<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM 10-KSB
(MARK ONE)
(X) Annual report pursuant to sections 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 0-23914
Entertainment Technologies & Programs, Inc.
-------------------------------------------
(Name of Small Business Issuer in its charter)
Delaware 87-521389
State or other jurisdiction of I.R.S. Employer ID No.
incorporation or organization)
16055 Space Center Blvd., Ste. 230, Houston, Tx 77062
-------------------------------------------------------
(Address of principal executive office) (Zip Code)
(281) 486-6115
--------------
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock $.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports 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 ( )
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein and will not 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.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on March 19,
1997 as reported on the NASDAQ Electronic Bulletin Board, was $1,685,112.
Shares of Common Stock held by each executive officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
The issuer's revenues for the year ended December 31, 1996 totaled $6,749,601.
As of March 19, 1997 Registrant had outstanding 20,507,821 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERNCE
NONE
Transitional Small Business Disclosure Format Yes ( ) No (X)
1
<PAGE>
ENTERTAINMENT TECHNOLOGIES AND PROGRAMS, INC.
ANNUAL REPORT ON FORM 10-KSB
DECEMBER 31, 1996
TABLE OF CONTENTS
PART I
Page
----
Item 1. Business 3
Overview 3
The Divisions 3
NiteLife Entertainment 3
Performance Sound and Light 4
Just Games, Inc. 5
Dynamic Image 5
Vision Quest Productions 6
Employees 6
Item 2. Description of Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for the Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis 7
Item 7. Financial Statements 9
Index to Consolidated Financial Statements 10
Report of Independent Certified Public Accountant 11
Consolidated Balance Sheet as of December 31, 1996 12
Consolidated Statements of Operations for the years ended
December 31, 1996 and 1995 14
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996 and 1995 15
Consolidated Statements of Cash Flows for the years
ended December 31, 1996 and 1995 16
Notes to Consolidated Financial Statements 17
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 25
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons:
Compliance with Section 16(a) of the Exchange Act 25
Item 10. Executive Compensation 27
Item 11. Security Ownership of Certain Beneficial Owners and Management 27
Item 12. Certain Transactions and Relationships 28
Item 13. Exhibits and Reports on Form 8-K 28
2
<PAGE>
PART I
------
ITEM 1- BUSINESS
- ----------------
OVERVIEW
The Company is a Delaware corporation. Prior to April 1995, it had not
engaged in any material operations since approximately 1988. In April 1995, the
Company entered into a reorganization transaction with the shareholders of
NiteLife, Inc. Consequently, the assets and the business of NiteLife became the
Company
NiteLife was incorporated on October 2, 1985 by James D. Butcher. The Company
was formed to provide audio and video entertainment at military bases located in
the United States and abroad: to provide mobile musical entertainment; and to
operate a music store in San Diego, California. Since its formation, the
Company has expanded both the number of products and services it provides and
the markets into which such products and services are distributed. Today, the
Company is strategically positioned as the provider of a comprehensive array of
entertainment products and services to both military and civilian markets.
The Company's business is currently operated through five (5) divisions
("Divisions"): NiteLife Entertainment (club development and management
division), Performance Sound and Light (equipment retail division), Just Games
(gaming and arcade division), Dynamic Image (design and facilities construction
division) and Vision Quest Productions (concert booking, promotion and
production division).
The Company is engaged, through its five Divisions, in:
1. The operation of entertainment facilities located on U. S. military
bases throughout the world.
2. The design and the retail sale of sound and lighting equipment through
mail order catalogs targeting the military market through NAF purchase
agreements and both the military and civilian consumer markets.
3. Amusement equipment installation and operation, both in the military
and the civilian markets
4. The design and construction of entertainment facilities and
restaurants.
5. The design, planning, promotion and production of live performances and
entertainment booking in both the military and the civilian markets.
THE DIVISIONS
NITELIFE ENTERTAINMENT
Overview
NiteLife Entertainment is engaged in the installation and operation of
nightclub facilities on U. S. military bases located in the United States,
Europe and Asia. At present, NiteLife Entertainment operates a total of 100
facilities. Nightclubs have historically been established on military bases by
military leaders
3
<PAGE>
in an attempt to: 1) retain service men and women on base, thereby avoiding
potential problems arising out of interaction between servicemen and civilians,
and 2) boost morale by providing U. S. style entertainment in foreign countries
where none otherwise exists.
In order to meet the needs of this market NiteLife provides a wide variety of
entertainment programs and services to base clubs. NiteLife typically installs
audio and video equipment, including a custom built disc jockey booth, state of
the art industrial video tape players and turntables, top of the line mixing
consoles and several 26" television monitors in each club. NiteLife provides
maintenance of all the equipment installed in a club and supplies all of the
records and music video tapes for use within its clubs. NiteLife also designs
and produces all club promotions for club managers. Additionally, NiteLife
hires, (on an independent contractor basis) trains and manages all disc jockey
talent operations within its clubs.
The comprehensive package of entertainment equipment and services is provided
by NiteLife to military customers at no cost, pursuant to a one year renewable
contract between the Company and the Air Force Non-Appropriated Fund Purchasing
Office (AFNAFPO). Each contract provides for a minimum number of hours of disc
jockey services at a specified hourly rate. These minimum hours are established
so that NiteLife recovers its investment, generally 40% of the first years
revenue, within eight months of operation.
The Future of NiteLife Entertainment
It has been the experience of the Company's management that, with the
continued loss of military budget funding, military clubs must become self-
sufficient or they will be closed. With the Company's turnkey club installation
and operation program, an existing military night club can be renovated with no
capital outlay by the military customer. The Company's management believes that
the continued loss of defense funding provides a basis for continued growth of
the NiteLife division through new installations both in the near and distant
future. The European market for NiteLife's turnkey club installation and
operation program has begun to open for the Company over the past year and
consequently, expansion into England, Germany, Italy, Spain and Turkey will
likely occur. The Company's management also perceives that opportunities for
expansion in the continental United States exist. The Company is only beginning
to explore opportunities for sale of its turnkey club installation and operation
program to military bases located in the Southeast and Central areas of the
United States.
