MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
448 West 16th Street
New York, NY 10011
INFORMATION STATEMENT REGARDING THE PROPOSED
ACTION TO BE TAKEN PURSUANT THE WRITTEN CONSENT
OF A MAJORITY STOCKHOLDER IN LIEU OF A SPECIAL
MEETING OF THE STOCKHOLDERS WHICH ACTION
HAS SUBSEQUENTLY BEEN RESCINDED
This information statement has been mailed on June 6, 1996 to the
stockholders of record on May 20, 1996 of Multimedia Concepts International,
Inc., a Delaware corporation (the "Company") in connection with the proposed
action to be take by the Company pursuant to the written consent by the
stockholders of the Company dated May 15, 1996. The action to be taken pursuant
to the written consent shall be taken on June 28, 1996. The principal executive
offices of the Company are located at 448 West 16th Street, New York, New York
10011 the Company's telephone number is (212) 675-6666.
THIS IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO
STOCKHOLDER MEETING WILL BE HELD TO CONSIDER ANY MATTER
WHICH WILL BE DESCRIBED HEREIN.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
Increase in the Authorized shares of Common Stock
On May 15, 1996, the Company's majority stockholder, European Ventures
Corp. ("EVC"), which owns 1,505,000 or approximately 50.1% of the 3,005,000
issued and outstanding shares of the Company's common stock, par value $.001 per
share (the "Common Stock") outstanding as of such date, executed a written
consent authorizing the Company to increase the authorized shares of Common
Stock from 10,000,000 to 40,000,000. Under Section 228 of the General
Corporation Law of the State of Delaware, any action requiring the consent of
the stockholders at an annual or special meeting of the stockholders of the
Company, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less that the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Company.
<PAGE>
RECENT DEVELOPMENTS
On April 4, 1996, the board of directors authorized the Company to enter
into a compensation agreement with director, Ilan Arbel, and pursuant thereto
granted to Ilan Arbel an option to purchase 1,900,000 warrants, identical to the
Warrants sold by the Company in its initial public offering. The option was
exercisable at $.04 per Warrant. The Warrants and shares underlying the Warrants
were registered for resale pursuant to a Form S-8 registration statement. Mr.
Arbel exercised this option in full and sold the Warrants in April 1996. In
addition, the board authorized the Company to issue an additional option to Mr.
Arbel to purchase 200,000 shares of Common Stock at $3.70 per share.
On April 19, 1996, the board of directors of the Company and Mr. Arbel
amended the compensation agreement and terminated the option to purchase 200,000
shares of Common Stock and in lieu thereof issued an option to purchase an
additional 1,000,000 Warrants. The option was exercisable at $.04 per Warrant.
The Warrants were registered for resale pursuant to an amendment to the Form S-8
registration statement. Mr. Arbel exercised this option in full and sold the
Warrants in May 1996.
As of May 15, 1996, the Company entered into an employment agreement (a
copy of which is annexed hereto as Appendix A) with Mr. Arbel, for a period of
five years, pursuant thereto Mr. Arbel became the President and Chief Executive
Officer of the Company. At such time the Company and Mr. Arbel determined that
the price paid for the Warrants was to low, and agreed to increase the price to
$1.90 per Warrant, whereby Mr. Arbel owes the Company $5,394,000, which may be
paid either in cash, or other securities. The term securities is defined as any
debt or equity security or convertible security, the underlying security of
which, is traded on either a national securities exchange or on the Nasdaq Stock
Market. The price for which the securities may be exchanged to reduce the debt
shall be 50% of the average bid price of the securities or the underlying
securities of a convertible security, for a period of ninety days ending five
days prior to the exchange. The employment agreement provides that no other
compensation or remuneration be paid to Mr. Arbel during its term.
In May 1996, the Company in anticipation of the execution of an employment
agreement (a copy of which is annexed hereto as Appendix B) with Rivka Arbel,
granted Mrs. Arbel an option to purchase from the Company up to 600,000
Warrants, which Warrants are to be identical to the Warrants issued in the
Company's initial public offering. Initially Mrs. Arbel was to pay $.04 per
Warrant and resell the Warrants pursuant to a Form S-8 registration statement,
however, the Company and Mrs. Arbel have determined that such price is to low
and have decided to increase the price to $1.90 per Warrant, which may be paid
either in cash, or other securities, as such term is described above. In June
1996 Mrs. Arbel entered into an employment agreement with the Company, for a
period of five years, pursuant thereto Mrs. Arbel became a Vice-President of the
Company. The employment agreement provides that no other compensation or
remuneration be paid to Mrs. Arbel during its term.
2
<PAGE>
In May, 1996 the Company acquired 51% of the outstanding shares of common
stock of Video On-Line USA, Inc., a company which has entered into a letter of
intent to purchase from Video Authoring Systems Group, Inc. ("VAS Group") 51% of
its outstanding shares of common stock for $1,000,000. VAS Group manufactures
and sells computer hardware systems used in scanning and converting to digital
format existing film and video sources that results in greatly enhanced
projection and playback quality from computer to video transfer. The Company
purchased 51 shares of Video for $100,000 and agreed to loan an additional
$900,000 for the purpose of consummating the purchase of VAS Group. The $900,000
loan shall be evidenced by a 36 month promissory note acquiring interest at 8%
per annum. The Company shall obtain the funds needed for this venture by
obtaining a loan from EVC, the Company's principal stockholder, on terms not
greater that can be obtained from a non-affiliated party.
On May 5, 1996, Video entered into a letter of intent to purchase from the
current stockholders of Software Affiliates, Inc. ("Software") 80% of the issued
and outstanding shares of its common stock for 150,000 shares of the Company's
Common Stock. Additionally, Video agreed to loan to Software an aggregate of
$250,000.
Software sells and markets high quality interactive software products for
consumer and corporate use. These products are acquired from independent
software developers and publishers. To date Software has launched four products,
including Animated Greetings Birthday Edition and Holiday Edition; ASK.ME, an
internet on-line help system; numerous video CD titles from Castle Multimedia
and Hollywood Selects library of interactive MPEG titles.
Independent Public Auditors
The Board of Directors of the Company has selected Lazar, Levine & Company,
LLP Certified Public Accountants, as independent accountants of the Company for
the fiscal year ending September 30, 1996. Stockholders are not being asked to
approve such selection because such approval is not required. The audit services
provided by Lazar, Levine & Company, LLP consisted of examination of financial
statements, services relative to filings with the Securities and Exchange
Commission, and consultation in regard to various accounting matters.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at a meeting are the Company's Common
Stock. The presence, in person or by proxy, of a majority of shares entitled to
vote will constitute a quorum for the meeting. Each share of Common Stock
entitles its holder to one vote on each matter submitted to stockholders. On the
Record Date there were 3,005,000 shares of Common Stock outstanding. Voting of
the shares of Common Stock is on a non-cumulative basis.
3
<PAGE>
The following table sets forth information as of May 31, 1996, with respect
to the beneficial ownership of shares of Common Stock by (i) each person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), known by the Company to be the
owner of more than 5% of the outstanding shares of Common Stock, (ii) each
director, and (iii) all officers and directors as a group. Except to the extent
indicated in the footnotes to the following table, each of the individuals
listed below possesses sole voting power with respect to the shares of Common
Stock listed opposite his name.
<TABLE>
<CAPTION>
Percent of
Number of Common Stock
Name Shares Owned (1)
- ---- ------ ---------
<S> <C> <C>
Sheikhar Boodram -- --
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York
Ilan Arbel (2)(3)(5) 1,505,000 50.1%
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York
Yair Arbel (2)(3)(5) 1,505,000 50.1%
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York
Moses Mika/European Ventures Corp. (2)(3) 1,505,000 50.1%
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York
Rivka Arbel (3)(4) -- --
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York
Alan Berkun -- --
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York
All Officers and Directors 1,505,000 50.1%
(5 as a Group) (2)-(5)
</TABLE>
4
<PAGE>
(footnotes from previous page)
(1) Does not give effect to (i) 5,910,000 shares of Common Stock reserved for
issuance upon the exercise of the Warrants, (ii) 240,000 shares of Common
Stock reserved for issuance upon the exercise of the Underwriter's Warrants
and the Warrants underlying the Underwriter's Warrants (iii) 150,000 shares
of Common Stock reserved for issuance under the Company's 1995 Senior
Management Incentive Plan, of which an option to purchase 75,000 shares at
$8.75 per share has been granted and (iv) 150,000 shares of Common Stock to
be issued upon the consummation of the acquisition of Software by Video.
(2) Moses Mika, the father of Yair Arbel and Ilan Arbel, is the sole officer,
director and stockholder of EVC.
(3) Yair Arbel, a director is the brother of Ilan Arbel, the Chief Executive
Officer and a director of the Company. Yair Arbel and Rivka Arbel are
husband and wife. It can be expected that the shares of Common Stock of
record and beneficially owned by members of the Arbel family would be voted
as a group on matters presented to the Company's stockholders; however
there is no voting agreement or arrangements which require such unified
voting.
(4) Does not include the Warrants or the shares of Common Stock issuable upon
exercise of the Warrants, issuable upon the exercise of an option grant to
Mrs. Arbel pursuant to an employment agreement. See "Employment
Agreements."
(5) Does not include (i) 2,900,000 shares of Common Stock issuable upon the
exercise of Warrants issued to Mr. Arbel, upon Mr. Arbel's exercise of
options to purchase 1,900,000 Warrant and 1,000,000 Warrants in April 1996
and May 1996, respectively, which Warrants were sold pursuant to a Form S-8
registration statement or (ii) 585,000 shares of Common Stock and 1,170,000
Warrants sold by Europe American Capital Corp. ("EACC"), a company of which
Yair Arbel is an officer, director and sole stockholder, pursuant to the
Company's registration statement on Form SB-2. See "-- Employment
Agreements" and "Recent Developments."
MANAGEMENT
Officers and Directors.
