FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-16736
MEDIA VISION PROPERTIES, INC.
(FORMERLY GULFSTAR INDUSTRIES, INC.)
(Exact name of registrant as specified in its charter)
Delaware 23-2442288
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Cleveland St. Clearwater, FL 34655
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (727) 441-4442
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-K.
[X]
Indicate by check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13, or 5(d) of the Exchange Act after
distribution of securities under a plan confirm by a court. Yes X No
As of September 30, 1998 the Company had 398,045 shares of common stock and
no shares of preferred stock outstanding.
1
<PAGE>
PART I
Item 1. Business.
(a) General Development of Business
Gulfstar Industries, Inc. (formerly Tier Environmental Services, Inc.) (the
"Company"), was incorporated under the laws of Delaware on December 3, 1986. The
Company was formed to seek potential business opportunities which in the opinion
of management may provide a profit to the Company.
On July 14, 1989, the Company entered into an Agreement and Plan of Re-
organization with Models World, Inc. ("MWI"), pursuant to which the Company
acquired all the issued and outstanding shares of MWI.
On October 1, 1993, the Company spun off all of its subsidiaries through
that date and had, as a result, recorded a quasi-reorganization as of that date.
The Company is presently a holding corporation which previously consisted
of two wholly owned subsidiaries that discontinued operations during the fiscal
year ended September 30, 1997; Plant Technical Services, Inc. in Texas, and Tier
Environmental of Florida. The Texas subsidiary was an engineering consulting
and placement service and the Florida subsidiary has been involved in
environmental clean-up.
Tier Environmental of Florida
On September 26, 1994, the Company acquired all of the issued and
outstanding shares of Tier Environmental Services, Inc. ("Tier of Florida"), a
Florida corporation. The Company issued 1,491,032 restricted shares of the
Company's common stock in exchange for all of the issued and outstanding common
shares of Tier of Florida. This subsidiary was included in the Company's results
of operating activities for the years ended September 30, 1995 and 1996. During
the year ended September 30,1997 the Company discontinued the operations (see
Part F/S - Item 7; "Discontinued Operations") of this subsidiary and on
September 26,1997 this corporation was administratively dissolved by the
state of Florida.
Media Vision Productions, Inc. (Formerly Gulfstar Industries, Inc.) (Parent
Company)
On September 29, 1994 the Company changed its name to Tier Environmental
Services, Inc. to reflect the above-mentioned merger. On January 10, 1996 the
Company changed its name to Gulfstar Industries, Inc..
On July 22, 1997 the Company filed a petition under Chapter 11 of the
bankruptcy laws. The significant petition proposals for the reorganization of
the Company includes:
1. The reverse split of prior outstanding shares of (1) one "new" share
for each (25) twenty-five "old" shares.
2. The 75,000 preferred shares will be converted to common shares prior
to the reverse split above.
3. The shareholders of the post reverse split shares above shall be
granted an option to purchase one share for each share held, at 75%
of the market price on the date exercised, exercisable not sooner
than six months from the date of confirmation of the plan of
reorganization becoming effective, January 4, 1999, and not later
than eighteen months after such date.
2
<PAGE>
4. Accepted proof of claims by creditors in class III (unsecured) and
class IV (secured) will receive one share of post reverse split
common stock for every $30 of the amount in which the holder has an
approved claim.
On September 2, 1998 the court confirmed the plan of reorganization, which
became effective on January 4, 1999. Additionally, on January 4, 1999 the
Company entered into a plan of merger with Media Vision Properties, Inc.
pursuant to the plan of merger the parent company changed its name to Media
Vision.
Plant Technical Services, Inc.
On September 27, 1995, the Company entered into a merger and acquisition
plan to acquire all the shares and assets of Plant Technical Services, Inc.
("PTS"), an engineering and technical services firm consulting to the power
industry, located in the Dallas/Ft. Worth area of North-Central Texas. The
Company issued Seventy Five Thousand (75,000) shares of convertible preferred
stock at a par value of Ten Dollars ($10) per share, in addition to Seven
Hundred Fifty Thousand (750,000) shares of common stock as per Rule 144, to the
shareholders of PTS, in exchange for all the issued and outstanding stock of
PTS.
The cash and note consideration, in addition to the shares issued was a total of
One Million Two Hundred Twenty Thousand Dollars ($1,220,000) to be paid as
follows: One Hundred Thousand Dollars ($100,000) at closing: Two Hundred Twenty
Thousand Dollars ($220,000) within One Hundred Eighty (180) days from the
closing date, and the balance of Nine Hundred Thousand Dollars ($900,000) in
the form of a note, to be paid in installments over a five year period
commencing on March 1, 1996. The initial management of PTS was headed by the
former majority shareholder of PTS and the existing managerial staff at the
time of the acquisition.
On May 15, 1996 the Company terminated the president and former shareholder
and the Company has been involved in litigation. The note was canceled in the
reorganization discussed above and the former president has appealed this
decision. The Company has withheld payments on the note above during this period
until such time a resolution has been reached.
This subsidiary was included in the Company's results of operating
activities for the fiscal year ended September 30, 1996 and the first quarter of
the fiscal year ended September 30, 1997, and discontinued operations effective
March 31, 1997.
During the year ended September 30,1997 the PTS subsidiary discontinued
operations and the subsidiary recorded losses on the abandonment of a project in
Mexico, offset by liabilities directly associated with this project as well as
the impairment of fixed assets and goodwill offset by liabilities directly
associated with these assets including liabilities it had recorded to a
shareholder pursuant to APB16, accounting for the acquisition of a subsidiary
utilizing the purchase method. Certain administrative liabilities remained as
of September 30,1997 (See Part F/S - Item 7; "Discontinued Operations"). On July
22,1998 PTS subsidiary filed a voluntary petition for complete liquidation
under Chapter 7 of the bankruptcy code in the Middle District of Florida, Tampa
Division. Effective September 30, 1998, for accounting purposes, the subsidiary
has been treated as liquidated as the last day of the fiscal period.
(b) Public Offering of Securities
On August 28, 1987, the Company filed a Form S-18 Registration Statement
under the Securities Act of 1933, as amended, with the Securities and Exchange
Commission (the "Registration Statement"). The Registration Statement was
declared effective on April 6, 1988. Pursuant to the Registration Statement,the
3
<PAGE>
Company offered and sold 10,000,000 Units (250,000 units adjusted for the 1 for
40 reverse stock split), each Unit consisting of one share of $.0001 ($.004
adjusted for 1 for 40 reverse split) par value Common Stock and one-half Class
A Warrant, one-half Class B Warrant and one-half Class C Warrant (the Class A
Warrants, Class B Warrants and Class C Warrants are collectively referred to
herein as the "Warrants"), at a price of $.02 ($.80 adjusted for the 1 for 40
reverse split) per Unit. The period for exercise of all the Warrants has expired
without any of the Warrants being exercised.
At the closing of such public offering on July 25, 1988, the Company
received aggregate net proceeds of $138,242 after deduction of expenses totaling
approximately $61,758 which consisted primarily of broker commissions and a
non-accountable expense allowance to the underwriter, and filing, legal,
accounting, printing and miscellaneous expenses.
(c) Other Matters
On November 25, 1989, the shareholders and directors of the Company
approved a proposal to reverse split the Company's common stock on a 1 for 40
basis, increase the exercise price of the Class A, B, and C Warrants to $1.60,
$2.40 and $3.20 respectively and increase the par value of the Common Stock to
$.004 per share.
On September 9, 1994 there was a reverse split of eight to one (8:1) that
resulted in a par value of $.032 from the previous par value of $.004. All
amounts related to common stock issued and outstanding as well as earnings per
share figures for 1993 have been restated to reflect the above split.
