<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 14(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For quarterly period ended March 1, 1997
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
--------------- ---------------------
Commission file number 0-21634
-------
METRO GLOBAL MEDIA, INC.
------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 65-0025871
- -------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1060 PARK AVENUE, CRANSTON, RHODE ISLAND 02910
----------------------------------------------
(Address of principal executive offices)
(401)942-7876
-------------------------
(Issuer's telephone number)
---------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
year)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,545,768 at March 31, 1997
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Balance Sheets F-1
Statements of Income F-2
Statements of Cash Flows F-3
Notes to Consolidated Financial Statements F-5 & F-6
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 1, 1997 VERSUS THREE
MONTHS ENDED FEBRUARY 29, 1996.
The Company had revenues of $4,722,341 for the three months ended March 1,
1997. This represents a 17.1% increase from revenues of $4,034,143 for the
three months ended February 29, 1996. Revenues consist principally of sales of
prerecorded videocassettes, magazines, electronic software products and related
items. Increased revenues were primarily the result of an increase in unit
sales of new releases and library titles from the Company's video catalog.
Additionally, the Company generated approximately $364,000 in revenue through
the sale of foreign film rights of some of the titles contained in its video
library as compared to $0 for the same period in fiscal 1996. Due to the
complete reorganization and restructuring of the Company's west coast
operation, the Company's new release schedule for the fiscal year ended May 31,
1997, has been significantly impacted. During the quarter ended March 1, 1997,
the Company released 45 new videos as compared to 69 for the same period in
1996. This represents a 34.8% decrease from the same period of a year ago;
however this represents a 165% increase over the 17 new videos released in the
quarter ended November 30, 1996. The new management of the Company's west
coast operation has come on line quickly and effectively. It is anticipated
that those films and videos, that were held back during the quarters ended
March 1, 1997, November 30, 1996, and August 31, 1996, will be added to the
release schedules for the remaining quarter of fiscal 1997 or incorporated into
the fiscal 1998 schedule.
Costs of revenues (including amortization of film costs) for the three month
period ended March 1, 1997 increased to $3,035,801 from $2,666,323 for the
corresponding period in the prior year principally due to the increase in
revenue. Costs of revenues as a percentage of revenues in the third quarter of
fiscal 1997 was 64.3% as compared to 66.1% in the third quarter of fiscal 1996.
Selling, general and administrative (SG&A) expenses for the three months ended
March 1, 1997, increased 12.0% or $168,971 to $1,580,097 from $1,411,126 for
the three months ended February 29, 1996 due to increases in advertising, legal
fees and freight expenses. Selling, general, and administrative expenses, as a
percentage of revenue, decreased to 33.5% in 1997 as compared to 35% in the
three months ended February 29, 1996.
<PAGE> 3
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 1, 1997 VERSUS THREE
MONTHS ENDED FEBRUARY 29, 1996.
Other income (expense) increased $(274,276) to $(31,583) for the quarter ended
March 1, 1997, as compared to $242,693 for the same quarter in 1996. The
increase in other income for the quarter ended February 29, 1996 was due to the
Company selling one of its Airborne for Men retail stores which resulted in a
gain of $171,795.
Operating income for the three month period ended March 1, 1997 was $106,443 as
compared to operating income of $(43,306)for the corresponding period in the
prior year. Net income for the fiscal quarters ended March 1, 1997 and 1996
were $42,670 and $145,384 respectively, resulting in earnings per share of $.01
for the quarter ended March 1, 1997 versus $.04 for the quarter ended February
29, 1996.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 1, 1997 VERSUS NINE
MONTHS ENDED FEBRUARY 29, 1996.
Revenues for the nine month period ended March 1, 1997 decreased 6.9% to
$13,267,996 from $14,246,384 for the nine months ended February 29, 1996, which
reflects the effect of the Company's decision to reduce its new release
schedule which has been explained in the MD&A for the quarters ended November
30 and August 31, 1996. Costs of revenues (including amortization of film
costs) for the nine month period ended March 1, 1997 were $8,397,483 in
comparison to $8,542,581 for the corresponding period in the prior year, a
decrease of 1.7%. The Company's gross profit percentage for the nine month
period ended March 1, 1997 decreased to 36.7% from 40% for the comparative
prior fiscal period. The decrease in gross profit percentage reflects the
reduction of new release sales due to reduction in the release schedule and the
Company incurring fixed costs which represent a larger portion of total costs
and are unfavorably impacted by the revenue reduction.
