U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________.
Commission File No. 0-25896
5TH AVENUE CHANNEL CORP.
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-3175814
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3957 N.E. 163RD STREET
NORTH MIAMI BEACH, FLORIDA 33160 33160
(Address of principal executive offices) (Zip Code)
(305) 947-3010
(Issuer's telephone number)
Securities registered under Section 12(G) of the Exchange Act:
Common Stock, par value $.001 per share
(Title of Class)
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 and (2) has been
subject to such filing requirements for the past 90 days. YES [ ] NO [X]
As of May 14, 1999, there were 9,535,143 shares of the issuer's Common Stock
outstanding.
Transitional Small Business Disclosure Format. YES [ ] NO [X]
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TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS................................................3
Consolidated Balance Sheets
as of March 31, 1999 and December 31, 1998 - (unaudited)............3
Consolidated Statements of Operations
for the three months ended March 31, 1999 and 1998 - (unaudited)....4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1999 and 1998 - (unaudited)....5
Notes to Unaudited Financial Statements.............................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...........14
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES......................................22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........23
ITEM 5. OTHER INFORMATION..........................................24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...........................24
SIGNATURES...................................................................26
2
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5TH AVENUE CHANNEL CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS MAR.31, 1999 DEC.31, 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 77,966 $ 256,209
Accounts receivable, net 566,286 41,559
Inventory 613,042 -
Loans receivable, related parties 46,097 28,191
Prepaid expenses & other
current assets 16,342 104,629
----------- -----------
Total Current Assets 1,319,733 430,538
Property & Equipment, Net (Note 3) 1,452,812 1,323,404
Licenses, Net (Note 4) 4,571,270 4,651,061
Acquired Intangibles, Net (Note 5) 2,654,241 615,000
Other Assets, Net 128,704 87,119
----------- -----------
TOTAL ASSETS $10,126,760 $ 7,107,172
=========== ===========
LIABILITIES & STOCKHOLDERS'EQUITY
Current Liabilities:
Accounts payable $ 526,221 $ 164,321
Accrued liabilities 620,718 611,096
Accrued salary, President 315,000 270,000
Current portion of long-term debt 585,587 417,492
Loans & notes payable, related parties 1,904,394 972,529
----------- -----------
Total current liabilities 3,951,920 2,435,438
Convertible debenture to
President (Note 7) - 2,366,000
Convertible debentures, net (Note 9) 303,382 232,449
License fees payable 909,502 931,148
Long-term debt 966 1,960
----------- -----------
Total liabilities 5,165,770 5,966,995
STOCKHOLDERS' EQUITY (Notes 7 and 8)
Common stock 9,536 4,504
Additional paid-in capital 14,766,193 9,942,225
Accumulated deficit (9,814,739) (8,806,552)
----------- -----------
Total Stockholders' Equity 4,960,990 1,140,177
----------- -----------
Total Liabilities & Stockholders
Equity $10,126,760 $ 7,107,172
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
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5TH AVENUE CHANNEL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- ---------
(UNAUDITED)
<S> <C> <C>
Revenue $ 1,162,640 $ 341,715
Direct Costs 557,662 48,281
--------- -------
Gross Margin 605,811 293,434
Operating Expenses:
Selling, general & administrative 830,262 413,095
Website & product design expenses 236,387 66,326
Depreciation & amortization 239,861 147,893
-------- --------
Operating Loss (700,699) (333,880)
--------- ---------
Other Income (Expense)
Accretion of debenture discount (218,849) -
Interest expense ( 88,638) (16,184)
--------- --------
Total Other Expense (307,487) (16,184)
---------- --------
Net Loss ($1,008,186) ($350,064)
============ ==========
Net Loss Per Share-basic and diluted ($0.11) ($0.09)
======= =======
Weighted Average Number of
Shares Outstanding 9,535,143 4,009,643
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
4
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5TH AVENUE CHANNEL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- --------
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss ($1,008,186) ($350,064)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization & depreciation 239,862 147,893
Accretion of debenture discount 218,849 -
Changes in operating assets and
Liabilities, net of acquisitions:
Increase in accounts receivable (524,727) (40,952)
Decrease in inventory 160,214 -
Increase in prepaid expenses (15,162) (18,905)
Increase in accounts payable 258,280 92,662
Increase in accrued liabilities 54,622 72,650
---------- --------
Net Cash Used in Operating Activities (616,248) (96,716)
Cash Flows From (Used In) Investing Activities:
Acquisition of equipment (202,664) (26,206)
Net cash received in acquisition of IBC 40,381 -
Decrease (increase) in other assets 88,287 (3,599)
---------- --------
Net Cash Used in Investing Activities (73,996) (29,805)
Cash Flows From Financing Activities:
Proceeds from related party loans, net 514,463 21,576
Repayment of Long-Term Debt (2,462) (1,892)
---------- --------
Net Cash Provided By (Used In)
Financing Activities 512,001 19,684
---------- --------
Net increase (decrease) in cash (178,240) 106,837)
Cash at beginning of period 256,209 113,207
---------- --------
Cash at end of period $ 77,966 $ 6,370
========== ========
</TABLE>
See Notes to Consolidated Financial Statements
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5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1999
(Unaudited)
Note 1 Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments necessary for a fair presentation
of financial position and the results of operations and cash flows for the
periods presented. They include the statements of all subsidiaries. Certain
information and note disclosures normally included in financial statements
prepared according to generally accepted accounting principles have been
condensed or omitted.
Note 2 Supplemental Cash Flow Information
Supplemental disclosure of cash flow information for the three months ended
March 31:
1999 1998
------- --------
Interest paid during the period $ 5,250 $ 16,345
Non-cash investing and financing activities:
Conversion of debentures $ 2,366,000 -
Stock issued for acquisition of IBC $ 2,463,000 -
Loan payable for acquisition of IBC $ 450,000 -
Note 3 Property & Equipment
Leasehold improvements $ 53,996
Furniture & office equipment 199,534
Website software and hardware 119,138
Vehicles 133,371
TV signal rebroadcast & receiving equipment 1,790,058
---------
Total cost 2,296,097
Less accumulated depreciation 843,285
---------
Net property & equipment $ 1,452,812
===========
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Note 4 Licenses
LaCrosse, Wisconsin $ 371,493
San Jose, Costa Rica 4,174,000
Stevens Point Wisconsin, net 355,625
Wausau Wisconsin, net 483,736
---------
Total cost 5,384,854
Less accumulated amortization 813,584
Net licenses $ 4,571,270
===========
On March 28, 1996, the Federal Communications Commission (FCC) completed its
auction of authorizations to provide single channel and Multi-channel
Multi-point Distribution Service (MDS) in 493 Basic trading Areas. The Company
won bids in 3 markets: Hickory-Lenoir-Morganton, NC; Wausau-Rhinelander, WI; and
Stevens Point-Marshfield-Wisconsin Rapids, WI. The Company's total bid for these
3 markets was $3,046,212. The Company made the full 10% down payment of $304,622
for all three markets but only made the second 10% down payment of $118,946 on
the 2 Wisconsin markets.
The remaining license fees payable to the FCC of $951,479 for the two Wisconsin
licenses are due quarterly over a ten year period commencing in October 1999.
The interest rate is the effective rate of ten-year US Treasury obligations plus
2-1/2%. At March 31, 1999 the Company has accrued but has not paid a total of
$175,904 of interest charged by the FCC on the $951,479 licenses payable.
A provision for asset impairment of $350,000 was recorded in the 4th quarter of
1998 related to of the undeveloped Wisconsin licenses obtained as a result of
the FCC auction in 1996.
On September 1, 1996, the unpaid license fee payable of $1,671,175 for the
Hickory, NC, license was defaulted. The Company will be liable to the FCC for
the difference between the Company's winning bid and a lower winning bid
received by the FCC in a subsequent auction of this license. The FCC has not yet
announced plans to re-auction the Hickory, NC, license and no liability is
recorded for the potential shortfall of a re-auction.
COSTA RICA LICENSES
In February 1996 the Company agreed to acquire three companies holding a total
of 18 frequency licenses for broadcast of pay television (i.e. "wireless cable")
services in Costa Rica together with related equipment and contracts with
subscribers. The $4,174,000 total cost of the licenses included a $2,000,000
note payable in one year with a 3.6% interest rate (see note 5).
The entire $4,174,000 purchase price of the three Costa Rican companies was
allocated to the 18 licenses since the value of the
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other assets acquired was minimal. The cost of the licenses is amortized on a
straight-line basis over 15 years.
Note 5 Acquisitions and Acquired Intangibles
Acquisition of The 5th Avenue Channel, Inc.
Effective December 10, 1998 the Company acquired 100% of the capital stock of
The Fifth Avenue Channel, Inc. ("5th Avenue")for 335,000 shares of the Company's
common stock and agreed to issue up to 665,000 additional "performance shares"
when The 5th Avenue Channel achieves $25,000,000 of sales or $1,000,000 of net
income in any calendar quarter.
The Company's controlling shareholder owned 65% of the 5th Avenue stock and
accordingly that portion of the acquisition was recorded similar to a pooling of
interests at the majority shareholders' historical cost which was insignificant.
The portion of 5th Avenue acquired from the minority shareholders was recorded
at the estimated fair value of the common stock issued. When and if the
performance shares are earned, they will be recorded at the estimated fair value
and included in acquired intangibles.
Fifth Avenue's primary assets are intangible and the $615,000 cost of acquiring
the minority shareholders' 5th Avenue stock was allocated entirely to acquired
intangibles which will be amortized over 5 years. All of 5th Avenue's operating
results were included in the Company's financial statements for 1998 and 1997.
Acquisition of IBC.
In February of 1999 the Company signed a letter of intent to acquire all of the
assets and business operations of International Broadcast Consultants of
America, Inc (IBC) for $450,000 in cash and 300,000 shares of the Company's
common stock. The acquisition was effective January 4, 1999 and has been
recorded as a purchase. The purchase was completed on May 12, 1999. A summary of
the allocation of the $2,913,000 purchase price to the net assets acquired
follows:
Cash` $ 40,381
Inventory 773,256
Officer loans 50,504
Equipment and leasehold improvements 44,429
Other assets 26,425
Accounts payable assumed (103,621)
Acquired intangibles 2,081,628
---------
Total purchase price 2,913,000
=========
The total consideration exceeded the estimated fair market value of the net
tangible assets acquired by $2,081,628. The excess has
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been recorded as acquired intangibles and is being amortized over 20 years.
The intangible assets include exclusive marketing rights for substantially all
of the products marketed by IBC. The operations of IBC have been integrated with
the 5th Avenue Channel for the first quarter of 1999.
Note 6 Loan Restructure and Conversion of Debenture
On February 12, 1997, the Company and seller of the Costa Rican licenses (the
"Seller") entered into an agreement to restructure the $2 million note issued in
the acquisition of one of the Costa Rican companies. The amended agreement
required the Company to pay $625,000 on or before March 7, 1997. The remaining
$1,375,000 principal balance plus accrued interest, was to be paid on or before
February 23, 1998. The Company failed to pay the $625,000 on March 7, 1997 and
in April 1997 the Seller declared the $2,000,000 note to be in default.
On May 19, 1997, the Company entered into an agreement with the Seller
restructuring the $2 million debt into a convertible debenture maturing in 12
months and bearing interest at 12% per annum. The principal amount of the
debenture was increased $100,000 for expenses owed or reimbursable to Seller at
the issue date of the debenture.
As consideration for this debt structuring, the Company agreed to issue to the
Seller (i) 180,000 shares of the Company's common stock with piggy back
registration rights, (ii) a warrant to purchase 500,000 shares at $1.00 per
share, and (iii) a warrant to purchase 500,000 shares at $5.00 per share. Under
the Agreement, the Seller became the President and Chairman of the Board and
received the right to nominate two members to the Company's Board of Directors
until the President exercised the conversion rights under the debenture.
