<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
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
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
509 Kinsale Road, Timonium, Maryland 21093
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (410) 643-2967
---------------------
Securities registered under Section 12(b) of the Exchange Act: None
------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share.
---------------------------------------
(Title of class)
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
----- -----
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. [ ]
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Issuer's revenues for the year ended December 31, 1997: $2,115,622.
Aggregate market value of the voting stock held by non-affiliates of
the registrant based upon a price of $ .025 per share, the average of the
inside bid and ask prices of the registrant's Common Stock at March 5, 1998:
$524,069. 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 5, 1998: 22,004,395 shares.
Transitional Small Business Disclosure Format (check one):
Yes No x
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AMENDMENT NO. 1
The Registrant hereby amends its 1997 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
ITEM 10. Executive Compensation
ITEM 11. Security Ownership of Certain Beneficial Owners
and Management
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
The directors and executive officers 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 Boylan.......... 56 Chairman of the Board, 1992 1988
Chief Executive Officer
and President
Fred E. Portner...... 53 Director 1988 --
James D. Sink........ 47 Director 1997 --
</TABLE>
John Boylan was first appointed Chairman of the Board, President, and Chief
Executive officer on April 1, 1992. He resigned as Chairman in November 1994,
while continuing as a Director. On September 8, 1995, Mr. Boylan was
re-appointed Chairman of the Board. Upon entering into a consulting agreement
with the Company on August 15, 1996, Mr. Boylan resigned from all positions
with the Company. On April 16, 1998, Mr. Boylan was re-appointed Chairman of
the Board, President, and Chief Executive Officer. Mr. Boylan joined the
Company as its Senior Vice President - Franchise Development in November 1987
and was appointed a Director in November 1988. In June of 1990, Mr. Boylan was
designated the Company's Senior Vice President - Business Development.
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 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.
James D. Sink, M.D. has served as a director since February 1997. Since
March 1996, Dr. Sink has been affiliated with Allegheny University Hospitals in
Philadelphia, Pennsylvania, where he is Professor of Cardiothoracic Surgery.
Prior to joining Allegheny University Hospitals, Dr. Sink was, for more than
five years, affiliated with Presbyterian Medical Center, in Philadelphia,
Pennsylvania, where he was Chief of Cardiothoracic
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<PAGE> 5
Surgery at the Philadelphia Heart Institute of Presbyterian Medical Center.
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 (the
"Named Executive Officer") for services in all capacities during 1997, 1996 and
1995 (there being no other executive officer of the Company whose total annual
salary and bonus exceeded $100,000 during 1997).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Underlying All Other
Name and Principal Options Compensation
Position Year Salary($) (#) ($)(2)
- ----------------------- ---- --------- ------------ ------------
<S> <C> <C> <C> <C>
Ronald W. Martignoni 1997 $ 92,884 (1) -0- $ 353
Chairman, Chief 1996 98,557 -0- 529
Executive Officer 1995 115,914 -0- 529
and President
- -------------
</TABLE>
(1) Includes $15,000 received under the terms of a consulting agreement.(See
below).
(2) Includes term life insurance premiums paid by the Company.
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<PAGE> 6
Mr. Martignoni resigned as Chairman of the Board, Chief Executive Officer
and President of the Company on April 16, 1998, after the appointment of Mr.
Boylan to the Board of Directors of the Company on that same day.(SEE ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT).
As previously reported, Mr. Martignoni had taken a position with an
unrelated company, effective October 6, 1997, and continued as the Company's
Chairman, President and Chief Executive Officer, under a consulting agreement
pursuant to which his compensation had been reduced accordingly. Under the
consulting agreement, Mr. Martignoni released the Company from all obligations
and liabilities, including any obligations under the severance agreement
between him and the Company referred to below. The consulting agreement
provided for a monthly consulting fee of $5,000 per month, which was payable
through April 1998,unless extended by the Company, in exchange for services
provided. Mr. Martignoni received payments through March 1998 under this
agreement; however he has continued to provide services to the Company without
compensation.
