<PAGE>
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, 2000
OR
Commission file number 33-16736
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, 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.)
105 S. NARCISSUS AVE. # 701 WEST PALM BEACH, FL 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 835-0094
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 confirmed by a court. Yes [X] No
As of September 30, 2000 the Company had 17,590,314 shares of common stock and
no shares of stock outstanding.
<PAGE>
PART I
Item 1. BUSINESS.
GENERAL DESCRIPTION OF BUSINESS
eContent, Inc. is a fully reporting public company, registered with
Standard & Poors and listed for trading on the NASDAQ OTC:BB under the symbol
ETNT. In the fiscal year ended September 30, 2000, the Company acquired a
majority interest in MPI Media Productions International, Inc. for $1,750,000
cash and 1,350,000 shares of restricted common stock.
eContent Inc. is a vertically integrated marketing company engaged in
the creation and exploitation of television programming, Internet content, and
related merchandising and distribution strategies. The Company completed the
developmental stage operation with the acquisition of the majority interest in
MPI discussed above.
MPI Media Productions International, Inc. is a diversified television
production company, which develops, produces and syndicates programming to major
networks. Founded in 1985, by award-winning producer/director Bob Marty, MPI
Media Productions International, Inc. has produced shows for PBS, CBS, BBC, A&E
and the Discovery Health Channel. MPI Media Productions International, Inc.
programs have been viewed by an estimated 150 million people worldwide.
On or before July 1, 2001, the Company intends to acquire the remaining
49% minority interest of MPI.
ORGANIZATIONAL BACKGROUND
eContent, Inc., originally named Gulfstar Industries, 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 the management would
provide a profit. Gulfstar became a holding company with two wholly owned
subsidiaries, Plant Technical Services, Inc., an engineering consulting and
placement service and Tier Environmental, an environmental preservation company,
both of which discontinued operations in the fiscal year ended September 30,
1997.
On July 22, 1997, Gulfstar filed a petition for reorganization under
Chapter 11 of the Federal Bankruptcy Code. On September 2, 1998 the Court
approved a proposed plan of reorganization, which would be funded through the
reverse merger of Gulfstar with Media Vision Productions, Inc.
On January 4, 1999, the merger was consummated, Gulfstar was
recapitalized and changed its name to Media Vision Productions, Inc. The
original Gulfstar shareholders retained 367,355 shares (7%), in the new company.
The Gulfstar creditors were issued 30,970 shares (.6%).
On October 1, 1999, the stock commenced trading, with a new name,
e-Content, Inc. a new symbol, "ETNT"..and a new future, Television Driven
E-Commerce Marketing.
2
<PAGE>
During the year ended September 30, 2000, the Company increased its
investment in MPI to $1,768,0000, and MPI has become a consolidated subsidiary
of ETNT. In the stock purchase agreement dated May 30, 2000, the Companies were
not scheduled to consolidate operation until the second quarter of 2001.
MPI is a full service video production and post-production company that
creates video products for broadcast television, major corporate and industrial
clients, and the home video market.
MPI has a successful track record marketing home videos through various
distribution channels including spot television ads, print, catalogs,
infomercials and public relations and editorial placements.
In conjunction with eContent this marketing continuum would be extended
to include Internet Stores developed and operated by eContent.
On September 27, 2000, the Company executed a letter of intent to
acquire Internet Broadcast
EMPLOYEES AND CONSULTANTS
As of September 30, 2000, the Company and its consolidated subsidiary
had approximately 5 executive consultants and 10 full time employees. In the
normal course of business the Company's production subsidiary engages the
services of as many as 75 television production specialists.
LICENSING RIGHTS
On October 26, 1999, eContent, Inc. acquired the master licensing
rights to Spartan Sporting Goods and Fashion. Spartan is one of the most widely
recognized and respected trademarks in the history of televised sports. In the
past forty years, an estimated 400 million boxing fans worldwide have seen the
SPARTAN name. Spartan's major competitor EVERLAST, capitalized on its popularity
in the boxing world to build a $100 million licensing empire. SPARTAN trunks,
robes and gloves have been worn by over "100 Champion Title Holders" including
Rocky Marciano, Muhammad Ali, Larry Holmes, George Foreman, Roberto Duran, Tommy
Hearns, Macho Camacho and Sugar Ray Leonard. In the next twelve months, SPARTAN
will outfit over 50 boxers in fights televised by HBO, ESPN, FOX and Showtime. A
wide range of Spartan licensed equipment and fashion is being developed for the
fast growing health, fitness and exercise markets.
Item 2. PROPERTIES.
Our corporate headquarters are located at 105 S. Narcissus Ave.,
Suite 701, West Palm Beach, Florida 33401. The lease provides for approximately
2500 sq. feet of space, expires in 2002 and the annual rent is approximately
$45,000.
The Company's MPI Subsidiary leases approximately 3000 square feet
if New York City for approximately $60,000 per year through 2001 and $61,500
for 2002.
3
<PAGE>
Item 3. LEGAL PROCEEDINGS.
eContent, Inc.'s predecessor had commenced an action against its
former president of its MBT subsidiary. On May 16,1996 we terminated the
President of the former 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. 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")
In September, 2000 the Company terminated its Executive Vice
President, Gary A. Goodell. In December, 2000 the former Executive Vice
President filed a complaint in the Circuit Court of the Fifteenth Judicial
Circuit in Palm Beach County seeking restatement of his employment contract.
The Company believes they were justified in this termination and anticipate
no material costs in excess of those accrued in the financial statement as a
result of this claim.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
4
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Prices of Common Stock
The primary market for our common stock is the Nasdaq OTC Bulletin
Board, where it trades under the symbol "ETNT". We became publicly traded as
"MVPI" on June 28, 1999, when we were called Media Vision Productions, Inc.
through a merger with Gulfstar Industries, Inc., formerly known as Tier
Environmental Services, Inc. On October 1, 1999 our name changed to eContent and
our symbol became "ETNT". The following table sets forth the high and low
closing bid prices for the shares for the periods indicated as provided by the
NASD's OTCBB System. The quotations shown reflect inter-dealer prices, without
retail mark-up, mark-down, or commission and may not represent actual
transactions.
<TABLE>
<CAPTION>
High Bid Low Bid
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1999
First Quarter Unavailable Unavailable
Second Quarter Unavailable Unavailable
Third Quarter $2.625 $ .50
Fourth Quarter $1.375 $ .75
FISCAL YEAR ENDED SEPTEMBER 30, 2000
First Quarter $2.125 $ .4375
Second Quarter $2.125 $ .8438
Third Quarter $2.4375 $1.0625
Fourth Quarter $1.1875 $ .375
</TABLE>
(b) SHAREHOLDERS.