During the year ended September 30, 1992 the Company issued 1,354,000
restricted shares of its common stock as a result of the merger with HBL. In
addition, the Company issued 3,310,000 restricted shares of its common stock to
individuals who provided services to the Company in prior years. As of September
30, 1993 the total number of shares outstanding was 9,892,495. After the 8:1
reverse split, effective September 8, 1994 this number became 1,236,562. On
September 22, 1994, there were an additional 350,000 shares that the Company
issued as part of a Regulation S registration. Also, an additional 1,311,570
shares were issued as part of several S-8 registration statements that the
Company authorized for individuals that had provided services for it during the
last several years. On September 26, 1994, as part of the agreement with Tier
Environmental Services, Inc. of Florida the Company issued 1,491,032 restricted
shares of its common stock to the Tier shareholders. On January 26, 1995 the
Company issued 325,000 shares as part of an S-8 registration, to various
entities for services provided for the Company as per their consulting
agreements. On that same date the Company also issued 75,000 restricted
shares under Rule 144 for work to be performed on behalf of the Company. On
April 18, 1995, May 5, 1995, and May 8, 1995 the Company issued an aggregate
625,000 shares in connection with Regulation S agreements with five offshore
investment entities.
On May 10, 1995 the Company requested the retirement of 136,466 restricted
shares from a shareholder who was issued the shares as part of a performance
contract which was never finalized and in dispute. On September 22, 1995 the
Company issued 800,000 shares as part of four separate consulting agreements
for work performed for the Company. On September 27, 1995, as part of the
agreement, to acquire PTS, the Company issued an additional 750,000 shares
of common stock and 75,000 shares of convertible preferred stock to the
previous PTS shareholders.
On September 28, 1995 the Company retired the 600,000 MBT convertible preferred
shares, in connection with the rescission of the merger with MBT. In June of
1996 the Company issued 110,000 shares to a law firm and a consultant for
services performed during the period ended September 30, 1996.
4
<PAGE>
(d) Competition
The Company has many competitors who are engaged in the various areas of
its business in the United States and Canada. Many of these competitors have
substantially greater financial and technical resources, and marketing
capabilities than the Company. Competitors with superior resources may be able
to utilize such resources to market these products and idea, and gain a
competitive edge over the Company.
(e) Employees
During the periods ended September 30, 1997 and prior the Company had
consultants in the Florida subsidiary, and up to 15 full-time employees in the
Texas subsidiary. In addition, and through its subsidiaries, the Company from
time to time, hired 500 to 600 employees in the Texas subsidiary and
subcontractors, as needed in both subsidiaries prior to the discontinuance of
operations in these subsidiaries. The Company expects to use consultants,
attorneys and accountants as necessary, and does not anticipate a need to engage
any full-time employees at this time.
Item 2. Properties.
The Company had maintained its offices at 20505 U.S. 19N., #12-283,
Clearwater, FL. 34624. The operational division of the Tier subsidiary was
located at 2901 West Busch Blvd., #711, Tampa, FL. 33618 through December 31,
1996, and the operational headquarters of PTS were located at 500 Grapevine
Highway, Suite 335, Hurst, Texas 76054, through May 8, 1997.
Item 3. Legal Proceedings.
The Company had commenced an action against its former president of its MBT
subsidiary. On May 16,1996 the Company terminated the President of the PTS
Subsidiary. The former president of the PTS subsidiary has commenced an action
for wrongful termination and the Company has defended its position and has
commenced a countersuit alleging misrepresentation in connection with the
acquisition of PTS. Both subsidiaries were defendants in various litigations
with debtors, over contract obligations and performance clauses. The Company
filed for reorganization under Chapter 11 of the bankruptcy laws, which has been
approved by the court and which has been deemed effective on January 4, 1999.
The above claims against the company have been dismissed as a result of the
reorganization. The former President of the PTS Subsidiary has appealed this
decision and the company's counsel has advised them it is unlikely he will
prevail on any or all of his claims.(See Item 7 Part F/S "Contingencies")
Item 4. Submission of Matters to a Vote of Security Holders.
The second plan of reorganization pursuant to Bankruptcy provisions under
Chapter 11, dated August 12, 1998. This vote was approved by a majority of
shareholders included those that did and did not vote, as noted in the order
confirming the plan on September 2, 1998, which became effective January 4,
1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. The Company's Common Stock is traded in the
over-the-counter market.
5
<PAGE>
The following sets forth the high and low bid quotations for each quarter
for the three-year period through September 30, 1998, based upon information
received from the National Quotation Bureau. Such quotations reflect inter-
dealer prices, and do not include retail mark-up, mark-down or commission. They
may not represent actual transactions.
High Bid Low Bid
1998 Unavailable at this time
1997 Unavailable at this time
1996 First Quarter $1.000 $ .656
Second Quarter $ .843 $ .578
Third Quarter $ .828 $ .359
Fourth Quarter $ .421 $ .198
(b) Shareholders. As of September 30, 1998, the Company had 398,045
shares of common stock outstanding, held by approximately 100 persons of record,
including brokerage firms and/or clearing houses holding the Company's common
shares in "street name" for their clients. The Company believes that there are
approximately 3,500 beneficial owners of its common stock. In addition, the
Company had authorized and issued 75,000 shares of Convertible Preferred stock
in 1995 as part of the PTS transaction, which as part of the plan of
reorganization was converted to a like amount of shares of common stock.
Effective for accounting purposes at September 30,1998 the Company recorded the
reverse split of the "old" shares totaling 9,181,365, including 75,000 preferred
shares converted to common with one (1) "new" share for each (25) twenty-five
"old" shares.
(c) Dividends. The Company has not paid or declared any dividends upon
its Common Stock since its inception and does not contemplate or anticipate
paying any dividends upon its Common Stock in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition and Plan
of Operations.
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying financial
statements, as well as information relating to the plans of the Company's
current management. The Company's operating divisions included Tier
Environmental, Inc. and Plant Technical Services, Inc. during the year ended
September 30, 1997 and both subsidiaries discontinued operations and the
Company filed a voluntary petition for reorganization under Chapter 11 of the
bankruptcy laws.
ABOUT THE SUBSIDIARIES DISCONTINUED DURING THE YEAR ENDED SEPTEMBER 30, 1998
TIER Environmental Services, Inc.
The primary revenue of this environmental subsidiary came from its work in
direct cooperation with the Florida legislature towards reimbursement for
eligible sites for environmental clean-up. The Governor's executive order dated
March 8, 1995 in reference to the Inland Protection Trust Fund (the "fund")
referendum had caused an uncertainty during the fiscal year ended September 30,
1996 and, in the opinion of management, ultimately led to the discontinuation of
this subsidiary during the first quarter of the fiscal year ended September 30,
1997.
6
<PAGE>
On March 29, 1995 Governor Chiles signed into law 95-2, Laws of Florida
(SB 1290). This law revises Florida Statute 376 as it relates to continued and
future site rehabilitation tasks for eligible sites. Chapter 95-2 does not
specifically amend or change the reimbursement regulations set forth in Chapter
62-773, F.A.C.
It should also be noted that the Legislature, DEP and representatives from
the petroleum clean-up industry worked during the last Legislative session in
1996 to pay off the entire outstanding backlog of reimbursement claims through
a bond issue, which included most "packages" the Company had in place through
December 31, 1996. During the quarter ended December 31, 1996, the Tier
subsidiary discontinued operations.
During the quarter ended December 31,1996, the first quarter of fiscal year
ended September 30,1997, the company recorded the discontinuation of the Tier
Subsidiary as it chose to undertake no new projects of the new funding method.
Management determined that it require more working capital to revitalize
operations. The new method and when coupled with the resignation of the
President and the present working capital position, this subsidiary was
discontinued on September 26,1997 the subsidiary corporation was
administratively dissolved.
