SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1996
Commission File No. 0-20236
CENTURY TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
COLORADO 65-0395829
- ------------------------------------ ---------------------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
201 North Robertson Boulevard, Beverly Hills, California 90211
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(310) 275-9063
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
-------- --------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of business of
Common Stock (.0001 Par Value) 13,206,985
- ----------------------------- --------------------------------
CLASS Outstanding at March 31, 1996
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 - 2 - INDEPENDENT ACCOUNTANTS' REVIEW REPORT
PAGE 3 - CONSOLIDATED BALANCE SHEETS AS OF MARCH 31,
1996 AND DECEMBER 31, 1995
PAGE 4 - CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 AND
FOR THE PERIOD FROM INCEPTION (DECEMBER 3,
1986) THROUGH MARCH 31, 1996 (UNAUDITED)
PAGE 5 - CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY OR DEFICIENCY FOR THE
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
PAGE 6 - CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
AND FOR THE PERIOD FROM INCEPTION (DECEMBER 3,
1986) THROUGH MARCH 31, 1996 (UNAUDITED)
PAGES 7 -21 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS
OF MARCH 31, 1996
PAGES 22-24 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS
OF OPERATION
PAGE 25 - PART II -OTHER INFORMATION
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors of:
Century Technologies, Inc. and Subsidiaries
(A Development Stage Company)
We have reviewed the accompanying consolidated balance sheet of Century
Technologies, Inc. and Subsidiaries (a development stage company) as of March
31, 1996, and the related consolidated statements of operations, changes in
stockholders' equity or deficiency, and cash flows for the three months ended
March 31, 1996, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these consolidated financial statements
is the representation of the management of Century Technologies, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
As discussed in Notes 3, 5 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.
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
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.
<PAGE>
Century Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Page Two
The financial statements for the year ended December 31, 1995, were audited by
us and we expressed an unqualified opinion on them in our report dated August
19, 1996, except for Note 10 which is dated September 16, 1996, but we have not
performed any auditing procedures since that date.
WEINBERG, PERSHES & COMPANY, P.A.
Boca Raton, Florida
September 30, 1996
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
ASSETS
------
MARCH 31, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- -----------
Cash $ 27,131 $ 131,801
Furniture, fixtures and
equipment, net 1,990 2,095
Option for rights to television
program 10,000 --
----------- -----------
TOTAL ASSETS $ 39,121 $ 133,896
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY OR DEFICIENCY
--------------------------------------------------
LIABILITIES
Notes payable, stockholders $ 1,460,318 $ 1,385,318
Accounts payable 50,305 63,164
Accrued interest, stockholders 45,566 23,000
----------- -----------
TOTAL LIABILITIES 1,556,189 1,471,482
----------- -----------
STOCKHOLDERS' EQUITY OR DEFICIENCY
Preferred stock, no par value;
10,000,000 shares authorized;
1,763,334 issued outstanding 5,102,667 5,102,667
Common stock, $.00001 par
value; 200,000,000 shares
authorized; 13,206,985 and
13,381,985 issued and outstanding,
respectively 133 135
Capital in excess of par 1,092,385 1,091,383
(Deficit) accumulated during the
development stage (7,712,253) (7,531,771)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY OR
DEFICIENCY (1,517,068) (1,337,586)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY OR
DEFICIENCY $ 39,121 $ 133,896
=========== ===========
Read accountants' review report and 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)
For the Three Months Ended Through
March 31, March 31,
1996 1995 1996
------------ ------------- -------------
(Unaudited) (Unaudited) (Unaudited)
REVENUES $ - $ - $ -
------------ ------------- ------------
EXPENSES:
General and
administrative 157,811 98,555 1,563,631
Interest 22,566 - 201,195
Depreciation
and
amortization 105 70 765
Disposal of
equipment - - 60,462
Write off of
film library - - 5,886,200
------------ ------------- -----------
Total
Expenses 180,482 98,625 7,712,253
------------ ------------- -----------
NET (LOSS) $ (180,482) $ (98,625) $(7,712,253)
- ---------- ============ ============= ===========
NET LOSS
PER SHARE OF
COMMON STOCK $ (.01) $ (.02)
============ =============
Weighted
Average Number
of Common
Shares
Outstanding 13,319,073 6,021,414
============ =============
Read accountants' review report and 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 AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
