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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB/A NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 0-17001
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CHOICES ENTERTAINMENT CORPORATION
- - - - --------------------------------------------------------------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 52-1529536
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
220 CONTINENTAL DRIVE, SUITE 102, NEWARK, DELAWARE 19713
- - - - -------------------------------------------------- --------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (302) 366-8684
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SECURITIES REGISTERED UNDER SECTION 12(b) OF THE ACT: NONE
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SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE.
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(TITLE OF CLASS)
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Check whether the issuer (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
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Aggregate market value of the voting stock held by non-affiliates of
the registrant based upon a price of $0.11 per share, the average of the inside
bid and ask prices of the registrant's Common Stock at March 25, 1996:
$2,399,399. For purposes of this calculation, all directors and officers of the
registrant have been considered affiliates.
Number of outstanding shares of the registrant's Common Stock at March
25, 1996: 22,004,365 shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
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AMENDMENT NO. 1
The Registrant hereby amends its 1995 Annual Report on Form 10-KSB, by
filing herewith the complete text of ITEMS 9 through 12 of Part III thereof,
consisting of:
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT
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ITEM 10. EXECUTIVE COMPENSATION
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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The executive officers and Directors of the Company are as follows:
<TABLE>
<CAPTION>
Year First
Year First Became an
Became a Executive
Name Age Position Director Officer
- - - - ------------------------------- ---- ------------------------ ---------- ----------
<S> <C> <C> <C> <C>
John A. Boylan................. 52 Chairman of the Board and 1988 1987
Director
Ronald W. Martignoni........... 41 President, Chief Executive 1992 1988
Officer, Assistant
Secretary and Director
Fred E. Portner................ 52 Director 1988
Lorraine E. Cannon............. 45 Chief Financial Officer, 1989
Treasurer and Secretary
</TABLE>
John A. Boylan was elected Chairman of the Board, President, and Chief
Executive Officer in April 1992. He resigned as Chairman in November 1994,
while continuing as a Director, and was reelected as Chairman in September
1995. He resigned as President and Chief Executive Officer in October 1995.
Mr. Boylan initially joined the Company as its Senior Vice President --
Franchise Development in November 1987, in which position he served until June
1990, and was elected a Director in November 1988. From June 1990 until April
1992, Mr. Boylan served as the Company's Senior Vice President -- Business
Development.
Ronald W. Martignoni has been President and Chief Executive Officer since
October 1995. Mr. Martignoni was elected to the Company's Board of Directors
in April 1992 and served as Vice Chairman -- Finance from April 1992 until
October 1995. Mr. Martignoni joined the Company as its Vice President --
Finance and Administration in July 1988 and was elected to the positions of
Senior Vice President -- Finance, Chief Financial Officer and Treasurer in
November 1988, in which positions he served until October 1995. Mr. Martignoni
has also served as Assistant Secretary since November 1988.
Fred E. Portner has served as a Director since July 1988. Since January
1992, Mr. Portner has served as President of Portner Consulting Services, a
mortgage banking consulting
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company, wholly-owned by Mr. Portner. Mr. Portner also served as Executive
Vice President and Chief Financial Officer of M.D.S. Bankmark Company, a
residential mortgage company, from September 1993 to January 1996. From June
1990 to December 1991, Mr. Portner served as Executive Vice President of
Directors Mortgage Loan Corporation, a California mortgage banking company.
Lorraine E. Cannon has been Chief Financial Officer and Treasurer since
October 1995. Ms. Cannon joined the Company as its Controller in January 1989
and was elected to the position of Secretary in August 1989.
Mr. Portner inadvertantly failed to file a Form 5 for 1994, as required by
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
with respect to the expiration of an option in accordance with its terms
during 1994, and inadvertantly failed to file a Form 4, as required by the
Exchange Act, with respect to the grant of an option in 1995. Both the
expiration and grant were subsequently reported by Mr. Portner in a late Form
5 filed in April 1996.
Directors of the Company hold their offices until the next annual meeting
of the Company's stockholders, until their successors have been duly elected
and qualified or until their earlier resignation, removal from office or
death.
Officers of the Company serve at the pleasure of the Board of Directors and
until the first meeting of the Board of Directors following the next annual
meeting of the Company's stockholders and until their successors have been
chosen and qualified or until their earlier resignation, removal from office
or death.
