid that year and the amount of the resulting balance
due, or overpayment, as the case may be. Within thirty (30) days after receipt
by Tenant of the statement, Tenant will have the right to inspect Landlord's
books and records pertaining to the Operating Expenses, at Landlord's office,
during normal business hours, after four days prior written notice. The
statement will become final and conclusive between the parties unless Landlord
receives written detailed objections within the thirty (30) day period. Any
balance shown to be due pursuant to the statement will be paid by Tenant to
Landlord within thirty (30) days and any overpayment will be immediately
credited against Tenant's obligation to pay anticipated Additional Rent for the
next year (or, if by reason of any termination of this Lease no such future
obligation exists, refunded to Tenant).
Additional Rent due by reason of this paragraph for the final months of this
Lease is due and payable even though it may not be calculated until subsequent
to the termination date of the Lease; and will be prorated according to that
portion of the calendar year that this Lease was in effect.
Notwithstanding the foregoing, the Additional Rent for the period ending
beginning January 1, 1966 and ending August 31, 1996 is abated.
6. TIME OF PAYMENT: Tenant agrees that Tenant will promptly pay any Rents, at
the times and place stated above; that Tenant will promptly pay charges for work
performed on order of Tenant, and any other charges that accrue under this
Lease; that, if any pall of the Rent or above mentioned charges remain due and
unpaid for ten days after they become due and payable, Landlord will be entitled
(in addition to all other rights and remedies available to it by law and in
equity) to receive a late payment penalty of five percent (5%) of the unpaid
amount.
7. SECURITY DEPOSIT: Deleted
8. USE: The Tenant will use and occupy the premises for general business
purposes consistent with the character and business activities of the building.
In the event that Tenant uses the Premises for purposes not expressly permitted
herein, the Landlord may, in addition to all other remedies available to it,
terminate this Lease or restrain said improper use by injunction.
9. QUIET ENJOYMENT: Upon payment by Tenant of the Rents herein provided, and
upon the observance and performance of all terms and provisions, on Tenant's
part to be observed and performed, Tenant will, subject to all of the terms and
provisions, of this Lease, peaceably and quietly hold and enjoy the Premises for
the Term.
10. INSURANCE PREMIUMS: If the Landlord's insurance premiums exceed the standard
premium rates for similar property because the nature of Tenant's operation
results in extra hazardous exposure, then Tenant will reimburse Land-ford,
immediately upon receipt of appropriate invoices from Landlord, for such
increase in premiums. It is understood and agreed between the parties that any
such increase in premiums will be considered as rent due and will be included in
any lien for rent.
11. RULES AND REGULATIONS: Tenant agrees to comply with all reasonable rules and
regulations Landlord may adopt from time to time for operation of the Building
and parking facilities, and protection and welfare of Building and parking
facilities, its tenants, visitors, and occupants. The current Rules and
Regulations, which Tenant hereby agrees to abide by, are attached as Exhibit
"B". Any future rules and regulations will become a part of this Lease, and
Tenant hereby agrees to comply with them upon delivery of a copy to Tenant,
providing the same do not materially deprive Tenant of any of its rights under
this Lease.
12. GOVERNMENTAL REQUIREMENTS: Tenant will faithfully observe all municipal and
County ordinances and codes, all State and Federal Statutes, rules and
regulations now in force or which may subsequently be in force.
13. SERVICES: Landlord will furnish the following to Tenant.
(a) Electricity for normal lighting and office machines and air conditioning
reasonably required in the Landlord's judgement for the comfortable use and
occupation of the premises between 8:00 a.m. and 6:00 p.m. on Monday through
Friday and Saturdays between 9.00 a.m. and 12:00 p.m. excluding normal business
holidays. If Tenant desires air conditioning for the leased premises outside the
normal Monday through Friday and Saturday hours, Tenant will pay Landlord
fifteen dollars per hour for such use.
(b) Routine maintenance, as deemed by Landlord to be normal and usual and of a
similar quality as other office. buildings located in Miami Lakes, in the common
stairs, common entries and toilet rooms of the building of which the premises
are a part, on Monday through Friday (and excluding weekends and holidays).
