U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended: June 30, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ To ___________________
Commission file number 0-21376
Phoenix Media Group, Ltd.
(Name of small business issuer in its charter)
Nevada 33-0714007
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
290 East Verdugo, Suite 207, Burbank, California 91502
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(Address of principal executive offices) (Zip code)
Issuer's telephone number (818)-563-3900
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Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
Common Stock, $0.001 Par Value
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(Title of class)
Convertible Preferred Series A, $0.01 Par Value
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(Title of class)
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant'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. [ ]
State issuer's revenues for its most recent fiscal year. $334,574
As of September 19, 2000, there were 6,720,649 shares of the Registrant's
common stock, par value $0.001, issued and outstanding. The aggregate market
value of the Registrant's voting stock held by non-affiliates of the Registrant
was approximately $2,957,000 computed at the average bid and asked price as of
September 19, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"): NONE
Transitional Small Business Disclosure Format (check one): Yes ; NO X
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TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business..............................................4
Item 2. Description of Property..............................................7
Item 3. Legal Proceedings....................................................7
Item 4. Submission of Matters to a Vote of Security Holders..................7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.............8
Item 6. Management's Discussion and Analysis or Plan of Operations...........9
Item 7. Financial Statements.................................................14
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.................................................14
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act....................15
Item 10. Executive Compensation...............................................17
Item 11. Security Ownership of Certain Beneficial Owners and Management.......17
Item 12. Certain Relationships and Related Transactions.......................18
Item 13. Exhibits and Reports on Form 8-K.....................................19
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PART I
ITEM 1 DESCRIPTION OF BUSINESS
General
The Company was formed for the purpose of creating a vehicle to obtain
capital to seek out, investigate and acquire interests in products and
businesses which may have potential for profit. The Company's objective is to
become a major player in the communications industry with an emphasis on radio,
television and Internet services.
Principal Products or services - The production of radio and television
infomercials and commercials. The development, publication, manufacture, design
and sale of books and toys in the image of or otherwise relating to the
character Manfred Moose(TM).
Distribution methods of the products or services - Radio and television
infomercials and commercials are solicited directly from a wide variety of
commercial prospects and distributed via electronic media to various radio and
television stations.
Status of any publicly announced new product or service - In Fiscal Year 1999,
the Company announced the development of the Manfred Moose(TM) Millenium Doll
and the book "Manfred Moose(TM) Flies to Hong Kong." Both products have been
completed and are being sold in the manner described above.
Competitive business conditions and issuer's competitive position in the
industry and methods of competition - Regarding radio and television commercials
and infomercials, the Company is faced with significant competition. The
Company's relative position in the industry is small.
Regarding Manfred Moose(TM), the competition is substantial including
several major corporations. Our relative position in the industry is very small.
Sources and availability of raw materials and the names of principal suppliers -
Not Applicable.
Dependence on one or a few major customers - Not Applicable.
The Company's common stock is traded on the National Association of
Security Dealers, Inc. (the "NASD's") OTC Bulletin Board Under the symbol
"PXMG."
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History
The Company was organized under the laws of the State of Utah on December
5, 1985 as Bullseye Corp. On June 22, 1992 the name of the Company was changed
to Natural Solutions, Ltd. and the corporate domicile was changed to the State
of Nevada. On March 25, 1994, the Company name was changed to Phoenix Media
Group, Ltd. The Company was in the development stage through June 30, 1994. The
June 30, 1995 year is the first year during which it is considered an operating
company. Its authorized capital stock is 50,000,000 shares of common stock, par
value $0.001 per share.
The executive offices of the Company are located at 290 East Verdugo, Suite
207, Burbank, California 91502. Its telephone number is (818)-563-3900.
OPERATING LOSSES
The Company has incurred net losses of approximately $226,000 for the
fiscal year ended June 30, 2000. Such operating losses reflect developmental and
other start-up activities relating to the character Manfred Moose(TM). The
Company expects to incur losses in the near future until profitability is
achieved. The Company's operations are subject to numerous risks associated with
establishing any new business, including unforeseen expenses, delays and
complications. There can be no assurance that the Company will achieve or
sustain profitable operations or that it will be able to remain in business.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
Revenues are not yet sufficient to support the Company's operating expenses
and are not expected to reach such levels until the first or second quarter of
2001. Since the Company's formation, it has funded its operations and capital
expenditures primarily through private placements of debt and equity securities.
See "Recent Sales of Unregistered Securities." The Company expects that it will
be required to seek additional financing in the future. There can be no
assurance that such financing will be available at all or available on terms
acceptable to the Company.
GOVERNMENT REGULATION
The Company is subject to all pertinent Federal, State, and Local laws
governing its business. The Company is subject to licensing and regulation by a
number of authorities in its State or municipality. These may include health,
safety, and fire regulations. The Company's operations are also subject to
Federal and State minimum wage laws governing such matters as working conditions
and overtime.
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RISK OF LOW-PRICED STOCKS
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of
1934 (the "Exchange Act") impose sales practice and disclosure requirements on
certain brokers and dealers who engage in certain transactions involving "a
penny stock."
