U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1995
Commission File No. 0-20236
CENTURY TECHNOLOGIES, INC.
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(Name of Small Business Issuer in Its Charter)
COLORADO 65-0395829
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(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
201 North Robertson Boulevard, Beverly Hills, California 90211
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(Address of Principal Executive Offices) (Zip Code)
(310) 275-9063
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
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Name of Each Exchange
Title of Each Class on Which Registered
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Securities registered under Section 12(g) of the Exchange Act:
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Common Stock ($.00001 Par Value)
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(Title of Class)
Check whether the issuer (1) has 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 issuer was required to file such reports, and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
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This report contains a total of __ pages.
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
Yes X No
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State issuer's revenues for its most recent fiscal year: None.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days.
Common Stock, par value $.00001 per share ("Common Stock"), was
the only class of voting stock of the Registrant outstanding on
October 25, 1996. Based on the closing bid price of the Common Stock
on the National Association of Securities Dealers, Inc. OTC Bulletin
Board as reported on October 25, 1996 ($0.21), the aggregate market
value of the 12,206,985 shares of the Common Stock held by persons
other than officers, directors and persons known to the Registrant to
be the beneficial owner (as that term is defined under the rules of
the Securities and Exchange Commission) of more than five percent of
the Common Stock on that date was approximately $2,563,467. By the
foregoing statements, the Registrant does not intend to imply that
any of these officers, directors or beneficial owners are affiliates
of the Registrant or that the aggregate market value, as computed
pursuant to rules of the Securities and Exchange Commission, is in
any way indicative of the amount which could be obtained for such
shares of Common Stock.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has 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 a court.
Yes No
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APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
13,206,985 shares of Common Stock, $.00001 par
value, as of September 30, 1996.
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PART I
BUSINESS
ITEM 1. DESCRIPTION OF BUSINESS
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Introduction
Century Technologies, Inc. (the "Company" or "Century") was a developmental
stage company and in the second half of 1996 started in the business of
distributing and producing entertainment programming to all media on an
international basis. While the Company's primary business is distribution of
television programming, Century is also involved in the areas of production,
co-production and co-financing of quality product that the Company will obtain
equity participations. The Company will also look to acquire programming on a
worldwide or selected territorial basis for distribution.
In November 1995, Mr. Peter B. Newgard became President and Chief
Executive Officer of Century with a primary goal to assemble a highly qualified
management and operating team for the purpose of bringing focus to the Company's
goal of co-producing original product and distribution of features and
television programming to all media on an international basis, including network
and cable television in the U.S. marketplace. Mr. Newgard has more than 15 years
experience in the television and entertainment industry, and in addition to
operating in an executive capacity for major movie and entertainment product and
distribution companies, has operated his own distribution company, Newgard
Entertainment Group, Ltd. ("Newgard Entertainment") in Beverly Hills,
California. An experienced executive in television distribution and syndication,
Mr. Newgard formed Newgard Entertainment in 1991 to be a worldwide distributor
of film and television programming. Markets developed by Mr. Newgard and Newgard
Entertainment included broadcast, first run syndication, pay-per-view, cable
programming and home video and all ancillary sales. Mr. Newgard created
strategic alliances with various companies, worldwide, which has allowed direct
access to Japan and the Far East, Mexico, South America and Europe. In addition,
Mr. Newgard provided consultant services to a number of companies in the
international television marketplace.
Since assuming control of Century in November 1995, new management has
moved forward in its due diligence in "cleaning up" past management's varied
dealings with the goal of firmly establishing a specific direction and business
of the Company. While past management attempted to become involved in various
diverse businesses, current management believes that a firm direction in the
Company's business purpose is critical in establishing a successful strategic
plan. This new focus will better serve the Company and its shareholders and
should enable the Company to finally generate revenue on a consistent basis.
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Current management has a long history in the entertainment programming
distribution business with established long-term relationships and contacts in
the entertainment community throughout the world. As part of its strategic
program, the Company has assembled a Board of Directors and additional personnel
to assist and direct the Company properly in the entertainment distribution
marketplace. With key personnel now in place, the Company's most important
mission is to secure distribution rights to high profile entertainment product
that can be exploited to a growing worldwide marketplace.
Concerning previous entertainment product acquisitions, prior management
of Century had entered into various transactions with Krypton International
Corporation, Video Licensing Group and C. Elvin Feltner, Jr., all related
parties, that involved certain rights to various feature libraries, lists of
titles and two packages containing two and five titles, respectively. Prior to
becoming involved with the Company, current management was led to believe that
these titles were in proper order and that previous management had performed the
necessary due diligence to establish the proper chain of title in order to
conclude licensing deals and properly market the titles. Unfortunately,
following numerous unfulfilled requests to receive proper documentation from the
licensor/seller of the features and research into the history of the various
titles, the Company was compelled to rescind all of the transactions as it
considers these assets to have no value to the Company or in the marketplace.
These transactions also included certain rights in a Spanish language film
library and two lists of primarily public domain films and broadcast air rights.
After numerous requests, the Company failed to receive any documentation or
substantiation concerning chain of title for any of the films. These rescissions
or cancellations resulted in the reduction in carrying value of approximately $6
million of the Company assets and the Company has filed a law suit to eliminate
more than $1.8 million in debt and 1,763,334 shares of preferred stock.
As a result of the foregoing, in August 1996, the Company filed suit
against C. Elvin Feltner and certain affiliated companies (CENTURY TECHNOLOGIES,
INC. V. VIDEO LICENSING GROUP, INC., KRYPTON INTERNATIONAL CORPORATION AND C.
ELVIN FELTNER, JR., Case No. 96-8581) in the U.S. District Court for the
Southern District of Florida requesting damages and equitable relief. More
specifically, the Company is seeking rescission of various licensing agreements,
a bill of sale and other agreements entered into between December 1992 and
November 1995 with various of the Defendants as well as compensatory and
punitive damages, interest and attorneys' fees based on fraudulent conduct of
the Defendants in relation to the various licensing and other agreements
previously entered into by the parties and for violation of the federal
Racketeer Influenced and Corrupt Organizations Act (RICO). The Company intends
to pursue this litigation vigorously and vindicate its interests and those of
its shareholders.
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The Marketplace
GENERAL - As indicated, Century will operate on an international basis,
licensing programming to all media. Management has an established history both
domestically and internationally in the entertainment distribution business.
Relationships and contacts are in place to move expeditiously and to market
entertainment programming in a quality fashion in all areas of media on a global
basis.
The Company now must move forward in obtaining quality product and utilize
management's talents in firmly establishing the Company as a credible source in
the entertainment marketplace. For the Company to achieve its goals in a quality
and cost-effective manner, it must inventory projects that will enable Century
to distribute the best product possible while limiting major downside risks. In
addition, the Company must assemble a varied product line, i.e., features,
series, specials and animation.
In the U.S. marketplace, there exists numerous outlets and literally
"windows" of program sales opportunities. With video, pay cable, basic cable,
satellite, local and network broadcasters, the United States enjoys the most
mature and varied entertainment marketplace in the world. The public may not
currently be able to access the so-called 500 channel universe, but 150 channels
is already a reality. For this reason, there exists a tremendous need for
programming in the television marketplace. Century intends to participate on
some level in every "tier" or outlet of the domestic entertainment marketplace.
CABLE TELEVISION - Pay and basic cable are potentially the most important
long-term markets for the Company to develop and gain participation. Major
buyers include HBO, Showtime, Turner, USA, A&E, Lifetime and Family Channel.
Each of these channels or cable networks buy library and first-run programming.
The type of programming and fees these cable networks will pay vary greatly, and
often can cover a majority of a particular production budget. In addition, cable
sales for "back-end" revenue after a syndication window can be an important
element in a budget.
SYNDICATION - This marketplace has become more difficult to exploit due to
less viable available time periods, cost of marketing, and the control and
leverage held by the major studios. Notwithstanding such limitations, given the
proper promotion and financial backing, syndication can generate significant
revenue and may allow for back-end or even simultaneous cable sales. The type of
programming becomes, in management's judgment, the most critical element for
success in syndication. Typically, other than "off-net" programming with a
built-in audience, the program should be able to appeal to the widest possible
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audience and have significant promotability or a "hook" to attract viewers. Most
obvious examples include programs that are highly exploitable, i.e., "Hard
Copy", "Inside Edition", "Cops".
NETWORKS - The major networks currently consist of ABC, NBC, CBS and, to a
lesser degree, FOX. The new fledgling, but heavily financed networks are The WB
(Warner Brothers) and UPN (Paramount). Traditional licensing of a series to the
major networks normally involves substantial deficit financing, which obviously
leads to the incurrence of high risks. Series network production is more
effectively left to the major studios which are willing to operate on an
immediate deficit with the expectation that they will derive large returns in
syndication.
Century, however, will seek for ways to work with the various networks as
they do pay for their product, and it provides a very positive message to the
overall marketplace concerning a company's proprietary product. Also as
previously indicated, the "back-end" asset value of network show or series can
be significant. For Century, at least initially, the new smaller networks are
somewhat easier to approach on programming ideas and specials. In addition, the
MOW business can be very profitable with the international marketplace, as
outlined hereafter.
Century also intends to be involved in all of the ancillary markets of
video, pay-per-view, and airline sales to name a sampling. Depending on the type
of product, sales to these ancillary markets can generate significant revenue.
INTERNATIONAL MARKETS - The International marketplace today represents a
significant portion of a company's total revenue. In some cases, international
revenue ranges between 40-65% of the total annual income. U.S. entertainment
companies can no longer rely strictly on revenue from the domestic market.
International sales revenue may cover a company's deficit on a given project
prior to its full U.S. release. While tastes certainly vary internationally, the
United States leads in quality entertainment and is universally recognized as
the leader.
The international marketplace has matured over the last ten years, but the
growth in recent years is more dramatic. Relationships between buyer and seller
have always been extremely important; however, in recent years, while the
importance of these relationships remain, buyers have become increasingly more
sophisticated with a mandate to acquire product that will appeal most to the
audience of their country and correspondingly will achieve higher ratings.
Moreover, very often if a strong relationship exists between the buyer and
seller and the product is either marginal or comparable to a competitor's
product, an existing relationship can be the critical factor in completing the
transaction. In the past, there was limited concern about ratings because most
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often there was only one or two stations in a market (except for the larger
territories such as U.K., Germany, France and Japan). The availability of a
broad range of channels and alternative programming has given added emphasis to
the need for quality and appealing programming.
In the international marketplace today, the Company has to be concerned
with demographics, ratings and high production values with known cast or stars.
Presently, the consensus among buyers is for action adventure programming
(without gratuitous violence), family programming and general dramas with
recognized stars. Series such as DYNASTY or mini-series are vary popular. U.S.
ratings do not always guarantee that a foreign buyer will acquire a program, but
buyers will certainly pay special attention to the higher rated programs to
evaluate whether they are applicable to its territory.
There are also general "rules" or exceptions applicable to particular
markets and sometimes for the overall international marketplace. For example,
programming that deals with drugs as a theme will not pass censorship in the
Middle East and Southeast Asia. Religious subjects, with the exception of
Christmas, are often banned. In addition, any disrespect for law enforcement,
parents, and the family are often not acceptable. Many times a station in a
given territory will need to cut or edit a program to comply with standards due
to offensive material. For this reason, most good producer/distributors
understand the need for both a "soft" and "hard" versions of a particular series
or feature.