The debenture was convertible by Seller into the Company's common stock at any
time after the issue date. The conversion price was equal to the lesser of (1)
$.50 per share of common stock or (2) the average of the closing "bid" for the
Company's common stock as reported on NASDAQ for the five trading days
immediately prior to the conversion date. The Company is required to maintain an
effective registration statement for such shares.
No interest was paid on the debenture and the $153,033 of interest accrued from
May 19, 1997 to December 31, 1997 was added to the debenture balance.
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In November, the President notified the Company of his intention to convert the
Debenture into common stock on or before May 15, 1998. As inducement for the
early conversion and for the President foregoing all interest on the Debenture
after December 31, 1997 an additional $109,967 was added to the Debenture
principal balance. The resulting $2,366,000 Debenture balance was converted into
4,732,000 shares of the Company's common stock in the first quarter of 1999.
Note 7 Preferred Stock Authorized But Unissued
The Company is authorized to issue up to 5,000,000 shares of "blank check"
preferred stock and to permit the Board of Directors, without shareholder
approval, to fix the rights, preferences and privileges including dividend
rights, conversion rights, terms of redemption or liquidation preferences.
Note 8 Stock Warrants, Options and Shares Reserved
Publicly Traded Common Stock Purchase Warrants
In connection with its initial public offering on May 10, 1995, the Company sold
1,610,000 redeemable common stock purchase warrants at a price of $.25 per
warrant. Each warrant entitles the holder to purchase, at any time from the date
of the offering through the fifth anniversary date, one share of common stock at
a price of $5.75 per share. The warrants are redeemable at a price of $.25 per
warrant under certain circumstances.
Private Placement Warrants
In August 1994 and December 1, 1994, the Company issued an aggregate of 625,000
common stock warrants as part of the sale of units of its securities. Such
warrants may be exercised within five years from the date of their issuance at
an exercise price of $5.75 per share. The warrants provide for adjustment in the
number of shares underlying the warrants upon the occurrence of certain events,
such as stock dividends, stock splits or other reclassifications of the
Company's common stock, a consolidation or merger of the Company, or a
liquidating distribution of the Company's common stock.
Stock Options
The Company has outstanding stock options to purchase a total of 1,018,000
shares at prices ranging from $2 to $15. The options were granted primarily in
1998 to employees, consultants and non employee individuals.
10
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UNDERWRITER STOCK WARRANTS
In connection with the public offering, the Company sold Underwriter's stock
warrants, at a price of $.001 per Warrant. Warrants to purchase 100,000 shares
of common Stock and warrants to purchase an additional 140,000 Warrants were
sold. The underwriter's stock warrants are exercisable at a price of $7.50 per
share, and the underwriter's warrants are exercisable at a price of $.375 per
warrant through May 10, 2000. Each warrant underlying the underwriter's warrants
is exercisable for one share of common stock at an exercise price of $5.75 per
share.
CONSULTING AGREEMENT
In July 1997, the Company entered into a two-year Consulting Agreement with an
investment banking firm (the "Consultant"). Pursuant thereto the Company granted
the Consultant 500,000 one-year warrants exercisable at $1.00 per share, 200,000
one-year warrants exercisable at $2.50 per share and 100,000 three-year warrants
exercisable at $2.50 per share. In October 1997 and 1998 assignees of the
Consultant exercised all of the one year warrants at $1 per share. The remaining
300,000 warrants have not been exercised.
See Note 6 for warrants to purchase 1,000,000 shares issued to the President in
the Restructuring of the $2,000,000 debt.
SHARES RESERVED
At March 31, 1999, the Company has reserved 6,045,500 shares of common stock for
future issuance pursuant to the aforementioned stock warrant and stock option
agreements.
Note 9 12% Convertible Debentures
In May 1998 the Company completed a private offering of $595,000 of 12%
Convertible Subordinated Debentures (the "May Debentures") to accredited
investors. The Debentures are convertible into shares of the Company's common
stock at $2 per share. Up to 50 % of the May Debentures can be converted after
February 28, 1999 and the remaining 50% can be converted after July 31, 1999
unless redeemed earlier by the Company. Notwithstanding the early redemption by
the Company, May debenture holders may convert no less than 50% of their
original debenture into shares of the Company's common stock. Interest is
payable monthly and the May Debentures mature on October 31, 1999.
In November 1998 the Company completed a private offering of $500,000 of 12%
Convertible Subordinated Debentures (the "November Debenture") to an accredited
investor. The November Debenture is convertible into shares of the Company's
common stock at $2.50 per share. Up to 50% of
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the November Debenture can be converted after July 31, 1999 and the remaining
50% can be converted after December 31, 1999 unless redeemed earlier by the
Company. Notwithstanding the early redemption by the Company, November Debenture
holder may convert no less than 50% of the original Debenture into common stock.
Interest is payable monthly and the debenture matures on April 30, 2000.
The Company recorded Additional Paid in Capital totaling $595,000 for the
difference between the closing price of the Company's common stock on the date
the May Debenture proceeds were received and the $2 conversion price for the May
Debentures. Approximately 50% of the $595,000 total discount was amortized as
additional interest expense over the period from receipt of May Debenture
proceeds to February 28, 1999, the earliest potential conversion date for 50% of
the May Debentures. The remaining 50% of $595,000 is being amortized ratably
over the 14 months ending July 31, 1999.
The Company recorded Additional Paid in Capital totaling $325,000 for the
difference between the closing price of the Company's common stock on the date
the November Debenture proceeds were received and the $2.50 conversion price for
the November Debenture. Approximately 50% of the $325,000 total discount is
being amortized as additional interest expense over the period from receipt of
November Debenture proceeds to July 31, 1999, the earliest potential conversion
date for 50% of the November Debenture. The remaining 50% of the $325,000 is
being amortized ratably over the 14 months ending December 31, 1999.
A total of $218,849 of the discount was amortized as additional interest expense
in the first quarter of 1999. The $253,000 remaining balance of the discount is
included as a reduction of the convertible debenture balance and will be fully
accreted by December 31, 1999.
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Note 10 Segment Information
The Company currently operates in two segments, wireless cable TV services and
the resale of products through electronic mediums including cable TV and the
Internet. In 1998 the Company only had the wireless cable TV operations in Costa
Rica and Wisconsin. Information regarding the companies two business segments
and the geographic business units follows (in thousands):
<TABLE>
<CAPTION>
OPERATING DEPRECIA- AMORTI-
REVENUES INCOME TION ZATION
-------- ---------- --------- -------
<S> <C> <C> <C> <C>
First Quarter-1999
Product Sales $ 746 $ 60 $ 8 $ 0
Wireless cable:
Costa Rica 342 9 55 73
Wisconsin 75 (66) 44 7
Corporate 0 (704) 11 42
----- ------ ----- ----
Total 1,163 (701) 118 122
===== ====== ===== ====
First Quarter-1998
Wireless cable:
Costa Rica 256 (39) 32 73
Wisconsin 85 (19) 30 7
Corporate 0 (276) 6 0
----- ------ ----- ----
Total $ 341 $ (334) $ 118 $ 80
===== ====== ===== ====
</TABLE>
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MANAGEMENTS DISCUSSION & ANALYSIS OR PLAN OF OPERATION
The following discussion contains, in addition to historical
information, "forward-looking statements" with respect to the Company which
represent the Company's expectations or beliefs, including, but not limited to,
statements concerning industry performance, the Company's operations,
performance, financial condition, growth, acquisition and divestiture
strategies, margins, future ventures and expansion plans. For this purpose, any
statements contained in this report that are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as "may," "expect," "believe," "anticipate,"
"intend," "could," "estimate," or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, certain of which are beyond the Company's control and actual
results may differ but are not limited to, the Company's limited availability of
cash and working capital; operating losses and accumulated deficit; limited
operating history; dependence on key members of its management; ability to gain
market acceptance and market share; ability to manage growth; Internet security
risks; uncertainty relating to the evolution of the Internet as a medium for
commerce; dependence on third party content providers; dependence on a
continuing subscriber base and license rights; risks of international
operations; Year 2000 problems; and other factors discussed in the Company's
filings with the Securities and Exchange Commission.
INTRODUCTION
The Company was organized as a Florida corporation on May 7, 1993 under
the name Tele Consulting Corp. and changed its name to Tel-Com Wireless Cable TV
Corporation on February 14, 1994. On March 17, 1999, the Company changed its
name to 5th Avenue Channel Corp.
The Company is focusing its efforts on implementing a business plan
intended to define its business strategy with a view towards establishing
profitable operations. Such business plan includes the establishment of the
Company's Internet site, offering business e-commerce solutions and the
continuation of the development efforts for the Company's television channel.
WEBSITE, E-COMMERCE AND TELEVISION OPERATIONS
WEBSITE. The Company developed, operates and markets
5thAvenueChannel.com, a website offering financial and other information as well
as consumer products. The website was launched in December 1998 in its initial
version. A revised version was launched in March 1999 with sections devoted to
products, personal success and motivational information, financial
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resources, and links to other sites. In April 1999, the website launched its
auction section, with collectible items in a number of categories including
automobiles, antique furniture, antique bicycles, and clocks. The Company plans
to add additional items.
The Company is designing its website to be a comprehensive source for
financial, success and entrepreneurship and to market high quality information,
services and products to its users. To achieve this objective, the Company has
negotiated a number of key agreements. The Company will also market, through
retail outlets, wholesalers, direct response, direct mail, mass merchants,
catalogues, Internet e-commerce and television, a wide variety of products from
manufacturers around the world.
The Company has signed an agreement with Zacks Investment Research
("Zacks"), a major supplier of financial information to the investment community
and various websites including those of Microsoft Investor, Yahoo, America
On-Line, Geo-Cities, Broadcast.com and others. The agreement provides for Zacks
to supply its complete package of financial information to 5thAvenueChannel.com.
The information is provided in a 24-hour per day data stream which is being
incorporated into the Company's design format for display on
5thAvenueChannel.com. The Company's website will also integrate other financial
information and services. The agreement with Zacks also includes the granting of
exclusive worldwide rights by Zacks to the Company for the utilization of Zacks'
information on television and for the use of the Zacks' name on television
including the creation of a co-branded television channel with the Company.
The Company also signed a letter of intent with KeyTrade, Inc.
("KeyTrade"), which operates KeyTrade Online, a privately held new online
brokerage service that is expected to launch by June 1, 1999, for KeyTrade to be
the online brokerage house featured on 5thAvenueChannel.com. The Company
believes that the addition of KeyTrade will further strengthen the financial
online services offered by 5thAvenueChannel.com. The Company's transaction with
KeyTrade is subject to negotiation and execution of a definitive agreement.
The Company has also entered into an agreement with Nightingale-Conant
Corporation, a large supplier of success and motivation books and tapes. The
Company has added Nightingale-Conant's products to its 5thAvenueChannel.com
product offerings and is developing a variety of informational programs
including online multi-cast seminars, chats, and excerpts from Nightingale
authors. Such programming will be on the Company's website and on the upcoming
5th Avenue television channel.
E-COMMERCE SOLUTIONS. The Company has established a
business-to-business division that offers product-based e-commerce solutions to
other web businesses and television networks. The Company has recently commenced
commercial
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sales to other websites and in some cases will be developing and/or managing
entire web businesses for other entities.