As of September 30, 2000, we had 17,590,314 shares of common stock
outstanding and approximately 425 stockholders of record.
(c) DIVIDENDS.
We have never declared or paid any cash dividends on our common stock
and do not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings, if any, to finance operations and
the expansion of our business. Any future determination to pay cash dividends
will be at the discretion of the board of directors and will be based upon our
financial condition, operating results, capital requirements, plans for
expansion, restrictions imposed by any financing arrangements and any other
factors that the board of directors deems relevant.
5
<PAGE>
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.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2000 VS. YEAR END SEPTEMBER 30, 1997
The Company has recorded revenue fo $1,474,209 for the year ended
September 30, 2000 as compared to revenue of $0 for the comperable period
ended September 30, 1999.
The Company recorded a net loss of $3,516,517 for the year ended
September 30, 2000 as compared to a loss of $3,942,234 for the comperable
period ended September 30, 1999 a decrease of $425,717. This represents a
loss per common share of $.27 for the year ended September 30, 2000 as
compared to a loss per common share of $.70 for the period ended
September 30, 1999.
Development, production and distribution expenses rose to $1,869,268
in fiscal 2000 compared to $127,387 in fiscal 1999. General and
administrative expenses rose to $1,520,294 in fiscal 2000 from $726,219 for
the comparable period in fiscal 1999. The increased Operations are due to
the Acquisition of the MPI Subsidiary.
PLAN OF OPERATIONS AND BUSINESS STRATEGY
Marketing is an exciting business ... based on an exact science.
Consumer spending is a direct function of media exposure. Television is the
nations most popular and powerful media. Public Television is the nations most
respected Network.
eContent, Inc., ETNT, is a vertically integrated marketing company
engaged in the creation of television show concepts and the development of
related products and merchandising strategies. The production subsidiary of
eContent Inc., MPI Media Productions International, inc. develops, produces and
syndicates programming to major networks worldwide. Founded in 1986, by
award-winning producer/director Bob Marty, MPI has produced shows for PBS, CBS,
BBC, A&E and the Discovery Health Channel. MPI programs have been viewed by an
estimated 150 million people.
6
<PAGE>
eContent Inc. has a long-term contract to produce network quality
television programming for distribution to the Public Television Network. Public
Television reaches 99% of American households. There are 346 Public Television
Stations, with 101 million loyal weekly viewers nationwide. MPI has established
itself as a major producer of Public Television family oriented entertainment
including high profile "SELLF-HELP" and "CONCERT" Fund Raising Specials. PBS
will release six new MPI Specials this season; ten new shows are in various
stages of pre-production and production.
The Company develops and retains a financial interest in products
related to each MPI Special. Public Television offers these products (ie. books,
cd's videos, etc.) to viewers as an incentive to pledge during the station's
800# Membership Drives. This nationwide exposure provides invaluable consumer
recognition. These and other products are cross promoted and sold through a
synchronized network of Mass Merchants, Bookstores, Music & Video Outlets, TV
Shopping, Web and Print Channels.
<TABLE>
<CAPTION>
MUSIC
MASS & TV
MERCHANTS BOOKS VIDEOS SHOPPING WEB PRINT
<S> <C> <C> <C> <C> <C>
Walmart Borders Tower QVC Amazon.com Parade
K-Mart Waldenbooks Sam Goody HSN CDNow.com USA Weekly
Target Barnes & Noble Best Buy Infomercials
ibookstore.com National Enquirer
</TABLE>
In the future, eContent Inc. will offer products, entertainment, and
informational interactive services at a niche web community created in
conjunction with each MPI Special. All customers, at all sales channels, will be
issued a GOLD MEMBERSHIP at the Web Community for the show that inspired their
purchase. Customers at each sales channel produce current cash flow and
earnaings and become pre-qualified, zero cost, AAA Members of an eContent Niche
Web Community.
eContent Inc. has long standing relationships with large,
well-respected companies in the telemarketing, credit card processing and
fulfillment industries. This will insure convenient, safe, problem free
electronic transactions for the eContent Inc. direct response and Web community
customer.
In summary, the eContent, Inc./MPI business model has proven staffed
structured to ling "THE POWER OF TELEVISION TO THE POWER OF THE INTERNET". The
Business Model has been tested and refined. Until the third quarter of 2001, its
value will remain unproven.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at September 30, 2000 was $178,476.
Since the reorganization, the Company has funded its operations from the
issuance of common stock and loans.
The Company raised approximately $250,000 through the issuance of
the Company's Common Stock during the quarter ending December 31, 2000 and
plans to raise an additional $5,000,000 during fiscal 2001 in private
placement transactions with accredited investors that are intended to be
exempt from registration pursuant to 506 of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933.
The Company intends on acquiring the remaining 49% of MPI during
fiscal 2001, which will utilize approximately $2,100,000 of these funds, the
balance would be available for general corporate purposes.
Should the Company not complete the merger and acquisition of MPI, the
strategic alliance and production schedules will continue.
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>
FORWARD LOOKING AND OTHER STATEMENTS
We have made statements in this document that are forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words. You should
read statements that contain these words carefully because they: (1) discuss our
future expectations; (2) contain projections of our future results of operations
or on our fiscal conditions, or (3) state other "forward looking" information.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict or which we do not fully control. Important factors that
could cause actual results to differ materially from these expressed or implied
by our forward-looking statement, include, but are not limited to those risks,
uncertainties and other factors discussed in this document.
9
<PAGE>
Item 7. FINANCIAL STATEMENTS.
(a)(1) The following documents are filed as part of this report:
a. CONSOLIDATED FINANCIAL STATEMENTS OF THE REGISTRANT, ECONTENT, INC
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Report of Independent Auditors' F-1
Consolidated Balance Sheet of eContent, Inc. (formerly
Media Vision Productions, Inc.) as of September 30, 2000 F-2
Consolidated Statements of Operations of eContent, Inc.
(formerly Media Vision Productions, Inc.) for the years
ended September 30, 2000 and September 30, 1999 and for
the period from inception (April 1, 1998) through
September 30, 2000 F-3
Consolidated Statements of Changes in Stockholders'
Equity of eContent, Inc (formerly Media Vision
Productions, Inc.) for the period from October 1, 1997
to September 30, 2000 F-5-F-7
Consolidated Statements of Cash Flows of eContent, Inc.