In April 1992, the Company entered into a severance agreement with Mr.
Martignoni which provided, under certain circumstances, that the Company would
pay him upon his severance an amount equal to one full year's base salary in
the event that his affiliation with the Company ceased within either one or two
years (depending upon the circumstances) following a "change in control" of the
Corporation, as that term is defined under the Company's Stock Option and
Appreciation Rights Plan of 1987. In November 1993, the Board of Directors
adopted an amendment to the severance agreement for Mr. Martignoni, which
principally increased the amount to be paid on severance from one full year's
base salary to two full years' base salary, as well as contained certain other
provisions, including a provision for the continued registration of option
stock following termination of his 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 Officer at December 31,
1997. No options were exercised during the year ended December 31, 1997 by the
Named Executive Officer, and there were no in-the-money unexercised options
held by the Named Executive Officer at December 31, 1997.
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<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options Held at
December 31, 1997(#)
--------------------------
Name Exercisable Unexercisable
---- ----------- -------------
<S> <C> <C>
Ronald W. Martignoni 1,425,000 -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 February 13, 1997, three non-employee directors, Messrs. James D. Sink,
Joseph DeSaye and Fred E. Portner, were granted, respectively, nonqualified
options to purchase 200,000, 200,000 and 50,000 shares of the Company's Common
Stock, exercisable on or after August 13, 1997, at an exercise price of $.05
per share, the price of the Company's Common Stock on the date of grant, which
options expire on February 13, 2002. Mr. DeSaye has since resigned as a
director, and no options have been exercised.
ITEM 11. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding ownership of
the Company's Common Stock and Series C Preferred Stock (the "Preferred
Stock"), as of April 17, 1998, by: (i) each person who is known by the Company
to own beneficially shares of Common Stock and/or Preferred Stock to which are
attributable more than five percent of the combined number of votes
attributable to all shares of Common and Preferred Stock outstanding on that
date, (ii) each director (Messrs. Boylan, Portner and Sink), (iii) the Named
Executive Officer (Ronald W. Martignoni) and (iv) all executive officers and
directors as a group.
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<PAGE> 8
<TABLE>
<CAPTION>
No. of Votes Attributable
No. of Shares of Common No. of Shares of to Common Stock and
Name and Address Stock Beneficially Owned, Preferred Stock Preferred Stock
of Beneficial Owner including Percentage Beneficially Owned, Beneficially Owned,
------------------- Owned (1) including including
--------- Percentage Owned(1) Percentage Owned (1) (2)
-------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Attel & Cie, S.A.
Via Nassa 58
6901 Lugano, Switzerland 2,601,112 (11.8%) -- 2,601,112 (11.1%)
John Maioriello
3416 The Strand
Manhattan Beach, CA 90266 1,826,000 (7.8%)(3) -- 1,826,000 (7.3%)
John A. Boylan
509 Kinsale Road
Timonium, MD 21093 1,442,000 (6.2%)(4) -- 1,442,000 (5.8%)
Ronald W. Martignoni
6 Chadwick Court
Voorhees, NJ 08043 1,425,000 (6.1%)(5) -- 1,425,000 (5.7%)
James D. Sink
220 Curwen Road
Rosemont, PA 19010 1,041,650 (4.7%) -- 1,041,650 (4.4%)
Fred E. Portner
121 Montgomery Place
Alexandria, VA 22314 190,000 *(6) -- 190,000 *
Shareholder Committee 13,861,119 (51.6%)(7) 107.4 (98.4%)(7) 13,861,119 (51.6%)
All executive officers and
directors as a Group (three 2,673,650 (12.3%) -- 2,673,650 (11.5%)
persons)
</TABLE>
- ------------------
* Less than 1%.