The Company has also entered into an agreement with United States Check
Company, Inc., a provider of transaction document image processing and
authentication technology to the financial services industry. The agreement
grants to the Company certain exclusive rights to a patent pending system for
allowing a customer to purchase, through charging to a credit card, a negotiable
buying certificate on the Internet and to either print it out directly or to
e-mail it to a gift recipient for printing. In contrast to coupon programs,
these buying certificates are not discounts off of products but are identical to
gift certificates purchased in a store. The certificates will be redeemable at a
variety of retail and direct response outlets throughout the United States as
well as through 5thAvenueChannel.com and other websites that sign up for the
program.
5TH AVENUE TELEVISION CHANNEL. The Company is developing its 5th Avenue
television channel. Programming will include co-branded Zacks/5thAvenueChannel
financial programming, co-branded 5th Avenue/Nightingale Conant success,
motivation and entrepreneurship programming, and lifestyle product programming.
Initial programming has already been filmed with Ivana Trump as host, and is
currently being edited. The Company is currently exploring and negotiating
production and distribution agreements for the television channel.
WIRELESS CABLE TELEVISION OPERATIONS. The Company is also a developer,
owner and operator of wireless cable television systems in Costa Rica and
LaCrosse, Wisconsin. Wireless cable television is provided to subscribers by
transmitting designated frequencies over the air to a small receiving antenna at
each subscriber's location. The Company provides television and related cable
services for multiple dwelling units, commercial locations and single family
residences. Since wireless cable systems do not require an extensive network of
coaxial cable and amplifiers, their capital cost per installed subscriber is
significantly less than that for hard-wire cable systems. In addition, operating
costs of wireless cable systems are generally lower than those of comparable
hard-wire cable systems due to lower network maintenance. As a result of lower
capital and operating costs, the Company is generally able to charge less for
its standard cable packages than the amount charged for comparable service
provided by its hard-wire cable competition.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 ("Q1-99") AS COMPARED TO THREE MONTHS ENDED
MARCH 31, 1998 ("Q1-98').
REVENUES. The Company had revenues of approximately $1,163,000 for
Q1-99 compared to approximately $342,000 in Q1-98. Approximately 64% of the
revenues
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were from sales of products and 36% from providing wireless cable TV services.
All of the Company's revenues in Q1-98 were generated from the wireless cable
television operations. The $821,000 increase in revenues is primarily due to the
purchase of the assets of International Broadcast Consultants of America, Inc.
("IBC") and product sales through electronic mediums. Wireless cable accounted
for $76,000 of the increase as Costa Rican revenues increased 33% from 256,000
to $342,000 from an increased subscriber base. Revenues from the Lacrosse system
declined $10,000 in Q1-99 from $ 85,000 in Q1-98 to $75,000 due to a decline in
the subscriber base.
DIRECT COSTS. Direct costs of revenues for Q1-99 increased
approximately $510,000 to approximately $558,000 compared to approximately
$48,000 in the Q1-98 period, due primarily to the sale of products. The gross
profit margin varies on each product and on some products the Company earns a
commission on the sale and only the commission is included in revenues with no
related direct cost of sales. The direct costs of the wireless cable operations
vary in direct proportion to the revenue change as programming costs are
generally paid per subscriber. The Company expects its gross margin to increase
significantly as the Company offers more products and services over electronic
mediums.
OPERATING EXPENSES. Operating expenses for Q1-99 included significant
costs of designing products and services to be offered on the 5th Avenue Channel
television channel and website. All promotional costs to establish a venue to
sell products over electronic mediums are being expensed as incurred. Only
software and hardware costs to design the website and processing product orders
are being deferred and amortized over a 5-year period.
In Q1-99 a total of approximately $237,000 of costs associated with
programming for the 5th Avenue Channel television channel and the related
website were expensed in 1999 compared with approximately $66,000 in Q1-98.
Costa Rica's operating expenses as a percent of revenues declined as
its fixed operating expenses were spread over a larger subscriber base in Q1-99
compared to Q1-98. However, the significant improvement in operating results in
Costa Rica were substantially offset by the deterioration in Wisconsin's
results. The Company is taking steps to reverse the declining subscriber base
trend in Wisconsin and to continue to significantly grow the Costa Rican
subscriber base. The results in the wireless cable TV segment may improve in
future periods if these efforts are successful.
INTEREST EXPENSE. Interest expense for Q1-99 was substantially higher
than in Q1-98 because interest expense included approximately $219,000 of
debenture discount accretion related to the issuance of 12% convertible
debentures totaling $595,000 in May 1998 and $500,000 in November 1998. Interest
on the license fees payable to the FCC for the undeveloped Wisconsin licenses
totaled $22,000 in Q1-99 and the Company recorded $33,000 of interest on the 12%
convertible debentures in Q1-99. Q1-98 contained no interest for the FCC
licenses or the Convertible debentures and no
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amortization of debenture discount. Interest expense on loans from related
parties was also much higher in Q1-99 because of significant increase in loans
and notes payable to the majority shareholder subsequent to March 31, 1998.
NET LOSS. The approximately $1,008,000 net loss for Q1-99 includes
$236,000 of website and product design costs related to the 5th Avenue Channel
compared with $66,000 of similar costs in Q1-98. The Q1-99 loss also includes
approximately $219,000 of accretion of discount on the May and November 1998. An
additional approximately $253,000 of discount remains to be amortized to
interest expense in 1999.
The net loss also included an approximately $520,000 increase in cash
used in operations in Q1-99, over the approximately $96,000 used in operations
in Q1-98, was primarily due to costs of developing the 5th Avenue Channel
television channel, the 5thAvenuechannel.com website and the products and
services to be sold over these electronic mediums.
The following table lists the unusual charges that affect the comparison of
Q1-99 and Q1-98 results of operations.
Q1-99 Q1-98
------- -------
5th Avenue Channel television channel
and websiteproduct design expense 236,000 66,000
Interest on 12% Convertible debentures & FCC license fees 55,000 0
Accretion of discount on convertible debentures 219,000 0
------- -------
Total of non-comparable expenses 510,000 66,000
------- -------
With the higher number of Costa Rican subscribers in Q1-99 than in
Q1-98, the Company expects to continue the trend of improved operating results
in Costa Rica. The purchase of the assets and operations of IBC effective
January 4, 1999 is also expected to continue to have a positive effect on
operating results for the remainder of 1999.
INFLATION AND FOREIGN CURRENCY FLUCTUATION. Costa Rica continues to
experience a decline in the value of the Colon relative to the US dollar of
approximately 1% per month. The government of Costa Rica mandates minimum salary
increases on July 1 and January 1 of each year. The Company has been able to
increase its prices to cover the wage increases and the effects of the currency
decline in Costa Rica and believes that it will be
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able to continue to do so without significant effect on its subscriber base.
LIQUIDITY
SOURCE AND USE OF CASH FOR 1999. During Q1-99 the Company received
approximately $514,000 of loan proceeds, net of repayments, from the majority
shareholder, Melvin Rosen. Approximately $202,000 of the cash was used to
purchase equipment primarily for the website and related software the remainder
combined with approximately $178,000 of the cash on hand at the beginning of the
year was used to fund operating losses.
Non-cash recurring items are the following: depreciation, amortization,
accretion of the discount of debentures. Net cash used in operating activities
was $616,248 for Q1-99.
CONVERSION OF DEBT TO EQUITY. In January 1999, Company's President and
holder of the Company's $2,366,000 convertible debenture converted half of said
debenture into 2,366,000 shares of the Company's common stock. The balance of
the debenture was converted into an additional 2,366,000 shares of the Company's
common stock in March 1999. The conversion had the effect of reducing the net
loss per share by $.10 from $.21 per share to $.11 per share.
NON CASH RECURRING ITEMS are as follows: Depreciation, amortization,
accession of the discount of debentures. Net cash used in operating activities
($616,248).
COMPLETION OF ACQUISITION OF THE FIFTH AVENUE CHANNEL, INC. In March
1999, the Company completed its acquisition of all 100 of the outstanding shares
of common stock of The Fifth Avenue Channel, Inc. ("Fifth Avenue") as follows:
25 shares from IBC Partners, a Florida general partnership of which Eric
Lefkowitz, a director of the Company, is a partner, 65 shares from Mel Rosen
("Rosen"), the President, Chief Executive Officer and a director of the Company,
and 10 shares from Ivana Trump ("Ms. Trump") (IBC Partners, Rosen and Ms. Trump
are hereinafter sometimes collectively referred to as the "Fifth Avenue
Shareholders"). In exchange, the Company issued an aggregate of 335,000 shares
of its common stock, proportionately to the Fifth Avenue Shareholders, based on
their relative share ownership in Fifth Avenue, and agreed to issue an
additional aggregate of 665,000 additional shares of its common stock to the
Fifth Avenue Shareholders, also based on their relative share ownership in Fifth
Avenue, as follows: 332,500 shares if Fifth Avenue achieves gross revenues in
excess of $10,000,000 for any calendar quarter and the remaining 332,500 shares
if Fifth Avenue achieves either gross revenues in excess of $25,000,000 for any
calendar quarter or net income in excess of $1,000,000 for any calendar quarter.
Additionally, the Company and Ms. Trump finalized an agreement (the
"Consulting Agreement") dated March 17, 1999 but effective as of November 5,
1998, pursuant to which Ms. Trump will act as the hostess of The 5th Avenue
Channel television channel and of 5thAvenueChannel.com, and will provide certain
other consulting and promotional services to the Company in exchange for a
base fee of $10,000 per month, additional fees for personal appearances and
three-year options to purchase an aggregate of 700,000 shares of the Company's
common stock as follows: 200,000
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shares at an exercise price of $5.00 per share; 200,000 shares at an exercise
price of $8.00 per share; 200,000 shares at an exercise price of $12.00 per
share; and 100,000 shares at an exercise price of $15.00 per share. The
Consulting Agreement has an initial term expiring on December 31, 2001 and is
automatically renewable for successive additional one-year terms unless either
party provides written notice of non-renewal to the other party not less than
sixty days prior to the expiration of the then current term.
ACQUISITION OF INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC.
Effective January 4, 1999 the Company entered into an agreement in principle to
purchase 100% of the assets and operations of International Broadcast
Consultants of America, Inc. ("IBC") owned by Messrs. Lefkowitz and Rothstein.
Under the terms of the agreement, the Company agreed to issue 300,000 shares of
its Common Stock and pay $450,000 in cash to IBC. IBC is active in the
electronic media field, specializing in new product marketing on cable TV. IBC's
products are aired to TV viewers in over 43 countries in their respective
languages and in 38 states in the U.S. The transaction was completed on May 12,
1999 pursuant to a definitive Asset Purchase Agreement dated as of such date but
effective as of January 4, 1999. See Items 2 and 5 of this report.
WORKING CAPITAL DEFICIT/ADDITIONAL DEBT OR EQUITY FINANCING REQUIRED.
The accompanying Consolidated Balance Sheet reflects current liabilities of $
3,9512,000 and current assets of $1,319,000 resulting in a working capital
deficit of $2,632,000 Approximately $2,200,000 of this working capital deficit
consists of amounts owed to Melvin Rosen, the President, CEO and majority
shareholder. Although the Costa Rican operations generate positive cash flow,
the cash flow does not cover the corporate overhead or the costs associated with
developing the products and services of the 5th Avenue Channel website and
television channel. Increasing the subscriber base requires additional capital
because the incremental equipment and labor installation costs per subscriber
exceed the installation fees charged the subscriber. It generally takes between
6 months and a year for the gross profit from each new subscriber to cover the
incremental costs of adding the subscriber.
The Company intends to substantially increase its current subscriber
base in the Costa Rican system and to moderately grow the LaCrosse system.
The Company believes it needs to raise additional capital in 1999 to
fund its corporate overhead and develop the 5th Avenue Channel website and
television channel. The Company is exploring various sources of additional
financing and has a commitment from Melvin Rosen, the majority shareholder, to
fund up to $2,000,000 if other sources of financing do not materialize.
