SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
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 2, 1998
ALLIANCE ENTERTAINMENT CORP.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-13054 13-3645913
- -------------------------------------------------------------------------------
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
4250 Coral Ridge Drive, Coral Springs, Florida 33065
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 346-0110
<PAGE>
Item 5. Other Events
On July 2, 1998, Alliance Entertainment Corp. (the "Company") filed
the Trustee's Monthly Reporting Package for the Month Ended May 31, 1998
(the "Trustee's Report"). The Company is required to file this report with the
United States Bankruptcy Court and the United States Trustee pursuant to
Bankruptcy Rule 2015 and the United States Trustee's "Operating Guidelines and
Financial Reporting Requirements." The Trustee's Report contains monthly
unaudited consolidating financial statements of Alliance Entertainment Corp. and
its debtor-in-possession subsidiaries, prepared in accordance with the American
Institute of Certified Public Accountants Statement of Position 90-7: "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code." for the one
month period reported therein.
On July 6, 1998, Alliance Entertainment Corp. (the "Company") announced its
earnings for the month ended May 31, 1998. The Company reported a consolidated
net loss of $7.2 million on net sales of $22.9 million. The reported loss
includes $2 million in interest and reorganization expenses, $3.9 million in
losses from its unconsolidated operations, including Castle Communications, and
$1 million in losses from its non-core businesses.
Certain matters discussed in the Trustee's Report are forward-looking
statements intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "expects" or words
of similar import. Similarly, statements that describe the Company's future
plans, objectives, estimates or goals are also forward-looking statements. Such
statements address future events and conditions concerning capital expenditures,
earnings, sales, liquidity and capital resources, and accounting matters. Actual
results in each case could differ materially from those currently anticipated in
such statements, by reason of factors such as future economic conditions,
including changes in customer demand, legislative, regulatory and competitive
developments in markets in which the Company operates; and other circumstances
affecting anticipated revenues and costs.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 Trustee's Monthly Reporting Package for the Month Ended
May 31, 1998
Exhibit 99.2 Press Release dated July 6, 1998
<PAGE>
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.
ALLIANCE ENTERTAINMENT CORP.
By: /s/ David E. Hawthorne
------------------------------------
Name: David E. Hawthorne
Title: Executive Vice President
and Chief Financial Officer
Date: July 7, 1998
<PAGE>
EXHIBIT INDEX
Exhibit 99.1 Trustee's Monthly Reporting Package for the Month
Ended May 31, 1998
Exhibit 99.2 Press Release dated July 7, 1998
TRUSTEE'S MONTHLY REPORTING PACKAGE
FOR THE MONTH ENDED MAY 31, 1998
ALLIANCE ENTERTAINMENT CORP. et al.
(Name of Debtor)
97 B 44673 through 97 B 44687 (BRL) (Jointly Administered)
(Case Numbers)
Willkie Farr & Gallagher
(Debtors' Attorneys)
/s/ David E. Hawthorne
------------------------------------------------
Signed by:
David E. Hawthorne, Executive Vice President, Chief Financial Officer
(Preparer)
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
May 31, 1998
(Amounts in Thousands)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,902
Accounts receivable, net 51,723
Inventory 54,807
Prepaid expenses and advances 3,299
Due From Affiliates
Refundable income taxes 2,097
-------------
Total current assets 115,828
INVESTMENTS 1,857
PROPERTY AND EQUIPMENT 25,824
COPYRIGHTS 3,786
COST IN EXCESS OF NET ASSETS
OF BUSINESSES ACQUIRED 44,892
COVENANTS NOT TO COMPETE 2,468
OTHER ASSETS 5,273
-------------
$ 199,928
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Excess of outstanding checks over
bank balance $ 148
Notes payable 29,000
Current maturities of long-term debt 638
Accounts payable and accrued expenses 36,419
-------------
Total current liabilities 66,205
LONG-TERM DEBT 6,549
LIABILITIES SUBJECT TO SETTLEMENT
UNDER THE REORGANIZATION CASE 416,897
STOCKHOLDERS' EQUITY
Common stock 4
Preferred Stock 5
Additional paid-in capital 146,965
Employee notes for stock purchase (52)
Retained earnings (deficit) (436,645)
Foreign Currency translation adjustment
-------------
(289,723)
-------------
$ 199,928
=============
*The following subsidiaries do not have any operating activity: Alliance
Ventures Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
MONTH ENDED May 31, 1998
(Amounts in Thousands)
<S> <C>
Net Sales $ 22,908
Cost of sales 19,897
-------------
Gross profit 3,011
Selling, general and administrative expenses 3,613
Amortization of intangible assets 491
-------------
4,104
-------------
(1,093)
-------------
Reorganization items 803
Other income (expense)
Equity in net income (loss) of unconsolidated
entities (3,930)
Amortization of deferred financing costs (137)
Other income (expense) - net 15
Interest expense (1,295)
-------------
(5,347)
-------------
Income(loss) before income taxes (7,243)
Provision for income taxes
-------------
Net income (loss) $ (7,243)
=============
*The following subsidiaries do not have any operating activity: Alliance