Plant Technical Services
The primary revenue sources of this subsidiary came from placing temporary
employees with utilities in North America with high demands at peak periods for
engineering professionals.
During the fourth quarter 1995 the Company's former president spent a
substantial portion of his time pursuing one acquisition in Mexico, the Hemyc
Group (see form 10-K for the fiscal year ended September 30, 1996) which in
turn, the Company has since rescinded. The Company had also continued to
attempt to complete or resolve a joint venture it had started with the Hemyc
Group which was substantially delayed as for the fiscal year ended September
30, 1996, due to the fiscal instability of the Hemyc group, which in the
present opinion of management was a fiscally unstable customer of this
subsidiary prior to the Company's acquisition, and is a subject to the
Company's litigation with the selling shareholder of PTS. The Company had
pursued and received a novation of the Hemyc portion of the contract and
plans on dealing with the utility directly. The Company negotiated with
several providers whom they had desired to complete the Mexican Laundry
project with or sell to outright. The Company also commenced negotiations to
sell or co-venture its placement services operations with a substantially
larger technical placement company, yet these negotiations did not provide a
resolution and the Company discontinued operations of this subsidiary
effective the quarter ended March 31, 1997.
RESULTS OF OPERATIONS
Year Ended September 30, 1998 vs. September 30, 1997
The Company's results from operations for the year ended September 30, 1998
consisted of an $45,527 administrative expenses of the reorganization. Net
income for the year ended September 30, 1998 of $1,016,185 is solely due to the
recording of the cancellation of indebtedness income reflecting the effect of
7
<PAGE>
the completion of the bankruptcy which is non-recurring. During the year ended
September 30, 1997, the Company reported a loss from operations, primarily of
the PTS subsidiary for the first quarter of the fiscal year of $93,433 on total
revenues of $967,260 as well as the loss from discontinued operations of the
Tier subsidiary of $1,136,162 which included the impairment of the remaining
goodwill and cancellation of indebtedness income and the loss from discontinued
operations of PTS subsidiary of $231,277, which included the impairment of
goodwill and abandonment of assets, net of the cancellation of indebtedness
directly associated with the acquisition of the same.
Liquidity and Working Capital and Plan of Operation
The Company's working capital deficit for the year ended September 30, 1998
is $ 86,099. At September 30, 1997 the Company had a deficit of $1,105,516.
As a result of the above, management believes the filing of the plan of
reorganization under Chapter 11 offers the best opportunity to restore
shareholder value to the Company's stockholders in light of the results of
operations and the financial condition of the Company, and on January 4, 1999
the Company's plan of reorganization became effective pursuant to the order of
September 2, 1998 confirming the second amended plan of reorganization.
Inflation
The rate of inflation has had little impact on the Company's results of
operations and is not expected to have a significant impact on continuing
operations.
8
<PAGE>
Item 7. Financial Statements.
(a)(1) The following documents are filed as part of this report:
a. Consolidated Financial Statements of the Registrant,
Media Vision Productions, Inc. (formerly Gulfstar Industries, Inc.)
Pages
Report of Independent Auditors' F-1
Report of Independent Accountants' F-2
Consolidated Balance Sheet of Media Vision Productions, Inc.
(formerly Gulfstar Industries, Inc.) as of September 30, 1998 F-3
Consolidated Statements of Operations of Media Vision
Productions, Inc (formerly Gulfstar Industries, Inc.)
for the years ended September 30, 1998 and
September 30, 1997 (Unaudited) F-4
Consolidated Statements of Changes in Stockholders'
Equity of Media Vision Productions, Inc. (formerly Gulfstar
Industries, Inc. for the period from October 1, 1996
to September 30, 1997 (Unaudited) and October 1, 1997
to September 30, 1998 F-5,F-6
Consolidated Statements of Cash Flows of Media Vision
Productions, Inc. (formerly Gulfstar Industries, Inc.)
for the years ended September 30, 1998 and
September 30, 1997 (Unaudited) F-7,F-8
Notes to the Financial Statements of Media Vision
Productions (formerly Gulfstar Industries, Inc.) F-9,F-25
b. Interim Financial Statements.
Not Applicable
c. Financial Statements of Businesses Acquired and to be Acquired
Not Available; see note 10
9<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Media Vision Productions, Inc. (Formerly Gulfstar Industries, Inc.)
We have audited the accompanying consolidated balance sheet of Media Vision
Productions, Inc. (formerly Gulfstar Industries, Inc.) and subsidiaries as of
September 30, 1998 and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the year then ended in the
accompanying index to the financial statements (Item 7.). 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Media Vision Productions, Inc.
(formerly Gulfstar Industries, Inc.) as of September 30, 1998, and the results
of operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The financial statements for the year ended September 30, 1997 were compiled by
us, and our report thereon, dated December 30, 1998, stated that we did not
audit or review those financial statements and, accordingly, expressed no
opinion or any other form of assurance on them.
/s/Schuhalter, Coughlin & Suozzo, LLC
SCHUHALTER, COUGHLIN & SUOZZO, LLC
Raritan, New Jersey
February 2, 1999
F-1
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
of Gulfstar Industries, Inc.
We have compiled the consolidated statements of operations, changes in
stockholder's equity and cash flows of Gulfstar Industries, Inc. for the year
ended September 30, 1997, in the accompanying index to the financial statements
(Item 7.), in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying 1997 financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
The financial statements for the year ended September 30, 1996, were audited by
us, and we expressed a qualified opinion regarding the entity's ability to
continue as a going concern and the uncertainty of the effect that a change in
the State of Florida's program which provided the primary source of revenue to
the Florida Subsidiary would have on the Company in our report dated January 9,
1997, but we have not performed any auditing procedures since that date.