Risks of the Industry
The down-sizing of military, which began in the 1990's will reduce the total
number of military installations that remain open. However, it is estimated
that even with the currently planned base closures, approximately 1,500 military
clubs will remain in service.
PERFORMANCE SOUND AND LIGHT
Overview
Performance Sound and Light (PS&L) is engaged in providing professional sound
and lighting equipment to military clubs and others through direct sales
efforts and through catalogs or buying guides.
PS&L, in January of 1995, commenced distribution of its sales catalog "The
Performance Sound & Light Buyers Guide", (Buyers Guide) which is being promoted
throughout the military using the Company's existing sales force and commission
based contract sales representatives. The Company's management believes that
the exclusivity of the Company's AFNAF contract, combined with an aggressive
direct sales marketing program, will establish the PS&L Buyer's Guide as a
primary source from which club managers and professionals may meet their
entertainment equipment needs.
4
<PAGE>
The Future of Performance Sound & Light
Plans are being developed for PS&L to produce two additional mail order
catalogs, each targeting a specific market niche. The first catalog will offer
sound and lighting equipment to the business to business market. The Company's
management perceives an opportunity exists to provide business and institutional
purchasers turnkey sound and lighting systems in an easy to read mail order
catalog.
The second catalog will target the general consumer. This catalog will
contain musical instruments, in addition to sound and lighting equipment.
Although there are many companies offering this type of catalog, the Company
believes that, as a result of the Company's presence on military bases, it
possess a unique access to the military consumer market.
Specific Risks of PS&L's Industry
A substantial investment in the design, production and mailing costs of a
catalog must be made prior to any sales being realized. Consequently, there can
be no assurances that the catalogs will generate sufficient sales in order for
the Company to recover its investment.
JUST GAMES, INC.
Just Games, Inc. is a corporation formed under the laws of the state of
California. The Company purchased Just Games in an "exchange of stock"
transaction in early 1994. Just Games is engaged in the installation and
operation of amusement game machines both on military bases and at civilian
locations. Just Games has been an operator of amusement machines for over ten
years. Although video games are its primary source of revenue, other games such
as pool tables, redemption games, cranes, sport games and kiddy rides are also
distributed and managed by Just Games.
The Company's management believes the success of Just Games will be determined
by it's ability to achieve certain fundamental goals and to change with the
industry. New technology must be followed closely and consumer trends must be
detected early. Based on this philosophy, Just Games has expanded its
operations into Family Entertainment Centers (FEC's) which offer major
attractions such as laser tag, go carts, batting cages, soft play arenas, and
miniature golf. The Company's management believes substantial growth in
revenues can be achieved by targeting growth in both military and civilian
markets in the FEC industry.
Risk of the Industry
The amusement industry is a fast paced and extremely competitive industry.
Return on investment can be very rapid, if current and future trends are closely
monitored and decisions are made with these trends in mind.
DYNAMIC IMAGE
Overview
Dynamic Image is engaged in the design and construction of entertainment
facilities such as nightclubs, sports bars and family entertainment centers on
military bases throughout the world.
Specific Risks of Dynamic Image
The design and construction business is extremely competitive. In some cases
the Company will be required to compete with businesses that may possess more
experience and financial
5
<PAGE>
resources. In addition, the Company will be exposed to those risks inherent in
the construction industry such as on-site injuries, labor strikes, and cost
overruns.
VISION QUEST PRODUCTIONS
Overview
Vision Quest Productions is engaged in the booking, promotion and production
of live local and nationally recognized concert acts on military bases around
the world. In 1993, the company was selected by the Pacific Air Force to
produce a program entitled "Stateside Sounds" which brought top 40 bands within
the Asian theater for a tour of U. S. military bases. "Sounds of NiteLife" is a
program which has been produced by the Company since 1993 and brings rock, top
40 and country acts on military bases located throughout the United States and
Japan.
The Future of Vision Quest Productions
The Company's management believes that the European market is growing rapidly
and consequently, has begun developing European routing schedules for the
"Sounds of NiteLife" entertainment package and larger scale national acts.
Vision Quest Productions also constantly seeks to generate income from the local
special events market, specializing in the production of national act concerts
at fairs and festivals.
EMPLOYEES
As of December 31, 1996 the Company had approximately 36 employees, of which
29 are full time and 7 are employed part time. The Company's employees are not
represented by any collective bargaining agreements, and the Company has never
experienced a work stoppage. The Company believes that its employee relations
are good.
ITEM 2 - DESCRIPTION OF PROPERTIES
- ----------------------------------
The Company leases office space for its corporate headquarters at 16055 Space
Center Blvd., Suite #230 Houston, Tx 77062. The lease expires on March 31,
2001.
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
On May 17, 1996, suit was filed in the Superior Court of California against
the Company, certain officers and former employees of the Company by the former
owner of one of the Company's wholly-owned subsidiaries. The suit alleges
breach of contract and nonpayment of amounts owed related to the acquisition of
the subsidiary. In the opinion of the Company's counsel, the suit is without
merit and the Company intends to defend itself vigorously.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None
6
<PAGE>
PART II
-------
ITEM 5. - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------
The Company's common stock is traded over the counter on the NASDAQ
OTC Electronic Bulletin Board under the symbol ETPI.
Quarter Ended High Low
- -------------------------------------------------------------
December 31, 1996 $.50 $.25
As of December 31, 1996 there were approximately 246 holders of the Company's
common stock.
The Company has not paid any dividends since its inception and does not
anticipate paying any dividends in the foreseeable future. Earnings, if any, of
the Company are expected to be retained for use in expanding the Company's
business. The payment of dividends is within the discretion of the Board of
Directors of the Company and will depend upon the Company's earnings, if any,
capital requirements, financial condition and such other factors as the Board of
Directors may consider relevant.
ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS
- ----------------------------------------------
Results of Operations
Year Ended December 31, 1996 compared to year ended December 31, 1995
Revenues for the year ended December 31, 1996 increased $39,000 or .5%
to $6,750,000 from $6,711,000 for the year ended December 31, 1995. This
increase was due to an increase in concert bookings and in design and
construction contracts for entertainment facilities partially offset by a
decrease in club revenues and amusement game revenues.
Gross profit for the year ended December 31, 1996 decreased $247,000 or
7% to $3,391,000 from $3,638,000 for the year ended December 31, 1995. This
increase was due partially to an increase in design and construction contracts
with lower profit margins and lower club revenues partially offset by an
increase in concert bookings and retail sales.
General and administrative expenses for the year ended December 31,
1996 decreased $85,000 or 3% to $3,032,000 from $3,117,000 for the year ended
December 31, 1995. This decrease is generally attributable to cost reductions
in the second half of the year.
Depreciation expense for the year ended December 31, 1996 increased
$236,000 or 61% to $621,000 from $385,000 for the year ended December 31, 1995.
This increase reflects higher purchases of property and equipment.
Amortization expense for the year ended December 31, 1996 increased
$515,000 or 436% to $633,000 from $118,000 for the year ended December 31, 1995.
This increase is partially attributable to the increase in amortization of
deferred installation cost of $313,000 due to the use of outside contractors for
club installations. As part of its cost reduction, the Company discontinued
this practice and expended the balance of deferred installation costs. Also
included in the increase in amortization expense is
7
<PAGE>
approximately $94,000 of deferred stock promotion costs which were incurred in
the fourth quarter of 1995 related to a proposed $10 million private placement.
The loss on disposal of assets of $323,000 was primarily the result of
the Company's amusement game subsidiary's loss of two major contracts in its
northern California market. As a result, the Company sold its excess inventory
of amusement games resulting in a loss of $278,000.
Interest expense increased $30,000 or 29% to $134,000 for the year
ended December 31, 1996 from $104,000 for the year ended December 31, 1995.
This increase in interest expense is due to increased short term borrowings with
associated higher interest rates.
Year Ended December 31, 1995 Compared to year ended December 31, 1994
Revenues for the year ended December 31, 1995 increased $469,000 or
7.5% to $6,711,000 from $6,242,000 for the year ended December 31, 1994. This
increase was partially due to the inclusion of Just Games, Inc. for the entire
year in 1995 versus seven months in 1994 plus increases in revenues in all other
areas. Also contributing to this increase was an increase in the number of
military clubs served, an increase in equipment sales to the military
installations partially offset by the sale of Harper's Music store in August,
1995.
Gross profit for the year ended December 31, 1995 increased $752,000 or
26% to $3,638,000 from $2,886,000 for the year ended December 31, 1994. A
portion of this increase was attributable to the inclusion of Just Games, Inc.
for the entire twelve month period in 1995 compared to seven months in 1994. The
balance of the increase was due to increased revenues in all other operating
areas. Also contributing to this increase was the sale of Harper's Music store
which had lower gross profit margins.
General and administrative expenses for the year ended December 31,
1995 increased $821,000 or 29% to $3,620,000 from $2,799,000 for the year ended
December 31, 1994. This increase is due to increased travel costs to service new
customers and potential customers, increased marketing expenses, expenses
incurred to raise additional capital and the addition of a Division President
and Chief Financial Officer.
Interest expense increased $46,000 or 78% to $104,000 for the year
ended December 31, 1995 from $58,000 for the year ended December 31, 1994. This
higher interest expense id sue to increased short-term borrowings with
associated higher interest rates,
Liquidity and Capital Resources
The Company at December 31, 1996 had a working capital deficit of
$704,000 compared to a deficit of $9,000 at December 31, 1995. This increase is
primarily due to increases in short term borrowings and accounts payable and
accrued expenses and a decrease in other current assets. During the third
quarter of 1996, the Company initiated major cost reductions including payroll
reductions, the discontinued use of outside contractors for club installations
and overall spending reductions. These reductions continued throughout the year
and continue subsequent to year-end. The Company believes that internally
generated cash is sufficient to fund the current level of operations. However,
additional capital requirements needed for planned growth and to reduce short
term debt will require the Company to seek additional outside financing. There
can be no assurance, however, the Company will be able to obtain such financing.
Subsequent to December 31, 1996, the Company finalized a private
placement agreement under which the Company offered to sell, on a "best efforts"
basis, up to $600,000 of convertible trust units in $100,000 increments. These
trust units bear interest at 14% and may be converted into common stock of the
Company at $1.00 per share. There can be no assurance, however, that the
offering will be successful.
8
<PAGE>
The Company at December 31, 1995 had a working capital deficit of
$9,000 as compared to a deficit of $316,000 at December 31, 1994. The Company
believes that internally generated cash is sufficient to fund the current level
of operations. However, additional capital requirements needed for planned
growth will require the Company to seek additional outside financing. There can
be no assurance, however, that the Company will be able to obtain such
financing.
In May 1995, the Company completed the private placement of 500,000
shares of the Company's common stock. The net proceeds of $896,000 were used to
repay short-term borrowings, reduce trade payables and to provide working
capital for fixed asset additions during the year.
During the fourth quarter of 1995, the Company entered into a private
placement agreement under which the Company offered to sell on a "best efforts"
basis, up to $10,000,000 of investment units comprised of the Company's common
stock and convertible redeemable debentures. However, sales of these investment
units did not materialize and the private placement agreement expired in
February, 1996 with no units being sold. The Company is currently exploring
various opportunities for equity funding, although there can be no assurances
that such efforts will be successful.
Capital expenditures in 1996 amounted to $671,000 compared to $739,032
in 1995.
ITEM 7. - FINANCIAL STATEMENTS
- ------------------------------
The company's audited Financial Statements for the years ended December
31, 1995 and 1996 are presented immediately following on pages F-10 to F-24.