How Century Will Operate Internationally
Century will make direct sales to the international marketplace wherever
possible. A minimum of outside sales representatives will be used except in
those markets where practical considerations require the use of agents. The
Company will specifically utilize sales representation in areas where problems
exist in traveling to these markets, collections, shipments and language
barriers. In these areas a firm must have someone well placed, knowledgeable and
credible who has established relationships with the buyers. In such markets, the
Company will utilize the services of established sales representatives also
associated with the major studios. It should be noted that in the territories
where Century has contracted with an agent, it will become the licensee on the
sales contract, and will not have to deal with the problems of censorship,
collections, acts of God, etc. Century will be paid directly by the
representative in accordance with established agreements. A further important
manner by which the Company will generate sales is through consummating output
deals with the larger companies in major territories to purchase present and
future products for a specified period of time.
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Company's Immediate Goal
It is extremely important that the Company obtain the distribution rights
to "high profile" product that will separate it in a very competitive
marketplace. In order to accomplish this, the Company must establish funding
and/or broadcast production partners on various projects. Another challenge will
be to find product that is "high profile" and of worldwide interest, but at the
same time does not place the Company (and its partners) at extreme financial
risk. In the main, the Company must initially have product that has a budget
that allows for a basic cable "home" domestically and has broadcast
applicability overseas. This type of product and budget allows for the most
upside potential with limited or no risk, especially with overseas or "outside"
partners from the outset.
Presently, the Company's programming is secondary product. This is not the
type of product that will appeal across the board to the international
community. It is strictly "filler" material that the buyer will take if it has
extra time periods and can envisage some type of interest in the market. Usually
the buyer can be persuaded to take this type of product if the seller has "high
profile" material such as theatrical features, top miniseries, or network type
programming such as E.R. or X-Files. Presently, the Company does not have any of
this material, commonly called locomotives, provide incentives for buyers to
license Century's secondary material.
Product and Partnerships
The Company intends to seek out primarily television product that has
either a U.S. network or cable commitment in order to have a presence in the
entertainment community and to enter the international marketplace. A series
which is action adventure or family programming with high production values and
some known talent should provide the impetus for the Company to launch a
successful and potentially profitable program.
As a newly formed small global distribution Company, Century must start
with quality television product consisting of series, Movies-of-the-Week (MOWs),
features and mini-series which could generate immediate income in both TV and
cable. Once the Company develops this type of product base, Century can afford
other types of product such as "lower-end" cable and ancillary material such as
documentaries and music specials which without "locomotives" will generate
limited revenue. Movies of the Week, in particular, are generally accepted as
astute and profitable programming ventures. MOWs are usually produced upon an
order from a U.S. (or cable) network for between $2-3 million. The deficit after
the network sale will be approximately $400,000-$600,000, which can usually be
recouped from foreign sales. If the movies have good action and star value, they
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can play everywhere and there is strong demand for this type of material.
Profits from these pictures can range between $500,000-$1,200,000 with further
"after-life" domestically.
The Company must also have a product on a distribution only basis. These
deals are negotiated on a simple percentage basis with a distribution company
generally not guaranteeing or putting up any funding. Distribution percentages
usually range from 20-30% domestically and 30-40% on international sales.
Finding quality product prior to the new distribution company fully establishing
itself in the marketplace and without putting forth funding is getting more
difficult. The Company will, however, always look for any opportunities and, as
the Company grows in establishing itself with "high profile" product, more
opportunities should present themselves.
For the Company to succeed and become a recognized supplier of
entertainment programming, Century must find partners to help fund the overall
operation and the acquisition of product. In order for the Company to achieve
its goals, both in the overall marketplace and with its shareholders, Century
must be involved with high quality programming. The better and more varied (i.e.
series, features, specials and kids programming) the product is, the greater
likelihood the Company will benefit financially and become more able to control
its destiny. Ultimately, as the Company expands in quality productions and
offerings, more profitable opportunities for distribution and partnerships
should become available. In today's marketplace, for the Company to become
involved with quality programs or project opportunities, it must be well-funded.
Current Programming and Association with Affinity Entertainment, Inc.
Presently, the Company has contracts in place, on a distribution only
basis, with a few program offerings. The Company has the worldwide distribution
rights to a 26-episode series titled, "The Traveling Gourmet." Century also has
the domestic distribution rights to five classic animated features. Through a
relationship with Affinity Entertainment, Inc. ("Affinity"), the Company has the
international distribution and domestic pay-per- view rights to a limited
four-hour series titled, "EdenQuest" and the worldwide distribution rights to a
ten episode series titled, "Adventure Quest."
At present, the Company cannot estimate its revenue stream from these
products. However, as the year progresses, management should be able to estimate
revenues as the Company moves forward with its marketing efforts.
In June 1996, the Company executed a letter of intent with Affinity
Entertainment, Inc. ("Affinity") which contemplates the acquisition by Affinity
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of a majority position in Century subject to the completion of due diligence and
negotiation of a definitive purchase price based on the level of investment by
Affinity. Affinity is similarly engaged in the distribution and production of
entertainment programming. Affinity has recently raised capital for the express
purpose of expanding their production of entertainment programming. Century
lacks the financial resources to achieve these goals in the short term. The
Company does however, have the key personnel and knowledge to distribute product
on a worldwide basis. Furthermore, Century has the strategic contacts and market
knowledge to help direct its clients to product and projects which offer
investment opportunities at an acceptable level of risk in order to maximize
revenue and earnings potential.
Ultimately, Century should have a greater market presence and leverage
bringing more producers and product to the Company. Further, with Century
distributing "high profile" quality programming this should generate greater
sales revenue on the "lesser" low priority type product.
Summary
In summary, the Company must operate as it currently exists, i.e., a small
independent company working to become a viable entity in the international
entertainment marketplace. Century will not initially try to compete with the
major studios or even larger independents. Century will need to produce,
co-produce or acquire quality TV product with high production value for the
international as well as the domestic marketplace. Century will seek to locate
and identify partners who will absorb some of the cost or downside in return for
territorial rights and/or equity in production product. In essence, Century's
goal is to build a reputation as a supplier of consistent quality programming
much like companies such as New World and Rysher have done.
Century will seek to operate on a cost-efficient basis, paying careful
attention to costs while seeking to maximize revenue. Century will also need to
demonstrate for the global entertainment community that it is a very aggressive
company doing everything possible to create a real presence within the industry.
Essential to the accomplishment of this goal is the Company's presence in all of
the international and domestic sales markets.
Employees
The Company employs four people on a full-time basis of which two
employees are in executive positions and the balance are engaged in sales and
administrative capacities.
ITEM 2. DESCRIPTION OF PROPERTIES
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The Company's executive offices are currently located at 201 North
Robertson Boulevard, Beverly Hills, California 90211. These premises, which
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consist of approximately 1,200 square feet of space, are the subject of a
month-to-month lease agreement with an affiliate of Mr. Peter Newgard, the
Company's President, at a rental of approximately $2,121.45 per month. The
Company expects to move to permanent facilities prior to December 31, 1996.
ITEM 3. LEGAL PROCEEDINGS
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In April 1996, the Company consummated a settlement of certain litigation
styled FERATON ANSTALT V. CENTURY TECHNOLOGIES, INC. (Case No. 95-6216) which
had been filed against the Company in the U.S. District Court, Southern District
of Florida, in which the Plaintiff alleged that the Company owed the Plaintiff
$1,000,000 together with interest on a promissory note that it had issued. In
connection with the settlement, the Company issued 356,667 shares of its
restricted Common Stock in exchange for the dismissal of the lawsuit.
In August 1996, the Company filed suit against C. Elvin Feltner and
certain affiliated companies (CENTURY TECHNOLOGIES, INC. V. VIDEO LICENSING
GROUP, INC., KRYPTON INTERNATIONAL CORPORATION AND C. ELVIN FELTNER, JR., Case
No. 96-8581) in the U.S. District Court for the Southern District of Florida
requesting damages and equitable relief. More specifically, the Company is
seeking rescission of various licensing agreements, a bill of sale and other
agreements entered into between December 1992 and November 1995 with various of
the Defendants as well as compensatory and punitive damages, interests and
attorney's fees based on fraudulent conduct of the Defendants in relation to the
various licensing and other agreements previously entered into by the parties
and for violation of the federal Racketeer Influenced and Corrupt Organizations
Act (RICO). The Company intends to pursue this litigation vigorously and
vindicate its interests and those of its shareholders.
On February 21, 1996, the Company was informed that an informal inquiry of
the Company and certain transactions had been initiated by the Enforcement
Branch of the United Stated Securities and Exchange Commission. The Company has
supplied the Commission with all documents as requested. The Company's Board of
Directors have authorized and is fully cooperating with the requests of the
Commission.
On September 13, 1996, the staff of the Securities and Exchange Commission
notified the Company that the Division of Enforcement intended to recommend that
the Commission institute a cease and desist order against the Company based on
allegations that the Company violated various sections of the Federal Securities
laws. The Staff has advised the Company that it does not consider its present
management as responsible for the matters which are the subject of the
Commission's inquiry.
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At the present time, the Company is not engaged in any other legal
proceedings nor is it aware of any material claims asserting liability against
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
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Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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(a) The Company's Common Stock is traded on the OTC Bulletin Board under
the symbol "CNTK" The following table sets forth the high and low bid quotations
for the Common Stock for the periods indicated. These quotations reflect prices
between dealers, do not include retail mark-ups, mark-downs or commission and
may not necessarily represent actual transactions.
Low High
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January 1 - March 31, 1994 $.(1) $-(1)
April 1 - June 30, 1994 $.(1) $-(1)
July 1 - September 30, 1994 $.343 $.406
October 1 - December 31, 1994 $.406 $.20
January 1 - March 31, 1995 $.031 $.438
April 1 - June 30, 1995 $.08 $.375
July 1 - September 30, 1995 $.08 $.29
October 1 - December 31, 1995 $.08 $.67
January 1 - March 31, 1996 $.15 $.51
April 1 - June 30, 1996 $.16 $.31
July 1 - September 31, 1996 $.18 $.38
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(1) Price information not available.
As of August 31, 1996, there were 146 holders of record of the Company's common
stock. The closing bid price quoted on the OTC Bulletin Board for the Company's
Common Stock at October 25, 1996 was $.21.
The Company has never declared or paid, and has no present intention to
pay, cash dividends on its Common Stock. Any future dividends will necessarily
depend upon the Company's future earnings, capital requirements, financial
condition and other factors.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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General
In November 1995, officers and directors tendered their resignations, and
new management took control of the Company. Management intends to establish
specific direction for the Company in the business of distributing and producing
entertainment programming including feature films and license rights to
libraries already held by the Company.
As part of the agreement between the Company and prior management, the
former president assumed certain notes payable and the rights and liabilities of
an agreement between the Company and Web Broadcasting Systems ("Web"). As
consideration to the Company, Web returned 200,000 common shares to the Company
in February 1996, and the Company expensed $50,000 already advanced to the
partnership.
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
The following is a discussion of material changes in the consolidated
results of operations of Century Technologies, Inc. which occurred in the twelve
months ended December 31, 1995.
For the year ended December 31, 1995, the Company experienced a
significant net loss from operating activities of $6,295,670 compared to
$731,671 for the same period in 1994, which was attributable to the Company
taking a one-time charge for rescinded transactions and obsolete equipment in
the amounts of $5,886,200 and $60,462.
General and Administrative Expenses
For the year ended December 31, 1995, the decrease in general and
administrative expenses is primarily due to a decrease in compensation paid to
employees, directors and consultants for services rendered. More specifically,
the Company issued stock for services valued at $272,800 in 1994 largely due to
attempts to generate operations and to seek merger and acquisition candidates.