(c) Maintenance, as deemed by Landlord to be normal and usual in similar office
buildings, of all exterior landscaping including the replacement of lamps and
ballasts necessary in building standard lighting fixtures.
(d) Maintenance and repair of the roof and all structural portions of the
Building (unless they are damaged by negligent act or omission of Tenant, or
Tenant's agents, employees, guests or invitees, in which event Tenant will be
solely responsible for the cost of repair).
(e) Janitorial service and trash and garbage removal for the areas leased by the
Tenant.
Such services will be provided as long as the Tenant is not in default under any
of the terms and provisions of this Lease, subject to interruption caused by
repairs, renewals, improvements, changes of service, alterations, strikes, lock-
outs, labor controversies, inability to obtain fuel or power, accidents,
breakdowns, catastrophes, national or local emergencies, "Acts of God" and
conditions and causes beyond the control of Landlord; and upon any such or
similar happening, no claim for damages, offset or abatement of rent for failure
to furnish any such services will be made by the Tenant or allowed by Landlord.
No electric current will be used except that furnished or approved by Landlord,
nor will electric cable or wire be brought into the Premises, except upon the
written consent and approval of the Landlord. Tenant will use only office
machines and equipment that operate on the Building's standard electric
circuits, and in no event allow them to overload the Building's standard
electric circuits from which the Tenant obtains electric current.
14. TENANT WORK: It is understood and agreed between the parties hereto that any
charges to Tenant by Landlord for services or for work done on the Leased
Premises by order of Tenant, or otherwise accruing under this Lease, will be
considered as rent due and included in any lien for rent.
15. TENANT MAINTENANCE AND REPAIR OF PREMISES Tenant, at Tenant's own expense,
will keep and maintain the Premises continuously in a neat and attractive
manner, in good repair and in tenantable condition during the Lease term and
will replace (under the direction and to the satisfaction of Landlord), at its
own expense. any and all broken glass caused by Tenant in and about the
Premises.
Tenant will make no alterations, additions or improvements in or to the Premises
without Landlord's prior written consent, which will not be unreasonably
withheld, but May be predicated upon Tenant's use of contractors who are
acceptable to Landlord, and all additions, fixtures, carpet or Improvements,
except only office furniture and fixtures which may be readily removable without
injury to the Premises, will remain part of the Premises at the expiration of
this Lease.
16. CONSTRUCTION LIENS: Tenant does not have any authority to create any
construction liens on Landlord's interest in the Premises and all persons
contracting with the Tenant for the construction or removal of any facilities or
other improvements on or about the Leased Premises, and all material suppliers,
contractors and laborers are charged with notice that they must look only to the
Tenant and to the Tenant's interests in the Premises to secure the payment of
any invoice for work done or material furnished at the request or instruction of
Tenant. Tenant will at all times keep the Premises free of construction liens,
and any other lien for labor, services, supplies, equipment or material
purchased or procured, directly or indirectly, by or for Tenant. Tenant further
agrees that Tenant will promptly pay and satisfy all construction and other
liens (resulting from its order), and will indemnity Landlord against all
expenses, costs and charges, including bond premiums for release of liens and
attorneys' fees and costs reasonably incurred; and in or relating to the defense
of any suit in discharging the Premises, the Building, or any part thereof from
any liens or other encumbrances caused by Tenant. In the event any such lien is
recorded, Tenant will bond against or discharge the same within ten (10) days
after it has been made or recorded. It is understood and agreed between the
parties that such expenses, costs, and charges referred to above will be
considered as rent due and included in any lien for rent.
17. PARKING: So long as Tenant is not in default of the terms and provisions of
this Lease, Landlord assigns to Tenant, for Tenant's exclusive use during the
Term hereof, a total of fourteen parking spaces in the building parking area,
three of which shall be under cover (two compact and one standard sized) and
eleven of which shall be uncovered, (five compact and six standard sized).
Landlord shall have the right, from time to time, to relocate and reassign the
designated parking spaces within the parking area. Landlord will not be liable
for any damage or theft of or from automobiles or other vehicles while in or
about the Building parking areas.
18. SECURITY; LOSS, DAMAGE:
(a) SECURITY: Landlord will not be responsible or liable for the theft, loss or
damage to person or properly in, on or about the Premises, including, without
limitation, any property of Tenant, Tenant's employees, agents and invitees.