-------------------------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK
---------------------- ----------------------- CAPITAL - IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT EXCESS OF PAR STAGE TOTALS
--------- ----------- ---------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
- --------------------------
Unaudited:
Issuance of common stock
per employment agreement - - 25,000 - 1,000 - 1,000
Return of shares issued - - (200,000) (2) 2 - -
Net (loss) for the period
ended March 31, 1996 - - - - - (180,482) (180,482)
---------- ------------ ---------- ---------- ------------- ------------ ------------
BALANCE, MARCH 31, 1996
(UNAUDITED) 1,763,334 $ 5,102,667 13,206,985 $ 133 $ 1,092,385 $ (7,712,253) $ (1,517,068)
- ------------------------ ========== ============ ========== ========== ============= ============ ============
See accompanying notes to consolidated financial statements
</TABLE>
5
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Period from Inception
For the Three Months Ended (December 3, 1986)
March 31, Through
1996 1995 March 31, 1996
(Unaudited) (Unaudited) (Unaudited)
------------ ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) $ (180,482) $ (98,625) $ (7,712,253)
Adjustments to reconcile net (loss) to net
cash used in operations:
Reduction of film library - - 5,886,200
Depreciation and amortization 105 70 765
Disposal of equipment - - 60,462
Stock issued for accrued interest - - 140,000
Debt issued for services - - 94,598
Stock issued for services 1,000 25,000 737,664
Write-off of television pilot - - 30,500
Deferred acquisition costs - - 15,000
Changes in:
Accounts payable (12,859) 630 64,860
Accrued salaries and taxes - 44,750 6,320
Accrued interest, stockholders 22,566 - 57,232
------------ ------------- -------------
Cash Flows Provided by (Used In) Operating Activities (169,670) (28,175) (618,652)
------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of TV pilot - - (30,500)
Purchase of property and equipment - - (5,118)
Option for rights to television program (10,000) - (10,000)
Purchase of film rights - - (47,000)
----------- ------------- -------------
Cash Flows (Used In) Investing Activities (10,000) - (92,618)
----------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable, stockholder 75,000 1,200 72,307
Proceeds from sale of common stock - (4,450) 514,300
Payments on notes payable, related party - - (28,969)
Proceeds from notes payable, related party - 27,500 183,969
Proceeds from note payable, stockholder - - 15,000
Note receivable, related party - - (18,206)
------------ ------------- -------------
Cash Flows Provided by Financing Activities 75,000 24,250 738,401
------------ ------------- -------------
NET CHANGE IN CASH (104,670) (3,925) 27,131
CASH, beginning of period 131,801 3,925 -
------------ ------------- ----------
CASH, end of period $ 27,131 $ - $ 27,131
============ ============= =============
</TABLE>
Read accountants' review report and notes
to consolidated financial statements
6
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
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 March 31,
1996, there has been no significant activity by either subsidiary.
In early 1996, the Company unilaterally rescinded all of its
existing 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, 5 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
------------
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
Read accountants' review report.
7
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------------------
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 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,
approximately $7,700,000 in cumulative losses have been capitalized,
have not been deducted for tax purposes, and represent a deferred
tax asset of approximately $2,618,000 at March 31, 1996. 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 period. These reclassifications had no effect on results of
operations or accumulated deficit as previously reported.
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.
Read accountants' review report.
8
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
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
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 the risk totalled -0- and
$60,000 for March 31, 1996 and December 31, 1995 respectively, for
the excess of the deposit liabilities reported by the bank over the
amounts that would have been covered by federal insurance.
Read accountants' review report.
9
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
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 March 31, 1996. 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 - FEATURE FILMS, FEATURE FILM LICENSE RIGHTS AND BROADCAST
- ------------------------------------------------------------------
TIME RIGHTS
-----------
A. Impairment
--------------
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 was
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 could have redeemed the preferred stock
at any time prior to conversion for $4,400,000.
If the stock was 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
Read accountants' review report.