There are no family relationships among the present executive officers and
Directors of the Company.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
The following table sets forth certain information relating to the
compensation awarded to, earned by or paid to the Chief Executive Officer and
the Company's other executive officers whose total annual salary and bonus
exceeded $100,000 during 1995 (the "Named Executive Officers") for services in
all capacities during 1995, 1994 and 1993.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Principal Compensation Options Compensation
Position Year Salary($) ($) (#) ($)(3)
- - - - ------------------------------- ------------ --------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
John A. Boylan(1) 1995 $130,000 -0- $1,030
Chairman of the Board 1994 130,000 375,000 1,030
1993 125,000 $ 12,587(2) -0- 1,030
Ronald W. Martignoni 1995 115,914 -0- 529
President and Chief 1994 116,346 375,000 529
Executive Officer 1993 120,192 -0- 569
</TABLE>
_____________
(1) Mr. Boylan served as President and Chief Executive Officer until October
1995.
(2) Includes automobile benefits of $10,315.
(3) Includes term life insurance premiums paid by the Company.
In April 1992, the Company entered into severance agreements with three
officers, including Messrs. Boylan and Martignoni, which provide, under
certain circumstances, that the Company will pay these officers upon their
severance an amount equal to one full year's base salary in the event that
their affiliation with the Company ceases within either one or two years
(depending upon the circumstances) following a "change in control" of the
Corporation, as that term is defined. In November 1993, the Board of Directors
adopted amendments to the severance agreements for Messrs. Boylan and
Martignoni, who are also directors of the Company. The amendments principally
increase the amount to be paid on severance from one full year's base salary
to two full years' base salary, as well as contain certain other provisions,
including a provision for the continued registration of option stock following
termination of their affiliation with the Company.
STOCK OPTIONS HELD AT FISCAL YEAR-END
The following table sets forth the aggregate options to purchase shares of
Common Stock of the Company held by the Named Executive Officers at December
31, 1995. No options were exercised during the year ended December 31, 1995 by
any of the Named Executive Officers, and there were no in-the-money
unexercised options held by any of the Named Executive Officers at December
31, 1995.
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<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options Held at
December 31, 1995(#)
--------------------------
Name Exercisable Unexercisable
- - - - -------------------- ----------- -------------
<S> <C> <C>
John A. Boylan 1,666,667 -0-
Ronald W. Martignoni 1,791,667 -0-
</TABLE>
Compensation of Directors
The Company currently has no standard arrangements pursuant to which
non-employee Directors are compensated for services provided as Directors.
On September 27, 1995, Mr. Portner, a non-employee Director, was granted a
nonqualified option to purchase 100,000 shares of the Company's Common Stock,
exercisable on or after September 27, 1996, at an exercise price of $0.17 per
share, the price of the Company's Common Stock on the date of grant, which
option expires on September 27, 2000.
ITEM 11. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
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The following table sets forth certain information regarding ownership of
the Company's Common Stock, as of March 25, 1996, by: (i) each person who is
known by the Company to own beneficially more than five percent of the Company's
Common Stock, (ii) each of the Company's Directors who beneficially owns shares,
(iii) each Named Executive Officer (as defined in ITEM 10) who beneficially owns
shares, and (iv) all executive officers and Directors as a group. The
information presented in the table is based upon the most recent filings with
the Securities and Exchange Commission by such persons or upon information
otherwise provided by such persons to the Company.
<TABLE>
<CAPTION>
No. of Shares of
Name and Address of Common Stock Percentage
Beneficial Owner Beneficially Owned(1) Owned
- - - - ----------------------------- ------------------------ -----------
<S> <C> <C>
John Maioriello 1,826,000(2) 7.8%
3416 The Strand
Manhattan Beach, CA 90266
Ronald W. Martignoni 1,791,667(3) 7.5%
6 Chadwick Court
Voorhees, NJ 08043
</TABLE>
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<TABLE>
<S> <C> <C>
John A. Boylan 1,733,667(4) 7.3%
509 Kinsale Road
Timonium, MD 21093
Attel & Cie, S.A. 1,346,495(5) 6.0%
Via Nassa 58
6901 Lugano, Switzerland
Fred E. Portner 150,000(6) 0.7%
121 Montgomery Place
Alexandria, VA 22314
All executive officers
and Directors as a Group
(four persons) 3,950,334(7) 15.3%
</TABLE>
__________________
(1) Beneficial Ownership is determined in accordance with the rules
of the Securities Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject to
options or warrants currently exercisable or exercisable within 60 days are
deemed outstanding for purposes of computing the percentage ownership of the
person holding such option or warrant but are not deemed outstanding for
purposes of computing the percentage ownership of any other person. Except as
may be indicated otherwise, and subject to community property laws where
applicable, the persons named in the table above have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them.
(2) Includes 1,500,000 shares of Common Stock issuable upon exercise
of fully-vested nonqualified stock options. See ITEM 12. Certain
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Relationships and Related Transactions.