Tenant acknowledges and agrees that Landlord is not responsible for the security
of the Premises or the parking area, or the Building in general.
(b) LOSS; DAMAGE: Landlord will not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling building materials
or components, gas, electricity, water, rain or leaks from any part of the
Building or from the pipes, appliances or plumbing works or from the roof,
street or sub-surface or from any other place or by dampness, humidity or by any
other cause of whatsoever, nature, unless directly caused by or due to the
negligence of Landlord, its agents, or employees; nor will Landlord or its
agents be liable for any such damage caused by other tenants or persons in the
Building or caused by construction of any private, public or quasi-public work;
nor will Landlord be liable for any latent defect in the Premises OF in the
Building (though Tenant will give immediate notice to Landlord in case of fire
or accidents in the Premises or in the Building or of any defective conditions
in them or in any fixtures or equipment.
19. ESTOPPEL STATEMENT: Tenant agrees that from time to time, upon not less than
ten (10) days prior request by Landlord, Tenant will deliver to Landlord a
statement in writing certifying: (a) that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that the Lease as
modified is in full force and effect and slating the modifications): (b) the
dates to which the rent and other charges have been paid, and, (c) that Landlord
is not in default under any provisions of this Lease, or, if in default,
specifying the nature of the default in detail.
20. SUBORDINATION OF LEASE: This Lease is subject and subordinate to any and all
mortgages now or subsequently encumbering the Building. This provision will be
self-operative without the execution of any further instruments. Notwithstanding
the foregoing, Tenant agrees to execute any instrument(s) which Landlord may
reasonably deem desirable to further evidence the subordination of this Lease to
any and all mortgages. At the option of any of the holder of any mortgage, upon
written notice to Tenant, then in any instance in which Tenant gives notice to
Landlord alleging any default by Landlord, Tenant will also simultaneously give
a copy of such notice to Landlord's mortgagee and such mortgagee will have the
right (but not the obligation) to cure or remedy the default during the period
that is permitted to Landlord, and Tenant will accept such curative or remedial
action (if any) taken by Landlord's mortgagee with the same effect as if the
action had been taken by Landlord. Tenant further agrees to execute any non-
disturbance and attornment agreement reasonably requested by any such mortgagee.
21. ASSIGNMENT OR SUBLETTING: Tenant must obtain the Landlord's prior written
consent, which will not be unreasonably withheld, in order to assign, transfer,
pledge or otherwise encumber or dispose of this Lease or sublet the Premises or
any portion of them or permit the Premises to be occupied by other persons. In
the case of a subletting, Landlord's consent may be predicated, among other
things, on Landlord becoming entitled to collect and retain all rentals payable
under the sublease.
In lieu of consenting or not consenting, Landlord may, at its option, (i) in the
case of the proposed assignment or subletting of Tenant's entire leasehold
interest, terminate this Lease in its entirety, or (ii) in the case of the
proposed assignment or subletting of a portion of the Premises, terminate this
Lease on that portion of the Premises that Tenant has proposed to assign or
sublet. In the event Landlord elects to terminate this Lease pursuant to clause
(ii) of this paragraph, Tenant's obligations as to Base Rental and Additional
Rent will be reduced in the same proportion that the Rentable Area of the
portion of the Premises for which this Lease is being terminated bears to the
total Rentable Area of the Premises.
If Tenant is a corporation (other than one whose shares are regularly and
publicly traded on a recognized stock exchange), trust, partnership or other
business entity, any change in the ownership (legal or equitable) to a third
party, will be deemed an assignment of this Lease.
22. HOLD HARMLESS OF LANDLORD AND PARTNERS: In consideration of the Premises
being leased to Tenant for the above Rent, Tenant agrees that Tenant, at all
times, will indemnify and hold harmless Landlord from all losses, damages,
liabilities and expenses (including reasonable attorneys' fees and costs) that
may arise or be claimed against Landlord for any injuries or damages to the
persons or property that arise from Tenant's use or occupancy of the Premises or
other portions of the Building (including the parking areas) or arising from any
acts or omissions of Tenant, Tenant's agents, employees, or invitees, or arising
from Tenant's failure to comply with the terms and provisions of this Lease or
any applicable laws, ordinances, codes or regulations. Landlord will not be
liable to Tenant for any damage, loss or injury to persons or property, except
when such damage, loss or injury results from negligence of Landlord, its agents
or employees. Tenant will indemnify and hold Landlord harmless from all such
claims, damages, liabilities, injuries and expenses. Any and all personal
property placed or moved into the Premises or Building will be at the risk of
Tenant or the owner thereof, and Landlord will not be liable to Tenant for any
damage to such personal property.
