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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-KSB
(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ________________ TO ________________
COMMISSION FILE NUMBER 000-17001
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CHOICES ENTERTAINMENT CORPORATION
(Name of small business issuer in its charter)
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DELAWARE 52-1529536
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
121 VINE STREET, SUITE 1903 SEATTLE, WASHINGTON 98121-1456
(Address of principal executive offices) (Zip Code)
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Issuer's telephone number, including area code: (206) 443-6948
--------------------------
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. /X/
Issuer's revenues for the year ended December 31, 1999: $0
Aggregate market value of the voting stock held by non-affiliates of the
registrant based upon a price of $.32 per share, the closing price of the
registrant's Common Stock at March 28, 2000: $7,447,794
For purposes of this calculation, all directors and officers of the
registrant have been considered affiliates.
Number of outstanding shares of Common Stock at March 28, 2000: 29,274,355
Transitional Small Business Disclosure Format (check one): Yes ____ No _X_
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement (the "Definitive Proxy
Statement") to be filed with the Securities and Exchange Commission relative to
the Company's 2000 Annual Meeting of Stockholders are incorporated by reference
into Part III of this Report.
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-KSB contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects" and similar expressions are
intended to identify forward-looking statements. The important factors discussed
under the caption "Risks Relating to Our Business," among others, could cause
actual results to differ materially from those indicated by forward-looking
statements made herein and presented elsewhere by management. Such forward-
looking statements represent management's current expectations and are
inherently uncertain. Investors are warned that actual results may differ from
management's expectations.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
OUR BUSINESS
The Board of Directors (the "Board") of Choices Entertainment Corporation
(the "Company" or "We") adopted a proposal on January 17, 2000 to change the
business of the Company to that of a technology holding company. We are
acquiring, investing in, and incubating companies engaged in Internet, computing
and other technologies in various stages of development.
WHAT WE HAVE DONE
We have acquired securities issued by publicly traded Photochannel
Networks Inc. In January 2000, the Company subscribed to a private placement of
CAN$2,300,000 principal amount of Convertible Subordinated Redeemable 0%
Debentures maturing April 30, 2000 (the "Debentures") issued by PhotoChannel
Networks Inc., a British Columbia corporation ("Photochannel"). The subscription
agreement calls for advances to Photochannel in exchange for the issuance of
Debentures as follows: CAN$350,000 by January 31, 2000; CAN$750,000 by
February 29, 2000; and CAN$1,200,000 by April 14, 2000. The Debentures are
convertible into Photochannel common stock, no par value, ("Photochannel Stock")
at the rate of 1 share of Photochannel Stock for each CAN$.50 in debenture
principal amount. Also, the company was granted warrants pursuant to a vesting
schedule to purchase additional shares of Photochannel Stock as follows: 140,000
warrants with an exercise price of CAN$.75; 300,000 warrants with an exercise
price of CAN$1.00; and 480,000 warrants with an exercise price of CAN$1.25. Each
warrant entitles the Company to purchase 1 share of Photochannel Stock at the
exercise price, for cash. The warrants are presently fully vested and will
expire June 30, 2000. As of the date of the filing of this report on
Form 10KSB, the Company had completed its obligations under the subscription
agreement. All of the securities acquired in this transaction as well as the
securities into which the securities acquired are convertible or exercisable
against are restricted securities ad must be held for the applicable holding
period from the date of conversion or exercise, as the case may be. The
applicable holding period in most cases will be 1 year.
Photochannel is a late-stage development company engaged in E-commerce
selling online photo-finishing services and digital and other cameras and
photographic equipment. Photochannel's website may be viewed at
WWW.PHOTOCHANNEL.COM.
We have acquired securities of non-publicly traded Tridium Research, Inc. In
March 2000, the Company paid $50,000 cash to acquire 250,000 shares of common
stock of Tridium Research Inc., a Washington corporation ("Tridium") based in
Kirkland, Washington. The 250,000 shares of common stock acquired represents
approximately 5% of all Tridium common stock issued and outstanding. The Company
has also obligated itself to provide an additional $200,000 to Tridium, upon
terms and conditions to be determined.
Tridium Research Inc. ("Tridium") is a development stage company that
produces and sells a dual monitor video card featuring "dual direct draw" (on
both screens) that plugs into the AGP (as opposed to the PCI) slot on a
computer. The ability to run multiple monitors is particularly applicable to
networked systems for businesses needing to display and provide user interface
to multiple users. The cards also permit multiple monitor arrays of, for
example, advertising displays, stock quoting systems, streaming video, and even
wide-screen movies.
One of the unique features of the Tridium video card is that it synchronizes
the display of each monitor plugged into the card. This eliminates the constant
periodic horizontal lines running down the computer screens as is experienced
with existing dual monitor video cards.
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Tridium has a patent application pending with respect to the hardware and
the software that it has developed.
Additional products under development involve multiple screen environment
applications and added software for value added systems. Users of Tridium's
technology include large and small businesses, governmental agencies, medical
companies, schools, power users, and the entertainment industry. More
information about Tridium can be obtained from its website at
WWW.DUALMONITOR.COM.
We are organizing a wholly owned subsidiary to be called Softuse Corp.
("Softuse"). Softuse has obtained a domain name as Softuse.com. Still in the
early stages of organization and development, SoftUse.com(SM) will be developed
as an application service provider or "ASP". The new subsidiary has developed a
demonstration website still under construction, and is in the process of
establishing strategic alliances with other companies engaged in providing
services to ASP's.
In deciding to change the direction of the Company, we decided to terminate
a letter of intent to acquire the business plan of Republic Hotel
Investors, Inc. (Republic"). The business plan called for the acquisition of a
substantial hotel portfolio that would have resulted in turning the Company into
a hotel properties holding company. On September 21, 1999, the Company announced
entering into a letter of intent to acquire the business of privately held
Republic Hotel Investors, Inc. of Seattle, Washington and Vancouver B.C. That
letter of intent was intended to lead to an agreement which would have
transferred to Choices all of Republic's assets in exchange for 144,789,382
shares of restricted Choices common stock. The details of the transaction are
contained in a Form 8-K filed with the Securities and Exchange Commission on
September 20, 1999.
As a result of the termination of the letter of intent, Lorne Bradley has
resigned as our Chairman and President. Also, we have issued 500,000 restricted
shares of the Company's common stock to Republic or its nominee as a negotiated
settlement with Mr. Bradley in connection with the termination of the letter of
intent. The reasons the Board decided to terminate the Republic agreement
included the then current state of the hotel financing market, the overbuilt and
late stage status of the hotel industry and, most importantly, a lack of
enthusiasm for financing the hotel business plan on the part of our existing
shareholders.
From June 1998 to September 1999, we focused on: (i) satisfying and
compromising various claims and liabilities; (ii) defending and settling
litigation, and paying professional fees, including substantial professional
fees associated with such litigation; (iii) maintaining administrative functions
(at present the Company has no employees); (iv) marshalling the books, documents
and records of the Company and transferring them to the storage facilities in
Coral Springs, Florida: (iv) retaining new independent public auditors to
replace the Company's prior independent public auditors, who resigned;
(v) actively engaging in discussions with various persons for the acquisition of
a new business or business opportunity for the Company; and, (vi) continuing the
status of the Company as a reporting registrant under the Securities Exchange
Act of 1934 and a publicly traded company.
OUR BUSINESS STRATEGY
We intend to operate in four modalities: providing capital to public
companies, providing capital to start-ups, acquiring operating companies, and
incubating new businesses under the corporate umbrella.
Our goal is to be the most profitable technology holding company in the
group of publicly traded companies of similar business focus by successfully
implementing our business plan and achieving our objectives.
Our objectives are:
- to maximize the rate of return on shareholders' equity and enhance
shareholder value;
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- to earn a rate of return over and above our cost of capital of not less
than 2 times our cost of capital, including capital provided by debt (if
any), equity and funds generated from business operations;
- to grow total assets to $50,000,000 by the end of the year 2000 and
thereafter to increase our assets until we experience decreasing rates of
return on investment capital;
- to generate revenues sufficient to cover our general and administrative
expenses and to service debt (if any).
Our strategies include:
- to acquire by purchase or merger interests in companies focusing on
commercially viable technological advances;
- to incubate some companies which we believe have exceptionally good
prospects for future commercial success but may not generate positive
economic results in the near term while in a development stage;
- to maximize the value of the companies we hold, in whole or in part, (our
"clients") by assisting them in building business operations and
opportunities having the potential to be highly profitable and becoming
leaders I their particular industry or sub-industry;
- to discontinue, sell, spin-off, offer for merger or acquisition, or
otherwise dispose of those interests or companies which have matured to
the point where the rate of return based on profitability to be expected
from continued ownership is equal to our below our cost of capital.
