SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------------------
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, 1999
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-16355
----------------------------------
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.)
-----------------------------------------
Securities registered under Section 12(b) of the Act: None.
Securities registered under Section 12(g) of the Exchange Act as of December
31, 1998: 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: $0.
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 April
12, 2000, was $417,872.
The number of shares outstanding of the issuer's common stock, no par value,
as of April 13, 2000, was 4,178,722.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Item 12 of the Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998, filed with the Securities and Exchange Commission on
April 15, 1999, is incorporated herein by reference.
PRINCETON MEDIA GROUP, INC.
FORM 10-KSB
For the Year Ended December 31, 1999
INDEX
HEADING PAGE
PART I
Item 1. Description of Business 3
Item 2. Description of Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders
7
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters 8
Item 6. Management's Discussion and Analysis 8
Item 7. Financial Statements 12
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 13
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) 14
Item 10. Executive Compensation 16
Item 11. Security Ownership of Certain Beneficial Owners
and Management 18
Item 12. Certain Relationships and Related Transactions 20
Item 13. Exhibits and Reports on Form 8-K 21
SIGNATURES 26
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. published approximately 25 well-established
lifestyle and special interest magazines which are distributed throughout the
United States and internationally. The magazines included "Oui," "Fitness
Plus," "Karate International," and "Lady's Circle Patchwork Quilts." Each
magazine targeted 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 was approximately 2.4 million per month.
PMG, through Kingston Press, Inc., a wholly-owned subsidiary of Princeton
Publishing, Inc., leased and operated a 70,000 square foot printing facility
located in Sussex, Wisconsin, just outside of Milwaukee. The plant printed
all of PMG's own magazines and also performed printing services for unrelated
third parties.
The two wholly-owned subsidiaries of PMG and a wholly-owned subsidiary of one
of the subsidiaries were unable to meet current obligations as they became
due. Management of the Company made extensive efforts in mid-1998 to obtain
sufficient financing to fund a plan of restructuring that would improve cash
flows and maintain operations of these subsidiaries. Management determined
that such financing was not obtainable in the time necessary for operations to
remain viable.
The Company was engaged in niche magazine publishing. This segment of the
magazine publishing industry relies heavily on rack sales for circulation and
on impulse buyers that purchase product through rack sales. Management was
aware of a large decrease in rack sales outlets over the last several years.
The decline in rack distribution has perpetuated a related decline in
advertising revenue in these rack-sales-dependent publications. Management
had attempted to offset declines in this area of revenue through acquisitions
in other related and complementary segments of the media industry including
the Internet and other electronic media areas. Management felt investment in
electronic media entities would also produce advertising revenue for the
publishing segment of the business. Management was unable to effectuate such
acquisitions rapidly enough to offset the declines in the printing and
publishing segments of operations.
On October 27, 1998, Princeton Publishing, Inc. and Firestone Publishing,
Inc., wholly-owned subsidiaries of Princeton Media Group, Inc., and Kingston
Press, Inc., a wholly-owned subsidiary of Princeton Publishing, Inc., each
filed an Assignment for the Benefit of Creditors (The Assignment(s)), a
proceeding governed under the laws of the State of Florida. The Assignments
were filed with the Court of the 11th Judicial Circuit in and for Miami-Dade
County, Florida on October 27, 1998. The Assignment proceeding gives
creditors the opportunity to file proofs of claims. The Assignments were
filed in order to expedite an orderly sale and disposition of the assets of
the entities and pay claims in order of priority.
Year 2000 Reporting
Because the Company has discontinued operations, the Company had no adverse
affect as a result of requirements for compliance with computer reprograming
in conjunction with the year 2000.
CURRENT PLANS
During 2000, management of the Company intends to pursue a plan of attempting
to locate an acquisition that could provide stable operations that would
restore shareholder value.
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.
Total rental expense for the facility detailed above was paid by a related
entity and offset by other intercompany office charges.
