-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B12P3JwCqFd90QEtazUoTzVbecbo8UFwPiyleydCElwOokBT4ZXdTfS9mHg4Bn/u 7k1x6SFnemM5oxr5+sZMRw== 0001038838-98-000090.txt : 19980515 0001038838-98-000090.hdr.sgml : 19980515 ACCESSION NUMBER: 0001038838-98-000090 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001025707 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 860793960 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 333-16031 FILM NUMBER: 98619766 BUSINESS ADDRESS: STREET 1: 10670 NORTH CENTRAL EXPRESSWAY STE 235 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 214-750-1323, EXT.26 MAIL ADDRESS: STREET 1: 227 SOUTH NINTH AVENUE CITY: POCATELLO STATE: ID ZIP: 83201 FORMER COMPANY: FORMER CONFORMED NAME: LITIGATION ECONOMICS INC DATE OF NAME CHANGE: 19961022 10QSB 1 U.S. Securities and Exchange Commission Washington D.C. 20549 Form 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Quarter Ended March 31, 1998 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 333-16031 EMPIRE COMMUNICATIONS CORPORATION (name of small business issuer as specified in its charter) Nevada 86-0793960 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification No.) 10670 N. Central Expressway, Suite 235, Dallas, Texas 75231 (Address of principal executive offices) Registrant's telephone no., including area code: 214-750-1323 Former name, former address, and former fiscal year, if changed since last report: Litigation Economics, Inc. 227 South Ninth Avenue, Pocatello, ID 83201 Securities registered pursuant to Section 12(b) of the Exchange Act: None Securities registered pursuant to Section 12(g) of the Exchange Act: None Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___. Common Stock outstanding at March 31, 1998: 2,000,000 shares(1) of $.001 par value common stock. ______________________ (1) Does not include 2,350,000 shares of Convertible Preferred Stock outstanding at March 31, 1998. Part 1 Financial Information Item 1 Financial Statements The Financial Statements of the Registrant required to be filed with this 10-QSB Quarterly Report were prepared by management together with Related Notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant.
EMPIRE COMMUNICATIONS CORPORATION (Formerly Litigation Economics, Inc) [Development Stage Company] CONDENSED BALANCE SHEETS [Unaudited] ASSETS Mar. 31, 1998 Dec. 31, 1997 ------------- ------------- CURRENT ASSETS: Cash $ 263,595 $10,434 Accounts Receivable - 8 Notes Receivable 1,250,000 - Total Current Assets 1,513,595 10,442 ---------- ------- PROPERTY AND EQUIPMENT (NET) - 24,680 OTHER ASSETS: Deposits - 125 Total Other Assets - 125 - ------ TOTAL ASSETS $1,513,595 $35,247 ========== ======= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Mar. 31, 1998 Dec. 31, 1997 ------------- ------------- CURRENT LIABILITIES: Accounts payable $594 $2,510 Unearned Revenue - 388 Total Current Liabilities 594 2,898 ---- ----- STOCKHOLDERS' EQUITY (DEFICIT): Preferred Stock; authorized 5,000,000 shares at At $0.001 par value; 2,350,000 shares issued and 2,350 - outstanding Common stock; authorized 50,000,000 shares at 2,000 1,600 $0.001 par value; 2,000,000 shares issued and outstanding Additional paid-in Capital 1,601,691 104,041 Deficit accumulated during the development stage (93,040) (73,292) Total Stockholders' Equity 1,513,001 32,349 ---------- ------- TOTAL LIABILITIES & EQUITY $1,513,595 $35,247 ========== =======
The accompanying notes are an integral part of these financial statements. NOTE: The balance sheet at December 31, 1997 was taken from the audited financial statements at that date and condensed. 2
EMPIRE COMMUNICATIONS CORPORATION (Formerly Litigation Economics, Inc. and Subsidiary) [Development Stage Companies] CONDENSED STATEMENTS OF OPERATIONS [Unaudited] For the Three For the Three From Inception, Months Ended Months Ended Apr. 22, 1995 - March 31, 1998 March 31, 1997 March 31, 1998 -------------- -------------- -------------- REVENUE $13,206 $0.00 $32,740 Cost of Goods Sold (1,200) - (1,200) Total Revenue $12,006 - $31,540 ------- ------- EXPENSES General and Administrative Expenses 17,406 - 106,379 Depreciation 2,313 - 6,060 Total Expenses $19,719 - $112,439 ------- -------- INCOME FROM OPERATION ($7,713) - $80,899 OTHER INCOME: Loss on sale of asset ($12,035) - (12,173) Interest income - - 32 TOTAL OTHER INCOME ($12,035) - ($12,141) NET INCOME ($19,748) - ($93,040) NET LOSS PER SHARE (.001) Nil (.04) Weighted Average Number of Shares Outstanding 2,370,555
The accompanying notes are an integral part of these financial statements. 3
EMPIRE COMMUNICATIONS CORPORATION (Formerly Litigation Economics, Inc.) [A Development Stage Company] Consolidated Statements of Stockholders' Equity Capital In Deficit Accumulated Common Stock Preferred Excess Of During the Shares Amount Shares Amount Par Value Development Stage ------ ------ ------ ------ --------- ----------------- BALANCE, July 31, 1996 -- $ -- -- $ -- $ -- Common stock issued for cash at $0.001 per share 1,000,000 $ 1,000 -- -- -- -- Recapitalization of G.E.C, Inc. 500,000 500 -- -- 4,141 -- Net loss for the period ended December 31, 1996 -- -- -- -- (5,017) BALANCE, December 31, 1996 1,500,000 1,500 -- -- 4,141 (5,017) Common stock issued for cash at $1.00 per share 100,000 100 -- -- 99,900 -- Net loss for the year ended December 31, 1997 -- -- -- -- -- (68,275) BALANCE, 1,600,000 1,600 -- -- 104,041 (73,292) December 31, 1997 Common stock issued as 2:1 forward split as 100% stock dividend 1,600,000 1,600 -- -- (1,600) -- Common stock surrendered to treasury shares pursuant to sale agreement of G.E.C., Inc. (1,200,000) (1,200) -- -- -- -- Preferred stock issued for cash at $0.6382 per share -- -- 2,350,000 2,350 1,497,650 -- Net loss for the quarter ended March 31, 1998 -- -- -- -- -- (19,748) BALANCE, March 31, 1998 2,000,000 2,000 2,350,000 2,350 1,600,091 (93,040)