Ventures Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
MONTH ENDED May 31, 1998
(Amounts in Thousands)
<S> <C>
Net Income (Loss) $ (7,243)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 928
Equity in net income (loss) of unconsolidated
entities 3,930
Reorganization items 803
Changes in working capital and other, net 4,638
Net cash provided by (used in) operating -------------
activities before reorganization items 3,056
-------------
Reorganization items:
Chapter 11 professional fees paid (803)
-------------
Net cash used by reorganization items (803)
-------------
Net cash provided by (used in)
operating activities 2,253
-------------
Cash Flows From Investing Activities
Purchase of property and equipment (183)
(Increase) decrease in investments
(Increase) decrease in copyrights (36)
(Increase) decrease in other assets (93)
Net cash provided by (used in) -------------
Investing Activities (312)
-------------
Cash Flows From Financing Activities
Increase (decrease) in excess of out-
standing checks over bank balance (114)
Net financing proceeds to affiliates 89
Proceeds from Borrowings
Payments on Borrowings (19)
Net Cash provided by (used in) -------------
Financing Activities (44)
-------------
Net increase (decrease) in cash: 1,897
Cash
Beginning 2,005
-------------
Ending $ 3,902
=============
* The following subsidiaries do not have any operating activity: Alliance
Ventures Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (Unaudited)
May 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance
Alliance Eliminations Entertainment
Entertainment AE Land Matrix and Corp. and
Sub-total Corp. Corp Software Execusoft Reclassification Subsidiaries*
---------- ----------- ----------- ---------- ---------- ----------------- --------------
ASSETS
CURRENT ASSETS
Cash and Cash
equivalents $ 2,327 $ 1,182 $ 363 $ 30 $ $ $ 3,902
Accounts receivable,
net 51,957 (326) 51 41 51,723
Inventory 54,807 54,807
Prepaid expenses 3,153 134 12 3,299
Due from affiliates 7,618 44,726 1,331 256 (53,931)
Refundable income taxes 36 2,061 2,097
Deferred income taxes
---------- ----------- ----------- ---------- ---------- ----------------- --------------
Total current assets 119,898 47,777 1,706 81 297 (53,931) 115,828
INVESTMENTS, at cost 943 8,659 (7,745) 1,857
PROPERTY AND EQUIPMENT 6,535 33 19,048 208 25,824
COPYRIGHTS 3,786 3,786
COST IN EXCESS OF
NET ASSETS OF
BUSINESS ACQUIRED 44,892 44,892
COVENANTS NOT TO
COMPETE 198 2,270 2,468
DEFERRED INCOME TAXES
OTHER ASSETS 176 4,446 136 515 5,273
---------- ----------- ----------- ---------- ---------- ----------------- --------------
$ 131,536 $ 108,077 $ 20,890 $ 804 $ 297 $ (61,676) $ 199,928
========== =========== =========== ========== ========== ================= ==============
LIABILITIES AND STOCKHOLDERS
EQUITY
CURRENT LIABILITIES
Excess of outstanding
checks over bank
balance $ 148 $ $ $ $ $ $ 148
Notes payable (3,633) 31,168 1,465 29,000
Current maturities of
long-term debt 223 415 638
Accounts payable
and accrued expenses 27,563 8,627 204 25 36,419
Income tax payable
---------- ----------- ----------- ---------- ---------- ----------------- --------------
Total current
liabilities 24,301 39,795 619 1,490 66,205
LONG-TERM DEBT 684 5,865 6,549
DEFERRED INCOME TAXES
LIABILITIES SUBJECT
TO SETTLEMENT UNDER
THE REORGANIZATION CASE 179,014 254,184 14,479 3,182 538 (34,500) 416,897
STOCKHOLDERS' EQUITY
Common Stock 3,123 4 1 13 (3,137) 4
Preferred Stock 5 5
Additional paid-in
capital 26,300 146,965 (26,300) 146,965
Employee notes for
stock purchase (52) (52)
Retained earnings
(deficit) (101,886) (332,824) (73) (3,869) (254) 2,261 (436,645)
Foreign currency
translation adjustment
---------- ----------- ----------- ---------- ---------- ----------------- --------------
(72,463) (185,902) (73) (3,868) (241) (27,176) (289,723)
---------- ----------- ----------- ---------- ---------- ----------------- --------------
$ 131,536 $ 108,077 $ 20,890 $ 804 $ 297 $ (61,676) $ 199,928
========== =========== =========== ========== ========== ================= ==============
*The following subsidiaries do not have any operating activity: Alliance
Ventures, Inc. AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (Unaudited)
May 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independent Passport Passport Castle AEC
National Music Music Concord Communications One Way One Stop
Distributors Distribution Worldwide Records (U.S.) Records Group Sub-total
------------ ----------- ----------- ---------- ------------- -------- ----------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ $ $ $ $ $ 47 $ 2,280 $ 2,327
Accounts receivable, net 2,354 2,639 974 (496) 4,284 42,202 51,957
Inventory 842 1,750 5,616 46,599 54,807
Prepaid expenses and
advances 26 2,380 457 290 3,153
Due from Affiliates (2,065) 8,760 698 1,365 (883) (110) (147) 7,618
Refundable income taxes 36 36
Deferred income taxes
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
Total current assets 1,131 11,425 698 6,505 (1,379) 10,294 91,224 119,898
INVESTMENTS, at cost 542 401 943
PROPERTY AND EQUIPMENT 209 639 5,687 6,535
COPYRIGHTS 3,786 3,786
COST IN EXCESS OF NET ASSETS
OF BUSINESSES ACQUIRED
COVENANTS NOT TO COMPETE 198 198
DEFERRED INCOME TAXES
OTHER ASSETS 2 12 20 43 99 176
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
$ 1,133 $ 11,437 $ 698 $ 11,062 $ (1,379) $ 10,976 $ 97,609 $ 131,536
============= ============ ============ ============ ============== ========== ============ ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Excess of outstanding