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 previously traded on the Nasdaq SmallCap Market
under the symbol "PMGIF" and, commencing in November, 1998 trade on the
Bulletin Board under the same symbol.
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
1999*
1998
Fourth quarter $ .72 $ 0.63*
Third quarter 1.54 .66
Second quarter 2.54 1.38
First quarter 2.47 1.75
* The Company's stock ceased to be traded on the Nasdaq SmallCap Market in
November, 1998 and became a Bulletin Board stock under the same symbol, PMGIF.
As of December 31, 1999, there were 4,178,722 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 April 14,
2000 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
failure of pending or anticipated acquisitions to be consummated.
The year ended December 31, 1999, compared to the year ended December 31,
1998:
Revenue consisted entirely of forgiveness of debt of approximately $212,000 on
liabilities settled through the closing of the businesses of the subsidiaries
placed into assignment. This was a decrease of approximately $11.2 million
from the revenue of the prior year.
Operating activities were restricted to administrative costs of approximately
$95,800 to keep the Company in compliance with filing requirements and other
regulatory requirements.
Net income was approximately $114,800 compared to a loss of $7.7 million of
the prior year.
The year ended December 31, 1998, compared to the year ended December 31,
1997:
Revenues for the year ended December 31, 1998 amounted to $11,443,984 compared
to $15,572,990 for the year ended December 31, 1997, reflecting a decrease of
$4,129,006. Revenues are almost entirely derived from magazine sales,
subscriptions, advertising, and outside printing. The decrease in revenues
reflected for the year ended December 31, 1997 is a result of the Company's
assignment of its operating subsidiaries on October 27, 1998.
Costs and expenses of revenues for the year ended December 31, 1998 were
$14,202,513 compared to $17,061,813 for the year ended December 31, 1997,
resulting in a decrease of $2,859,300. The decline is due to the assignment of
the Company's operating subsidiaries on October 27, 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1999, $1,684 in interest expense was
charged to operations, compared to $798,944 for the year ended December 31,
1998, reflecting a decrease of $797,260. Interest expense is primarily
related to two promissory notes with the Chairman of the Board and a related
party.
Liquidity and capital resources are hereinafter discussed in three broad
categories: operating activities, investing activities and financing
activities.
Cash remained unchanged at $-0- at December 31, 1999 compared with $-0- at
December 31, 1998.
During the year ended December 31, 1999, net cash used in operating activities
was $56,543, representing a decrease of $969,562 from net cash of $1,026,105
used in operating activities during the year ended December 31, 1998.
During the year ended December 31, 1999, net cash used in investing activities
was $-0- compared with $772,996 used in investing activities during the
year ended December 31, 1998.
During the year ended December 31, 19997, net cash provided by financing
activities was $56,543, representing a decrease of $1,126,000 from net cash
provided by financing activities of $1,182,543 during the year ended December
31, 1998.
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
Balance Sheet December 31, 1999
Statements of Operations and Accumulated Deficit
For the Years Ended December 31, 1999 and 1998
Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998
Notes to Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in and disagreement with accountants on accounting and
financial disclosure.
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 April 13, 2000:
Year First Position
Elected With
Name Age Director Company
J. McNamara 51 1996 Chairman, Director, Chief Executive
Officer, Acting President, and Secretary
J. Leshinsky 46 1996 Director
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 served as a consultant to the chairman
of Alliance Entertainment, Inc. He currently is a Director of National Auto
Credit, Inc. and served as that company's Chairman of the Board and CEO until
fourth quarter of 1999.
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.
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.
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, 1999
and 1998.
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 1999 $ -(1) - -
- - - - -
Chairman of Board 1998 $ 88,846(1) - - -
1,200,000 - -
</TABLE>
(1) Based on an annual salary of $150,000. Mr. McNamara's salary ceased in
October, 1998, but he continues to serve as Chairman of the Board.
