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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JULY 16, 1998
THE PRODUCERS ENTERTAINMENT GROUP LTD.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-18410 95-4233050
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
5757 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90036
(Address of Principal Executive Offices)
(323) 634-8634
(Registrant's Telephone Number)
NONE
(Former Name of Registrant)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND FOR THE PERIOD
FROM NOVEMBER 11, 1996 (INCEPTION)
TO JUNE 30, 1997 AND
THE YEAR ENDED JUNE 30, 1998
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
CONTENTS
JUNE 30, 1998
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<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statements of Operations 3
Statements of Partners' Equity/Stockholders' Deficit 4
Statements of Cash Flows 5 - 6
Notes to Financial Statements 7 - 9
</TABLE>
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
MWI Distribution, Inc.,
dba MediaWorks, International
We have audited the accompanying balance sheet of MWI Distribution, Inc., dba
MediaWorks, International as of June 30, 1998, and the related statements of
operations, partners' equity/stockholders' deficit, and cash flows for the
period from November 11, 1996 (inception) to June 30, 1997 and for the year
ended June 30, 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MWI Distribution, Inc., dba
MediaWorks, International as of June 30, 1998, and the results of its operations
and its cash flows for the period from November 11, 1996 (inception) to June 30,
1997 and the year ended June 30, 1998 in conformity with generally accepted
accounting principles.
/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
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SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
September 24, 1998
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
BALANCE SHEET
JUNE 30, 1998
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ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 252,122
Accounts receivable, net of allowance for doubtful accounts
of $75,367 1,611,037
-----------
Total current assets 1,863,159
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FURNITURE AND EQUIPMENT
Office equipment 5,456
Less accumulated depreciation 746
-----------
Total furniture and equipment 4,710
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DEPOSITS AND OTHER ASSETS 10,835
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TOTAL ASSETS $ 1,878,704
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Participation payable $ 688,669
Accounts payable and accrued expenses 153,570
Due to third-party producers 1,195,503
Deferred income 139,126
-----------
Total current liabilities 2,176,868
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STOCKHOLDERS' DEFICIT
Common stock, no par value
50,000 shares authorized
20,000 shares issued and outstanding 23,885
Accumulated deficit (322,049)
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Total stockholders' deficit (298,164)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,878,704
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM NOVEMBER 11, 1996 (INCEPTION) TO JUNE 30, 1997 AND
FOR THE YEAR ENDED JUNE 30, 1998
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<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
REVENUES $ 2,506,850 $ 827,817
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COST OF SALES
Producers' share of revenues 1,418,500 627,087
Participation expense 688,669 --
Commissions 16,810 50,800
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Total cost of sales 2,123,979 677,887
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GROSS PROFIT 382,871 149,930
OPERATING EXPENSES 725,714 29,525
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INCOME (LOSS) FROM OPERATIONS (342,843) 120,405
OTHER INCOME
Interest income 5,196 678
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INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (337,647) 121,083
PROVISION FOR INCOME TAXES
Current 800 800
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NET INCOME (LOSS) $ (338,447) $ 120,283
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</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
STATEMENTS OF PARTNERS' EQUITY/STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM NOVEMBER 11, 1996 (INCEPTION) TO JUNE 30, 1997 AND
FOR THE YEAR ENDED JUNE 30, 1998
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<TABLE>
<CAPTION>
Common Stock
----------------------------- Accumulated Partners'
Shares Amount Deficit Equity Total
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET INCOME, NOVEMBER
11, 1996 (INCEPTION)
TO JUNE 30, 1997 $ 120,283 $ 120,283
--------- --------- --------- ------- ---------
BALANCE, JUNE 30,
1997 -- $ -- $ -- 120,283 120,283
PARTNER DISTRIBUTIONS (80,000) (80,000)
NET LOSS, JULY 1, 1997
TO NOVEMBER 13,
1997 (16,398) (16,398)
CHANGE IN LEGAL ENTITY
FROM LLC TO
CORPORATION 20,000 23,885 (23,885) --
NET LOSS, NOVEMBER
14, 1997 TO JUNE
30, 1998 (322,049) (322,049)
--------- --------- --------- ------- ---------
BALANCE, JUNE 30,
1998 20,000 $ 23,885 $(322,049) $- $(298,164)
========= ========= ========= ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM NOVEMBER 11, 1996 (INCEPTION) TO JUNE 30, 1997
AND FOR THE YEAR ENDED JUNE 30, 1998
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<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 1,652,475 $ 193,291
Cash paid to suppliers and employees (1,421,061) (92,001)
Interest received 5,196 678
Income taxes paid (100) (100)
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Net cash provided by operating activities 236,510 101,868
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment (5,456) --
Increase in deposits -- (800)
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Net cash used in investing activities (5,456) (800)
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CASH FLOWS FROM FINANCING ACTIVITIES
Partnership distributions from the LLC (80,000) --
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Net cash used in financing activities (80,000) --
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Net increase in cash 151,054 101,068
CASH, BEGINNING OF PERIOD 101,068 --
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CASH, END OF PERIOD $ 252,122 $ 101,068
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</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE PERIOD FROM NOVEMBER 11, 1996 (INCEPTION) TO JUNE 30, 1997 AND
FOR THE YEAR ENDED JUNE 30, 1998
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<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income (loss) $(338,447) $ 120,283
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Allowance for bad debts 75,367 --
Depreciation 746 --
(Increase) decrease in
Accounts receivable (994,378) (692,026)
Development costs (10,035) --
Increase (decrease) in
Participations payable 688,669 --
Accounts payable and accrued expenses 86,215 67,355
Due to third-party producers 646,747 548,756
Deferred income 81,626 57,500
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 236,510 $ 101,868
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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NOTE 1 - BUSINESS ACTIVITY
MWI Distribution, Inc., dba MediaWorks, International (the "Company")
(a California corporation) markets animated children's television
series, videos, and merchandise under contractual agreements with
third-party film producers in exchange for commissions. The Company
licenses rights on a worldwide basis with foreign revenues constituting
100% of total revenues.