The names, ages and positions of the Company's Executive Officers and
Directors are as follows;
Name Age Position
---- --- --------
Ilan Arbel 42 Chief Executive Officer,
President and Director
Rivka Arbel 43 Vice-President and
Director
Sheikhar Boodram 33 Secretary and Director
Yair Arbel 47 Director
Alan Berkun 35 Director
5
<PAGE>
The directors of the Company are elected annually by its stockholders and
the officers of the Company are appointed annually by its Board of Directors.
Vacancies on the Board of Directors may be filled by the remaining directors.
Each current director and officer will hold office until the next annual meeting
of stockholders, or until his successor is elected and qualified.
Sheikhar Boodram has been the Secretary of the Company since June 12, 1995
and was the President of the Company from June 12, 1995 until May 1996. Mr.
Boodram is the sole Officer and Director of American Eagle Industries Corp.
("American Eagle") and Match II, Inc. ("Match II"). Mr. Boodram has been a
Director of American Toys, Inc. since May 1993. From September 1992 to present,
Mr. Boodram has been employed as Vice-President and a Director of Mister Jay
Fashions International, Inc. From October 1991 to September 1992, Mr. Boodram
was employed as a designer with Mister Jay Fashions International, Inc. From
1979 until October 1991, Mr. Boodram was the production manager for Lady Helene
Sophisticates, Ltd., a manufacturer of ladies garments which ceased operations
in 1991.
Rivka Arbel has been a Director of the Company since June 12, 1995 and
Vice-President since May 1996. From 1992 to present, Ms. Arbel has been a
director of Mister Jay Fashions International, Inc. From 1986 to present, Ms.
Arbel has been President and a Director of Amigal, Ltd., a producer of men's and
women's wear in Israel. Ms. Arbel is the wife of Yair Arbel, a director of the
Company and an officer, director and sole stockholder of EACC.
Yair Arbel has been a director of the Company since June 12, 1995. Mr.
Arbel is currently employed by Israeli Aircraft Industries, where he has been
employed since 1980. Yair Arbel is the husband of Rivka Arbel and the brother of
Ilan Arbel, the former President and Secretary and current Director of the
Company. Mr. Arbel is an officer, director and sole stockholder of EACC.
Ilan Arbel was the President, Secretary and a Director of the Company from
inception until June 12, 1995 upon the election of Sheikhar Boodram. As of
August 1, 1995 Mr. Arbel was re-elected as a Director of the Company and as of
May 1996 Mr. Arbel was re-elected as President and Chief Executive Officer.
Since 1994 and 1991, Mr. Arbel has been the President, Chief Executive Officer
and a Director of American Toys, Inc. and Mister Jay Fashions International,
Inc. In May 1993, Mr. Arbel became a Director of Play Co. Toys, a public company
which is a retailer of toys and since June 1994, he has been the Chairman of the
Board. In 1990, Mr. Arbel was an officer and director of Calro Fashions, Ltd., a
company which filed a bankruptcy petition and has received a discharge in
bankruptcy. From 1989 to present, Mr. Arbel has been the sole Officer and
Director of TransAtlantic Commerce Corp. ("TACC"), a company involved in
investments and finance in the United States and Europe. Mr. Arbel is a graduate
of the University Bar Ilan in Israel, with B.A. degrees in Economics, Business
and Finance.
Alan Berkun has been a Director of the Company since June 12, 1995. Mr.
Berkun has also been a Director of American Toys, Inc. and Play Co. Toys since
July 1993. For more than
6
<PAGE>
the past five years, Mr. Berkun has been employed by Russo Securities as its
general counsel. Mr. Berkun was licensed as an NASD Series 7 Registered
Representative with Russo Securities from October 1991 through November 1991 and
June 1989 through October 1989. Mr. Berkun's Series 7 license lapsed in December
1993, however, subsequently, Mr. Berkun received a waiver from the NASD and
renewal of his Series 7 status. Presently, Mr. Berkun is the sole officer,
director and stockholder of Emme Corp., d/b/a Marlowe & Company, a registered
NASD broker/dealer. Mr. Berkun is an attorney licensed in the State of New York.
Significant Employees
American Eagle Imports, Inc. ("AEI"), a consulting company owned by Carolyn
Seymour Jones 38, provides sales and design consulting services to the Company,
however, there is no consulting agreement between the Company and AEI. Prior to
August 1, 1995 the Company had individual consulting agreements with Ms. Jones
and is still dependent on her personal efforts and abilities in the design and
sales of both the American Eagle and Match II lines. Previously, the Company
engaged Ms. Jones and Harmon Shidlosky as consultants under agreements which
were terminated pursuant to the provisions of such agreements in August 1995.
The Company hired Dona Amarasekera as head of the design department of both
American Eagle and Match II and to oversee the work of AEI. Ms. Amarasekera
resigned in May 1996.
Ms. Jones was employed at Mitchell Apparel, Inc., a garment importer from
1989 to March 1992. From March 1992 to 1993 she worked for United American
Industries, Inc. a clothing manufacturer. From 1993 to June 1994 she was
employed at Hiteck Dye, Inc., a clothing due company.
Howard I. Wertheim, D.M.D., 61, has been the President and sole director of
Multimedia Publishing, Inc. ("MMP") since its inception in July, 1994. From 1987
to present, Dr. Wertheim has served as the Chairman of the Board of Spectrum
Pharmaceutical Corporation, a public company engaged in research and development
of a cure for Tinnitus a hearing disorder. From 1992 to present, Dr. Wertheim
has been a consultant for the Center for Biomedical and Environmental
Technologies, which is a non-for profit company helping start up biotech
companies by providing them with access to incubators.
Bert A. Spilker, PHD, MD, FCP, FFPM, 54, from 1993 to present Dr. Spilker
has been the executive director of Orphan Medical, a public company, which is a
subsidiary of Chronomed, Inc., a public company which engages in the licensing
rights to market certain pharmaceutical drugs. From 1983 to 1993, Mr. Spilker
was a director of project coordination for Borrough's Wellcome Company,
pharmaceutical company.
It is estimated that Dr. Wertheim has devoted and will continue to devote
approximately 90% of his business time to MMP and that Dr. Spilker has devoted
and will continue to devote less than 10% of his business time to MMP.
7
<PAGE>
The Company has agreed to indemnify its officers and directors with respect
to certain liabilities including liabilities which may arise under the
Securities Act of 1933. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to any charter, provision, by-law, contract,
arrangement, statute or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer, or controlling person of the Company in the successful
defense of any such action, suit or proceeding) is asserted by such director,
officer or controlling person of the Company in connection with the Securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Executive Compensation
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and Non-Plan
(as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded to,
earned by, paid by the Company during the years ended September 30, 1995 and
1994 to the named executive officer of the Company.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------
(a) (b) (c) (d) (e)
Name and Principal Other Annual
Position (1) Year Salary($) Bonus($) Compensation($)
------------ ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Sheikhar Boodram 1995 -0- -0- -0-
President, Secretary 1994 -0- -0- -0-
</TABLE>
(1) See "-- Employment Agreements" and "Recent Developments" for a
discussion of the compensation received by Ilan Arbel and Rivka
Arbel.
8
<PAGE>
Employment Agreement
As of May 15, 1996, the Company entered into an employment agreement with
Mr. Arbel, for a period of five years, pursuant thereto Mr. Arbel became the
President and Chief Executive Officer of the Company. At such time the Company
and Mr. Arbel determined that the $.04 price paid for the Warrants was to low,
and agreed to increase the price to $1.90 per Warrant, whereby Mr. Arbel owes
the Company $5,394,000, which may be paid either in cash, or other securities.
The price for which the securities may be exchanged to reduce the debt shall be
50% of the average bid price of the securities or the underlying securities of a
convertible security, for a period of ninety days ending five days prior to the
exchange. The employment agreement provides that no other compensation or
remuneration be paid to Mr. Arbel during its term. See "Recent Developments."
In May 1996, the Company in anticipation of the execution of an employment
agreement with Rivka Arbel, granted Mrs. Arbel an option to purchase from the
Company up to 600,000 Warrants, which Warrants are to be identical to the
Warrants issued in the Company's initial public offering. Initially Mrs. Arbel
was to pay $.04 per Warrant and resell the Warrants pursuant to a Form S-8
registration statement, however, the Company and Mrs. Arbel have determined that
such price is to low and have decided to increase the price to $1.90 per
Warrant, which may be paid either in cash, or other securities. In June 1996
Mrs. Arbel entered into an employment agreement with the Company, for a period
of five years, pursuant thereto Mrs. Arbel became a Vice-President of the
Company. The employment agreement provides that no other compensation or
remuneration be paid to Mrs. Arbel during its term. See "Recent Developments."
1995 Senior Management Incentive Plan
In June 1995, the Board of Directors adopted the Senior Management
Incentive Plan (the "Management Plan"), which was adopted by stockholder
consent. The Management Plan provides for the issuance of up to 150,000 shares
of the Company's Common Stock in connection with the issuance of stock options
and other stock purchase rights to executive officers and other key employees.
The Management Plan was adopted to provide the Board of Directors with
sufficient flexibility regarding the forms of incentive compensation which the
Company will have at its disposal in rewarding executive officers and directors
who are also employees of the Company or a subsidiary or the Company, who render
significant services to the Company or its subsidiaries. The Board of Directors
intends to offer key personnel equity ownership in the Company through the grant
of stock options and other rights pursuant to the Management Plan to enable the
Company to attract and retain qualified personnel without unnecessarily
depleting the Company's cash reserves. The Management Plan is designed to
augment the Company's existing compensation programs and is intended to enable
the Company to offer executive officers and directors who are also employees of
the Company a personal interest in the Company's growth and success through
awards of either shares of Common Stock or rights to acquire shares of Common
Stock.
9
<PAGE>
A total of 150,000 shares of Common Stock will be reserved for issuance
under the Management Plan. It is anticipated that awards made under the
Management Plan will be subject to three-year vesting periods, although the
vesting periods are subject to the discretion of the Administrator (as defined
below).
The Management Plan is to be administered by the Board of Directors or a
committee of the Board, if one is appointed for this purpose (the Board or such
committee, as the case may be, will be referred to in the following description
as the "Administrator"). Members of the Board of Directors who are eligible for
awards or have been granted awards may not vote on any matters affecting the
administration of the Management Plan or the grant of any award thereunder.