/s/Schuhalter, Coughlin & Suozzo, LLC
SCHUHALTER, COUGHLIN & SUOZZO, LLC
Raritan, New Jersey
December 30, 1998
F-2
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
(FORMERLY GULFSTAR INDUSTRIES, INC.)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
Assets
Current Assets
Cash $ 32
Total Current Assets 32
Total Assets $ 32
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 86,131
Total Current Liabilities 86,131
Stockholders' Equity
Common stock, par value $.80 per share; authorized
10,000,000 shares, issued and outstanding 398,045 318,436
Convertible preferred stock, authorized 1,000,000 shares,
par value $10.00; no shares issued and outstanding -
Additional paid in capital (318,436)
Retained deficit, subsequent to reorganization (7-22-97) (86,099)
Total Stockholders' Deficit (86,099)
Total Liabilities and Stockholders' Deficit $ 32
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
(FORMERLY GULFSTAR INDUSTRIES, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For For
the Year the Year
Ended Ended
September 30, September 30,
1998 1997
(Unaudited)
Contract Revenues Earned $ - $ 967,260
Other Income - -
Total Revenue - 967,260
Cost of contract revenues earned - 823,028
Gross Profit - 144,232
Operating Expenses
Selling and administrative expenses 45,527 174,383
Depreciation and amortization - 28,896
Interest expense - 32,386
Provision for bad debts - 2,000
Loss from operations (45,527) (93,433)
Cancellation of indebtedness income 1,061,712 -
Loss from discontinued operations of Florida
environmental subsidiary including $1,101,929
of impairment of goodwill, $38,946 of bad
debts, $16,403 abandonment of fixed assets,
$196,132 cancellation of indebtedness income
and $213,961 loss from operations during the
phase out period - (1,136,162)
Loss from discontinued operations of Texas
engineering consulting subsidiary including
$492,590 of impairment of goodwill, $113,359
of bad debts, $1,151,092 abandonment of data
base and fixed assets, $28,997 depreciation
and amortization, $1,556,981 cancellation of
indebtedness income and $144,576 loss from
operations during the phase out period - (231,277)
Income (loss) before taxes 1,016,185 (1,460,872)
Benefit from (provision for) income taxes - -
Net (Loss) $1,016,185$(1,460,872)
Income (loss) per share $ 2.77 $ (3.98)
Weighted average shares outstanding 367,255 367,255
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
(FORMERLY GULFSTAR INDUSTRIES, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
PERIOD FROM OCTOBER 1, 1996 THROUGH SEPTEMBER 30, 1997 (UNAUDITED) AND
OCTOBER 1, 1997 THROUGH SEPTEMBER 30, 1998
(EFFECTIVE DATE OF APPROVAL OF THE COMPANY'S
PLAN OF REORGANIZATION UNDER CHAPTER 11)
Common Stock Preferred Stock
Shares Amount Shares Amount
Balance, October 1, 1996 9,509,123 $ 304,292 75,000 $ 750,000
Recision of contingent common
stock from prior acquisition (357,133) (11,428) - -
(Unaudited)
Recision of common stock for
services (Unaudited) (45,625) (1,460) - -
Net loss for year ended
September 30, 1997
(Unaudited) - - - -
Balance, September 30, 1997
(Unaudited) 9,106,365 291,404 75,000 750,000
Cancellation of preferred
shares for conversion to
common stock on one to one
basis 75,000 2,400 (75,000) (750,000)
Reverse split of 1 new share (9,181,365) (293,804) - -
of common stock for each 25
prior shares of common stock
and change of par value to
$.80 367,255 293,804 - -
Issuance of common stock for
the cancellation of
indebtedness pursuant to plan
of reorganization 30,970 24,632 - -
Retained deficit prior to re-
organization charged to
additional paid in capital - - - -
Net income for year ended
September 30, 1998 - - - -
Balance, September 30, 1998 398,045 $ 318,436 $ - $ -
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Retained
Deficit
Subsequent
to Quasi-
Quasi- Reorganization
Additional Reorganization and
Paid In (10-1-93) Reorganization
Capital Adjustment (of 7-22-97 ) Total
$3,314,934 $ (59,033) $(3,793,733) $ 516,460
(131,426) - - (142,854)
(16,790) - - (18,250)
- - (1,460,872) (1,460,872)
3,166,718 (59,033) (5,254,605) (1,105,516)
747,600 - - -
- - - -
- - - -
(21,400) - - 3,232
- - 1,016,185 1,016,185
(4,211,354) 59,033 4,152,321 -
$ (318,436) $ - $ (86,099) $ (86,099)
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
(FORMERLY GULFSTAR INDUSTRIES, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
September 30,
1998 1997
(Unaudited)
OPERATING ACTIVITIES
Cash Flows From (Used In) Operating Activities:
Net loss $1,016,185 $ (93,433)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization - 28,896
Expense reduction via recision of common stock - (18,250)
Provision for bad debts - 2,000
Cancellation of indebtedness income (1,061,712) -
Decrease (increase) in accounts receivable - (60,716)
Increase in accounts payable and accrued
expenses 45,430 160,090
Increase in accrued interest - 32,386
Net cash from (used in) operating activities (97) 50,973
DISCONTINUED OPERATING ACTIVITIES:
Cash Flows (Used In) Discontinued Operating
Activities:
Net loss - (1,367,439)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - 28,997
Provision for bad debts - 152,305
Loss on assets disposed - 1,167,495
Impairment losses - 1,594,519
Cancellation of indebtedness - 1,616,552
Decrease (increase) in contracts in progress - 1,493,814
Decrease (increase) in accounts receivable - 720,491
(Increase) decrease in other receivables and
escrow deposits - 304,212
(Decrease) increase in contracts payable - (1,493,814)
(Decrease) increase in accounts payable and
accrued expenses - (1,037,529)
Net cash (used in) discontinued operating
activities - (52,501)
Net (decrease) in cash and cash equivalents (97) (1,528)
Cash and cash equivalents, beginning of year 129 1,657
Cash and cash equivalents, end of year $ 32 $ 129
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation (September 30, 1997 - Unaudited)
The accompanying consolidated balance sheet at September 30, 1997 and the
related statements of income, cash flows and stockholders' equity for the
year then ended is unaudited. In the opinion of the Company's management
these reflect all adjustments necessary for a fair presentation of the
results for the unaudited period. Specifically, insufficient information
was available for certain accounting records of the discontinued
subsidiaries to be audited, which provided a scope limitation beyond the
control of management, and the Company's independent accountant informed
the Company that the compiled financial statements for September 30, 1997
was the highest level of service that they could provide under the
circumstances. The Company believes the September 30, 1997 financial
statements satisfy the filing requirements, under these circumstances, in
reliance upon Exchange Act Rule 12B-21 as they represent the best and most
current financial information that the Company has at this time.
Nature of Business
Gulfstar Industries, Inc. (the "Company") was originally incorporated
under the laws of the State of Delaware on December 3, 1986 as Flair
Communications, Inc.
After the completion of its public offering in August of 1987 as Flair
Communications, the Company went through management and operational
changes and on October 1, 1993 underwent a quasi-reorganization.
On September 26, 1994, the Company acquired all of the issued and
outstanding shares of Tier Environmental Services, Inc. ("Tier of
Florida"), a Florida corporation. The Company issued 1,491,032 restricted
shares of the Company's common stock in exchange for all of the issued and
outstanding common shares of Tier of Florida. During the year ended
September 30, 1997 (Unaudited) this subsidiary discontinued operations and
was administratively dissolved by the State of Florida on September 26,
1997.
On September 29, 1994 the Company changed its name to Tier Environmental
Services, Inc. to reflect the above-mentioned merger.
On September 27, 1995, the Company entered into a merger and acquisition
plan to acquire all the shares and assets of Plant Technical Services,
Inc. ("PTS"), an engineering and technical services firm consulting to the
power industry, located in Texas. The Company issued Seventy Five
Thousand (75,000) shares of convertible preferred stock at a par value of
Ten Dollars ($10) per shares, Seven Hundred Fifty Thousand (750,000)
shares of common stock pursuant to SEC Rule 144, as well as cash and debt
of $1,220,000 to the shareholders of PTS, in exchange for all the issued
and outstanding stock of PTS.
In February 1996, the Company changed its name to Gulfstar Industries,
Inc.
During the year ended September 30, 1997 (Unaudited) the PTS subsidiary
discontinued operations and the subsidiary recorded losses on the
abandonment of a project in Mexico, offset by liabilities directly
associated with this project as well as the impairment of fixed assets and
goodwill offset by liabilities directly associated with these assets
including liabilities it had recorded to a shareholder pursuant to APB16,
F-8
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
accounting for the acquisition of a subsidiary utilizing the purchase
method. Certain administrative liabilities remained as of September 30,
1997.
On July 22, 1998 the PTS subsidiary filed a voluntary petition for
complete liquidation under Chapter 7 of the bankruptcy code in the middle
district of Florida, Tampa Division. On July 27, 1998 the court set a
date for a meeting of creditors of August 19, 1998 and a deadline for
filing proof of claims of November 17, 1998. The Company anticipates
approval and confirmation of the petition at which time no liabilities,
other than the same $40,000 of post petition liabilities from the
reorganization plan of the Company in its chapter 11 petition, will
survive that proceeding.