Currently, the Company's Common Stock is considered a penny stock for
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's Common Stock in the secondary market. In addition, the market
liquidity for the Company's securities may be severely adversely affected, with
concomitant adverse effects on the price of the Company's securities.
Under the penny stock regulations, a broker or dealer selling penny stock
to anyone other than an established customer or "accredited investor"
(generally, an individual with net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the broker
or dealer or the transaction is otherwise exempt. In addition, the penny stock
regulations require the broker or dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission (the "SEC") relating to the penny stock market, unless the
broker or dealer or the transaction is otherwise exempt. A broker or dealer is
also required to disclose commissions payable to the broker or dealer and the
registered representative and current quotations for the Securities. In
addition, a broker or dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account and information with respect to the limited market in penny stocks.
LACK OF TRADEMARK AND PATENT PROTECTION
The Company relies on a combination of trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures to
protect its products. The Company holds a trademark on the name Manfred
Moose(TM) and copyrights on several Manfred Moose(TM) images. Notwithstanding
these safeguards, it is possible for competitors of the company to obtain its
trade secrets and to imitate its products. Furthermore, others may independently
develop products similar or superior to those developed or planned by the
Company.
COMPETITION
The Company faces competition from a wide variety of entertainment
distributors, many of which have substantially greater financial, marketing and
technological resources than the Company.
Regarding radio and television commercials and infomercials, the Company is
faced with significant competition. The Company's relative position in the
industry is small.
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Regarding Manfred Moose(TM), the competition is substantial including
several major corporations. Our relative position in the industry is very small.
EMPLOYEES
As of September 19, 2000, the Company has 4 employees, of which, two are
full time.
ITEM 2 DESCRIPTION OF PROPERTY
The Company maintains an office condominium at 290 east Verdugo Avenue,
Suite 207, Burbank California. The property was purchased for $75,000 and is
being amortized over 39 years. The property is subject to a first mortgage with
monthly payment of $393.36 over 30 years at 8.75%.
In the opinion of management, all properties owned by the Company are
adequately insured.
ITEM 3 LEGAL PROCEEDINGS
The Company is not engaged in any legal proceedings other than the ordinary
routine litigation incidental to its business operations, which the Company does
not believe, in the aggregate, will have a material adverse effect on the
Company, or its operations.
ITEM 4 SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
No matters were subject to a vote of security holders during the year June
30, 2000.
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PART II
ITEM 5 MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The stock is traded over-the-counter with the trading symbol "PXMG". The
following high and low bid information was provided by PC Financial Network. The
quotations provided reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
1998 HIGH BID LOW BID
First Quarter (09/30/98) $0.180 $0.125
Second Quarter (12/31/98) $0.150 $0.080
Third Quarter (03/31/99) $0.120 $0.080
Fourth Quarter (06/30/99) $0.125 $0.063
1999
First Quarter (09/30/99) $0.480 $0.060
Second Quarter (12/31/99) $0.220 $0.130
Third Quarter (03/31/00) $0.800 $0.130
Fourth Quarter (06/30/00) $0.950 $0.150
DIVIDENDS
The Company has not paid any cash dividends to date and does not anticipate
paying dividends in the foreseeable future. It is the present intention of
management to utilize all available funds for the development of the Company's
business.
The number of shareholders of record of the Company's Common Stock as of
September 19, 2000 was approximately 800.
RECENT SALES OF UNREGISTERED SECURITIES
The Company over the past three years has sold 10,000 shares of common
stock.
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On October 30, 1997 the Company issued 10,000 shares in exchange for $5,000
in consulting services under Section 4(2) of the Securities and Exchange
Commission Act of 1933 to Mr. William Concha (non-affiliate investor)
On August 16, 1999 the Company issued 160,000 shares in exchange for
$32,000 in consulting services under Section 4(2) of the Securities and Exchange
Act of 1933 to Messrs. Irwin, Smith, Martin and Hanna (affiliate investors)
On January 30, 2000 the Company issued 20,000 shares in exchange for
$50,000 in consulting services under Section 4(2) of the Securities and Exchange
Act of 1933 to Messrs. Levy, Neur and Kingstone (non-affiliate investors)
On May 1, 2000 the Company issued 25,000 shares in exchange for $6,250 in
consulting services under Section 4(2) of the Securities and Exchange Act of
1933 to Messrs. Mister and Grossman (non-affiliate investors)
Shares to Be Issued:
Name # of Shares Exemption Type of Purchaser Value/Share
Bristol 128,000 4(2) (not involving a Affiliate $1.00
public offering)
All investors, including the non-affiliate investors, were given access to the
books and records of the Company, including financial statements, and given the
opportunity to ask management any and all questions concerning the Company and
its prospects for the future. The non-affiliate issuances of securities were
issued as compensation for services provided to the Company as were the
affiliate issuances. The investors were asked about prior investment history,
business experience and educational background. After reviewing that
information, these investors were determined to be capable of making an informed
investment decision based upon this information. All were informed as to the
restricted nature of the stock being received and all represented and warranted
that they were purchasing the stock for their own account.