(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. A person is also deemed to be the beneficial
owner of securities if that person has the right to acquire beneficial
ownership of such securities, such as Common or Preferred Stock, through the
exercise of options or warrants that are currently exercisable or exercisable
within 60 days. Any securities not outstanding, which are subject to such
options or warrants, shall be deemed outstanding for purposes of computing the
percentage ownership of the person holding such options or warrants, but shall
not be 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 and
Preferred Stock shown as beneficially owned by them.
(2) Each share of Preferred Stock is entitled to vote on all matters
submitted to a vote of the Company's stockholders together with the Common
Stock and not as a separate class, unless otherwise required by law, with each
share of Preferred Stock entitled to 40,000 votes.
(3) Includes 1,500,000 shares of Common Stock issuable upon exercise of
fully-vested nonqualified stock options.
(4) Includes 1,000,000 shares of Common Stock issuable upon exercise of
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fully-vested 1991 Management Options and 375,000 shares of Common Stock
issuable upon exercise of fully-vested 1994 Management Options.
(5) Includes 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.
(6) Represents 100,000 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) The Shareholder Committee may be deemed to constitute a group under
the rules of the Securities and Exchange Commission. The following
table sets forth certain information regarding the ownership of
shares of the voting stock owned beneficially by the members of the
Shareholder Committee, as contained in the Schedule 14-A filed by
the Committee on April 17, 1998, as well as the percentage Stock
owned by each, and together as a group, on April 17, 1998. The
Company assumes no responsibility for the accuracy of the
information contained in the table below at the date of this
report.(See ITEM 12. Certain Relationships and Related
Transactions.)
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner (a) Beneficial Ownership (b) Percent of Class (c)
- ------------------------------------------------- ------------------------ --------------------
<S> <C> <C>
Thomas Renna 165,500 (d) *
George Pursglove
Cary Palulis 268,000 (e) 1.0%
Harold Hamburg 490,000 (f) 1.8
William M. Goatley 1,073,500 (g) 4.4
Mark and Barbara Raifman 1,154,900 (h) 4.6
Carl Shaifer 2,037,000 (I) 8.2
Frank H. Harvey 401,000 (j) 1.6
P. L. Anderson, Jr. 405,000 (k) 1.6
Gail A. Ramey 644,000 (l) 2.5
Kenneth Hiniker 1,064,500 (m) 4.0
Leon Barnard 108,300 *
Alberta Tabony 44,000 *
Margaret Stone 134,000 *
Franklin A. Stone 399,450 1.5
Maurice and Susan Matson 250,000 *
Gary Welchman 193,000 *
Max Scheuerer 362,000 1.4
David Beckman 245,100 *
Coleman Goldberg 77,200 *
D.J. Stone 111,250 *
Philip Mumford 159,872 *
Jerome Neidfelt 400,000 1.5
Beverly L. Fader 202,000 *
Gerald Bing 80,000 *
Wendell and Grazina Standridge 90,000 *
Fred and Sandy Borke 39,500 *
Robert E. Lapides 84,200 *
Peter Rena 20,000 *
Gail Faifman 166,800 *
Thomas Povinelli and Anna Saras 106,123 *
Al Riccardi 655,170 2.5
Madeline Esposito 57,534 *
Kenneth Stilger 506,500 1.9
George Cannan 350,000 1.3
Anna Tolson 20,000 *
Carmen Malagisi 41,000 *
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership Percent of Class
- ------------------------ -------------------- ----------------
<S> <C> <C>
Carmen Malagisi
R. Neil and Gale F. Lively 47,500 *
Kathy Travis 1,833 *
Michael Desaye 86,000 *
Stacy Cannan 54,100 *
Caroline P. Costante 33,287 *
Rudy and Carlene Kreutzans 99,000 *
Joseph and Fullenkamp 40,000 *
H. Bryan Lewis 60,000 *
Jonathan Votel 70,000 *
Larry Feeney 200,000 *
Richard D. Hollingworth 15,000 *
Mark K. Van Ness 90,000 *
------- -
Totals 13,756,119 51.25%
---------- ------
</TABLE>
- - Represents beneficial ownership of less than 1% of the outstanding shares of
the Voting Stock.