The Company issued only $102,000 in common stock in exchange for services in
1995.
Write-Off of Film Library
The increase in total expenses in 1995 compared to 1994 predominantly
reflects the write-off of assets relating to various feature libraries, list of
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titles and two packages containing two and five titles, respectively. Prior to
becoming involved with the Company, current management was led to believe that
these titles were in proper order and that previous management had performed the
necessary due diligence to establish the proper chain of title in order to
conclude licensing deals and market the titles. Upon conducting its own due
diligence review regarding the chain of title of the features, the Company was
compelled to cancel or rescind all transactions entered into by previous
management regarding feature films and broadcast air time as of December 31,
1995. This action resulted in reductions in the Company assets of $5,386,200 and
$500,000 respectively. The write off of the film library and related assets also
accounts for the significant increase in net loss and net loss per common share.
In addition, management has chosen to proceed conservatively by continuing
to reflect liabilities relating to the transactions until the successful
disposition of a lawsuit filed in August 1996 by the Company against an
individual and two affiliated companies in connection with such transactions.
In October 1995, the Company canceled a note payable of $1,800,000 and
1,000,000 shares of preferred stock valued at $4.00 per share upon the execution
of a new agreement for the Spanish title library which superseded a previous
agreement executed in November 1994. This agreement has also been rescinded by
the Company and is a subject of the same lawsuit filed by the Company in August
1996.
The increase in total expenses also reflects the Company's decision to
dispose of $60,742 in obsolete theatrical and film editing equipment which would
have been prohibitively expensive to repair and operate.
Liquidity and Capital Resources
The Company experienced cash flows from financing activities of $320,500
of which $165,500 were proceeds from the sale of common stock and the balance
from notes payables.
In November 1995, the Company announced that it had been named as a
defendant in a lawsuit styled FERATON ANSTALT VS. CENTURY TECHNOLOGIES, INC.
alleging that the Company owed $1,000,000 plus interest on a promissory note
that it had issued to another party. In April 1996, the Company announced that
it had issued 356,000 shares of its restricted common stock in exchange for the
dismissal of the suit.
Also in April 1996, the Company announced that it had rescinded or
canceled all agreements entered into by previous management with an individual
and two of his affiliated companies. These agreements pertained to various film
titles and license rights and broadcast air time and were subject to provision
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of documentation supporting chain of title and ownership which were never
produced. The Company filed suit in August 1996 in order to effectuate the
rescissions and for damages.
In June 1996, the Company entered into a letter of intent with a Affinity
Entertainment, Inc., a producer of television programming and movies, to
purchase a majority interest in the Company with the expectation of receiving
financing as part of such investment. As of October 25, 1996. Affinity had
advanced $400,000 on an unsecured basis to the Company in order to allow the
continuation of the Company's operations.
As of December 31, 1995, the Company had not commenced active business
operations. However, in 1996 the Company anticipates that distribution sales,
sales of restricted common stock, investments through co-productions and loans
together with funds advanced by Affinity will be adequate to meet its cash flow
requirements for fiscal year 1996.
ITEM 7. FINANCIAL STATEMENTS
--------------------
The financial statements and supplementary data are included under Item
13(a)(1) and (2) of this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
--------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
On April 11, 1996, A.J. Robbins, P.C. was replaced as the Company's
auditors. During the two most recent fiscal years and interim period subsequent
to December 31, 1994, there were no disagreements with A.J. Robbins, P.C. on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure or any reportable events. The report of A.J.
Robbins, P.C. for the fiscal years ended December 31, 1993 and December 31, 1994
did not contain an adverse opinion, disclaimer of opinion, qualification, or
modification as to audit scope or accounting principles; however, the opinion
did contain a modification as to uncertainty as to substantial doubt about the
Company's ability to continue as a going concern. On April 26, 1996, the Board
of Directors of the Company appointed Weinberg, Pershes & Company, P.A. as
independent auditors of the Company for the fiscal years ended December 31,
1995, and 1996. Weinberg, Pershes & Company, P.A. has not consulted with the
Company as to accounting policies or issues prior to engagement.
15
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
--------------------------------------------------------------------
COMPLIANCE UNDER SECTION 16(A) OF THE EXCHANGE ACT
--------------------------------------------------
The following table sets forth the names, ages and positions with the
Company of the executive officers, directors and a key employee of the Company.
Directors will be elected at the Company's annual meeting of stockholders and
serve for one year or until their successors are elected and qualify. Officers
are elected by the Board and their terms of office are, except to the extent
governed by employment contract, at the discretion of the Board.
Name Age Position
---- --- --------
Peter B. Newgard 39 President, Chief Executive
Officer, Secretary, Treasurer
and Director
Alan Horowitz 66 Director
Jeffrey Kazmark 48 Director
Joe Levinsohn 57 President of International
Division
The officers are elected annually by the Board of Directors and serve at
the discretion of the Board of Directors. Mr. Newgard and Mr. Levinsohn devote
substantially full time to the business of the Company. Except for options
granted to the Company's outside directors the Company has no compensation
arrangements for any of such directors.
PETER B. NEWGARD -- In November 1995, Mr. Newgard was selected as
President and Chief Executive Officer of Century to assemble a qualified team
for the purpose of bringing focus to the Company's goals of co-producing
original product and distribution of features and television programming to all
media worldwide including network and cable television in the U.S. marketplace.
An experienced executive in television distribution and syndication, Mr. Newgard
formed Newgard Entertainment Group, Ltd. in 1991 to be a worldwide distributor
of film and television programming. Markets included broadcast, first run
syndication, cable programming and home video. Newgard Entertainment Group, Ltd.
distributed for television, cable, pay cable, and all ancillary sales with
successfully forays in the pay-per-view business. He created strategic alliances
with various companies worldwide which has allowed direct access to Japan, the
Far East, Mexico, South America and Europe. In addition, he provided consultant
services to a number of companies in the worldwide television marketplace.
16
<PAGE>
As one of four original Vice Presidents establishing the syndication drive
at Buena Vista Television, Mr. Newgard opened the Southern Division of the
television arm of The Walt Disney Company. Responsibilities included overseeing
all sales and administration for 11 Southern States and direct involvement in
numerous station group sales. At The Walt Disney Company, Mr. Newgard launched
first run series such as "Regis and Kathie Lee", "Win, Lose or Draw" and Siskel
and Ebert". Also Mr. Newgard was one of the key executives responsible for
reintroducing Disney animation to television with highly successful series such
as "Ducktales" and "Chip 'n' Dale". Prior to his successful ground breaking with
The Walt Disney Company, Mr. Newgard served as Vice President, Division Manager,
MGM/UA Television, another major film industry participant.
Mr. Newgard also has extensive professional television and film production
experience stemming from his initial and varied television production work at
KUAT-TV in Tucson, Arizona and his long association with Petersen
Communications, Inc., one of Hollywood's longest subsisting independent
producers, where he served as Executive Vice President in charge of Sales.
JEFFREY KAZMARK -- Mr. Kazmark has served as a director of the Company
since December 1995. In 1971, Mr. Kazmark relocated to Washington, D.C. where he
worked for WGAY-AM/Fm selling radio time and was promoted to Senior Account
Executive. In 1974, Mr. Kazmark joined WRC-TV, NBC Television's proprietary
owned and operated station, as one of the youngest Account Executives in the
company at that time. A year later, he was promoted to National Account
Executive for NBC and relocated to Los Angeles. Between 1979 and 1985, Kazmark
held additional positions in sales and management in both Los Angeles and New
York for the Company.
In 1985, Mr. Kazmark was named President of Advertising Sales at Access
Entertainment where he ran the advertising related sponsorship side of the
company. After leaving Access, Kazmark went back to NBC and then returned to New
York where he was promoted to Director of Sales for WNBC. In 1990, Mr. Kazmark
returned to Los Angeles to work with Orbis Communications, a subsidiary of
Carolco Pictures, as the head of West Coast Sales Operation for Syndication. At
Orbis, Mr. Kazmark was an integral part of the sales team launching the first
run series "The Joker's World" and "The $100,000 Pyramid" and numerous feature
packages including the Carolco catalog of movies. In 1992, Mr. Kazmark became
Vice President of Television of Carolco Services. While at Carolco Mr. Kazmark
was the key television sales executive on such major features as "Basic
Instinct", "Universal Soldier", Total Recall" and "Terminator 2". Mr. Kazmark
formed Kazmark Entertainment Group, a film and television production and
distribution company in 1993.
17
<PAGE>
ALAN HOROWITZ -- Mr. Horowitz has served as a director of the Company
since December 1995. After serving in the U.S. Marine Corps, Mr. Horowitz worked
for HRH Construction Corporation in New York as a project manager ending up as
president of its subsidiary, HRH California, Inc. in Los Angeles. In 1965, Mr.
Horowitz entered the entertainment business joining United Picture Corporation
starting as Assistant to the Producer. Since that time, he has been involved in
all aspects of television and motion picture production. He served on the Board
of Directors and was Executive Vice President of Albert S. Ruddy Productions
where he worked on major productions such as "The Godfather" and "The Longest
Yard."
In 1979, Mr. Horowitz became Vice President and Executive Production
Manager of MGM Television. While at MGM, Mr. Horowitz oversaw production of
numerous features and series for NBC such as "Chips", "French Atlantic Affair"
(a six-hour mini-series for ABC), "Beyond Westworld" and "The Goodbye Girl," Mr.
Horowitz' other credits include Executive Production Manager on the feature film
"Heaven Can Wait," Executive Producer on the feature film "Paramedics" and
Associate Producer on Universal's "Bandit" television feature series which
consisted on four two-hour movies. Mr. Horowitz continues to work in the
entertainment industry as a consultant to numerous production companies on
development, production and post-production. Mr. Horowitz is a member of the
Academy of Motion Picture Arts and Sciences.
JOE LEVINSOHN -- In January 1996, Mr. Levinsohn joined Century as
President of its International Division. His duties are to establish the Company
as an important participant in the international marketplace which includes all
sales and distribution, and acquisition of product for distribution worldwide.
Mr. Levinsohn is also responsible for identifying possible partners for
strategic alliances, co-production and co-financing. He has over thirty years of
experience in the entertainment industry working with companies in the
international arena of sales, development, marketing, product evaluation,
co-production and global broadcasting worldwide. As Director of Television Sales
and Marketing for ABC Pictures International, Mr. Levinsohn joined the American
Broadcasting Company in 1980 where he was responsible for the worldwide
licensing of all ABC produced programming including ABC News. He was also
responsible for international co-production and the identification of alliance
partners. His tenure with ABC culminated with his selection as Vice President
and Managing Director of ABC Sports Worldwide Sales & Marketing where he devised
strategies to maximize international revenues for both in-house product and
international material acquired abroad.
Mr. Levinsohn relocated to Los Angeles in 1986 to join Republic Pictures
as President of International with a mandate to establish their international
distribution organization. In fulfilling his responsibilities, Mr. Levinsohn
18
<PAGE>
developed a client base establishing Republic as one of the leading independent
television international distributors in the industry. Mr. Levinsohn went on to
identify co-production partners for Republic and set up global alliances with
multinational companies to form international co-ventures.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
Cash Compensation
Total cash compensation paid to all executive officers as a group for
services provided to the Company in all capacities during the year ended
December 31, 1995 aggregated to $42,612. Set forth below is summary compensation
table in the tabular format specified in the applicable rules of the Securities
and Exchange Commission. As indicated, no officer of the Company or any of its
subsidiaries received total salary and bonus which exceeded $100,000 during the
periods reflected.