Selling, general and administrative expenses for the nine months ended March 1,
1997 decreased 8.2% to $4,614,396 from $5,025,995 for the nine months ended
February 29, 1996. The decrease was primarily due to reductions in
advertising, artwork, depreciation, payroll costs, and legal fees resulting
from better cost control, lower sales, and resolution of previously pending
legal matters. However, as a percentage of sales, selling, general and
administrative expenses remained constant at 35%.
Other income (expense) increased $(299,508) to $(139,925) for the nine months
ended March 1, 1997, as compared to $159,583 for the same period in 1996. The
increase in other income for the nine months ended February 29, 1996 was due to
the Company selling three of its Airborne for Men retail stores which resulted
in a gain of $289,620.
Net income for the nine months ended March 1, 1997, decreased to $66,229 from
$569,736 for the nine months ended February 29, 1996, which resulted in
earnings per share of $.04 for the nine months ended March 1, 1997, versus $.21
per share for the nine months ended February 29, 1996.
<PAGE> 4
LIQUIDITY AND CAPITAL RESOURCES AT MARCH 1, 1997
At March 1, 1997, the Company had $157,291 in cash compared to $360,671 in cash
at May 31, 1996. Working capital decreased by 2.5% to $3,249,442 at March 1,
1997 from $3,332,590 at May 31, 1996, primarily as a result of the increase in
accounts payable and accrued expenses which are substantially offset by
increases in accounts receivable and inventory. Inventory increased due to the
Company's broader product line and anticipated sales growth needs, and accounts
receivable increased due to increased sales of all the Company's products.
Cash Flows from Operating Activities: Net cash of $888,222 was provided by
operating activities for the nine months ended March 1, 1997, versus net cash
of $789,142 for the same period in the prior fiscal year. Net inventory
increased $120,052 from May 31, 1996.
Of the Company's total accounts receivable at March 1, 1997, $1,333,250 was
owed by Capital Video Corporation ("CVC"), a chain of retail video stores of
which certain affiliates of the Company are officers or shareholders, as
compared to $662,807 at May 31, 1996, which increase is primarily attributable
to the increase in sales to CVC due to an increase in the number of retail
outlets operated by CVC. The Company had a perfected interest in the inventory
of CVC and the personal guaranty of its shareholder and his spouse; however,
due to the excellent payment history of Capital these guarantees have been
released. No allowance for related party receivables and no related party bad
debt expense has been recorded in the Company's financial statements.
Cash Flows from Financing Activities: Cash flows from financing activities
during the nine months of fiscal 1997 and 1996 resulted from borrowings from
finance companies, and repayments of such borrowings and leases. Proceeds from
borrowings were $639,551 and were primarily attributable to the line of credit
agreement entered into with a finance company in June, 1995.
Proceeds from borrowings were used for working capital needs and to fund
production of new videos and films to be released later in this fiscal year.
During the nine months ended March 1, 1997, 74 of these films and videos were
completed and released and the company entered into 9 new production
agreements. The completion of the 45 outstanding films and videos in
work-in-process will require approximately $1,000,000. The number of
outstanding films and videos work-in-progress can vary greatly in any given
period due to a variety of factors such as talent and director availability,
production schedule conflicts, and release schedules. Financing for these
activities will be generated through earnings and profits.
Cash Used in Investing Activities: Net cash used for investing activities was
$981,456 for the nine months ended March 1, 1997, compared to $1,434,753 for
the prior year. Cash was invested in motion pictures and other films
(entertainment programming expansion) as discussed above, in leasehold
improvements, and in duplicating and editing equipment for the Company's west
coast operations.
Management is continuing to negotiate a new financing arrangement with its line
of credit lenders. Upon the completion of these negotiations, the Company
anticipates that it will have increased funds available for its use at a lower
cost.
<PAGE> 5
LIQUIDITY AND CAPITAL RESOURCES AT MARCH 1, 1997 (CONTINUED)
In August, 1996, the Company acquired the option to purchase all of the
operating subsidiaries of Phantasm Holdings, BV of Holland, one of the largest
distributors of adult entertainment products in Europe. Under the terms of the
Option Agreement, the Company has the option to acquire, at any time prior to
July 31, 1999, the stock of Phantasm Video Productions, B.V. Holland, Malabo
Video Productions GmbH of Germany, and Phantasm Video Productions SARL of
France, at a purchase price to be determined based on a multiple of earnings of
these companies for the two years prior to the date of exercise of the option.