YEAR 2000 ISSUES. Many existing computer programs use only two digits
to identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer
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applications could fail or create erroneous results by or at the Year 2000 (the
"Year 2000 Issue"). The accounting software used by the Company is Year 2000
compliant (meaning it recognizes dates in the Year 2000 and beyond) at most
subsidiary operations. The Company does not anticipate a material financial
impact as a result of the Year 2000 Issue nor does it anticipate any material
financial expenditure to remedy the Year 2000 date change within its own
software. The Company's expenditures to date on investigating and remedying Year
2000 issues has been insignificant.
The Company has nearly completed an internal audit of its computer
systems and software to determine what issues, if any, exist. Upon completion of
its internal audit, the Company will evaluate the full scope of issues, related
costs, and available remedies to insure the Company's systems continue to meet
its internal needs. Anticipated costs for system and software modifications will
be expensed as incurred.
However, the Company has no control over Year 2000 compliance by
vendors of the Company. If the Company's vendors are not in Year 2000
compliance, this could have a material adverse effect to the Company. The
Company has made inquiry to all of its major customers and suppliers in an
attempt to assess the Year 2000 readiness of its major suppliers. The results of
this inquiry have not revealed any issues that the Company believes can have a
material adverse effect on the financial condition of the Company.
RECENT ACCOUNTING PRONOUNCEMENTS. The Company does not expect SFAS 130,
which establishes standards for reporting and displaying comprehensive income,
its components and accumulated balances to have any effect on the Company's
financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company has
adopted the provisions of SFAS No. 131.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments The Company has not entered into derivatives contracts to hedge
existing risks or for speculative purposes. Accordingly, the Company does not
expect adoption of the new standard on January 1, 2000 to affect its financial
statements.
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
AMENDMENT OF ARTICLES OF INCORPORATION TO CHANGE NAME AND INCREASE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK. On March 18, 1999, the Company
filed Articles of Amendment to its Articles of Incorporation with the Florida
Department of State to increase the number of authorized shares of its Common
Stock from 10,000,000 to 50,000,000. 4,732,000 shares of the additional
authorized but unissued shares of Common Stock were issued to Mr. Melvin Rosen
in connection with his conversion of the Company's convertible debenture to
equity, and the remainder of the additional authorized but unissued shares may
be issued by the Company for any proper corporate purpose, including
acquisitions, raising of additional equity capital, stock dividends or upon the
exercise of stock options. The Company's shareholders do not have preemptive
rights to subscribe for or purchase any of the additional authorized shares of
Common Stock. The future issuance of additional shares of Common Stock made
possible through the increase in the number of authorized shares on other than a
pro rata basis may dilute the ownership and proportionate voting rights of the
Company's current shareholders. The amendment also could make it more difficult
to acquire control of the Company and thereby discourage attempts to do so, even
though the Company's shareholders may deem such an acquisition desirable. To the
extent that it impedes any such attempts, the amendment may serve to perpetuate
the Company's current management.
SHARES OF COMMON STOCK ISSUED IN CONNECTION WITH THE ACQUISITION OF 5TH
AVENUE CHANNEL, INC. Pursuant to the Share Exchange Agreement dated February 28,
1999 and effective as of December 10, 1998 (which agreement was amended on March
17, 1999), the Company acquired all of the outstanding shares of The Fifth
Avenue Channel, Inc. ("Fifth Avenue") and in exchange issued an aggregate of
335,000 shares of its common stock, proportionately to the shareholders of Fifth
Avenue, based on their relative share ownership in said entity. The Company
further agreed to issue an additional aggregate of 665,000 additional shares of
its common stock to them, also based on their relative share ownership as
follows: 332,500 shares if the Company achieves gross revenues in excess of
$10,000,000 for any calendar quarter and the remaining 332,500 shares if the
Company achieves either gross revenues in excess of $25,000,000 for any calendar
quarter or net income in excess of $1,000,000 for any calendar quarter.
Additionally, pursuant to the Consulting Agreement by and between the
Company and Ms. Ivana Trump dated March 17, 1999 but effective as of November 5,
1998, the Company agreed to grant to Ms. Trump three-year options to purchase an
aggregate of 700,000 shares of the Company's common stock as follows: 200,000
shares at an exercise price of $5.00 per share; 200,000 shares at an exercise
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price of $8.00 per share; 200,000 shares at an exercise price of $12.00 per
share; and 100,000 shares at an exercise price of $15.00 per share.
SHARES OF COMMON STOCK ISSUED IN CONNECTION WITH THE ACQUISITION OF
INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC. ("IBC"). Pursuant to the
Asset Purchase Agreement by and among the Company, IBC and IBC's shareholders,
effective January 4, 1999 but executed on May 12, 1999, the Company purchased
100% of the assets and operations of IBC, and as part of the purchase price
therefore, issued 300,000 shares of its common stock to IBC.
CONVERSION OF DEBT TO EQUITY. The Company issued an aggregate of
4,732,000 shares of its common stock to Mr. Melvin Rosen in the quarterly period
ended March 31, 1999 in connection with Mr. Rosen's conversion of the Company's
secured convertible debenture to equity.
The foregoing securities were all issued without registration under the
Securities Act of 1933 as amended by reason of the exemption from registration
afforded by the provisions of Section 4(2) thereof, as transactions by an issuer
not involving a public offering, each recipient of securities having delivered
appropriate investment representations to the Company with respect thereto and
having consented to the imposition of restrictive legends upon the certificates
evidencing such securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its most recent annual meeting of shareholders on
February 12, 1999 and submitted the following matters to the record holders of
its then 6,400,315 outstanding shares of common stock for approval: (1) election
of directors for the ensuing year, (2) amendment of the Company's Articles of
Incorporation to increase the number of authorized shares of the Company's
common stock from 10,000,000 shares to 50,000,000 shares, (3) amendment of the
Company's Articles of Incorporation to change the Company's name to "5th Avenue
Channel Corp.," and (4) ratification of the selection of BDO Seidman LLP as the
Company's independent public accountants for the year ending December 31, 1998.
The Company subsequently changed its independent public accountants. See Item
6(b)1 of this report. All of these matters were approved by a majority of the
Company's shareholders present in person or by proxy and entitled to vote
thereon. Messrs. Melvin Rosen, Samuel Simkin, Eric Lefkowitz and Dennis Devlin
were elected directors of the Company. The following is a tabulation of votes
cast in person at the meeting or by proxy solicitation: (see Item 6-B1 of this
report Form 8K).
PROPOSAL VOTES FOR VOTES AGAINST ABSTAINED
- -------- --------- ------------- ---------
Election of Directors:
Melvin Rosen 5,125,614 2,200 ---
Samuel Simkin 5,125,614 2,200 ---
Eric Lefkowitz 5,126,614 1,200 ---
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Dennis Devlin 5,126,614 1,200 ---
Amendment of Articles of 5,055,840 57,504 14,470
Incorporation to increase
authorized shares
Amendment to Articles of 5,122,364 4,850 600
Incorporation to change name
Ratification of selection of 5,112,919 4,228 10,667
accountants
ITEM 5. OTHER INFORMATION
ACQUISITION OF ASSETS OF INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC.
("IBC"). On May 12, 1999, the Company completed its acquisition of all of the
assets of IBC pursuant to an Asset Purchase Agreement executed as of such date,
but effective as of January 4, 1999. Under the terms of the Asset Purchase
Agreement, the Company paid $450,000 in cash to IBC and agreed to issue 300,000
shares of its Common Stock to IBC in exchange for the purchased assets. IBC is a
Florida corporation owned and operated by Messrs. Eric Lefkowitz, a director and
an executive Vice President of the Company, and Ivan Rothstein, an Executive
Vice President of the Company. IBC is active in the electronic media field,
specializing in new product marketing on cable television.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
2.1 Share Exchange Agreement by and among the Registrant, IBC
Partners, Melvin Rosen and Ivana Trump dated February 28, 1999
but effective as of December 10, 1998 (1)
2.2 Amendment to Share Exchange Agreement by and among the
Registrant, IBC Partners, Melvin Rosen and Ivana Trump dated
March 8, 1999. (1)
2.3 Asset Purchase Agreement by and among the Registrant,
International Broadcast Consultants of America, Inc., Eric
Lefkowitz and Ivan Rothstein, dated May 12, 1999 but effective
as of January 4, 1999.*
3.1 Amended and Restated Articles of Incorporation.(2)
3.2 By-Laws(3)
10.1 Debt Restructuring Agreement (4)
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10.2 Secured Convertible Debenture(4)
10.3 Agreement to Convert the Secured Convertible
Debenture(5)
10.4 Consulting Agreement between the Registrant, Ivana Trump and
Melvin Rosen, effective November 5, 1998 dated February 28,
1999 (2)
27.1 Financial Data Schedule (for Commission use only)*
99.1 Financial Statements of Business Acquired.
Financial Statements of International Broadcast Consultants of
America, Inc. are not included in this Report, but will be
filed by amendment not later than 60 days from the date
hereof, in accordance with Item 7 of Form 8-K.
99.2 Financial Statements of Business Acquired.
Pro forma financial statements giving effect to the
acquisition of certain assets of International Broadcast
Consultants of America, Inc. are not included in this Report,
but will be filed by amendment not later than 60 days from the
date hereof, in accordance with Item 7 of Form 8-K.
- -----------------
*Filed herewith.
(1) Incorporated by reference to the Registrant's Current Report on Form
8-K dated March 25, 1999.
(2) Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998, filed on April 23,
1999.
(3) Incorporated by reference to the Registrant's Registration Statement on
Form S-18 (SEC File No. 33-41164), declared effective September 24,
1991.
(4) Incorporated by reference to the Registrant's Current Report on Form
8-K, dated June 27, 1997.
(5) Incorporated by reference to the Registrant's Post Effective Amendment
No. 2 to Form SB-2 (SEC File No. 33-88788-A) declared effective January
21, 1997.
(b) REPORTS ON FORM 8-K:
1. Current Report on Form 8-K dated February 25, 1999, reporting a
change in the Registrant's principal accountants.
2. Current Report on Form 8-K dated March 25, 1999, reporting the
completion of the acquisition of The Fifth Avenue Channel, Inc.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
5TH AVENUE CHANNEL CORP.
By: /s/ MELVIN ROSEN
---------------------------------------------
Melvin Rosen, President and Chief
Executive Officer (Principal Executive
Officer)
By: /s/ SAMUEL SIMKIN
---------------------------------------------
Samuel Simkin
(Principal Financial and Accounting Officer)
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<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.3 Asset Purchase Agreement by and among the Registrant,
International Broadcast Consultants of America, Inc., Eric
Lefkowitz and Ivan Rothstein, dated May 12, 1999 but effective
as of January 4, 1999.*
27.1 Financial Data Schedule (for Commission use only)*
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("the Agreement"), dated as of May 12,
1999 (the "Closing Date") and effective as of January 4, 1999 (the "Effective
Date"), is made by and between 5th Avenue Channel Corp., a Florida corporation
("5th Avenue"), and International Broadcast Consultants of America, Inc., a
Florida corporation ("IBC"), and Eric Lefkowitz ("Lefkowitz") and Ivan Rothstein
("Rothstein"), the shareholders of IBC.
WITNESSETH:
WHEREAS, IBC is engaged in the business of merchandising a wide variety
of products through television, mass markets, direct purchase, and other
marketing venues, as well as representing manufacturers and their products; and
WHEREAS, 5th Avenue desires to purchase substantially all of the assets
and business operations of IBC (collectively, the "Assets");
WHEREAS, IBC and its sole shareholders, Lefkowitz and Rothstein, desire
to sell the Assets to 5th Avenue; and
WHEREAS, the parties have negotiated a purchase and sale of the Assets,
upon terms and conditions provided herein.