Reorganization under Bankruptcy Proceedings
In July 1997, the Company filed a petition under Chapter 11 of the
Bankruptcy laws. This generally delays payment of liabilities incurred
prior to filing the petition while the Company develops a plan of
reorganization that is satisfactory to its creditors and allows it to
continue as a going concern (see Note 2). The carrying amounts of assets
and liabilities are unaffected by the proceedings, but liabilities are
presented according to the status of creditors for the year ended
September 30, 1997. The Company's petition was confirmed by the
Bankruptcy Court on September 2, 1998 and became effective on January 4,
1999. The Plan of Reorganization and confirmation of the same included
the acceptance of the agreement and merger plan between Media Visions
Productions, Inc. (the Company) and Media Vision Properties, Inc., whereby
holders of existing voting shares immediately before the confirmation
retain less than 50% of the voting shares of the surviving entity (See
Note 10) and the post petition liabilities allowed and claims exceed the
carrying value of assets. Therefore the Company has adopted the fresh-
start approach for accounting purposes and retained deficits prior to
September 30, 1998 have been charged to additional paid in capital.
In February 1996, the Company changed its name to Gulfstar Industries,
Inc. On January 4, 1999, pursuant to the plan of reorganization and plan
of merger the company changed its name to Media Vision Productions, Inc.
Acquisition and Discontinuation of Tier Environmental Services, Inc.
On September 26, 1994 Gulfstar Industries, Inc. acquired all of the common
stock of Tier Environmental Services, Inc. through an acquisition and
redemption by Tier Environmental Services, Inc. of its common stock
totaling approximately $2,982,400 in value, exclusive of acquisition
costs. Tier's principal business is to provide environmental remediation
services in the State of Florida, at petroleum contaminated sites
designated by the State of Florida as sites subject to authorized
reimbursement under the Inland Protective Trust Fund. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. The agreement also called for the additional issuance of
Gulfstar stock to Tier shareholders if the Company spun off a former
subsidiary, which in turn the Company did on September 25, 1995. As such,
the Company was required to issue an additional 357,133 shares which were
included in the balance sheet and valued at $142,855 for the balance sheet
at September 30, 1996. For the year ended September 30, 1997, the Company
rescinded these amounts, reducing the carrying amount of the goodwill from
this transaction by the same $142,855. The excess (approximately
$2,845,220) of the total acquisition cost over the recorded value of
assets acquired was allocated to goodwill and was being amortized over 20
years. After reviewing the carrying value at September 30, 1996 over one
F-9
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
half of the unamortized balance was written off to impairment loss due to
the uncertainty of the effect of the change in the Florida program will
have on the Company. During the year ended September 30, 1997
(Unaudited) the subsidiary discontinued operations and the remaining
carrying value was recorded as an impairment loss. The statement of
operations includes Tier's results of operations for the year ended
September 30, 1997 (Unaudited). During that year, the Tier subsidiary
recorded losses on the abandonment of all the assets including the
permanent impairment of goodwill of this subsidiary which was offset by
income from the cancellation of indebtedness due to insolvency. As of
October 1, 1997 no activity of this former subsidiary are included in the
financial statements.
Acquisition costs aggregating $250,000 ($75,000 in 1995 and $175,000 in
1994) had been capitalized as a result of this acquisition. Additional
acquisition costs aggregating $340,000 and $516,250 were charged to
additional paid in capital in 1995 and 1994 respectively. Such
capitalized acquisition costs related to the financing costs associated
with the acquisition, which represent premiums paid to a finance company
to assist the funding of these projects and were being amortized over 5
years. Due to the change in the funding method of this program the
balance of these acquisition costs which related to the funding method
were written off at September 30, 1996 and is included in impairment loss
for that year.
Acquisition and Discontinuation of Plant Technical Services, Inc.
Plant Technical Services, Inc. was engaged in the professional engineering
business, providing consulting, design, start-up support, operation,
maintenance, contract personnel and construction management service to
technical industries throughout the United States.
On September 29, 1995 Gulfstar acquired all of the common stock of Plant
Technical Services, Inc. (PTS) through an acquisition and redemption by
PTS of its stock with the issuance of 750,000 shares of Gulfstar common
stock, 75,000 shares of Gulfstar $10.00 preferred stock and cash and notes
of $1,220,000, exclusive of acquisition costs. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. The excess (approximately $1,277,000) of the total
acquisition cost over the recorded value of assets acquired was allocated
$500,000 to a proprietary database PTS developed which is being amortized
over seven years and $571,144 (which has been reduced by $199,006 for the
accrued loss on a long term contract net of a $6,772 deferred tax benefit)
to goodwill which was being amortized over 20 years.
During the quarter ending March 31, 1997 the Texas subsidiary made the
determination to cease operations which it did so on approximately May 20,
1997 (Unaudited).
Principles of Consolidation
The accompanying consolidated balance sheet as of September 30, 1998
includes the accounts of the Company and the $40,000 of post petition
liabilities recorded on the Company's books from the PTS subsidiary. The
statement of operations for 1997 includes Media Vision Productions, Inc.
(formerly Gulfstar Industries, Inc.); the Tier subsidiary and the PTS
subsidiary. The statement of operations for 1998 includes Media Vision
Productions, Inc. and the effect of the final liquidation of the PTS
subsidiary.
F-10
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
All significant intercompany accounts and transactions have been
eliminated.
Restatement and Reclassification of Financial Statement Presentation
On October 1, 1993, by unanimous consent of the board of directors, which
at the time represented a majority of the shareholders of the Company, the
Company spun off all of its subsidiaries except for MBT Associates; a
subsidiary in which the acquisition was subsequently rescinded; and as of
that date recorded a quasi-reorganization adjustment.
Revenue Recognition
During the year ended September 30, 1997, the Company's primary revenues
were derived mainly from engineering placement services, and were based
upon standard billing rates charged by the hours worked. Corresponding
expenses were recorded for all hours included in revenue.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit, and all highly liquid debt instruments
with original maturities of three months or less.
Fixed Assets
Fixed assets were stated at cost less accumulated depreciation.
Maintenance, repairs and minor replacements are charged to operations as
incurred; major replacements and betterments are capitalized.
Depreciation of fixed assets is provided on the straight-line method over
estimated useful lives of 5 to 7 years. The cost of assets sold or
retired and related accumulated depreciation are removed from the accounts
at the time of disposition, and any resulting gain or loss is reflected in
income for the period. During the year ended September 30, 1997
(unaudited) the company recorded abandonment losses in the discontinued
operations of its two subsidiaries.
Long-lived Assets
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable.
If the sum of the expected future undiscounted cash flows is less than the
carrying amount of the asset, a loss is recognized for the difference
between the fair value and carrying value of the asset. During the year
ended September 30, 1997 the company recorded the total impairment of
goodwill in the discontinued operations of both its subsidiaries and
abandonment loss on the data base in the PTS subsidiary.
Goodwill
Goodwill is the excess of the purchase price over the fair value of net
assets acquired in business combinations accounted for as purchases.
Goodwill is amortized on a straight-line basis over 20 years. Goodwill is
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the sum of
the expected future undiscounted cash flows is less than the carrying
amount of the goodwill, a loss is recognized for the difference between
the fair value and carrying value of the goodwill. During the year ended
September 30, 1997, the company recorded the total impairment of goodwill
due to the discontinuance of activity in its subsidiaries.
F-11
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
Financial Instruments
The following methods and assumptions were used by the Company to estimate
fair values of financial instruments as discussed herein:
Cash and cash equivalents: The carrying amount approximates fair value
because of the short period to maturity.
Accounts payable and accrued expenses: The carrying value of the accounts
payable and accrued expenses approximate their fair value and were
reflected at the post-petition value at September 30, 1998.
Income Taxes
SFAS No. 109 "Accounting for Income Taxes" was issued by the Financial
Accounting Standards Board in February, 1992. SFAS No. 109 requires the
asset and liability method of accounting for income taxes. Under this
method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable
to future years to differences between the financial statement carrying
amounts and the tax basis of existing assets and liabilities. The Company
adopted SFAS No. 109 for the year ended September 30, 1994 and all periods
thereafter.