10
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 3 - FEATURE FILMS, FEATURE FILM LICENSE RIGHTS AND BROADCAST
- ------------------------------------------------------------------
TIME RIGHTS (CONTINUED)
-----------------------
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 airtime has been impaired and has
expensed the remaining unamortized balance (See Note 11).
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 February 1993, unbeknownst to the Company, the
note holder transferred all rights, 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 April
1996 by issuing the third party 356,667 shares of the Company's
common stock and cancelled 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 Note 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
Read accountants' review report.
11
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 3 - FEATURE FILMS, FEATURE FILM LICENSE RIGHTS AND BROADCAST
- ------------------------------------------------------------------
TIME RIGHTS (CONTINUED)
-----------------------
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 Note 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 and
11).
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.
On October 22, 1994, $2,300,000 in broadcast time which the Company
owned, was 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 films and
broadcast time rights has been impaired and has expensed the
unamortized balance. (See Note 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
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.
Read accountants' review report.
12
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 3 - FEATURE FILMS, FEATURE FILMS LICENSE RIGHTS AND BROADCAST
- -------------------------------------------------------------------
TIME RIGHTS (CONTINUED)
-----------------------
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 licensing rights has
been impaired and has expensed the cost (See Notes 5 and 11).
B. Investment in Partnership
----------------------------
On March 11, 1994, the Company entered into a letter of intent to
form a general partnership ("WSN") with an unrelated party (Web
Broadcasting Systems, Inc. or "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 March 1996, WSN returned 200,000 of the 400,000 shares of the
Company's common stock (See Note 7).
C. Options for Rights to Television Program
-------------------------------------------
On February 1, 1996, the Company paid $10,000 for an option to
obtain world-wide exploitation rights for a television program.
NOTE 4 - PROPERTY AND EQUIPMENT
- --------------------------------
Property and equipment consists of the following as of March 31,
1996 and December 31, 1995:
March 31, December 31,
1996 1995
---------- ----------
Office furniture
and equipment $ 2,095 $ 2,095
Less accumulated
depreciation (105) -
---------- ----------
$ 1,990 $ 2,095
========== ==========
Read accountants' review report.
13
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 4 - PROPERTY AND EQUIPMENT (CONTINUED)
- ---------------------------------------------
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 $105 and $70 for the three months
ended March 31, 1996 and 1995.
NOTE 5 - NOTES PAYABLE
- -----------------------
On November 30, 1994, the Company purchased a Spanish language
library of 640 feature films. As consideration, the Company issues
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 proper chain of title. 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. See Note 3 for additional
information on impairment of these assets.
On December 21, 1994, the Company borrowed $15,000 under a
promissory note from one of its stockholders. Repayment was to be
made within 90 days with interest at 8% per year. This note was
assumed by the former president in October 1995.
In 1995 and 1996, the Company borrowed $170,000 and $75,000,
respectively, from various stockholders payable within one year with
interest at 8.5%. The total balance owed to these stockholders as of
March 31, 1996 is $245,000.
Read accountants' review report.
14
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 6 - RELATED PARTY TRANSACTIONS
- ------------------------------------
On February 3, 1995, the Company borrowed $2,500 from a stockholder
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 9% per year. The note was convertible, 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 valued at $25,000 as compensation
for services.
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 year. 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 year. The note was assumed
by the former president.
On September 29, 1995, the Company issued a director 50,000 shares
of common stock valued at $2,000 for his three years of service on
the Board of Directors.
On September 29, 1995, the Company issued to the former president
1,500,000 shares of its common stock valued at $60,000 for services
rendered.
On October 27, 1995, the Company authorized the issuance of
1,000,000 shares of common stock valued at $40,000 to the current
president in accordance with his employment agreement.
Read accountants' review report.
15
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
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 its current president 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 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 for
$5,000 in a private sale.
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. The Company also
Read accountants' review report.
16
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
- -------------------------------------------
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.
On June 26, 1995, the Company entered into an 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. This agreement was cancelled
in late 1995.
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
March 1996 WSN returned 200,000 shares (See Note 3). The stock was
recorded at a value of $16,000.
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.
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.
Read accountants' review report.
17
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
- -------------------------------------------
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
================
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.
Read accountants' review report.