(a) The address of the beneficial owner is c/o the Committee, 10770
Wiles Road, Coral Springs, Florida 33076-4681.
(b) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Shares of
voting stock subject to stock options and warrants currently
exercisable or exercisable within 60 days are deemed to be
outstanding for calculating the percentage ownership of the person
holding such options and the percentage ownership of any group of
which the holder is a member, but are not deemed outstanding for
calculating the percentage of any other person. Except as indicated
by footnote, and except for voting or investment power held jointly
with a person's spouse, the persons named in the above table have
sole voting and investment power with respect to all shares of
capital stock shown beneficially owned by them.
(c) Percentage is calculated based upon 26,364,395 shares of voting
stock outstanding on April 17, 1998.
(d) Includes warrants to acquire 1.8 shares of Series C Preferred Stock
("Preferred Stock").
(e) Includes 3.2 shares of Preferred Stock and warrants to acquire .3
shares of Preferred Stock.
(f) Includes 9.6 shares of Preferred Stock and warrants to acquire .9
shares of Preferred Stock.
(g) Includes 24 shares of Preferred Stock and warrants to acquire 2.25
shares of Preferred Stock.
(h) Includes 16 shares of Preferred Stock and warrants to acquire 1.5
shares of Preferred Stock.
(i) Includes 36.8 shares of Preferred Stock and warrants to acquire
3.45 shares of Preferred Stock.
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(j) Includes 6.4 shares of Preferred Stock and warrants to acquire .6
shares of Preferred Stock.
(k) Includes 4.8 shares of Preferred Stock and warrants to acquire .45
shares of Preferred Stock.
(l) Includes 6.4 shares of Preferred Stock and warrants to acquire .6
shares of Preferred Stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 25, 1997, a group of stockholders demanded that they be given
control of the Company and on December 10, 1997, this group filed preliminary
solicitation material with the Securities and Exchange Commission, seeking to
remove and replace two of three members of the Company's Board of Directors.
On February 11, 1998 and April 17, 1998, revised preliminary solicitation
material was filed by an expanded group of stockholders (the "Shareholder
Committee") in connection with the solicitation of written consents, also to
remove and replace two directors. The Company believes that the solicitation
material, as filed, contains materially misleading statements and omissions of
material facts and that the Shareholder Committee has failed to file a Schedule
13D in accordance with the requirements of the Securities Exchange Act of 1934.
John E. Maioriello, a former 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 and Preferred Stock voting together. See ITEM
11. Securities Ownership of Certain Beneficial Owners and Management.
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 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.
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.
Also in contemplation of
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the JD Merger, the Company and JD incurred certain costs in connection with the
Company's plans to acquire certain retail video store chains.
In connection with the JD Letter of Intent, the Company and JD also reached
an agreement for the payment of finder's fees, in the event the JD Merger was
not consummated, 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.
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, 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,
1995, 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.
Previously, on December 6, 1994, JD agreed that in the event that
the then contemplated merger between JD Store Equipment and the Company (the
"JD Merger") was not consummated, JD Store Equipment would pay to the Company
legal fees billed to the Company by the above law firm. That law firm resigned
as counsel to the Company shortly after JD Store Equipment notified the Company
that it was terminating the JD Merger in September 1995. Subsequently, the
Company made a demand for payment upon JD Store Equipment for all fees and
disbursements in the amount of $793,281 billed to it by the law firm, of which
$439,482 has to date been paid by the Company. JD Store Equipment has responded
with a suggestion of a counter claim in an unspecified amount for losses
allegedly incurred in connection with the acquisition program. To avoid the
uncertainties associated with litigation and with collecting any judgment that
may be obtained, the Company has attempted to reach a settlement with JD Store
Equipment and the law firm, pursuant to which JD Store Equipment would pay
unpaid fees to the law firm, the Company would release
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<PAGE> 13
JD Store Equipment from any obligation to pay the $793,281 of legal fees billed
to the Company and the Company would be released by JD Store Equipment and the
law firm. Although discussions have taken place regarding such a settlement,
there is no assurance that any settlement will be concluded. Moreover, the law
firm has notified the Company that it intends to file a lawsuit against the
Company in connection with its outstanding invoices.