<TABLE>
Option/SAR Grants in Last Fiscal Year
Individual Grants
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
James McNamara 1,200,000(1) 100% $3.00/Share(2) 1/15/08
(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 $2.00 per share in January, 1998 per vote
of the Board of Directors.
</TABLE>
<TABLE>
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Name Shares Number of Securities Value of
Acquired On Value Underlying Unexercised in the
exercise (#) Realized Options/SAR's at FY- Money
Options/SAR's
End (#) at
FY-End ($)
Exercisable/Unexercisable
Exercisable/Unexercisable
James
McNamara 0 0 400,000/800,000
0/0
</TABLE>
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
Joel Leshinsky Common Stock 22,000(1) Less than
1%
3409 Heather Terrace
Lauder Hill, FL 33319
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(3) 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 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 1999, the Company loaned $5,300 to Celebrity Entertainment, Inc.
("Celebrity"), to assist Celebrity in meeting minimal operating expenses.
Celebrity's President and a director is James J. McNamara, Chairman of the
Company. During 1999, Mr. McNamara loaned the Company $20,366 for
administrative expenses; the note bears interest at 5% and accrued interest as
of December 31, 1999 was $368. In addition, J. William Metzger, the other
director of Celebrity, loaned the Company $41,477 bearing interest at 5%;
accrued interest was $1,316 as of December 31, 1999. The disclosure set forth
in Item 12 of the Registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998, filed with the Securities and Exchange
Commission on April 15, 1999, is incorporated herein by reference.
The Company shares corporate headquarters office space with Celebrity.
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; filed as Exhibit 10.36 to the Company's Form 10-KSB for the fiscal
year ended December 31, 1997, File No. 0-16355, filed with the Securities
and Exchange Commission on March 30, 1998; incorporated herein by
reference.
10.37 Amendment to Distribution Agreement with Curtis Circulation Company
dated
March 6, 1989; filed as Exhibit 10.37 to the Company's Form 10-KSB for
the
fiscal year ended December 31, 1997, File No. 0-16355, filed with the
Securities and Exchange Commission on March 30, 1998; incorporated
herein
by reference.
10.38 Amendment to Distribution Agreement with Curtis Circulation Company
dated
February 3, 1994; filed as Exhibit 10.38 to the Company's Form 10-KSB
for
the fiscal year ended December 31, 1997, File No. 0-16355, filed with
the
Securities and Exchange Commission on March 30, 1998; incorporated
herein
by reference.
10.39 Lease Agreement with Dolphin Lakes Partnership [now with Nationalwide
Finance Corporation, as successor] dated July 20, 1995; filed as Exhibit
10.39 to the Company's Form 10-KSB for the fiscal year ended December
31,
1997, File No. 0-16355, filed with the Securities and Exchange
Commission
on March 30, 1998; incorporated herein by reference.
10.40 Addendum to Lease with Nationalwide Finance Corporation dated February
10,
1998; filed as Exhibit 10.40 to the Company's Form 10-KSB for the fiscal
year ended December 31, 1997, File No. 0-16355, filed with the Securities
and Exchange Commission on March 30, 1998; incorporated herein by
reference.
27.1 Financial Data Schedule, filed as Exhibit 27.1 to the Company's Form
10-KSB
for the fiscal year ended December 31, 1997, File No. 0-16355, filed with
the Securities and Exchange Commission on March 30, 1998; incorporated
herein by reference.
(b) The following report on Form 8-K was filed during the quarter ended
December 31, 1998 by the Company:
Date Date
of Report Filed Items Reported Financial Statements
Filed
10/27/98 11/03/98 Assignment of the Company's None
three wholly-owned subsidiaries
which constituted all of the
Company's operations.
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: April 13, 2000
PRINCETON MEDIA GROUP, INC.
/s/ James J. McNamara
By: James J. McNamara,
Chairman of the Board and
Acting Chief Executive Officer,
and Chief Financial Officer
/s/ Joel Leshinsky,
By: Joel Leshinsky, Director
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Princeton Media Group, Inc.