Economic Dependence
The Company was dependent upon a secured creditor, not demanding payment
on its demand note, which the creditor is a corporation affiliated with a
stockholder and director of the Company. Subsequent to the Chapter 11
reorganization, no liabilities remained this shareholder.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
Significant estimates included in the financial statements include the
value ascribed the consideration of the Company's stock issued in
connection with the acquisition of Tier in September, 1994 as well as the
contingent shares issued in September 1995, the value ascribed to the
Company's stock issued in connection with the acquisition of PTS in
September, 1995, and the corresponding impairment losses for both
subsidiaries recorded for the year ended September 30, 1997.
F-12
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
Accounts payable and accrued expenses
Accounts payable and accrued expenses have been adjusted to reflect post
petition values and consisted of the following at September 30, 1998:
Administrative (expenses) (to be paid by
Acquiror pursuant to plan of reorganization) $ 31,093
Accrued 401K Contributions (to be paid by
Acquiror pursuant to plan of reorganization 40,000
Advanced Expenses (which have already been paid by
Acquirior pursuant to plan of reorganization) 15,038
$ 86,131
Earnings Per Share
Earnings per share amounts are computed based on the weighted average
shares outstanding plus shares that would be outstanding assuming
conversion of the preferred stock which are considered common stock
equivalents. For the 1997 (Unaudited) earning per share included in the
statement of operations, the weighted average was computed as if the
rescissions were recorded on the first day of the period. The 1998
earnings per share (and 1997 unaudited) were restated to reflect the 1 for
25 split pursuant to the plan of re-organization, effective at the
beginning of both periods.
Supplemental Information - Statement of Cash Flows
For the Years Ended
September, 1998
1997 1998
Interest Paid $ 0 $ 0
Income Taxes Paid $ 0 $ 0
Schedule of Non Cash Investing and Financing Activities:
For the Years Ended
September 30,
1998 1997
(Unaudited)
Rescission of 357,133 contingent shares of
common stock issued to "Tier" shareholders $ 142,854
Rescission of 45,625 shares issued for services
previously charged to operating expenses $ 18,250
Income from the cancellation of unsecured
notes payable of the "Tier" subsidiary $ 136,561
Cancellation of preferred stock credited to
additional paid in capital $ 750,000
Reclassification of liabilities to common
stock pursuant to plan of reorganization $ 3,232
F-13
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
NOTE 2 - PLAN OF REORGANIZATION
As stated in Note 1, the Company Media Vision Productions, Inc. (formerly
Gulfstar Industries, Inc. and Subsidiaries) has filed a petition under
Chapter 11 of the Bankruptcy laws. The significant petition proposals
divide prepetition liabilities into two categories:
- Class II consisted of unsecured obligations totaling $53,111. The
obligees will be impaired to the extent that they will not be paid the
full amount owed them, and will receive one share of post reverse split
common stock for every $30 of the amount in which the holder has an
approved claim.
- Class IV consisted of equity security holders and related party lenders
in the amount of $812,649 and 75,000 preferred shares. The security
holders will be impaired to the extent that they will not be paid the full
amount owed them, and will receive one share of post reverse split stock
for every $30 of the amount in which the holder has an approved claim.
Preferred shareholders shall receive one common share for each preferred
share, prior to the reverse split of shares pursuant to the plan of
reorganization.
As a result of the above, $3,232 was recorded as common stock for the
issuance of 30,970 shares based upon the OTC trading price at the time of
conversion, and the balance of these liabilities were recorded as
cancellation of indebtedness income during the year ended September 30,
1998. Additionally, the plan of reorganization provided for the
shareholders as of the date of the reorganization to receive 1 share of
"new" common stock for each 25 shares of "prior" common stock or 367,225
"new" shares for the 9,181,365 "old" shares including 75,000 shares of
preferred stock as converted, previously outstanding.
Additionally, the Plan proposed the repayment of $40,000 of liabilities to
a 401K plan and creditors with accepted proof of claims shall receive one
share for every $30 of the amount in which that holders has an approved
claim. As stated in Note 1, the Plan as confirmed became effective on
January 4, 1999. The effects of the approval are reflected in the
financial statements as of September 30, 1998.
NOTE 3 - CAPITAL STOCK
Common Stock
In December 1986 the Company authorized 3,000 shares and issued 1,000
shares of no par common stock. In 1987 the Company also sold 10,000 units
of common stock and warrants in a public offering, which after giving
effect to splits increased the outstanding shares of the Company to
3,625,000 and the authorized shares to 10,000,000 with a par value of
$.004.
After additional issuances of stock from 1987 through 1993, and after
adjusting for the effect of an eight to one reverse split recorded on
September 22, 1994, the Company had 1,844,776 shares outstanding on
October 1, 1993 with a par value $.032. On this date, additional paid in
capital was charged with retained deficit amounts other than par value
pursuant to the quasi-reorganization discussed in Note 1.
F-14
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
During 1994, the Company sold 350,000 shares in an overseas offering which
generated gross proceeds of $700,000 to the Company. Direct offering
costs of $129,237 were incurred bringing net proceeds to the Company of
$570,763.
In connection with services rendered with the above transaction and the
acquisition discussed in Note 1, the Company issued 341,182 shares of
stock for services valued at $682,364. A corresponding charge to
additional paid in capital for the same amount was recorded.
In 1994, in connection with the Company's acquisition of TIER
Environmental Services, Inc. (Florida) the Company issued 1,491,032 shares
of common stock as discussed in Note 1. These shares are subject to the
restrictions of SEC rule 144.
In 1995 the Company sold 625,000 shares in an overseas offering which
generated gross proceeds of $918,613 to the company. Direct offering
costs of $147,700 were incurred bringing net proceeds to the Company of
$770,913.
In 1995 the Company issued 2,155,000 shares of common stock for services
in connection with the overseas offerings and the acquisition of PTS
discussed in Note 1. These shares were valued at $1,551,600 and a
corresponding charge to additional paid in capital for the same amount was
recorded.
In connection with the acquisition of TIER of Florida discussed in Note 1,
357,133 shares of common stock were to be issued to the shareholders of
TIER in 1996. These shares were rescinded effective the first day of the
fiscal year ended September 30, 1997.
In 1996 and 1995 the Company issued 110,000 and 485,000 shares of common
stock for services which were charged to operating expenses, respectively.
During the fiscal year ended September 30, 1997, 45,625 of these shares
were recorded.
The Company sold 1,000,000 shares in January and February 1996 in an
overseas offering which generated gross proceeds to the company of
$234,000. Direct offering costs of $35,100 were incurred bringing net
proceeds to the Company of $198,900.
Reserved shares
In connection with the acquisition of TIER, discussed in Note 1, 357,133
shares of common stock became due during 1995. These shares, if and when
issued, will be subject to restriction under SEC rule 144 and have been
treated as outstanding as of September 30, 1996 and had yet to be issued.
These shares were rescinded, effective October 1, 1996, in connection with
the discontinuance of this subsidiary during the quarter ending December
31, 1996.
In connection with the plan of reorganization, the company objected to the
claim of the prior shareholder of the PTS subsidiary, and as discussed in
Note 6, the disallowed claim would have to be overturned, which the
company has been advised by counsel is unlikely. Had the claim been
allowed, this shareholder could be awarded up to 58,833 of "new" shares
pursuant to the plan of reorganization.
F-15
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
Preferred Stock
The certificate of incorporation of the Company authorizes its board of
directors to issue for value 1,000,000 shares of preferred stock, $10 par
value. Preferred stock may be issued in series with such designations,
relative rights, preferences and limitations as may be fixed from time to
time by the board of directors of the Company. In connection with the
acquisition of PTS, the Company issued 75,000 shares which are convertible
into common stock on a one to one basis.
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
During the year ending September 30, 1996, $44,419 was charged to
operations based upon the value ascribed to 110,000 shares which were
issued to a law firm and a consultant for services performed during the
period. During the year ended September 30, 1997.