<TABLE>
<CAPTION>
Summary Compensation Table
Other All
Name and Annual Restricted Other
Principal Compen- Stock Options/ LTIP Compen-
Position Period Salary Bonus Sation Award(s) Sars(#) Payouts Sation
- --------- ------ ------ ----- ------ --------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Guido Volante 1995 $ 9,045 - $ - 1,500,000 - - $ -0-
President 1994 $11,225 - $ - 32,238 - - $ -0-
and CEO* 1993 $42,888 - $ - 25,000 - - $ -0-
Peter B. Newgard
President and
CEO* 1995 $17,467 - $ - 1,000,000 3,500,000 - $ -0-
- -------------------------------
* Mr. Volante resigned in all capacities with the Company in November 1995 and was succeeded by
Mr. Newgard.
</TABLE>
Employment Agreements
The Company and Mr. Newgard entered into an Employment Agreement effective
October 27, 1995 pursuant to which Mr. Newgard was employed for a 5-year term
which anticipates a renewal for two additional one-year periods upon mutual
agreement between the parties. Mr. Newgard will receive a base salary of
$100,000 per annum, which will be subject to adjustment in the discretion of the
Board of Directors of the Company. The Agreement also provides that Mr. Newgard
will receive an annual bonus, the terms of which are to be subsequently
negotiated. The Company also agreed to issue to Mr. Newgard 1,000,000 shares of
its Common Stock as a signing bonus. On October 27, 1995, the closing price of
the Company's Common Stock on the OTC Bulletin Board was $.125. The Company also
19
<PAGE>
agreed to issue to Mr. Newgard options to purchase and aggregate of up to
3,500,000 shares of Common Stock of the Company. The right to exercise and the
exercise price per share as to the related number of shares is as follows: at
January 1, 1996, 500,000 shares exercisable at $0.15/share; at January 1, 1997,
500,000 shares exercisable at $.20/share; at January 1, 1998 500,000 shares
exercisable at $.25/share; at January 1, 1999 1,000,000 shares exercisable at
$.30/share; and at January 1, 2000 1,000,000 shares exercisable at $.50/share.
Mr. Newgard will have the right to exercise all such options in the event of any
acquisition resulting in change of control of the Company, and would lose the
right to exercise any such options if following the aforementioned dates, his
employment should terminate by reason of his resignation or by termination of
such employment by the Company for cause.
On January 2, 1996, the Company entered into a one year Employment
Agreement with Joe H. Levinsohn, which is subject to renewal by the Company for
two successive 12-month periods. During the initial term of the employment
agreement, Mr. Levinsohn will be compensated with an annual salary of $100,000,
which salary will be increased to $125,000 during the first renewal period and
$150,000 for the second renewal period of the employment agreement. At the time
of execution, Mr. Levinsohn received 25,000 shares of the Company's restricted
Common Stock. In addition, Mr. Levinsohn received options to purchase 300,000
shares of Common Stock of the Company exercisable at $.30 per share for the
first installment of 100,000 shares, at $0.50 per share for the second
installment of 100,000 shares and $0.75 per share for the remaining 100,000
shares of Common Stock, subject to renewal of the employment agreement by the
Company during the successive annual terms. The term of each of the Warrants is
for a five-year period following the vesting of the options. Furthermore, Mr.
Levinsohn is entitled to receive a bonus at each anniversary date of his
employment agreement during the term thereof in an amount equal to 5% of the net
earnings of the Company for the preceding period, but not in excess of
$50,000.00 per annum.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
- ---------------------------------------------------------------------------------
Percent of
Number of Total Options/
Securities SARs Granted
Underlying to Employees Exercise or
Options/SARs in Fiscal Base Price Expiration
Name Granted (#) Year ($/Sh) Date
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter Newgard 3,500,000 100% $.15/.20/ 04/01/00
.25/.30/.50
</TABLE>
20
<PAGE>
Option Exercises and Values at Year End
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Value of
Number of Unexercised
Unexercised In-the-Money
Option/SARs Option/SARs
at FY-End (#) at FY-End
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
---- ------------ -------- ------------- -------------
Peter B. Newgard - - 500,000/3,000,000 $0/625,000
Option Grants
In connection with the Company's Employment Agreement with Peter Newgard,
the Company issued to Mr. Newgard options to purchase an aggregate of up to
3,500,000 shares of Common Stock of the Company. The right to exercise and the
exercise price per share as to the related number of shares are as follows: At
January 1, 1996, 500,000 shares exercisable at $0.15 per share; at January 1,
1997, 500,000 shares exercisable at $0.20 per share; at January 1, 1998, 500,000
shares exercisable at $0.25 per share; at January 1, 1999, 1,000,000 shares
exercisable at $0.30 per share; and at January 1, 2000, 1,000,000 shares
exercisable at $0.50 per share.
Each of the options expire five years from applicable vesting date or 90
days from the date Mr. Newgard ceases to be an employee of the Company as a
result of either death or disability. At October 27, 1995, the closing price of
the Company's Common Stock on the OTC Bulletin Board was $0.125 per share. Mr.
Newgard will have the right to exercise all such options in the event of any
acquisition resulting in change of control of the Company, and would lose the
right to exercise any such options if following the aforementioned dates, his
employment should terminate by reason of his resignation or termination of such
employment by the Company for cause.
In connection with the Company's Employment Agreement dated January 2,
1996 with Joe H. Levinsohn, the Company issued to Mr. Levinsohn options to
purchase an aggregate of up to 300,000 shares of Common Stock of the Company.
The right to exercise and the exercise price per share as to the related number
of shares is as follows: At January 2, 1996, 100,000 shares exercisable at $0.30
per share; at January 2, 1997, 100,000 shares exercisable at $0.50 per share;
and at January 2, 1998, 100,000 shares exercisable at $0.75 per share; at
January 2, 1996, the closing bid price of the Company's Common Stock on the OTC
Bulletin Board was $.48.
Each of the options expires five years from the applicable vesting date or
90 days from the date Mr. Levinsohn ceases to be an employee of the Company as a
21
<PAGE>
result of either death or disability. All options will terminate immediately in
the event that Mr. Levinsohn's employment with the Company is terminated for
cause. The Company has agreed to file a Registration Statement under the
Securities Act of 1933 to cover the resale of the shares underlying the options.
In connection with the selection of Mr. Alan P. Horowitz as a Director of
the Company, on December 20, 1995 the Company awarded to Mr. Horowitz options to
purchase an aggregate of 125,000 shares of Common Stock of the Company. The
right to exercise and the exercise price per share as to the related number of
shares are as follows: At December 22, 1995, 25,000 shares exercisable at $0.25
per share; at December 22, 1996, 25,000 shares exercisable at $0.50 per share;
at December 22, 1997, 25,000 shares exercisable at $0.75 per share; at December
22, 1998, 25,000 shares exercisable at $1.00 per share; and at December 22,
1999, 25,000 shares exercisable at $1.25 per share. Each of the options is for a
five-year term following the date of vesting.
In connection with the selection of Mr. Jeffrey H. Kazmark as a Director
of the Company, on December 20, 1995 the Company awarded to Mr. Kazmark options
to purchase an aggregate of 125,000 shares of Common Stock of the Company. The
right to exercise and the exercise price per share as to the related number of
shares are as follows: At December 22, 1995, 25,000 shares exercisable at $0.25
per share; at December 22, 1996, 25,000 shares exercisable at $0.50 per share;
at December 22, 1997, 25,000 shares exercisable at $0.75 per share; at December
22, 1998, 25,000 shares exercisable at $1.00 per share; and at December 22,
1999, 25,000 shares exercisable at $1.25 per share. Each of the options is for a
five-year term following the date of vesting.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth Common Stock ownership as of September 30,
1996 with respect to (i) each person known to the Company to be the beneficial
owner of five (5%) percent or more of the Company's outstanding Common Stock,
(ii) each director of the Company and (iii) all executive officers and directors
of the Company as a group. This information as to beneficial ownership was
furnished to the Company by or on behalf of the persons named. Unless otherwise
indicated, the business address of each person listed is 201 North Robertson
Boulevard, Beverly Hills, California 90211. Information with respect to the
percent of class is based on 13,206,985 shares of the Company's Common Stock
issued and outstanding as of September 30, 1996.
22
<PAGE>
Shares Percent
Name Beneficially Owned(1) of Class
---- --------------------- --------
Peter B. Newgard(2) 1,500,000 10.9%
Alan Horowitz(3) 25,000 0.1%
Jeffrey Kazmark(4) 25,000 0.1%
All Officers and
Directors as a Group
(3 persons)................ 1,550,000 11.1%
(1) Except as otherwise indicated in the footnotes below, each stockholder has
sole power to vote and dispose of all the shares of Common Stock listed
opposite his name.
(2) Mr. Newgard is President and Chief Executive Officer of the Company.
Includes 500,000 shares of Common Stock issuable upon exercise of certain
options by Mr. Newgard, but does not include 3,000,000 shares of Common
Stock issuable upon exercise of options which have not as yet vested.
(3) Mr. Horowitz is a Director of the Company. Consists of 25,000 shares of
Common Stock issuable upon exercise of certain options, but does not
include 100,000 shares of Common Stock issuable upon exercise of options
which have not as yet vested.
(4) Mr. Kazmark is a Director of the Company. Consists of 25,000 shares of
Common Stock issuable upon exercise of certain options, but does not
include 100,000 shares of Common Stock issuable upon exercise of options
which have not as yet vested.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
On March 3, 1995, the Company issued to Albert Lanzilli, Jr., a former
director of the Company, 25,000 shares of Common Stock as compensation for
services to the Board of Directors, which issuance was valued at $25,000. On
March 6, 1995, the Company borrowed $25,000.00 from Mr. Lanzilli, pursuant to a
three-month promissory note. The loan was to mature June 6, 1995 together with
interest at the rate of 8% per annum. In connection with the issuance of such
note, the Company also issued options to acquire 25,000 shares of its Common
Stock exercisable at $.02 per share which were subsequently exercised. The
promissory note was assumed by Mr. Guido Volante, the former President of the
Company.
In June 1995, the Company borrowed $10,000 from Mr. Lanzilli, pursuant to
three-month promissory notes. The loan included interest at the rate of 8% per
23
<PAGE>
annum. These promissory notes were also assumed by Mr. Volante. On August 1,
1995, the Company borrowed $2,500.00 from Mr. Lanzilli, pursuant to a
three-month promissory note. The note was to mature on November 1, 1995 together
with accrued interest at the rate of 8% per annum. This promissory note was also
assumed by Mr. Volante.
On September 29, 1995, the Company issued to Emilio Carrillo, a former
director of the Company, 50,000 shares of Common Stock of the Company in
recognition of services previously provided to the Board of Directors, which
issuance was valued at $2,000.
On September 29, 1995, the Company issued to its former President, Mr.
Guido Volante, 1,500,000 shares of Common Stock in lieu of salary, which
issuance was valued at $60,000.
On March 11, 1994, a Letter of Intent was signed and subsequently on May
15, 1995, the Company and WEB Broadcasting Systems, Inc. ("WEB") entered into an
agreement to form a general partnership to operate and distribute a graphic and
text sports cable programming network pursuant to which the Company had agreed
to invest $1,000,000 in such general partnership, to loan the general
partnership an additional $2,000,000 and to issue 4,000,000 shares of the
Company's Common Stock (subsequently restructured to 200,000 shares of Common
Stock) in exchange for which WEB would sell to such general partnership its wire
service hardware, software and related technology. On November 1, 1995, the
Company, WEB and Mr. Guido Volante entered into an agreement in connection with
the termination of Mr. Volante as an officer and director of the Company. Under
the terms of this agreement, the parties agreed to the assignment by the Company
of all of its rights and interest in the Company's agreement with WEB to Mr.