Our tactics include:
- presently to focus on Internet and computer related technologies, however,
nothing in our business plan limits us from taking positions or starting
companies in other technological areas such as telecommunications,
bio-medical, micro-scanning and other high-technology fields or
industries;
- to acquire and build a highly skilled, experienced and talented team of
company executives and support people and to maximize their productivity
through technology;
- to raise capital at a cost which approaches market rates for companies
engaged in similar businesses;
- to maintain at relatively low levels our holding company general and
administrative expense;
- to build and expand business relationships between and among the companies
we own, in whole or in part, as well as other participants in their
respective industries or sub-industries, such that mutually reciprocal
business advantage can be achieved and such that we achieve synergy in the
mix of our corporate holdings.
RISKS RELATING TO OUR BUSINESS
WE MAY NOT HAVE OPERATING INCOME OR NET INCOME IN THE FUTURE.
During the fiscal year ended December 31, 1999, we had an operating loss of
approximately $840,789 and net income of approximately $(840,789). We may not
have operating income or net income in the future. If we continue to operate at
a loss, we may not have enough money to maintain or grow our business.
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OUR OPERATING HISTORY UNDER THE NEW BUSINESS PLAN IS LIMITED.
We have limited operating history. Our success cannot be guaranteed or
accurately predicted. There can be no assurance that we will be able to acquire,
incubate, own or operate Internet and other technologies profitably. Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered in the establishment of a new company or line of business
in a highly competitive market and industry.
There is no assurance that we will be able to operate and manage our
technology business on a profitable basis or that cash flow from operations will
be sufficient to pay our operating costs. We anticipate the need to raise
additional capital to finance our initial operations. We will seek, if
necessary, additional financing through debt or equity financing. We cannot
assure that additional financing, if needed, will be available to us, or that,
if available, the financing will be on terms acceptable to the Company. There is
no assurance that the our estimate of our reasonably anticipated liquidity needs
is accurate or that new business developments or other unforeseen events will
not occur resulting in the need to raise additional funds. In the event that we
cannot raise needed capital, it will have a material adverse effect on the
Company.
We expect to incur significant operating losses and to generate negative
cash flow from operating activities during the next several years. There can be
no assurance that we will achieve or sustain profitability or positive cash flow
from operating activities in the future or that it will generate sufficient cash
flow to service any debt requirements.
WE MAY HAVE PROBLEMS RAISING MONEY WE NEED IN THE FUTURE.
In recent years, we have financed our operating losses in part with loans
from shareholders and private placements of the Company's securities. This
funding source may not be sufficient in the future, and we may need to obtain
funding from outside sources. However, we may not be able to obtain funding from
outside sources. In addition, even if we find outside funding sources, we may be
required to issue securities to them with greater rights than those currently
possessed by holders of shares of the Company's common and preferred stock. We
may also be required to take other actions that may lessen the value of the
Company's common and preferred stock, including borrowing money on terms that
are not favorable to us.
OUR GROWTH PLACES STRAINS ON OUR MANAGERIAL, OPERATIONAL AND FINANCIAL
RESOURCES.
Our rapid growth has placed, and is expected to continue to place, a
significant strain on our managerial, operational and financial resources.
Further, as the number of our subsidiaries, client companies, and other business
partners grows, we will be required to manage multiple relationships with
various strategic partners and other third parties. Further growth of our
business will increase the strain on our managerial, operational and financial
resources, which in turn will limit our ability to successfully implement our
business plan. In addition, our success is dependent on our ability to attract,
train, retain and motivate highly skilled people, especially for our management
team. Our success also depends on our ability to attract, train, retain, and
motivate other highly qualified technical and managerial personnel. Competition
for people such as these is intense. In addition, our future success will depend
on our ability to build a support organization commensurate with the growth of
our business and the Internet. Currently, the Company only has two unpaid
executive officers and no employees.
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WE MAY INCUR SIGNIFICANT COSTS TO AVOID INVESTMENT COMPANY STATUS AND MAY SUFFER
OTHER ADVERSE CONSEQUENCES IF DEEMED TO BE AN INVESTMENT COMPANY.
We may incur significant costs to avoid investment company status and may
suffer other adverse consequences if we are deemed to be an investment company
under the Investment Company Act of 1940. We have made some equity investments
in other businesses that may constitute investment securities under the 1940
Act. A company may be deemed to be an investment company if it owns investment
securities with a value exceeding 40% of its total assets, subject to certain
exclusions. Investment companies are subject to registration under, and
compliance with, the 1940 Act unless a particular exclusion or Securities and
Exchange Commission safe harbor applies. If we were to be deemed an investment
company, we would become subject to the requirements of the 1940 Act. As a
consequence, we would be prohibited from engaging in business or issuing our
securities as we have in the past and we might be subject to civil and criminal
penalties for noncompliance. In the future, contracts we enter into might be
voidable, and a court-appointed receiver could take control of the Company and
liquidate its business.
Our investment securities currently comprise more than 40% of our assets in
this interim start-up and organizational phase of our business. Unless an
exclusion or safe harbor is available, we will have to attempt to reduce our
investment securities as a percentage of our total assets. This reduction can be
accomplished in a number of ways, including the disposition of investment
securities and the acquisition of non-investment security assets. Our current
business plan includes an emphasis on the latter method and we believe that
during any relevant time period, we will not ultimately be deemed to be an
investment company. If we are wrong, we will be required to sell investment
securities sooner than we otherwise would. These sales may be at depressed
prices and we may never realize anticipated benefits from, or may incur losses
on, these investments. Some investments may not be sold due to contractual or
legal restrictions or the inability to locate a suitable buyer. Moreover, we may
incur tax liabilities when we sell assets. We may also be unable to purchase
additional investment securities that may be important to our operating
strategy. If we decide to acquire non-investment security assets, we may not be
able to identify and acquire suitable assets and businesses upon acceptable
terms.
WE DEPEND ON CERTAIN IMPORTANT EXECUTIVE OFFICERS, AND THE LOSS OF ANY OF THEM
MAY HARM OUR BUSINESS.
Our performance is substantially dependent on the performance of our
executive officers and, in particular, Tracy M. Shier, our President and Chief
Executive Officer. His familiarity with the Internet industry and technology in
general, investment methods and structures, financial markets, business
organization, especially in a start-up phase, law, and other matters makes him
especially important at this time to our success. The loss of the services of
any of our executive officers or future key employees may harm our business.
OUR STRATEGY OF EXPANDING OUR BUSINESS THROUGH ACQUISITIONS OF OTHER BUSINESSES
AND TECHNOLOGIES PRESENTS SPECIAL RISKS.
We intend to continue to expand our business through the acquisition of
businesses, technologies, products and services from other businesses.
Acquisitions involve a number of special problems, including, depending on the
nature and structure of the acquisition, and not necessarily in the order of
importance: difficulty integrating acquired technologies, operations, and people
with the existing business; diversion of management attention in connection with
both negotiating the acquisitions and integrating the acquired assets; potential
issuance of securities in connection with the acquisition that may lessen the
rights of holders of our currently outstanding securities; the need to incur
additional debt; strain on managerial and operational resources as management
tries to oversee the larger operations; the requirement to record additional
amortization of good will and other intangible assets that could be significant;
and, exposure to unforeseen liabilities of acquired companies.
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We may not be able to successfully address these problems. Moreover, our
future operating results will depend to a significant degree on our ability to
successfully manage growth and integrate acquisitions. In addition, some of our
investments are in early-stage companies with limited operating histories and
limited or no revenues. We may not be able to successfully develop these young
companies.
IF THE UNITED STATES OR OTHER GOVERNMENTS REGULATE THE INTERNET MORE CLOSELY,
OUR BUSINESS MAY BE HARMED.
Because of the Internet's popularity and increasing use, new laws and
regulations may be adopted. These laws and regulations may cover issues such as
privacy, pricing and content. The enactment of any additional laws or
regulations may impede the growth of the Internet and our Internet-related
business and could place additional financial burdens on us.
WE MUST BE ABLE TO RESPOND TO THE RAPID CHANGES IN TECHNOLOGY AND DISTRIBUTION
CHANNELS RELATED TO THE INTERNET.
Our success will depend on our ability to adapt to a rapidly evolving
marketplace. We may not be able to adequately adapt our products and services or
acquire new products and services that can compete successfully. In addition, we
may not be able to establish and maintain effective distribution channels.
WE ARE SUBJECT TO INTENSE COMPETITION.
The market for Internet products and services is highly competitive.
Moreover, the market for Internet products and services lacks significant
barriers to entry, enabling new businesses to enter this market relatively
easily. Competition in the market for Internet products and services may
intensify in the future. Numerous well-established companies and smaller
entrepreneurial companies are focusing significant resources on developing and
marketing products and services that will compete with our products and
services. In addition, many of our current and potential competitors have
greater financial, technical, operational and marketing resources. We may not be
able to compete successfully against these competitors. Competitive pressures
may also force prices for Internet goods and services down and may reduce our
revenues.
OUR STRATEGY OF SELLING ASSETS OF, OR INVESTMENTS IN, THE COMPANIES THAT WE
ACQUIRE AND DEVELOP PRESENTS RISKS.
A significant element of our business plan involves selling, in public or
private offerings, the companies, or portions of the companies, that we have
acquired and developed. Market and other conditions largely beyond our control
affect: our ability to engage in such sales; the timing of such sales; and the
amount of proceeds from such sales.