The price of the issuance was the price negotiated between the Company and the
investor.
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ITEM 6 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE
When used in this Form 10-KSB, the words anticipated, estimate, expect, and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions including
the possibility that the Company's will fail to generate projected revenues.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected.
General
The following discusses the financial position and results of operations of
the Company.
Significantly all of the Company's revenues came from its resale of
air time to its customers. That was the Company's principle service provided
during fiscal 2000. During fiscal 2000, the Company began purchasing air time
from a total of four stations, which is double the number of stations it was
purchasing from during fiscal 1999. Revenues from sales of items associated with
Manfred Moose(TM) were negligible. At the present time, approximately twelve
percent of customers with six month contracts renew their contracts while
approximately twenty percent of customers with three month contracts renew their
contracts. Although the Company provides service to its customers with repeat
business, there is no assurance that such customers will maintain or increase
the level of volume of business of the Company.
The Company produces a weekly radio talk show which it produces in its
Burbank offices. The Company purchases air time from four radio stations and
resells the air time to customers seeking to advertise their goods and services
during the program. The Company has been producing its radio show for over two
years. The companies which sponsor the talk show through their purchase of air
time can play their own previously produced commercials or have the Company
provide the commercial for broadcast during the show.
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Results of Operations - The following table set forth, for the years ended June
30, 2000 and 1999, certain items from the Company's Condensed Statements of
Operations expressed as a percentage of net sales.
2000 1999
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Sales, Net ..................................... 100.0% 100.0%
Cost of Sales .................................. 56.6% 29.0%
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Gross Margin ................................... 43.4% 71.0%
Operating Expenses ............................. 100.4% 58.8%
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Operating Income (Loss) ........................ (57.0)% 12.2%
Other Income (Expense), Net .................... (10.5)% (1.5)%
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Income (Loss) Before Income Taxes .............. (67.5)% 10.7%
Income Taxes ................................... 0.3% 0.3%
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Net Income (Loss) .............................. (67.8)% 10.4%
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Net Sales
Net sales for Fiscal 2000 compared to Fiscal 1999 increased by
approximately $57,000 or 21%. This increase was due to expansion of sales and
marketing efforts and the addition of new products and services.
Cost of Sales
Cost of sales for Fiscal 2000 increased approximately $109,000 or 135%
compared to Fiscal 1999. As a percentage of sales, cost of sales increased 27.6%
from 29.0% to 56.6%. This increase was due to the purchase of additional air
time at increased costs.
Operating Expenses
Operating expenses during Fiscal 2000 increased approximately $173,000
or100.6% compared to Fiscal 1999 from $162,821 to $336,064. As a percentage of
sales, operating expenses increased 60.5% from 58.8% to 100.4%. This increase in
operating expenses is attributable to the Company's efforts with regard to
developing Manfred Moose(TM) and related products to market and sell in the
future and includes compensation to officers and directors as well as actual
production
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costs. It is anticipated that this trend will continue as the Company continues
to develop and seek new opportunities to license and market Manfred Moose(TM)
merchandise. The Company cannot predict how and when, if ever, it will recoup
these operating expenses until the Company can gauge whether or not this
character will be successful with consumers and as a marketing tool for
businesses wishing to license the character for their use.
Liquidity and Capital Resources
The Company requires working capital to fund its current operations. The
Company has budgeted its anticipated revenue and cash flows, after paying
expenses, from its sale of radio air time to provide for its anticipated
expenditures to fund development of the Manfred Moose(TM) project until such
time as the Company begins to receive revenue from Manfred Moose(TM) projects.
If the Company's revenues decline below present or projected levels, the Company
may have to scale back its operations and its proposed development of Manfred
Moose(TM) to accommodate the resulting shortfall in revenues to fund its
projects. Generally the Company has adequate funds for its activities. There are
no formal commitments from banks or other lending sources for lines of credit or
similar short-term borrowing. It is anticipated that the current operations will
expand and the funds generated will exceed the Company's working capital
requirements for the next year.
The Company has long term goals to further develop Manfred Moose(TM)
merchandise and products over the next twelve month period and expects that the
projects it currently has in development will require approximately $150,000
over the next twelve months. The Company believes that its operations will be
able to provide the funds for these development costs over the next twelve
months. The Company anticipates that ultimately, these development costs will be
recouped through the eventual sales of the various products being developed. If
revenues are not sufficient to fund its operations, the Company will need to
seek alternative sources of financing either through loans or through raising
capital. There are no formal commitments from banks or other lending sources for
lines of credit or similar short-term borrowing. There can be no assurances that
the Company will be able to obtain alternative financing through loans or
capital and the Company has no commitments for either type of financing. If
alternative financing is not available, then the Company will be forced to scale
back its proposed operations and perhaps be forced to abandon its Manfred
Moose(TM) projects or delay it significantly. The Company's lack of current
assets would be a factor to be considered by potential lenders or investors in
deciding whether or not to loan money to or invest in the Company.