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(3) Includes 366,667 shares of Common Stock issuable upon exercise
of fully-vested Long-Term Management Incentive Options, 1,050,000 shares of
Common Stock issuable upon exercise of fully-vested 1991 Management Options, and
375,000 shares of Common Stock issuable upon exercise of fully-vested 1994
Management Options.
(4) Includes 291,667 shares of Common Stock issuable upon exercise
of fully-vested Long-Term Management Incentive Options, 1,000,000 shares of
Common Stock issuable upon exercise of fully-vested 1991 Management Options, and
375,000 shares of Common Stock issuable upon exercise of fully-vested 1994
Management Options.
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(5) Includes 180,000 shares of Common Stock issuable upon exercise
of fully exercisable warrants. Does not include 500,000 shares held by Credit
de L'industrie et du Development, S.A., Via Nassa 58, 6901 Lugano,
Switzerland, placement agent for Attel & Cie, S.A.
(6) Represents 60,000 shares of Common Stock issuable upon exercise
of fully-vested nonqualified stock options and 90,000 shares of Common Stock
issuable upon exercise of fully-vested 1994 Management Options.
(7) Includes 658,334 shares of Common Stock issuable upon exercise
of fully-vested Long-Term Management Incentive Options, 2,250,000 shares of
Common Stock issuable upon exercise of fully-vested 1991 Management Options,
60,000 shares of Common Stock issuable upon exercise of fully-vested
nonqualified options, and 915,000 shares of Common Stock issuable upon
exercise of fully-vested 1994 Management Options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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John E. Maioriello, Chairman of the Board and a principal stockholder of JD
Store Equipment, Inc. ("JD"), is deemed under rules of the Securities and
Exchange Commission to be the beneficial owner of more than five percent of
the Company's Common Stock. See ITEM 11. Securities Ownership of Certain
Beneficial Owners.
As previously reported, on November 4, 1994, the Company and JD
entered into a letter of intent (the "JD Letter of Intent"), providing for a
merger of the Company and JD (the "JD Merger"). In connection with the JD
Letter of Intent, JD paid $100,000 to the Company, paid an additional $100,000
to the Company to secure the right of the Company to negotiate the acquisition
of another company and arranged for the issuance on its credit of a $100,000
letter of credit to a vendor of the Company, which letter of credit expired in
accordance with its terms on April 15, 1995. Upon expiration of the letter of
credit, Mr. Maioriello personally guaranteed a line of credit provided by said
vendor to the Company in an amount of approximately $250,000.
As previously reported, in accordance with the JD Letter of Intent and in
contemplation of the JD Merger, John Maioriello was appointed Chairman of the
Board of the Company. In connection with his appointment, on November 29,
1994, Mr. Maioriello was granted an option to purchase 1,500,000 shares of the
Company's Common Stock at an exercise price of $0.75 per share (the fair
market value on the date of grant), which option is fully vested. Also in
contemplation of the JD Merger, the Company and JD incurred certain costs in
connection with the Company's plans to acquire certain retail video store
chains. JD also agreed, in the
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event the JD Merger was not consummated, to pay all legal fees billed to the
Company by its then principal outside law firm.
As previously reported, in connection with the JD Letter of Intent,
the Company and JD also reached an agreement in the event the JD Merger was
not consummated, for the payment of finder's fees with respect to any
completed merger or acquisition which Mr. Maioriello was responsible for
having introduced to the Company from the date of the JD Letter of Intent
until such time as it was publicly announced that the JD Merger would not be
consummated (September 11, 1995). Any finder's fees paid are to consist of
warrants to purchase shares of the Company's Common Stock in an amount based
upon 10% of the consideration issued or paid by the Company in said merger or
acquisition. The exercise price of the warrants is to be at a 20% discount to
the bid price of the Company's Common Stock, generally calculated on the date
of the letter of intent for said merger or acquisition. The warrants are to
have a five-year term and are to include piggy-back registration rights.
As previously reported, the Company and JD entered into an Agreement
and Plan of Reorganization and Merger (the "Merger Agreement"), dated as of
July 19, 1995, as amended, which provided, inter alia, for the JD Merger,
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through the merger of a newly formed California corporation, formed as a
wholly-owned subsidiary of the Company, with and into JD, as a result of
which, JD, as the surviving corporation in the merger, would become a wholly-
owned subsidiary of the Company. On September 8, 1996, JD notified the Company
that it was terminating the Merger Agreement in accordance with its terms and,
in connection therewith, Mr. Maioriello resigned as Chairman of the Board of
the Company.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this Amendment to its 1995 Annual Report on Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.
CHOICES ENTERTAINMENT CORPORATION
By: /s/ Lorraine E. Cannon
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Lorraine E. Cannon
Chief Financial Officer
April 26, 1996
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