(formerly Media Vision Productions, Inc.) for the years
ended September 30, 2000 and September 30, 1999 and for the
period from inception (April 1, 1998) through
September 30, 2000 F-8
Notes to Consolidated Financial Statements F-9-F-20
</TABLE>
b. Interim Financial Statements.
Not Applicable
c. Financial Statements of Businesses Acquired and to be Acquired
Not Applicable
10
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of eContent, Inc. (Formerly Media Vision Productions, Inc.)
We have audited the accompanying consolidated balance sheet of eContent, Inc.
(formerly Media Vision Productions, Inc.) and subsidiaries as of September 30,
2000 and the related consolidated statements of operations and cash flows for
the two years then ended and from April 1, 1998 (Date of Inception) through
September 30, 2000 and the consolidated statement of stockholders' equity from
October 1, 1997 through September 30, 2000 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 eContent, Inc. (formerly Media
Vision, Inc) as of September 30, 2000, and the results of operations and its
cash flows for the two years then ended and from April 1, 1998 (Date of
Inception) through September 30, 2000 in conformity with generally accepted
accounting principles.
SCHUHALTER, COUGHLIN & SUOZZO, LLC
Raritan, New Jersey
January 4, 2001
F-1
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Assets
Current Assets
Cash and Equivalents $ 267,813
Restricted Cash 1,860
Accounts receivable Billed and Unbilled - Net
of $9000 allowance for bad debt 401,717
Due from selling stockholder 141,265
Prepaid Expenses and other current assets 74,089
-----------
886,744
Property and equipment, net of $18,790
accumulated depreciation 132,169
Other Assets
Intangible assets, net of accumulated
amortization of $205,975 6,121,199
Deposits 19,544
-----------
Total Other Assets 6,140,743
-----------
Total Assets 7,159,656
===========
Liabilities and Stockholders' Equity
Liabilities
Accounts payable and accrued expenses 323,691
Corporate taxes payable 66,431
Bank credit line 53,146
Due to stockholder 15,000
Due to selling stockholder 250,000
-----------
Total Liabilities 709,268
Commitments and Contingencies (Note 7) --
Minority interests in consolidated subsidiary 36,775
Stockholders' Equity
Common stock, par value $.08 per share; authorized
50,000,000 shares, issued and outstanding 17,590,314 1,407,225
-----------
Convertible preferred stock, authorized 1,000,000 shares,
par value $10.00; no shares issued and outstanding 12,660,898
Additional paid in capital
Deferred Compensation (53,000)
Deficit accumulated during development stage (7,600,510)
-----------
Total Stockholders' Equity 6,414,613
-----------
Total Liabilities and Stockholders' Deficit 7,159,656
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From
April 1,
1998
For the For the (Date of
Year Year Inception)
Ended Ended to
September 30, September 30, September 30,
1999 2000 2000
------------- ------------- -------------
<S> <C> <C> <C>
Production Revenue $ -- $ 1,131,398 $ 1,131,398
Royalty and Other Revenue -- 342,811 342,811
----------- ----------- -----------
TOTAL REVENUES $ -- 1,474,209 1,474,209
----------- ----------- -----------
COSTS AND EXPENSES:
Development, production and distribution 127,387 1,869,268 1,996,655
General and administrative 726,219 1,520,294 2,388,272
Depreciation and amortization 16,905 207,500 224,405
Stock based compensation 3,043,667 1,289,396 4,333,062
----------- ----------- -----------
TOTAL COSTS AND EXPENSES 3,914,178 4,886,457 8,942,394
LOSS FROM OPERATIONS
before other expenses and
provisions for income taxes 3,914,178 3,412,248 7,468,185
OTHER INCOME (EXPENSE):
Bad debt expense -- (3,000) (3,000)
Settlement expense (10,556) (22,288) (32,844)
Interest income -- 2,487 2,487
Interest expense (17,500) (3,703) (21,203)
Minority interest in consolidated
subsidiary earnings -- (36,775) (36,775)
TOTAL OTHER INCOME EXPENSE (28,056) (63,279) (91,335)
/Loss Before Income Taxes 3,942,234 3,475,527 7,559,520
----------- ----------- -----------
Provision for income taxes -- 40,990 40,990
----------- ----------- -----------
NET LOSS $(3,942,234) $(3,516,517) $(7,600,510)
=========== =========== ===========
LOSS PER COMMON SHARE,
BASIC AND DILUTED $ (.70) $ (.27)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING, BASIC
AND DILUTED 5,653,619 12,914,484
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FROM OCTOBER 1, 1997 TO SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance, October 1, 1997
as previously reported 9,106,365 $ 291,404 75,000 $ 750,000
Cancellation of preferred
shares for conversion to
common stock on one to one
basis in reorganization 75,000 2,400 (75,000) (750,000)
Reverse split of one new (9,181,365) (293,804) - -
share of common stock for
each 25 prior shares of
common stock and change
of par vale to $.80 367,355 293,804 - -
Retained deficit prior to
reorganization charged to
additional paid in capital - - - -
Net income reported by
predecessor for the year
ended September 30, 1998 - - - -
Issuance of common stock for
the cancellation of
indebtedness pursuant to
plan of reorganization 30,970 24,632 - -
--------- ------- ------- -------
Subtotal 398,045 318,436 - -
Change of par value from
$.80 to $.08 - (286,592) - -
Retroactive effect of
recapitalization on
January 4, 1999 including
the elimination of
prior retained deficit 4,000,000 320,000 - -
--------- ------- ------- -------
Balance as restated for
recapitalization
effective April 1, 1998 4,398,045 $ 351,844 $ - $ -
========= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FROM OCTOBER 1, 1997 TO SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Additional Total
Deferred Paid In Stockholders'
Compensation Capital (Deficit) Equity
<S> <C> <C> <C> <C>
- $3,166,718 $5,313,638 $(1,102,284)
- 747,600 - -
- - - -
- - - -
- (4,211,354) (4,211,354) -
- - 1,016,185 1,016,185
- (21,400) - -
--------- --------- --------- ---------
- (318,436) (86,099) (86,099)
- 286,592 - -
- (320,000) 86,099 86,099
--------- --------- --------- ---------
$ - $ (351,844) $ - $ -
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FROM OCTOBER 1, 1997 TO SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
------ ------ ---------- ------
<S> <C> <C> <C> <C>
Balance as restated for
recapitalization
effective April 1, 1998 4,398,045 351,844 - -
Issuance of common stock,
in private placement, net
of offering costs of
$14,011 255,000 20,400 - -
