<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 18, 2000
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SELECT MEDIA COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its chapter)
New York 000-24706 13-3415331
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(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation or organization) Identification No.)
44 E. 32nd Street, New York City, NY 10016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 584-1900
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666 Third Avenue, New York, NY 10015
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(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not Applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 18, 2000, Select Media Communications, Inc. acquired all of
the outstanding shares of capital stock of Sigma Sound Services, Inc. ("Sigma")
for $1,000,000 in cash from Joseph Tarsia. Mr. Tarsia will continue to act as
president of Sigma and the assets acquired will continue to be used in that
business. This transaction was accounted for as a purchase. The assets purchased
in this transaction include:
Recording equipment
Furniture and fixtures
Computer and office equipment
Leasehold improvements
The Registrant obtained financing for this transaction from Lloyds
Bahamas Securities, LTD in the form of convertible notes, which were
subsequently converted into shares of the Registrant's common stock at $0.50 per
share.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not Applicable
ITEM 5. OTHER EVENTS
Not Applicable
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not Applicable
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENT AND EXHIBITS
(A) Audited Financial Statements of Sigma Sound Services, Inc.
(B) Pro Forma Financial statements for Select Media
Communications, Inc.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SELECT MEDIA COMMUNICATIONS, INC.
By: /s/ MITCH GUTKOWSKI
--------------------------------
Mitch Gutkowski, President
Date: November 22, 2000
<PAGE> 4
CONTENTS
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<TABLE>
<S> <C>
SIGMA SOUND SERVICES, INC. Page
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INDEPENDENT AUDITORS REPORT F-1
FINANCIAL STATEMENTS
Balance Sheet F-2
Statement of Operations and Retained Earnings F-3
Statement of Cash Flows F-4
NOTES TO FINANCIAL STATEMENTS F-5 - F-7
SELECT MEDIA COMMUNICATIONS, INC.
PROFORMA CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED) F-8
Balance Sheet as of December 31, 1999 F-9
Statement of Operations for the Year Ended December 31, 1999 F-10
NOTES TO PROFORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS F-11
</TABLE>
<PAGE> 5
INDEPENDENT AUDITORS REPORT
To the Stockholders of
Sigma Sound Services, Inc.
We have audited the accompanying balance sheet of Sigma Sound Services, Inc. as
of December 31, 1999 and the related statements of operations, accumulated
deficit, and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the 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 audit 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 Sigma Sound Services, Inc. as
of December 31, 1999 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
s/ Marcum & Kliegman LLP
March 27, 2000
F-1
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SIGMA SOUND SERVICES, INC.
BALANCE SHEET
December 31, 1999
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<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,400
Accounts receivable 34,517
---------
Total Current Assets $ 35,917
PROPERTY AND EQUIPMENT, Net 104,600
---------
TOTAL ASSETS $ 140,517
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 58,685
Accrued expenses 46,336
---------
Total Current Liabilities $ 105,021
CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock, no par value, 5,000 shares
authorized, 20 issued and outstanding 1,000
Additional paid-in capital 865,002
Accumulated deficit (830,506)
---------
TOTAL STOCKHOLDERS' DEFICIENCY 35,496
---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 140,517
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
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SIGMA SOUND SERVICES, INC.
STATEMENT OF OPERATIONS ACCUMULATED DEFICIT
For the Year Ended December 31, 1999
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<TABLE>
<S> <C> <C>
SALES $ 502,791
COST OF SALES 210,198
GROSS PROFIT $ 292,593
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 479,070
---------
OPERATING LOSS (186,477)
OTHER INCOME 41,850
---------
NET LOSS (144,627)
ACCUMULATED DEFICIT - Beginning (685,879)
---------
ACCUMULATED DEFICIT - Ending $(830,506)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 8
SIGMA SOUND SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1999
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<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(144,627)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation $ 39,427
Decrease in accounts receivable 18,833
Increase in accounts payable 3,477
Increase in accrued expenses 7,936
---------
TOTAL ADJUSTMENTS 69,673
---------
NET CASH USED IN OPERATING
ACTIVITIES (74,954)
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisitions of property and equipment (18,104)
CASH FLOWS FROM FINANCING ACTIVITIES
Contributed capital 89,049
---------
NET DECREASE IN CASH (4,009)
CASH - Beginning 5,409
---------
CASH - Ending $ 1,400
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
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SIGMA SOUND SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - Summary of Significant Accounting Policies
Description of the Business
Sigma Sound Services, Inc. (the "Company") was incorporated in the
Commonwealth of Pennsylvania on September 24, 1991 for the purpose of
providing studio space and technology for the recording of audio media
for the music, movie and commercial advertising industries. The Company
generates substantially all of its revenues from this activity.