During the year ended June 30, 2000, the Company sold $57,750 in
investments held for sale. This consisted of securities transferred to the
Company in satisfaction of an account receivable of the Company. These
securities were sold in the fall of 1999, with the Company incurring a loss of
$32,859 on the transaction. The Company does not anticipate this type of
activity recurring in the future. Also during the year ended June 30, 2000, the
company issued 205,000 shares of the Company's Common Stock in exchange for
services. The loss on sale of investments and expense due to the issuance of
stock for services make up approximately $121,000 of the Company loss
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before taxes of approximately $226,000 for the year ended June 30, 2000 compared
to a net profit before taxes of approximately $29,000 for the year ending June
30, 1999.
For the year ended June 30, 2000, the Company's asset value of vehicles
rose to $34,173 compared to $15,200 for the year ended June 30, 1999. This
increase is attributable to the purchase of a Ford Taurus for use by the
Company's CEO.
The Company requires working capital principally to fund its current
operations. Generally the Company has adequate funds for its activities. There
are no formal commitments from banks or other lending sources for lines of
credit or similar short-term borrowing. It is anticipated that the current
operations will expand and the funds generated will exceed the Company's working
capital requirements for the next year.
The Company generates and uses cash flows through three activities:
operating, investing, and financing. During 2000, operating activities used cash
of approximately $163,000 as compared to net cash used of approximately $4,000
for 1999. Much of this increase in attributable to the Company's development and
marketing of Manfred Moose(TM).
Cash flows used in investing activities is primarily due to the acquisition
of approximately $52,000 of computer equipment, office furniture and automotive
equipment for 2000. During 1999 investing activities provided approximately
$1,200, from shareholder loans and notes receivable and used approximately
$4,500 for the purchase of property and equipment.
Financing activities used less than $9,000 in principle payments on debt
for 2000 and $1,000 for 1999. During 2000 financing activities provided $216,000
in proceeds from capital stock issued.
Management believes that the Company's current cash and funds available
will be sufficient to meet capital requirements and short term and long term
working capital needs in the fiscal year ending June 31, 2001 and beyond, unless
a significant acquisition or expansion is undertaken. The Company is constantly
searching for potential acquisitions and/or expansion opportunities. However,
there are no arrangements or ongoing negotiations for any acquisition or
expansion.
Inflation and Regulation
The Company's operations have not been, and in the near term are not
expected to be, materially affected by inflation or changing prices. The Company
encounters competition from a variety of Companies in its markets. Many of these
companies have long standing customer relationships and are well-staffed and
well financed. The Company believes that competition in the its industries is
based on customer satisfaction and production of quality products and services,
although the ability, reputation and support of management is also significant.
The Company does not believe that any recently enacted or presently pending
proposed legislation will have a material adverse effect on its results of
operations.
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Factors That May Affect Future Results
Management's Discussion and Analysis and other parts of this registration
statement contain information based on management's beliefs and forward-looking
statements that involve a number of risks, uncertainties, and assumptions. There
can be no assurance that actual results will not differ materially for the
forward-looking statements as a result of various factors, including but not
limited to the following:
The markets for many of the Company's offerings are characterized by
rapidly changing technology, evolving industry standards, and frequent new
product introductions. The Company's operating results will depend to a
significant extent on its ability to design, develop, or otherwise obtain and
introduce new products, services, systems, and solutions and to reduce the costs
of these offerings. The success of these and other new offerings is dependent on
many factors, including proper identification of customer needs, cost, timely
completion and introduction, differentiation from offerings of the Company's
competitors, and market acceptance. The ability to successfully introduce new
products and services could have an impact on future results of operations.
Government Regulations - The Company is subject to all pertinent Federal, State,
and Local laws governing its business. The Company is subject to licensing and
regulation by a number of authorities in its State or municipality. These may
include health, safety, and fire regulations. The Company's operations are also
subject to Federal and State minimum wage laws governing such matters as working
conditions and overtime.
ITEM 7 FINANCIAL STATEMENTS
The financial statements of the Company and supplementary data are
included beginning immediately following the signature page to this report. See
Item 13 for a list of the financial statements and financial statement schedules
included.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Company
and its accountants on any matter of accounting principles, practices or
financial statements disclosure.
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PART III
ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT
Executive Officers and Directors
The members of the Board of Directors of the Company serve until the next annual
meeting of stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors. The following table
sets forth the name, age, and position of each executive officer and director of
the Company:
Directors and Executive Officers.
(1) (2) (3)
NAME and AGE POSITION TERM OF OFFICE
Ronald R. Irwin 54 C.E.O. and Chairman Until next meeting
Richard Spangler 65 President & Director Until next meeting
David Petrik 52 Director Until next meeting
Wayne Smith 45 Secretary/Treasurer Until next meeting
Ronald R. Irwin - During the past 5 years, Mr. Irwin has been engaged full
time as Chairman and C.E.O. for the Company.
Richard Spangler - During the past 5 years, Mr. Spangler has served full
time as President and Director for the Company.