9
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
INDEX TO CONSOLIIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Certified Public Accountant 11
Consolidated Balance Sheet as of December 31, 1996 12
Consolidated Statements of Operations for the years
ended December 31, 1995 and 1996 14
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1995 and 1996 15
Consolidated Statements of Cash Flows for the years
ended December 31, 1995 and 1996 16
Notes to Consolidated Financial Statements 17
<PAGE>
BRIAN S. NATHANSON, C.P.A. MEMBER:
- --------------------------
American Institute of Certified Public Accountants
-Tax Division
-S.E.C. Practice Section
California Society of Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors and Stockholders of Entertainment
Technologies & Programs, Inc. and subsidiaries, Houston, Texas
I have audited the accompanying consolidated balance sheet of Entertainment
Technologies & Programs, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the two years in
the periods ended December 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these consolidated financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Entertainment
Technologies & Programs, Inc. as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the two years in the
periods ended December 31, 1996 and 1995 in conformity with generally accepted
accounting principles.
Brian S. Nathanson, CPA
March 27, 1997
3101 West Coast Highway, Suite 210, Newport Beach, California 92663
Telephone(714)574-8333 Facsimile(714)574-8334
11
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 14,850 $ 62,277
Accounts receivables, net of allowance of $14,986
in 1996 and $19,719 in 1995 452,772 455,766
Contract receivable - current portion 3,500 42,000
Retail inventory 138,921 133,683
Deferred stock promotion costs 62,765
Deferred installation costs 139,131
Prepaid expenses 9,640 16,432
Other current assets 69,717 47,102
----------- -----------
Total Current Assets 689,400 959,156
PROPERTY AND EQUIPMENT
Amusement games 1,169,716 1,328,439
Furniture and fixtures 103,089 89,782
Club equipment 2,326,599 2,084,317
Vehicles 111,701 138,506
Leasehold improvement 3,946 0
Less: accumulated depreciation (1,429,312) (1,082,201)
----------- -----------
Net Property and Equipment 2,285,739 2,558,843
OTHER ASSETS:
Non-current portion of contract receivable 3,500
Notes receivable 192,900
Other 2,635 52,194
----------- -----------
Total other assets 2,635 248,594
----------- -----------
TOTAL ASSETS $ 2,977,774 $ 3,766,593
=========== ===========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
12
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 679,902 $ 586,792
Notes payable & current portion of long-term debt 632,880 366,215
Other 80,439 15,350
---------- ----------
Total Current Liabilities 1,393,221 968,357
LONG TERM LIABILITIES:
Deferred income taxes 0 75,028
Notes payable - non-current 101,929 8,626
---------- ----------
Total Long Term Liabilities 101,929 83,654
---------- ----------
Total Liabilities 1,495,150 1,052,011
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 50 million shares
authorized, 20,507,821 shares outstanding 20,508 20,231
Additional paid-in-capital 2,448,268 2,470,990
Unearned compensation 0 (67,269)
Retained earnings ( 986,152) 290,630
---------- ----------
Total Shareholders' Equity 1,482,624 2,714,582
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,977,774 $3,766,593
========== ==========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
13
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1996 1995
----------- ----------
<S> <C> <C>
Revenues:
Entertainment Services $ 6,248,224 $6,008,664
Retail 501,377 702,241
------------ ----------
Total 6,749,601 6,710,905
Cost of Goods Sold
Entertainment Services 2,782,453 2,601,998
Retail 575,958 470,941
------------ ----------
Total Cost of Goods Sold 3,358,411 3,072,939
------------ ----------
Gross Profit 3,391,190 3,637,966
General & Administrative Expeneses 3,032,217 3,619,878
Depreciation 620,777 385,187
Amortization 632,985 118,011
Loss On Disposal of Assets 322,978 0
Interest Expense 134,043 103,640
Other (Income) Expense (3,853)
----------- ----------
(Loss) Before Taxes (1,351,810) (81,699)
Provision For Income Taxes (75,028) 0
----------- ----------
Net (Loss) $(1,276,782) $ (81,699)
=========== ==========
Net (Loss) Per Share $ (0.06) $ (0.00)
=========== ==========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
14
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock Add'l
# Assigned Paid in Retained Unearned
Shares Value Capital Earnings Comp. Net
------------- --------------- ---------------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balances December 31, 1994 19,350,188 $19,350 $1,425,625 $ 372,329 $ 1,817,304
Net (Loss) for Year 1995 (81,699) (81,699)
Private Placement 500,000 500 895,500 896,000
Stock Issued 250,402 250 70,857 71,107
Unearned Comp. 130,000 130 79,009 $ (79,139)
Amortization 11,870 11,870
---------- ------- ---------- ------------ -------- -------------
Balances December 31, 1995 20,230,590 20,230 2,470,991 290,630 (67,269) 2,714,582
Net (Loss) for year 1996 (1,276,782) (1,276,782)
Unearned Comp. (30,000) (30) (79,109) 0 67,269 (11,870)
Stock issued 307,231 308 56,386 0 0 56,694
---------- ------- ---------- ------------ -------- -------------
Balances December 31, 1996 20,507,821 $20,508 $2,448,268 $ (986,152) $ 0 $ 1,482,624
========== ======= ========== ============ ======== =============
</TABLE>
See Accompanying Notes and Independent Auditor's Report
15
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income/(loss) $(1,276,782) $ (81,699)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 620,777 385,187
Amortization 632,985 118,011
Provision for doubtful accounts 10,000
Disposal of property and equipment 322,978
Discount on note receivable 92,900
Non-cash expenses 72,922
Deferred Income taxes (75,028)
Changes in operating assets and liabilities, net of effects
of acquisitions:
Accounts receivable 2,994 (10,583)
Retail inventory (5,238) 178,733
Other assets (404,912) (340,921)
Accounts payable 93,110 (32,360)
Other current liabilities 65,089 (17,807)
----------- ----------
Net cash provided by (used in) operating activities 141,795 208,561
Cash Flows From Investing Activities:
Purchases of property, plant and equipment (670,651) (739,032)
Notes Rec. Harpers 100,000 (192,900)
Collection on contract receivable 0 42,000
Other 21,461 (4,845)
----------- ----------
Net cash used in investing activities (549,190) (894,777)
Cash Flows From Financing Activities:
Proceeds from issuance of debt 722,607 427,124
Proceeds from issuance of Common Stock 0 967,107
Payment of debt (362,639) (573,452)
----------- ----------
Net cash provided by financing activities 359,968 820,779
Increase (Decrease) in cash (47,427) 134,563
Cash at beginning of period 62,277 (72,286)
----------- ----------
Cash at end of period $ 14,850 $ 62,277
=========== ==========
Supplemental disclosure of cash paid for:
Interest $ 134,043 $ 103,640
Income taxes 0 0
Non-cash investing and financing activities:
Net stock grants 44,824
Coffman investment 28,098
</TABLE>
See Accompanying Notes and Independent Auditor's Report
16
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - ORGANIZATION
Entertainment Technologies & Programs, Inc. (ETP) ("The Company"), through
its wholly-owned subsidiary NiteLife, Inc., acquired effective April 14,
1995, provides audio and video entertainment at U.S. military bases located
domestically and abroad, sells sound and lighting equipment, provides
facilities design and installation services to night clubs and restaurants;
and through its wholly-owned subsidiary Just Games, Inc., acquired
effective June 1, 1994, installs and operates amusement game machines.