18
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 8 - STOCK OPTION PLANS (CONTINUED)
- ---- ----------------------------------
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.
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 $29,000 in consulting services. No
stock has been awarded under the ESC Plan during the year ended
December 31, 1995 or the three months ended March 31, 1996.
NOTE 10 - COMMITMENTS
- ---------------------
On January 3, 1994, the Company entered into five year employment
agreements with its former president and former secretary/treasurer.
In 1994, the Company issued 73,296 shares of its common stock to
these two former officers for $48,775 of accrued salaries due to the
Read accountants' review report.
19
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
NOTE 10 - COMMITMENTS (CONTINUED)
- ---------------------------------
former president and $19,050 of accrued salaries due to the former
secretary/treasurer. The employment agreements for these former
officers were terminated November 9, 1995. 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 current Chief Executive Officer/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 common stock. 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 for the year ended December 31, 1995. In November 1995, the
Company moved its operations and the lease was terminated.
On February 21, 1996, the Company was informed that an informal
inquiry of the business had been initiated by the Enforcement Branch
of the United States Securities 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.
Read accountants' review report.
20
<PAGE>
CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
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 (See
Notes 3 and 5).
NOTE 12 - 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 $300,000.
Read accountants' review report.
21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 0F FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
General
In November 1995, all of the Company's 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
Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1995
The following is a discussion of material changes in the consolidated
results of operations of Century Technologies, Inc. which occurred in the three
months ended March 31, 1996.
For the three months ended March 31, 1996, the Company experienced a
significant net loss from operating activities of $180,482 compared to $98,625
for the same period in 1995 which was primarily due to an increase in general
and administrative expenses discussed below.
General and Administrative Expenses
For the three months ended March 31, 1996, the increase in general and
administrative expenses is primarily due to an increase in the number of
employees hired by the Company and general operating expenses. In January 1996
the Company issued 25,000 shares valued at $1,000 as a signing bonus for its new
President of International.
Interest expenses increased by $22,566 for the three months ended March
31, 1996 compared to $0 for the same period in 1995.
In February the Company paid $10,000 for an exclusive option to finance
production of a series of television programs in consideration of worldwide
exploitation rights for the series. The Company paid an additional $5,000 in
August to extend the initial option period to February 1, 1997. The series is
presently untitled and is scheduled to be produced in 1997.
22
<PAGE>
Write Off of Film Library
The difference in assets against liabilities predominantly reflects the
write-off in the prior quarter of assets relating 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 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.
As of December 31, 1995, the Company also decided to dispose of $60,462 in
obsolete theatrical and film editing equipment which would have been
prohibitively expensive to repair and operate.
Liquidity and Capital Resources
For the three months ended March 31, 1996, the Company experienced cash
flows from financing activities of $75,000 from a note payable.
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. The Company in turn canceled 356,000 of preferred stock
which had previously been issued in replacement of the note.
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
23
<PAGE>
titles and license rights and broadcast air time and were subject to provision
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 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 fund the
Company's operations. On November 1, 1996, the Company announced that it had
signed a definitive agreement to complete its sale of a majority interest in the
Company to Affinity. Under the terms of the agreement, Century sold 37,500,000
units to Affinity in consideration of $3 million in cash, forgiveness of debt
and a promissory note. Each unit consists of one share of common stock and one
warrant to purchase one additional share of common stock at $2.00 expiring
December 31, 2001.
As of March 31, 1996, the Company had not commenced active business
operations. However, the Company anticipates that distribution sales, sales of
restricted common stock, investments through co-productions and loans together
with the funds made available through the agreement with Affinity will be more
than adequate to meet its cash flow requirements for fiscal year 1996.
24
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
Exhibits: Exhibit 27: Financial data schedule (Electronic filing only)
Reports on Form 8-K: There were no reports on Form 8-K filed for the three
months ended March 31, 1996.
25
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTURY TECHNOLOGIES, INC.
By: /s/Peter B. Newgard
---------------------
Peter B. Newgard
President and Chief
Executive Officer
Date: 11/12/96
---------
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CENTURY TECHNOLOGIES, INC. FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 27
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<RECEIVABLES> 0
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5,102
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