Subject to the specific provisions of the Management Plan, the Administrator
will have the discretion to determine the recipients of the awards, the nature
of the awards to be granted, the dates such awards will be granted, the terms
and conditions of awards and the interpretation of the Management Plan, except
that any award granted to any employee of the Company who is also a director of
the Company will also be subject, in the event the persons serving as members of
the Administrator of such plan at the time such award is proposed to be granted
do not satisfy the requirements regarding the participation of "disinterested
persons" set forth in Rule 16b-3 ("Rule 16b-3") promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to the approval of an
auxiliary committee consisting of not less than three individuals (all of whom
qualify as "disinterested persons" as defined under Rule 16b- 3. In the event
the Board of Directors deems the formation of an auxiliary committee
impractical, the Board is authorized to approve any award under the Management
Plan. As of the date hereof, the Company has not yet determined who will serve
on such auxiliary committee, if one is required. The Management Plan generally
provides that, unless the Administrator determines otherwise, each option or
right granted under the plan will become exercisable in full upon certain
"change of control" events as described in the plan. If any change is made in
respect of the Common Stock subject to the Management Plan or subject to any
right or option granted under the Management Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Administrator will make appropriate adjustments to the Management Plan and the
number of shares and price per share of Common Stock subject to outstanding
rights or options. Generally, the Management Plan may be amended by action of
the Board of Directors, except that any amendment which would change the class
of securities subject to the plan, increase the total number of shares subject
to such plan, extend the duration of such plan, materially increase the benefits
accruing to participants under such plan, or change the category of persons who
can be eligible for awards under such plan must be approved by the affirmative
vote of the owners of a majority of Common Stock entitled to vote. The
Management Plan permits awards to be made thereunder until June 2005.
Directors who are not otherwise employed by the Company will not be
eligible for participation in the Management Plan. The Management Plan provides
for four types of awards: stock options, incentive stock rights, stock
appreciation rights (including limited stock appreciation rights) and restricted
shares, as described below.
10
<PAGE>
Stock Options
Options granted under the Management Plan may be either incentive stock
options which qualify as such under the Code ("ISOs") or options which do not
qualify under the Code as ISOs ("non-ISOs"). ISOs may be granted at an option
price of not less than 100% of the fair market value of the Common Stock on the
date of grant, except that an ISO granted to any person who owns Common Stock
representing more than 10% of the total combined voting power of all classes of
Common Stock of the Company ("10% Stockholder") must be granted at an exercise
price of at least 110% of the fair market value of the Common Stock on the date
of the grant. The exercise price of non-ISOs may not be less than 85% of the
fair market value of the Common Stock on the date of grant. The Administrator
will determine the exercise period of the options granted which shall be no less
than one year from the date of grant. Non-ISOs may be exercisable for a period
of up to 13 years from the date of grant. ISOs granted to persons other than 10%
Stockholders may be exercisable for a period of up to 10 years from the date of
grant; ISOs granted to 10% Stockholders may be exercisable for a period of up to
five years from the date of grant. The aggregate fair market value (determined
at the time an ISO is granted) of shares of Common Stock that are subject to
ISOs held by a plan participant that may be exercisable for the first time
during each calendar year may not exceed $100,000. The Company granted an option
to purchase 75,000 shares of Common Stock at $8.75 per share to Howard Wertheim,
the president of MMP. The option vest at a rate of one-third upon grant and
one-third each year thereafter.
Payment for shares of Common Stock purchased pursuant to exercise of stock
options may be paid in full in cash, or by certified check or, at the discretion
of the Administrator, (i) by promissory note, (ii) promissory note combined with
cash, (iii) by shares of Common Stock having a fair market value equal to the
total exercise price or (iv) by a combination of items (i)-(iii) above. The
provision that permits the delivery of already owned shares of stock as payment
for the exercise of an option may permit "pyramiding". In general, pyramiding
enables a holder to start with as little as one share of common stock and, by
using the shares of common stock acquired in successive, simultaneous exercises
of the option, to exercise the entire option, regardless of the number of shares
covered thereby, with no additional cash or investment other than the original
share of common stock used to exercise the option.
Upon termination of employment, an optionee will be entitled to exercise
the vested portion of an option for a period of up to three months after the
date of termination, except that if the reason for termination was a discharge
for cause, the option shall expire immediately, and if the reason for
termination was death or permanent disability of the optionee, the vested
portion of the option will remain exercisable for a period of 12 months
thereafter.
11
<PAGE>
Incentive Stock Rights
Incentive stock rights consist of incentive stock units each of which is
equivalent to one share of Common Stock and may be awarded in consideration for
services performed for the Company or any subsidiary. Each incentive stock unit
shall entitle the holder thereof to receive, without payment of cash or property
to the Company, one share of Common Stock in consideration for services
performed for the Company or any subsidiary by the employee, subject to the
lapse of the incentive periods, at which time the Company will issue one share
of Common Stock for each unit awarded upon the completion of each specified
period. If the employment with the Company of the holder of the incentive stock
units terminates prior to the end of the incentive period relating to the units
awarded, the rights will thereupon be null and void, except that if termination
is caused by death or permanent disability, the holder or his/her heirs, as the
case may be, will be entitled to receive a pro rata portion of the shares
represented by the units, based upon that portion of the incentive period which
has elapsed prior to the death or disability.
Stock Appreciation Rights (SARs)
SARs may be granted to recipients of stock options under the Management
Plan. In the discretion of the Board of Directors, SARs may be granted
simultaneously with, or subsequent to, the grant of a related stock option and
may be exercised to the extent that the related option is exercisable, except
that no general SAR (as hereinafter defined) may be exercised within a period of
six months of the date of grant of such SAR and no SAR granted with respect to
an ISO may be exercised unless the fair market value of the Common Stock on the
date of exercise exceeds the exercise price of the ISO. An option holder may be
granted general SARs ("general SARs") or limited SARs ("limited SARs"), or both.
General SARs permit the holder thereof to receive an amount (in cash, shares of
Common Stock or a combination of both) equal to the number of SARs exercised
multiplied by the excess of the fair market value of the Common Stock on the
exercise date over the exercise price of the related option. Limited SARs are
similar to general SARs, except that, unless the Administrator determines
otherwise, they may be exercised only during a prescribed period following the
occurrence of one or more of the following "change of control" transactions: (i)
the approval of the Board of Directors and stockholders of the Company of a
consolidation or merger in which the Company is not the surviving corporation,
the sale of all or substantially all the assets of the Company, or the
liquidation or dissolution of the Company; (ii) the commencement of a tender or
exchange offer for the Company's Common Stock (or securities convertible into
Common Stock) without the prior consent of the Board; (iii) the acquisition of
beneficial ownership by any person or other entity (other than the Company or
any employee benefit plan sponsored by the Company) of securities of the Company
representing 25% or more of the voting power of the Company's outstanding
securities; or (iv) in the event, during any period of two consecutive years or
less, individuals who at the beginning of such period constitute the entire
Board cease to constitute a majority of the Board, unless the election, or the
nomination for election, of each new director is approved by at least a majority
of the directors then still in office.
12
<PAGE>
An SAR holder may exercise his or her SAR rights by giving written notice
of such exercise to the company which specifies the number of shares of Common
Stock involved. The exercise of any portion of either the related stock option
or the tandem SARs will cause a corresponding reduction in the number of shares
remaining subject to the option or the tandem SARs, thus maintaining a balance
between outstanding options and SARs. SARs have the same termination provisions
as the underlying stock options (as described above) in the event an SAR holder
ceases to be an employee of the Company.
Restricted Stock Purchase Agreements
Restricted share agreements provide for the issuance of restricted shares
of Common Stock to eligible participants under the Management Plan. The Board of
Directors may determine the price to be paid by the participant for the shares
or that the shares may be issued for no monetary consideration. The shares
issued shall be subject to restrictions for a stated restricted period during
which the participant must continue employment with the Company in order to
retain the shares. Payment can be made in cash, a promissory note or a
combination of both.
Restricted shares awarded under the Management Plan will be subject to a
period of time designated by the Administrator (the "restricted period") during
which the recipient must continue to render services to the Company before the
restricted shares will become vested. The Administrator may also impose other
restrictions, terms and conditions that must be fulfilled before the restricted
shares may vest.
Upon the grant of restricted shares, stock certificates registered in the
name of the recipient will be issued and such shares will constitute issued and
outstanding shares of Common Stock for all corporate purposes. The holder will
have the right to vote the restricted shares and to receive all regular cash
dividends (and such other distributions as the Administrator may designate,
other than distributions made solely with respect to the restricted shares
("retained distributions")), if any, which are paid or distributed on the
restricted shares, and generally to exercise all other rights as a holder of
Common Stock, except that, until the end of the restricted period: (i) the
holder will not be entitled to take possession of the stock certificates
representing the restricted shares or receive retained distributions and (ii)
the holder will not be entitled to sell, transfer or otherwise dispose of the
restricted shares. A breach of any restrictions, terms or conditions established
by the Administrator with respect to any restricted shares will cause a
forfeiture of such restricted shares.
Upon expiration of the applicable restricted period(s) and the satisfaction
of any other applicable conditions, the restricted shares and any dividends or
other distributions not distributed to the holder (the "retained distributions")
thereon will become vested. Any restricted shares and any retained distributions
thereon which do not so vest will be forfeited to the Company. If prior to the
expiration of the restricted period a holder is terminated without cause or
because of a total disability (in each case as defined in the Management Plan),
or dies, then, (unless otherwise provided in the restricted share agreement
providing for the award of
13
<PAGE>
restricted shares) the restricted period applicable to each award of restricted
shares will thereupon be deemed to have expired. Unless the Administrator
determines otherwise, if a holder's employment terminates prior to the
expiration of the applicable restricted period for any reason other than as set
forth above, all restricted shares and any retained distributions thereon will
be forfeited. Upon forfeiture of any restricted shares, the Company will repay
to the holder thereof any amount the holder originally paid for such shares.
Acceleration of all awards under the Management Plan shares shall occur,
under the provisions of Section 13 the Management Plan, on the first day
following the occurrence of any of the following: (a) the approval by the
stockholders of the Company of an "Approved Transaction"; (b) a "Control
Purchase"; or (c) a "Board Change".