Volante, and WEB agreed to release of the Company from its obligations under
such agreement.
In November 1995, in connection with the resignation of Ms. Miriam Mercado
as a Director and Officer of the Company, Ms. Mercado entered into an agreement
with the Company. In consideration for the sum of $5,000.00, Ms. Mercado agreed
to restrict the disposition of 717,000 shares of Common Stock for various
periods. All of the aforementioned shares were subsequently sold.
On October 27, 1995, the Company issued to Mr. Peter Newgard, its current
President, 1,000,000 shares of Common Stock pursuant to his employment agreement
with the Company. The issuance was valued at $40,000.00. On February 26, 1996,
the Company issued to Mr. Joe Levinsohn 25,000 shares of the Company's Common
Stock pursuant to his employment agreement with the Company. The issuance was
valued at $1,000.00. Both of these executives received options as part of such
employment agreements. See "Executive Compensation"
24
<PAGE>
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
--------------------------------------
(a) (1) and (2) Financial Statements and Schedules
----------------------------------
The financial statements listed on the index to financial statements on
page F-1 are filed as part of this Form 10-KSB.
(b) Reports on Form 8-K
-------------------
The Company filed Form 8-K report dated May 16, 1996 (item 4).
The Company filed Form 8-K report dated June 6, 1996 (item 5).
(c) Exhibits
--------
The following Exhibits are incorporated by reference or included in this
report:
Number Description Of Document
- ------ -----------------------
3 (a) Articles of Incorporation incorporated by reference
to Form 10 filed May 20, 1993.
3 (b) By-Laws incorporated by reference to Form 10 filed
May 20, 1993.
4 Specimen certificate for Common Stock incorporated by
reference to Form 10 filed May 20, 1993.
10 Employment Agreement with Peter Newgard
incorporated by reference to Form 8-K filed
November, 1995
16 Letter on change in certifying accountant
incorporated by reference to Form 8-K filed May 16,
1996.
27 Financial Data Schedule (Electronic filing only)
25
<PAGE>
SIGNATURE
---------
In accordance with Section 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized on this 29th day of October, 1996.
CENTURY TECHNOLOGIES, INC.
By: /s/Peter B. Newgard
---------------------
Peter B. Newgard
President and Chief
Executive Officer
In accordance with the Exchange, this Report has been signed
below by the following person on behalf of the Registrant, and in the capacities
and on the date indicated.
Signature Title Date
- --------- ----- ----
President and Principal
Executive, Financial and
/s/Peter B. Newgard Accounting Officer October 29, 1996
- ---------------------------
Peter B. Newgard
/s/Jeffrey Kazmark Director October 29, 1996
- ---------------------------
Jeffrey Kazmark
/s/Alan Horowitz Director October 29, 1996
- ---------------------------
Alan Horowitz
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
-------------------------------------------
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
REPORT
AS OF DECEMBER 31, 1995
-----------------------
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
-------------------------------------------
CONTENTS
PAGES 1 - 2 - INDEPENDENT AUDITORS' REPORT
PAGE 3 - CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1994
PAGE 4 - CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 AND FOR THE PERIOD FROM
INCEPTION (DECEMBER 3, 1986) THROUGH DECEMBER 31, 1995
(UNAUDITED)
PAGES 5 - 7 - CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
OR DEFICIENCY FOR THE PERIOD FROM INCEPTION (DECEMBER 3,
1986) THROUGH DECEMBER 31, 1995
PAGES 8 - 9 - CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 AND FOR THE PERIOD FROM
INCEPTION (DECEMBER 3, 1986) THROUGH DECEMBER 31,
1995 (UNAUDITED)
PAGE 10- 28 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31,
1995, 1994 AND 1993
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Century Technologies, Inc. and Subsidiaries
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of Century
Technologies, Inc. and Subsidiaries (a development stage company) as of December
31, 1995, and the related consolidated statements of operations, changes in
stockholders' equity or deficiency, and cash flows for the year ended December
31, 1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
consolidated financial statements based on our audit. The consolidated financial
statements of Century Technologies, Inc. and Subsidiaries as of December 31,
1994 and for the years ended December 31, 1994 and 1993, were audited by other
auditors whose opinion dated September 22, 1995 expressed an unqualified opinion
on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As discussed in Notes 3, 6 and 11, the Company filed a lawsuit to rescind the
agreements for the purchase and/or licensing of feature films. The Company has
determined that the related assets have been impaired and has expensed the
unamortized balances.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Century
Technologies, Inc. and Subsidiaries (a development stage company) as of December
31, 1995 and the results of its operations and cash flows for the year ended
December 31, 1995 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 of the
consolidated financial statements, the Company has not yet commenced operations
<PAGE>
Century Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Page Two
and does not have sufficient liquid assets with which to pay expenses when they
arise, which raises substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
WEINBERG, PERSHES & COMPANY, P.A.
Boca Raton, Florida
August 19, 1996
Except for Note 10 which
is dated September 16, 1996
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
ASSETS
------
1995 1994
----------- -----------
Cash $ 131,801 $ 3,925
Advances to stockholders -- 2,700
Note receivable - related party -- 3,583
Furniture, fixtures and
equipment, net 2,095 60,742
Broadcast time -- 500,000
Feature films and license rights -- 5,386,200
Deposits -- 1,000
----------- -----------
TOTAL ASSETS $ 133,896 $ 5,958,150
------------ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY OR DEFICIENCY
--------------------------------------------------
LIABILITIES
Notes payable, stockholders $ 1,385,318 $ 1,815,000
Accounts payable 63,164 33,301
Accrued salaries and taxes -
stockholders -- 63,990
Accrued interest, stockholders 23,000 10,469
----------- -----------
TOTAL LIABILITIES 1,471,482 1,922,760
----------- -----------
STOCKHOLDERS' EQUITY OR DEFICIENCY
Preferred stock, no par value;
10,000,000 shares authorized;
1,763,334 and 2,763,334 issued
and outstanding, respectively 5,102,667 9,102,667
Common stock, $.00001 par
value; 200,000,000 shares
authorized; 13,381,985 and
6,019,485 issued and outstanding,
respectively 135 59
Capital in excess of par 1,091,383 --
(Deficit) accumulated during the
development stage (7,531,771) (5,067,336)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY OR
DEFICIENCY (1,337,586) 4,035,390
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY OR
DEFICIENCY $ 133,896 $ 5,958,150
---------- =========== ===========
See accompanying notes to consolidated financial statements
3
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------
Period from
Inception
(December
3, 1986)
Through
For the Years Ended December 31, December
----------------------------------------- 31, 1995
1995 1994 1993 (Unaudited)
----------- ----------- ----------- -----------
REVENUES $ - $ - $ - $ -
----------- ----------- ----------- -----------
EXPENSES:
General and
administrative 336,197 720,959 347,806 1,405,820
Interest 12,531 10,469 143,962 178,629
Depreciation
and
amortization 280 243 39 660
Disposal of
equipment 60,462 -- -- 60,462
Writeoff of
film library 5,886,200 -- -- 5,886,200
----------- ----------- ----------- -----------
Total
Expenses 6,295,670 731,671 491,807 7,531,771
----------- ----------- ----------- -----------
NET (LOSS) $(6,295,670) $ (731,671) $ (491,807) $(7,531,771)
- --------- =========== =========== =========== ===========
NET LOSS
PER COMMON
SHARE $ (.78) $ (.15) $ (.16)
=========== =========== ===========
Weighted
Average Number
of Common
Shares
Outstanding 8,033,935 4,813,983 3,151,509
=========== =========== ===========
See accompanying notes to consolidated financial statements
4
<PAGE>
<TABLE>
<CAPTION>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY OR DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK
---------------------- ----------------------- CAPITAL - IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT EXCESS OF PAR STAGE TOTALS
--------- ----------- ---------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, Inception
December 3, 1986 - $ - - $ - $ - $ - $ -
Issuance of common stock for
services, $.00001 per share - - 1,250,000 13 - - 13
Net (loss) for period
December 3, 1986 to
December 31, 1986 - - - - - (2) (2)
--------- ----------- ---------- ---------- ------------- ------------ ------------
Balances, December 31, 1986 - - 1,250,000 13 - (2) 11
Net (loss) for the year ended
December 31, 1987 - - - - - (20) (20)
--------- ----------- ---------- ---------- ------------- ------------ ------------
Balances, December 31, 1987 - - 1,250,000 13 - (22) (9)
Net (loss) for the year
ended December 31, 1988 - - - - - (20) (20)
--------- ----------- ---------- ---------- ------------- ------------ ------------
Balances, December 31, 1988 - - 1,250,000 13 - (42) (29)
Net (loss) for the year ended
December 31, 1989 - - - - - (20) (20)
--------- ----------- ---------- ---------- ------------- ------------ ------------
Balances, December 31, 1989 - - 1,250,000 13 - (62) (49)
Net (loss) for the year
ended December 31, 1990 - - - - - (20) (20)
--------- ----------- ---------- ---------- ------------- ------------ ------------
Balances, December 31, 1990 - - 1,250,000 13 - (82) (69)
Issuance of common stock for
services, $.00001 per share - - 6,250,000 62 - - 62
Net (loss) for the year
ended December 31, 1991 - - - - - (191) (191)
--------- ----------- ---------- ---------- ------------- ------------ ------------
Balances, December 31, 1991 - - 7,500,000 75 - (273) (198)
Issuance of preferred stock
for cable broadcast time,
$2.80 per share 1,000,000 2,800,000 - - - - 2,800,000
Net (loss) for the year
ended December 31, 1992 - - - - - (12,350) (12,350)
Retroactive effect of
contributed and retired
common stock - - (4,500,000) (45) 45 - -
--------- ----------- ---------- ---------- ------------- ------------ ---------
Balances, December 31, 1992 1,000,000 2,800,000 3,000,000 30 45 (12,623) 2,787,452
Issuance of common stock
for public relations
services, $.32 - - 200,000 2 62,498 - 62,500
Issuance of common stock
for $3.00 per share cash,
net of offering costs of
$6,200 - - 9,000 - 20,800 - 20,800
Issuance of common stock,
$.10 per share cash - - 25 - 250 - 250
Issuance of common stock for
equipment and feature films,
$3.00 per share - - 36,000 - 108,000 - 108,000
Issuance of common stock for
public relations services,
$.75 per share - - 50,000 1 37,499 - 37,500
See accompanying notes to consolidated financial statements
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY OR DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK
---------------------- ----------------------- CAPITAL - IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT EXCESS OF PAR STAGE TOTALS
--------- ----------- ---------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
for consulting services,
$.75 per share - $ - 20,000 $ - $ 15,000 $ - $ 15,000
Issuance of common stock for
directors' compensation,
$.75 per share - - 150,000 2 112,498 - 112,500
Issuance of common stock for
officers' compensation,
$.53 per share - - 61,331 - 32,601 - 32,601
Issuance of common stock for
consulting services,
$.25 per share - - 5,000 - 1,250 - 1,250
Issuance of common stock,
stock, $1.00 per share cash - - 5,000 - 5,000 - 5,000
Issuance of preferred stock
for feature films, $4.00
per share 50,000 151,000 - - - - 151,000
Issuance of preferred stock
for debt, $3.02 per share 713,334 2,151,667 - - - - 2,151,667
Issuance of common stock
for debt, $3.15 per share - - 30,000 - 94,598 - 94,598
Net (loss) for the year
ended December 31, 1993 - - - - - (491,807) (491,807)
---------- ----------- --------- ---------- ------------- ------------ ------------
Balances - December 31, 1993 1,763,334 5,102,667 3,566,356 35 490,039 (504,430) 5,088,311
Contributed capital - - - - 60,000 - 60,000
Issuance of common stock for
$.40 per share cash - - 12,500 - 5,000 - 5,000