NOW, THEREFORE, in consideration of the above recitals, the covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE OF ASSETS. Subject to the terms and conditions set forth
herein, 5th Avenue shall purchase, and IBC shall sell, the Assets, as listed on
SCHEDULE 1 hereto, in exchange for 300,000 shares of 5th Avenue common stock,
par value $0.001 per share ("5th Avenue Shares"), and $450,000 in cash, to be
paid by 5th Avenue to IBC as follows:
(a) 300,000 5th Avenue Shares shall be issued by 5th Avenue to
IBC at Closing, with the stock certificates representing such Shares to be
delivered to IBC within ten (10) business days following the Closing, and
thereafter such 5th Avenue Shares shall be included in the 5th Avenue
registration statement on Form SB-2, which is currently on file with the U. S.
Securities and Exchange Commission, File No. 33-41459, but not yet effective, or
in a newly filed registration statement substituting such pending registration
statement; and
(b) $450,000 in cash payable by 5th Avenue to IBC pursuant to
the terms of a Non-Negotiable Promissory Note (the "Note") dated as of the
Closing Date(a copy of which Note is attached as Exhibit "A" hereto), which Note
shall be guaranteed by Melvin Rosen, President and CEO of 5th Avenue pursuant to
a form of Guaranty attached as Exhibit "B" hereto.
The sale, transfer, conveyance and assignment of the Assets by
IBC to 5th Avenue shall be effected on the Closing Date by IBC's execution and
delivery to 5th Avenue of an instrument of transfer in the form attached hereto
as EXHIBIT "C" (the "Bill of Sale"). At the Closing, all of the Assets shall be
transferred by IBC to 5th Avenue free and clear of any and all liens,
encumbrances, mortgages, security interests, pledges, claims, equities and other
restrictions or charges of any kind or nature whatsoever and 5th Avenue shall be
the sole owner of all right, title and interest in and to the Assets.
Except as otherwise agreed in writing by 5th Avenue and IBC,
5th Avenue shall not assume or otherwise be responsible at any time for any
liability, obligation, debt or commitment of IBC,
<PAGE>
Lefkowitz or Rothstein, whether absolute or contingent, accrued or unaccrued,
asserted or unasserted, or otherwise, including but not limited to any
liabilities, obligations, debts or commitments of IBC, Lefkowitz or Rothstein
(i) incident to, arising out of or incurred with respect to this Agreement and
the transactions contemplated hereby (including any and all sales, use, income
or other taxes arising out of the transactions contemplated hereby) or (ii)
which otherwise arise or are asserted or incurred by reason of events, acts or
transactions occurring, or the operation of IBC's business prior to, on or after
the Effective Date.
2. REPRESENTATIONS AND WARRANTIES OF 5TH AVENUE. 5th Avenue hereby
makes the following representations and warranties to IBC, subject to and except
as otherwise set forth in 5th Avenue's Annual Report on Form 10-KSB for the year
ended December 31, 1997 (the "5th Avenue Form 10-KSB") or in the Schedules
referred to herein and incorporated into this Agreement by this reference:
(a) CORPORATE ORGANIZATION. 5th Avenue is duly organized,
validly existing and in good standing under the laws of the State of Florida and
has full corporate power, authority and legal right to own its properties and to
conduct the businesses in which it is now engaged. 5th Avenue is duly licensed
or qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction where the ownership or lease of its assets or the
operation of its businesses requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, operations, property or financial or other condition of 5th Avenue
taken as a whole. All of the capital stock of the subsidiaries of 5th Avenue is
owned of record and beneficially by 5th Avenue.
(b) AUTHORITY. 5th Avenue has the corporate power and
authority to execute and deliver this Agreement and to perform all of its
covenants and agreements hereunder. The execution and delivery of this Agreement
by 5th Avenue, the performance by 5th Avenue of its covenants and agreements
hereunder and the consummation by 5th Avenue of the transactions contemplated
hereby have been duly authorized by all necessary corporate action.
(c) ENFORCEABILITY. This Agreement has been duly executed and
delivered and constitutes the valid and legally binding obligation of 5th
Avenue, enforceable against 5th Avenue in accordance with its terms except as
such enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally or by the
principles governing the availability of specific performance, injunctive relief
and other equitable remedies (regardless of whether such enforceability is
considered in equity or at law), including requirements of reasonableness and
good faith in the exercise of rights and remedies thereunder; (ii) applicable
laws and court decisions which may limit or render unenforceable certain terms
and provisions contained therein, but which do not substantially interfere with
the practical realization of the benefits thereof, except for the economic
consequences of any procedural delay which may be imposed by, relate to or
result from such laws and court decisions; and (iii) the limitations on the
enforceability of the securities indemnification provisions set forth herein by
reason of matters of public policy.
(d) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement by 5th Avenue, nor the consummation of the transactions
contemplated hereby, nor the performance by 5th Avenue of its covenants and
agreements hereunder (i) violates any provision of the Articles of Incorporation
or By-Laws of 5th Avenue; (ii) violates any existing law, statute, ordinance,
regulation, or any order, judgment or decree of any court or governmental agency
to which 5th Avenue is a party or by which any of its assets is bound; or (iii)
conflicts with or will result in any breach of any of the terms of or constitute
a default under or result in the termination of or the creation of any lien
pursuant to the terms of any indenture, mortgage, real property lease,
securities purchase agreement, credit or loan agreement or other material
agreement to which 5th Avenue is a party or by which 5th Avenue or any of its
assets is
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bound, to the extent such violation thereof, conflict therewith, breach thereof,
default thereunder or termination thereof would have a material adverse effect.
(e) CAPITALIZATION. As of the Closing Date, the authorized
capital stock of 5th Avenue consists of (i) 5,000,000 shares of preferred stock,
$.001 par value per share (the "5th Avenue Preferred Stock"), of which no shares
are issued and outstanding; and (ii) 50,000,000 shares of 5th Avenue common
stock, $.001 par value per share (the "5th Avenue Common Stock"), of which,
currently there are approximately 9,000,000 shares issued and outstanding.
SCHEDULE 2(E) attached hereto sets forth a list of all options, warrants or
other securities exercisable for, convertible into or exchangeable for 5th
Avenue Preferred Stock or 5th Avenue Common Stock or other subscription,
commitments or agreements for 5th Avenue to issue 5th Avenue Preferred Stock or
5th Avenue Common Stock.
(f) APPROVALS. Except as may be required under federal and
state securities laws (which have been or, in the case of compliance required on
a post-sale basis, will be complied with), the execution, delivery and
performance of this Agreement by 5th Avenue does not require (i) the consent,
waiver, approval, license or authorization of or any filing with any person or
any governmental authority; or (ii) the approval or authorization of the
shareholders of 5th Avenue.
(g) LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 2(G),
attached hereto, there are no (i) actions, suits, claims, investigations or
legal, or administrative or arbitration proceedings pending or, to the best
knowledge of 5th Avenue, threatened against or affecting 5th Avenue, whether at
law or in equity, or before or by any governmental authority or (ii) judgments,
decrees, injunctions or orders of any governmental authority or arbitrator
against 5th Avenue which, in any case, could have a material adverse effect on
5th Avenue's business, operations, property or financial condition.
(h) FINANCIAL STATEMENTS. The audited consolidated financial
statements of 5th Avenue as of December 31, 1998 included in the 5th Avenue Form
10-KSB (the "5th Avenue Financial Statements") were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may have been indicated in the notes thereto or
to the extent footnotes thereto have been omitted) and fairly present (subject
to normal audit adjustments) the financial position of 5th Avenue at the dates
thereof and the consolidated results of the operations and statement of changes
in financial position for the periods then ended.
(i) ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Schedule 2 (i) or in the 5th Avenue Form 10-KSB or as incurred in the ordinary
course of business subsequent to December 31, 1998, as of the date hereof (i) to
the best of its knowledge, 5th Avenue has no material liability of any nature
(matured or unmatured, fixed or contingent) that was not provided for or
disclosed therein, and (ii) to the best knowledge of 5th Avenue, all liability
reserves established by 5th Avenue set forth in the 5th Avenue Financial
Statements were adequate in all material respects for the purposes indicated
therein.
(j) NO CHANGE. Since December 31, 1998 there has not been (i)
any material adverse change in the condition (financial or otherwise),
operations, results of operations, assets, liabilities, business or prospects of
5th Avenue taken as a whole; (ii) any material liability or obligation
(contingent or otherwise) incurred by 5th Avenue, other than current liabilities
(or obligations) or capital leases incurred in the ordinary of business; (iii)
any asset or property of 5th Avenue made subject to a lien of any kind, except
(A) liens for taxes not yet due or which are being contested in good faith and
by appropriate proceedings, provided that adequate reserves with respect thereto
are maintained on 5th Avenue's books in accordance with generally accepted
principles; (B) landlords', carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like liens arising in the ordinary course of
business, provided that payments for the related products or services are not
overdue for a period of more than 60 days or are being contested in good faith
and by appropriate proceedings; (C) pledges or
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deposits in connection with worker's compensation, unemployment insurance and
other social security legislation; (D) deposits to secure the performance of
contracts, bids, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature; (E) easements, rights-of-way,
restrictions and other similar encumbrances incurred in the ordinary course of
business; and (F) liens which, in the aggregate, are not material in amount, and
which do not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of 5th Avenue's business;
(iv) any waiver of any material valuable right of 5th Avenue, or the
cancellation of any material debt or claim held by 5th Avenue; (v) any payment
of dividends on, or other distributions with respect to, or any direct or
indirect redemption or acquisition of, any shares of 5th Avenue Common Stock, or
any agreement or commitment therefor; (vi) any mortgage, pledge, sale,
assignment or transfer of any tangible or intangible assets of 5th Avenue,
except, with respect to tangible assets, in the ordinary course of business;
(vii) any loan by 5th Avenue to any officer, director, employee or shareholder
of 5th Avenue, or any agreement or commitment therefor; (viii) any material
damage, destruction or loss (whether or not covered by insurance) which does or
may adversely affect the condition (financial or otherwise), operations, results
of assets, property, business or prospects of 5th Avenue; or (ix) any change in
the accounting methods or practices followed by 5th Avenue.
(k) TAXES. Except as indicated in SCHEDULE 2(K) attached
hereto, 5th Avenue has accurately prepared and timely filed, or has had
accurately prepared and timely filed on its behalf, or has filed appropriate
extensions of time to file, all tax returns which, to its knowledge, are
required to be filed by it, and has paid all taxes shown to be due and payable
on said returns or on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any of its property by
any nation or government, any state or other political subdivision thereof, and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (other than those the
amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
generally accepted accounting principles have been provided on the books); and,
to its knowledge, no tax liens have been filed nor claims being asserted with
respect to any such taxes, fees or other charges
(l) DISCLOSURE. The representations or warranties made by 5th
Avenue in this Agreement or in any other document or certificate furnished in
connection herewith did not contain at the time made or, if set forth herein, do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements herein or therein, in light of
the circumstances under which they are made, not misleading in any material
respect. There is no fact known to 5th Avenue that has a material adverse effect
or, other than general economic conditions in the industry in which 5th Avenue
operates, that 5th Avenue reasonably believes will in the future not have a
material adverse effect, which has not been set forth in this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF IBC, LEFKOWITZ AND ROTHSTEIN. IBC,
Lefkowitz and Rothstein, jointly and severally, hereby make the following
representations and warranties to 5th Avenue, subject to and except as otherwise
disclosed in the attached schedules:
(a) RECEIPT OF CORPORATE INFORMATION. All requested documents,
records and books pertaining to 5th Avenue have been delivered to IBC, Lefkowitz
and Rothstein, and all of IBC's, Lefkowitz's and Rothstein's questions and
requests for information as to 5th Avenue have been answered to their
satisfaction.