checks over bank balance $ 2 $ 5 $ $ 141 $ $ $ $ 148
Notes payable 193 3,764 704 (1,439) (6,855) (3,633)
Current maturities of
long-term debt 223 223
Accounts payable and
accrued expenses 2,139 1 1,199 31 1,482 22,711 27,563
Income Tax Payable
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
Total current liabilities 2,334 6 5,104 735 43 16,079 24,301
LONG-TERM DEBT 684 684
DEFERRED INCOME TAXES
LIABILITIES SUBJECT
TO SETTLEMENT UNDER
REORGANIZATION CASE 71,991 13,526 1,392 6,457 7,333 13,092 65,223 179,014
STOCKHOLDERS' EQUITY
Common Stock 1,000 5 22 2,095 1 3,123
Preferred Stock
Additional paid-in capital 16,117 7 27 10,149 26,300
Employee notes for stock
purchase
Retained earnings (deficit) (90,309) (2,107) (694) (548) (9,447) (4,254) 5,473 (101,886)
Foreign Currency
Translation Adjustment
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
(73,192) (2,095) (694) (499) (9,447) (2,159) 15,623 (72,463)
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
$ 1,133 $ 11,437 $ 698 $ 11,062 $ (1,379) $ 10,976 $ 97,609 $ 131,536
============= ============ ============ ============ ============== ========== ============ ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
MONTHS ENDED May 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance
Alliance Eliminations Entertainment
Entertainment AE Land Matrix and Corp. and
Sub-total Corp. Corp Software Execusoft Reclassifications Subsidiaries*
---------- ------------- ---------- ---------- ---------- ----------------- --------------
Net sales $ 22,833 $ $ $ 75 $ $ $ 22,908
Cost of sales 19,870 27 19,897
---------- ------------- ---------- ---------- ---------- ----------------- --------------
Gross Profit 2,963 48 3,011
Selling, general
and administrative
expenses 3,201 303 (40) 149 3,613
Amortization of
intangible assets 16 475 491
---------- ------------- ---------- ---------- ---------- ----------------- --------------
3,217 778 (40) 149 4,104
---------- ------------- ---------- ---------- ---------- ----------------- --------------
(254) (778) 40 (101) (1,093)
---------- ------------- ---------- ---------- ---------- ----------------- --------------
Reorganization items 803 803
Other income
(expense)
Equity in net income
(loss) of unconsolidated
entities (3,930) (3,930)
Amortization of
deferred financing
costs (135) (2) (137)
Other income (expense)
- net 6 3 6 15
Interest expense (568) (679) (38) (10) (1,295)
---------- ------------- ---------- ---------- ---------- ----------------- -------------
(562) (4,741) (40) (4) (5,347)
---------- ------------- ---------- ---------- ---------- ----------------- -------------
Income before
income taxes (816) (6,322) (105) (7,243)
Provision for
income taxes ---------- ------------- ---------- ---------- ---------- ----------------- -------------
Net income (loss) $ (816) $ (6,322) $ $ (105) $ $ $ (7,243)
========== ============= ========== ========== ========== ================= =============
*The following subsidiaries do not have any operating activity: Alliance
Ventures, Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
MONTH ENDED May 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independent Passport Passport Castle AEC
National Music Music Concord Communications One Way One Stop
Distributors Distribution Worldwide Records (U.S.) Records Group Sub-total
------------ ----------- ----------- ---------- ------------- -------- ---------- ------------
Net sales $ $ $ $ 375 $ $ 758 $ 21,700 $ 22,833
Cost of sales 195 486 19,189 19,870
------------- ----------- ----------- ----------- ------------- -------- ---------- ------------
Gross Profit 180 272 2,511 2,963
Selling, general and
administrative expenses 87 309 219 2,586 3,201
Amortization of
intangible assets 16 16
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
87 325 219 2,586 3,217
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
(87) (145) 53 (75) (254)
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
Reorganization items
Other income (expense)
Equity in net income
(loss) of unconsolidated
entities
Amortization of deferred
financing costs
Other income (expense)
- net (3) 4 5 6
Interest expense (391) (71) (52) (47) (7) (568)
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
(391) (74) (48) (47) (2) (562)
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
Income (loss) before
income taxes (478) (219) (48) 6 (77) (816)
Provision for
income taxes
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
Net income (loss) $ (478) $ $ $ (219) $ (48) $ 6 $ (77) $ (816)
============ =========== =========== =========== ============= ======== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
MONTH ENDED May 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance
Alliance Eliminations Entertainment
Entertainment AE Land Matrix and Corp. and
Sub-total Corp. Corp Software Execusoft Reclassifications Subsidiaries*
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Net Income (loss) $ (816) $ (6,322) $ $ (105) $ $ $ (7,243)
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and
amortization 153 611 155 9 928
Equity in net income (loss)
of unconsolidated entities 3,930 3,930
Reorganization items 803 803
Changes in working
capital and other, net 4,559 49 30 (3) 3 4,638
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Net cash provided by
(used in) operating
activities before
reorganization items 3,896 (929) 185 (99) 3 3,056
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Reorganization Items:
Chapter 11 professional
fees paid (803) (803)
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Net cash used by
reorganization items (803) (803)
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Net cash provided by
(used in) operating
activities 3,896 (1,732) 185 (99) 3 2,253
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Cash Flows From Investing Activities
Purchase of property
and equipment (124) (59) (183)
(Increase) Decrease in
Investments
Investments
(Increase) Decrease in
Copyrights (36) (36)
Increase in other assets (7) 14 (100) (93)
Net cash provided by
(used in) ---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Investing Activities (167) 14 (59) (100) (312)
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Cash Flows From Financing Activities
Increase (decrease) in
excess of outstanding
checks over bank balance (114) (114)
Net financing proceeds
to affiliates (2,227) 2,188 (92) 223 (3) 89
Proceeds from issuance
of stock
Proceeds for redemption
of stock
Proceeds from Borrowings (19) (19)
Payments on Borrowings
Net Cash provided by
(used in) ---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Financing Activities (2,360) 2,188 (92) 223 (3) (44)
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Effect of foreign
currency translation
Net increase (decrease)
in cash: 1,369 470 34 24 1,897
Cash
Beginning 958 712 329 6 2,005
========== ============ ========== =========== ========== ================== ===============
Ending $ 2,327 $ 1,182 $ 363 $ 30 $ $ $ 3,902
========== ============ ========== =========== ========== ================== ===============
*The following subsidiaries do not have any operating activity: Alliance
Ventures Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
MONTH ENDED May 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independent Passport Passport Castle AEC
National Music Music Concord Communications One Way One Stop
Distributors Distribution Worldwide Records (U.S.) Records Group Sub-total
---------------- -------------- --------- --------- --------------- -------- --------- -----------
Net Income (loss) $ (478) $ $ $ (219) $ (48) $ 6 $ (77) $ (816)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 20 17 116 153
Equity in net income (loss)
of unconsolidated entities
Reorganization items
Changes in working capital
and other, net 803 304 848 2,604 4,559
Net cash provided by (used
in) operating activities ---------------- -------------- --------- --------- --------------- -------- --------- ----------
before reorganization items 325 105 (48) 871 2,643 3,896
---------------- -------------- --------- --------- --------------- -------- --------- ----------
Reorganization items:
Chapter 11 professional
fees paid
---------------- -------------- --------- --------- --------------- -------- --------- ----------
Net cash used by
reorganization items
---------------- -------------- --------- --------- --------------- -------- --------- ----------
Net cash provided by (used in)
operating activities 325 105 (48) 871 2,643 3,896
---------------- -------------- --------- --------- --------------- -------- -------- ----------
Cash Flows From Investing
Activities
(Purchase) disposal of property
(Increase) decrease
in investments (2) (122) (124)
(Increase) decrease
in copyrights (36) (36)
(Increase) decrease
in other assets (7) (7)
Net cash provided by
(used in)
---------------- -------------- --------- --------- --------------- -------- -------- ----------
Investing Activities (36) (2) (129) (167)
---------------- -------------- --------- --------- --------------- -------- -------- ----------
Cash Flows From Financing
Activities
Increase (decrease) in excess
of outstanding checks
over bank balance 2 (61) (55) (114)
Net financing proceeds to
affiliates (1,263) (8) 48 (767) (237) (2,227)
Proceeds from issuance of stock
Payments for redemption of stock
Proceeds from Borrowings
Payments on Borrowings (19) (19)
Payments on Borrowings
Net Cash provided by
(used in) ---------------- -------------- --------- --------- --------------- -------- -------- ----------
Financing Activities (1,261) (69) 48 (822) (256) (2,360)
---------------- -------------- --------- --------- --------------- -------- -------- ----------
Effect of foreign currency
translation
Net increase (decrease) in
cash: (936) 47 2,258 1,369
Cash
Beginning 936 22 958
================ ============== ========= ========= =============== ======== ======== ==========
Ending $ $ $ $ $ $ 47 $ 2,280 $ 2,327
================ ============== ========= ========= =============== ======== ======== =========
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATING FINANCIAL STATEMENTS
Unaudited Interim Financial Information
The unaudited consolidating financial statements of Alliance Entertainment
Corp. and subsidiaries (the "Company"), have been prepared in accordance with
the American Institute of Certified Public Accountants Statement of Position
90-7: "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7") and generally accepted accounting principles applicable to a
going concern, which principles, except as otherwise disclosed, assume that
assets will be realized and liabilities will be discharged in the normal course
of business. The Company filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code ("Chapter 11") on July 14, 1997 (the "Filing").
The Company is presently operating its business as a debtor-in-possession
subject to the jurisdiction of the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court").