Issuance of common stock for
consulting services, $.25
per share - - 495,000 5 123,745 - 123,750
Issuance of common stock for
directors' compensation,
$.40 per share - - 2,500 - 1,000 - 1,000
Issuance of common stock for
directors' compensation,
$.40 per share - - 25,000 - 10,000 - 10,000
Issuance of common stock for
$.23625 per share cash - - 800,000 8 188,992 - 189,000
Issuance of common stock for
$1.00 per share cash - - 1,500 - 1,500 - 1,500
Issuance of common stock for
$.75 per share cash - - 3,333 - 2,500 - 2,500
Issuance of common stock for
legal services, $.35 per
share - - 205,000 2 71,748 - 71,750
Issuance of common stock for
consulting services, $.20
per share - - 200,000 2 39,998 - 40,000
Issuance of common stock for
promotional services, $.10
per share - - 195,000 2 19,498 - 19,500
Issuance of common stock for
promotional services, $.10
per share - - 100,000 1 9,999 - 10,000
See accompanying notes to consolidated financial statements
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY OR DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK
---------------------- ----------------------- CAPITAL - IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT EXCESS OF PAR STAGE TOTALS
--------- ----------- ---------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
promotional services, $.10
per share - - 25,000 - 2,500 - 2,500
Issuance of common stock for
$.12375 per share - - 200,000 2 24,748 - 24,750
Issuance of preferred stock
for feature films, $4.00
per share 1,000,000 4,000,000 - - - - 4,000,000
Predecessor cost adjustment
for acquisition of film
rights - - - - (1,085,565) (3,831,235) (4,916,800)
Issuance of common stock for
services, $.00007 per share
cash - - 15,000 - 1,500 - 1,500
Issuance of common stock for
compensation, $.259905 per
share - - 73,296 1 19,049 - 19,050
Issuance of common stock for
offering costs, $.1375 per
share - - 100,000 1 13,749 - 13,750
Net (loss) for the year
ended December 31, 1994 - - - - - (731,671) (731,671)
--------- ------------ ---------- ---------- ------------- ------------ ------------
Balance, December 31, 1994 2,763,334 9,102,667 6,019,485 59 - (5,067,336) 4,035,390
Issuance of common stock as
incentive for note - - 37,500 - 37,500 - 37,500
Issuance of common stock for
services - unrelated parties - - 600,000 7 62,005 - 62,012
- related parties - - 2,550,000 26 101,974 - 102,000
Issuance of common stock for
cash - - 3,750,000 38 164,962 - 165,000
Issuance of stock to acquire
interest in General
Partnership - - 400,000 4 15,996 - 16,000
Exercise of stock options
at $.02 per share - - 25,000 1 499 - 500
Adjustment for licensing of
film library (1,000,000) (4,000,000) - - 708,447 3,831,235 539,682
Net loss for the year
ended December 31, 1995 - - - - - (6,295,670) (6,295,670)
---------- ------------ ---------- ---------- ------------- ------------ ------------
BALANCE, DECEMBER 31, 1995 1,763,334 $ 5,102,667 13,381,985 $ 135 $ 1,091,383 $ (7,531,771) $ (1,337,586)
- -------------------------- ========== ============ ========== ========== ============= ============ ============
See accompanying notes to consolidated financial statements
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
Period from Inception
(December 3, 1986)
For the Years Ended December 31, Through
1995 1994 1993 December 31, 1995
----------- ---------- ---------- ---------------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) $(6,295,670) $ (731,671) $ (491,807) $ (7,531,771)
Adjustments to reconcile net (loss) to net cash provided
by (used in) operations:
Reduction of film library 5,886,200 - - 5,886,200
Depreciation and amortization 280 243 39 660
Disposal of equipment 60,462 - - 60,462
Stock issued for accrued interest - - 140,000 140,000
Debt issued for services - - 94,598 94,598
Stock issued for services 217,512 272,800 246,351 736,664
Write-off of television pilot - 30,500 - 30,500
Deferred acquisition costs - 15,000 - 15,000
Changes in:
Prepaid expenses - 31,250 (31,250) -
Deposits 1,000 - (1,000) -
Accounts payable 29,857 3,826 44,067 77,719
Accrued salaries and taxes (57,701) 60,893 3,097 6,320
Accrued interest 12,531 9,939 530 34,666
----------- ---------- ---------- -------------
Cash Flows Provided by (Used in) Operating Activities (145,529) (307,220) 4,625 (448,982)
----------- ---------- ---------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of TV pilot - - (30,500) (30,500)
Purchase of property and equipment (2,095) (2,553) (470) (5,118)
Purchase of film rights (45,000) (2,000) - (47,000)
----------- ---------- ---------- -------------
Cash Flows (Used In) Investing Activities (47,095) (4,553) (30,970) (82,618)
----------- ---------- ---------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholder advances - (570) (2,981) (2,693)
Proceeds from sale of common stock 165,500 322,750 26,050 514,300
Payments on notes payable, related party - (3,814) (25,155) (28,969)
Proceeds from notes payable, related party 155,000 - 28,969 183,969
Proceeds from note payable, stockholder - 15,000 - 15,000
Note receivable, related party - (18,206) - (18,206)
----------- ---------- ---------- -------------
Cash Flows Provided by Financing Activities 320,500 315,160 26,883 663,401
----------- ---------- ---------- -------------
NET CHANGE IN CASH 127,876 3,387 538 131,801
CASH, beginning of period 3,925 538 - -
----------- ---------- ---------- ----------
CASH, end of period $ 131,801 $ 3,925 $ - $ 131,801
=========== ========== ========== =============
See accompanying notes to consolidated financial statements
</TABLE>
8
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND FOR THE
PERIOD FROM INCEPTION (DECEMBER 3, 1986) THROUGH DECEMBER 31,
-------------------------------------------------------------
1995 (UNAUDITED)
----------------
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES
- ----------------------------------------------------------------------
During 1992, the Company acquired $2,000,000 of feature film
licensing rights in exchange for a $2,000,000 note payable which was
then converted to 713,334 shares of preferred stock in December
1993.
During 1992, the Company acquired $4,000,000 of broadcast time
valued at the predecessors' cost of $2,800,000 for issuance of
1,000,000 shares of convertible preferred stock. Subsequently, the
Company exchanged $2,300,000 of broadcast time for the licensing
rights to 165 feature films.
During 1993, the Company acquired five feature films for issuance of
50,000 shares of preferred stock which have been valued at $151,000.
In December 1993, the Company converted a note payable of $94,598
for 30,000 shares of common stock.
During 1993, the Company acquired video production equipment and
feature films for 36,000 shares of common stock valued at $108,000.
During 1993, the Company issued 20,000 shares of common stock for
$15,000 of deferred acquisition costs.
During 1994, the Company acquired a Spanish language film library of
640 feature films valued at $883,200, the predecessor cost, from a
stockholder in exchange for 1,000,000 shares of $4 convertible
preferred stock and a $1,800,000 note payable. In October 1995, this
agreement was cancelled and a new agreement was entered in to.
During 1994, the Company issued 100,000 shares of its common stock
for $13,750 in connection with a cancelled public offering.
During 1994, the Company paid $530 in interest.
As of December 31, 1995, the Company has deemed the value of the
feature films, the feature film license rights and the broadcast
time rights to be impaired and as a result has expensed the
unamortized balance.
9
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
Organization
------------
Century Technologies, Inc. (a development stage company)
(the Company) was incorporated under the laws of Colorado
on December 3, 1986. The Company is in the development
stage as defined in Financial Accounting Standards Board
Statement No. 7. Since inception, activities have been
limited to raising capital.
In July 1993, the Company formed two wholly-owned
subsidiaries. World Gaming Network, Inc. and Century
Productions. As of December 31, 1995, there has been no
significant activity by either subsidiary.
In early 1996, the Company unilaterally rescinded all of its
contracts for its acquisitions of broadcast time and feature films.
Subsequently, the Company filed a lawsuit seeking a declaratory
judgement as to the Company's right to rescind these agreements (See
Notes 3, 6 and 11).
On November 9, 1995, the former President and Secretary/ Treasurer
resigned.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
Income Taxes
------------
Effective January 1, 1993, the Company has adopted the liability
method of accounting for income taxes pursuant to Statement of
Financial Accounting Standards No. 109. Under this method, deferred
income taxes are recorded to reflect the tax consequences in future
years of temporary differences between the tax basis of the assets
and liabilities and their financial amounts at year-end. The Company
provides a valuation allowance to reduce deferred tax assets to
their net realizable value. For financial reporting, start-up costs
are expensed as incurred; for tax purposes they are capitalized and
will be amortized over five years when operations begin.
Amortization of film license rights is amortized by the individual
10
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING DECEMBER 31, 1995, 1994 AND 1993
-----------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------------------
film forecast method for financial statement purposes but is
amortized over 10 years on the straight-line basis for tax purposes.
The Company is not in operation at this date. Therefore, $7,500,000
has been capitalized, had not been deducted for tax purposes and
represents a deferred tax asset of $2,550,000 at December 31, 1995.
The Company is providing a valuation allowance in the full amount of
the deferred tax asset since there is no assurance of future taxable
income.
Reclassification
----------------
Certain amounts in the prior year consolidated financial statements
have been reclassified for comparative purposes to conform with the
current year. These reclassifications had no effect on results of
operations or accumulated deficit as previously reported.
Feature Films and Feature Film License Rights
---------------------------------------------
Amortization of feature films and feature film license rights (which
have all been released) are computed on the individual-film-forecast
method in the same ratio that current years' revenues will bear to
anticipated total gross revenues. The anticipated total gross
revenues are estimated by management and will be reviewed quarterly,
therefore, revisions to amortization rates and write downs to net
realizable value may occur.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Depreciation and
amortization expense is generally provided on a straight-line basis
using estimated useful lives of 5-10 years for equipment and 7-15
years for leasehold improvements. Maintenance and repairs are
expensed as incurred; major renewals and betterments are
capitalized. When items of property and equipment are sold or
retired the related cost and accumulated depreciation are removed
from the accounts and any gain or loss is included in the results of
operations.
11
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------------------
Loss Per Common Share
---------------------
Loss per common share is computed by dividing net loss applicable to
common stock by the weighted average number of common stock and
common stock equivalents assumed outstanding during the period. The
conversion of preferred stock, warrants and common stock options
were anti-dilutive and were not included in the calculation of the
weighted average common shares outstanding.
Use of Estimates in the Preparation of
--------------------------------------
Consolidated Financial Statements
---------------------------------
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Statement of Cash Flows
-----------------------
For purposes of this statement, the Company considers all highly
liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Significant Concentration of Credit Risk
----------------------------------------
The Company has concentrated its credit risk for cash by maintaining
deposits in banks located within the same geographic region. The
maximum loss that would have resulted from risk totalled $60,000 and
-0- for 1995 and 1994, respectively, for the excess of the deposit
liabilities reported by the bank over the amounts that would have
been covered by federal insurance.