Prior to November 14, 1997, the Company operated as a limited liability
company pursuant to the provisions of the Delaware Limited Liability
Company Act. During the period from inception, November 11, 1996, until
November 13, 1997, the Company did business as MediaWorks, LLC.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For the purpose of reporting cash flows, the Company considers cash on
deposit, cash on hand, and financial instruments purchased with an
original maturity of three months or less to be cash equivalents.
Furniture and Equipment
Furniture and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the estimated useful
lives of the assets of three to five years.
Revenues
Revenues are recognized under non-cancelable agreements when the
Company has a signed sales agreement and when certain conditions of
sale, including collection of the contract amount and delivery of the
product, are reasonably assured.
Funds advanced by customers prior to the product being delivered are
recorded as deferred income.
Credit Policy
The Company grants uncollateralized credit to its customers. To date,
it has not experienced significant credit-related losses; however,
based on information available at June 30, 1998, it has established an
allowance for doubtful accounts of $75,367.
7
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
================================================================================
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
SFAS No. 109 requires a liability approach for measuring deferred tax
assets and liabilities based on temporary differences existing at each
balance sheet date using enacted tax rates in effect when those
differences are expected to reverse. For the year ended June 30, 1998,
such differences arose principally from net operating loss
carryforwards.
No provision for federal and state income taxes has been recorded
through November 15, 1997, since the Company operated as a limited
liability company and had elected to have taxable income/loss pass
through to its members. Further, no provision for federal and state
income taxes for the period from November 14, 1997 to June 30, 1998 has
been recorded as the Company incurred net operating losses. At June 30,
1998, the Company has approximately $300,000 and $150,000 of federal
and state net operating loss carryforwards, respectively, for tax
reporting purposes available to offset future taxable income; such
carryforwards expire in 2018 and 2003, respectively.
Deferred tax assets, consisting primarily of the tax effect of net
operating loss carryforwards, are offset with a valuation allowance
because of the uncertainty regarding realizability. As of June 30,
1998, the valuation allowance was $110,000.
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 disclosures of contingent assets and liabilities at the
date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3 - CASH
The Company maintains cash deposits at a bank located in California and
in an investment fund located in Maine. Deposits at the bank are
insured by the Federal Deposit Insurance Corporation up to $100,000. As
of June 30, 1998, uninsured balances held at the bank and in the
investment fund aggregated to approximately $300,000.
8
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MWI DISTRIBUTION, INC.,
DBA MEDIAWORKS, INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
================================================================================
NOTE 4 - CONCENTRATIONS
Major Customers
During the year ended June 30, 1998, the Company did business with two
customers whose sales comprised approximately 13% and 10% of revenues.
As of June 30, 1998, these customers represented 19% and 10% of
accounts receivable.
Major Supplier
During the year ended June 30, 1998 and for the period from November
11, 1996 (Inception) to June 30, 1997, the Company did business with
one film producer whose product comprised approximately 62% and 100% of
revenue, respectively.
NOTE 5 - AGREEMENT WITH THE PRODUCERS ENTERTAINMENT GROUP, LTD.
On November 15, 1997, the Company entered into an agreement with The
Producers Entertainment Group, Ltd. ("TPEG"). Under the agreement, TPEG
agreed to provide certain financing in exchange for 65% of the
Company's "net revenue" generated by distribution to foreign markets.
In accordance with this agreement, the Company recognized $688,669 of
participation expense during the year ended June 30, 1998. As of June
30, 1998, $688,669 was payable to TPEG and was classified in the
balance sheet under the caption "Participation payable."
NOTE 6 - RELATED PARTY TRANSACTIONS
During 1997, the Company incurred commission expense of $48,800 to a
stockholder.
NOTE 7 - SUBSEQUENT EVENT
On July 15, 1998, all of the issued and outstanding shares of the
Company were purchased by a subsidiary of TPEG (see Note 5).
9
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SIGNATURES
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 hereunto duly authorized.
September 28, 1998 THE PRODUCERS ENTERTAINMENT GROUP LTD.
By: /s/ IRWIN MEYER
--------------------------------
Irwin Meyer
Chief Executive Officer