As a result, we may not be able to sell some of these assets. In addition,
even if we are able to sell, we may not be able to sell at favorable prices. If
we are unable to sell these assets at favorable prices, our business will be
harmed.
THE VALUE OF OUR BUSINESS MAY FLUCTUATE BECAUSE THE VALUE OF SOME OF OUR ASSETS
FLUCTUATES.
A portion of our assets includes the equity securities of both publicly
traded and non-publicly traded companies. In particular, we own or have the
right to own a significant number of shares of common stock of Photochannel
Networks Inc., which is a publicly traded company. The market price and
valuations of the securities that we hold in this and other companies may
fluctuate due to market conditions and other conditions over which we have no
control. Fluctuations in the market price and
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valuations of the securities that we hold in other companies may result in
fluctuations of the market price of our common stock and may reduce the amount
of working capital available to us.
OUR QUARTERLY RESULTS MAY FLUCTUATE WIDELY.
Our operating results have fluctuated widely on a quarterly basis during the
last several years, and we expect to experience significant fluctuation in
future quarterly operating results. Many factors, some of which are beyond our
control, have contributed to these quarterly fluctuations in the past and may
continue to do so. These factors include: payment of costs associated with our
acquisitions, timing and sales of assets; specific economic conditions in the
industries in which we do business; and general economic conditions.
The emerging nature of the commercial uses of the Internet makes predictions
concerning our future revenues difficult. We believe that period-to-period
comparisons of our results of operations will not necessarily be meaningful and
should not be relied upon as indicative of our future performance. It is also
possible that in some future fiscal quarters, our operating results will be
below the expectations of securities analysts and investors. In such
circumstances, the price of our common stock may decline.
THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE.
The market price of our common stock has been, and is likely to continue to
be, volatile, experiencing wide fluctuations. In recent years, the stock market
has experienced significant price and volume fluctuations that have particularly
impacted the market prices of equity securities of many companies engaged in
Internet-related businesses. Some of these fluctuations appear to be unrelated
or disproportionate to the operating performance of such companies. Future
market movements may adversely affect the market price of our common stock.
OWNERSHIP OF OUR COMPANY IS CONCENTRATED.
Our officers, directors and 5% or greater shareholders beneficially owned
approximately 45% of our voting stock on a fully diluted basis as of March 30,
2000. As a result, this group possesses significant influence over the Company
on matters including the election of directors. The concentration of ownership
may: delay or prevent a change in control; impede a merger, consolidation,
takeover or other business involving the Company; or discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
the Company.
THE SUCCESS OF OUR CROSS-BORDER OPERATIONS IS SUBJECT TO SPECIAL RISKS AND
COSTS.
We intend to continue to make investments in and acquire businesses,
technologies and operations outside of the United States. This international
activity requires significant management attention and financial resources. Our
ability to expand internationally will be limited by the general acceptance of
the Internet and intranets in other countries. Accordingly, we expect to commit
substantial time and development resources to selected international markets.
We expect that the financial results of our international activities will be
denominated in United States dollars. As a result, an increase in the value of
the United States dollar relative to other currencies may make the financial
results of our international activities result in gains or losses on foreign
currency translations.
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GENERAL DESCRIPTION--HISTORY
On June 16, 1997, the Company sold substantially all of its assets and
business to West Coast Entertainment Corporation ("West Coast"). Prior to the
sale to West Coast (the "West Coast Transaction"), the Company operated a chain
of retail video home entertainment stores, principally under the trade name
CHOICES-Registered Trademark- MOVIES AND GAMES, which rented and sold
videocassette tapes, video games and other video home entertainment products.
The Company's home entertainment stores were located in Delaware, New Jersey and
Pennsylvania.
The Company was incorporated in Maryland in July 1985, under the name PPV
Enterprises, Inc., and was reincorporated in Delaware under the name
DataVend, Inc. in August 1987. In March 1990, the Company changed its name to
"Choices Entertainment Corporation."
ITEM 2. DESCRIPTION OF PROPERTY
The Company's temporary executive offices are located at 121 Vine Street,
Suite 1903, Seattle, Washington 98121-1456; its telephone number is
(206) 443-6948. The executive offices are provided rent-free by Tracy M. Shier,
President and Chief Executive Officer of the Company and Interim Chief Financial
Officer.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant to the lawsuit Dion Signs & Service, Inc. vs.
Choices Entertainment Corporation, Civil Action No. 91-6871. The case is now
pending in the Providence County Superior Court, Providence, Rhode Island. Dion
Signs & Service, Inc. alleges that it is owed approximately $33,000 plus
interest, costs and reasonable attorney's fees for the failure by Choices
Entertainment Corporation to pay for signage that was erected at various
locations pursuant to a contract. The Company is advised that pre-judgment
interest on the claim accrues from the date the cause of action arose and that
the amount of pre-judgment interest could approximate the amount of the claim,
or approximately $33,000. The Company is further advised that the case has not
been set for trial, there has been very little discovery, and that it is not
possible to determine the likelihood of the outcome of this case at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is currently traded in the over-the-counter
market on the Bulletin Board ("OTC-Bulletin Board") under the symbol CECS. The
following table sets forth the high and low inside bid prices as reported by the
Bulletin Board.
<TABLE>
<CAPTION>
COMMON
STOCK
(CESC)
-------------------
1998 HIGH LOW
- ---- -------- --------
<S> <C> <C>
First quarter............................................... .04 .02
Second quarter.............................................. .02 .02
Third quarter............................................... .02 .02
Fourth quarter.............................................. .01 .002
1999
- ------------------------------------------------------------
First quarter............................................... .01 .006
Second quarter.............................................. .03 .006
Third quarter............................................... .155 .01
Fourth quarter.............................................. .10 .045
</TABLE>
On April 15, 2000, the closing price for the Company's common stock was $.19
as reported by the OTC-Bulletin Board.
The quotations set forth above reflect inter-dealer prices, without retail
markup, markdown or commission and may not necessarily represent actual
transactions.
HOLDERS. As of March 30, 2000, approximately 533 holders of record held the
outstanding shares of the Company's common stock and 33 holders of record held
the outstanding shares of the Company's preferred stock.
DIVIDENDS. The Company has not declared or paid any dividends on its common
stock since its inception. The Board of Directors does not contemplate the
payment of dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is management's discussion and analysis of certain significant
factors that have affected the Company's financial condition, changes in
financial condition and results of operations. It also includes a discussion of
the Company's liquidity and capital resources at December 31, 1999, and later
dated information, where practicable. This discussion should be read together
with the Company's Financial Statements and the Notes thereto beginning on page
F-1.
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This schedule contains summary unaudited financial information taken from
the financial statements of Choices Entertainment Corporation and is qualified
in its entirety by reference to such financial statements.
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<CAPTION>
1999 1998 1997 1996 1995
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STATEMENT OF OPERATIONS DATA:
Net Sales..................... $ -- $ -- $ -- $ -- $ 4,760,684
Cost of Sales................. -- -- -- -- 3,323,740
----------- ----------- ----------- ----------- -----------
Gross Profit.................. -- -- -- -- 1,436,944
Operating Expenses............ 825,816 117,736 716,369 655,059 3,947,208
----------- ----------- ----------- ----------- -----------
Income (Loss) From
Operations.................. 825,816 (117,736) (716,369) (655,059) (2,510,264)
Other Income (Expense)........ (14,973) 353,307 (37,081) (51,830) 370,937
----------- ----------- ----------- ----------- -----------
Income (Loss) from Continuing
Operations.................. $ (840,789) $ 235,571 $ (753,450) $ (706,889) $(2,139,327)
=========== =========== =========== =========== ===========
PER SHARE DATA:
Continuing Operations......... $ (.03) $ .01 $ (.03) $ (.03) $ (.10)
=========== =========== =========== =========== ===========
Weighted Average Shares
Outstanding (Basic)......... 24,489,327 22,004,000 22,004,000 22,004,000 21,652,000
=========== =========== =========== =========== ===========
BALANCE SHEETS:
Total Assets.................. 20,113 2,220 201,996 1,179,859 1,556,910
Total Liabilities............. 625,936 92,254 524,939 2,506,406 2,250,777
----------- ----------- ----------- ----------- -----------
Stockholders' Equity.......... (605,823) (90,034) (322,943) (1,326,547) (693,867)
=========== =========== =========== =========== ===========
</TABLE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
On June 16, 1997, the Company sold substantially all of its assets and
business to West Coast Entertainment Corporation ("West Coast"). Notwithstanding
the sale of its operating business, the Company's financial statements included
herein have been presented on the basis that the Company is a going concern,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The accounting affect of the sale of
substantially all of the Company's assets and business to West Coast (the "West
Coast Transaction") was a net loss of $2,663 for the year ended December 31,
1998, before extraordinary income of $303,799 relating to the affects of the
West Coast Transaction. There was no material accounting effect on the financial
statements of the Company due to the West Coast Transaction for the period ended
December 31, 1999. As of December 31, 1999, the Company had a net working
capital deficiency of approximately $531,442. As of April 20, 2000, the Company
had approximate cash balances of $64,205 (unaudited).