12
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 2 - GOING CONCERN
- -----------------------
The accompanying consolidated financial statements have been
prepared on a going-concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company has not yet commenced
operations, has never generated revenue and has minimal cash to
operate at December 31, 1995. The Company's continuation as a
going-concern is dependent upon its ability to generate sufficient
cash flow to meet its obligations on a timely basis, to obtain
financing as may be required, and ultimately attain profitable
operations. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of
asset amounts that might be necessary should the Company be unable
to continue as a going concern.
NOTE 3 - IMPAIRMENT OF FEATURE FILMS, FEATURE FILM LICENSE RIGHTS AND BROADCAST
- --------------------------------------------------------------------------------
TIME RIGHTS
-----------
On December 2, 1992, the Company acquired the rights to $4,000,000
in broadcast time on Channel America, a national television network
formed by 93 low-power and full-power affiliates across the United
States. As consideration for the transfer, the Company issued
1,000,000 shares of its preferred stock. The preferred stock is able
to be converted to common stock after two years at the then current
market price, provided, however, that the conversion amount will not
equal more than 7 1/2% of the issued and outstanding shares of the
Company. The Company can redeem the preferred stock at any time
prior to conversion for $4,400,000.
If the stock is not redeemed, the preferred stockholder has a right
to receive the first $200,000 of net earnings as a dividend and 5%
of the net earnings per year thereafter. On October 22, 1994, the
parties agreed to extend the conversion date of the preferred stock
to March 31, 1996. The value of the broadcast time and preferred
stock was recorded at $2,800,000 which approximates the transferor's
historical basis. As of December 31, 1995, the Company has
determined that the value of the broadcast time has been impaired
and has expensed the remaining unamortized balance (See Notes 6 and
11).
13
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 3 - IMPAIRMENT OF FEATURE FILMS, FEATURE FILM LICENSE RIGHTS AND BROADCAST
- --------------------------------------------------------------------------------
TIME RIGHTS (CONTINUED)
-----------------------
On December 2, 1992, the Company acquired license rights for 100
feature films. The license period was for 10 years for the
television and home video media. The license fee was $20,000 per
film for total consideration of $2,000,000 payable on December 2,
1994 with interest at 7% per year, payable at maturity,
collateralized by the film license rights. This agreement was
subsequently divided into two separate agreements and two separate
notes of $1,000,000 each. On December 29, 1993, the two $1,000,000
notes plus accrued interest of $151,667 were converted to 713,334
shares of its preferred stock ($3.02 per share). These shares were
convertible into common stock at $3.00 per share after three years
and were callable at any time. Upon conversion, the note holder
represented to the Company that one of the $1,000,000 promissory
notes was lost. In fact, in February, 1993, unbeknownst to the
Company, the note holder transferred all right, title and interest
in one of the notes to a third party who filed a lawsuit against the
Company for non payment on the note. The Company settled the lawsuit
in 1996, by issuing the third party 356,667 shares of the Company's
common stock and canceled 356,667 shares of convertible preferred
stock. As of December 31, 1995, the Company has determined that the
value of the license rights has been impaired and has expensed the
remaining unamortized balance (See Notes 6 and 11).
On October 26, 1993, the Company acquired title to five feature
films. As consideration, the Company issued 50,000 shares of its
preferred stock valued at $151,000 to the sole shareholder of a
company that owned the Company's preferred stock. These shares were
convertible into common stock at $3.00 per share after three years
and were callable at any time. As of December 31, 1995, the Company
has determined that the value of the films has been impaired and the
Company has expensed the unamortized balance (See Notes 6 and 11).
During 1993, the Company acquired two feature films and video
production equipment for 36,000 shares of common stock valued at
$50,000 and $58,000, respectively. The Company has abandoned the
equipment and has written off the two feature films. (See Notes 4, 6
and 11).
14
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 3 - IMPAIRMENT OF FEATURE FILMS, FEATURE FILM LICENSE RIGHTS AND BROADCAST
- --------------------------------------------------------------------------------
TIME RIGHTS (CONTINUED)
-----------------------
On March 11, 1994, the Company entered into a letter of intent to
form a general partnership (WSN) with an unrelated party (WBS) which
was to operate and distribute a graphic and text sports cable
programming network. The Company finalized this agreement and agreed
to invest $1,000,000 into WSN and loan $2,000,000 to WSN with
interest at 7.5% per annum due in five years. WBS agreed to sell its
wire service software, hardware and technology to WSN for $1,000,000
and 400,000 shares of the Company's common stock. As part of the
resignation of the former president, the former president assumed
the Company's general partnership interest and all liabilities
related to this agreement and in 1996, WSN returned 200,000 of the
400,000 shares of the Company's common stock.
On September 20, 1994, the Company acquired the licensing rights to
one feature film for $2,000. This licensing right has been fully
amortized in 1995, since no revenues have or will be generated (See
Note 6).
On October 22, 1994, $2,300,000 in broadcast time rights which the
Company owned were exchanged for licensing rights to 165 feature
films. The term of the license rights was 10 years. During those 10
years, the Company had the right to unlimited exhibitions and
reproductions and could have assigned any and all rights acquired.
As of December 31, 1995, the Company has determined that the value
of the film and broadcast time rights has been impaired and has
expensed the unamortized balance (See Notes 6 and 11).
On November 30, 1994 the Company purchased a Spanish language
library of 640 feature films from a stockholder of the Company. As
consideration, the Company issued a $1,800,000 note payable and
issued 1,000,000 shares of the Company's preferred stock. These
15
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 3 - IMPAIRMENT OF FEATURE FILMS, FEATURE FILM LICENSE RIGHTS AND BROADCAST
- --------------------------------------------------------------------------------
TIME RIGHTS (CONTINUED)
-----------------------
feature films were valued at $883,200 which was the predecessor's
cost. A predecessor cost adjustment of $4,916,800 was charged to
stockholders' equity. On October 2, 1995, this agreement, note and
preferred stock were cancelled and the Company executed a new
agreement calling for a down payment of $200,000 and a balance of
$1,600,000 to be paid over 10 years from the proceeds received from
the exhibition of the films. The terms call for no interest to be
charged. The Company has adjusted this stream of payments to its net
present value using an 8.5% interest rate. As of December 31, 1995,
the Company has determined that the value of the films have been
impaired and has expensed the cost (See Notes 6 and 11).
NOTE 4 - PROPERTY AND EQUIPMENT
- --------------------------------
Property and equipment consists of the following as of December 31:
1995 1994
---------- -------
Idle equipment $ - $ 58,000
Office furniture
and equipment 2,095 2,753
Leasehold improvements - 270
---------- ----------
2,095 61,023
Less accumulated
depreciation - (281)
---------- ----------
$ 2,095 $ 60,742
========== ==========
In 1995, the Company expensed $60,462 of obsolete and idle equipment
which consisted primarily of theater projection and film editing
equipment.
Depreciation and amortization was $280, $243 and $39 for the years
ended December 31, 1995, 1994 and 1993, respectively.
16
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 5 - NOTES PAYABLE
- -----------------------
On November 30, 1994, the Company purchased a Spanish language
library of 640 feature films. As consideration, the Company issued
1,000,000 shares of $4 convertible preferred stock and a $1,800,000
note payable. In October 1995, the agreement, note and preferred
stock were cancelled and a new agreement was executed. The Company
paid a down payment of $45,000 and owed an additional down payment
of $155,000 if within 60 days of the execution of the agreement the
licensee received proper chain of title. It is the Company's
position that it has not been provided. The total consideration to
be paid was $1,800,000 including the down-payment. The $1,600,000
portion was to be paid from revenues collected over a period of 10
years. This outstanding balance has been reduced to its net present
value using an interest rate of 8.5%. The Company considers the
films to be impaired and has expensed the unamortized balance.
On December 21, 1994, the Company signed a promissory note for
$15,000 from one of its stockholders payable in 90 days with
interest at 8% per year. This note was assumed by the former
president in October 1995.
In 1995, the Company borrowed $170,000 from various stockholders
payable within one year with interest at 8.5%.
NOTE 6 - RELATED PARTY TRANSACTIONS
- ------------------------------------
During 1993, a company owned by the majority stockholder of the
Company (CP) made net advances totalling $3,814 to the Company with
interest of 10% per annum. Accrued interest was $530 at December 31,
1993. During 1994, the Company repaid the advances from CP and made
non-interest bearing advances totalling $18,206 to CP. During 1994,
CP assumed certain liabilities of the Company totalling $14,623.
During 1994, CP made advances in the amount of $18,789.
During the period December 1992 to March 1993, the Company leased
office space from a former officer of the Company on a
month-to-month basis for $1,200 per month. Rent expense was $3,600
and $1,200 for the years ended December 31, 1993 and 1992,
respectively.
On February 3, 1995, the Company borrowed $2,500 from a stockholder
under a promissory note. Repayment was to be made within three
17
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)
- -------------------------------------------------
months from the date of the note together with accrued interest
computed at the rate of 9% per annum. The note was able to be
converted, at the option of the holder, into restricted preferred
shares of the Company at the conversion rate of one restricted share
for each $5.00 of unpaid principal and accrued interest. In 1995 the
note was assumed by the former president of the Company.
On March 3, 1995, the Company issued one of its former directors
25,000 shares of its common stock as compensation for services to
the Company valued at $25,000.
On March 6, 1995, the Company borrowed $25,000 from one of its
former directors under a promissory note. Repayment was to be made
within three months from the date of the note, together with accrued
interest computed at the rate of 8% per annum. As additional
inducement for the loan, the Company issued options to acquire
25,000 shares of its common stock exercisable at $.02 per share.
These options were exercised in 1995 and the note was assumed by the
former president.
In June and August 1995, the Company borrowed $12,500 from one of
its directors under three promissory notes. Repayment was to be made
within three months from the date of the notes together with accrued
interest computed at the rate of 8% per annum. The notes were
assumed by the former president.
On September 29, 1995, the Company issued a director 50,000 shares
of common stock for his three years of service on the Board of
Directors valued at $2,000.
On September 29, 1995, the Company issued to the former president
1,500,000 shares of its common stock for services rendered valued at
$60,000.
On October 27, 1995, the Company authorized the issuance of
1,000,000 shares of common stock to the current president in
accordance with his employment agreement valued at $40,000.
18
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)
- -------------------------------------------------
On November 7, 1995, notes totalling $12,500 due to a former officer
were converted to common stock at $1.00 per share.
During the two month period ended December 31, 1995, the Company
leased office space from the current president of the Company on a
month to month basis.
On February 26, 1996, the Company issued to an employee, as called
for in his employment agreement, 25,000 shares of the Company's
common stock valued at $.04 per share.
NOTE 7 - STOCKHOLDERS' EQUITY
- ------------------------------
During 1993, the Company sold six units (each unit consisting of
1,500 shares of common stock at $3.00 per share) at a price of
$4,500 per unit and exchanged 24 units, of which 22 units were
issued to the sole stockholder of a company that owns the Company's
preferred stock. The Company received net proceeds of $20,800 from
the sale of the six units.
During 1993, the Company sold 25 shares of its common stock in a
private sale and received $250.
During 1993, the Company issued 255,000 shares of common stock in
consideration for public relations and consulting services valued at
$101,250.
On January 12, 1993, the Company approved the reacquisition and
retirement of 4,500,000 shares of its outstanding common stock from
19
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
- -------------------------------------------
the majority stockholder for no consideration as a contribution to
capital. All references throughout the consolidated financial
statements, including per share data give retroactive effect to the
stock retirement.