To preserve the option the Company will be required to pay a $200,000 fee for
the option that will be due and payable on or about August, 1997.
Management believes that funds provided by operations and existing lines of
credit are adequate to meet the anticipated short-term and long-term capital
needs. Management believes that inflation has not had a material effect on its
operations.
<PAGE> 6
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets
------
For the Nine For the
months ended year ended
March 1, May 31,
1997 1996
(Unaudited) (Audited)
--------- -------
<S> <C> <C>
Current assets:
- --------------
Cash $ 157,291 $ 360,671
Accounts receivable, net 3,878,016 3,210,179
Inventory 4,166,576 4,046,524
Prepaid expenses and other current assets 151,458 102,193
Deferred income taxes 78,500 78,500
----------- -----------
Total current assets 8,431,841 7,798,067
--------------------
Motion pictures and other films at cost, less accumulated
amortization of $5,356,684 and $4,003,287, respectively 2,656,694 2,658,382
Property and equipment at cost, less accumulated depreciation
and amortization of $1,203,581 and $895,319, respectively 1,564,213 1,463,059
Other assets 559,778 289,731
----------- -----------
Total assets $13,212,526 $12,209,239
------------ =========== ===========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
- -------------------
Current portion of long-term debt $ 775,572 $ 657,277
Current portion of capital lease obligations 223,367 128,063
Accounts payable and accrued expenses 4,151,352 3,403,694
Income taxes payable 32,108 276,443
----------- -----------
Total current liabilities 5,182,399 4,465,477
------------------------- ----------- -----------
Other liabilities:
- -----------------
Long-term debt, less current portion 397,618 626,847
Capital lease obligations, less current portion 413,432 304,017
Deferred income taxes 42,000 42,000
----------- -----------
Total other liabilities 853,050 972,864
----------------------- ----------- -----------
Commitments and contingencies
Total liabilities 6,035,449 5,438,341
----------------- ----------- -----------
Shareholder's equity:
- --------------------
Common stock, $.0001 par value; authorized 10,000,000 shares;
issued and outstanding, 3,545,768 and 3,408,034 shares, respectively 353 341
Additional paid-in capital 5,475,286 5,179,098
Unearned compensation (43,750)
Retained earnings 1,701,438 1,635,209
----------- -----------
Total shareholders' equity 7,177,077 6,770,898
-------------------------- ----------- -----------
Total liabilities and shareholders' equity $13,212,526 $12,209,239
------------------------------------------ =========== ===========
</TABLE>
See notes to consolidated financial statements
F-1
<PAGE> 7
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Nine Three Nine
months ended months ended months ended months ended
March 1, March 1, February 29, February 29,
1997 1997 1996 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $4,722,341 $13,267,996 $4,034,143 $14,246,384
Costs of revenues, including amortization
of motion pictures and other films 3,035,801 8,397,483 2,666,323 8,542,581
---------- ----------- ---------- -----------
1,686,540 4,870,513 1,367,820 5,703,803
Selling, general and administrative
expenses 1,580,097 4,614,396 1,411,126 5,025,995
---------- ----------- ---------- -----------
Income from operations 106,443 256,117 (43,306) 677,808
----------------------
Other income (expense), net (31,583) (139,925) 242,693 159,583
---------- ----------- ---------- -----------
Income before income taxes 74,860 116,192 199,387 837,391
--------------------------
Income tax expense 32,190 49,963 54,003 267,655
---------- ----------- ---------- -----------
Net income $ 42,670 $ 66,229 $ 145,384 $ 569,736
---------- ========== =========== ========== ===========
Net income per common and
common equivalent share primary $ .01 $ .02 $ .04 $ .21
Weighted average number of shares
outstanding 3,611,587 3,717,435 3,334,710 2,751,802
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 8
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
March 1, February 29,
1997 1996
(Unaudited) (Unaudited)
--------- ---------
<S> <C> <C>
Cash flows from (used by) operating activities:
- ----------------------------------------------
Net income $ 66,229 $ 569,736
------------ ------------
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 1,209,314 1,695,840
Amortization of unearned compensation 43,750 56,250
Consulting services for common stock 0 51,413
Gain on disposal of asset 2,857 (289,620)
Cancellation of debt income 0 15,000
Allowance for inventory obsolescence 0 100,000
(Increase) decrease in assets:
Accounts receivable (667,837) (545,275)
Inventory (120,052) (403,694)
Prepaid expenses and other current assets (49,265) (74,361)
Deferred income taxes 0 166,175
Other assets (97) 1,274
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 647,657 (507,349)
Income taxes payable (244,334) (80,255)
Deferred income taxes 0 34,008
------------ ------------
Total adjustments 821,993 219,406
----------------- ------------ ------------
Net cash provided by operating activities 888,222 789,142