Correction of predecessor
shares canceled in reverse
split and cancellation of
indebtedness (2,836) (227) - -
Net loss for the period
from April 1, 1998 (date
of inception) to
September 30, 1998 - - - -
--------- --------- --------- ---------
Balance, September 30,
1998, as restated 4,650,209 372,017 - -
Issuance of common stock
in connection with the
extension of note payable 500,000 40,000 - -
Issuance of common stock in
private placements, net of
offering costs of $62,472 912,500 73,000 - -
Issuance of common stock in
consideration for
cancellation of note
payable plus accrued
interest 500,000 40,000 - -
Issuance of common stock to
employees for services 3,400,000 272,000 - -
Issuance of stock options
to employees - - - -
Net loss for the year ended
September 30, 1999 - - - -
--------- --------- --------- ---------
Balance at September 30,
1999 10,162,709 $ 797,017 - $ -
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FROM OCTOBER 1, 1997 TO SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Additional Total
Deferred Paid In Stockholders'
Compensation Capital (Deficit) Equity
<S> <C> <C> <C> <C>
- (351,844) - -
- 220,589 - 240,989
- 227 - -
- - (141,759) (141,759)
--------- --------- --------- ---------
- (131,028) (141,759) 99,230
- (15,000) - 25,000
- 776,028 - 849,028
- 227,500 - 267,500
- 2,754,000 - 3,026,000
(88,333) 106,000 - 17,667
- - (3,942,234) (3,942,234)
--------- --------- --------- ---------
$ (88,333) $3,717,500 $(4,083,993) $ 342,191
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY -- (Continued)
FROM OCTOBER 1, 1997 TO SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at October 1, 1999 9,962,709 $ 797,017 - -
Shares issued in
consideration for
cancellation of officer
loans 805,424 64,434 - -
Issuance of shares in
connection with
acquisition of MPI
subsidiary 1,350,000 108,000
Issuance of stock options
to employee of subsidiary - - - -
Exercise of stock options 500,000 40,000
Issuance of common stock
for services 1,135,000 90,800
Issuance of shares in private
placement, net of
option costs of $184,975 3,437,181 274,974
Shared issued for cash
and guarantee of acquisition
note 400,000 32,000
Amortization of deferred
compensation - -
Net Loss - -
---------- ---------- -------- ------
17,598,314 $1,407,225
========== ========== ======== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY -- (Continued)
FROM OCTOBER 1, 1997 TO SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Additional Total
Deferral Paid In Stockholders'
Compensation Capital (Deficit) Equity
------------ ---------- --------- -------------
<S> <C> <C> <C> <C>
$(88,333) $3,717,500 $(4,083,993) $ 342,191
- 740,990 - 805,424
4,042,000 4,150,000
- 368,750 - 368,750
60,000 100,000
1,801,952 1,892,752
1,811,706 2,086,680
118,000 150,000
35,333 35,333
- - (3,516,517) (3,516,517)
-------- ---------- ----------- -----------
$ (53,000) $12,650,878 $(7,600,510) $ 6,414,613
======== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From
April 1,
1998
For the For the (Date of
Year Year Inception)
Ended Ended to
September 30, September 30, September 30,
1999 2000 2000
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net Loss (3,942,234) $ (3,516,517) $ (7,600,510)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization 16,905 207,500 224,405
Interest expense 17,500 - 17,500
Loan fees 25,000 - 25,000
Stock based compensation
and expenses paid by stock 3,043,667 2,585,670 5,629,337
Changes in assets and liabilities:
Restricted Cash - 252,221 252,221
Accounts Receivable - (88,465) (88,465)
Prepaid Expenses and
other Current Assets - 75,223 75,223
Deferred Revenue - (274,094) (274,094)
Taxes Payable - 47,012 47,012
Accounts payable and accrued
expenses 74,078 (111,037) (31,672)
Deposits (4,200) (2,390) (6,590)
--------- --------- ---------
Net cash used in operating
activities (769,284) (824,877) (1,730,633)
--------- --------- ---------
Cash flows from investing
activities:
Investment in intangible assets (90,481) (1,737,500) (1,827,981)
Investment in property and
equipment (22,184) (13,498) (35,682)
Advance on production rights (375,000) - (375,000)
--------- --------- ---------
Net cash used in investing
activities (487,665) (1,750,998) (2,238,663)
--------- --------- ---------
Cash flows from financing
activities:
Cash acquired in acquisition - 290,656 290,656
Net proceeds from issuance of
common stock 835,017 2,236,680 3,326,697
Proceeds from loans 250,000 298,713
Advances from officers' 38,954 327,000 365,954
Advance from stockholder 15,000 - 15,000
Repayment of loans (48,713) (11,198) (59,911)
--------- --------- ---------
Net cash provided by
financing activities 1,090,258 2,843,138 4,237,109
--------- --------- ---------
Net increase (decrease)in cash
and cash equivalents (166,691) 267,263 267,813
Cash and cash equivalents,
Beginning of Period 167,241 550 0
--------- --------- ---------
Cash and cash equivalents,
End of Period $ 550 $ 267,813 $ 267,813
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-10
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
eContent, Inc. (formerly Media Vision Productions, 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. On September 29, 1994 the Company changed its
name to Tier Environmental 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 Texas.
In February 1996, the Company changed its name to Gulfstar Industries,
Inc.
On January 4, 1999 the Company acquired all of the issued and
outstanding shares of Media Visions Properties, Inc. and changed its name to
Media Vision Productions, Inc.
On October 1, 1999 the Company changed its name to eContent, Inc. The
primary business of eContent is to design, develop and market television
programming, internet content and to exploit related merchandising
opportunities.
In May, 2000, the Company acquired a 41% interest in Media
Productions International, Inc. and on September 28, 2000 the Company
increased its ownership to 51% of MPI.
NOTE 2 - LOSSES DURING THE DEVELOPMENT STAGE
The Company has incurred operating losses totaling $7,600,510 from
inception April 1, 1998 through September 30, 2000.
The Company has been in the development stage through September 30,
2000 and its activities have been focused on the acquisition of the MPI
subsidiary and the development of MPI's programs. Because eContent has been
in the development stage, the accompanying financial statements should not be
regarded as typical for normal operating periods.