Except as set forth, the unaudited consolidating balance sheet as of May
31, 1998, and the unaudited consolidating statements of operations and cash
flows for the month ended May 31, 1998 (interim financial information), have
generally been prepared on the same basis as the audited financial statements
except that the unaudited financial statements. The financial statements include
all adjustments believed by management to be necessary to fairly reflect the
Company's financial position and results of operations in accordance with
generally accepted accounting principles. The preparation of these financial
statements has required the development by management of a number of significant
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. Significant estimates
inherent in the preparation of the accompanying financial statements include
management's estimate of future cash flows used as a basis to assess the
recoverability of long-lived assets, adjustments to reduce the carrying value of
inventory and accounts receivable to net realizable value and estimates of cost
incurred in connection with restructuring and related activities. These
accounting estimates are subject to material change in the near term. In
addition, the accompanying financial statements are unaudited and, upon
completion of the annual financial statement audit by the Company's independent
accountants for the year ended December 31, 1998 may require further
adjustments. Excluded from the Filing were the following non-debtor subsidiaries
of the Company's Proprietary Products Group, including: Castle Communications
plc (and its related affiliates); The St. Clair Entertainment Group, Inc.; and
Red Ant Entertainment LLC ("Red Ant") (and its related affiliates). Accordingly,
the accompanying financial statements have been prepared excluding their
financial position, results of operations and cash flows. The results of
operations of those businesses and the Company's underlying equity therein have
been presented under the equity method of accounting. In the opinion of the
Company, the interim financial information is considered preliminary and may not
include all adjustments, necessary for a fair statement of the results of the
interim period.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim financial information. These
statements should be read in conjunction with the Company's financial statements
for the year ended December 31, 1997. The results of operations for the month
ended May 31, 1998, may not be indicative of the operating results for the full
year or any future interim period.
The Company experienced significant operating losses in 1996 and 1997 and
continued to post a year-to-date operating loss in 1998. The Company's ability
to continue as a going concern is dependent upon the confirmation of a plan of
reorganization by the Bankruptcy Court, the ability to maintain compliance with
debt covenants under the Revolving Credit and Guaranty Agreement, as amended,
("DIP Financing Agreement"), achievement of profitable operations, and the
resolution of the uncertainties of the reorganization case discussed below.
<PAGE>
Restructuring and Other Charges
During the month ended May 31, 1998, approximately $.5 million was paid and
charged against liabilities established by the Company at December 31, 1997 for
restructuring and other non-recurring charges relating to its consolidation
plans. As of May 31, 1998, approximately $7.5 million remains to be paid in
future periods.
Reorganization under Chapter 11; Pre-Petition Credit Agreement
On June 30, 1997, the Company failed to make the full amortization payment
of $1.5 million on its senior secured credit facility (the "Pre-petition Credit
Agreement") and additionally failed to satisfy a financial covenant requiring
the Company raise $35 million of equity prior to July 1, 1997 and as a result
was in default under the provisions of its Pre-petition Credit Agreement. Under
the terms of its Pre-petition Credit Agreement and as a result of the existing
defaults, the Company's banks had the right to accelerate the maturity of
approximately $187 million of outstanding indebtedness.
Additionally, as a result of the defaults under the Pre-petition Credit
Agreement, the Company was unable to make a July 15, 1997 interest payment due
and payable on the Company's $125 million of 11.25% Senior Subordinated Notes
due 2005.
On July 14, 1997, as a result of the defaults under the Pre-petition Credit
Agreement, the pending payment default on the Company's Senior Subordinated
Notes and an overall inability to operate the Company's business under the
existing liquidity restraints, the Company and fourteen of its wholly-owned
subsidiaries filed voluntarily under Chapter 11 of the Bankruptcy Code in order
to facilitate the reorganization of the Company's core businesses and the
restructuring of the Company's long-term debt, revolving credit and trade and
other obligations. The Company continues to operate with its existing directors
and officers as a debtor-in-possession subject to the Bankruptcy Court's
supervision and orders. Excluded from the filing were certain businesses in the
Company's Proprietary Products Group, including: Castle Communications plc (and
its related affiliates); The St. Clair Entertainment Group, Inc.; and Red Ant
Entertainment LLC ("Red Ant") (and its related affiliates). The filing was made
in the U.S. District Court for the Southern District of New York in Manhattan.
The filing of the petition under Chapter 11 of the Bankruptcy Code resulted
in the occurrence of an Event of Default under the Company's: (i) Indenture
relating to its 11.25% Senior Subordinated Notes due 2005; (ii) Credit
Agreement; (iii) 6% Exchangeable Notes; and (iv) Mortgage Bond for its
distribution facility in Coral Springs, Florida.
Pursuant to the provisions of the Bankruptcy Code, all of the Company's
liabilities as of July 14, 1997, were automatically stayed upon the Company's
filing of its petition for reorganization. In addition, absent approval from the
Bankruptcy Court, the Company is prohibited from paying any pre-petition
obligations. In hearings held on July 14 and 16, 1997, the Bankruptcy Court
approved the Company's request for payment of certain pre-petition wages and
benefits, use of the Company's cash management system and retention of legal and
financial professionals.
<PAGE>
In the Company's Chapter 11 case, substantially all liabilities as of the
date of the Filing are subject to settlement under a plan of reorganization to
be voted upon by the Company's creditors and stockholders and confirmed by the
Bankruptcy Court. Schedules have been filed by the Company with the Bankruptcy
Court setting forth the assets and liabilities of the Company as of the date of
the Filing as shown by the Company's accounting records. Differences between
amounts shown by the Company and claims filed by creditors are being
investigated and resolved. The ultimate amount and settlement terms for
pre-petition liabilities are subject to a plan of reorganization, and
accordingly, are not presently determinable.
Under the Bankruptcy Code, the Company may elect to assume or reject real
estates leases, employment contracts, personal property leases, service
contracts and other executory pre-petition leases and contracts, subject to
Bankruptcy Court approval. The Company cannot presently determine or reasonably
estimate the ultimate liability which may result from the filing of claims for
any rejected contracts or from leases which may be rejected at a future date.