If Landlord is made a party to any litigation relating to any of the matters in
the preceding paragraph, then Tenant will protect and hold Landlord harmless and
pay all costs, expenses and reasonable attorneys' fees incurred or paid by
Landlord in connection with such litigation and any appeal thereof.
In all events, Tenant will look solely to the premises and rents derived
therefrom for enforcement of any obligation of the Landlord under this Lease or
by law assumed or enforceable against Landlord. Tenant agrees that any such
obligations do not constitute personal obligations of Landlord, or any of its
partners, and will not create or involve any claim against or personal liability
on the part of any of them, and that Tenant will look solely to Landlord's
interest in the Premises for satisfaction of any liability of Landlord to
Tenant.
23. CASUALTY LOSS: If the Premises (or a material portion of them) are
rendered untenantable by reason of fire or other casualty loss, a just
proportionate share of the Rent will abate while untenantable. The Landlord in
such case, will have the option either to continue this Lease in effect (in
which event the Landlord will repair the Premises other than any Tenant
improvements) within five (5) months after the date of the loss (subject to any
delay caused by a force majeure), or to cancel this Lease as of the date of the
loss. Landlord will notify Tenant after a loss as to which option Landlord
elects.
24. CONDEMNATION: In the event that the Premises or any material parl thereof
are taken for any public or quasi-public use by condemnation or by right of
eminent domain, or. purchase in avoidance or settlement of a condemnation or
eminent domain proceeding, Landlord and Tenant agree that this Lease will be
canceled, and Rent will abate as of the date of taking. Any and all condemnation
awards will be the properly of the Landlord.
25. DEFAULT: The following are "events of default:"
(a) If Tenant defaults in the payment of any Rent or other charges and such
default continues for a period of thirty (30) days after written notice from
Landlord to Tenant,
(b) If Tenant defaults in the performance of or fails to comply with any of the
agreements, terms, conditions or regulations contained in this Lease (other than
payment of rent) and such default or noncompliance continues for ten (10) days
after written notice from Landlord to Tenant,
(c) If Tenant files a voluntary petition in bankruptcy or is adjudicated
bankrupt or insolvent, or files any petition or answer seeking any creditor
protection, reorganization, liquidation, dissolution or similar relief under the
current or any future federal bankruptcy act or any other current or future
applicable federal, state or other debtor's relief statute or law, or seeks or
consents to the appointment of any trustee, receiver or liquidator of all or any
substantial part of Tenant's properties or of the Premises;
(d) If within ninety (90) days after commencement of any proceeding by or
against Tenant seeking any protection, reorganization, liquidation, dissolution
or similar relief under the current or any future federal bankruptcy act or any
other applicable federal, state or other debtor's relief statute or law, such
proceeding is not dismissed, or stayed on appeal, or if, within ninety (90) days
after the appointment, without the consent of Tenant, of any trustee, receiver
or liquidator of Lessee or of all or any substantial part of Lessee's properties
or of the Premises, such appointment has not been vacated or stayed on appeal or
otherwise, or if, within ninety (90) days after the expiration of any such stay,
such appointment is not vacated:
(e) If the Premises are seized under any execution, levy, attachment or other
legal process and such is not promptly vacated or stayed on appeal or otherwise,
or if the Tenant's interest in the Premises is sold by judicial sale and the
sale is not promptly vacated or stayed on appeal or otherwise; or,
(f) If Tenant fails to take possession and open for business within thirty (30)
days after commencement of the Term, or subsequently vacates, abandons, or
deserts the Premises, or ceases the continual operation of its business.