The Company believes that its remaining cash resources at September
30, 2000, along with cash flows expected to be generated from financings that
are expected to close in the short term will be sufficient to fund the
Company's operations through 2001. Additional funding will be required to
purchase the remaining minority interest of the MPI subsidiary. However,
there can be no assurance that the Company will generate sufficient revenues
to provide positive cash flows from operations or that sufficient capital
will be available, when required, to permit the Company to realize its plans.
F-11
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REORGANIZATION AND SUBSEQUENT RECAPITALIZATION
In July 1997, the Company filed a petition under Chapter 11 of the
Bankruptcy laws. 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 eContent Inc. (formerly 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 and the post petition
liabilities allowed and claims exceed the carrying value of assets. On January
4, 1999, pursuant to the plan of reorganization and plan of merger the company
changed its name to Media Vision Productions, Inc. On October 1, 1999, the
Company changed its name to eContent, Inc.
For accounting purposes the acquisition has been treated as an
acquisition of eContent, Inc. (formerly Media Vision Productions, Inc.) by Media
Vision Properties, Inc. and therefore a recapitalization of Media Vision
Properties, Inc. The historical financial statements prior to January 4, 1999
are those of Media Vision Properties, which was incorporated on June 17, 1997
but did not issue stock, have assets, or commence operations until April 1,
1998. Additionally, proforma information is not presented since the transaction
is treated as a recapitalization.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated balance sheet as of September 30, 1999
includes the accounts of the Company and its wholly owned subsidiary, Media
Vision Properties Inc., which commenced operations on April 1, 1998.
All significant intercompany accounts and transactions have been eliminated.
RESTATEMENT AND RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Due to the recapitalization, historical stockholders' equity of the
acquirer (Media Vision Properties, Inc.) prior to the merger is retroactively
restated for the equivalent number of shares received in the merger after giving
effect to any difference in par value of the issuer's and acquirer's stock with
an offset to paid-in capital. Retained deficit of the acquirer has been carried
forward after the acquisition.
Certain reclassifications have been made to the 1999 financial
statements to conform with the 2000 financial statement presentation.
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.
F-12
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
LONG-LIVED ASSETS
The Company accounts for long-lived assets under the provisions of SFAS
No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to Be Disposed of," which states that whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable and long-lived assets and certain identifiable intangibles are to be
disposed of, they should be reported at the lower of carrying amount or fair
value less cost to sell. The Company does not believe that any such changes in
circumstances have occurred.
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.
INCOME TAXES
The Company accounts for income taxes using the asset and liability
method. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using currently enacted tax
rates. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in results of operations in the period that includes the
enactment date. Because of the uncertainty regarding the Company's future
profitability, the future tax benefits of its losses have been fully reserved
for. Therefore, no benefit for the net operating loss has been recorded in the
accompanying consolidated financial statements.
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.
F-13
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LOSS PER COMMON SHARE, BASIC AND DILUTED
The Company accounts for net loss per common share in accordance with
the provisions of Statements of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share"("EPS"). SFAS No. 128 reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Common equivalent shares
have been excluded from the computation of diluted EPS since their effect is
antidilutive. The 1998 earnings per share were restated to reflect the 1 for 25
split pursuant to the plan of re-organization, and the 4,000,000 shares issued
in the merger accounted for as a reorganization were treated as outstanding
effective from the date of inception.
SUPPLEMENTAL INFORMATION - STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
September 30
1999 2000
<S> <C> <C>
Interest Paid $ 0 $ 3,703
==== =====
Income Taxes Paid $ 0 $ 625
==== =====
</TABLE>
SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
For the Years Ended
September 30,
1999 2000
<S> <C> <C>
Issuance of 500,000 shares of common
shares for loan fees $ 25,000 $ 0
====== =======
Cancellation of $250,000 loan principal
and accrued interest of $17,500 for
issuance of 500,000 shares of common
stock $267,500 $267,500
======= =======
Cancellation of $327,000
of advances from officers
for issuance of 327,000
shares of common stock $ 0 $327,000
======= =======
Cancellation of $478,424
unpaid salary and expenses
for issuance of 478,424
shares of common stock $ 0 $478,424
======= =======
</TABLE>
F-14
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ORGANIZATIONAL COSTS
Costs incurred by the Company and liabilities assumed in the
acquisition of eContent, Inc. accounted for as a recapitalization of Media
Vision Properties, Inc. have been capitalized at historical cost. Amortization
is computed using the straight line method over the estimated life of 60 months.
Amortization expense was $0 and $13,572 for the period from April 1,
1998 through September 30, 1999 and the year ended September 30, 1999,
respectively.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with
SFAS No. 123, "Accounting for Stock-Based Compensation," which permits entities
to recognize as expense over the vesting period, the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of Accounting Principles Board
("APB") Opinion No. 25 and provide pro forma net income and pro forma earnings
per share disclosures for employee stock option grants as if the fair
value-based method, as defined, had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure required by SFAS No. 123. Compensation expense is generally recorded
on the date of grant only if the current market price of the underlying stock
exceeded the exercise price.
The Company accounts for nonemployee stock-based awards in which goods
or services are the consideration received for the equity instruments issued
based on the fair value of the consideration received or the fair value of the
equity instrument issued, whichever is more readily determinable.
F-15
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - STOCKHOLDERS' EQUITY
COMMON STOCK
The Company has authorized 50,000,000 shares of common stock with a par
value of $.08.
As of October 1, 1997 the Company's predecessor had 9,181,365 shares of
common stock outstanding, after the exchange of 75,000 preferred shares to
common shares pursuant to the Plan of Reorganization.
The Company recorded a reverse split in bankruptcy of one new share of
common stock for each 25 prior shares.
Also pursuant to the plan of reorganization the Company issued 30,970
shares to creditors.
On January 4, 1999, and effective to April 1, 1998 due to the
recapitalization, the Company issued 4,000,000 shares of its common stock in
connection with the reverse acquisition of Media Vision Productions Inc.
Through September 30, 1998, the Company issued 255,000 shares of its
common stock for $1.00 per share in private placements, which net of offering
costs of $14,011, generated net proceeds to the Company of $240,989.
In February 1999 the Company issued 500,000 shares in connection with a
loan and recorded loan fees of $25,000.
Through March 1999, the Company issued 742,500 shares of its common
stock for $1.00 per share in private placements, which net of offering costs of
$62,472, generated net proceeds to the Company of $680,028.
In May and June 1999, the Company issued 170,000 shares of its Common
Stock for $1.00 in private transactions, generating net proceeds to the Company
of $170,000.