David Petrik - During the past 5 years, Mr. Petrik has served as Director
and Chief Engineer for the Company. Prior to his employement with the Company,
he worked as a Radio Engineer for KROQ Radio in Los Angeles, CA, and the Premier
Radio Network in Los Angeles, Ca.
Wayne Smith - During the past 5 years has served as Secretary/Treasurer for
the Company. During this same period of time, he has also worked for Trans World
Airlines, Inc. in a non-executive position.
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Conflicts of Interest
Certain conflicts of interest existed at June 30, 2000 and may continue to exist
between the Company and its officers and directors due to the fact that each has
other business interests to which he devotes attention. Each officer and
director may continue to do so notwithstanding the fact that management time
should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its management,
and conflicts may develop in the future. The Company has not established
policies or procedures for the resolution of current or potential conflicts of
interests between the Company, its officers and directors or affiliated
entities. There can be no assurance that management will resolve all conflicts
of interest in favor of the Company, and failure by management to conduct the
Company's business in the Company's best interest may result in liability to the
management. The officers and directors are accountable to the Company as
fiduciaries, which means that they are required to exercise good faith and
integrity in handling the Company's affairs. Shareholders who believe that the
Company has been harmed by failure of an officer or director to appropriately
resolve any conflict of interest may, subject to applicable rule of civil
procedure, be able to bring a class action or derivative suit to enforce their
rights and the Company's rights.
Board Meetings and Committees
The Directors will not receive remuneration from the Company until a
subsequent offering has been successfully completed, or cash flow from operating
permits, all in the discretion of the Board of Directors. Directors may be paid
their expenses, if any, of attendance at such meeting of the Board of Directors,
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as Director. No such payment shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor. No compensation has been paid to the Directors. The Board
of Directors may designate from among its members an executive committee and one
or more other committees. No such committees have been appointed.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year.
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ITEM 10 EXECUTIVE COMPENSATION
None of the executive officer's salary and bonus exceeded $100,000 during
any of the Company's last two fiscal years.
Ronald R. Irwin, C.E.O. and Chairman received compensation of approximately
$60,000 per year during the past two years.
ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
AND MANAGEMENT
Principal Shareholders
The table below sets forth information as to each person owning of record
or who was known by the Company to own beneficially more than 5% of the
6,925,649 shares of issued and outstanding Common Stock of the Company as of
June 30, 2000 and information as to the ownership of the Company's Stock by each
of its directors and executive officers and by the directors and executive
officers as a group. Except as otherwise indicated, all shares are owned
directly, and the persons named in the table have sole voting and investment
power with respect to shares shown as beneficially owned by them.
(1) (2) (3) (4)
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Owner Class
--------------------------------------------------------------------------------
Common Stock Bristol Investments Limited 900,000 13.39%
1601 Kinwick Centre
32 Hollywood Road
Central Hong Kong
Zhong Hong Li
Directors & Executives
Ronald R. Irwin, CEO & Director 3,500,000 52.08%
290 E. Verdugo Ave.
Burbank, CA 91502
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(1) (2) (3) (4)
Title of Name and Amount and
Class Address of Nature of
Beneficial Beneficial Percent of
Owner Owner Class
________________________________________________________________________________
Richard Spangler, President & 100,000 1.49%
Director
290 E. Verdugo Ave.
Burbank, CA 91502
David Petrik, Director 25,000 0.37%
290 E. Verdugo Ave.
Burbank, CA 91502
Wayne K. Smith, Sec/Treas. 68,000 1.01%
290 E. Verdugo Ave.
Burbank, CA 91502
Directors and executive 3,693,000 54.95%
officers as a Group
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997 The Company loaned an officer/director $20,100, interest
at 1%, repayable at $201 per month for ten months with a balloon payment due in
2007. In addition an officer/director advanced $2,500 at 0% interest, to the
Company.
18
<PAGE>
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements PAGE
Independent Auditor's Report F-1
Balance Sheets, June 30, 2000 and 1999 F-2
Statements of Operations,
For the Years Ended June 30, 2000 and 1999 F-4
Statements of Changes in Stockholders' Equity,
For the Years Ended June 30, 2000 and 1999 F-5
Statements of Cash Flows,
For the Years Ended June 30, 2000 and 1999 F-6
Notes to Consolidated Financial Statements F-7
2. Financial Statement Schedules
The following financial statement schedules required by Regulation S-X are
included herein.
All Schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits
The following exhibits are included as part of this report:
Exhibit
Number Exhibit
3.1 Articles of Articles of Incorporation and By-Laws. (1)
27.1 Financial Data Schedule
(1) Incorporated by reference
19
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
PHOENIX MEDIA GROUP, LTD.
Dated: September 27, 2000 By /S/ Ronald R. Irwin
---------------------------
Ronald R. Irwin,
C.E.O. and Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 27h day of September
2000.