In April 1995, NiteLife, Inc. agreed to be acquired by Westcott Financial
Corporation, a publicly-held corporation which had no substantive
operations. Shareholders of NiteLife, Inc. tendered their shares of stock
and received an equal number of shares of Westcott Financial Corporation
stock. Former NiteLife, Inc. shareholders, including persons who
subscribed to a private placement of 500,000 shares of NiteLife, Inc. stock
issued in May 1995, now control approximately 90 percent of outstanding
Westcott shares.
Effective July 13, 1995 Westcott Financial Corporation, (a Delaware
corporation) changed its name to Entertainment Technologies & Programs,
Inc. (ETP, Inc.) In late May 1996 the company relocated it's headquarters
from San Diego, California to Houston, Texas.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- ---------------------------
The accompanying consolidated financial statements include the accounts of
ETP, Inc., NiteLife, Inc. (a California Corporation) and Just Games, Inc.
(a California Corporation). All intercompany balances and transactions
have been eliminated in consolidation. Certain amounts in the prior year
consolidated financial statements have been reclassified to conform to the
current presentation.
2,000,000 outstanding shares plus 18,000,000 issued shares of Westcott
Financial Corporation were exchanged for 20,000,000 issued shares of
NiteLife, Inc. resulting in 20,000,000 outstanding shares of the Company's
$0.001 par value common stock following the reverse merger.
Since Westcott Financial Corporation had no substantive operations or any
assets, the consolidated financial statements for 1995 presented in this
report reflect the operations of NiteLife, Inc. and Just Games, Inc. prior
and subsequent to the reverse merger.
Fiscal Year
- -----------
The Company's fiscal year ends on December 31st of each year.
17
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
Revenue Recognition
- -------------------
The Company recognizes revenue as services are provided.
Inventories
- -----------
Inventories consist primarily of items available for catalog sales and for
intercompany equipment sales and are valued at the lower of cost or market.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. The cost of major renewals and
betterments are capitalized; repairs and maintenance costs are expensed
when incurred. Depreciation is computed using the straight-line method
over the following estimated useful lives:
Description Estimated Life
----------- --------------
Amusement games 3-5 years
Furniture and fixtures 5-8 years
Club equipment 5-8 years
Leasehold improvements 15 years
Autos and trucks 5 years
Accelerated depreciation methods (MACRS) are used for tax purposes.
Cash and Cash Equivalents
- -------------------------
Cash represents cash in demand deposit accounts and cash on hand. The
Company had no cash equivalents at year end.
Accounts Receivable
- -------------------
Accounts receivable consist primarily of amounts due from U.S. military
bases for entertainment services provided.
Accounts receivable are stated net of allowances for uncollectibles
($14,986 at December 31, 1996, $19,719 at December 31, 1995) which is
charged to operations based on an evaluation of potential losses.
Income Taxes
- ------------
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes". Deferred taxes
arise primarily from the recognition depreciation revenues and expenses in
different periods for income tax and financial reporting purposes. These
are offset by tax benefits created by net operating losses.
18
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
Net Earnings Per Share of Common Stock
- --------------------------------------
Primary net earnings per share has been computed by dividing net earnings
by the weighted average number of common stock equivalents outstanding
during the period. Fully diluted earnings per share are not presented, as
there are no outstanding options. The weighted average shares outstanding
used in the calculation was 20,309,561 in 1996 and 19,803,467 in 1995.
Fair Value of Financial Instruments
- -----------------------------------
The fair value of the company's debt approximates a nominal amount due to
the relatively short maturities.
Basis of Accounting
- -------------------
The consolidated financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles
(GAAP). GAAP requires the use of some estimates, namely in the area of bad
debt allowances, useful lives of depreciable assets, valuation allowance
for deferred tax assets based on future taxable income. Actual results
could be different than the estimates used in these financial statements.
NOTE 3 - CONTRACTS RECEIVABLE
The contract receivable resulted from the sale of a former division of the
Company. The Company receives monthly payments in the form of goods
received, of $3,500. This contract expired in February 1997.
NOTE 4 - CONCENTRATION OF CREDIT RISK & SIGNIFICANT CUSTOMERS
The Company's major customer is the United States Military. Though the
majority (67%) of the Company's revenues are derived from services provided
to military installations, the decision to contract with the Company rests
with the individual bases. During 1996 and 1995, no one military base
accounted for more than 10% of consolidated revenues. The Company has not
been adversely affected by the military downsizing. In the case of further
military downsizing, the effect on sales and operations is unknown.