----------------------------------------- ------------ ------------
Cash flows from (used by) financing activities:
- ----------------------------------------------
Proceeds from the issuance of common stock 26,250 563,038
Increase in notes payable 0 411,466
Payments on notes payable (10,934) (4,923)
Payments on capital leases (125,462) (78,555)
------------ ------------
Net cash provided (used) by financing activities (110,146) 891,026
------------------------------------------------ ------------ ------------
Cash flows used by investing activities:
- ---------------------------------------
Investments in motion pictures and other films (977,335) (1,213,995)
Purchase of property and equipment (4,121) (220,758)
------------ ------------
Net cash used by investing activities (981,456) (1,434,753)
------------------------------------- ------------ ------------
Increase (decrease) in cash (203,380) 245,415
---------------------------
Cash, beginning of period 360,671 67,057
------------ ------------
Cash, end of period $ 157,291 $ 312,472
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 9
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Nine months ended
March 1, February 29,
1997 1996
---- ----
<S> <C> <C>
Supplemental disclosures of cash flow information:
- -------------------------------------------------
Cash paid during the period for:
Interest $143,248 $124,634
======== ========
Income taxes $294,297 $ 1,107
======== ========
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
During the quarter ended November 30, 1996, the Company issued 90,000 shares of
common stock with a value of $230,000 to settle an outstanding accounts payable
balance with a consultant.
During the quarter ended November 30, 1996, a note receivable for $211,023 was
exchanged in full by acquiring PAL masters to be used for the sale of film
rights internationally.
During the quarter ended November 30, 1996, the Company settled pending
litigation by agreeing to pay a fine of $200,200 of which $100,200 was paid.
The Company was indemnified by a previous owner and therefore has reduced the
indebtedness to that owner by $200,200 accordingly.
During the quarter ended March 1, 1997, the Company financed $330,181 of
property, plant, and equipment by capital lease obligations.
See notes to consolidated financial statements.
F-4
<PAGE> 10
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 1997 AND FEBRUARY 29, 1996
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Metro Global
Media, Inc. ("Metro Global") and its wholly-owned subsidiaries (collectively
the "Company"). All intercompany balances and transactions have been
eliminated in consolidation.
Financial Statements
The interim financial statements are prepared pursuant to the requirements for
reporting on Form 10-QSB. The May 31, 1996 balance sheet data was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles. The interim financial information
included herein is unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) that are, in
the opinion of management, necessary to a fair presentation of the financial
position, results of operation, and changes in financial position for the
interim periods. The interim financial statements and notes thereto should be
read in conjunction with the financial statements and notes included in the
Company's latest annual report. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The current
period results of operations are not necessarily indicative of results which
ultimately will be reported for the full year ending May 31, 1997.
Earnings Per Share (EPS)
Earnings per common and common equivalent share are based on the average number
of common shares outstanding during each period, assuming exercise of all
options have exercise prices less than the average market price of the common
stock using the treasury stock method. Fully diluted computations reflect the
additional dilutive effect of using period-end prices under the treasury stock
method.
The weighted average number of common shares and common stock equivalent shares
utilized in computing earnings per share were 3,611,587 and 3,334,710 for
primary and fully diluted earnings per share for the quarters ended March 1,
1997 and 1996 respectively.
Notes Payable
During June, 1995, Metro, Inc., a wholly owned subsidiary of the Company,
entered into a line of credit agreement with a finance company. Under the
agreement, Metro, Inc. may borrow up to 70% of assigned accounts receivable
less than 90 days old, up to a maximum of $750,000. The balance due under the
line of credit bears interest at the prime rate plus 6% per annum. In
addition, Metro, Inc. shall pay the finance company a collateral management or
notification fee equal to 3/4 of 1% of sales submitted to the finance company
for inclusion in the net security value of accounts receivable, but no more
than $7,500 per month. The outstanding balance under the line is secured by
accounts receivable of Metro, Inc and guaranties of the Company and certain
officers/shareholders. The line of credit expires during June, 1997. As of
March 1, 1997, the balance on the line of credit was $639,551.