If there is an event of default, then the Landlord may, at any time thereafter,
terminate this Lease and retake possession, declare the balance of the entire
rent for the entire rental term of this lease to be immediately due and payable
(in which event Landlord may then proceed to collect all of the unpaid rent
called for by this Lease by distress or otherwise), or pursue any other remedy
afforded by law or equity, provided that such default and all other defaults at
the time existing have not been fully cured, and all legal expenses and costs
incurred by the Landlord in connection with enforcing this Lease, have not been
fully paid.
Nothing in this Lease will be construed as precluding the Landlord from having
such remedy as may be and become necessary in order to preserve the Landlord's
right or the interest of the Landlord in the Premises and in this Lease, even
before the expiration of the grace or notice periods, if under particular
circumstances then existing the allowance of such grace or the giving of such
notice would prejudice or endanger the rights and estate of the Landlord in this
Lease or in the Premises. All rights and remedies granted in this Lease to
Landlord or available at law or equity will be cumulative and not exclusive.
26. LIEN FOR PAYMENT OF RENT: Deleted.
27. WAIVER OF DEFAULT: Failure of Landlord to declare any default immediately
upon its occurrence, or delay in taking any action in connection with such
default, is agreed not waive the default, and Landlord will have the right to
declare any default at any time and then take action.
No waiver of any term, provision, condition or covenant of this Lease by
Landlord will be deemed to imply or constitute a further waiver by Landlord of
any other term, condition or regulation of this Lease and no acceptance of Rent
or other payment will be deemed a waiver of any default.
28. RIGHT OF ENTRY: Landlord, or any of its agents, will have the right to enter
the Premises during all reason-able hours to examine them or to make such
repairs, additions or alterations as may be deemed necessary for the safety,
comfort, or preservation, of the Premises or the Building; and to exhibit the
Premises at any time within one hundred and eighty (180) days before the
expiration of this Lease.
29. INSURANCE: Tenant will maintain, at its expense, throughout the Term of
this Lease, the following insurance coverages:
(a) liability insurance for bodily injury and properly damage to protect both
Landlord and Tenant against claims, damage, costs and attorney's fees arising
out of accidents of any kind occurring on or about the Premises, the Building or
the parking area with combined single limit liability coverage of not less than
$1,000,000 and property damage coverage of not less than $200,000;
(b) fire and extended casualty insurance with sufficient coverage to reimburse
the loss of all of Tenant's improvements to the Premises, and all of Tenant's
fixtures, equipment, personal properly and inventory;
(c) the Landlord hereby waives the requirement for plate glass insurance
covering the replacement value of all plate glass in or about the Premises with
the proviso that the Tenant agrees to pay the Landlord for the replacement of
any glass broken by the Tenant's employees and/or invitees; and,
(d) appropriate workers' compensation and any and all other insurance required
by law.
All insurance must be written by insurers qualified to do business in Florida
and reasonably acceptable to Landlord. A certificate or duplicate policies
showing such insurance in force will be delivered to Landlord prior to
commencement of the Lease Term, and such insurance and updated certificate or
renewed policies will be maintained with Landlord throughout the Term of this
Lease.
30. NOTICE: Any notice given to Landlord will be sent to Landlord by United
States certified mail, postage prepaid, return receipt requested, addressed to
Landlord at Landlord's office at the address set forth on page 2. or hand
delivered to Landlord at its office. Any notice given Tenant under the terms of
this Lease, will be in writing and will be sent by United States certified mail,
postage prepaid, return receipt requested, or hand delivered to the Tenant at
the Premises (except that prior to commencement of the Term, notices to the
Tenant will be sent to the address set forth on page 2 hereof). Either party,
from time to time, by such notice, may specify another address to which
subsequent notice will be sent. Any notice given by mail will be deemed given
three (3) days following the date of mailing.
31. COMMON AREAS: All automobile parking or drive areas, walkways, loading
areas, landscaped areas and other areas and improvements provided by Landlord
for the general use, in common, of tenants will be at all times subject to the
Landlord's control and management, and Landlord will have the right to
establish, modify and enforce rules and regulations with respect to all such
facilities.