NOTE 5 - SALE OF HARPERS MUSIC STORE
On August 11, 1995, the Company completed the sale of its retail music
store to the management team which operated the store, including a former
Director of the Company. The sales price was based on inventories less
liabilities assumed by the buyers. A note was issued by the buyers for
$192,900. Payments consist of interest only payments at 10.5% for two
years. The balance to be paid over five years. The company realized a
gain of $3,853 on the sale of the retail music store in 1995.
19
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 6 - DISCOUNT ON NOTE RECEIVABLE
On June 21,1996, the Company discounted the note receivable (NOTE 5) of
$192,900 it had received in connection with the sale of its retail music
oerations to $100,000 and sold back to its makers, including a former
director of the Company. The discounted price was equal to a third party
offer. The discount was amortized fully in 1996.
NOTE 7 - NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995
-------- --------
<S> <C> <C>
Installment notes (2) with monthly payments
totaling $569 in 1996 and $1,979 in 1995, with
interest rates from 5.9% to 15.9% secured by
vehicles. 13,733 14,501
Note payable (3) to equipment leasing company,
due in monthly installments totaling $2,478, with
maturity dates of February 1999. The interest
rates are 15.68% secured by specified amusement
machines 50,267 -0-
Notes payable (2) to equipment leasing company,
due in monthly installments totaling $5,676, with
maturity dates February 1999, interest rates
are 21.32% secured by specified amusement
machines. 116,853 -0-
--------- --------
TOTAL LONG TERM DEBT 180,853 14,501
LESS CURRENT PORTION (78,924) (5,875)
--------- --------
TOTAL $ 101,929 $ 8,626
========= ========
</TABLE>
Aggregate maturities of the Company's long-term debt during the next five
years are as follows:
1997 $78,924
1998 86,383
1999 15,546
2000 0
2001 0
20
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8 - OTHER ASSETS/SHORT TERM DEBT
The company had short term borrowings (due within one year) of $507,122 in
1996 and $138,042 in 1995 from (2) finance companies. This borrowing is
secured by the proceeds of some of the Company's entertainment contracts.
Payments under the contract are received directly by the finance company.
The balance at Dec. 31, 1996 and 1995 was $292,266 and $122,842,
respectively. In addition three other notes totaling $186,690 and a bank
line of credit of $75,000 existed at Dec. 31, 1996.
Total short term debt is as follows:
Short term debt $552,956
Current portion long term debt 78,924
--------
Total debt due within one year $632,880
========
NOTE 9 - ACQUISITIONS
Effective April 14, 1995 the Company acquired NiteLife, Inc. In a reverse
merger. See Note 1.
Assuming the acquisition of NiteLife, Inc. had been made as of January
1995, the unaudited proforma combined sales, net loss, and net loss per
share for the year ended December 31, 1995 would have been $6.7 million,
($82 thousand) and ($0.00), respectively.
NOTE 10 - INCOME TAXES
The Company has the following tax carryforwards to 1997. They expire in
the years 2009-2011.
Federal California
Net Operating Loss (NOL) $1,789,585 $902,724
Alternative Minimum Tax NOL $1,607,711 $749,281
Accumulated Adjusted Current Earnings $ 15,454 $193,903
Prior Year Minimum Tax Credit $ 5,930 $ 1,190
Contributions $ 620 $ 620
Sec. 1231 Losses $ 260,518 $270,518
21
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 11 - DEFERRED INSTALLATION COSTS
Prior to the third quarter of 1996, the Company utilized outside
contractors to build and install lighting and sound equipment pursuant to
the terms of entertainment services contracts between the Company and U.S.
military bases. This cost had been deferred and amortized over twelve
months, the initial term of the contract. The Company discontinued this
practice and fully amortized all deferred installation costs as of December
31, 1996.
NOTE 12 - DEFERRED STOCK PROMOTION COSTS
Subsequent to the acquisition of NiteLife, Inc. (Note 1) the Company
produced an informational video and incurred other costs related to the
promotion of the Company's new identity and operating divisions. This cost
was deferred at December 31, 1995 and fully amortized during 1996.
NOTE 13 - UNEARNED COMPENSATION
In 1995, the Company granted 100,000 shares and 30,000 shares,
respectively, of the Company's unregistered and restricted common stock to
a Division President/Dierctor of the Company and an officer of the Company.
These shares were granted pursuant to employment agreements with these
individuals and vested over twenty-four months. During the 2nd quarter
1996, the 100,000 shares granted to the Division President were determined
to have been part of the consideration given for an investment in a
military club management services company owned by the Division President
prior to joining the Company. This investment was written off in 1994.
Also during the 2nd quarter 1996, in a cost reduction effort, the officer
and the Company mutually agreed to cancel the stock grant.
NOTE 14 - ISSUANCE OF COMMON STOCK
In September, 1996, the Company granted 60,000 shares of the Company's
unregistered and restricted Common Stock to a Division President/Director
of the Company for personally guaranteeing equipment lease obligations of
the Company. The Company also granted 50,000 shares of the Company's
unregistered and restricted Common Stock to several employees, including
30,000 shares to an officer of the Company.
Also in September, the Company granted 180,000 share of its unregistered
and restricted common stock to a financial public relations firm as payment
for twelve months consulting agreement. Additionally, the Company granted
17,231 shares of its unregistered and restricted common stock as payment
for a financial research report on the Company.
22
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 15 - LEGAL PROCEEDINGS
On May 17, 1996, suit was filed in the Superior Court of California against
the Company, certain officers and former employees of the Company by the
former owner of one of the Company's wholly-owned subsidiaries. The suit
alleges breach of contract and nonpayment of amounts owed related to the
acquisition of the subsidiary. In the opinion of the Company's counsel,
the suit is without merit and the Company intends to defend itself
vigorously.
NOTE 16 - BUSINESS SEGMENTS
During 1995 the Company operated primarily in three business segments;
providing audio and video entertainment at U.S. military bases, selling
retail, and operating amusement game machines. During 1996 and 1995 all
intersegment activities have been eliminated in consolidation.