F-5
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
* 10.1 Amendment to Stock Option Agreement dated
January 16, 1997 by and between Kenneth F.
Guarino and the Registrant
* 10.2 Indemnification Agreement dated December 3,
1996 by Kenneth F. Guarino in favor of the
Registrant
* 10.3 Termination Agreement dated April 10, 1997
between Capital Video Corporation, Elvira
Famiglietti and Metro, Inc.
* 10.4 Description of the Directors Compensation
Arrangement
* Filed herewith
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
METRO GLOBAL MEDIA, INC.
By:/s/ T. JAMES BLAIR
----------------------------------
T. James Blair, Treasurer
(duly authorized, principal financial
and chief accounting officer)
Date: April 15, 1997
--------------------------------
<PAGE> 1
Exhibit 10.1
AMENDMENT TO STOCK OPTION AGREEMENT
THIS AMENDMENT TO STOCK OPTION AGREEMENT, entered into as of January 16,
1997, by and among Metro Global Media, Inc., a Delaware corporation formerly
known as South Pointe Enterprises, Inc. with an office at 1060 Park Avenue,
Cranston, RI 02910 (hereinafter called the "Company") and Kenneth F. Guarino,
having a mailing address at 1060 Park Avenue, Cranston, RI 02910
(hereinafter called the "Optionee").
W I T N E S S E T H
WHEREAS, the parties entered into a Stock Option Agreement effective as
of January 1, 1993 (the "Stock Option Agreement"); and
WHEREAS, the parties desire to amend the Stock Option Agreement as set
forth herein.
NOW THEREFORE, in consideration of the covenants herein set forth, the
parties agree as follows:
1. Section 2 of the Option Agreement is hereby amended by deleting said
Section 2 in its entirety and by inserting to following, such that Section 2
shall be and shall read as follows:
2. Term of Option. This Option and all rights hereunder
shall expire on December 31, 2006, unless this Option shall have
sooner terminated as provided herein.
2. Section 5 of the Option Agreement is hereby amended by deleting said
Section 5 in its entirety.
<PAGE> 2
3. Except as expressly modified hereby, the Option Agreement is hereby
ratified and affirmed and remains in full force and effect as of the date
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Metro Global Media, Inc.
By: /s/ T. James Blair
-------------------------
T. James Blair, Treasurer
/s/ Kenneth F. Guarino
-----------------------------
Kenneth F. Guarino
<PAGE> 1
Exhibit 10.2
AFFIDAVIT AND INDEMNIFICATION AGREEMENT
I, Kenneth F. Guarino, do depose and say that:
1. I am the legal and beneficial owner of all right, title and
interest in 100,000 shares of the common stock of Metro Global Media, Inc. (the
"Corporation"), which shares are presently held in the treasury of the Company;
2. My rights in said shares have not, in whole or in part, been
assigned, transferred, hypothecated, pledged or otherwise disposed of and that
I am entitled to full and exclusive possession of said shares;
3. This affidavit is made for the purpose of inducing the Corporation
to effect the re-issuance of the 100,000 shares in the treasury to the
undersigned; and
4. I hereby agree to indemnify and to hold the Corporation, its
officers, directors, agents, attorneys and employees, harmless from and against
any and all liabilities in respect of claims, suits, proceedings, damages,
judgments, settlements, expenses and costs (including, without limitation,
reasonable counsel fees) which the Corporation may suffer or incur by reason of
its re-issuing said shares to me, including, without limitation claims arising
with respect to the ownership of the shares issued hereby, or with respect to
the issuance and/or cancellation by the Corporation of Stock Certificate No.
1083.
/s/ Kenneth F. Guarino
Subscribed and sworn to before me this 3rd day of December, 1996.
/s/ Jennifer St. Cyr
Notary Public
<PAGE> 1
Exhibit 10.3
TERMINATION AGREEMENT AND RELEASE
THIS AGREEMENT, dated as of the 10th day of April, 1997 by and
between Metro, Inc. (formerly known as North Star Distributors, Inc., a Rhode
Island corporation having its principal offices at One Metro Park Drive,
Cranston, RI 02910 ("Metro"), Capital Video Corporation, having a mailing
address of 788 Reservoir Avenue, Cranston, RI 02910 ("Capital") and Elvira
Famiglietti ("EF") having a mailing address of 1060 Park Avenue, Cranston, RI
02910.