Included in amounts due to related parties at September 30, 1996 for
expenses advanced by a company affiliated with a stockholder and director
of the company was $754,399 and $9,000 advanced from a corporate
stockholder. Other than the $9,000 from the corporate stockholder, these
amounts bore an interest rate of prime and were due upon demand. On July
22, 1997 these amounts totaled $812,649 and $9,000 respectively, and these
were discharged during the year ended September 30, 1998 for 27,088 shares
and no shares, pursuant to the plan of reorganization as confirmed,
respectively.
Note payable to stockholder (the former sole stockholder of PTS) includes
$7,145 of a non-interest bearing instrument. Additionally, this note had
been reduced by amounts reserved for the anticipated loss on long term
contract and $918,944 remains which represents the balance on the
acquisition note after such reduction, bearing interest at 8%. $72,760 of
interest was accrued on this note and is included in interest expense and
accrued expenses for the year ending September 30, 1996.
NOTE 5 - LEASES
The Company had leased certain of its office facilities and office
equipment under operating leases. As a result of the plan of
reorganization, no obligations for leases remained as of September 30,
1998.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company's Tier subsidiary was a defendant in various lawsuits from
vendors who are seeking moneys which are payable, by the State of Florida,
for services related to the assessment and clean-up of petroleum
contamination. The services for which payments are sought are generally
authorized for reimbursement pursuant to legislative enactments. The
lawsuits have mostly resulted from the State of Florida delaying payments
and by eliminating the payment of interest. The Company had been
successful in eliminating similar lawsuits as its "funding packages" are
factored, as discussed in Note 10 and submitted to the State of Florida.
The Company's Tier subsidiary was also a defendant in four cases not
related to reimbursement from the State of Florida. These cases involve
allegations of direct debts of the Company. The original debts of the
plaintiff's have been recorded on the Company's financial statements. The
management of the Company was negotiating to resolve these cases, and with
the discontinuance of this subsidiary and the administrative dissolution
F-16
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
by the State of Florida on September 26, 1997, these amounts were included
as income from the cancellation of indebtedness during the year ended
September 30, 1997. No claims were made by the investors in the
bankruptcy proceeding of the parent company.
The Company's subsidiary PTS has various claims and pending actions
incident to the business operations of the Company including equipment
delivered for the Mexican project. One supplier obtained a judgement of
$388,904, which is included in the amounts already recorded as payables
for this project. During the year ended September 30, 1997, the company
discontinued the PTS subsidiary and liabilities for the Mexican project
were recorded as a reduction of the loss on the abandonment of the Mexican
project. Additionally, on July 22, 1998 the PTS subsidiary filed a
voluntary petition for complete liquidation under Chapter 2 of the
Bankruptcy Code, and as such no liabilities are expected to survive that
proceeding.
The Company's subsidiary PTS had entered into an employment agreement with
its President for a period of five years beginning September 29, 1995 that
provides for a minimum annual salary of $150,000 and also benefits,
performance bonuses and a commission of 1% of the purchase price on all
acquisitions completed on behalf of the Company. The Company terminated
the president in May of 1996 and is involved in litigation with their
former president. The former president is seeking salary under the terms
of the employment agreement and under a cross complaint the Company is
seeking a reduction in the note payable, pursuant to its lawsuit which
among other things alleges breech of contract, failure to disclose a
pending lawsuit as well as misrepresentation of financial conditions.
During the year ended September 30, 1997 the company discontinued
operations of its PTS subsidiary and recorded the cancellation of all
liabilities to this shareholder. The former president filed a motion for
rehearing or reconsideration of the confirmation and an order was entered
on September 22, 1998 denying this motion finding this request as well as
the record was without merit. The former president has appealed this
decision. The Company has recorded no liabilities as it is expected this
appeal will be dismissed. In the unlikely event that the former president
should prevail in any or all of its claims against the company, the
company has reserved 58,833 of "new" shares, which represents the maximum
amount of shares the former president would be entitled to under the plan
of reorganization.
The Company's subsidiary PTS had also entered into an employment agreement
with its Vice President for a period of three years commencing September
29, 1995 that provides for annual compensation of $72,000 plus benefits
and an option to purchase common stock of the Company valued at $100,000
issued in the form of a warrant.
In connection with the spin off of its MBT subsidiary discussed in Note 1,
the Company subsequently became aware of the possibility of financial
improprieties and potential misstatements in financial statements
previously issued. The Company has initiated a lawsuit against the former
president of this subsidiary to whom the other subsidiary had been spun
off to. The suit alleges, amongst other items, that the president did not
make available financial information as required in its agreement to the
parent company. The Company is seeking $5,000,000 in damages, in a
lawsuit filed in Florida. Both the former president and the former
subsidiary corporation have defaulted and the Company is proceeding to
obtain a default judgement against them. The Company cannot at this time
reasonably predict whether it will be able to collect this judgement.
F-17
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
NOTE 7 - INCOME TAXES
Provision for income taxes relating to the company's Tier subsidiary
consists of the following:
1998 1997
(Unaudited)
(Income tax expense) benefit from taxes
- deferred $ - $ -
Provision for income tax differs from income tax expense that would result
from applying domestic statutory rates to pretax income from continuing
operations as follows:
1998 1997
(Unaudited)
Effect of non-deductible expenses $ - $ -
Deferred tax effects of temporary
differences - -
(Provision for) benefit from income
taxes $ - $ -
Deferred taxes consist of the following at September 30, 1998:
1998 1997
(Unaudited)
Total deferred tax assets $ 29,270 $1,148,016
Less: valuation allowance (29,270) (1,148,016)
- -
Total deferred tax liabilities - -
Net deferred tax liability $ - $ -
Deferred tax assets and liabilities are attributable to temporary
differences relating to accounts receivable and accounts payable that
arise primarily because one of the Company's subsidiaries is on a cash
basis for federal income tax purposes. The other subsidiary has deferred
tax assets which are attributable to temporary differences relating to the
anticipated loss on long term contracts. The approximate tax affects of
these temporary differences are reflected in the figures for total
deferred tax assets and total deferred tax liabilities above. In
addition, the Company has net operating loss carryovers of approximately
$5,079,000 available to offset taxable income on July 22, 1997. At the
effective date of the reorganization discussed in Note 1, (September 30,
1998 for accounting purposes); the Company had available net operation
loss carryforwards of $5,079,000 for which the tax benefits will be
reported as a direct addition to contributed capital if the tax benefits
are recognized in a subsequent year. Deferred tax assets are provided on
net operating loss carryforwards for tax purposes after the
reorganization; or $86,099, which have arisen subsequent to the
reorganization of the 7-22-97.
As a result of the merger discussed in Note 10, the utilization of these
net operating losses will be substantially limited annually due to the
change in control arising from the merger.
NOTE 8 - DEFINED EMPLOYEE CONTRIBUTION PLANS
Effective May 1, 1990, the Company's PTS subsidiary adopted the Comerica
Bank-Texas Profit Sharing and 401(k) Master Defined Contribution Plan and
Trust. All employees were eligible for participation. The Company may
F-18
<PAGE>
MEDIA VISION PRODUCTIONS, INC.
FORMERLY GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the year ended September 30, 1997)
make matching contributions equal to the participant's eligible
contributions, which may not exceed 5% of the participant's compensation
for the plan year. No matching contributions to the plan were made during
the years ending September 30, 1997. In connection with the
discontinuance of the PTS subsidiary and the bankruptcy of this subsidiary
and the plan of reorganization of the Company, the acquiror has agreed to
deposit approximately $40,000 within six months after the plan of
reorganization for any contribution shortfalls, after which the company
has no further obligations under this plan.