Signatures Title
/S/ Ronald R. Irwin
Ronald R. Irwin C.E.O. and Chairman
(Principal Executive Officer)
/S/ Wayne Smith
Wayne Smith Secretary/Treasurer
(Principal Financial and Accounting
Officer)
/S/ Richard Spangler
Richard Spangler President and Director
/S/ David Petrik
David Petrik Director
20
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Phoenix Media Group, Ltd.
Burbank, California
We have audited the accompanying balance sheets of Phoenix Media Group,
Ltd. as of June 30, 2000 and 1999, and the related statements of operations,
retained earnings, and cash flows for the two years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Phoenix Media Group, Ltd. as
of June 30, 2000 and 1999, and the results of its operations and its cash flows
for the two years then ended in conformity with generally accepted accounting
principles.
Respectfully submitted,
/s/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
July 31, 2000
F - 1
<PAGE>
PHOENIX MEDIA GROUP, LTD.
BALANCE SHEETS
June 30,
-----------------------
2000 1999
--------- ---------
ASSETS
Cash ............................................... $ 19,815 $ 2,312
Inventory .......................................... 34,130 --
Investments held for sale .......................... -- 57,750
--------- ---------
Total Current Assets ....................... 53,945 60,062
--------- ---------
Property and Equipment
Office Equipment ................................... 24,315 12,965
Radio Equipment .................................... 26,312 16,405
Office Condominium ................................. 75,000 75,000
Vehicles ........................................... 41,586 15,200
--------- ---------
167,213 119,570
Less Accumulated Depreciation ...................... (46,679) (33,560)
--------- ---------
Net Property and Equipment ................. 120,534 86,010
--------- ---------
Other Assets
Stockholder Loans .................................. 18,598 18,432
Intangibles (Net of Accumulated Amortization of
$65,000 and $52,540) ............................ -- 12,460
Goodwill (Net of Accumulated Amortization of
$20,000 and $16,167) ............................ -- 3,833
--------- ---------
Total Non Current Assets ................... 18,598 34,725
--------- ---------
Total Assets ............................... $ 193,077 $ 180,797
========= =========
F - 2
<PAGE>
PHOENIX MEDIA GROUP, LTD.
BALANCE SHEETS
(Continued)
June 30,
---------------------
2000 1999
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ....................................... $ 18,769 $ 2,135
Accrued expenses ....................................... 7,823 19,128
Stockholder loans ...................................... 8,000 8,000
Current portion of long-term debt ...................... 6,520 477
--------- ---------
Total Current Liabilities ...................... 41,112 29,740
--------- ---------
Long-term Debt ......................................... 59,647 48,230
--------- ---------
Stockholders' equity
Series A convertible preferred stock (par value $.01),
5,000,000 shares authorized, no shares issued or
Outstanding June 30, 2000 and 1999 .................... -- --
Common Stock (par value $.001), 50,000,000 shares
Authorized, 6,925,649 shares issued and outstanding
June 30, 2000, and 6,720,649 on June 30, 1999 ........ 6,926 6,721
Common Stock to be Issued 128,000 shares ............. 128 --
Paid in capital in excess of par value ................. 501,776 285,849
Retained deficit ....................................... (416,512) (189,743)
--------- ---------
Total Stockholders' Equity ..................... 92,318 102,827
--------- ---------
Total Liabilities and Stockholders' Equity ..... $ 193,077 $ 180,797
========= =========
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
PHOENIX MEDIA GROUP, LTD.
STATEMENTS OF OPERATIONS
For the Year Ended
June 30,
--------------------------
2000 1999
----------- -----------
Revenue
Sales ..................................... $ 334,574 $ 277,112
Cost of sales ............................. 189,289 80,439
----------- -----------
Gross Margin ...................... 145,285 196,673
Operating Expenses
General and Administrative ................ (336,064) (162,821)
Other Income (Expense)
Interest expense .......................... (5,007) (4,283)
Interest income ........................... 5 109
Gain (loss) on sale of assets ............. (30,079) (45)
----------- -----------
Income (loss) before income taxes ......... (225,860) 29,633
Income taxes .............................. 909 800
----------- -----------
Net Income (Loss) ......................... $ (226,769) $ 28,833
=========== ===========
Earnings (Loss) Per Share ................. $ (0.03) $ --
=========== ===========
Weighted Average Shares Outstanding ....... 6,872,443 6,720,649
=========== ===========
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
PHOENIX MEDIA GROUP, LTD.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Capital in
Preferred Stock to be Issued Common Stock Excess of Retained
---------------- ---------------- ---------------------
Shares Amount Shares Amount Shares Amount Par Value Deficit
------ -------- ------- ------- ----------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance July 1, 1998 ............... -- $ -- -- $ -- 6,720,649 $ 6,721 $ 285,849 $(218,576)
Net Income ......................... -- -- -- -- -- -- -- 28,833
------ -------- ------- ------- ----------- -------- --------- ---------
Balance June 30, 1999 .............. -- -- 6,720,649 6,721 285,849 (189,743)
Issuance of shares for services .... -- -- 205,000 205 88,055 --
Stock sold Cash .................... -- -- 128,000 128 -- -- 127,872 --
Net Loss ........................... -- -- -- -- -- -- -- (226,769)
------ -------- ------- ------- ----------- -------- --------- ---------
Balance June 30, 2000 .............. -- $ -- 128,000 $ 128 6,925,649 $ 6,926 $ 501,776 $(416,512)
====== ======== ======= ======= =========== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 5
<PAGE>
PHOENIX MEDIA GROUP, LTD.