Mr. Maioriello has also requested indemnification for legal fees and
expenses incurred in the defense of the previously concluded stockholder
litigation in California, which are substantial and material in amount. The
Company has denied the former director's request as it does not believe that it
has any obligation for indemnification of such legal fees and expenses.
However, it is contemplated that any settlement reached with JD Store
Equipment, as described above, would include a release by the former director
of any indemnification claims that he may have against the Company. There is no
assurance, however, that any such settlement will be concluded or, if
concluded, as to what would be the terms of such a settlement.
The Company's 5% unsecured promissory notes (the "Notes"), in the
principal amount of $680,000, matured on September 11, 1997, leaving the
holders thereof with the sole remedy of converting such notes into shares of
the Company's Series C Preferred Stock (valued at $.25 per share of Common
Stock). The Holders of such Notes have, in accordance with the terms of the
Notes, converted such Notes into 68 shares of the Company's Series C Preferred
Stock. In addition, because of its severely distressed financial condition, the
Company elected to issue 3.6833 shares of its Series C Preferred Stock to the
holders of the Notes, in payment of $36,833 of accrued interest due such
noteholders in September, 1997, in accordance with the terms of such Notes.
Certain members of the Shareholder Committee, named in the Beneficial Ownership
Table, are the holders of such Preferred Stock. See ITEM 11. Securities
Ownership of Certain Beneficial Owners and Management.
John A. Boylan, an officer and director, is deemed under the rules of the
Securities and Exchange Commission to be the beneficial owner of more than five
percent of the Company's Common and Preferred Stock voting together. See ITEM
11. Securities Ownership of Certain Beneficial Owners and Management. As
previously reported, on August 15, 1996, the Company entered into an
eleven-month consulting agreement with Mr. Boylan, under which he received
$3,500 on a bi-weekly basis, had use of a car, already under lease by the
Company, and received health insurance benefits for a period of one year. The
Company entered into this agreement as part of a severance agreement with Mr.
Boylan, pursuant to which he resigned from employment and from all
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<PAGE> 14
positions with the Company, released the Company from all obligations and
liabilities, including any obligations under an existing severance agreement
between him and the Company, and agreed to the cancellation of certain
fully-vested options to purchase 291,667 shares of Common Stock. Mr. Boylan was
re-appointed to the Company's Board of Directors and named President and Chief
Executive Officer of the Company on April 16, 1998.
On July 12, 1994, Max Scheuerer, a member of the Shareholder Committee,
loaned the Company $50,000, and on December 7, 1994, loaned the Company
$100,000, which loans are evidenced by two 10% promissory notes. The aggregate
principal amount owing on the promissory notes was reduced to $120,000 from
$150,000 as a result of a $30,000 payment by the Company on November 30, 1995,
following the filing of a lawsuit against the Company by Mr. Scheuerer seeking
collection of said notes. The lawsuit was withdrawn following said $30,000
payment without prejudice to its being reinstated if the balance owing on the
notes was not paid in full prior to March 15, 1996. As previously reported, on
September 18, 1996, a lawsuit was filed against the Company in which Mr.
Scheuerer sought to obtain a judgment against the Company for amounts owing
under the two aforementioned promissory notes. The lawsuit was dismissed with
prejudice on June 25, 1997, upon the payment by the Company to Mr. Scheuerer of
$145,230, in full settlement of all amounts owed to Mr. Scheuerer.
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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 1996 Annual Report on Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.
CHOICES ENTERTAINMENT CORPORATION
By:/s/ John Boylan
--------------------
John Boylan
Chief Executive Officer
April 28, 1998
14