From June 1998 to August 1999, current directors of the Company have:
(i) satisfied and compromised various claims and liabilities; (ii) defended and
settled litigation, and paid professional fees, including substantial
professional fees associated with such litigation; (iii) maintained
administrative functions (at present the Company has no employs);
(iv) marshaled the books, documents and records of the Company and transferred
them to the Company's offices in Coral Springs, Florida: (iv) retained new
independent public auditors to replace the Company's prior independent public
auditors, who resigned; (v) actively engaged in discussions with various persons
for the acquisition of a new business or business opportunity for the Company;
and, (vi) attempted to continue the status of the Company as a reporting
registrant under the Securities Exchange Act of 1934 and a publicly traded
company.
10
<PAGE>
The primary source of funds for the year ended December 31, 1999 was
shareholder loans. The Company borrowed $300,000 at interest rates of 10% and
12%. The Company had no revenues.
In February 2000, the Company closed a self-offered private offering of 390
of the Company's Series C Preferred Stock in the aggregate offering amount of
$780,000. Offering expenses were less than $3,000. Each share of the Preferred
Stock is convertible into 40,000 shares of the Company's common stock, par value
$.01, the ("Common Stock") and carries the voting rights of the underlying
Common Stock. The proceeds from this offering were used to retire all notes
payable, to pay down the obligations of the Company to officers and directors of
the Company, to pay down accounts payable to an immaterial amount, and to
acquire minority interests in two companies.
In the event the Company is not successful in securing needed capital in the
near term, as to which no assurance can be given, the Company does not believe
that there will be any amounts available for distribution to the Company's
stockholders.
CAPITAL EXPENDITURES
The Company's capital expenditures were $0 during the year ended
December 31, 1999.
MATERIAL CHANGES IN FINANCIAL CONDITION
The following material changes in financial condition reflect changes
occurring during the period from December 31, 1998 through December 31, 1999.
AS OF DECEMBER 31, 1999 AND 1998:
Assets:
Total assets increased by approximately $17,893 between December 31, 1998
and December 31, 1999, as the result of an increase in borrowing by the Company.
Liabilities:
Total liabilities increased by approximately $533,682 between December 31,
1998 and December 31, 1999, primarily due to the recognition by the Board of
Directors of the Company of certain obligations to existing and former officers
and directors to compensate them for services rendered to the Company and due to
increased borrowing.
Stockholders' Deficit:
Between December 31, 1999 and December 31, 1998, the increase in
stockholders' deficit was due to net loss of approximately $840,789 for the year
ended December 31, 1999. Included in net loss was the cash and non-cash payment
to existing and former officers of the Company of certain obligations owing to
them.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
The following material changes in results of operations occurred during the
two-year period from January 1, 1998 through December 31, 1999.
CONTINUING OPERATIONS:
Losses from continuing operations were approximately $840,789 during 1999,
compared to income of approximately $235,571 during 1998. The decrease of
approximately $1,076,360 primarily related to an increase in the recognized
expenses of the Company, increased business activity at the Company and the fact
that the results for 1998 included the accounting affects of the West Coast
Transaction.
11
<PAGE>
DISCONTINUED OPERATIONS:
There was a loss from discontinued operations of approximately $0 and $2,663
for the periods ending December 31, 1999 and December 31, 1998 respectively.
NET LOSS:
As a result of the foregoing, the Company had a net loss of approximately
$840,789 during 1999, which included no extraordinary income compared to net
income of approximately $232,908 in 1998, which included net income due to the
West Coast Transaction of approximately $235,571.
ITEM 7. FINANCIAL STATEMENTS
The Company's Financial Statements and Notes thereto are filed together with
this report starting at Page F-1. The Financial Statements and Notes for the
period ending December 31, 1999 are audited by Miller and Co. LLP and are
included herein based on their auditor's report dated April 28, 2000, except for
Note J, for which the date is May 3, 2000.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information called for by Items 9 - 12 of Form 10KSB are contained in
the definitive proxy statement (the "Definitive Proxy Statement") to be filed
with the Securities and Exchange Commission relative to the Company's 2000
Annual Meeting of Stockholders and is hereby incorporated by reference to the
Definitive Proxy Statement, as filed.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits: The exhibits are listed in the Index to Exhibits appearing on
Page E-1.
(b) Reports on Form 8-K: During the quarter ended December 31, 1999, the
Company filed no reports on Form 8-K.
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report on Form 10KSB for the period ending December 31, 1999 to be
signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
CHOICES ENTERTAINMENT CORPORATION
Date: May 12, 2000 By: /s/ TRACY M. SHIER
-------------------------- -----------------------------------------
Tracy M. Shier
CHIEF EXECUTIVE OFFICER
Date: May 12, 2000 By: /s/ TRACY M. SHIER
-------------------------- -----------------------------------------
Tracy M. Shier
INTERIM CHIEF FINANCIAL OFFICER
</TABLE>
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<S> <C>
/s/ JAMES D. SINK May 12, 2000
--------------------------------------------
James D. Sink
Director
/s/ TRACY M. SHIER May 12, 2000
--------------------------------------------
Tracy M. Shier
Director
/s/ THOMAS RENNA May 12, 2000
--------------------------------------------
Thomas Renna
Director
</TABLE>
13
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent auditors' report................................ F-2
Balance Sheets.............................................. F-3
Statements of Income........................................ F-4
Statements of accumulated deficit........................... F-5
Statements of cash flows.................................... F-6
Notes to financial statements............................... F-7
</TABLE>
F-1
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the shareholders
Choices Entertainment Corporation
Seattle, Washington
We have audited the accompanying balance sheet of Choices Entertainment
Corporation as of December 31, 1999, and the related statements of income and
accumulated deficit, and cash flows for the years ended December 31, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 1999 financial statements referred to above present
fairly, in all material respects, the financial position of Choices
Entertainment Corporation, as of December 31, 1999, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B to the
financial statements, the Company suffered recurring losses from operations and
had a working capital deficiency at December 31, 1999. Those conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters are also described in Note B. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Miller and Co. LLP
Certified Public Accountants
Santa Monica, California
April 28, 2000 except for Note J, for which the date is May 3, 2000
F-2
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
BALANCE SHEETS
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash........................................................ $ 19,494
Accounts receivable......................................... --
------------
TOTAL CURRENT ASSETS........................................ 19,494
OTHER ASSETS
Other assets................................................ 619
------------
TOTAL ASSETS................................................ $ 20,113
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses....................... $ 375,936
Accrued merger and acquisition expenses..................... --
Notes payable--current...................................... 175,000
------------
TOTAL CURRENT LIABILITIES................................... 550,936
------------
LONG-TERM LIABILITIES
Notes payable--noncurrent................................... 75,000
------------
TOTAL LONG-TERM LIABILITIES................................. 75,000
------------
TOTAL LIABILITIES........................................... 625,936
------------
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.01 per share, authorized 5,000
shares, 109.1 shares issued and outstanding in 1999....... 1
Common stock, par value $0.01 per share, authorized
50,000,000 shares, issued and outstanding 28,504,395
shares in 1999............................................ 285,044
Additional paid-in capital.................................. 21,496,035
Accumulated deficit......................................... (22,386,903)
------------
TOTAL SHAREHOLDERS' EQUITY.................................. (605,823)
------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $ 20,113
============
</TABLE>
F-3
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------- -----------
(UNAUDITED)
<S> <C> <C>
EXPENSES:
Selling, general and administrative......................... $ 29,985 $ 65,587
Professional and consulting................................. 770,831 51,181
Acquisition termination..................................... 25,000 --
Depreciation and amortization............................... -- 968
TOTAL EXPENSES.............................................. 825,816 117,736
OTHER INCOME AND EXPENSES:
Interest expense............................................ 14,973 --
Interest income............................................. -- 1,035
Other income................................................ -- 48,473
Reduction of accrued legal fees............................. -- 303,799
TOTAL OTHER INCOME AND EXPENSES............................. (14,973) 353,307
INCOME (LOSS) FROM CONTINUING OPERATIONS.................... (840,789) 235,571
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations.................. -- (2,663)
INCOME (LOSS) FROM DISCOUNTINUED OPERATIONS................. -- (2,663)
NET INCOME (LOSS)........................................... $(840,789) $232,908
========= ========
NET INCOME (LOSS) PER SHARE OF COMMON STOCK BASIC INCOME
(LOSS) PER SHARE:
CONTINUING OPERATIONS....................................... $ (0.03) $ 0.01
DISCONTINUED OPERATIONS..................................... $ -- $ --
NET INCOME (LOSS)........................................... $ (0.03) $ 0.01
DILUTED INCOME (LOSS) PER SHARE:
CONTINUING OPERATIONS....................................... $ (0.03) $ 0.01
DISCONTINUED OPERATIONS..................................... $ -- $ --