In October 1999 the Company agreed to issue 500,000 shares of stock in
consideration for cancellation of the loan and accrued interest, discussed in
note 8, totaling $267,500. These shares are treated as outstanding as of
September 30, 1999 pursuant to SFAS 128.
On September 24, 1999 the Company granted 3,400,000 shares to officers
and directors in connection with their employment agreements.
During fiscal year ended September 30, 2000 the Company issued
3,437,181 shares for $.69 per share, which net of offering costs of $284,975
generated net proceeds to the Company of $2,086,680.
During the year ended September 30, 2000 the Company issued 805,420
shares to officers in consideration for cancellation of $327,000 of unpaid
advances and $478,424 of unpaid salary and expenses.
The Company issued 500,000 stock options at $.20 per share, valued
at $368,750 which were exercised during the period.
During the year ended September 30, 2000 the Company issued
1,135,000 shares of its common stock for services to consultants valued at
$1,892,752.
As discussed in Note 5, the Company issued 400,000 shares to an
officer in connection with the acquisition of MPI.
F-16
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESERVED SHARES AND TREASURY STOCK
In connection with the plan of reorganization, the company objected to
the claim of the prior shareholder of the predecessor subsidiary, and as
discussed in Note 7, 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. On November 3, 1999, the Company placed 200,000 shares
in escrow in connection with an offer to settle the dispute with the prior
shareholder of the predecessor corporation. These shares were valued at the
settlement value of $182,600 and recorded as treasury stock. These shares were
treated as outstanding as of September 30, 1999 pursuant to SFAS 128 and a like
amount was recorded as accrued settlement in current liabilities. In
February, this offer was rescinded and the financial statements were restated
to reverse the treasury stock.
STOCK OPTIONS
In connection with the employment agreements discussed in Note 7, the
Company issued stock options to the officers which vest over the three years
covered in the agreement and generally expire in five years.
A summary of the stock option activity for the two years ended
September 2000, all of which were nonqualified stock options, is set forth
below:
<TABLE>
<CAPTION>
Weighted Average
Number of Exercise
Options Price
<S> <C> <C>
Granted 400,000 $ .625
Exercised - -
Canceled - -
------- -------
Outstanding at September 30, 1999 and 2000 400,000 $ .625
======= =======
Exercisable at September 30, 2000 166,667 $ .625
======= =======
</TABLE>
The weighted average fair value of options granted in 1999 was
estimated as of the date of grant using the Black-Scholes stock option pricing
model, based on the following weighted average assumptions: annual expected
return of 0%, annual volatility of 90%, risk-free interest rate ranging from
4.85 to 6.18 and expected option life of 3 years.
The per share weighted-average fair value of stock options granted
during 1999 was $2.18. The per share weighted average remaining life of the
options outstanding at September 30, 2000 is 1.5 years.
F-17
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has elected to continue to account for stock-based
compensation under APB Opinion No. 25, under which no compensation expense has
been recognized for stock options granted to employees at fair market value. Had
compensation expense for stock options granted under the Plan been determined
based on fair value at the grant dates, the Company's net loss for 1999 would
have been increased to the pro forma amounts shown below.
<TABLE>
<CAPTION>
September 30,
1999
<S> <C>
Net loss:
As reported $ 3,942,234
Pro forma $ 4,069,899
</TABLE>
For the years ended September 30, 1999 and 2000 the Company recorded
noncash charges totaling $17,666 and $35,333, in connection with the grant
of 400,000 options to employees. Such charges are the result of the
differences between the quoted market value of the Company's common stock on
the date of grant and the exercise price for options issued to employees.
WARRANTS
In connection with the Plan of Reorganization effective January 4,
1999, approximately 367,355 shares issued entitled each holder to a warrant to
purchase stock, effective from July 4, 1999 through July 4, 2000. The exercise
price is equal to 75% of the trading price on the date exercised.
In connection with private placements during fiscal year ended
September 30, 2000, 3,556,040 warrants are exercisable at $1.50.
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 predecessor's acquisition of
PTS, the Company issued 75,000 shares were converted into common stock on a one
to one basis pursuant to the plan of reorganization. As of September 30, 2000
the Company had no preferred stock outstanding.
F-18
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - TRANSACTIONS WITH RELATED PARTIES
During the fiscal year ended September 30, 1999 two officers of the
Company advanced $38,954 of working capital to the Company with no specific
repayment terms and no interest. These advances are expected to be repaid from
the proceeds of pending private placements.
In September 1999, a shareholder advanced the company $15,000 with
interest at 7% per annum and principal due on demand. Interest expense of $0
and $1,350 was recorded for the fiscal year ended September 30, 1999 and; to
date no demand has been made for repayment.
During the fiscal year ended September 30, 2000 two officers of the
Company advanced $327,000 to the Company and in turn were issued 327,000
shares of the Company's common stock for repayment.
During the fiscal year ended September 30, 2000 four officers
received 478,424 shares of the Company's common stock in lieu of unpaid
salary and expenses totaling $478,424.
In connection with the acquisition of the MPI Subsidiary an officer
advanced the Company $150,000 in September, 2000 and personally guaranteed a
$250,000 note to the seller in exchange for 400,000 shares of the Company's
common stock.
NOTE 6 - 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. On January 5, 1999 the
Company entered into an operating lease for the present office premises for a
period of three years commencing on February 1, 1999 through January 31,
2002. The Company's MPI subsidiary recently extended its New York City
premises lease through December, 2002. The leases call for basic rent and
certain occupancy costs and the remaining minimum payments under the lease at
September 30, 2000 are as follows:
Through fiscal year ending:
<TABLE>
<S> <C>
September 30, 2001 $ 106,301
September 30, 2002 77,201
September 30, 2003 15,374
-------
Total $ 198,876
=======
</TABLE>
F-19
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company's predecessor's subsidiaries were involved in various
litigation in connection with their prior operations which were eliminated by
the reorganization under bankruptcy.
In connection with the predecessor's acquisition and operation of its
former operating subsidiary PTS, the Company had terminated and commenced an
action against the former president of the PTS subsidiary. In turn, the former
president had commenced an action for wrongful termination against the Company.
These actions were dismissed in the bankruptcy proceedings and the former
president has appealed this decision. The Company has placed 200,000 shares in
escrow and recorded the shares as treasury stock pending the acceptance or lack
thereof of the offer. The offer value was based upon 58,833 shares reserved at
the time of the plan of reorganization at $.105 and 141,167 shares valued at
$1.25, the market price on the date the shares were put in escrow. The Company
rescinded its offer and restated opening equity by reversing treasury
stock.