Revenue Recognition
Operating revenue is recorded on the date of each recording session.
Accounts Receivable
Accounts receivable has been adjusted for all known uncollectible
accounts. As such allowance for doubtful has not been recorded.
Property and Equipment
Property and equipment is stated at cost. Maintenance and repairs are
charged to expense as incurred; cost of major additions and betterments
are capitalized. When property and equipment is sold or otherwise
disposed of, the cost and related accumulated depreciation are eliminated
from the accounts and resulting gain or loss is reflected in income.
Depreciation and Amortization
Depreciation is provided for using the straight-line method over the
estimated useful lives of the related assets. The cost of leasehold
improvements is amortized over the lesser of the estimated useful lives
of the assets or the length of the related leases.
Income Taxes
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be an "S" corporation. In lieu of corporate
income taxes, the shareholders of an "S" corporation are taxed on their
proportionate share of the corporation's taxable income.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers
all short-term investments with an original maturity of three months or
less to be cash equivalents.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense for the
year ended December 31, 1999 was $6,678.
F-5
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SIGMA SOUND SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - Summary of Significant Accounting Policies, continued
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE 2 - Property and Equipment
Property and equipment at December 31, 1999 consists of the following:
<TABLE>
<CAPTION>
Estimated
1999 Useful Lives
---- ------------
<S> <C> <C>
Recording equipment $ 730,745 5 years
Furniture and fixtures 40,187 7 years
Computer and office equipment 30,808 5 years
Leasehold improvements 77,467 31-39 years
---------
879,207
Less: accumulated depreciation (774,607)
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Property and Equipment, Net $ 104,600
=========
</TABLE>
Depreciation and amortization expense for the year ended December 31,
1999 was $39,427.
NOTE 3 - Contingencies
Litigation
The Company is involved in litigation through the normal course of
business. The Company believes that the resolution of these matters will
not have a material adverse effect on the financial position or results of
operations of the company.
NOTE 4 - Related Party Transactions
The Company rents its office space from the Company's principal
stockholder and chief executive officer (CEO) on a month to month basis.
The rent expense for the year ended December 31, 1999 was approximately
$76,000.
F-6
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SIGMA SOUND SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
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NOTE 4 - Related Party Transactions, continued
During 1999 the CEO forgave cumulative advances of approximately $89,000.
Accordingly, the company recorded the forgiveness as an increment to
additional paid in capital.
NOTE 5 - Subsequent Event
On January 18, 2000, Select Media Communications Inc., a publicly traded
entity on the NASDAQ OTC Bulletin Board, purchased all of the issued and
outstanding common stock of the Company for $1,000,000.
F-7
<PAGE> 12
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited proforma combined balance sheet as of December 31, 1999,
and the unaudited pro forma consolidated statements of operations for the year
ended December 31, 1999, are based on the historical financial statements of
Selected Media Communications, Inc. and Sigma sound Services, Inc. and give
effect to the proforma adjustments described herein as though the acquisition of
Sigma Sound Services, Inc. dated January 18, 2000 had been consummated at
December 31, 1999 for the unaudited combined balance sheet, and at January 1,
1999 for the unaudited combined statements of operations.
The unaudited pro forma combined financial statements should be read in
conjunction with the notes thereto and with the historical financial statements
of Select Media Communications, Inc., as filed in its annual report on Form 10-K
and previously filed Form 10-Q and the historical financial statements of Sigma
Sound Services, Inc. included elsewhere herein. The unaudited pro forma combined
financial statements are not necessarily indicative of the Company's combined
financial position or results of operations that would have been achieved had
the acquisition been consummated at December 31, 1999 for the unaudited combined
balance sheet, and at January 1, 1999 for the unaudited combined statements of
operations.
Under the terms of a purchase agreement dated January 1, 2000 Select Media
Communications, Inc. purchased all of the issued and outstanding common stock of
Sigma Sound Services, Inc. The transaction was accounted for under the purchase
method of accounting.
F-8
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SELECTED MEDIA COMMUNICATIONS, INC.