NET INCOME (LOSS)........................................... $ (0.03) $ 0.01
</TABLE>
F-4
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
STATEMENTS OF ACCUMULATED DEFICIT
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
PREFERRED ADDITIONAL
STOCK COMMON STOCK PAID-IN ACCUMULATED
SHARES SHARES AMOUNT CAPTIAL DEFICIT TOTAL
--------- ------------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1997........................ 109.1 22,004,395 $220,044 $21,236,035 $(21,779,022) (322,943)
Net income for the year ended
December 31, 1998........... -- -- -- -- 232,908 232,908
Balance at December 31,
1998........................ 109.1 22,004,395 220,044 21,236,035 (21,546,114) (90,035)
Issuance of common stock in
exchange for services....... 6,000,000 60,000 240,000 -- 300,000
Issuance of common stock in
exchange for acquisition
termination settlement...... -- 500,000 5,000 20,000 -- 25,000
Net income for the year ended
December 31, 1999........... -- -- -- -- (716,451) (716,451)
Balance at December 31,
1999........................ 109.1 28,504,395 $285,044 $21,496,035 $(22,386,903) $(605,823)
===== ========== ======== =========== ============ =========
</TABLE>
F-5
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... $(840,789) $232,908
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................... -- 968
Loss on retirement of assets................................ -- 2,663
Issuance of stock in exchange for services.................. 325,000 --
Change in assets and liabilities:
Change in accounts receivable............................... -- 1,123
Change in other assets...................................... (473) (21)
Change in accounts payable.................................. (122,605) (21,253)
Change in accrued merger and acquisition expenses........... (50,000) (303,799)
Change in accrued professional fees......................... (30,403) (99,355)
Change in accrued salaries.................................. -- (2,859)
Change in other accrued expenses............................ 241,480 (5,418)
--------- --------
TOTAL ADJUSTMENTS........................................... 608,209 (427,951)
--------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES......... (232,580) (195,043)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable................................. $ 300,000 $ --
Repayment of notes payable.................................. (50,000) --
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 250,000 --
--------- --------
NET INCREASE (DECREASE) IN CASH............................. 17,420 (195,043)
CASH AT BEGINNING OF YEAR................................... 2,074 197,117
CASH AT END OF YEAR......................................... $ 19,494 $ 2,074
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 3,800 $ --
</TABLE>
F-6
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE A--SUMMARY OF ACCOUNTING POLICIES
BUSINESS ACTIVITY
The Company was incorporated under the laws of the State of Maryland on
July 11, 1985, as "PPV Enterprises, Inc." On August 18, 1987, the Company
changed its name to "DataVend, Inc." and reincorporated under the laws of the
State of Delaware. On March 14, 1990, the Company changed its name to Choices
Entertainment Corporation. On June 16, 1997, the Company sold substantially all
of its assets and business to West Coast Entertainment Corporation. On
August 30, 1999 the Company entered into an agreement the effect of which would
have been to change the company to a hotel properties holding and operating
company. On January 16, 2000 the Company's Board of Directors adopted a plan to
change the business of the Company to that of a technology holding company and
terminated the plan to become a hotel company effective as of December 30, 1999.
ACCOUNTING 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
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION
In order to facilitate comparison of financial information, certain amounts
reported in the prior year comparative totals have been reclassified to conform
with the current year presentation.
NOTE B--LIQUIDITY
On June 16, 1997, the Company sold substantially all of its assets and
business to West Coast Entertainment Corporation (the "West Coast Transaction").
Notwithstanding the sale of its operating business, the Company's financial
statements included herein have been presented on the basis that the Company is
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
net losses aggregating $22,386,903 and a working capital deficit of
approximately $531,442 for the year ended December 31, 1999. Although the
Company posted net losses in each year since its existence, after the sale of
substantially all of the Company's assets and business to West Coast (the "West
Coast Transaction"), the Company was able to show income in the amount of
$232,908 for the year ended December 31, 1998. The West Coast Transaction had no
material affect on the Company's financial statements for the year ended
December 31, 1999.
Under the terms of the West Coast Transaction, the purchase price of
$2,430,000 was paid to the Company in cash on June 16, 1997, less $243,000 that
was held by West Coast in escrow, pursuant to the terms of a escrow agreement
between the Company and West Coast, to satisfy certain indemnity obligations of
the Company, if any, to West Coast, and which was, subject to amounts withheld
pursuant to any claims made by West Coast, to be released to the Company over a
period of eighteen months. On December 22, 1997, the Company negotiated a
compromise and full release of the escrow upon the payment by West Coast to the
Company of $211,000 on that date. The release of the escrow
F-7
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE B--LIQUIDITY (CONTINUED)
did not affect in any manner the Company's indemnity obligations to West Coast
pursuant to the terms of the asset purchase agreement between the Company and
West Coast.
On September 8, 1997, a lawsuit was filed by the Company against a former
officer, in the Superior Court of California, in which the Company sought
repayment of a loan made by the Company to the former officer in 1995. A
settlement of this lawsuit was concluded on February 25, 1998, pursuant to which
the former officer agreed to pay the Company $40,000 in monthly installments
beginning March 1, 1998 through September 1, 1998, which were paid on a timely
basis.
From the closing of the West Coast Transaction on June 16, 1997, to
August 30, 1999, the Company has principally (i) satisfied and compromised
various claims and liabilities; (ii) defended and settled litigation, and paid
professional fees, including substantial fees associated with such litigation;
(iii) maintained administrative functions (at present the Company has no
employees); and (iv) attempted to identify and consider new business
opportunities.
The Company's former President and Chief Executive Officer, took a position
with an unrelated company, effective October 6, 1997, but continued as the
Company's Chairman, President and Chief Executive Officer, under a consulting
agreement pursuant to which his compensation was reduced accordingly. The
consulting agreement expired in accordance with its terms on April 30, 1998.
As of December 31, 1997, claims and liabilities included but were not
limited to professional fees billed in connection with the Company's
discontinued acquisition program in the amount of $353,799, which was unpaid to
a law firm retained in that connection. On February 9, 1999, the Company settled
this obligation for $50,000. As of December 31, 1999, these claims and
liabilities were $0.
The primary source of funds for the year ended December 31, 1999 was
shareholder loans. The Company borrowed $300,000 at interest rates of 10% and
12%. The Company had no revenues.
As of the date of this report, the Company has approximately $19,494 in
cash. The Company's viability in raising needed capital is seriously in
question. In the event the Company is not successful in securing needed capital
in the near term, as to which no assurance can be given, the Company does not
believe that its viability as an ongoing business is assured.
NOTE C--WEST COAST TRANSACTION AND DISCONTINUED OPERATIONS
The Company recognized a net loss on the retirement of its assets of
approximately $2,663, which has been reported in discontinued operations on the
Statements of Income for the year ended December 31, 1998.
NOTE D--NOTES PAYABLE
As of December 31, 1999, the Company has notes payable outstanding in the
amount of $250,000. The Company's 10% unsecured promissory notes in the
principal amount of $75,000 will mature in mid 2001. The second set of unsecured
notes in the amount of $175,000 at 12% interest rate are 90-day notes, which
matured on December 29, 1999. See Note K--Subsequent Events.
F-8
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE E--DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE
The Financial Accounting Standards Board issued in February 1997, SFAS
no. 129 "Disclosure of Information about Capital Structure". SFAS 129 requires
disclosure of descriptive information about securities, e.g. rights and
privileges of the various securities outstanding, the number of shares issued
upon conversion, exercise, or satisfaction or required conditions are the
liquidation preference of preferred stock (Convertible Preferred Shares).
1. CONVERTIBLE PREFERRED SHARES:
<TABLE>
<CAPTION>
AUTHORIZED ISSUED AND PREFERRED
SHARES OUTSTANDING STOCK
---------- ----------- ---------
<S> <C> <C> <C>
Balance at December 31, 1997................................ 5,000 109.1 $ 1.09
Issuance of preferred stock in lieu of cash to investors.... -- -- --
Balance at December 31, 1998................................ 5,000 109.1 1.09
----- ----- ------
Issuance of preferred stock in lieu of cash to investors.... -- -- --
----- ----- ------
Balance at December 31, 1999................................ 5,000 109.1 $ 1.09
===== ===== ======
</TABLE>
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
Convertible Preferred Shares entitled to 40,000 votes.
2. COMMON STOCK:
<TABLE>
<CAPTION>
ISSUED
AUTHORIZED AND COMMON
SHARES OUTSTANDING STOCK
---------- ----------- --------
<S> <C> <C> <C>
Balance at December 31, 1997............................... 50,000,000 22,004,395 $220,044
Issuance................................................... -- -- --
---------- ---------- --------
Balance at December 31, 1998............................... 50,000,000 22,004,395 $220,044
---------- ---------- --------
Issuance of common stock in exchange for services.......... -- 6,000,000 60,000
---------- ---------- --------
Issuance of common stock in exchange for acquisition
termination settlement................................... -- 500,000 5,000
---------- ---------- --------
Balance at December 31, 1999............................... 50,000,000 28,504,395 $285,044
========== ========== ========
</TABLE>
The Company's common stock is currently traded in the over-the-counter
market on the OTC-Bulletin Board. On March 31, 2000 the last sale price was $.32
as reported by the OTC-Bulletin Board.