(b) RISKS. Each of IBC, Lefkowitz and Rothstein acknowledge
and understand that the acquisition of the 5th Avenue Shares involves a high
degree of risk in that (i) they may not be able to liquidate the investment in
the event of an emergency; (ii) transferability of such shares is extremely
limited; and (iii) in the event of a disposition of such shares, IBC, Lefkowitz
and Rothstein could sustain
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a complete loss of their entire investment. IBC, Lefkowitz and Rothstein are
each sufficiently experienced in financial and business matters to be capable of
evaluating the merits and risks of an investment in 5th Avenue; IBC, Lefkowitz
and Rothstein have evaluated such merits and risks, including risks particular
to their situations; and IBC, Lefkowitz and Rothstein have determined that their
investment in 5th Avenue is suitable for them.
(c) INVESTMENT INTENT. The 5th Avenue Shares are being
acquired by IBC, Lefkowitz and Rothstein for their own account with no present
intention of distributing the 5th Avenue Shares to others, except, in the case
of IBC, for the expected distribution of such shares to Lefkowitz and Rothstein,
as the sole shareholders of IBC, in connection with the expected dissolution and
liquidation of IBC within a reasonably short time after the Closing. Neither
IBC, nor Lefkowitz nor Rothstein has any contract, undertaking, agreement or
arrangement with any person to sell, transfer or otherwise distribute to any
person or to have any person sell, transfer or otherwise distribute the 5th
Avenue Shares. Neither IBC, nor Lefkowitz nor Rothstein are presently engaged,
nor plan to engage within the presently foreseeable future, in any discussion
with any person regarding such a sale, transfer or other distribution of the 5th
Avenue Shares or any interest therein.
(d) COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS. IBC,
Lefkowitz and Rothstein understand that the 5th Avenue Shares have not been
registered under the Securities Act. IBC, Lefkowitz and Rothstein understand
that they may have to hold the 5th Avenue Shares indefinitely unless and until
the sale or other transfer thereof is subsequently registered under the
Securities Act or an exemption from such registration is available. IBC,
Lefkowitz and Rothstein understand that their right to transfer the 5th Avenue
Shares will be subject to certain restrictions, which include restrictions
against transfer under the Securities Act and applicable state securities laws.
In addition to such restrictions, IBC, Lefkowitz and Rothstein realize that they
may not be able to sell or dispose of the 5th Avenue Shares as there may be no
public or other market for the 5th Avenue Shares. IBC and its shareholders
understand that certificates evidencing the 5th Avenue Shares shall bear a
legend substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY APPLICABLE STATE LAW. THEY MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED UNLESS REGISTERED UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE LAW OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
(e) CORPORATE ORGANIZATION. IBC: (i) is duly organized,
validly existing and in good standing under the laws of the State of Florida;
(ii) has full corporate power, authority and legal right to own its properties
and to conduct its business in which it is now engaged; (iii) is duly licensed
or qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction where the ownership or lease of its assets or the
operation of its business requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on its business,
operations, properties or financial or other condition taken as a whole; and
(iv) does not have any subsidiaries and does not own any equity interest in any
other business entity. True, correct and complete copies of IBC's Articles of
Incorporation and Bylaws as presently in effect have been delivered by IBC to
5th Avenue. As of the Closing Date, 100% of the issued and outstanding shares of
IBC's capital stock are held by Lefkowitz and Rothstein in equal 50% portions.
(f) CORPORATE RECORD BOOKS. The corporate minute books of IBC,
to the full extent they exist, have been made available to 5th Avenue. To the
extent such records are not available or in existence, Lefkowitz and Rothstein,
constitute the holders of all of the outstanding shares of voting
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stock of IBC under IBC's Articles of Incorporation, Bylaws, as well as under
applicable law, to ratify, adopt and approve same, and have ratified, adopted
and approved the transaction described herein and all prior actions of the
officers, Board of Directors and shareholders of IBC.
(g) AUTHORITY. IBC and each of Lefkowitz and Rothstein have
full power and authority to enter into this Agreement and the agreements
contemplated hereby and perform their respective obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and all
other agreements and transactions contemplated hereby have been duly authorized
by the Board of Directors and the shareholders of IBC and no other corporate
proceedings on its part are necessary to authorize this Agreement and the
transactions contemplated hereby.
(h) ENFORCEABILITY. This Agreement and all other agreements
contemplated hereby to be entered into by IBC, Lefkowitz and/or Rothstein have
been duly executed and delivered by them and constitute the valid and legally
binding obligations of IBC, Lefkowitz and Rothstein, enforceable against each of
them in accordance with their terms except as such enforceability may be limited
by (i) bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally or by the principles governing the
availability of specific performance, injunctive relief and other equitable
remedies (regardless of whether such enforceability is considered in equity or
at law), including requirements of reasonableness and good faith in the exercise
of rights and remedies thereunder; (ii) applicable laws and court decisions
which may limit or render unenforceable certain terms and provisions contained
therein, but which do not substantially interfere with the practical realization
of the benefits thereof, except for the economic consequences of any procedural
delay which may be imposed by, relate to or result from such laws and court
decisions; and (iii) the limitations on the enforceability of the securities
indemnification provisions set forth herein by reason of matters of public
policy.
(i) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement by IBC, Lefkowitz and Rothstein nor the consummation of the
transactions contemplated hereby, nor the performance by IBC, Lefkowitz and
Rothstein of their respective covenants and agreements hereunder (i) violates
any provision of the Articles of Incorporation or ByLaws of IBC; (ii) violates
any existing law, statute, ordinance, regulation, or any order, judgment or
decree of any court or governmental agency to which IBC is a party or by which
any of the Assets are bound; or (iii) conflicts with or will result in any
breach of any of the terms of or constitute a default under or result in the
termination of any agreement to which IBC, Lefkowitz and/or Rothstein is a party
or the creation of any lien pursuant to the terms of any indenture, mortgage,
real property lease, securities purchase agreement, credit or loan agreement or
other agreement to which IBC, Lefkowitz and Rothstein is a party or by which
IBC, Lefkowitz or Rothstein or any of the Assets are bound, to the extent such
violation thereof, conflict therewith, breach thereof, default thereunder or
termination thereof would have a "Material Adverse Effect" as hereinafter
defined. "Material Adverse Effect" as used with respect to IBC and the Assets
means any circumstances, state of facts or matters which might reasonably be
expected to have an adverse effect in respect of the Assets or business of IBC
resulting in a 20% or greater reduction in net sales or net worth of IBC or the
value of the Assets.
(j) NO ENCUMBRANCES. IBC, Lefkowitz and Rothstein represent
that IBC is the sole owner, legally and beneficially, of the Assets, free and
clear of all liens, pledges, encumbrances and claims of every kind and that upon
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder, all legal and beneficial ownership of the
Assets will be validly transferred to and vested in 5th Avenue free and clear of
all liens, pledges, encumbrances and claims of every kind. As a result, 5th
Avenue will be the sole owner of the Assets.
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(k) APPROVALS. Except as may be required under federal and
state securities laws (which have been or, in the case of compliance required on
a post-sale basis, will be complied with), the execution, delivery and
performance of this Agreement by IBC, Lefkowitz and Rothstein does not require
the consent, waiver, approval, license or authorization of or any filing with
any person or any governmental authority.
(l) FINANCIAL STATEMENTS. SCHEDULE 3(L) hereto is a copy of
IBC's unaudited balance sheet as of March 31, 1999. IBC has no liability,
whether accrued, absolute or contingent, that is not reflected on said balance
sheet. Since the balance sheet date, to the best knowledge of the IBC, Lefkowitz
and Rothstein, there has not been any change that would or has had a Material
Adverse Effect.
(m) CONTRACTS. SCHEDULE 3(M) contains a true and complete list
of all agreements related to or involving IBC's business or under which IBC or
any of the Assets are subject or bound in any respect, including, without
limiting the generality of the foregoing, any and all: contracts and agreements
for the purchase, sale or lease of inventory, goods, materials, equipment,
hardware, supplies or other personal property, or for the performance or
furnishing of services; contracts and agreements for the sale or lease of
products or the furnishing of services for which IBC received payment in advance
of delivering such products or furnishings such services and have not yet
delivered such products or furnished such services; joint venture, partnership
or other contracts, agreements or arrangements involving the sharing of profits;
agreements containing any covenant or covenants which purport to limit the
ability or right of IBC, Lefkowitz or Rothstein to engage in any aspects of
IBC's business or compete in any aspect of such business with any person or
entity; agreements, contracts or arrangements pursuant to which IBC has
appointed any organization or person to act as its distributor or sales agent or
pursuant to which IBC has been appointed as a distributor or sales agent by any
third party; and licenses, sub-licenses and other contracts and agreements to
which IBC, Lefkowitz or Rothstein is a party or otherwise subject relating to
patents, trademarks, trade names or copyrights or applications for any thereof,
inventions, trade secrets or other proprietary know-how or technical assistance.
A complete and accurate copy of each written
contract, agreement and other document or relationship identified on SCHEDULE
3(M) has been delivered or made available to 5th Avenue or, if oral, a complete
and accurate summary thereof has been delivered to 5th Avenue. Except as set
forth on SCHEDULE 3(M) hereto, all of the contracts and agreements described on
SCHEDULE 3(M) are valid, binding and enforceable in accordance with their
respective terms, are in full force and effect and were entered into in the
ordinary course of business on an "arms-length" basis. Except as set forth on
SCHEDULE 3(M), IBC is not in breach or default under any of such agreements and,
to the best knowledge of IBC, Lefkowitz and Rothstein, no occurrence or
circumstance exists which constitutes (with or without the giving of notice or
the lapse of time or both) a breach or default by the other party thereto.
Neither IBC, Lefkowitz nor Rothstein have been notified or advised by any party
to an agreement of such party's intention or desire to terminate or modify any
such contract or agreement.
(n) REAL PROPERTY. IBC does not own and has never owned any
real property. Neither Lefkowitz nor Rothstein own or have owned any real
property that has been used in any aspect of IBC's business. SCHEDULE 3(N)
hereto is an accurate, complete, current, and complete list of each lease or
sublease of real property to which IBC is a party or by which IBC may be bound,
and a description of the real property leased thereunder. With respect to each
lease or sublease described on SCHEDULE 3(N) hereto: (i) IBC has been in
peaceful possession of the property leased thereunder and neither IBC nor the
landlord (to the knowledge of IBC) is in default thereunder; (ii) no waiver,
indulgence or postponement of any of the obligations thereunder has been granted
by the lessee or lessor thereunder; and (iii) there exists no event, occurrence,
condition, or act known to IBC which upon notice or lapse of time would be or
become a default thereunder. IBC has not violated or breached any provision of
any such lease or sublease, and
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all obligations required to be performed by IBC under any such lease or sublease
have been fully and properly performed.
(o) LEGAL PROCEEDINGS. Except as identified and described in
SCHEDULE 3(O) attached hereto, there is no claim, action, obligation, liability,
expense, lawsuit, demand, inquiry, investigation, notice of violation, or other
proceeding pending or, to the best knowledge of IBC, Lefkowitz and Rothstein
threatened against any IBC, Lefkowitz or Rothstein which would prevent IBC,
Lefkowitz or Rothstein from entering into or performing their respective
obligations under this Agreement, or which, if adversely determined, would have
a Material Adverse Effect. There is no order, judgment, injunction, or other
ruling by any governmental, regulatory or administrative outstanding against
IBC, Lefkowitz or Rothstein having, or which, insofar as can be reasonably
foreseen of any kind, in the future may have, a Material Adverse Effect.