An "Approved Transaction" is defined as (A) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of Common Stock would be converted into cash,
securities or other property other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (B) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (C) the adoption of any plan or proposal for
the liquidation or dissolution of the Company.
A "Control Purchase" is defined as circumstances in which any person (as
such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act),
corporation or other entity (other than the Company or any employee benefit plan
sponsored by the Company) (A) shall purchase any Common Stock of the Company (or
securities convertible into the Company's Common Stock) for cash, securities or
any other consideration pursuant to a tender offer or exchange offer, without
the prior consent of the Board of Directors, or (B) shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the then outstanding securities of
the Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors (calculated
as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire
the Company's securities).
A "Board Change" is defined as circumstances in which, during any period of
two consecutive years or less, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least a majority
of the directors then still in office.
Certain Relationships and Related Transactions
In June 1994, in connection with the incorporation of the Company, European
Ventures Corp. ("EVC") acquired 1,500,000 shares of the Company's Common Stock
for aggregate
14
<PAGE>
consideration of $400,000. Moses Mika, the sole officer, director and
stockholder of EVC is the father of Ilan and Yair Arbel. Between July 1994 and
March 1995, the Company obtained bridge financing (the "Bridge Loan") from
Europe American Capital Corp. ("EACC"), of which Yair Arbel is an officer,
director and sole stockholder, in the amount of $2,500,000. The Bridge Loan was
evidenced by a promissory note dated June 1, 1995 in such principal amount,
bearing interest at the rate of 10% per annum and due and payable on September
30, 1996. In connection with such loan, in July 1994, the Company issued EACC
300,000 shares and 600,000 Warrants for aggregate consideration of $300 and
$600, respectively. On September 28, 1995 EACC converted $1,510,500 principal
amount of the Bridge loan into 285,000 shares of Common Stock and 570,000
Warrants. The sale of the shares of Common Stock, Warrants and shares of Common
Stock issuable upon the exercise of the Warrants issued to EACC were registered
and sold pursuant to the Company's registration statement on Form SB-2 dated
November 9, 1995.
In May 1994, MMP was incorporated in the State of Delaware. Mitchell
Lampert, a partner of Lampert & Lampert, counsel to the Company, was a director
of MMP until June 1995, when he resigned. The current owners of MMP and their
percentage interest is as follows: affiliates of Lampert & Lampert own 22%; Dr.
Bert Spilker owns 22%; Howard Wertheim, D.M.D., the President and sole director
of MMP, owns 22%; and the Company owns 34%, which in June 1995, TransAtlantic
Commerce Corp., a British Virgin Island corporation of which Ilan Arbel is the
sole officer and director, and of which Yair Arbel is the sole stockholder were
received as a capital contribution.
In June 1994, American Eagle Industries Corp. ("American Eagle") sold
110,000 shares, 50,000 shares, 20,000 shares, 10,000 shares and 10,000 shares of
its Common Stock to EACC, Carolyn Seymour Jones, Dorothy Zimmerman, Anita
Friedman and Neil Benedaret, respectively, for consideration of $1,100, $500,
$200, $100 and $100, respectively. Anita Friedman, Neil Benedaret and Dorothy
Zimmerman are all related to each other. The shares owned by EACC were
transferred to the Company as a capital contribution, whereby American Eagle
became a 55% owned subsidiary of the Company.
In July 1994, the stockholders of MMP entered into a stockholders agreement
(i) limiting the resale of shares of Common Stock of MMP by its stockholders
without giving MMP and the other stockholders the right of first refusal on a
pro rata basis (ii) requiring the unanimous consent of the board of directors to
take certain actions including (a) amending MMP's certificate of incorporation
or by-laws, (b) acquisitions, mergers or the dissolution of MMP, (c) discharge
of its officers, (d) sale or lease of assets, (e) borrowing of money by MMP or
any of its officers or directors, (f) the payment of dividends and salaries, (g)
capital expenditures of $50,000 or more or (h) the issuance of additional
shares. The sole member of the board of directors of MMP is Howard Wertheim, and
therefore, Mr. Wertheim controls the operations of MMP.
In July 1994, MMP and Raven Press entered into an agreement, pursuant to
which the CD-ROM version of "Guide to Clinical Trials" and "Patient Recruitment
in Clinical Trials " is being co-published by MMP and Raven Press, with expenses
and profits, if any, to be split equally between the parties. In addition, under
such agreement, the CD-ROM version of
15
<PAGE>
"Medical Dictionary in Six Languages" is being published solely by MMP, with a
15% royalty on gross sales payable to Raven Press.
In March 1995, American Eagle loaned the sum of $135,000 to Dytex Honduras,
S.A. ("Dytex"), an entity located in Honduras which is responsible for dyeing
the fabric provided by the Company. The loan is due on demand and is payable
without interest. As consideration for the loan, Dytex has reduced the Company's
labor rate to $1.30 per pound, which is a reduction of $.50 per pound from its
normal labor rate of $1.80 per pound.
In April 1995, EVC, the principal stockholder of the Company, issued a
subordinated debenture to Euro-Atlantic Securities, Inc., the underwriter of the
Company's initial public offering, in the principal amount of $250,000. The loan
is subordinate to all debts of the underwriter, accrues interest at the rate of
10% per annum and the principal amount and accrued interest is due and payable
on March 31, 1998. A copy of the loan was filed with the NASD in April 1995. On
April 4, 1995 and May 26, 1995, EVC loaned to the Underwriter $50,000 and
$75,000, respectively. The loans accrued interest at 10% per annum and matured
on the later of August 15, 1995 and the completion by the underwriter of its
first public offering in which it acts as an underwriter. These loans were
assigned to an unaffiliated party on June 1, 1995.
In May 1996 the Company acquired 51% of the outstanding shares of common
stock of Video On-Line USA, Inc. ("Video"), a company which has entered into a
letter of intent to purchase from Video Authoring Systems Group, Inc. ("VAS
Group") 51% of its outstanding shares of common stock for $1,000,000. The
Company purchased 51 shares of Video for $100,000 and agreed to loan an
additional $900,000 for the purpose of consummating the purchase of VAS Group.
The $900,000 loan shall be evidenced by a 36 month promissory note accruing
interest at 8% per annum. The Company shall obtain the funds needed for this
venture by obtaining a loan from EVC, the Company's principal stockholder, on
terms not greater that can be obtained from a non-affiliated party.
On May 5, 1996, Video entered into a letter of intent to purchase from the
current stockholders of Software Affiliates, Inc. ("Software") 80% of the issued
and outstanding shares of its common stock for 150,000 shares of the Company's
Common Stock. Additionally, Video agreed to loan to Software an aggregate of
$250,000.
See "Management - Employment Agreement" and "Recent Developments" for
information on the Company's compensation arrangements.
I. AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION
The Board of Directors of the Company have unanimously determined that an
amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of Common Stock is advisable, and accordingly, has voted to
recommend an amendment to the stockholders for adoption. Stockholders are urged
to carefully read the materials that follow as they involve matters of
particular importance. The full text of the Amendment to the Certificate of
Incorporation is set forth in Appendix C to this Information Statement.
16
<PAGE>
Increase In Authorized Common Stock
The Board of Directors has unanimously approved a proposal to amend the
certificate of Incorporation to authorize an increase in the authorized shares
of Common Stock of the Company to 40,000,000 shares from 10,000,000 shares. As
of May 1, 1996, there were 3,005,000 shares of Common Stock issued and
outstanding and 6,450,000 shares reserved for issuance upon the exercise of
options, warrants and other contractual commitments.
The Company desires to aggressively pursue business acquisitions and
opportunities, which may include the issuance of shares of Common Stock and the
expenditure of capital. The Company may require additional capital to sustain
operations and for potential acquisitions. The Board of Directors anticipates it
will investigate and consider acquisitions, joint venture and similar
transactions which may involve a broad range of financial arrangements. The
Board of Directors believes that situations will arise where it is necessary or
advantageous to accept additional equity investment through the sale of Common
Stock. Additionally, the Board believes that the issuance of shares to effect an
acquisition, instead of the payment of the Company's operating revenues is in
the best interests of the Company.
The Board of Directors proposed an amendment to the Company's Certificate
of Incorporation (the "Amendment"), and same was approved by written consent of
the Company's majority stockholder, EVC, to increase the number of authorized
shares of Common Stock after such Amendment to 40,000,000 shares. The additional
shares of Common Stock being authorized by the Amendment would enable the
Company to proceed with financing and acquisition opportunities without the
delay and expense associated with the holding of a special meeting or soliciting
the consent or approval of stockholders at the time such additional shares are
needed, except as required by any regulatory authority.
The Company has no current plans, or commitments for the issuance of any
Common Stock, except as described herein. However, the Board may consider
transactions involving the sale or issuance of Common Stock. Accordingly, the
Board of Directors considers it desirable to have additional shares of Common
Stock available to provide the Company with increased flexibility in structuring
possible future financings and acquisitions and in meeting other corporate needs
which may arise.
Amendment Proposed by the Board of Directors
The full text of the Amendment to Article FOURTH is annexed hereto as
Appendix A to this Information Statement. The following description of the
amendment is qualified in its entirety by reference to Article FOURTH of
Appendix A.
The Company's Articles of Incorporation currently authorizes the issuance
of 10,000,000 shares of Common Stock. As of May 1, 1996, the Company has
outstanding 3,005,000 shares of Common Stock. As of such date, there was also
reserved for issuance upon the conversion or exercise of various securities of
the Company 6,300,000 shares of Common Stock, leaving a total of 9,305,000
shares authorized, unissued and unreserved shares of Common Stock available for
future issuances.
17
<PAGE>
The number of authorized shares of Common Stock after the Amendment will
represent an increase of 30,000,000 shares of Common Stock over and above the
10,000,000 shares of Common Stock currently authorized.