The principal categories of claims classified as "Liabilities subject to
settlement under the reorganization case" are identified below. All amounts
presented below may be subject to future adjustments depending on Bankruptcy
Court actions, further developments with respect to disputed claims,
determination as to the security of certain claims, the value of any collateral
securing such claims, or other events.
<TABLE>
<CAPTION>
Liabilities Subject to Settlement (000's)
-------
Under the Reorganization Case May 31, 1998
- ----------------------------- ---------------------
<S> <C>
Accounts payable and accrued expenses $143,518
Pre-Petition Credit Agreement 136,100
11.25% Senior Subordinated Notes due 2005 125,000
6% Exchangeable Notes 10,805
Other Promissory Notes 1,395
Obligations under capital leases 4
Accounts payable Non-Debtor Subsidiaries 75
--------
$416,897
========
</TABLE>
On June 25, 1998, the Bankruptcy Court approved the Company's Disclosure
Statement for its Plan of Reorganization. The approval of the Disclosure
Statement allows the Company to commence the solicitation of votes for approval
of its Plan of Reorganization. Plan materials and ballots are expected to be
mailed on June 30, 1998. The deadline for returning the ballots is July 24,
1998, and a hearing to confirm the Plan is scheduled for July 30, 1998. Also,
the Court approved the sale of the Company's U.K. subsidiary, Castle
Communication to London-based Rutland Trust PLC. The sale is expected to be
consummated on or before July 1, 1998.
In the event that a plan of reorganization is approved by the Bankruptcy
Court, continuation of the business after reorganization will be dependent upon
the success of future operations and the Company's ability to meet its
obligations as they become due. In the event that such a plan of reorganization
is not approved by the Bankruptcy Court and a Restructuring Plan is not
consummated, the ability of the Company to continue as a going concern depends
on the success of future operations and the ability of the Company to generate
sufficient cash from operations and financing sources to meet its obligations as
they become due and to finance its operations. The accompanying financial
statements have been prepared on a going concern basis, which, except as
disclosed, contemplates continuity of operations, realization of assets and
discharge of liabilities in the ordinary course of business. As a result of the
Chapter 11 filing, the Company may have to sell or otherwise dispose of assets
and discharge or settle liabilities for amounts other than those reflected in
the financial statements. Further, a plan of reorganization could materially
change the amounts currently recorded in the financial statements. The financial
<PAGE>
statements do not give effect to all adjustments to the carrying value of
assets, or amounts and classification of liabilities that might be necessary as
a consequence of the proceeding. The appropriateness of using the going concern
basis is dependent upon, among other things, confirmation of a plan of
reorganization, success of future operations and the ability to generate
sufficient cash from operations and financing sources to meet obligations.
In addition, valuation methods used in Chapter 11 reorganization cases vary
depending on the purpose for which they are prepared and used and are rarely
based on generally accepted accounting principles, the basis on which the
accompanying financial statements are prepared. Accordingly, the values set
forth in the accompanying financial statements are not likely to be indicative
of the values presented to or used by the Bankruptcy Court. As a result,
valuations of the Company based on the accompanying financial statements may be
significantly higher than valuations used by the Company in determining the
amounts to be received, if any, by each class of creditors under a plan of
reorganization.
DIP Financing
In connection with the Company's Chapter 11 filing, on July 16, 1997, the
Company entered into a DIP Financing Agreement with Chase Manhattan Bank
providing for a maximum of $50 million of debtor-in-possession ("DIP") financing
subject to approval by the Bankruptcy Court. The DIP Financing Agreement is
intended to address the Company's immediate working capital needs and to support
the Company's operations during its Chapter 11 proceedings. The Company's use of
the full DIP Financing Agreement was approved by the Court.
The DIP Financing Agreement provides for borrowings under a revolving
credit and a letter of credit facility. Loans under the revolving credit
facility bear interest at either the Alternate Base Rate (as defined in the DIP
Financing Agreement) plus 1.5% or at the Adjusted LIBOR Rate (as defined in the
DIP Financing Agreement) plus 2.75%. Loans under the letter of credit facility
bear interest at the Alternate Base Rate plus 1.5%. The terms of the DIP
Financing Agreement contain certain restrictive covenants including: limitations
on the incurrence of additional guarantees, liens and indebtedness; limitations
on the sale of assets and the making of capital expenditures. The DIP Financing
Agreement also requires that the Company meet certain minimum earnings before
taxes and other expenses as defined through the end of 1998.
Under the DIP Financing Agreement, Chase Manhattan Bank has been given a
perfected first priority lien on all property and assets of the Company and its
fourteen wholly-owned debtor-in-possession subsidiaries. The banks who are
parties to the Pre-Petition Credit Agreement, as well as certain other secured
creditors of the Company, have been granted replacement liens on the Company's
assets (junior to the lien granted under the DIP Financing Agreement) to
adequately protect such creditors' secured claims against the Company prior to
its Chapter 11 filing.
The DIP Financing Agreement expires on January 31, 1999, or earlier upon
the occurrence of certain events, including confirmation of a plan of
reorganization by the Bankruptcy Court, a sale of substantially all of the
assets of the Company, or failure by the Company to receive a final order
confirming a plan of reorganization.