STATEMENTS OF CASH FLOW
For the Year Ended
June 30,
--------------------
Cash Flows From Operating Activities: ................ 2000 1999
--------- --------
Net income (loss) .................................... $(226,769) $ 28,833
Adjustments to reconcile
Net income (loss) to net cash provided by (used in)
Operating activities:
Amortization and depreciation ...................... 37,248 29,719
(Gain) Loss on sale of assets ...................... (2,780) 45
Change in operating assets and liabilities:
Inventory .......................................... (34,130) --
Investments held for sale .......................... 57,750 (57,750)
Accounts payable ................................... 16,644 (2,759)
Checks written in excess of cash in bank ........... -- --
Accrued expenses ................................... (11,305) (1,600)
--------- --------
Net cash used by operating activities .............. (163,342) (3,512)
--------- --------
Cash Flows From Investing Activities:
Stockholders loans .................................... (166) 1,259
Purchase of property and equipment .................... (52,699) (4,561)
--------- --------
Net cash used in investing activities ................. (52,865) (3,302)
--------- --------
Cash Flows From Financing Activities:
Proceeds from issuance of debt ........................ 26,173 --
Principle payments on debt ............................ (8,713) (437)
Proceeds from capital stock issued .................... 216,250 --
--------- --------
Net cash provided by (used in) financing activities ... 233,710 (437)
--------- --------
Net increase (decrease) in cash and cash equivalents ... 17,503 (7,251)
Cash and cash equivalents at beginning of period ....... 2,312 9,563
--------- --------
Cash and cash equivalents at end of period ............. 19,815 $ 2,312
========= ========
Supplemental Disclosure of Cash Flow Information:
Interest ..............................................$ 5,007 $ 4,283
Income taxes ..........................................$ 909 $ --
Supplemental Schedule of Non-Cash Investing and Financing Activities: None
The accompanying notes are an integral part of these financial statements.
F - 6
<PAGE>
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
This summary of accounting policies of Phoenix Media Group, Ltd. is
presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Company was organized under the laws of the State of Utah on December
5, 1985 as Bullseye Corp. On June 22, 1992 the name of the Company was changed
to Natural Solutions, Ltd. and the corporate domicile was changed to the State
of Nevada. On March 25, 1994, the Company name was changed to Phoenix Media
Group, Ltd. The Company is in the development stage through June 30, 1994. The
June 30, 1995 year is the first year during which it is considered an operating
company.
Nature of Business
The Company was formed for the purpose of creating a vehicle to obtain
capital to seek out, investigate and acquire interests in products and
businesses which may have potential for profit. The Company's objective is to
become a major player in the communications industry with an emphasis on radio,
television and Internet services.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with maturity of three months or less to be
cash equivalents to the extent the funds are not being held for investment
purposes.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No.109 requires recognition of deferred
income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.
Earnings (Loss) Per Share
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" (EPS). SFAS No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
F - 7
<PAGE>
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
(Continued)
Diluted net income per common share was calculated based on an increased
number of shares that would be outstanding assuming that the warrants are
converted to common shares. The effect of outstanding common stock equivalents
are anti-dilutive for 1999 and 1998 and are thus not considered.
The reconciliations of the numerators and denominators of the basic
earnings per share computations are as follows:
For the Year Ended June 30, 1999
--------------------------------------
Per Share
Income Shares Amount
-------------- --------- -----------
Basic EPS
Net Income to common
shareholders .............. $ 28,833 6,720,649 $ --
============== ========= ===========
For the Year Ended June 30, 2000
----------------------------------------
Per Share
Income Shares Amount
-------------- ---------- -----------
Basic EPS
Net Loss to common
shareholders $ (226,769) 6,872,443 $ (0.03)
============= =========== ===========
Amortization
Intangibles and goodwill are amortized using the straight line method over
five years. Amortization expense related to intangibles and goodwill totaled
$16,293 for the year ended June 30, 2000 and $17,000 for the year ended June 30,
1999.
Goodwill was created by the excess of the purchase price over cost of
acquisitions made in fiscal year 1995, and is amortized on a straight-line basis
over 5 years. Management regularly assesses the carrying amount of intangible
assets and where, in their opinion, the value is less than the carrying amount,
the loss is recognized immediately.
F - 8
<PAGE>
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (Continued)
The Company has implemented the provisions of SFAS No. 121, "Accounting for
the impairment of Long-Lived Assets and for Long-Lived Assets Disposed of." SFAS
No. 121 requires that long-lived assets and certain identifiable intangibles to
be held and used by the Company be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If the sum of the expected future cash flows from the use of the
assets and its eventual disposition (undiscounted and without interest charges)
is less than the carrying amount of the asset, an impairment loss is recognized.