23
<PAGE>
ENTERTAINMENT TECHNOLOGIES & PROGRAMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
Information regarding the business segments for 1996 and 1995 is presented
below:
YEAR ENDED DECEMBER 31
----------------------
1996 1995
-------- -------
Revenue (000's)
Military entertainment $ 4,530 $4,401
Retail music 501 702
Amusement games 1,719 1,608
------- ------
Total revenue $ 6,750 $6,711
======= ======
Operating Profit (000's)
Military entertainment $ 84 $ 50
Retail music 4 273
Amusement games (429) 62
Other (877) (367)
------- ------
Total operating profit (1,218) 18
Interest, other expense, (net) 134 100
------- ------
Loss before taxes $(1,352) $ (82)
======= ======
Identifiable Assets (000's)
Military entertainment $ 1,944 $2,370
Retail music 188 178
Amusement games 851 1,023
Other (5) 95
------- ------
Total identifiable assets $ 2,978 $3,766
======= ======
Depreciation
and Capital
Amortization Expenditures
(In Thousands of Dollars)
YEAR ENDED DECEMBER 31
------------------------------
1996 1995 1996 1995
------ ------ ------ ------
Military entertainment 787 310 305 606
Retail music 8 -- 6 --
Amusement games 356 163 352 133
Other 103 30 8 0
------ ---- ---- ----
$1,254 $503 $671 $739
====== ==== ==== ====
24
<PAGE>
ITEM 8. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None
PART III
--------
ITEM 9. - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
- -----------------------------------------------------------------------
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT.
---------------------------------------------------
The following table sets forth certain information concerning the Company's
executive officers and directors:
<TABLE>
<CAPTION>
Name Age Position
- ---- ----- --------
<S> <C> <C>
James Douglas Butcher 37 Chairman of the Board and CEO
Leonida Butcher 40 Co-Treasurer and Director
William M. Grasberger 42 Vice President and Director
Mark Madamba 34 Director
Jeffery Thornton 40 Director
Bernard J. Prem 49 CFO/Co-Treasurer
</TABLE>
JAMES "DOUG" BUTCHER, the Company's founder, Chairman of the Board of
Directors and Chief Executive Officer, formed a mobile music company in 1978,
while in the Navy, to provide entertainment services to the military nightclub
at the bases on which he was stationed. After being transferred to San Diego in
1980, Mr. Butcher continued in the entertainment business obtaining several Navy
contracts in the San Diego area. By 1982, after departing the Navy, the disc
jockey business became a full time venture based on two clubs, one mobile D. J.
system and a need for quality entertainment. Mr. Butcher has built the company
into the provider of comprehensive entertainment service and products it is
today.
LEONIDA BUTCHER, General Manager, Performance Sound and Light, is the wife
of James D. Butcher, the Company Chairman of the Board and CEO. Mrs. Butcher
has been employed by the Company since 1985 and prior to assuming her present
position in August 1995, had been responsible for the operation of the Company's
retail music store.
WILLIAM MICHAEL GRASBERGER, President, NiteLife Entertainment has been
with NiteLife since 1983. Prior to joining the Company, Mr. Grasberger was
employed for ten years as a radio broadcaster and a music disc jockey. Mr.
Grasberger has a Bachelor of Arts degree from California State University of
Pennsylvania where he won the Distinguished Service Award for his work in radio
and television, student government and academics. Mr. Grasberger was the
founder of Video Link which distributes music videos to clubs and restaurants
and most importantly, provides the company with its music videos. The Video
Link television show, developed by Mr. Grasberger in 1986, is still being seen
around the world on the Armed Forces Television Network.
25
<PAGE>
MARK MADAMBA, President, Just Games, Inc. since May 1994. After graduating
from high school in 1980, Mr. Madamba entered the Technical Vocational Institute
of New Mexico. At age 19, he successfully completed and received a two year
diploma in digital electronics. Mr. Madamba then moved to Kadena Air Base,
Japan where he began working as an electronic technician in the Air Force slot
machine program. In 1986, he designed and produced an electronic circuit board
to eliminate a computer design error in the base's slot machines. The new
circuit was used throughout the Air Force and was eventually sold to the
manufacturer as well. Mr. Madamba subsequently was recognized as the top
electronic troubleshooter in the Air Force slot machine program and was
transferred to the Headquarters Air Force Morale, Welfare and Recreation
Department in San Antonio, Texas. There he served as a Technical Advisor and
Program Manager for the thirty million dollar a year Air Force slot machine
program encompassing over 35 bases worldwide. Using computer aided design
programs, Mr. Madamba designed eleven new games that were installed as a
modification to existing machines. He also developed all game and machine
specifications for the Air Force's first video poker and stepper motor driven
slot machine. In 1990, Headquarters Pacific Air Forces employed Mr. Madamba to
provide technical and management oversight to ten bases in the Pacific Rim.
Based at Osan Air Base, South Korea he was directly responsible for the slot
program at Osan Air Base.
JEFFERY THORNTON, President, Vision Quest Productions. Mr. Thornton is an
honors graduate of the University of Northern Colorado, with a degree in
Recreation Administration and a minor in Business Mr. Thornton began his
professional career as the first Parks and Recreation Director for a Southwest
Native American Indian Tribe, the Pascua Yaqui Tribe in Tucson, Arizona.
Subsequently, Mr. Thornton was hired as the Recreation coordinator for the Air
Force Logistics Command at Wright Patterson Air Force Base, Dayton, Ohio. His
supervision of recreation and sports activities extended to six bases throughout
the United States. Following that, Mr. Thornton became the Recreation Director
for the Naval Training Center in San Diego which included eleven facilities and
over 500 personnel. After five years with NTC, Mr. Thornton became the Moral,
Recreation and Club Director for the Submarine Base San Diego, and was in charge
of all operations on the base. In addition to his other duties, Mr. Thornton
wrote the "NiteLife Handbook of Club Programs and Fun", a detailed event
planning guide, published and distributed by the Company, and used extensively
by military clubs worldwide.