NOTE 9 - NOTES PAYABLE
Notes payable consisted of the following at September 30, 1996:
Note payable, 8% interest, originally due
December 1, 1994, unsecured and in arrears $ 48,000
Note payable, 9% interest, originally due
December 23, 1993, unsecured and in arrears 25,000
Note payable, 9% interest, originally due
November 18, 1993, unsecured and in arrears 33,000
Note payable, 8% interest, originally due
December 22, 1994, unsecured and in arrears 30,561
$ 136,561
During the year ended September 30, 1997, the company discontinued
operations and was administratively dissolved and as such recorded the
cancellation of these notes as income which offset the abandonment losses
in this subsidiary. No obligations from these notes survived the plan of
reorganization which became effective on January 4, 1999.
NOTE 10 - SUBSEQUENT EVENTS
On January 4, 1999 the company's plan of reorganization became effective,
as confirmed on September 2, 1998 and pursuant to that plan the company
entered into a plan of merger with Media Vision Properties, Inc. and the
company changed its name to Media Vision Productions, Inc. The agreement
provides for the exchange of 1 share of Media Vision Productions, Inc.
(the company) for each share of Media Vision Properties, Inc. It is
anticipated that up to 4,500,000 shares of the Company's stock will be
issued the shareholders of Media Vision Properties, Inc. to effect this
exchange.
Additionally, for purposes of accounting going forward, Media Vision
Properties, Inc. (Subsidiary) will be considered the acquiror and the plan
of reorganization provides for the acquiror to pay certain accrued
expenses as noted in Notes 1 and 2.
F-19
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
NONE.
PART III
Item 9. Directors and Executive Officers of Registrant.
(a) Directors and Officers. The following schedule sets forth the name
of each director and officer of the Company and the nature of all positions, and
offices with the Company presently held by them during the fiscal year ended
September 30, 1997. Each director and officer, except Amin Bishara who was
appointed temporarily to fill a vacancy, has been elected until the next annual
meeting of shareholders of the Company, or until his successor shall have been
elected and qualified. As part of the acquisition agreement with Plant
Technical Services, Inc., of Texas, some of the previous directors have
resigned and new directors have been appointed in their place as of September
30, 1996.
The executive officers and directors of the Company are as follows:
Name Age Position Held
Warren Douglas Cattanach 54 Director and Officer
(resigned December, 1996)
George E. Fiske 63 Director and Officer
(resigned January, 1997)
Amin T. Bishara 54 Director (Temporary)
(terminated May, 1996)
Frank Corris 52 President of Plant
Technical Services, Inc.
(resigned May, 1997)
William O'Callaghan 58 Outside Director
Martin Sportschuetz 38 Outside Director
Jochen Brenner 33 Outside Director
(resigned July, 1997)
Warren Douglas (Doug) Cattanach, had been the President and CEO of Tier of
Florida since January of 1994. He had served as Vice President and Construction
Coordinator of Tier since June of 1992. Previous to that position was the Vice
President, Chief Estimator and Project Manager of the Greater Bay Construction
Company, where he was involved in commercial construction projects of up to
$5m. His experience as Project Coordinator and General Manager was gained while
working for Innovative Remodeling and Design, Inc.; Soltesz/Brandt Development
Corporation; and Chattan Development Corporation, during the period from June
1989 until September 1991. On December 26, 1996, Mr. Cattanach resigned as
president of Tier of Florida.
Amin T. Bishara joined the Company as a temporary Director on September 27,
1995, pending stockholder approval, as part of the acquisition and merger
agreement with Plant Technical Services, Inc. Mr. Bishara was the majority
shareholder of PTS and originally stayed on as the President of the subsidiary
and was assigned a seat on the Board of Directors. On May 19, 1996 Mr. Bishara
was terminated. The Company is presently in litigation with Mr. Bishara.
Martin Sportschuetz became a director in March, 1996 and represents the
interest of various German clients who have invested in the Company since 1993.
Mr. Jochen A. Brenner became a director of the Company in connection with
the shareholders' meeting of March 15, 1996, in representation for the interest
of German clients who have been purchasing the Company's securities in the open
market since 1993. Mr.Brenner is the founder and chief executive officer of SFU
10
<PAGE>
Group, Ltd. SFU manages funds for a number of other private investors,
including investments in real estate, energy, and currency trading. Mr.
Brenner attended the University of Hohenheim, Stuttgart, where he studied
economics from 1986 to 1989. Mr Brenner resigned upon the filing of the
Company's voluntary Petition for Bankruptcy under Chapter 11.
Item 10. Executive Compensation.
Securities
of property
Salaries, insurance
fees, benefits or
director's repayment
Name of individual fees, of
or number of Capacities in commission personal
persons in group which served and Bonuses Benefits
Officers and Directors
as a group $ 0 0
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Management
The following table sets forth the number of Common Shares of the Company
owned by record, or to the knowledge of the Company, beneficially, by each
Officer or Director of the Company and by each person owning five percent or
more of the Company's outstanding shares, as of September 30, 1998.
Amount and Nature of Percentage of
Name and Address Beneficial Ownership Class Owned
Warren Douglas Cattanach 609,250 7.09%
Amin T. Bishara 750,000 8.73%
All officers and directors as a group own 1,359,250 or 15.82% of the
outstanding shares of the Company.
Item 12. Certain Relationships and Related Transactions.
During the year ended September 30, 1996, $44,419 was charged to operations
based upon the value ascribed to 110,000 shares which were issued to a law firm
and a consultant for services performed during the period. During the year ended
September 30,1997, $18,250 was treated as a reduction of operating expenses as
a result of the rescission of 45,625 of these shares.
Included in amounts due to related parties at September 30, 1997 for
expenses advanced by a company affiliated with a stockholder and director of the
company was $812,659 and $9,000 advanced from a corporate stockholder. Other
than the $9,000 from the corporate stockholder, these amounts bear an interest
rate of prime and are due upon demand. No amounts remaining as of September
30,1998.
Note payable to stockholder (the former sole stockholder of PTS) includes
$7,145 of a non-interest bearing instrument. Additionally, this note has been
reduced by amounts reserved for the anticipated loss on long term contract and
$918,944 remains which represents the balance on the acquisition note after such
reduction, bearing interest at 8%. The company commenced litigation with this
shareholder and during the fiscal year ended September 30, 1997 these notes were
recorded as cancellation of indebtedness income in connection with the
discontinuation of the PTS Subsidiary.
11
<PAGE>
PART IV
Item 13. Exhibits.
(a)(1) The following is a list of exhibits filed as part of this
Annual Report on Form 10-KSB. Where so indicated by footnote,
exhibits which were previously filed are incorporated by
reference.
Exhibit Number
Reference Description
(3a)* Articles of Incorporation, as amended
(3b)* By-laws, as amended
(4)* Specimen of Common Stock certificate
(101)* Agreement and merger plan between Tier Environmental Services,
Inc. and Plant Technical Services, Inc.
(10m)* Employment Agreement with:
(a) Amin Bishara
(b) Frank Corris
(12)* Agreement of Sale between Tier Environmental Services, Inc.
and MBT Associates, Inc.
* The above items were previously filed and are hereby incorporated by
reference.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant, caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GULFSTAR INDUSTRIES, INC.
FORMERLY TIER ENVIRONMENTAL SERVICES, INC
Dated: February 4, 1999,
and submitted with By:/s/William O'Callaghan
re-assigned access codes William O'Calllaghan, Acting President
February 19, 1999
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 32
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 32
<CURRENT-LIABILITIES> 86131
<BONDS> 0
0
0
<COMMON> 318436
<OTHER-SE> (318436)
<TOTAL-LIABILITY-AND-EQUITY> 32
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 45527
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (45527)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45527)
<DISCONTINUED> 1061712
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1016185
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 0
</TABLE>