On March 18, 1998, the Company and Chase Manhattan agreed to an amendment
to the DIP Financing Agreement. The terms of the amendment modify certain
covenants related to (1) permitted capital expenditures, (2) minimum earnings
before interest, taxes, depreciation and amortization, as defined, (3) minimum
carrying value of inventories, and (4) the amount of permitted selling, general
and administrative expenses relating to certain non core operations. The
amendments were approved by the bankruptcy court on April 1, 1998.
<PAGE>
Indebtedness
As a result of the Filing, substantially all debt outstanding at July 14,
1997, was classified as liabilities subject to settlement. No principal or
interest payments are made on any pre-petition debt (excluding interest payments
on the Pre-petition Credit Agreement with Chase Manhattan Bank) without
Bankruptcy Court approval or until a reorganization plan defining the repayment
terms has been approved.
Generally, interest on pre-petition debt ceases accruing upon the filing of
a petition under the Bankruptcy Code. However, if debt is collateralized by an
interest in property whose value (minus the cost of preserving such property)
exceeds the amount of the debt, post-petition interest may be payable. Other
than those noted above, no other determinations have yet been made regarding the
value of the property interests which collateralize various debts. Although
interest may be paid pursuant to an order of the Bankruptcy Court, other than
interest on the Pre-petition Credit Agreement, it is uncertain whether any other
post-petition interest will be payable or paid. The Company believes at this
time that it is unlikely that such interest will be paid. Contractual interest
expense not recorded on certain pre-petition debt (11.25% Senior Subordinated
Notes due 2005, 6% Exchangeable Notes and other promissory notes) totaled
approximately $1.3 million for the month ended May 31, 1998.
Income Taxes
Based upon current operations of the Company and other factors, an income
tax benefit was not recorded for the Company and its fourteen wholly owned
subsidiaries which filed under Chapter 11 for the month ended May 31, 1998. The
Company anticipates that pre-tax losses, if any, which may be realized during
the fiscal year ending December 31, 1998, will not result in the recording of
any additional tax benefit by the Company. Further, any net operating loss carry
forwards prior to, and subsequent to the filing date, may be severely reduced by
the bankruptcy case.
Reorganization Items
The Company recorded the following expense and income items during the
month ended May 31, 1998, directly associated with the Chapter 11 reorganization
proceedings and the resulting restructuring of its operations:
(000's)
Month Ended
May 31, 1998
-------------------
Professional fees $803
Professional fees represent estimates of expenses incurred, primarily for legal,
consulting and accounting services provided to the Company and the creditors
committee (which are required to be paid by the Company while in Chapter 11).
Interest income represents interest earned on cash invested during the Chapter
11 proceeding.
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
Trade Payables and Insurance
May 31, 1998
To the best of the Company's knowledge, all post-petition trade payables
are current and all insurance policies, including all applicable workers'
compensation and disability insurance policies, are fully paid as of May 31,
1998.
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Court Reporting Schedules - Tax Payments and Collections
Month ended May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Gross Wages Paid $2,419,696.69 Schedule I
Payroll Taxes Withheld 551,293.87 Schedule II
Payroll Taxes Incurred 187,947.42 Schedule III
Gross Taxable Sales 55,195.62 Schedule IV
Sales Tax Collected 3,737.22 Schedule IV
Payment of Payroll Taxes - Schedule V
Payment of Tax Payments 66,798.48 Schedule VI
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule I
Court Reporting Schedules for Payroll Tax Payments and Collections
Two week periods ended May 1, May 15 and May 29
GROSS WAGES PAID
<TABLE>
<CAPTION>
<S> <C>
Two Week Period Ended
Date Gross Wages
- --------------------- --------------
May 1, 1998 $ 833,558.39
May 15, 1998 809,199.61
May 29, 1998 776,938.69
--------------
Total $2,419,696.69
==============
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule II
Court Reporting Schedules for Payroll Tax Payments and Collections
Two week periods ended May 1, May 15 and May 29
PAYROLL TAXES WITHHELD
<TABLE>
<CAPTION>
<S> <C> <C>
Two Week Periods Ended Payroll Tax
Date Tax Type Withheld
- --------------------- ------------------ -----------
May 1, 1998 Federal Income Tax $121,082.74
FICA & MEDI w/h 58,490.14
State w/h 9,706.04
Local w/h 1,020.20
May 15, 1998 Federal Income Tax 117,079.50
FICA & MEDI w/h 55,993.70
State w/h 9,482.65
Local w/h 681.26
May 29, 1998 Federal Income Tax 114,434.39
FICA & MEDI w/h 53,974.56
State w/h 8,635.12
Local w/h 713.57
-------------
TOTAL $551,293.87
=============
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule III
Court Reporting Schedules for Payroll Tax Payments and Collections
Two week periods ended May 1, May 15 and May 29
PAYROLL TAXES INCURRED
<TABLE>
<CAPTION>
<S> <C> <C>
Two Week Period Ended Employer Payroll Amount
Date Tax Contributions Incurred
- --------------------- --------------------- -----------
May 1, 1998 FICA & MEDI Expenses $58,490.02
FUTA 1,642.47
Disability/SUI 6,016.76
May 15,1998 FICA & MEDI Expenses 55,997.64
FUTA 1,448.07
Disability/SUI 5,235.05
May 29,1998 FICA & MEDI Expenses 53,974.41
FUTA 1,213.97
Disability/SUI 3,929.03
-----------
TOTAL $187,947.42
===========
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule IV
Schedules of Sales and Meals Tax Collected
Month Ended May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Sales Tax Gross Taxable
Taxing Jurisdiction Collected Sales
- -----------------------------------------
Florida Department of Revenue $2,011.48 $33,524.67
State Board of Equalization - California 544.34 6,598.00
New York Department of Revenue 12.40 155.00
New York Department of Revenue 551.00 6,701.00
New Jersey Department of Revenue 35.00 587.00
State of Michigan - Department of Treasury 102.00 1,699.95
State of Board of Equalization - California 481.00 5,930.00
--------- ----------
$3,737.22 $55,195.62
========= ==========
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule V
Court Reporting Schedules for Payroll Tax Payments and Collections
Two week periods ended May 1, May 15 and May 29
PAYMENT OF TAXES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Tax Period Tax Type Taxing Jurisdiction Date Paid Amount Paid
- ----------- -------- ------------------- --------- -----------
</TABLE>
The Company's payroll is processed by a third party payroll service.