We have audited the accompanying balance sheet of Princeton Media Group,
Inc.(the "Company") as of December 31, 1999 and the related statements of
operations and accumulated deficit, and cash flows for the year then ended.
We have also audited the consolidated statements of operations and accumulated
deficit, and cash flows of Princeton Media Group, Inc. and subsidiaries for
the year ended December 31, 1998. 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 audits 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 1999 financial statements referred to above present
fairly, in all material respects, the financial position of Princeton Media
Group, Inc. as of December 31, 1999 and the results of its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles. Also, in our opinion, the 1998 consolidated financial statements
of Princeton Media Group, Inc. and subsidiaries present fairly, in all
material respects, the consolidated results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 2 to the
financial statements, the Company has experienced significant operating
losses, has placed all of its operating subsidiaries in assignment for the
benefit of creditors, has an accumulated deficit and has negative working
capital at December 31,
1999. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Holyfield Associates, P.A.
Certified Public Accountants
West Palm Beach, Florida
April 13, 2000
<TABLE>
PRINCETON MEDIA GROUP, INC.
Balance Sheet
December 31, 1999
<S>
<C>
Assets
Current assets
Cash
$ -
Marketable securities, at market value
2,930
Due from affiliate
5,300
Total current assets
8,230
Property and equipment
43,408
Less accumulated depreciation
(18,616)
Property and equipment, net
24,792
Total assets $
33,022
Liabilities and Shareholders' Equity (Deficit)
Current liabilities
Accounts payable $
226,829
Accrued expenses
50,000
Advances payable - related parties
61,843
250,000
Accrued interest
1,684
Total current liabilities
590,356
Shareholders' equity (deficit):
Series A Preference Shares
28,923
Series C Preference Shares
739,696
Common Stock
21,297,570
Deficit
(22,623,523)
Total shareholders' equity (deficit) (
557,334)
Total liabilities and shareholders' equity $
33,022
</TABLE>
See accompanying notes to financial statements.
<TABLE>
PRINCETON MEDIA GROUP, INC.
Statements of Operations and Accumulated Deficit
For the Years Ended December 31, 1999 and
1998
1999 1998
<S>
<C> <C> (Consolidated)
Revenues:
Distribution, circulation, and other
income $ - $
8,196,277
Advertising
income
- 2,050,752
Printing
income
- 1,196,954
Net
revenues
- 11,443,984
Costs and operating expenses:
Cost of
sales
- 9,345,876
Selling and
administrative
95,813 4,856,637
Loss from
operations (
95,813) (2,758,529)
Other income (expense):
Interest
income
- 52,879
Interest
expense
( 1,684) ( 798,944)
Bad
debt
- (1,528,744)
Loss on disposition of
assets
- - ( 35,398)
Loss on assignment of
subsidiaries
- - (1,374,299)
Total other
income,(expense) (
1,684) (5,007,638)
Loss before extraordinary
income (
97,497) (7,766,167)
Extraordinary income - forgiveness of debt
212,283 -
Net income
(loss)
114,786 (7,766,167)
Accumulated deficit - beginning of the
year (22,738,309)
(14,972,142)
Accumulated deficit - end of the
year $ (22,623,523)
$(22,738,309)
Basic and diluted loss per share:
Loss before extraordinary
income $ ( 0.03) $
( 1.99)
Extraordinary
income
0.05 -
Net income (loss) per
share $
0.02 $ ( 1.99)
See accompanying notes to financial statements.
<PAGE>
</TABLE>
<TABLE>
PRINCETON MEDIA GROUP, INC.
Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998
1999 1998
<S> <C> <C>
(Consolidated)
Cash flows from operating activities:
Net income (loss) before extraordinary item $ ( 97,497)
$(7,766,167)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 8,681
277,395
Amortization -
318,999
Loss on disposition of assets 4,920
35,398
Bad debt expense -
1,528,744
Writeoff of deferred acquisition costs - 1,323,132
Loss on disposition of subsidiaries -
1,374,299
Stock issued and options and warrants granted
for consulting services -
426,579
Changes in assets and liabilities
exclusive of assets and liabilities acquired:
(Increase) decrease in:
Accounts receivable -
(309,415)
Inventories -
80,559
Deferred costs, acquisitions -
(286,792)
Prepaid expenses -
12,593
Deposits - (
77,089)
Increase (decrease) in:
Accounts payable 25,669
2,069,896
Accrued expenses - (
129,290)
Deferred revenue -
31,801
Accrued interest 1,684
107,500
Net cash used in operating activities ( 56,543)
(1,026,105)
Cash flows from investing activities:
Capital expenditures - (
65,159)
Proceeds on sale of assets -
4,000
Investment in joint venture - (
25,866)
Advances on note receivable - related party - (
685,971)
Net cash used in investing activities - (
772,996)
Cash flows from financing activities:
Proceeds from exercise of stock options -
740,125
Advances from related parties 61,843
1,750,000
Payments on notes payable -
(1,183,557)
Payments on line of credit - (
118,333)
Cash assigned in assignment of subsidiaries - (
5,692)
Advances to related party ( 5,300)
Net cash provided by financing activities 56,543
1,182,543
PRINCETON MEDIA GROUP, INC.
Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998
1999 1998
<S> <C> <C>
(Consolidated)
Net increase (decrease) in cash - (
616,558)
Cash, beginning of period -
616,558
Cash, end of period $ - $
- -
Supplemental cash flow information:
Interest paid $ - $ 673,812
Income taxes paid $ - 7,983
Noncash Investing and Financing Activities:
For capital acquisitions $ - $
457,696
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PRINCETON MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Princeton Media Group, Inc. ("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 operated a publishing and printing business that owned, published,
and printed approximately twenty-five periodicals that have national and
international distribution. Through several subsidiaries the Company had
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.
As disclosed in a report filed on Form 8-K filed with the SEC on November 3,
1998, the two wholly-owned subsidiaries of PMG and a wholly-owned subsidiary
of one of the subsidiaries were unable to meet current obligations as they
became due. Management of the Company had made extensive efforts over a
period of several months during 1998 to obtain sufficient financing to fund a
plan of restructuring that would improve cash flows and maintain operations of
these subsidiaries. At the end of October management determined that such
financing was not obtainable in the time necessary for operations to remain
viable.
On October 27, 1998, Princeton Publishing, Inc. and Firestone Publishing,
Inc., wholly-owned subsidiaries of Princeton Media Group, Inc., and Kingston
Press, Inc., a wholly-owned subsidiary of Princeton Publishing, Inc., each
filed an Assignment for the Benefit of Creditors (the Assignment(s)), a
proceeding governed under the laws of the State of Florida. The Assignments
were filed with the Court of the 11th Judicial Circuit in and for Miami-Dade
County, Florida. The Assignment proceeding gives creditors the opportunity to
file proofs of claims. The Assignments were filed in order to expedite an
orderly sale and disposition of the assets of the entities and pay claims in
order of priority.
The three companies filing the Assignments were in the publishing and printing
business. Their operations constituted all of the operations of the Company.
The Company's common stock was publicly traded on the Nasdaq SmallCap market
under the symbol "PMGIF" until November, 1998 at which time the Company
voluntarily became a bulletin board stock traded on the OTC under the same
symbol.
Management is currently investigating several acquisitions with operations
sufficient to restore some or all value to shareholders.
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. and Firestone Publishing, Inc., until the assignment for the benefit of
creditors on October 27, 1998. All significant intercompany transactions and
balances have been eliminated.
(B) 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.
(C) 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.
(D) 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.
(E) 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.
(F) Earnings (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 income (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 years showing
losses.