Consequences of the Amendment
Stockholders should note that certain disadvantages may result from the
adoption of the amendment. Such disadvantages may include a significant
reduction in their interest in the Company with respect to earnings per share,
voting, liquidation, value and book and market value per share if the additional
authorized shares of Common Stock are issued. While not having such purpose, the
amendment could have the effect of deterring a future takeover attempt which the
majority of stockholders may deem to be in their best interest. Such event would
arise if the Board of Directors deemed it in the best interest of the Company to
issue an option to purchase Common Stock, a security convertible into shares of
Common Stock or shares of Common Stock to a party friendly to management in an
amount that would make it less likely for an unfriendly purchase to attempt an
acquisition of shares by tender offer or other purchase. If a majority in voting
power of the current stockholders desire a takeover or change in control of the
Company, and if such takeover or change were opposed by the Board of Directors,
the additional shares of Common Stock could possibly be used by the Company to
thwart the desires of the majority.
Members of the Board of Directors may have a conflict in proposing
this amendment, and such amendment may operate to the disadvantage of
stockholders by reducing the likelihood of a hostile takeover of the Company
which may result in a change in the membership of the Board of Directors.
FINANCIAL INFORMATION
A COPY OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB FOR THE SIX MONTHS
ENDED MARCH 31, 1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION HAS BEEN
FURNISHED AS A PART OF THIS INFORMATION STATEMENT, WITHOUT THE ACCOMPANYING
EXHIBITS TO THE COMPANY'S STOCKHOLDERS. ANNUAL AND QUARTERLY REPORTS SHALL BE
FURNISHED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR SENT TO
MULTIMEDIA CONCEPTS INTERNATIONAL, INC., 448 WEST 16TH STREET, NEW YORK, NY
10011.
By Order of the Board of Directors,
Sheikhar Boodram
Secretary
June 6, 1996
18
APPENDIX C
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
Under Section 242 of the Delaware Corporation Law:
The undersigned, for the purpose of amending the Certificate of
Incorporation of MULTIMEDIA CONCEPTS INTERNATIONAL, INC., does hereby certify
and set forth:
FIRST:
The name of the Corporation is
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
SECOND:
The Certificate of Incorporation was filed by the Department of State on
June 6, 1994.
THIRD:
The amendment of the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to authorize an increase in the
authorized number of shares of Common Stock from 10,000,000 to 40,000,000
shares, as follows:
The Certificate of Incorporation of this Corporation are amended by
changing "Article IV", so that, as amended, said Article shall read as follows:
"FOURTH:
The amount of the total authorized capital stock of this
Corporation is FORTY MILLION (40,000,000) shares of
Common Stock, par value $.001 per share."
<PAGE>
FOURTH:
The amendment to the Certificate of Incorporation of the Corporation set
forth above was adopted by written consent of the Corporation's majority
shareholder on the 15th day of May.
IN WITNESS WHEREOF, the undersigned President of this Corporation has
executed this Certificate of Amendment on this 24th day of June, 1996.
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
--------------------------------------
Sheikhar Boodram, President
2
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 33-94484-NY
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3835325
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
448 West 16th Street, New York, NY 10011
(Address of principal executive offices)
(212) 675-6666
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No __
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $.001 par value. 3,005,000 shares outstanding as of March 31, 1996
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
PART 1. Financial Information
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - March 31, 1996 (Unaudited)
and September 30, 1995 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Six and Three Months Ended March 31, 1996 and 1995 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Six and Three Months Ended March 31, 1996 and 1995 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6. - 7.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8. - 9.
PART 2. Other Information 10.
SIGNATURES 11.
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ASSETS -
March 31, September 30
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,522,277 $ 2,207
Accounts receivable - net of allowances for doubtful accounts of $14,921 935,585 603,715
Inventories 650,000 1,785,189
Advances to affiliate (Note 2) 215,000 --
Loan receivable - officer -- 257,222
Prepaid expenses and other current assets 29,500 29,500
----------- -----------
TOTAL CURRENT ASSETS 4,352,362 2,677,833
----------- -----------
FIXED ASSETS:
Furniture and fixtures 11,547 11,547
Machinery and equipment 17,814 17,814
----------- -----------
29,361 29,361
Less: accumulated depreciation 7,977 5,040
----------- -----------
21,384 24,321
----------- -----------
OTHER ASSETS:
Security deposits 34,684 34,684
Deferred offering costs (Note 4) -- 145,000
Cost in excess of net assets acquired - net of accumulated
amortization 25,667 26,667
----------- -----------
60,351 206,351
----------- -----------
$ 4,434,097 $ 2,908,505
=========== ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 268,078 $ 502,298
Accrued expenses and other liabilities 65,694 64,788
----------- -----------
TOTAL CURRENT LIABILITIES 333,772 567,086
----------- -----------
LONG-TERM DEBT PAYABLE TO AFFILIATE (Note 3) 99,710 989,500
----------- -----------
MINORITY INTEREST IN SUBSIDIARY (Note 1) -- --
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (Notes 3 and 4):
Common stock, $.001 par value; 10,000,000 shares authorized, 3,005,000 and
2,085,000 shares issued and outstanding at
March 31, 1996 and September 30, 1995, respectively 3,005 2,085
Additional paid-in capital 5,675,449 1,909,315
Retained earnings (deficit) (1,677,839) (559,481)
----------- -----------
4,000,615 1,351,919
----------- -----------
$ 4,434,097 $ 2,908,505
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- --------------------------
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 1,890,411 $ 2,100,889 $ 1,973,442 $ 3,801,779
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 2,536,690 1,932,792 2,609,600 3,497,585
Operating expenses 224,100 216,339 453,185 444,678
----------- ----------- ----------- -----------
2,760,790 2,149,131 3,062,785 3,942,263
----------- ----------- ----------- -----------
(LOSS) FROM OPERATIONS (870,379) (48,242) (1,089,343) (140,484)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (16,210) (59,047) (40,948) (118,095)
Interest and other income (expense) 8,119 (11,468) 11,933 (10,936)
----------- ----------- ----------- -----------
(8,091) (70,515) (29,015) (129,031)
----------- ----------- ----------- -----------
(LOSS) BEFORE MINORITY INTERESTS (878,470) (118,757) (1,118,358) (269,515)
Minority interests (Note 1) -- -- -- --
----------- ----------- ----------- -----------
(LOSS) BEFORE PROVISION (CREDIT)
FOR INCOME TAXES (878,470) (118,757) (1,118,358) (269,515)
Provision (credit) for income taxes -- -- -- --
----------- ----------- ----------- -----------
NET (LOSS) $ (878,470) $ (118,757) $(1,118,358) $ (269,515)
=========== =========== =========== ===========
(LOSS) PER COMMON SHARE (Note 5) $ (.30) $ (.06) $ (.49) $ (.13)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
(Note 5) 2,929,725 2,085,000 2,303,798 2,085,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------
March 31,
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(1,118,358) $ (269,515)
Adjustments to reconcile net (loss) to net cash (used for) operating activities:
Depreciation of fixed assets 2,937 663
Amortization of excess of costs over net assets acquired 1,000 1,000
Change in assets and liabilities:
(Increase) decrease in accounts receivable (331,870) 691,352
Decrease (increase) in inventories 1,135,189 (179,367)
(Increase) in loan to supplier -- (135,000)
(Increase) in prepaid expenses and other current assets -- (14,006)
(Decrease) in accounts payable (234,220) (235,929)
Decrease in accrued expenses and other liabilities 906 10,419
----------- -----------
Net cash (used for) operating activities (544,416) (130,383)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans repaid by officers 257,222 --
Advances to affiliate (215,000) --
Purchases of fixed assets -- (11,546)
Security deposits paid -- (14,684)
----------- -----------
Net cash provided by (used for) investing activities 42,222 (26,230)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock and warrants 3,912,054 --
Expenses associated with initial public offering -- (145,000)
Loans (repaid to) received from affiliate (889,790) 290,546
----------- -----------
Net cash provided by financing activities 3,022,264 145,546
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,520,070 (11,067)
Cash and cash equivalents, at beginning of year 2,207 21,333
----------- -----------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 2,522,277 $ 10,266
=========== ===========
SUPPLEMENTAL INFORMATION:
Taxes paid $ -- $ --
Interest paid -- --
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of
Multimedia Concepts International Inc. ("the Company") and its 55%
owned subsidiary, American Eagle Industries Corp. "Industries" and
its wholly owned subsidiary, Match II, Inc. Through March 31, 1996
losses applicable to the minority shareholders exceeded their
interest in Industries, which was reduced to zero, and as such,
excess losses were charged against the operations of the Company.
Future earnings attributable to the minority interest in Industries,
if any, will first be credited to the operations of the Company, to
the extent that such excess losses were previously absorbed by the
Company. Industries began operations in August 1994.
All intercompany transactions and balances have been eliminated on
consolidation.
In the opinion of management the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly the financial position of the Company as of March 31, 1996,
the statements of operations for the three and six month periods
ended March 31, 1996 and 1995 and the statements of cash flows for
the six month periods ended March 31, 1996 and 1995.
It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto of the
Company, included in its registration statement on Form SB- 2, which
became effective on November 9, 1995 and which is incorporated
herein by reference.
The results of operations for the three and six month periods ended
March 31, 1996, should not be regarded as necessarily indicative of
the results that may be expected for the full year.
NOTE 2 - ADVANCES TO AFFILIATE:
The Company owns 34% of the issued and outstanding stock of Multi
Media Publishing Corp. ("MMP"), a development stage company. As of
March 31, 1996, the Company had advanced $215,000 to this affiliate.
NOTE 3 - DUE TO AFFILIATE:
On September 28, 1995, an affiliate to whom the Company owed
$2,500,000, agreed to convert a portion of this receivable to equity
in the Company. In exchange for a reduction of $1,510,500 in the
amount it owed the affiliate, the Company agreed to issue 285,000
shares of common stock at $5.00 per share and 570,000 redeemable
common stock warrants at $.15 per warrant. These prices are the same
as the price offered to the public in an initial public offering
(see Note 4).
As of March 31, 1996, the Company owed this affiliate $99,710.
Interest is being charged at an annual rate of 10%.
6
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - EQUITY FINANCING:
In January 1996, the Company, through its underwriter, successfully
completed an initial public offering of 920,000 shares of common
stock (including the underwriter's over allotment) at a price of
$5.00 per share together with two warrants for each share, at a
price of $.15 per warrant.