32. CONDITION OF PREMISES ON TERMINATION OF LEASE AND HOLDING OVER: Tenant
agrees to surrender, at the end of the Term of this Lease or upon any early
termination of this Lease, the Premises in as good condition as the Premises
were at the beginning of the Term, ordinary wear and tear excepted. Tenant
agrees that if it does not surrender the Premises at the end of the Term, then
Tenant will pay one and one half times the amount of the Rent (provided the
Tenant remains in occupancy of the Premises with the Landlord's written
approval) paid by Tenant for the last full month of the Term for each month or
portion that Tenant holds over and any damages that Landlord may suffer because
of Tenant's failure to surrender possession of the Premises including those
resulting from any claim by a succeeding tenant brought because of Landlord's
delay in delivering possession of the Premises to the succeeding Tenant, to the
extent that the delay is occasioned by Tenant. Notwithstanding the foregoing,
the then current rent shall be in effect for the first thirty days of the
holding over period.
No act by Landlord or its agents during the Term will be deemed an acceptance of
a surrender of the Premises, and no agreement to accept a surrender of the
Premises will be valid unless it is in writing signed by Landlord.
33. OCCUPANCY AND PERSONAL PROPERTY TAXES: Tenant will be responsible for and
pay before delinquency all municipal, county or state taxes assessed during the
Term of this Lease on any occupancy interest or personal properly of any kind,
owned by or placed in the Premises.
34. SIGNS: Landlord will have the right to install signs on the Premises. No
signs of any kind will be placed by the Tenant on the exterior of the Building
or any other portions of the Building. All signs to be placed on the Premises
will be of a style, size, lettering and content approved by the Landlord.
35. FLOOR LOADS: Tenant will not overload the floors and will not install any
heavy equipment of any kind, without prior written approval of the Landlord.
36. TRIAL BY JURY: It is mutually agreed by Landlord and Tenant that each waives
trial by jury in any action, proceeding or counterclaim brought by either of the
parties against the other on any matters arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant, and Tenant's use or
occupancy of the Premises.
37. INVALIDITY OF PROVISION: If any term or provision of this Lease or its
application to any person or circumstance is to any extent found to be invalid
or unenforceable, then the remainder of this Lease or the application of such
term or provision to a person or circumstance other than that held invalid or
unenforceable will not be affected and each other term and provision of this
Lease will be valid and be enforceable to the fullest extent permitted by law.
This Lease will be construed in accordance with Florida law.
38. TIME OF ESSENCE: It is understood and agreed that time is of the essence
of all the terms and provisions of this Lease.
39. SUCCESSORS AND ASSIGNS: All terms and provisions of this Lease to be
observed and performed by Tenant will be applicable to and binding upon Tenant's
successors and assigns; subject, however, to the restrictions as to assignment
and subletting by Tenant provided above.
40. ATTORNEY'S FEES: If there is litigation between the parties relating to this
Lease in any way, then the prevailing party will be entitled to recover its
reasonable attorneys' fees and legal expenses and costs relating to remedy of
the default (including costs and fees relating to any appeal and enforcement of
any remedy).
41. MISCELLANEOUS. The terms "Landlord" and "Tenant" include the singular and
plural, masculine, feminine and neuter, heirs, successors, personal
representatives and assigns, wherever the context requires or admits. "Landlord"
will be the owner of the Premises, from time to time, and upon the sale of the
Premises by the current owner, the new owner will be bound and liable as
"Landlord" under all of the terms and provisions under this Lease (including any
obligation to return the Security Deposit) and the former owner will
automatically be released from all obligations to Tenant. The terms and
provisions of this Lease are expressed in the text and body of this Lease and
the paragraph headings are solely for the convenience of the reader, are not
intended to be inclusive and will not be construed to limit or expand any of the
provisions of this Lease. Any formally executed addendum or modification of this
Lease will be deemed expressly incorporated, unless a contrary intention is
clearly stated. Notwithstanding anything here to the contrary, Landlord will not
be or be deemed to be in default unless it has failed to cure its default within
a reasonable time following its receipt of notice of the supposed default.
All exhibits attached to this Lease are hereby incorporated in and made a part
of it. Neither this Lease nor any memorandum or short form of it may be recorded
in the Public Records of Dade County, Florida.