On September 24, 1999 the Company entered into employment agreements
with its president and two executive officers. The general terms of the
agreements provide for the three officers to receive annual salaries totaling
$515,000 for fiscal 2000, $566,500 for fiscal 2001 and $623,150 for fiscal 2002.
Additionally, the agreements provide for stock options and grants of shares
enumerated in Note 4.
On October 5, 1999, the Company entered into a licensing agreement with
an individual and Spartan Sporting Goods and Fashions, Inc. ("Spartan") a
privately held New York Corporation for the exclusive master license of certain
logos, trademarks and copyrights. The agreement provides that the Company pay
30% of all royalty income received from the producers under this agreement to
the Licensor, or "Spartan". Additionally, the agreement provides for minimum
annual non-refundable license fees for up to nine years as follows:
<TABLE>
<CAPTION>
Calendar Year Amount
<S> <C>
2001 $25,000
2002 $25,000
2003 $30,000
2004 $36,000
2005 $43,200
2006 $51,850
2007 $62,200
2008 $74,650
</TABLE>
F-20
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES
No provision has been made for corporate income taxes on the parent
company due to cumulative losses incurred. The Company has available
unrealized tax benefits of approximately $2,828,800 in the form of net
operating loss ("NOL") carryforwards of approximately $8,320,000 for federal
income tax purposes to reduce future taxable income. If not utilized, the
federal NOL's expire at various dates through 2020.
Certain changes in stock ownership can result in a limitation in the
amount of net operating loss and tax credit carryovers that can be utilized each
year, including the merger and plan of acquisition dated January 4, 1999.
The Company has recognized these tax benefits as a deferred tax asset
subject to a 100% valuation allowance since it is uncertain whether or not these
tax benefits will be realized.
During the fiscal year end September 30, 2000 provision for taxes
on the Company's consolidated subsidiary for the four months ended September
30, 2000 consisted of the following:
<TABLE>
<CAPTION>
Total Federal State & Local
------- --------- ---------------
<S> <C> <C> <C>
Current $ 39,740 $ 20,645 $ 19,095
Deferred 1,250 1,250 0
------- ------- -------
Total $ 40,990 $ 21,895 $ 19,095
======= ======= =======
</TABLE>
NOTE 9 - PROPERTY AND EQUIPMENT
Property and equipment, at cost, at September 30, 2000 is as follows:
<TABLE>
<S> <C>
Production equipment $ 112,796
Office equipment $ 35,683
Leasehold improvements $ 2,480
Less- Accumulated depreciation (18,790)
-------
$132,169
=======
</TABLE>
Depreciation expense for the period from April 1, 1998 (date of
inception) through September 30, 1999 and the year ended September 30, 2000 was
$3,333 and $15,097, respectively.
NOTE 10 - NOTES PAYABLE
The Company borrowed $250,000 with notes bearing interest at 1% per
month, or 12% per annum, in February, 1999. In connection with these notes, the
Company issued 500,000 shares of its common stock to the makers, valued at
$25,000, when the Company's shares were not trading.
Subsequent to September 30, 1999 the Company and the makers agreed to
convert these notes, together with accrued interest of $17,500, totaling
$267,500, to 500,000 shares of common stock. The shares have been reflected as
outstanding as of September 30, 1999 pursuant to SFAS 128.
In connection with the acquisition of the majority interest of the
MPI subsidiary, an officer guaranteed a $250,000 note to the seller which was
repaid subsequent to September 30, 2000.
Bank credit line represents revolving line of credit of the
Company's MPI subsidiary at prime plus 2.5 percent personally guaranteed by
the officer.
F-21
<PAGE>
eCONTENT, INC.
(FORMERLY MEDIA VISION PRODUCTIONS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - ACQUISITION OF MAJORITY INTEREST IN CONSOLIDATED SUBSIDIARY
On December 12, 1999 the Company agreed to acquire up to 100% of the
issued and outstanding shares of Media Productions International, Inc., ("MPI")
a privately held New York Corporation which primarily operates as a television
production company. The terms provide the Company will pay $1,150,000 by January
31, 2000, $2,800,000 by June 1, 2000 and the issuance of 1,135,000 shares of the
Company's Common Stock. Additionally, the Company is to provide up to $550,000
working capital and agreed to enter into an employment agreement with MPI's
president.
On May 31, 2000 the Company acquired 46% and on September 28, 2000
the Company acquired an additional 5% of MPI with the issuance of common
stock, cash and expenses totaling $5,987,500 and assumed liabilities in
excess of basis of $249,193. This excess was recorded at $2,760,000 of
goodwill with a 20 year life; $2,607,519 of licensing rights with the life of
10 years and $869,174 of customer lists with a life of 7 years, all of which
are included in intangible assets, net of $174,307 of amortization for the
four months ended September 30, 2000.
The following unaudited pro forma summary presents the consolidated
results of operations as if the business combination had occurred on
October 1, 1999:
<TABLE>
<CAPTION>
For the year ended
September 30, 2000
------------------
<S> <C>
Revenue $ 3,515,133
Net loss (3,312,117)
Loss per share $ (.23)
</TABLE>
The above amounts are based upon certain assumptions and estimates which the
Company believes are reasonable. The pro forma results do not necessarily
represent results which would have occurred if the business combination had
taken place at the date and on the basis assumed above.
F-22
<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.
Our present executive officers and directors are:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
---- --- -------------
<S> <C> <C>
John P. Sgarlat 50 Chairman of the Board of
Directors and Chief Executive Officer
William H. Campbell 55 Executive Vice President, CFO, - Corporate
Secretary and Director
Gary A. Goodell 50 Director
John B.A. Haggin, Jr. 44 Executive Vice President -
Development and Director
Cornelia Eldridge 46 Director
</TABLE>
John P. Sgarlat has served as our Chairman of the Board of Directors
and Executive Officer since January 4, 1999. Mr. Sgarlat has extensive
experience in the Investment Banking, Direct Response Marketing and Media
Industries. Mr. Sgarlat graduated from Villanova University, Magna Cum Laude,
with a Bachelor of Arts degree in Philosophy. He also completed a three-year
program in the Securities Industry Association Division of the University of
Pennsylvania - Wharton School of Finance.