BERNARD J. PREM, Chief Financial Officer and Co-Treasurer. Prior to
joining the Company in September 1995, Mr. Prem was employed for thirteen years
with Intermedics, Inc. a manufacturer of cardiac pacemakers, in various
financial management positions. Mr. Prem has worked in the auditing departments
of W. R. Grace & Co. and Cooper Industries, Inc. Mr. Prem was graduated from
Christian Brothers College in Memphis, Tennessee with a degree in accounting.
James D. Butcher and Leonida Butcher, both directors of the Company, are
husband and wife. Other than Mr. and Mrs. Butcher, there are no family
relationships between any director or executive officers of the Company, either
by blood or by marriage.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than ten percent
of a registered class of the Company's equity securities to file various reports
with the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. concerning their holdings of, and transactions in,
securities of the Company. Copies of these filings must be furnished to the
Company.
Based on a review of the copies of such forms furnished to the Company, the
Company notes that Bernard J. Prem did not timely file a Form 3 Initial
Statement of Beneficial Ownership of Securities within ten days following their
respective appointments as officers or directors of the Company.
26
<PAGE>
ITEM 10.- EXECUTIVE COMPENSATION
- --------------------------------
The following table sets forth information concerning compensation of the
chief executive officer and all other executive officers of the Company whose
salary and bonus exceeded $100,000 for services rendered to the Company for the
fiscal year ended December 31, 1996.
Summary Compensation Table (1)
Annual Compensation
----------------------------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
James D. Butcher 1996 156,000 (1) (2)
President and Chief
Executive Officer
(1) The Company currently has not adopted any bonus, profit sharing or long-
term compensation plan providing any executive officer, director or
employee with any compensation except as provided above.
(2) Perquisites and other personal benefits did not in the aggregate reach the
lesser of $50,000 or 10% of the total of annual salary reported in this
table.
EMPLOYMENT AGREEMENT
Effective November 10, 1995, the Company entered into a ten-year employment
agreement with James Butcher. The agreement provides for an annual salary of
$156,000, increasing to $240,000 upon completion of a secondary offering. All
future increases will be at the discretion of the Board of Directors
compensation advisory committee. The employment agreement may be terminated
upon death, disability or for "just cause" (as defined therein).
COMPENSATION OF DIRECTORS
The Company's Board of Directors is comprised entirely of employees of the
Company, and receive no additional compensation in connection with attending
Board Meetings. The Company intends to actively pursue and attract capable and
notable independent outside directors. Consequently, the Company currently
exploring the issue of director compensation.
ITEM 11. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 19, 1996 for (a) each person
known by the Company to own
27
<PAGE>
beneficially more than 5% of the Common Stock, (b) each director, (c) each
executive officer identified in the compensation table above, and (d) officers
and directors of the Company as a group.
Name of Beneficial Number of Shares Percentage
Owner Beneficially Owned Owned
- ------------------ ------------------ ----------
James D. Butcher &
Leonida Butcher
480 Kirby Rd.
Seabrook, Tx 77586 10,747,561 52.41%
Michael W. Grasberger
1201 Enterprise Ave. #423
League City, Tx 77573 2,820,960 13%
Mark Madamba 124,820 .61%
Jeffrey Thornton 44,078 .21%
All Officers and
Directors as a group (6) 13,67,374 67.13%
ITEM 12. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
There have been no material transactions, series of similar transactions or
currently proposed transactions, to which the Company or any of its subsidiaries
was or is to be a party, in which the amount involved exceeds $60,000 and in
which any director or executive officer or any security holder who is known to
the Company to own of record or beneficially more than 5% of the Company's
common stock or any member of the immediate family of any of the foregoing
persons, had a material interest.
The Company has no parents; it is the parent of NiteLife Entertainment,
Inc., Just Games, Inc. and their affiliated companies.
There have been no material transactions, series of similar transactions,
currently proposed transactions, or a series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds $60,000 and in which any promoter or founder or any
member of the immediate family of the foregoing persons, had a material
interest.
ITEM 13. - EXHIBITS AND REPORTS ON FORM 8-K
- -------------------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Entertainment Technologies and Programs, Inc.
/s/ James D. Butcher
----------------------
By: James D. Butcher, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ James D. Butcher President, Chief Executive March 28, 1997
- -------------------- Officer and Director (principal
James D. Butcher executive officer)
/s/ Bernard J. Prem Chief Financial Officer, Co-Treasurer March 28, 1997
- -------------------- (principal financial officer,
Bernard J. Prem principal accounting officer)
/s/ Leonida Butcher Co-Treasurer and Director March 28, 1997
- --------------------
Leonida Butcher
/s/ Mark Madamba Director March 28, 1997
- ----------------
Mark Madamba
/s/Jeffrey Thornton Director March 28, 1997
- -------------------
Jeffery Thornton
/s/ William Grasberger Director March 28, 1997
- ----------------------
William Grasberger
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-KSB AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 14,850
<SECURITIES> 0
<RECEIVABLES> 452,772
<ALLOWANCES> 0
<INVENTORY> 138,921
<CURRENT-ASSETS> 689,400
<PP&E> 3,715,051
<DEPRECIATION> 1,429,312
<TOTAL-ASSETS> 2,977,774
<CURRENT-LIABILITIES> 1,393,221
<BONDS> 101,929
0
0
<COMMON> 20,508
<OTHER-SE> 1,462,116
<TOTAL-LIABILITY-AND-EQUITY> 2,977,774
<SALES> 6,749,601
<TOTAL-REVENUES> 6,749,601
<CGS> 3,358,411
<TOTAL-COSTS> 3,358,411
<OTHER-EXPENSES> 4,608,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134,043
<INCOME-PRETAX> (1,351,810)
<INCOME-TAX> (75,028)
<INCOME-CONTINUING> (1,276,782)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,276,782)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