In December 1993, the Company issued 25,000 shares of its common
stock to each of its six directors in consideration for services
valued at $112,500.
In December 1993, the Company issued 61,331 shares of its common
stock to officers for services valued at $32,601.
During December 1993, the Company converted $98,598 in debt to
30,000 shares of common stock. In January 1994, the Company received
$60,000 from the stockholder as contributed capital.
On December 31, 1993, the Company sold 5,000 shares of common stock
for $5,000.
During 1994, the Company issued options to acquire 150,000 shares of
its common stock to an officer/ stockholder. The options were
exercisable at 85% of the fair market value of the stock on the date
of grant or $.20 per share through May 1997. As part of the
officer's terminations, these options were cancelled.
In January 1994, the Company sold 12,500 shares of common stock in a
private sale and received $5,000.
On February 16, 1994, the Company granted options to purchase
400,000 shares of its common stock to an unrelated financial
consultant as compensation for future services. The options are
exercisable at the option of the holder over a period of five years
at $.625 per share at any time between February 16, 1994 and
February 16, 1999 in blocks of 50,000 shares. No options have been
exercised to date.
In February 1994, the Company issued 2,500 shares of its common
stock to an employee as additional compensation.
20
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
- -------------------------------------------
The Company also granted the employee options to purchase an
additional 2,500 shares of its common stock at $.10 per share which
are exercisable after 30 days of employment. As of December 31,
1995, these options have expired.
In April 1994, the Company entered into a subscription agreement
with an entity to issue 1,000,000 shares of its common stock for a
$250,000 note receivable ($.25 per share) with payment due July 14,
1994, and collateralized by the Company's common stock. During 1994,
the Company adjusted the purchase price of the stock and received a
total of $213,750, net of offering costs of $13,750, from the
subscription agreement and issued 496,000 shares of its common
stock.
In June 1994, the Company issued 25,000 shares of its common stock
valued at $10,000 to one of the former directors as compensation for
their services.
In September and October 1994, the Company sold 229,833 shares of
its common stock and received $46,500.
In September 1994, the Company issued 205,000 shares of its common
stock for consulting services.
In November 1994, the Company issued 15,000 shares of its common
stock to a stockholder for the services rendered on the private
placement.
In December 1994, the Company issued 200,000 shares of its common
stock for $15,250 in consulting services.
On June 26, 1995, the Company entered into a public relations
agreement with a public relations firm whereby the firm would
provide marketing and promotional services in exchange for 550,000
shares of the Company's common stock, valued at $.10 per share.
Contingent upon financing being acquired by the Company, the
agreement will be on a cash basis of $10,000 per month for the first
year and an automatic renewal for two years at $15,000 per month.
This agreement was cancelled in late 1995.
21
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
- -------------------------------------------
On August 30, 1995, the Company sold 2,250,000 shares of its common
stock in a private sale at $.04 per share for a total of $90,000 for
the purpose of the acquisition of WSN and working capital (See Note
3).
On October 11, 1995, the Company sold 1,500,000 shares of its common
stock under a Regulation S filing at $.05 per share for a total of
$75,000.
On October 16, 1995, the Company issued 400,000 shares of its common
stock as part of the agreement with WSN relating to the general
partnership. In November 1995, the Company's investment in the
general partnership was transferred to the former President and in
1996 WSN returned 200,000 shares. The stock was recorded at a value
of $16,000 (See Note 3).
On November 7, 1995, the Company issued 50,000 shares of the
Company's common stock to a consultant in lieu of payment for
services valued at $7,013.
STOCK OPTIONS ISSUED BUT UNEXERCISED
------------------------------------
NUMBER OF SHARES EXPIRATION DATE EXERCISE PRICE
---------------- --------------- --------------
400,000 February 14, 1999 .62
50,000 December 20, 2000 .25
50,000 December 20, 2001 .50
50,000 December 20, 2002 .75
50,000 December 20, 2003 1.00
50,000 December 20, 2004 1.25
100,000 January 2, 2001 .30
500,000 January 1, 2001 .15
500,000 January 1, 2002 .20
500,000 January 1, 2003 .25
1,000,000 January 1, 2004 .30
1,000,000 January 1, 2005 .50
----------------
4,250,000
================
22
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 8 - STOCK OPTION PLANS
- ----------------------------
1992 Incentive Stock Option Plan
--------------------------------
During 1992, the Board of Directors adopted the "1992 Incentive
Stock Option Plan" reserving 500,000 shares of the Company's common
stock for said plan. It is a qualified plan under Section 422 of the
Internal Revenue Code of 1986, as amended.
The purchase price of each share of common stock placed under option
shall not be less than 100% of the fair market value on the date the
option is granted unless the optionee owns more than 10% of the
voting stock of the Company, then the purchase price shall be 110%
of the fair market value. The option period shall not be more than
10 years (five years for 10% stock holders) from the date of grant
and will expire one year from the date of optionee's termination. To
date, no options have been granted.
The Board of Directors further adopted the "1992 Non- Statutory
Stock Option Plan" reserving 1,000,000 shares of the Company's
common stock which shall not be a qualified plan under the Internal
Revenue Code of 1986, as amended.
The purchase price of each share of common stock placed under option
shall be not less than 100% of the fair market value on the date the
option is granted. The option period shall not be more than 10 years
from the date of grant and will expire one year from the date of
optionee's termination. To date, no options have been granted.
23
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 9 - EMPLOYEE STOCK COMPENSATION PLAN
- ------------------------------------------
The Board of Directors elected to adopt the 1994 Employee Stock
Compensation (ESC) Plan effective September 12, 1994. The board
authorized the issuance of 1,000,000 shares of $.00001 par value
common stock issuable upon awards under the ESC Plan and such number
of shares is to be formally reserved solely for the purpose of this
plan. 500,000 of these shares are to be registered under the
Securities Act of 1993, as amended, under cover of a registration
statement on Form S-8. During September and October 1994, 205,000
shares were issued to an attorney for legal fees of $71,750 and
295,000 shares were issued for $29,500 in consulting services.
NOTE 10 - COMMITMENTS
- ---------------------
During 1993, the Company entered into a license agreement with an
unrelated entity whereby the entity obtained the exclusive right and
license under copyright to duplicate, manufacture, market, promote,
sell and exploit at its sole discretion all forms of videograms from
the Company's film library for home use in English and Spanish. The
territory consisted of the United States of America, all U.S.
Military installations around the world and Mexico for a period of
ten years. The Company was entitled to receive royalties on the
amount of 15% and 10% of gross receipts derived from the sale of
video devices with a suggested retail price at or below $20 and
gross receipts from video devices with a suggested retail value over
$20, respectively. The Company was entitled to 20% of any gross
receipts received by FRE from the sale and distribution by third
party sub license agreements. This agreement has been cancelled
under the rescission of the agreement regarding the film library
(See Note 3).
On January 26, 1994, the Company entered into an agreement with an
unrelated consultant whereby consultant is to provide marketing and
promotional services for the Company to assist in obtaining
financing for the acquisition of a casino. During 1994, a consultant
was paid approximately $50,000 and the agreement was terminated.
24
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 10 - COMMITMENTS (CONTINUED)
On January 3, 1994, the Company entered into an employment
agreements with its former president and former vice president/
secretary/ treasurer for a period of five years. In 1994, the
Company issued 73,296 shares of its common stock to the vice
president/secretary/ treasurer for $19,050 of accrued salary and
accrued $48,775 for the president for the year ended December 31,
1994. As of December 31, 1995, there was no compensation or amounts
owed to the former officers.
On October 27, 1995, the Company entered into an employment
agreement with its CEO/current president. The agreement calls for an
annual salary of $100,000 plus 20% of net after tax earnings of the
Company. As part of this agreement, the Company issued the executive
1,000,000 shares of the common stock of the Company. As additional
compensation, the president has been granted stock options
totalling, 3,500,000 shares at exercise prices ranging from $.15 to
$.50 to be exercised at a specific amount each year.
The Company leased office space from an unrelated entity under a
month-to-month operating lease for $857 per month. Rent expense was
$6,207 and $8,458 for the years ended December 31, 1995 and 1994
respectively. The Company moved its operations to California in
November 1995 and the lease was terminated.
On February 21, 1996, the Company was informed that an informal
inquiry of the Company and certain transactions had been initiated
by the Enforcement Branch of the United States Securities and
25
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 10 - COMMITMENTS (CONTINUED)
- ----------------------------------
and Exchange Commission. The Company has supplied the Commission
with all documents as requested. The Company's Board of Directors
have authorized and instructed management to comply with the
requests of the Commission which the Company has done.
On September 13, 1996, the staff of the Securities and Exchange
Commission notified the Company that the Division of Enforcement
intended to recommend that the Commission institute a cease and
desist order against the Company based on allegations that the
Company violated various sections of the Securities laws. The
concerns of the Securities and Exchange Commission are with prior
management.
NOTE 11 - LITIGATION
- --------------------
On August 19, 1996, the Company filed a lawsuit against two
companies and an individual related to the two companies regarding
the Company's acquisition and licensing of certain feature films and
acquisition of broadcast time rights. The Company's position is that
it was fraudulently induced to enter into various purchase and
licensing agreements for certain feature films and broadcast time
rights by the two companies and individual by falsely representing
and warranting to the Company that they owned the media rights to
the feature films and all broadcast time rights under the contracts
and the authority to license the media rights and/or convey title,
to such films and sell the broadcast time rights. It is the
Company's position that the defendants did not own the media rights
and/or title to the films and broadcast time rights and did not have
the authority to license or sell the rights conveyed under the
agreements. As part of the various agreements, the defendants agreed
to deliver documentation to the Company which demonstrates
transferors' ownership interest. The Company asserts that the
defendants not only failed to provide the Company with the
documentation, but never intended to provide such documentation.
26
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
NOTE 12 - DEFERRED ACQUISITION COSTS
- ------------------------------------
During November 1993, the Company entered into an agreement with an
unrelated investment banking firm (IBF) whereby IBF agreed to
provide the company with consulting services in the areas of
mergers, acquisitions, divestitures, joint ventures and private
placement financing. IBF was to receive a fee of 5% of the total
amount of cash financing it obtains for the Company. If the funding
obtained is other than cash, IBF was to receive common stock of the
Company equal to 15% of the value of the transaction.
During the year ended December 31, 1993 and 1994, the Company issued
20,000 and 495,000 shares of its common stock to IBF for $15,000 and
$123,750, respectively, as advances for services. The cost of the
services were capitalized as deferred acquisition costs. Since IBF
was unable to locate equity financing or merger candidates, $138,750
was charged to operations in 1994.
NOTE 13 - SUBSEQUENT EVENT
- --------------------------
On June 4, 1996, the Company signed a letter of intent with Affinity
Entertainment, Inc. to allow Affinity to purchase a majority
interest in the Company. The percentage of ownership will be
determined upon the completion of Affinity Entertainment due
diligence procedures. In addition, Affinity will provide unsecured
loans or capital necessary to allow the continuation of the
Company's operations. As of the date of this report, Affinity has
advanced $225,000.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CENTURY TECHNOLOGIES, INC. FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1995 , AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1996
<CASH> 132
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 132
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 134
<CURRENT-LIABILITIES> 1,471
<BONDS> 0
5,102
0
<COMMON> 0
<OTHER-SE> (6,439)
<TOTAL-LIABILITY-AND-EQUITY> 134
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,296
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,296)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,296)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,296)
<EPS-PRIMARY> (.78)
<EPS-DILUTED> (.78)
</TABLE>