(p) COMPLIANCE WITH LAW AND APPLICABLE GOVERNMENT REGULATIONS.
IBC is presently complying in all material respects of its operations,
practices, real property, plants, structures, and other property, and all other
aspects of IBC's business, with all applicable regulations and orders,
including, but not limited to, all regulations relating to the safe conduct of
business, environmental protection, quality and labeling, antitrust, taxes,
consumer protection, equal opportunity, discrimination, health, sanitation,
fire, zoning, building and occupational safety where such failure or failures
would individually or in the aggregate have a Material Adverse Effect. There are
no claims pending, nor to the best knowledge of IBC, Lefkowitz or Rothstein are
there any claims threatened, nor has IBC, Lefkowitz or Rothstein received any
written notice, regarding any violations of any regulations and orders enforced
by anyone claiming jurisdiction over IBC, Lefkowitz or Rothstein, including any
requirement of Occupational Safety and Health Administration or any pollution
and environmental control agency (including air and water). SCHEDULE 3(P) hereto
sets forth all permits, licenses, orders, franchises and approvals from all
federal, state, local and foreign governmental regulatory bodies held by IBC
relating to the operation of IBC's business.
(q) ABSENCE OF UNDISCLOSED LIABILITIES. Neither IBC nor
Lefkowitz nor Rothstein has any material liability of any nature (matured or
unmatured, fixed or contingent) that has not been disclosed in writing to 5th
Avenue.
(r) TAXES. IBC has accurately prepared and timely filed, or
has had accurately prepared and timely filed on its behalf, all tax returns
which, to IBC's, Lefkowitz's and Rothstein's knowledge, are required to be filed
by IBC, and IBC has paid all taxes shown to be due and payable on said returns
or on any assessments made against it or any of its respective properties and
all other taxes, fees or other charges imposed on it or any of its properties by
any nation or government, any state or other political subdivision thereof, and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (other than those the
amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
generally accepted accounting principles have been provided on the books); and,
to IBC's, Lefkowitz's and Rothstein's knowledge, no tax liens have been filed
nor have claims been asserted with respect to any such taxes, fees or other
charges.
(s) DISCLOSURE. To the best of IBC's, Lefkowitz's and
Rothstein's knowledge, the representations or warranties made by IBC, Lefkowitz
and Rothstein in this Agreement or in any other document or certificate
furnished in connection herewith did not contain at the time made or, if set
forth herein, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they are made, not misleading in any
material respect. There is no fact known to IBC, Lefkowitz and Rothstein that
has a Material Adverse Effect or, other than general economic conditions in the
industry in which IBC operates,
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that IBC, Lefkowitz and Rothstein reasonably believe will in the future have a
Material Adverse Effect, which has not been set forth in this Agreement.
(t) BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon IBC, Lefkowitz or Rothstein.
4. REGISTRATION OF 5TH AVENUE SHARES. 5th Avenue agrees to amend its
pending registration statement on Form SB-2, File No. 33-41459, or to file a new
registration statement to include the 5th Avenue Shares, and shall diligently
pursue completion of such filing and undertake its best efforts to have such
registration statement declared effective by the Securities and Exchange
Commission (the "SEC") as soon as reasonably practicable.
(a) OBLIGATIONS OF 5TH AVENUE. In connection with the
registration of the 5th Avenue Shares pursuant to this Section 4, 5th Avenue
shall:
(i) Prepare and file any necessary amendments
(including post-effective amendments) and supplements to the registration
statement and the prospectus used in connection with the registration statement
and take such other reasonable action as may be necessary to have the
registration statement declared effective by the SEC and keep the registration
statement effective until the 5th Avenue Shares are capable of full and complete
public sale without registration under the Securities Act and to comply with the
provisions of the Securities Act and the Securities Exchange Act of 1934 (the
"Exchange Act"), and the rules and regulations thereunder, with respect to the
disposition of the 5th Avenue Shares;
(ii) Notify IBC, Lefkowitz and Rothstein, after
becoming aware thereof, (A) when the registration statement or the prospectus
included therein or any prospectus amendment or supplement or post-effective
amendment has been filed and, with respect to the registration statement or any
post-effective amendment, when the same has become effective, or (B) of any
request by the SEC for amendment of or supplement to the registration statement
or related prospectus or for additional information;
(iii) Furnish promptly to IBC, Lefkowitz and
Rothstein such reasonable number of copies of a prospectus, and all amendments
and supplements thereto, in conformity with the requirements of the Securities
Act, and such other documents as IBC and its shareholders may reasonably request
in order to facilitate their disposition of the 5th Avenue Shares;
(iv) Use its best efforts to register and qualify the
5th Avenue Shares under the securities or blue sky laws of such states as shall
be reasonably requested by IBC and its shareholders, and prepare and file in
those states such amendments (including post-effective amendments) and
supplements and to take such other actions as may be necessary to maintain such
registration and qualification in effect at all times during the period 5th
Avenue is required to maintain the registration statement effective, and to take
all other actions necessary or advisable to enable the disposition of such
securities in such states, provided that 5th Avenue shall not be required in
connection therewith or as a condition thereto to subject itself to taxation, to
qualify to do business or to file a general consent to service of process in any
such states; and
(v) Notify IBC, Lefkowitz and Rothstein, at any time
when a prospectus relating to the 5th Avenue Shares is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in the registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein
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or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. 5th Avenue shall promptly amend or
supplement the registration statement to correct any such untrue statement or
omission, and provide IBC, Lefkowitz and Rothstein with an amended or
supplemented prospectus with respect to the 5th Avenue Shares that corrects such
untrue statement or omission.
(b) IBC OBLIGATIONS. It shall be a condition precedent to the
obligations of 5th Avenue to IBC, Lefkowitz and Rothstein to take any action
pursuant to this Section 4 that IBC, Lefkowitz and Rothstein shall furnish to
5th Avenue such information regarding (i) the Assets, (ii) IBC, Lefkowitz and
Rothstein, (iii) the 5th Avenue Shares acquired by IBC pursuant to this
Agreement, (iv) other shares of 5th Avenue common stock held by IBC, Lefkowitz
and Rothstein, and the intended method of disposition of such securities as
shall be reasonably required to effect the registration of the 5th Avenue Shares
acquired by IBC, Lefkowitz and Rothstein pursuant to this Agreement, and the
intended method of disposition of such shares, and IBC, Lefkowitz and Rothstein
shall execute such documents in connection with such registration as 5th Avenue
may reasonably request.
(c) EXPENSES OF REGISTRATION. All expenses incurred by 5th
Avenue in complying with this section, including, without limitation,
registration and filing fees, fees and expenses of complying with state
securities and blue sky laws, printing expenses, and fees and disbursements of
5th Avenue's counsel and accountants, shall be paid by 5th Avenue.
(d) INDEMNIFICATION RELATING TO REGISTRATION.
(i) 5th Avenue shall indemnify and hold harmless IBC,
Lefkowitz and Rothstein within the meaning of the Securities Act or the Exchange
Act (each a "Seller Indemnified Party" and collectively, the "Seller Indemnified
Parties"), against any losses, claims, damages, expenses or liabilities (joint
or several) to which any of them may become subject under the Securities Act,
the Exchange Act, or otherwise, insofar as such losses, claims, damages,
expenses or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a "Violation"): (A)
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (B) the
omission or alleged omission to state therein information required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or (C) any violation or
alleged violation by 5th Avenue of the Securities Act, the Exchange Act, or any
state securities or blue sky law; and 5th Avenue shall reimburse each Seller
Indemnified Party, promptly as such expenses are incurred, for any legal or
other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that the indemnity agreement contained in this
section shall not apply to amounts paid in settlement of any such loss, claim,
damage, expense, liability, action or proceeding if such settlement is effected
without the consent of 5th Avenue, which consent shall not be unreasonably
withheld, nor shall 5th Avenue be liable in any such case for any such loss,
claim, damage, expense, liability, action or proceeding to the extend that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in the
registration statement by IBC or its shareholders.
(ii) Promptly after receipt by an indemnified party
under this Section 4 of notice of the commencement of any action (including any
governmental action), such Seller Indemnified Party shall, if a claim in respect
thereof is to be made against 5th Avenue under this section, deliver to 5th
Avenue a written notice of the commencement thereof and 5th Avenue shall have
the right to participate in and, to the extent it so desires, to assume control
of the defense thereof with counsel mutually
10
<PAGE>
satisfactory to 5th Avenue and the indemnified parties; provided, however, that
an indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by 5th Avenue, if, in the reasonable opinion of
counsel for the Seller Indemnified Party, representation of such Seller
Indemnified Party by the counsel retained by 5th Avenue would be inappropriate
due to actual or potential differing interests between such party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to 5th Avenue within a reasonable time of the commencement of any
such action shall relieve 5th Avenue of any liability to the Seller Indemnified
Party under this section only to the extent prejudicial to 5th Avenue's ability
to defend such action, but the omission so to deliver written notice to 5th
Avenue shall not relieve it of any liability that is may have to any Seller
Indemnified Party otherwise than under this section. The indemnification
required by this section shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, promptly as such
expense, loss, damage or liability is incurred.
(iii) To the extent any indemnification by 5th Avenue
is prohibited or limited by law, or is otherwise unavailable to or insufficient
to hold harmless a Seller Indemnified Party, 5th Avenue agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under this section, provided that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5. CLOSING DATE; DELIVERIES BY THE PARTIES. The closing of the sale of
the Assets (the "Closing") shall occur contemporaneously with the execution and
delivery of this Agreement and all other documents and materials to be executed
and delivered as contemplated herein. Such Closing shall include or shall be
promptly followed by the following deliveries:
(a) DOCUMENTS TO BE DELIVERED BY IBC, LEFKOWITZ AND ROTHSTEIN.
IBC, Lefkowitz and Rothstein has delivered or caused to be delivered, or
promptly will deliver, to 5th Avenue the following:
(i) The Bill of Sale duly executed by the President
of IBC and conveying all right, title and interest in and to the Assets,
together with all of its manually signed and available copies of its agreements,
bills of sale and receipts for payments for the Assets, documents of title,
registrations and any other papers providing evidence of the ownership of the
Assets by IBC; and
(ii) such other instruments, documents and
certificates, if any, as are required to be delivered pursuant to the provisions
of this Agreement or that may be reasonably requested in furtherance of the
provisions of this Agreement.
(b) DOCUMENTS TO BE DELIVERED BY 5TH AVENUE. 5th Avenue has
delivered or caused to be delivered, or promptly will deliver, to IBC:
(i) a letter to Continental Stock Transfer requesting
the issuance of two stock certificates each in the amount of 150,000 5th Avenue
Shares, representing the 5th Avenue Shares being issued to IBC in connection
with this Agreement;
(ii) the Note in the form attached hereto as EXHIBIT
"A" to evidence the $450,000 deferred payment obligation of 5th Avenue to IBC
under this Agreement;
(iii) a Guaranty of Melvin Rosen, in the form
attached hereto as Exhibit "B", guaranteeing the promissory note of 5th Avenue;
and
11
<PAGE>
(iv) such other instruments, documents and
certificates, if any, as are required to be delivered pursuant to the provisions
of this Agreement, or that may be reasonably requested in furtherance of the
provisions of this Agreement.