The net proceeds to the Company from the sale of the common stock
and warrants offered, after deducting underwriting discounts and
commissions and other expenses of the offering were approximately
$3,912,000.
NOTE 5 - EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share has been computed on the basis of the
weighted average number of common shares and common equivalent
shares outstanding during each period presented.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of significant
factors which have affected the registrant's financial position and
operations during the period ended March 31, 1996.
Multimedia Concepts International, Inc. (the "Company") is a
Delaware corporation which was organized in June 1994 under the name
U.S. Food Corporation; its name was changed to its present name in
June 1995. The Company acquired fifty-five (55%) percent of the
capital stock of American Eagle Industries Corp. ("Industries") in
June, 1994. In June 1994, Industries acquired 100% of the issued and
outstanding shares of common stock of Match II, Inc. The Company
also acquired thirty-four (34%) percent of the issued and
outstanding capital stock of Multi Media Publishing Corp. ("MMP"),
in June 1995.
Industries designs and manufactures a line of private label knit
tops predominantly for men and boys, including two types of t-shirts
(one with a pocket and one without) and two types of polo shirts
(one with a button collar and one without).
American Eagle also manufactures a lightweight denim jacket.
Match II sells its own brand name of ladies tops and coordinates
under the tradename "Match II". The Match II garments are sold
nationally in boutique stores and specialty chain stores.
MMP is a development stage entity which has to date completed the
production of two computer compact disc read only memory discs
("CD-ROM"), which are CD-ROM versions of three clinical books.
The financial information presented herein includes: (i) Balance
sheets as of March 31, 1996 and September 30, 1995, (ii) Statements
of operations for the three and six month periods ended March 31,
1996 and 1995 and (iii) Statements of cash flows for the six month
periods ended March 31, 1996 and 1995.
Results of Operations
Sales for the three and six months ended March 31, 1996 were
$1,890,000 and $1,973,000, respectively as compared to $2,101,000
and $3,802,000, respectively for the comparable periods of the prior
year. This decrease was due to a reduction in sales to the Company's
most significant customer, K-Mart. There is no assurance that K-Mart
will resume buying from the Company or that the Company will be able
to replace this volume of sales lost with another customer.
The Company's overhead costs remained fairly constant when comparing
the three and six months ended March 31, 1996 to March 31, 1995.
Interest expense decreased when comparing the three and six months
ended March 31, 1995 to March 31, 1996. For the comparable three
month periods interest costs decreased from $59,000 to $16,000. For
the six month periods the decrease was from $118,000 and $41,000, as
the Company repaid all outstanding loans from the proceeds of its
initial public offering (see below).
8
<PAGE>
For the three months ended March 31, 1996 the Company reflected a
loss of approximately $878,000 or $.30 per share. For the three
months ended March 31, 1995 the Company reflected a loss of
approximately $119,000 or $.06 per share. The higher loss for 1996
was a result of having a much higher cost of sales during the 1996
period. For the six months ended March 31, 1996, the Company
reflected a loss of $1,118,000 ($.49 per share) as compared to the
six months ended March 31, 1995 whereby the Company reflected a loss
of $270,000 or $.13 per share. The higher 1996 loss was due to a 48%
sales decline and to a higher cost of sales.
Liquidity and Capital Resources
At March 31, 1996 the Company had cash of $2,522,000, working
capital of $4,019,000 and long-term debt of $99,710. At September
30, 1995 the Company had cash of $2,000, working capital of
$2,111,000 and long-term debt of $989,000.
The significant improvement between September 30, 1995 and March 31,
1996 was due to the fact that in January, 1996, the Company, through
its underwriter, successfully completed an initial public offering
of 920,000 shares, including the underwriter's overallotment, of its
common stock (together with two warrants for each share) and
received net proceeds of approximately $3,912,000.
The Company currently has made no material capital commitments and
none are currently contemplated.
Management believes that the funds it presently has available
(primarily from its IPO) are significant for at least the ensuing
twelve month period.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material legal proceedings against the Company or
in which any of their property is subject.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securityholders.
None.
Item 5. Other Reports.
On May 5, 1996 the Company acquired 51% of the outstanding shares of common
stock of Video On-Line USA, Inc., a Delaware corporation ("Video") for $100,000
and a commitment to loan an additional $900,000 for the purpose of acquiring 51%
of the shares of common stock of Video Authoring Systems Group, Inc. ("VAS
Group"). Video entered into a letter of intent to purchase from VAS Group 51% of
its outstanding shares of common stock for $1,000,000. The $900,000 loan when
issued shall accrue interest at the rate of 8% per annum, maturing 36 months
from issuance.
The board of directors authorized the Company to borrow money from European
Ventures Corp. ("EVC") a principal stockholder of the Company, of which Moses
Mika, father of Ilan Arbel Yair Arbel, directors of the Company, is the sole
officer, director and shareholder, in order to obtain necessary funds to provide
the loan to Video. The terms of such loan shall be negotiated at the time of
issuance, which loan shall not be on better terms than may be obtained from an
unaffiliated.
VAS Group manufactures and sells computer hardware systems used in scanning
and converting to digital format existing film and video sources that results in
greatly enhanced projection and playback quality from computer to video
transfer.
VAS Group's current products include devices for high resolution computer
to NTSC/PAL conversion, HDTV to NTSC/PAL downconversion, animation control, and
analog NTSC/PAL encoding.
10
<PAGE>
The RTC product is a real time converter for high resolution computer to
NTSC/PAL video. The RTC HD3:2 makes HDTV compatible with NTSC/PAL for
broadcasting into homes without an HDTV monitor. The RTC Windows product is a
graphical user interface for our RTC and RTC HD3:2 products, which controls all
functions of the devices. Current customers of VAS Group products include the
Microsoft Corporation and Disney.
In April 4, 1996 in the Company entered into an agreement with Ilan Arbel,
whereby the Company granted Mr. Arbel an option to purchase 1,900,000 Warrants
at $.04 per Warrants and an option to purchase 200,000 shares of Common Stock at
$3.70 per share. The Company filed a Form S-8 registration statement registering
the sale of the securities underlying these options. Mr Arbel exercised the
option to purchase the Warrants in full on April 15, 1996 and subsequently
resold all the Warrants pursuant to the Form S-8 registration statement.
In May 1996, the Company amended its compensation arrangement with Mr.
Arbel terminating the option to purchase shares of Common Stock and issued an
option to purchase an additional 1,000,000 Warrants at $.04 per Warrant. Mr
Arbel exercised the option to purchase the Warrants in full on May 6, 1996 and
subsequently resold all the Warrants pursuant to the amended Form S-8
registration statement.
Item 6. Exhibits and Reports:
(a) Exhibits
10.13 - Compensation Agreement with Ilan Arbel. (See Exhibit 4 to S-8 registra-
tion statement dated April 9, 1996, file No.333-4328).
10.14 - Amended Compensation Agreement with Ilan Arbel. (See Exhibit 4 to S-8
registration statement dated May 2, 1996, file No.333-4328).
(b) Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 6, 1996 MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
By: /s/ Sheikhar Boodram
------------------------------
Sheikhar Boodram, President
12
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31, Ended March 31,
------------------------ ---------------------------
1996 1995 1996 1995
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
PRIMARILY EARNINGS:
NET (LOSS) $ (878,470) $ (118,757) $ (1,118,358) $ (269,515)
========== ========== ============ ===========
SHARES:
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,929,725 2,085,000 2,303,798 2,085,000
========== ========== ============ ===========
PRIMARY EARNINGS (LOSS) PER
COMMON SHARE $ (.30) $ (.06) $ (.49) $ (.13)
========== ========== ============ ===========
</TABLE>
13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the 15th day of May, 1996 by and between Multimedia Concepts International,
Inc., a Delaware corporation (the "Company"), and Ilan Arbel, an individual
("Executive").
In consideration of the mutual covenants and conditions hereinafter set
forth, the parties hereto agree as follows:
1. Term. The Company hereby employs Executive, and Executive hereby accepts
employment hereunder, for a term of five (5) years (the "Term") commencing on
the date hereof, subject to prior termination by mutual agreement of the parties
hereto or hereinafter provided.
2. Position and Duties. Executive shall as of this date become and serve as
the Chief Executive Officer and President of the Company and shall have such
powers and duties as may from time to time be prescribed by the Board of
Directors or bylaws of the Company. Executive shall provide services hereunder
for a minimum of 20 hours per week during the Term.
3. Outside Business Activities Precluded. During his employment, Executive
shall devote his reasonable energies, interest, abilities and productive time to
the performance of his duties under this Agreement. The Company is aware of Mr.
Arbel's other business interests.
4. Compensation. The Executive has recieved in anticipation of the
execution of this agreement an option to purchase from the Company 2,900,000
common stock purchase warrants (the "Warrants"), which Warrants are to be
identicle to the Warrants issued in the Company's initial public offering.
Initially the Executive paid $.04 per Warrant and resold the Warrants pursuant
to a Form S-8 registration statement, however, the Company and the Executive
hereby have determined that such price was to low and have decided to increase
the price to $1.90 per Warrant, whereby Mr. Arbel owes the Company $5,394,000,
which may be paid either in cash, or other securities. The term securities shall
be defined as any debt or equity security or convertible security, the
underlying security of which, is traded on either a national securities exchange
or on the Nasdaq Stock Market. The price for which the securities may be
exchanged to reduce the debt, shall be 50% of the average bid price of the
securities or the underlying securities of a convertible security, for a period
of ninety days ending five days prior to the exchange. The Executive shall
receive no other compensation or remuneration during the term of this Agreement.
<PAGE>
5. Confidentiality. Executive acknowledges that the Company holds as
confidential certain information, material and knowledge respecting the intimate
and confidential affairs of the Company in the various phases of its business,
including, but not limited to, trade secrets, techniques, marketing plans,
strategy, forecasts, customer lists and mailing lists ("Proprietary
Information"). Subject to Section 9 hereof, Executive hereby agrees as follows:
(a) All Proprietary Information shall be the sole property of the
Company and its assigns. Executive hereby assigns to the Company any rights
he may have or acquire in all Proprietary Information during his
performance of services hereunder.