The Company has not declared or paid any dividends on its preferred or
common stock.The Board of Directors does not contemplate the payment of
dividends in the foreseeable future,.
In August 1999, the Company's Board of Directors passed a resolution
expressly recognizing the obligation of the Company to compensate each of Jim
Sink, George Pursglove, Thomas Renna and Tracy Shier for services rendered and
to be rendered to the Company in connection with the change of
F-9
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE E--DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE (CONTINUED)
control of the Company and the maintenance of it as an existing, reporting
corporation. Pursuant to that resolution, the Board fixed the obligation to each
of the named individuals at $120,000 and gave each the option to take some part
or that entire amount in securities of the Company. On December 29, 1999 the
Board of Directors of the Company passed a resolution instructing the Company's
transfer agent to issue restricted shares of the Company's common stock to the
named individuals, in an amount of shares and in exchange for release of an
amount of the Company's obligation as follows: Jim Sink--2,400,000
shares--$120,000; George Pursglove--1,200,000 shares--$60,000; Thomas
Renna--1,200,000 shares--$60,000; and Tracy Shier--1,200,000 shares--$60,000. At
or about the time of the adoption of the December 29th resolution, the price of
the stock was approximately $.05 per share.
Included in the December 29(th) resolution was an instruction to the
Company's transfer agent to issue 500,000 shares of the Company's common stock
to Railex Republic Industrial Development LLC, an affiliate of Lorne Bradley and
Republic Hotel Investors, Inc. This issuance of the Company's common stock
related to the termination agreement by and between Republic Hotel
Investors, Inc. and the Company pursuant to which the Company ended its plans to
become a hotel property holding and operating company.
RIGHTS AND PRIVILEGES:
The holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefore at such times and in such
amounts as the board may from time to time determine. The shares of Common Stock
are neither redeemable nor convertible, and the holders thereof have no
preemptive or subscription rights to purchase any securities of the Company.
Upon liquidation, dissolution or winding up of the company, the holders of
Common Stock are entitled to receive the assets of the company which are legally
available for distribution, after payment of all debts, other liabilities and
any liquidation preference of any outstanding preferred stock. Each outstanding
share of Common Stock is entitled to one vote on all matters submitted to a vote
of stockholders. There is no cumulative voting and no preemptive right.
The Convertible Preferred Shares are the company's only authorized and
outstanding series or class of preferred shares.
The Convertible Preferred Shares have no liquidation preference. With
respect to rights to participate in distributions or payments in the event of
liquidation, dissolution or winding up of the company, the Convertible Preferred
Shares ranks the same as the Company's Common Stock (defined above) and any
other capital shares of the company which do not, by their terms, rank senior to
or pari passu with the Convertible Preferred Shares.
Dividends on the Convertible Preferred Shares are non-cumulative and will
only be paid when, as and if declared by the Board of Directors of the Company,
in its sole discretion, in an amount per share equal to the amount of the
dividend declared on the Common Stock, if any.
Convertible Preferred Shares are convertible, in whole or in part, at any
time, at the option of the holder, into Common Stock at a ratio of 40,000 shares
of the Company's Common Stock (as more fully described above) for each
Convertible Preferred Share. Holders of the Convertible Preferred Shares are not
entitled to any distributions unless declared by the Board of Directors as
described above.
F-10
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE E--DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE (CONTINUED)
The holders of Convertible Preferred Shares have voting rights equivalent to
the rights of holders of the Common Stock. Each Convertible Preferred Share
bears 40,000 votes on any matter brought before the stockholders such as the
election of Directors and are entitled to notice of annual or special
stockholder meetings. The Board of Directors of the Company is not prohibited
from adopting and submitting to the Company's voting stockholders any proposed
amendment to the Certificate of Incorporation of the Company or a Certificate of
Designation which would create a class of preferred shares ranking senior to the
Convertible Preferred Shares as to dividends and liquidation preference.
Convertible Preferred Shares are not redeemable by the Company.
Upon liquidation, dissolution or winding up of the Company, the holders of
Convertible Preferred Shares will receive an amount equal to the amount, if any,
received by holders of the Common Stock, in pari passu.
NOTE F--STOCK OPTIONS
OPTIONS
The following table sets forth certain information regarding stock options
granted by the Company, which were outstanding at December 31, 1999:
<TABLE>
<CAPTION>
SHARES OF EXERCISE
NUMBER COMMON STOCK PRICE EXPIRATION REGISTRATION
DATE OF GRANT OF HOLDERS SUBJECT TO OPTION PER SHARE DATE RIGHTS
- ------------- ---------- ----------------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
January 31, 1991................... 2 510,000 $0.43 January 31, 2001 Registered
TOTAL............................ 510,000
=======
</TABLE>
STOCK OPTION AND APPRECIATION RIGHTS PLAN
The Company has an unallocated reserve of 1,694,000 shares of its common
stock for grant under its 1987 Stock Option and Appreciation Rights Plan (the
"1987 Plan"). Pursuant to the 1987 Plan, the Company may grant either incentive
stock options, intended to comply with the requirements of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified stock
options, as well as stock appreciation rights.
All matters relating to the 1987 Plan are administered by a committee
selected by the Company's Board of Directors, including selection of
participants, allotment of shares, determination of price and other conditions
of purchase. The exercise price of incentive stock options granted under the
1987 Plan may not be less than the fair market value of the common stock on the
date of grant and the term of the option may not exceed ten years from the date
of grant. In the case of incentive options granted to individuals who own more
than 10% of the outstanding common stock of the Company, the exercise price may
not be less than 110% of the fair market value of the common stock on the date
of the 1987 Plan grant and the term of the option may not exceed five years from
the date of grant. All options and stock appreciation rights granted under the
1987 Plan are non-transferable other than by will or by the laws of descent and
distribution.
F-11
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE F--STOCK OPTIONS (CONTINUED)
The following table sets forth information with respect to incentive stock
options under the Plan for the two years ended December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDER PRICE PER
OPTION(1) SHARE
------------ ---------
<S> <C> <C>
Outstanding at December 31, 1998, and 1999............. -- --
</TABLE>
- ------------------------
(1) Gives effect to the expiration of options due to termination of employment
F-12
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE F--STOCK OPTIONS (CONTINUED)
NON-QUALIFIED MANAGEMENT INCENTIVE STOCK OPTIONS
On January 31, 1991, the Board of Directors approved the grant of 4,750,000
1991 Management Options to four executive officers of the Company. One officer
has subsequently retired and two other officers have left the Company. One
ex-officer exercised his options in full, one ex-officer exercised 540,000
options leaving 510,000 options outstanding, and 1,000,000 options held by the
second officer who has left the Company remains outstanding. All of the 1991
Management Options were issued at an exercise price of $.4325 per share, which
represented the bid price for the Company's common stock on the date of the
grant of such options. The 1991 Management Options vested fully as of August 2,
1991, and expire January 31, 2001.
On February 9, 1994, the Board of Directors approved the grant of 915,000
1994 Management Options to three officers and one director of the Company at an
exercise price of $.23 per share, which represented the bid price for the
Company's common stock on the date of grant of such options. The 1994 Management
Options vested fully as of April 7, 1994, and expire on January 31, 2001.
Registration statements under the 1933 Act have been filed by the Company
with respect to the 8,425,001 shares underlying the 1987 Stock Option and
Appreciation Rights Plan (the "1987 Plan"), the outstanding Long-Term Management
Incentive Options, the 1991 Management Options, and the 1994 Management Options,
and an option held by a director. Of these options, 3,591,501 have either been
cancelled, exercised or have expired and 1,694,500 options remained unissued
under the 1987 SOP. Generally, such registration permits the immediate sale of
the 3,139,500 vested shares upon exercise, subject to the volume limitations
imposed by Rule 144.
Holders of these options are afforded certain anti-dilution and piggyback
rights under the 1933 Act with respect to the shares of common stock issuable
upon exercise of said options.
On September 27, 1995, the Company granted a five-year non-qualified stock
option to purchase 100,000 shares of the Company's common stock to a director of
the Company at an exercise price of $.19 per share, the average fair market
value on that date.
On February 13, 1997, the Board of Directors of the Company authorized the
grant of non-qualified stock options to purchase 450,000 shares of the Company's
common stock at $.05 per share, the fair market value of the common stock on
that date, to three directors of the Company. The options became fully vested
after six months from the date of grant.
NOTE G--NET LOSS PER SHARE OF COMMON STOCK
Basic income per share for the years ended December 31, 1999 and 1998, were
computed by dividing the net income by the weighted average number of common
shares outstanding during the periods.