6. GENERAL INDEMNIFICATION.
(a) INDEMNIFICATION BY 5TH AVENUE. 5th Avenue hereby agrees to
indemnify and holds harmless IBC, Lefkowitz and Rothstein in respect of any and
all losses, claims, demands, judgments, expenses, or liabilities, including all
attorneys' fees and court costs in any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction or before an
arbitrator ("Adverse Consequence") suffered by IBC, Lefkowitz and Rothstein in
connection with each and all of the following:
(i) Any material misrepresentation or material breach
of any representation or warranty made by 5th Avenue in this Agreement or other
document attached hereto or delivered to IBC by 5th Avenue in connection with
the transactions contemplated hereby;
(ii) The material breach of any covenant, agreement,
or obligation of 5th Avenue contained in this Agreement or any other instrument
specifically contemplated by this Agreement; or
(iii) Any misrepresentation contained in any
statement in writing or certificate furnished by 5th Avenue pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement,
which results in a material adverse effect on 5th Avenue's business, operations
or property.
(b) INDEMNIFICATION BY IBC. IBC, Lefkowitz and Rothstein
hereby agree to indemnify and hold harmless 5th Avenue and its directors,
officers, employees and agents in respect of any and all Adverse Consequences
incurred by 5th Avenue in connection with each and all of the following:
(i) Any material misrepresentation or material breach
of any representation or warranty made by IBC, Lefkowitz or Rothstein in this
Agreement or other document attached hereto or delivered to 5th Avenue by IBC,
Lefkowitz or Rothstein in connection with the transactions contemplated hereby;
(ii) The material breach of any covenant, agreement,
or obligation of IBC, Lefkowitz or Rothstein contained in this Agreement or any
other instrument specifically contemplated by this Agreement; or
(iii) Any material misrepresentation contained in any
statement in writing or certificate furnished by IBC, Lefkowitz or Rothstein
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement
(c) PROCEDURE FOR INDEMNIFICATION. Whenever any claim shall
arise for indemnification hereunder, the party seeking indemnification (the
"Indemnitee") shall promptly notify the other party (the "Indemnitor") of the
claim and, when known, the facts constituting the basis for such claim. If any
claim for indemnification hereunder results from or is in connection with any
claim or Adverse Consequence by a person who is not a party to this Agreement
("Third Party Claim"), such
12
<PAGE>
notice shall also specify, if known, the amount or an estimate of the amount of
the liability arising therefrom. The Indemnitee shall give the Indemnitor prompt
notice of any such claim and the Indemnitor shall undertake the defense thereof
by representatives of its own choosing, reasonably satisfactory to the
Indemnitee, at the expense of the Indemnitor. The Indemnitee shall have the
right to participate in any such defense of a Third Party Claim with advisory
counsel of its own choosing, at its own expense. If the Indemnitor, within a
reasonable time after notice of any such Third Party Claim, fails to defend, the
Indemnitee or any affiliate of the Indemnitee shall have the right to undertake
the defense, compromise or settlement of such Third Party Claim on behalf of,
and for the account of, the Indemnitor, at the expense and risk of the
Indemnitor. The Indemnitor shall not, without the Indemnitee's written consent,
settle or compromise any such Third Party Claim or consent to entry of any
judgment that does not include, as an unconditional term thereof, the giving by
the claimant or the plaintiff to the Indemnitee and the Indemnitee's directors,
officers, employees and agents, an unconditional release from all liability in
respect of such Third Party Claim. The Indemnitee shall not pay any claim
covered by this right to indemnification prior to giving the Indemnitor the
notice of such claim required by this Section 6 and the opportunity provided
herein to handle the claim itself.
(d) PAYMENT. All indemnification hereunder shall be effected
upon demand by payment of cash or delivery of a cashier's check in the amount of
the indemnification liability.
7. NOTICES. All notices, reports and other communications hereunder to
5th Avenue or to IBC, Lefkowitz and Rothstein shall be in writing, shall refer
specifically to this Agreement and shall be hand delivered or sent by facsimile
transmission or by registered mail or certified mail, overnight courier, return
receipt requested, postage prepaid, in each case to the respective persons and
addresses specified below (or to such other persons or addresses as may be
specified in writing to the other party):
If to 5th Avenue, to: 5th Avenue Channel Corp.
Attn: Melvin Rosen, President
3957 N.E. 163rd Street
North Miami Beach, Florida 33160
Fax No.: (305) 919-8154
If to IBC or its shareholders, to: International Broadcast Consultants of
America, Inc.
Attn: Eric Lefkowitz and Ivan Rothstein
3957 N.E. 163rd Street
North Miami Beach, Florida 33160
Fax No.: (305) 945-9974
Any notice or communication given in conformity with this
section shall be deemed to be effective when received by the addressee if
delivered by hand or overnight courier or by facsimile (with confirmed receipt),
and three days after mailing, if mailed.
8. NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the part of any
of the parties to this Agreement to exercise and no delay in exercising any
right, power, remedy or privilege under this Agreement or provided by statute or
at law or in equity or otherwise, including, without limitation, the right or
power to terminate this Agreement, shall impair, prejudice or constitute a
waiver of any such right, power, remedy or privilege or be construed as a waiver
of any breach of this Agreement or as an acquiescence therein, nor shall any
single or partial exercise of any such right, power, remedy or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power, remedy or privilege.
13
<PAGE>
9. PAYMENT OF LIABILITIES; DISCHARGE OF LIENS.
(a) IBC, Lefkowitz and Rothstein shall satisfy and discharge
as the same shall become due, all of their respective liabilities, obligations,
debts and commitments including but not limited to tax liabilities of IBC,
Lefkowitz and Rothstein, except for liabilities for taxes being disputed by IBC,
Lefkowitz and Rothstein in good faith, which shall be satisfied and discharged
upon resolution of any such dispute.
(b) If following the Closing Date any other liens,
encumbrances, mortgages, security interests, pledges, claims, or other
restrictions or charges whatsoever arising out of acts of omissions of IBC,
Lefkowitz and Rothstein shall exist or be levied upon 5th Avenue or the Assets,
then IBC, Lefkowitz and Rothstein shall promptly notify 5th Avenue and shall, at
their own cost and expense, promptly take such action as may be necessary to
discharge the same by bond or otherwise. If IBC, Lefkowitz or Rothstein shall
fail to discharge any such lien, encumbrance, mortgage, security interest,
pledge claim, or other restriction or charge, 5th Avenue may do so, in which
event IBC, Lefkowitz and/or Rothstein shall pay to 5th Avenue on demand the
amount paid by 5th Avenue together with 5th Avenue's losses, and reasonable
costs and expenses, including reasonable attorneys' fees and expenses.
10. MISCELLANEOUS.
(a) FURTHER ASSURANCES. At any time, and from time to time,
each party shall execute such additional instruments and take such action as may
be reasonably requested by any other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
(b) COSTS AND EXPENSES. 5th Avenue hereby agrees to pay all of
its own costs and expenses incurred in negotiating this Agreement and
consummating the transactions described herein. Further, 5th Avenue agrees to
pay all of the reasonable out of pocket costs and expenses of IBC and its
shareholders in negotiating this Agreement and consummating the transactions
described herein, including, without limitation, the reasonable fees and
expenses of legal counsel for IBC and its shareholders and any costs incurred by
such legal counsel for appraisals of the Assets.
(c) ENTIRE AGREEMENT. This Agreement, including all schedules
and exhibits thereto, constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof. It supersedes all prior
negotiations, letters and understandings relating to the subject matter hereof.
(d) AMENDMENT. This Agreement may not be amended, supplemented
or modified in whole or in part except by an instrument in writing signed by all
parties hereto.
(e) ASSIGNMENT. This Agreement may not be assigned by any
party hereto without the prior written consent of the other party.
(f) CHOICE OF LAW. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the State of Florida,
without giving effect to the application of the principles pertaining to
conflicts of laws.
(g) HEADINGS. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
14
<PAGE>
(h) PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
(i) CONSTRUCTION. The parties hereto and their respective
legal counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the parties
hereto, but rather in accordance with the fair meaning thereof.
(j) SURVIVAL. The representations, warranties, and
indemnification obligations of the parties hereunder and in any instrument or
other document delivered pursuant hereto shall survive the consummation of the
transactions contemplated by this Agreement.
(k) SEVERABILITY. The invalidity, illegality or
unenforceability of any provision or provisions of this Agreement will not
affect any other provision of this Agreement, which will remain in full force
and effect, nor will the invalidity, illegality or unenforceability of a portion
of any provision of this Agreement affect the balance of such provision. In the
event that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
(l) ENFORCEMENT. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
the successful party shall be awarded reasonable attorneys' fees, expenses and
costs, at all trial and appellate levels. Any suit, action or proceeding with
respect to this Agreement shall be brought in the courts of Miami-Dade County in
the State of Florida or in the U.S. District Court for the Southern District of
Florida. The parties hereto hereby accept the exclusive jurisdiction of those
courts for the purpose of any such suit, action or proceeding.
(m) JURISDICTION; VENUE. The parties hereto submit to personal
jurisdiction in the courts located in Miami-Dade County. Venue for any such
action, in addition to any other venue permitted by statute, shall be Miami-Dade
County, Florida. The parties hereto hereby irrevocably waive, to the fullest
extent permitted by law, any objection that any of them may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any judgment entered by any court in respect
thereof brought in Miami-Dade County, Florida, and hereby further irrevocably
waive any claim that any suit, action or proceeding brought in Miami-Dade
County, Florida, has been brought in an inconvenient forum.
(n) REMEDIES. The parties hereto acknowledge and agree that
any party's remedy at law for a breach or threatened breach of any of the
provisions of this Agreement would be inadequate and such breach or threatened
breach shall be per se deemed as causing irreparable harm to such party.
Therefore, in the event of such breach or threatened breach, the parties hereto
agree that, in addition to any available remedy at law, including but not
limited to monetary damages, an aggrieved party, without posting any bond, shall
be entitled to obtain, and the offending party agrees not to oppose the
aggrieved party's request for, equitable relief in the form of (i) specific
enforcement, (ii) a temporary restraining order, (iii) a temporary or permanent
injunction, or (iv) any other equitable remedy that may then be available to the
aggrieved party.
(o) BINDING NATURE AND INUREMENT. This Agreement shall be
binding upon and shall inure to the benefit of any successors, assigns, heirs,
executors, administrators, and personal representatives of the parties hereto.
15
<PAGE>
(p) NO THIRD-PARTY BENEFICIARIES. No person shall be deemed to
possess any third-party beneficiary right pursuant to this Agreement. It is the
intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
(q) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, individually or through their
duly authorized officers, as the case may be, have executed this Agreement as of
the date first written above.
"5TH AVENUE"
5TH AVENUE CHANNEL CORP., a Florida corporation
By: /s/ Melvin Rosen
------------------------------------------
Melvin Rosen, President
"IBC"
INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA,
Inc., a Florida corporation
By: /s/ Eric Lefkowitz
------------------------------------------
Eric Lefkowitz, President
By: /s/ Ivan Rothstein
------------------------------------------
Ivan Rothstein, Vice President
"LEFKOWITZ"
/s/ Eric Lefkowitz
------------------------------------------
Eric Lefkowitz, Individually
"ROTHSTEIN"
/s/ Ivan Rothstein
------------------------------------------
Ivan Rothstein, Individually
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-01-1999
<CASH> 77,966
<SECURITIES> 0
<RECEIVABLES> 566,286
<ALLOWANCES> 0
<INVENTORY> 613,042
<CURRENT-ASSETS> 1,319,733
<PP&E> 2,296,097
<DEPRECIATION> (843,285)
<TOTAL-ASSETS> 10,126,760
<CURRENT-LIABILITIES> 3,951,920
<BONDS> 0
0
0
<COMMON> 9,536
<OTHER-SE> 4,951,454
<TOTAL-LIABILITY-AND-EQUITY> 10,126,760
<SALES> 1,162,640
<TOTAL-REVENUES> 1,162,640
<CGS> 557,662
<TOTAL-COSTS> 557,662
<OTHER-EXPENSES> 1,506,510
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 307,487
<INCOME-PRETAX> (1,008,186)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,008,186)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,008,186)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