PROFORMA COMBINED BALANCE SHEET
December 31, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Pro forma Pro forma
Debit Credit Pro forma
Select Sigma Adjustments Adjustments Combined
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<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 344 $ 1,400 (a) $ 200,000 (b) $ (200,000) $ 1,744
Accounts receivable 365,200 34,517 -- -- 399,717
Prepaid expenses and other 64,507 -- -- -- 64,507
Due from stockholder 166,000 -- -- (a) (166,000) --
------------ ------------ ------------ ------------ ------------
Total Current Assets 596,051 35,917 200,000 (366,000) 465,968
------------ ------------ ------------ ------------ ------------
PROPERTY AND EQUIPMENT,
Net 539,235 104,600 -- -- 643,835
Reorganization value , net 1,873,854 -- -- -- 1,873,854
Investment in subsidiary -- -- (b) 1,000,000 (c) (1,000,000) --
Deposit on acquisition 400,000 -- -- (b) (400,000) --
Intangible asset, net -- -- (c) 964,504 (d) (321,500) 643,004
------------ ------------ ------------ ------------ ------------
Total Assets $ 3,409,140 $ 140,517 $ 2,164,504 $ (2,087,500) $ 3,626,661
============ ============ ============ ============ ============
CURRENT LIABILITIES
Accounts payable $ 1,315,977 $ 58,685 $ -- $ -- $ 1,374,662
Accrued expenses 2,194,656 46,336 -- (e) 40,000 2,280,992
Notes payable 567,500 -- -- -- 567,500
Due to stockholder -- -- -- (a) 34,000 34,000
Current maturities of long
term debt -- -- -- (b) 200,000 200,000
Current portion of capital
lease obligation 55,490 -- -- -- 55,490
Reorganization liabilities,
current portion 100,000 -- -- -- 100,000
------------ ------------ ------------ ------------ ------------
Total Current Liabilities 4,233,623 105,021 -- 274,000 4,612,644
Long term debt -- -- -- (b) 200,000 200,000
Capital lease obligation 120,224 -- -- -- 120,224
Reorganization liabilities 1,479,969 -- -- -- 1,479,969
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES 5,833,816 105,021 -- 474,000 6,412,837
------------ ------------ ------------ ------------ ------------
STOCKHOLDERS' DEFICIT
Common stock 9,608 1,000 (c) (1,000) -- 9,608
Additional paid in capital 7,313,262 865,002 (c) (865,002) -- 7,313,262
Accumulated deficit (9,747,546) (830,506)(d)&(e) (361,500)(c) 830,506 (10,109,046)
------------ ------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS'
DEFICIT (2,424,676) 35,496 (1,227,502) 830,506 (2,786,176)
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 3,409,140 $ 140,517 $ (1,227,502) $ 1,304,506 $ 3,626,661
============ ============ ============ ============ ============
</TABLE>
F-9
<PAGE> 14
SELECTED MEDIA COMMUNICATIONS, INC.
PROFORMA COMBINED STATEMENT OF OPERATIONS
December 31, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Pro forma Pro forma
Debit Credit Pro forma
Select Sigma Adjustments Adjustments Combined
------ ----- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
SALES $ 2,310,002 $ 502,791 $ -- $ -- $ 2,812,793
COST OF SALES 1,294,890 210,198 -- -- 1,505,088
----------- --------- --------- ------ -----------
GROSS PROFIT 1,015,112 292,593 -- -- 1,307,705
----------- --------- --------- ------ -----------
SELLING, GENERAL AND
ADMINISTRATIVE
Stock-based compensation 881,470 -- -- -- 881,470
Selling, general and administrative
Expenses 4,646,804 479,069 (d) 321,500 -- 5,447,373
----------- --------- --------- ------ -----------
TOTAL SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES 5,528,274 479,069 321,500 -- 6,328,843
----------- --------- --------- ------ -----------
OPERATING LOSS (4,513,162) (186,476) (321,500) -- (5,021,138)
OTHER EXPENSE
Other income 32,476 41,850 -- -- 74,326
Loss on capital improvement
receivable (557,303) -- -- -- (557,303)
Interest expense (357,793) -- (e) (40,000) -- (397,793)
----------- --------- --------- ------ -----------
Total Other Expense (882,620) 41,850 (40,000) -- (880,770)
----------- --------- --------- ------ -----------
NET LOSS $(5,395,782) $(144,626) $(361,500) $ -- $(5,901,908)
=========== ========= ========= ====== ===========
</TABLE>
F-10
<PAGE> 15
SELECT MEDIA COMMUNICATIONS, INC.
NOTES TO PROFORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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(a) To record the receipt of $200,000 from a stockholder of the Company for
the purpose of acquiring the common stock of Sigma.
(b) To record the acquisition of all of the issued and outstanding common
stock of Sigma for $1,000,000 with $400,000 paid at the signing of the
Agreement, $200,000 paid at closing and a $400,000 10% secured noted due
in two installments of $200,000 plus accrued interest on June 30, 2000 and
January 3, 2001.
(c) To record the allocation of the excess of the purchase price over the
estimated fair value of the net assets acquired.
(d) To record the amortization of goodwill over 3 years.
(e) To record the accrual of interest on the 10% secured note.
F-11