(b) Executive represents that his performance of all the terms of this
Agreement as an employee of the Company does not and will not breach any
agreement to keep in confidence Proprietary Information acquired by him in
confidence or in trust prior to his employment. Executive has not entered
into, and agrees that he will not enter into, any agreement, either written
or oral, in conflict herewith.
(c) Executive agrees not to disclose to any person, other than in
furtherance of the Company's business, or use, other than in the Company's
business, any Proprietary Information, either during or after his
employment or the termination of this Agreement, except with the express
written permission of the Board of Directors of the Company. Executive
understands that information and materials received in confidence by
Executive from third parties either within or outside of the Company with
regard to the business of the Company is included within the meaning of
this Section 6. Upon termination of his employment, Executive agrees not to
make copies of written Proprietary Information and Executive agrees to
return all written Proprietary Information to the Company.
6. Non-Competition.
6.1 Definitions. For the purpose of this Section 6 and Section 7 hereof,
the following terms shall have the meanings ascribed to them below:
(a) "Covenant Term" shall mean a period beginning on the date hereof
and ending on the later of (A) the date which is five years from the date
hereof, or (B) the date which is one year after the date on which this
Agreement, or Executive's employment hereunder, is terminated.
(b) "Covenant Territory" shall mean the States of U.S.
2
<PAGE>
(c) "Business of the Company" shall mean the business children's
entertainment.
(d) "Future Similar Business of the Company" shall mean any and all
business conducted by or engaged in by the Company, other than the Business
of the Company, during the period of Executive's employment hereunder.
6.2 Covenant. During the Covenant Term, Executive shall not, without the
prior written consent of the Company, directly or indirectly, (a) own (except
that Executive may own not more than one percent (1%) of the equity securities
or securities convertible into equity securities of any corporation or other
entity the securities of which are traded on a national stock exchange or listed
on the National Association of Securities Dealers Automated Quotation System),
manage, operate, join, control or participate in the ownership, management,
operation or control of, or be connected as a promoter, joint venturer, agent,
director, officer, employee, partner, consultant or otherwise with, any profit
or non-profit, business or organization which directly or indirectly, engages in
the Business or Future Similar Business in the Covenant Territory or which
otherwise, directly or indirectly, competes with the Business or Future Similar
Business in the Covenant Territory.
6.3 Interpretation of Unenforceable Provision. The parties intend for the
provisions of this Section 6 to be construed, interpreted, and enforced to the
maximum extent permitted by law. The parties acknowledge and agree that they
have both participated in the preparation of this Agreement and it shall not be
construed or interpreted against either party on the basis that it was prepared
by such party. In the event that any provision of this Section 6, or part
thereof, shall be determined by any court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect for any reason, such provision
shall be revised and/or interpreted to make it enforceable to the maximum extent
in all other respects as to which it may be enforceable, all as determined by
such court in such action. The parties intend for the covenant of Executive set
forth in this Section 6 to be a series of separate covenants, one for each and
every city, county, state or province in the Covenant Territory.
7. Non-Solicitation. Executive agrees that during the Covenant Term, he
will not, directly or indirectly, (a) induce any customer of the Company or its
successors to patronize any business similar to the Business or Future Similar
Business; (b) request or advise any customer (including, without limitation,
distributors) or supplier of the Company or its successors to withdraw, curtail
or cancel such customer's or supplier's business with the Company or its
successors; (c) disclose to any other person or corporation the name or
addresses of any of the customers of the Company or its
3
<PAGE>
successors; or (d) induce or encourage any employee to terminate his
relationship with the Company.
8. Termination.
8.1 Death. This Agreement shall terminate immediately upon Executive's
death, unless sooner terminated hereunder.
8.2 Termination by the Company With Cause. The Company shall have the right
to terminate Executive's employment hereunder for Cause. For purposes of this
Agreement, "Cause" means (a) a breach of Section 3 hereof; (b) subject to
Section 8.4 hereof, the failure by Executive substantially to perform his duties
or obligations hereunder, other than Section 3 hereof, within 15 days after
notice of such failure; (c) Executive engaging in misconduct which is materially
injurious to the Company; (d) Executive engaging in any act that in any way has
a direct, substantial, and adverse effect on the Company's reputation; (e)
habitual drunkenness; (f) unlawful drug use; (g) Executive making payments or
gifts to clients not approved by the Board of Directors or within corporate
practice; (h) Executive receiving payments or gifts in excess of $250.00 from
customers or suppliers for Executive's own benefit; (i) Executive committing a
crime of moral turpitude; or (j) Executive's conviction by, or entry of a plea
of guilty or nolo contendere in, a court of competent jurisdiction of a crime
constituting a felony.
8.3 No Termination by the Company Without Cause. The Company shall not have
the right to terminate Executive's employment hereunder without Cause.
8.4 Disability. If Executive shall be unable to perform his services
hereunder by reason of illness or other incapacity, his failure so to perform
his duties will not be grounds for terminating his employment for Cause by the
Company; provided, however, should the period of such incapacity exceed three
months, or if on 50% or more of the normal working days throughout six (6)
consecutive months Executive is unable to perform his duties fully due to such
incapacity, then the Company may terminate his employment hereunder.
9. General Provisions.
9.1 Notices. All notices required to be given under the terms of this
Agreement shall be in writing and shall be deemed to have been duly given only
if delivered to the addressee in person or mailed by certified mail, return
receipt requested, to the address as included in the Company's records or to any
such other address as the party to receive the notice shall advise by due notice
given in accordance with this paragraph. Any party hereto may change its or his
address for the purpose of
4
<PAGE>
receiving notices, demands and other communications as herein provided, by a
written notice given in the manner aforesaid to the other party hereto.
9.2 Benefit of Agreement and Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
executors, administrators, successors and assigns; provided, however, that
Executive may not assign any of his rights or duties hereunder except upon the
prior written consent of the Board of Directors of the Company.
9.3 Remedies.
(a) Executive and the Company acknowledge the services to be rendered
by Executive hereunder are of a special, unique, unusual, extraordinary and
intellectual character, and in this regard, Executive and the Company agree
that upon a termination by Executive of his employment, the Company shall
have the right to any and all damages the Company may have as a result of
such termination and to which the Company may be entitled at law or in
equity.
(b) Upon a breach of any of Sections 6, 7 or 8 hereof by Executive,
the Company shall be entitled to injunctive relief, both pendente lite and
permanently, without posting a bond or other security or proving actual
damages, in addition to any other remedy it may have at law.
9.4 Applicable Law. This Agreement is made in and is to be governed by and
construed under the laws of the State of New York.
9.5 Captions. The captions appearing at the commencement of the sections
hereof are descriptive only and for convenience of reference only and are not
intended to be part of or to effect the meaning or interpretation of this
Agreement.
9.6 Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
9.7 Entire Agreement. This Agreement contains the entire agreement of the
parties, and supersedes any and all other agreements, either oral or in writing,
between the parties hereto with respect to the subject matter hereof. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, oral or otherwise, have been made by either party, or anyone
acting on behalf
5
<PAGE>
of either party, which are not embodies herein, and that no other agreement,
statement or promise not contained in this Agreement shall be valid or binding.
9.8 Amendments. This Agreement may be modified or amended only by an
agreement in writing signed by the Company and Executive.
9.9 Waiver. No waiver of any provision hereof shall be valid unless made in
writing and signed by the party making the waiver. No waiver of any provision of
this Agreement shall constitute a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver.
9.10 Attorneys' Fees. Should any party hereto institute any action or
proceeding at law or in equity, or in connection with any arbitration, to
enforce any provision of this Agreement, including an action for declaratory
relief, or for damages by reason of an alleged breach of any provision of this
Agreement, or otherwise in connection with this Agreement, or any provision
hereof, the prevailing party shall be entitled to recover from the losing party
or parties reasonable attorneys' fees and costs for services rendered to the
prevailing party in such action or proceeding.
9.11 Representations and Warranties. Each party hereto represents and
warrants that it or he has the power and authority to execute and deliver this
Agreement and to perform its or his obligations hereunder.
9.12 Compliance with Laws and Policies. Executive agrees that he will at
all times comply strictly with all applicable laws and all current and future
policies of the Company.
9.13 Arbitration. Any dispute or controversy arising under or in connection
with this Agreement, other than matters pertaining to injunctive relief,
including, without limitation, temporary restraining orders, preliminary
injunctions and permanent injunctions, shall, upon the written demand of either
party served upon the other party, be submitted to arbitration. Such arbitration
shall be held in the City of New York, New York, and conducted in accordance
with the Rules of the American Arbitration Association.
IN WITNESS WHEREOF, this Agreement is executed on the day and year first
above written.
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
By: /s/ Sheikhar Boodram
-----------------------------
6
<PAGE>
Name:
Title:
EXECUTIVE
By: /s/ Ilan Arbel
-----------------------------
Ilan Arbel
7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the 15th day of May, 1996 by and between Multimedia Concepts International,
Inc., a Delaware corporation (the "Company"), and Rivka Arbel, an individual
("Executive").
In consideration of the mutual covenants and conditions hereinafter set
forth, the parties hereto agree as follows:
1. Term. The Company hereby employs Executive, and Executive hereby accepts
employment hereunder, for a term of five (5) years (the "Term") commencing on
the date hereof, subject to prior termination by mutual agreement of the parties
hereto or hereinafter provided.
2. Position and Duties. Executive shall as of this date become and serve as
the Vice-President of the Company and shall have such powers and duties as may
from time to time be prescribed by the Board of Directors or bylaws of the
Company. Executive shall provide services hereunder as shall be required by the
board of directors.
3. Outside Business Activities Precluded. During his employment, Executive
shall devote his reasonable energies, interest, abilities and productive time to
the performance of his duties under this Agreement. The Company is aware of Ms.
Arbel is working for Amigal, Ltd., a clothing manufacturer in Israel.
4. Compensation. The Executive has recieved in anticipation of the
execution of this agreement an option to purchase from the Company up to 600,000
common stock purchase warrants (the "Warrants"), which Warrants are to be
identicle to the Warrants issued in the Company's initial public offering.