Diluted income per share for the years ended December 31, 1999 and 1998,
were computed by dividing the net income by the weighted average number of
common shares outstanding during the period, as well as, the number of common
shares that would be outstanding as a result of the
F-13
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE G--NET LOSS PER SHARE OF COMMON STOCK (CONTINUED)
conversion of the Company's Convertible Preferred Shares. The approximate number
of shares used in the computation of income or loss per share amounts is as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
YEAR ENDED DECEMBER 31, USED IN CALCULATION
- ----------------------- -------------------
<S> <C>
1999
Basic..................................................... 24,489,387
Diluted................................................... 28,853,327
1998
Basic..................................................... 22,004,000
Diluted................................................... 26,364,395
</TABLE>
The difference between basic and diluted weighted average number of shares
is due to the Convertible Preferred Shares.
NOTE H--INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the liability method of
accounting for deferred income taxes. Deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities, and are measured by applying enacted tax rates for the
taxable years in which those differences are expected to reverse. Recognition of
deferred tax assets is subject to a valuation allowance if it is more likely
than not that some or all of a deferred tax asset will not be realized.
As of December 31, 1999 the Company had approximately $18,735,000 of net
operating loss carry-forwards for tax purposes which may be available to offset
future federal income, if any, through 2010. The amount ultimately available, if
any in future years, is subject to certain limitations. Should the Company
operate profitably in future years, it may be subject to current tax expense in
certain states for which no net operating loss carry-forwards are available.
NOTE I--COMMITMENTS
The Company currently has no material lease commitments. The Company's
executive office is provided rent-free by the Company's President.
Rent expenses for 1999 and 1998 were $ 0.
NOTE J--PENDING LITIGATION
The Company is a defendant to the lawsuit Dion Signs & Services, Inc. vs.
Choices Entertainment Corporation, Civil Action No. 91-6871. The case is now
pending in the Providence County Superior Court, Providence, Rhode Island. Dion
Signs & Services, Inc. alleges that it is owed approximately $33,000 plus
interest, costs and reasonable attorney's fees for the failure by Choices
Entertainment Corporation to pay for signage that was erected at various
locations pursuant to a contract. If the plaintiff is successful, the case has a
potential verdict of approximately $33,000.00 plus close to 100% interest. In
addition, Rhode Island statute would allow for the imposition of counsel fees
because it's premised upon a contract action. Accordingly, the total exposure
could be in the range of $70,000 to
F-14
<PAGE>
CHOICES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE J--PENDING LITIGATION (CONTINUED)
$75,000. Since the case has not been set for trial, and very little discovery
has been done, it is not possible to determine the likelihood of the outcome of
the case at this time.
NOTE K--SUBSEQUENT EVENTS
In January 2000, the Company subscribed to a private placement of
CAN$2,300,000 principal amount of Convertible Subordinated Redeemable 0%
Debentures maturing April 30, 2000 (the "Debentures") issued by PhotoChannel
Networks Inc., a British Columbia corporation ("Photochannel"). The subscription
agreement calls for advances to Photochannel in exchange for the issuance of
Debentures as follows: CAN$350,000 by January 31, 2000; CAN$750,000 by
February 29, 2000; and CAN$1,200,000 by April 14, 2000. The Debentures are
convertible into Photochannel common stock, no par value, ("Photochannel Stock")
at the rate of 1 share of Photochannel Stock for each CAN$.50 in debenture
principal amount. Also, the company was granted warrants pursuant to a vesting
schedule to purchase additional shares of Photochannel Stock as follows: 140,000
warrants with an exercise price of CAN$.75; 300,000 warrants with an exercise
price of CAN$1.00; and 480,000 warrants with an exercise price of CAN$1.25. Each
warrant entitles the Company to purchase 1 share of Photochannel Stock at the
exercise price, for cash. The warrants are presently fully vested and will
expire June 30, 2000. As of the date of the filing of this report on
Form 10KSB, the Company had completed its obligations under the subscription
agreement. All of the securities acquired in this transaction as well as the
securities into which the securities acquired are convertible or exercisable
against are restricted securities and must be held for the applicable holding
period from the date of conversion or exercise, as the case may be. The
applicable holding period in most cases will be 1 year.
In February 2000, the Company closed a self-offered private offering of 390
of the Company's Series C Preferred Stock in the aggregate offering amount of
$780,000. Offering expenses were less than $3,000. Each share of the Preferred
Stock is convertible into 40,000 shares of the Company's common stock, par value
$.01, the ("Common Stock") and carries the voting rights of the underlying
Common Stock. The proceeds from this offering were used to retire all notes
payable, to pay down the obligations of the Company to officers and directors of
the Company, to pay down accounts payable to an immaterial amount, and to
acquire minority interests in two companies. Certain convertible debt were
converted to Convertible Preferred Shares.
In March 2000, the Company paid $50,000 cash to acquire 250,000 shares of
common stock of Tridium Research Inc., a Washington corporation ("Tridium")
based in Kirkland, Washington. The 250,000 shares of common stock acquired
represents approximately 5% of all Tridium common stock issued and outstanding.
The Company has also obligated itself to provide an additional $200,000 to
Tridium, upon terms and conditions to be determined.
F-15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3(a) Certificate of Incorporation, as amended(1)
(b) Certificate of Designations of Series C Preferred Stock, as
amended(2)
(c) Amended and Restated By-Laws,(13)
4 Form of certificate evidencing shares of Common Stock(4)
10(a) Stock Option and Appreciation Rights Plan of 1987(4)
(b) Form of Long-Term Management Incentive Stock Option
Agreement(5)
(c) Form of 1991 Management Option Agreement(5)
(d) Consulting Agreement between Registrant and Ronald W.
Martignoni(6)
(e) Severance Benefits Agreement, as amended, between Registrant
and Lorraine E. Cannon(7)
(f) Form of 1994 Management Option Agreement(7)
(g) Non-Employee Director Stock Option Agreement between
Registrant and Fred E. Portner(8)
(h) Non-Employee Director Stock Option Agreement between
Registrant and Fred E. Portner(9)
(i) Non-Employee Director Stock Option Agreement between
Registrant and James D. Sink(9)
(j) Asset Purchase Agreement, dated December 16, 1996, as
amended, between West Coast Entertainment Corporation and
Registrant(10)
10.99(a) Consulting Agreement between Registrant and Thomas Renna(11)
(b) Letter of Intent to Acquire Republic Hotel Investors,
Inc.(12)
(c) Termination Contract with Republic Hotel Investors, Inc.(13)
23 Consent of Miller and Co.(13)
27 Financial Data Schedule(13)
</TABLE>
- ------------------------
(1) Filed as an Exhibit to Registrant's Registration Statement on Form S-8 File
No. 33-87016) and incorporated herein by reference.
(2) Filed as an Exhibit to Registrant's 1996 Annual Report on Form 10-KSB, and
incorporated herein by reference.
(3) Filed as an Exhibit to Registrant's 1992 Annual Report on Form 10-K and
incorporated herein by reference.
(4) Filed as an Exhibit to Registrant's Registration Statement on Form S-1,
inclusive of Post-Effective Amendment No. 1 thereto (File No.: 33-198983)
and incorporated herein by reference.
(5) Filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration Statement (File No.: 33-32396), and incorporated
herein by reference.
(6) Filed as an Exhibit to Registrant's Quarterly Report on Form 10-QSB, for
the quarter ended September 30, 1997, and incorporated herein by reference.
(7) Filed as an Exhibit to Registrant's 1993 Annual Report on Form 10-K, and
incorporated herein by reference.
E-1
<PAGE>
(8) Filed as an Exhibit to Registrant's Quarterly Report on Form 10-QSB, for
the quarter ended March 31, 1996, and incorporated herein by reference.
(9) Filed as an Exhibit to Registrant's Quarterly Report on Form 10-QSB, for
the quarter ended March 31, 1997, and incorporated herein by reference.
(10) Filed as an Exhibit to Registrant's definitive Proxy Statement, dated
February 11, 1997, with regard to a Special Meeting of Stockholders held
on March 12, 1997, as further amended by Second and Third Amendments
thereto filed as Exhibits to Registrant's Forms 8-K, dated April 28, 1997,
and May 29, 1997, all of which Exhibits are incorporated herein by
reference.
(11) Filed as an Exhibit to Registrant's Quarterly Report on Form 10-QSB, for
the quarter ended June 30, 1999, and incorporated herein by reference.
(12) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
August 30, 1999 and incorporated herein by reference.
(13) Filed herewith.
E-2
<PAGE>
Exhibit 3(c)
CHOICES ENTERTAINMENT CORPORATION
* * * * *
AMENDED AND RESTATED BY-LAWS
* * * * *
ARTICLE I
OFFICES
SECTION 1.1. The registered office shall be in the City of Wilmington,
County of New Castle, and State of Delaware.
SECTION 1.2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. All meetings of the stockholders for the election of
directors shall be held in the City of Wilmington, State of Delaware, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
SECTION 2.2. Annual meetings of stockholders, commencing with the year
2000, shall be held on the 26th day of May, if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 2:30 PM, or at such
other date and time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, at which they shall elect by
a plurality vote a board of directors, and transact such other business as may
properly be brought before the meeting.
SECTION 2.3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
SECTION 2.4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
SECTION 2.6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
SECTION 2.7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 2.8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
<PAGE>
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 2.9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
SECTION 2.10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted after
eleven (11) months from its date, unless the proxy provides for a longer period
and is coupled with an interest.