Depreciation
Office furniture, equipment and leasehold improvements, are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated economic useful lives of the related assets as follows:
Office furniture 5-10 years
Equipment 5-7 years
Office Condominium 39 years
Maintenance and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the property and related
accumulated depreciation accounts, and any resulting gain or loss is credited or
charged to income.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made in the 1999 financial statements
to conform with the 2000 presentation.
F - 9
<PAGE>
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit
risk such as foreign exchange contracts, options contracts or other foreign
hedging arrangements. The Company maintains the majority of its cash balances
with one financial institution, in the form of demand deposits.
NOTE 2 - CAPITAL TRANSACTIONS
Preferred Stock
The Board of Directors of the Company has the authority to fix by
resolution for each particular series of preferred stock the number of shares to
be issued; the rate and terms on which cumulative or non-cumulative dividends
shall be paid; conversion features of the preferred stock; redemption rights and
prices, if any; terms of the sinking fund, if any to be provided for the shares;
voting powers of preferred shareholders; and any other special rights,
qualifications, limitations, or restrictions.
NOTE 3 - STOCK OPTIONS
Effective April 9, 1993 the Board of Directors approved a five year "Option
to Purchase" to be exercised on or after May 1, 1993 and to expire at midnight,
mountain time, on June 30, 1998. Under the provisions of the plan, options to
purchase up to 230,000 shares at prices ranging from $1.00 to $5.00 per share
were granted to eight directors and members of the Advisory Board. The purchase
price for the common stock under these options may be paid in cash, by
delivering shares of common stock already owned by the optionee (valued at its
fair market value at the time of exercise), by delivering options (valued at the
amount by which the fair market value of the common stock at the time of
exercise exceeds the exercise price), or other consideration acceptable to the
Company. At June 30, 1998 all 230,000 options expired unexercised.
NOTE 4 - INCOME TAXES
Deferred taxes result from temporary differences in the recognition of
income and expenses for income tax reporting and financial statement reporting
purposes. Deferred benefits of $140,000 and $64,000 for the years ended June 30,
2000 and 1999 respectively, are the result of net operating losses.
F - 10
<PAGE>
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(CONTINUED)
NOTE 4 - INCOME TAXES (Continued)
The Company has recorded net deferred income taxes in the accompanying
balance sheets as follows:
As at June 30,
--------------------
2000 1999
--------- --------
Future deductible temporary differences related to
Reserves, accruals, and net operating losses .. $ 140,000 $ 64,000
Valuation allowance .............................. (140,000) (64,000)
--------- --------
Net Deferred Income Tax .......................... $ -- $ --
========= ========
As of June 30, 2000, the Company had a net operating loss ("NOL") carry
forward for income tax reporting purposes of approximately $415,000 available to
offset future taxable income. This net operating loss carry forward expires at
various dates between June 30, 2001 and 2011. A loss generated in a particular
year will expire for federal tax purposes if not utilized within 15 years.
Additionally, the Internal Revenue Code contains provisions which could reduce
or limit the availability and utilization of these NOLs if certain ownership
changes have taken place or will take place. In accordance with SFAS No. 109, a
valuation allowance is provided when it is more likely than not that all or some
portion of the deferred tax asset will not be realized. Due to the uncertainty
with respect to the ultimate realization of the NOLs, the Company established a
valuation allowance for the entire net deferred income tax asset of $140,000 as
of June 30, 2000. Also consistent with SFAS No. 109, an allocation of the income
(provision) benefit has been made to the loss from continuing operations.
The difference between the effective income tax rate and the federal
statutory income tax rate on the loss from continuing operations are presented
below:
As at June 30,
-------------------
2000 1999
-------- --------
Expense (Benefit) at the federal statutory rate of 34% ... $(77,000) $ 9,800
Nondeductible expenses ................................... -- 340
-------- --------
Utilization of net operating loss carryforward ........... $ 77,000 $(10,140)
-------- --------
$ -- $ --
======== ========
F - 11
<PAGE>
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(CONTINUED)
NOTE 5 - RELATED PARTY TRANSACTIONS
During 1997 The Company loaned an officer/director $20,100, interest
at 1%, repayable at $201 per month for ten months with a balloon payment due in
2007. In addition an officer/director advanced $2,500 at 0% interest, to the
Company.
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
As at June 30,
----------------------
2000 1999
--------- --------
Mortgage payable with interest at 8.75%,
payable monthly $393.36, due March 22,
2003, collateralized by deed of trust ............. $ 48,230 $ 48,707
Loan payable with interest at 4.9%,
payable monthly $398.81, due July 15, 2004,
collateralized by automotive equipment ............. 17,937 --
Less Current Maturities ............................ (6,520) (477)
-------- --------
Net Long-term Debt ................................. $ 59,647 $ 48,230
======== ========
Annual principal payments on long-term debt are as follows:
2001 $ 4,633
2002 4,886
2003 5,154
2004 3,333
2005 738
thereafter $45,107
F - 12