W I T N E S E T H
WHEREAS, Capital and Metro are parties to a Security Agreement dated
September 24, 1993 (the "Security Agreement") pursuant to which Capital grants
to Metro a security interest in all of the inventory of Capital, as defined
therein, as collateral for all of the trade accounts payable of Capital to
Metro incurred in the ordinary course of business (the "Accounts Payable"); and
WHEREAS, EF has provided to Metro a Guaranty Agreement dated December
1, 1993 with respect to all of the Accounts Payable of Capital (the "EF
Guaranty);
WHEREAS, the parties desire to terminate the Security Agreement and
the Guaranty.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. The Security Agreement and Guaranty are hereby terminated
effective as of the date hereof and are no longer of any force and effect, and
all rights and obligations of the respective parties are hereby terminated and
canceled.
2. Metro, for itself and its agents, servants, employees,
officers, directors, representatives, predecessors, successors and assigns, do
hereby voluntarily and willingly remise, release and forever discharge and
quitclaim unto EF and her agents, servants, employees, representatives,
successors and assigns, any and all manner of actions, causes of action, debts,
dues, claims and demands, both in law and equity, statutory, contractual, or
otherwise that they ever had, now has, or in the future may have, for or by
reason or means of any matter of thing from the beginning of the world to the
date hereof, including, without limitation, any actions, causes of action,
debts, dues, claims and demands based on, arising out of, under or in
connection with the Accounts Payable or the Guaranty.
3. This Termination Agreement and Release shall be governed by the
laws of the State of Rhode Island.
<PAGE> 2
4. This Termination Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Termination
Agreement as of the date first above written.
<TABLE>
<S> <C>
WITNESS: Metro, Inc.
By: /s/ T. James Blair
- ----------------------------------- -------------------
Title: Treasurer
WITNESS: Capital Video Corporation
By: A Daniel Geribo
- ----------------------------------- ----------------
Title: President
/s/ Elvira Famiglietti
- ----------------------------------- ----------------------
Elvira Famiglietti
</TABLE>
<PAGE> 1
Exhibit 10.4
DESCRIPTION OF THE METRO GLOBAL MEDIA, INC. DIRECTORS COMPENSATION ARRANGEMENT
On January 8, 1997, the Board of Directors of Metro Global Media, Inc.
(the "Company") unanimously approved the issuance to each Director of the
Company 600 shares of the Company's Common Stock, as well as an option to
purchase an additional 600 shares of Common Stock (the "Option"), to be issued
pursuant to the Company's 1997 Equity Incentive Plan (the "Plan"), representing
meeting fees for each fiscal year. On March 25, 1997, the Board of Directors
adopted the Plan.
The purpose of the Plan is to encourage officers, directors and
employees of the Company and its subsidiaries to continue their association
with the Company by providing favorable opportunities for them to participate
in the ownership of the Company and in its future growth.
The shares and the options will be issued on January 15 of each year,
and the options will be priced based upon the average closing sale price of the
Company's Common Stock, as quoted on NASDAQ, during the month of each September
immediately preceding the January in which they are issued. The options will
remain exercisable for so long as the recipient continues to sit on the board,
and for a period of 90 days following the cessation of the recipient's service
on the Board, but in no event will the options remain exercisable after March
25, 2077. Each director will be required to execute a stock option agreement
as required by the Plan.
The shares to be issued to the directors as well as the shares
issuable upon exercise of the options will be registered with the Securities
and Exchange Commission on the Form S-8 registering the Plan.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> May-31-1997
<PERIOD-START> Jun-1-1996
<PERIOD-END> Mar-1-1997
<CASH> 157,291
<SECURITIES> 0
<RECEIVABLES> 3,878,016
<ALLOWANCES> 0
<INVENTORY> 4,166,576
<CURRENT-ASSETS> 8,431,841
<PP&E> 1,564,213
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,212,526
<CURRENT-LIABILITIES> 5,182,399
<BONDS> 397,618
0
0
<COMMON> 353
<OTHER-SE> 7,177,077
<TOTAL-LIABILITY-AND-EQUITY> 13,212,526
<SALES> 13,267,996
<TOTAL-REVENUES> 13,267,996
<CGS> 8,397,483
<TOTAL-COSTS> 4,614,396
<OTHER-EXPENSES> (139,925)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 212,419
<INCOME-PRETAX> 116,192
<INCOME-TAX> 49,963
<INCOME-CONTINUING> 66,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,229
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