Accordingly, at each payroll period the Company transfers funds to the payroll
service who in turn makes payments directly to the appropriate taxing
jurisdiction on the Company's behalf.
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule VI
Schedules of Tax Payments
Month Ended May 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Tax Jurisdiction Tax Type Amount Paid Date Paid
- -------------------------------------------- ---------------------------- ---------------- --------------------
Florida Department of Revenue Florida Sales and Use Tax $ 1,981.48 May 19, 1998
State Board of Equalization - California California Sales and Use Tax 517.00 May 19, 1998
City of Albany, New York Property Tax 3,792.00 May 21, 1998
Coral Springs, Florida Taxpayer Service Sales and Use Tax 10.00 May 22, 1998
State of Delaware Franchise Tax 60,000.00 May 28, 1998
State of Delaware Franchise Tax 52.25 May 22, 1998
State of Delaware Franchise Tax 52.25 May 28, 1998
State of Delaware Franchise Tax 52.25 May 28, 1998
State of Delaware Franchise Tax 52.25 May 28, 1998
State of Delaware Franchise Tax 52.25 May 28, 1998
State of Delaware Franchise Tax 52.25 May 28, 1998
State of Delaware Franchise Tax 52.25 May 28, 1998
State of Delaware Franchise Tax 52.25 May 28, 1998
Georgia Department of Revenue Corporate Net Worth 80.00 May 8, 1998
-------------
TOTAL $ 66,798.48
=============
</TABLE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------------------------x
In re :
: Chapter 11
ALLIANCE ENTERTAINMENT CORP., et al, : Case No. 97 B 44673
: through 97 B 44687 (BRL)
Debtors. :
: (Jointly Administered)
- ------------------------------------------------x
Verification Under Penalty of Perjury
STATE OF FLORIDA )
) ss:
COUNTY OF BROWARD )
David Hawthorne, being duly sworn, deposes and says:
1. I am Executive Vice President, Chief Financial Officer of Alliance
Entertainment Corp. The foregoing operating statements of Alliance Entertainment
Corp. and subsidiaries were prepared under my direction.
2. The foregoing operating statements are true and correct to the best of
my knowledge, information and belief.
/s/ David E. Hawthorne
--------------------------------
David E. Hawthorne
Sworn to before me this
29th day of June, 1998
/s/ Maryann Vertucci
- ---------------------------
Notary Public
News Release
- ----------------------------------------------
Sitrick and Company Inc.
Los Angeles/New York
Contact: Sandra Sternberg
Brenda Adrian
Sitrick and Company
310-788-2850
FOR IMMEDIATE RELEASE
- ---------------------
ALLIANCE ENTERTAINMENT CORP. REORGANIZATION MOVES FORWARD;
SOLICITATION PROCESS BEGINS
NEW YORK -- July 6, 1998 -- Alliance Entertainment Corp. (OTC: AETTQ) filed
its monthly operating report with the Office of the United States Trustee. The
Company reported a consolidated net loss of $7.2 million on net sales of $22.9
million. The loss includes $2 million in interest and reorganization expenses,
$3.9 million in losses from its unconsolidated operations, including Castle
Communications and $1 million in losses from its non-core operations.
The Court has set dates for several key steps in the Alliance case
including July 24, 1998, as the ballot deadline and July 30, 1998 for the
confirmation hearing. Under the terms of the Plan, the newly reorganized
Alliance Entertainment will become majority owned by a syndicate of banks led by
The Chase Manhattan Bank, as agent.
"We are pleased with the progress Alliance has made in the reorganization
process," said Eric Weisman, president and chief executive officer. "With the
support of the banks and the major creditors, we anticipate Alliance will emerge
from Chapter 11 in early August."
Alliance Entertainment Corp. is the largest wholesaler of prerecorded music
and related products. In addition, Alliance through its Concord and Castle
subsidiaries, is a developer and marketer of catalog content in several genres.
The Company currently employs approximately 800 people in the United States,
Canada and the United Kingdom and maintains headquarters in Coral Springs, Fla.
Alliance Entertainment Corp. and certain of its subsidiaries filed to reorganize
under Chapter 11 on July 14, 1997.
Forward-looking statements herein are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"expects," "anticipates," or words of similar import. Similarly, statements that
describe the Company's future plans, objectives, estimates or goals are
forward-looking statements. There are certain important factors that could cause
results to differ materially from those anticipated by forward-looking
statements made herein. Investors are cautioned that all forward-looking
statements involve risks and uncertainty.