Initially the Executive was required to pay $.04 per Warrant and resold the
Warrants pursuant to a Form S-8 registration statement, however, the Company and
the Executive hereby have determined that such price was to low and have decided
to increase the price to $1.90 per Warrant, which may be paid either in cash, or
other securities. The term securities shall be defined as any debt or equity
security or convertible security, the underlying security of which, is traded on
either a national securities exchange or on the Nasdaq Stock Market. The price
for which the securities may be exchanged to purchase the Warrants shall be 50%
of the average bid price of the securities or the underlying securities of a
convertible security, for a period of ninety days ending five days prior to the
exchange. The Executive shall receive no other compensation or remuneration
during the term of this Agreement.
<PAGE>
5. Confidentiality. Executive acknowledges that the Company holds as
confidential certain information, material and knowledge respecting the intimate
and confidential affairs of the Company in the various phases of its business,
including, but not limited to, trade secrets, techniques, marketing plans,
strategy, forecasts, customer lists and mailing lists ("Proprietary
Information"). Subject to Section 9 hereof, Executive hereby agrees as follows:
(a) All Proprietary Information shall be the sole property of the
Company and its assigns. Executive hereby assigns to the Company any rights
he may have or acquire in all Proprietary Information during his
performance of services hereunder.
(b) Executive represents that his performance of all the terms of this
Agreement as an employee of the Company does not and will not breach any
agreement to keep in confidence Proprietary Information acquired by him in
confidence or in trust prior to his employment. Executive has not entered
into, and agrees that he will not enter into, any agreement, either written
or oral, in conflict herewith.
(c) Executive agrees not to disclose to any person, other than in
furtherance of the Company's business, or use, other than in the Company's
business, any Proprietary Information, either during or after his
employment or the termination of this Agreement, except with the express
written permission of the Board of Directors of the Company. Executive
understands that information and materials received in confidence by
Executive from third parties either within or outside of the Company with
regard to the business of the Company is included within the meaning of
this Section 6. Upon termination of his employment, Executive agrees not to
make copies of written Proprietary Information and Executive agrees to
return all written Proprietary Information to the Company.
6. Non-Competition.
6.1 Definitions. For the purpose of this Section 6 and Section 7 hereof,
the following terms shall have the meanings ascribed to them below:
(a) "Covenant Term" shall mean a period beginning on the date hereof
and ending on the later of (A) the date which is five years from the date
hereof, or (B) the date which is one year after the date on which this
Agreement, or Executive's employment hereunder, is terminated.
(b) "Covenant Territory" shall mean the States of U.S.
(c) "Business of the Company" shall mean the business children's
entertainment.
(d) "Future Similar Business of the Company" shall mean any and all
business conducted by or engaged in by the Company, other than the Business
of the Company, during the period of Executive's employment hereunder.
6.2 Covenant. During the Covenant Term, Executive shall not, without the
prior written consent of the Company, directly or indirectly, (a) own (except
that
2
<PAGE>
Executive may own not more than one percent (1%) of the equity securities or
securities convertible into equity securities of any corporation or other entity
the securities of which are traded on a national stock exchange or listed on the
National Association of Securities Dealers Automated Quotation System), manage,
operate, join, control or participate in the ownership, management, operation or
control of, or be connected as a promoter, joint venturer, agent, director,
officer, employee, partner, consultant or otherwise with, any profit or
non-profit, business or organization which directly or indirectly, engages in
the Business or Future Similar Business in the Covenant Territory or which
otherwise, directly or indirectly, competes with the Business or Future Similar
Business in the Covenant Territory.
6.3 Interpretation of Unenforceable Provision. The parties intend for the
provisions of this Section 6 to be construed, interpreted, and enforced to the
maximum extent permitted by law. The parties acknowledge and agree that they
have both participated in the preparation of this Agreement and it shall not be
construed or interpreted against either party on the basis that it was prepared
by such party. In the event that any provision of this Section 6, or part
thereof, shall be determined by any court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect for any reason, such provision
shall be revised and/or interpreted to make it enforceable to the maximum extent
in all other respects as to which it may be enforceable, all as determined by
such court in such action. The parties intend for the covenant of Executive set
forth in this Section 6 to be a series of separate covenants, one for each and
every city, county, state or province in the Covenant Territory.
7. Non-Solicitation. Executive agrees that during the Covenant Term, he
will not, directly or indirectly, (a) induce any customer of the Company or its
successors to patronize any business similar to the Business or Future Similar
Business; (b) request or advise any customer (including, without limitation,
distributors) or supplier of the Company or its successors to withdraw, curtail
or cancel such customer's or supplier's business with the Company or its
successors; (c) disclose to any other person or corporation the name or
addresses of any of the customers of the Company or its successors; or (d)
induce or encourage any employee to terminate his relationship with the Company.
8. Termination.
8.1 Death. This Agreement shall terminate immediately upon Executive's
death, unless sooner terminated hereunder.
8.2 Termination by the Company With Cause. The Company shall have the
right to terminate Executive's employment hereunder for Cause. For purposes of
this Agreement, "Cause" means (a) a breach of Section 3 hereof; (b) subject to
Section 8.4 hereof, the failure by Executive substantially to perform his duties
or obligations
3
<PAGE>
hereunder, other than Section 3 hereof, within 15 days after notice of such
failure; (c) Executive engaging in misconduct which is materially injurious to
the Company; (d) Executive engaging in any act that in any way has a direct,
substantial, and adverse effect on the Company's reputation; (e) habitual
drunkenness; (f) unlawful drug use; (g) Executive making payments or gifts to
clients not approved by the Board of Directors or within corporate practice; (h)
Executive receiving payments or gifts in excess of $250.00 from customers or
suppliers for Executive's own benefit; (i) Executive committing a crime of moral
turpitude; or (j) Executive's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent jurisdiction of a crime constituting a
felony.
8.3 No Termination by the Company Without Cause. The Company shall not
have the right to terminate Executive's employment hereunder without Cause.
8.4 Disability. If Executive shall be unable to perform his services
hereunder by reason of illness or other incapacity, his failure so to perform
his duties will not be grounds for terminating his employment for Cause by the
Company; provided, however, should the period of such incapacity exceed three
months, or if on 50% or more of the normal working days throughout six (6)
consecutive months Executive is unable to perform his duties fully due to such
incapacity, then the Company may terminate his employment hereunder.
9. General Provisions.
9.1 Notices. All notices required to be given under the terms of this
Agreement shall be in writing and shall be deemed to have been duly given only
if delivered to the addressee in person or mailed by certified mail, return
receipt requested, to the address as included in the Company's records or to any
such other address as the party to receive the notice shall advise by due notice
given in accordance with this paragraph. Any party hereto may change its or his
address for the purpose of receiving notices, demands and other communications
as herein provided, by a written notice given in the manner aforesaid to the
other party hereto.
9.2 Benefit of Agreement and Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
executors, administrators, successors and assigns; provided, however, that
Executive may not assign any of his rights or duties hereunder except upon the
prior written consent of the Board of Directors of the Company.
9.3 Remedies.
(a) Executive and the Company acknowledge the services to be rendered
by Executive hereunder are of a special, unique, unusual, extraordinary and
intellectual character, and in this regard, Executive and the Company agree
that upon a
4
<PAGE>
termination by Executive of his employment, the Company shall have the
right to any and all damages the Company may have as a result of such
termination and to which the Company may be entitled at law or in equity.
(b) Upon a breach of any of Sections 6, 7 or 8 hereof by Executive,
the Company shall be entitled to injunctive relief, both pendente lite and
permanently, without posting a bond or other security or proving actual
damages, in addition to any other remedy it may have at law.
9.4 Applicable Law. This Agreement is made in and is to be governed by and
construed under the laws of the State of New York.
9.5 Captions. The captions appearing at the commencement of the sections
hereof are descriptive only and for convenience of reference only and are not
intended to be part of or to effect the meaning or interpretation of this
Agreement.
9.6 Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
9.7 Entire Agreement. This Agreement contains the entire agreement of the
parties, and supersedes any and all other agreements, either oral or in writing,
between the parties hereto with respect to the subject matter hereof. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, oral or otherwise, have been made by either party, or anyone
acting on behalf of either party, which are not embodies herein, and that no
other agreement, statement or promise not contained in this Agreement shall be
valid or binding.
9.8 Amendments. This Agreement may be modified or amended only by an
agreement in writing signed by the Company and Executive.
9.9 Waiver. No waiver of any provision hereof shall be valid unless made in
writing and signed by the party making the waiver. No waiver of any provision of
this Agreement shall constitute a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver.
9.10 Attorneys' Fees. Should any party hereto institute any action or
proceeding at law or in equity, or in connection with any arbitration, to
enforce any provision of this Agreement, including an action for declaratory
relief, or for damages by reason of an alleged breach of any provision of this
Agreement, or otherwise in connection with this Agreement, or any provision
hereof, the prevailing party shall be
5
<PAGE>
entitled to recover from the losing party or parties reasonable attorneys'
fees and costs for services rendered to the prevailing party in such action
or proceeding.
9.11 Representations and Warranties. Each party hereto represents and
warrants that it or he has the power and authority to execute and deliver this
Agreement and to perform its or his obligations hereunder.
9.12 Compliance with Laws and Policies. Executive agrees that he will at
all times comply strictly with all applicable laws and all current and future
policies of the Company.
9.13 Arbitration. Any dispute or controversy arising under or in connection
with this Agreement, other than matters pertaining to injunctive relief,
including, without limitation, temporary restraining orders, preliminary
injunctions and permanent injunctions, shall, upon the written demand of either
party served upon the other party, be submitted to arbitration. Such arbitration
shall be held in the City of New York, New York, and conducted in accordance
with the Rules of the American Arbitration Association.
IN WITNESS WHEREOF, this Agreement is executed on the day and year first
above written.
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
By: /s/ Ilan Arbel
-------------------------
Name: Ilan Arbel
Title: President
EXECUTIVE
By: /s/ Rivka Arbel
-------------------------
Rivka Arbel
6