William H. Campbell has served as our Executive Vice President
-Corporate Affairs since January 4, 1999. He has 15 years experience in investor
and corporate relations. Through the years Mr. Campbell established contacts
with the financial press, radio, television and print which included television
interviews with CNN, FNN and many local stations. He has also been interviewed
and quoted in many major business and financial publications.
Gary Goodell served as our Executive Vice President - Marketing from
January 4, 1999 through September, 2000. Mr. Goodell has 25 years experience
in radio, TV and recording industry. Prior to joining the Company, since 1994
he was contracted with a major market television station to produce and
syndicate programming to over 300 stations. He has owned and operated radio
stations. In the record industry he has marketed and promoted top acts for
CBS, Warner Brothers, EMI, RCA and Capital.
John B.A. Haggin, Jr. has served as our Executive Vice President -
Development since January 4, 1999. Mr. Haggin is a real estate developer and
philanthropist; B.A. in Business, Valley Forge Military Academy, Wayne, PA,
1977. CEO Tri-Star Construction, Wellington, FL 1994; Founder, Haggin Family
Foundation for Special Olympics, Palm Beach, FL Fundraiser, Migrant Workers of
Hope Town, Florida 1996.
Cornelia Eldridge has served as a director since February 2000. She
is President of Eldridge Associates, Inc. (EAI), a management consulting firm
she founded in 1981. Prior to building her own Firm, Cornelia held
management positions at Mass Mutual Life Insurance Co., Loeb Rhoades and
Touche Ross & Co. She was also a Partner at Ditri Associates, a leverage
buyout firm that focuses on taking over under performing manufacturing
companies. Cornelia has a BA from Ohio Wesleyan University and an MBA from
University of Massachusetts. She serves on the Board of DE Frey, Inc., a
financial services firm, SysComm, Inc., the largest assembler and reseller of
IBM mid-tange computers, and Registry Magic, Inc., a voice recognition
company.
11
<PAGE>
Item 10. EXECUTIVE COMPENSATION.
<TABLE>
<CAPTION>
Securities
and 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
<S> <C> <C> <C>
John P. Sgarlat(1) Chairman, CEO $240,000 0
William H. Campbell(1) Exec. VP 150,000 0
Gary A. Goodell(1) Exec. VP 100,250 0
John Haggin(1) Exec. VP 165,897 -
$656,147 0
</TABLE>
(1) Denotes Director.
On September 24, 1999 the Company entered into employment agreements
with Messrs. Sgarlat, Campbell and Goodell. The general terms of the agreements
provide for the officers to receive annual salaries of $240,000, $150,000 and
$125,000, respectively and annual increases of 10% in future years. After the
initial three year term, the agreements provide for one year annual renewals at
a 10% increase. The agreements also provide for options to purchase an aggregate
of 133,333 shares per year for the first 3 years at $.625.
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, 2000.
<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Name and Address Beneficial Ownership Class Owned
---------------- -------------------- -----------
<S> <C> <C>
John Sgarlat(1) 3,000,000 17.1
William Campbell 1,025,179 5.8
Gary Goodell 1,017,384 5.8
John B. Haggin 904,736 5.1
Cornelia Eldridge 0 0
Robert Marty 1,350,000 7.7
</TABLE>
All officers and directors as a group own 7,297,299 or 41.5% of the
outstanding shares of the Company.
(1) includes 88,875 held by family members.
12
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal year ended September 30, 1999 two officers of the
Company advanced $38,954 of working capital to the Company with no specific
repayment terms and no interest. These advances are expected to be repaid
from the proceeds of pending private placements.
In September 1999, a shareholder advanced the company $15,000 with
interest at 7% per annum and principal due on demand. No interest expense was
recorded for the fiscal year ended September 30, 1999 and to date no demand has
been made for repayment.
In connection with the predecessor's acquisition and operation of its
former operating subsidiary PTS, the Company had terminated and commenced an
action against the former president of the PTS subsidiary. In turn, the former
president had commenced an action for wrongful termination against the Company.
These actions were dismissed in the bankruptcy proceedings and the former
president has appealed this decision. The Company has placed 200,000 shares in
escrow and recorded the shares as treasury stock pending the acceptance or lack
thereof of the offer. The offer value was based upon 58,833 shares reserved at
the time of the plan of reorganization at $.105 and 141,167 shares valued at
$1.25, the market price on the date the shares were put in escrow. The Company
will record a charge to additional paid in capital if the offer is accepted.
Gary Goodell was issued no additional consideration for his assignment
of the rights to an agreement with Independence Public Media to the Company.
During the fiscal year ended September 30, 2000 two officers of the
Company advanced $327,000 to the Company and in turn were issued 327,000
shares of the Company's common stock for repayment.
During the fiscal year ended September 30, 2000 four officers
received 478,424 shares of the Company's common stock in lieu of unpaid
salary and expenses totaling $478,424.
In connection with the acquisition of the MPI subsidiary an officer
advanced the Company $150,000 in September, 2000 and personally guaranteed a
$250,000 note to the seller in exchange for 400,000 shares of the Company's
common stock.
13
<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.
<TABLE>
<CAPTION>
Exhibit Number
Reference Description
--------- -----------
<S> <C>
(2a) 2nd Amended Plan of Reorganization
(2b) Agreement and Plan of Merger between Media Vision Production, Inc and Media Vision
Properties, Inc.
(3a)* Articles of Incorporation, as amended
(3b)* By-laws, as amended
(4)* Specimen of Common Stock certificate
(a)
(10)* Employment Agreement with:
(10.1)*
(a) John P. Sgarlat
(b) William Campbell
(c) Gary Goodell
10.2 (a) Assignment of Rocky Mountain Music Marketing Contract
10.3 (b) Contract with Independence Public Media***
10.4 (c) Licensing Agreement Spartan Sporting Goods.
10.5* Stock Purchase Agreement between MPI Media Productions
International, Inc. and eContent, Inc.
</TABLE>
* The above items were previously filed and are hereby incorporated by
reference.
14
<PAGE>
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
eContent, Inc.
(formerly Media Vision Productions, Inc.),
------------------------------------------
Dated: January 12, 2001
By: /s/ JOHN P. SGARLAT
--------------------------------------
John P. Sgarlat, Chairman, CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
BY: /s/ JOHN P. SGARLAT January 12, 2001
------------------------------
John P. Sgarlat, Chairman, CEO
BY: /s/ WILLIAM H. CAMPBELL January 12, 2001
-------------------------------
William H. Campbell, CFO
BY: /s/ JOHN HAGGIN January 12, 2001
-------------------------------
John Haggin, COO
15