The following table sets forth the computation of basic income per share:
1999
1998
Loss before extraordinary item $( 97,497)
$(7,766,167)
Less: preferred stock dividends ( 44,000) ( 44,000)
Loss to common shareholders before extraordinary item ( 141,497)
(7,810,167)
Extraordinary income - forgiveness of debt 212,283
- -
Net income (loss) to common shareholders 70,786
(7,810,167)
Weighted average common shares outstanding 4,178,722 3,921,116
Basic and diluted (loss) per share
from continuing operations $ ( 0.03) $ (
1.99)
Extraordinary income 0.05
- -
Basic income (loss) per share $ 0.02 $ (
1.99)
(G) 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.
2. Going Concern and Management's Plans
As shown in the accompanying financial statements, the Company has experienced
significant operating losses and negative cash flow from operations in recent
years and has an accumulated deficit of $22,623,523 at December 31, 1999. As
detailed in Note 1, the Company placed all of its operating subsidiaries in
assignment on October 27, 1998. Management is attempting to locate an
acquisition that would provide stable operations, but there are no agreements
to do so as of the date of filing of this report. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
3. Income Taxes
There was no provision for income taxes for the years ended December 31, 1999
and 1998 due to the loss from the disposition of subsidiaries in 1998. There
was no current or deferred provision for income taxes for the years ended
December 31, 1999 and 1998, due to the loss realized from the disposition of
the subsidiaries in 1998. Furthermore, there is no deferred tax asset or
liability reflected in the financial statements because those assets with
significant temporary differences between income tax and book bases were sold
as part of the subsidiaries, and because it is more likely than not that the
net operating loss carryforwards will not be realized.
4. Capital Stock
A summary of capital stock as of December 31, 1999 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 4,178,722 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
$304,333 at December 31, 1999.
Series D and E:
These were entirely converted or redeemed in 1997. Management does not plan
any further issuances.
(B) Options and Warrants
There were no options and warrants issued during 1999. Issuances in 1998 were
as follows:
1998
Exercise
Shares Price*
Outstanding at
Beginning of year 388,638 $
10.37
Granted
Consultants 468,000 $ 1.59
Total granted 468,000 $
1.59
Exercised (468,000) $
1.59
Expired ( 39,938 $
54.53
Outstanding and
exercisable at year end 357,700 $ 4.77
* Weighted average
In 1998 total fair value of options and warrants granted as consulting fees
was $740,125. At December 31, 1998, 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 which ranged from
$4.85 to $8.85.
The Company's stock was not actively trading at year end and the Company had
no operations. Stock options are considered to have no value at year end.
Black-Scholes option-pricing model assumptions used in determining fair value
- - 1998:
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 1999 or 1998
except as detailed in Item D below.
(D) Employee Stock Grants and Options
In 1998 employees were granted compensation awards of stock valued at
$14,506. The Company accounts for its stock-based compensation in accordance
with APB Opinion No. 25.
(E) Changes in Equity
Changes in equity for the years ended December 31, 1999 and 1998 were as
follows:
Preferred Stock Series A and Series C:
Series A Series C
Shares Amount Shares Amount
Balance at December 31, 1998 32,500 28,923 1,100,000 739,696
Changes - none - - - -
Balance at December 31, 1999 32,500 $28,923 1,100,000 $739,696
Common shares:
Shares Amount
Balance at December 31, 1998 4,178,722 $21,297,570
Changes - none - -
Balance at December 31, 1999 4,178,722 $21,297,570
5. Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet 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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 2,930
<RECEIVABLES> 5,300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,230
<PP&E> 43,408
<DEPRECIATION> 18,616
<TOTAL-ASSETS> 33,022
<CURRENT-LIABILITIES> 590,356
<BONDS> 0
0
768,619
<COMMON> 21,297,570
<OTHER-SE> (557,334)
<TOTAL-LIABILITY-AND-EQUITY> 33,022
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 95,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,684
<INCOME-PRETAX> (97,497)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 212,283
<CHANGES> 0
<NET-INCOME> 114,786
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