42. EFFECTIVE DATE: Submission of this instrument for examination does not
constitute an offer, right of first refusal, reservation of or option for the
Premises or any other space or premises in, or about the Building. This
instrument becomes effective as a Lease upon execution and delivery by both
Landlord and Tenant.
43. BROKERAGE: Tenant represents and warrants that it has not dealt with any
broker, salesman, agent or other person in connection with this transaction,
other than Cushman & Wakefield of FL, Inc. and Keyes Company and that no other
broker, salesman agent or other person brought about this transaction, and
Tenant agrees to indemnify and hold Landlord harmless from and against any
claims by any other broker, salesman, agent or other person now claiming a
commission or other form of compensation by virtue of having dealt with Tenant
with regard to this leasing transaction.
44. FORCE MAJEURE: The term "force majeure" as used in this Lease will mean
"Acts of God", labor disputes (whether lawful or not), material or labor
shortages, restrictions by any governmental authority, civil riots, floods or
other cause beyond a party's control.
45. ENTIRE AGREEMENT: This Lease contains the entire agreement between the
parties and it may be modified only by an agreement in writing signed by the
party to be charged with the modification. Tenant specifically represents that
it has not relied upon any statement(s), representation(s), prior or
contemporaneous oral promise(s) or agreement(s) other than those specifically
set forth in this Lease.
IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered this
Lease in several counterparts each of which will be deemed an original, but all
constituting a single agreement, at Dade County, Florida, as of the day and year
first above written.
Witnesses: Dolphin Lakes Partnership.
EXHIBIT A
FLOOR PLAN
[not reproduced]
EXHIBIT 8
RULES AND REGULATIONS
1 . Sidewalks, doorways, vestibules, halls, stairways and similar areas will not
be obstructed by tenants or used for any purpose other than access to and from
the leased premises and for going from one to another part of the building.
2. Plumbing fixtures and appliances will be used only for purposes constructed,
and no sweeping, rubbish, rags or other unsuitable material will be thrown or
placed within the premises. Any damage resulting from such misuse of the
premises will be paid by Tenant, and Landlord will not in any case be
responsible for such.
3. No signs, advertisements or notices will be painted or affixed on or to any
windows or doors or other part of the building, except of such color, size and
style and in such places as will be first approved in writing by Landlord. No
nails, hooks or screws will be driven or inserted in any part of the building,
after Tenant's Improvements are completed, except by the building maintenance
personnel; nor will any part of the building be defaced by tenants.
4. A directory will be placed by Landlord, at its expense, in a conspicuous
place in the building. No other directories will be permitted, unless previously
authorized by Landlord in writing.
5. Tenants will not do, or permit anything to be done, in or about the building,
or bring or keep anything there, that will in any way increase the rate of fire
or other insurance on the building, or on property kept there, or obstruct or
interfere with the rights of, or otherwise injure or annoy other tenants, or do
anything in conflict with the valid pertinent laws, rules or regulations of
Landlord or any governmental authority.
6. Tenant will notify the building manager when safes or other heavy equipment
are to be taken in or out of the building and the moving will be done under the
supervision of the building manager, after written permission from the Landlord.
Persons employed to move such property must be acceptable to Landlord.
7. Tenants will not make or permit any improper noises in the building, or
otherwise interfere in any way with other tenants, or persons having business
with them.
8. Nothing will be swept or thrown into the corridors, halls, elevator shafts or
stairways. No birds or animals will be brought into or kept in or about the
building.
9. No machinery of any kind (other than normal office equipment) will be
operated on leased premises without the prior written consent of Landlord, who
may condition such consent upon the payment by Tenant of additional rent as
compensation for excess consumption of water or electricity, or both, occasioned
by the operation of the machinery; nor will Tenant use or keep
in the building any inflammable or explosive fluid or substance, or any
illuminating material, except candles.
10. Movement in or out of the building of furniture or office equipment, or
dispatch or receipt by tenant of any merchandise or materials which requires use
of elevators or stairways, or movement through building entrances, such as the
lobby, will be restricted to hours designated by Landlord. All such movement
will be under supervision of the building manager, by prearrangement. Such
prearrangement must be initiated by Tenant and will be by determination of
Landlord and subject to his decision and control, of the time, method and
routing of movement, and limitations imposed by safety or other concerns which
may prohibit any article, equipment or any other item from being brought into
the building. Tenant is to assume all risks of damage to articles moved and
injury to persons or public engaged or not engaged in such movement, including
equipment, property and personnel of Landlord, if damaged or injured as a result
of acts in connection with providing this service to Tenant, from time of the
beginning through the completion of the moving or delivery, and Landlord will
not be liable for acts of any persons engaged in, or any damage or loss to any
of said property or persons resulting from, any act in connections with such.