SECTION 2.11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 3.1. The number of directors which shall constitute the whole
board shall be not less than three (3) nor more than twelve (12). The first
board after the adoption of these bylaws shall consist of at least three (3)
directors. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the board of directors or by
the stockholders at the annual meeting. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 3.2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
SECTION 3.2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding
<PAGE>
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office.
SECTION 3.3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these by-laws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 3.4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
SECTION 3.5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION 3.6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
SECTION 3.7. Special meetings of the board may be called by the
president on three (3) days' notice to each director, either personally or by
mail or by facsimile communication; special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of two directors unless the board consists of only one director; in which case
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of the sole director.
SECTION 3.8. At all meetings of the board, a majority of directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 3.9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
SECTION 3.10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
SECTION 3.11. The board of directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate
<PAGE>
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
SECTION 3.11.A In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
SECTION 3.11.B Any such committee, to the extent provided in the
resolution of the board of directors, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to the following matters: (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the General Corporation Law of Delaware to be submitted to
stockholders for approval or (ii) adopting, amending or repealing any by-law of
the corporation. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors.
SECTION 3.12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
SECTION 3.13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of non-employee directors. Directors who are also
employees of the corporation shall serve without compensation except to the
extent of re-imbursement of expenses pursuant to the policy of the corporation
regarding such re-imbursement. Non-employee directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity except that of employee and
receiving compensation therefor. Non-employee members of special or standing
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
SECTION 3.14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
SECTION 4.1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by facsimile telecommunication.
SECTION 4.2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
<PAGE>
ARTICLE V
OFFICERS
SECTION 5.1. The officers of the corporation shall be chosen by the
board of directors and shall be a president, a secretary and a treasurer. The
board of directors may also choose vice-presidents, and one or more assistant
secretaries and assistant treasurers. Any number of offices may be held by the
same person, unless the certificate of incorporation or these by-laws otherwise
provide.
SECTION 5.2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, a secretary and a
treasurer. Any number of offices may be held by the same person, unless the
certificate of incorporation or these by-laws otherwise provide.
SECTION 5.3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
SECTION 5.4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
SECTION 5.5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. The board of directors shall fill any
vacancy occurring in any office of the corporation.
THE PRESIDENT
SECTION 5.6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
SECTION 5.7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
SECTION 5.8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
SECTION 5.9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
<PAGE>
SECTION 5.10. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
SECTION 5.11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
SECTION 5.12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
SECTION 5.13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
SECTION 5.14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
SECTION 6.1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. The president or a vice-president, and
the treasurer- or an assistant treasurer, or the secretary or an assistant
secretary, of the corporation shall sign certificates representing the shares.
SECTION 6.1.A If the corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 6.1.B Within a reasonable time after the issuance or transfer
of uncertificated stock, the corporation shall send to the registered owner
<PAGE>
thereof a written notice containing the information required to be set forth or
stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the
General Corporation Law of Delaware or a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 6.2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
SECTION 6.3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
SECTION 6.4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
SECTION 6.5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
SECTION 6.6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
<PAGE>
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
SECTION 7.1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
SECTION 7.2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
SECTION 7.3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
SECTION 7.4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
SECTION 7.5. The fiscal year of the corporation shall be the calendar
year.
SEAL
SECTION 7.6. The corporation may adopt a corporate seal. The corporate
seal shall have inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
INDEMNIFICATION
SECTION 7.7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware, but nothing herein shall prevent the corporation from indemnifying its
officers, directors, employees and agents by contract or otherwise.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
<PAGE>
Approved and Adopted by the Board of Directors of Choices Entertainment
Corporation by unanimous written consent this __ day of April, 2000.
_/s/ _____________________________
James D. Sink, Director
___/s/ ___________________________
Tracy M. Shier, Director
_____/s/ _________________________
Thomas Renna, Director
<PAGE>
Exhibit 10.99 (c)
CONTRACT TERMINATION AGREEMENT
THIS AGREEMENT made as of the 30th day of December 1999.
BETWEEN: CHOICES ENTERTAINMENT CORPORATION, a Delaware
corporation ("Choices")
-And-
Republic Hotel Investors, Inc., a Washington
corporation ("RHII")
WHEREAS Choices and RHII are the parties to a binding Letter of Intent the
("LOI") dated as of the 30th day of August, 1999 in respect of the acquisition
of the business of RHII by Choices;
AND WHEREAS the parties thereto have agreed to terminate the LOI;
NOW THEREFORE for good and valuable consideration, the receipt and sufficiency
of which are hereby irrevocably acknowledged by each of the parties hereto, the
parties hereto hereby covenant and agree as follows:
1. RHII hereby accepts the sum of 500,000 shares of the common stock, par value
$0.01 per share, of Choices in full and final settlement of any and all amounts
owing by Choices to RHII or its officers, directors, shareholders or agents,
pursuant to the LOI, which shares are hereby assigned over by RHII to Lorne
Bradley and or his nominee, and such shares shall be delivered to RHII as soon
as is reasonably practicable after the date of this Agreement but in any event
no later than February 15, 2000. The shares of the common stock deliverable
pursuant to this agreement shall be registered in the name of Railex Republic
Industrial Development Corporation whose address is P.O. Box 2148, Vancouver,
B.C., V6B 3T8, Canada.
2. The LOI is hereby terminated and has no further force and effect as of the
date hereof. Choices hereby agrees to timely pay any amount owed
<PAGE>
Seattle Northwest Securities Corporation when, as and if such amount owing
becomes a liquidated amount.
3. Lorne Bradley hereby tenders his resignation as Chairman of the Board of
Directors, President and Chief Executive Officer of Choices which resignation is
hereby accepted.
4. RHII does hereby release and forever discharge Choices and any directors,
officers and employees of Choices of and from all manner of actions, causes of
action, deeds, suits, proceedings, debts, dues, duties, accounts, interest,
covenants, contracts, demands, damages sums of money, obligations, promises,
guarantees and liabilities whatsoever, both in law an in equity, which RHII ever
had, now has or hereafter can, shall or may have for or by reason of or in
respect of any cause, act, matter or thing whatsoever existing up to and
including the date hereof against Choices or any one of them, provided that
nothing herein contained shall be construed so as to release Choices from their
obligations and covenants arising out of or in respect of this Agreement.
5. Choices does hereby remise, release and forever discharge RHII of and from
all manner of actions, causes of action, deeds, suits, proceedings, debts, dues,
duties, accounts, interest, covenants, contracts, demands, damages, sums of
money, obligations, promises, guarantees and liabilities whatsoever, both in law
an in equity, which RHII and any officer, director, shareholder or agent thereof
ever had, now has or hereafter can, shall or may have for or by reason of or in
respect of any cause, act, matter or thing whatsoever existing up to and
including the date hereof against RHII, provided that nothing herein contained
shall be construed so as to release RHII from its obligations and covenants
arising out of or in respect of this Agreement.
6. RHII will not, in any manner whatsoever, directly or indirectly, at any time
or under any circumstances, use, impart, disclose, divulge or otherwise make
available to any person, or obtain any benefit from, whether directly or
indirectly, by any act or omission, any information concerning the property,
business or affairs of Choices, without the express written consent of Choices,
which consent may be unreasonably withheld.
7. This Agreement shall be governed by and construed in accordance with the laws
of the State of Washington, and venue shall lie in King County.
8. This Agreement shall inure to the benefit of and be binding upon the
<PAGE>
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
9. Time is of the essence of this agreement.
[The Next page is the Signature Page}
[SIGNATURE PAGE]
IN WITNESS WHEREOF the parties hereto have duly executed this agreement as of
the date first written above.
Choices Entertainment Corporation,
By: its Board of Directors,
/s/ James D. Sink
James D. Sink
/s/ Thomas Renna
Thomas Renna
/s/ Tracy M. Shier
Tracy M. Shier
Republic Hotel Investors, Inc.
By: /s/ Lorne Bradley
Lorne Bradley, President
<PAGE>
As to the assignment by RHII over to Lorne Bradley or his nominee:
Republic Hotel Investors, Inc.
By: /s/ Tracy M. Shier
Tracy M. Shier, Director
<PAGE>
EX-23
EXHIBIT 23
[LETTERHEAD]
The Board of Directors
Choices Entertainment Corporation:
We consent to incorporation by reference in the Registration Statements (Nos.
33-44343 and 33-87016) on Form S-8, of Choices Entertainment Corporation of
our report dated April 28, 2000 relating to the balance sheet of Choices
Entertainment Corporation as of December 31, 1999, and the related statements
of income, accumulated deficit, and cash flows for the year ended December
31, 1999 and 1998, which report appears in the December 31, 1999 annual
report on Form 10-KSB of Choices Entertainment Corporation.
Our report contains an explanatory paragraph that states that the Company has
suffered recurring losses from operations and has a net working capital
deficiency. Those conditions raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Miller and Co.
Certified Public Accountants
Santa Monica, California
April 28, 2000
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