11. No draperies, shutters, or other window coverings will be installed on
exterior windows, walls or doors facing public corridors without Landlord's
prior written approval. Landlord will have the right to require installation and
use of uniform coverings.
12. No portion of Tenant's area or any other part of the building will at any
time be used or occupied as sleeping or lodging quarters.
13. Landlord will not be responsible for lost or stolen properly, equipment,
money, or jewelry from Tenant's area or public rooms, regardless of whether such
loss occurs when the area is locked against entry.
14. Landlord specifically reserves the right to refuse admittance to the
building from 7 p.m. to 7 a.m. daily, or on Sundays or on legal holidays, to any
person or persons who cannot furnish satisfactory identification, or to any
person or persons who for any other reason, in the Landlord's judgment, should
be denied access to the premises. Landlord, for the protection of the tenants
and their effects, may prescribe hours and intervals during the night on Sundays
and holidays, when all persons entering and departing the building will be
required to enter their names, the offices to which they are going (or from
which they are leaving), and the time of entrance or departure in a register
provided for that purpose by the Landlord.
15. The various levels of the Building will be designated as follows: the
"Lobby" will be the ground floor; and the floors above will be designated as
floors 2, 3 and 4.
16. Landlord reserves the right to rescind any of these Rules and make such
other further reasonable rules and regulations that Landlord will from time to
time believe conducive to the safety, protection, care and cleanliness of the
building, its operation, the preservation of good order, and the protection and
comfort of its tenants, their agents, employees and invitees, which Rules, when
made and notice of them given to Tenant, will be binding upon Tenant as if
originally prescribed.
EXHIBIT 10.40
ADDENDUM TO LEASE
The following is an addendum dated February 10th, 1998, to the
lease between the landlord of the Nationalwide Finance
Corporation and Firestone Publishing Inc. as the Tenant occupying
Suite 420 at 14411 Commerce Way, Miami Lakes, Florida 33014.
All terms and conditions referenced in the original lease between
the parties as referenced above shall remain the same except as
herein modified.
1. Tenant will be adding an additional 960 square feet known as
suite 305 at The Dolphin Building.
2. Tenant's new monthly rend will increase by the pro-rata
increase of the square footage.
3. The new rental amount will be as follows:
Rent = $4,822.67 + $1,280.00 = $6,102.67 + sales tax
Cam = $139.77 + $36.80 = $176.57
960 square feet x $16.00 per foot = $15,360.00 - 12 months = $1,280.00
960 square feet x $.46 per foot = $441.60 - 12 months = $36.80
4. Tenant will accept the additional space once it has been
painted, carpeted & with additional outlets.
5. Tenant's new rental increase will be effective with completion
of Item #4.
6. This executed addendum shall become a part of the original
lease document and all other terms and conditions not referenced
herein shall remain the same.
/S/ Witness /s/ Firestone Publishing
Inc. - Tenant
By: Walter Weidenbaum,
Pres.
Date: 2/23/98
Nationalwide Finance Corp.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
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ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<ALLOWANCES> 5,295,841
<INVENTORY> 535,984
<CURRENT-ASSETS> 3,705,674
<PP&E> 2,218,730
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<TOTAL-ASSETS> 18,490,276
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<BONDS> 8,250,007
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<COMMON> 19,671,389
<OTHER-SE> (14,972,142)
<TOTAL-LIABILITY-AND-EQUITY> 18,490,276
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<TOTAL-REVENUES> 15,572,990
<CGS> 10,999,454
<TOTAL-COSTS> 17,061,813
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 968,826
<INCOME-PRETAX> (2,457,649)
<INCOME-TAX> 112,383
<INCOME-CONTINUING> (2,570,032)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,570,032)
<EPS-PRIMARY> (1.67)
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