4 EMPIRE COMMUNICATIONS CORPORATION (Formerly Litigation Economics, Inc. and Subsidiary) [Development Stage Companies] NOTES TO UNAUDITED CONDENSED & CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Condensed Financial Statements - The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations at March 31, 1998 and for all the periods presented have been made. Organization and Operating History - The Company was incorporated in the State of Nevada on April 27, 1995, under the name of Landmark Leasing, Corp. The Company planned on operating as a leasing company of residential property, commercial property, vehicles, and related activities. The Company has discontinued these activities and accordingly remains a development stage company. The Company changed its name to Litigation Economics, Inc. on August 22, 1996. On August 22, 1996, the Company acquired all of the outstanding stock of GEC, Inc., (the Subsidiary) for 1,000,000 shares of the Company's common stock valued at $.001 per share or $1,000 which represented the capital contributed to the subsidiary. The acquisition of the Subsidiary was recorded as a recapitalization of the Subsidiary, whereby the acquired company is treated as the surviving entity for accounting purposes. The subsidiary was formed on July 31, 1996 in the State of Idaho. The Subsidiary is engaged in the field of economic advising and consulting and commenced principal business operations as of June 2, 1997. Accordingly, the subsidiary is also considered a development stage company. On March 16, 1998, Empire Financial Investments LLC, a Texas limited liability company ("Empire"), purchased 2,350,000 shares of the Registrant's new Series A Convertible Preferred Stock. As of March 16, 1998, these shares and the common share votes associated with these Series A Preferred shares, constituted approximately 77.9% of total common share votes of the Company, and constituted approximately 54% of the total equity securities of the Company. Empire is a controlled subsidiary of Empire Financial Corporation ("EFC"), a Texas-based merchant banking and investment firm headquartered in Dallas, Texas. EFC is actively engaged in the acquisition and development of operating companies, focused on industrial production and commercial distribution businesses. Accounting Method - The Company's financial statements are prepared using the accrual method of accounting. The Company has selected a December 31, year end. Net Loss Per Share - The computation of loss per share of common stock is based on the weighted average number of shares outstanding at the date of the consolidated financial statements. Provision for Taxes - At December 31, 1996, the Company had net operating loss carry forwards of approximately $5,000 that may be offset against future taxable income through 2011. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carryforward are offset by a valuation allowance of the same amount. Depreciation Methods - The Company is depreciating its property and equipment, which consists of computer equipment, fax machines, filing cabinets, etc., using the straight line method, over the estimated useful lives of the related assets ranging from 3 to 10 years. Cash and Cash Equivalents - For purposes of financial statement presentation, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation - The consolidated financial statements include accounts of Empire Communications Corporation and its wholly-owned subsidiary, GEC, Inc. through March 13, 1998, at which date the subsidiary was sold to a company controlled by Cornelius Hofman. Inter-company transactions have been eliminated. Revenue Recognition - Revenue will be recognized upon the completion of consulting and advising services. 5 NOTE 2 - GOING CONCERN The Company's consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have significant cash and has not had significant operations. To date, the Company has been able to cover operating costs with existing financial resources. Officers of the Company have committed to make capital contribution or advances to the Company should additional funds be needed to pay operating expenses. NOTE 3 - RELATED PARTY TRANSACTIONS On March 13, 1998, the Board of Directors of the Company approved the assignment to the Company, and the Company's assumption of, Empire's agreement with Deluxe Corporation for the acquisition by Empire of two of Deluxe Corporation's operating businesses: specifically all of the equity securities of Paper Direct, Inc. and all of the assets of Current Social Expressions, Inc. The Company is obligated to pay Deluxe Corporation $80,000,000 for these businesses, and the Company intends to raise this money though a combination of leveraged acquisition debt, using the assets being acquired as collateral, and new equity funding, including the $1,500,000 capital infusion from Empire. The Company is currently developing a private offering of equity securities to complete the acquisition funding for the PaperDirect/Social Expressions transaction. Sale of Subsidiary Also on March 13, 1998, the Shareholders and the Board of Directors of the Company approved the sale of all of the Company's interest in G.E.C., Inc. to Cornelius A. Hofman II, the former President and Chief Executive Officer of the Company, G.E.C., Inc. was the Company's sole operating subsidiary through which it conducted its historical economic consulting business. This sale was made for $130,000, being paid $10,000 in cash and $120,000 through the surrender by Mr. and Mrs. Hofman of 1,200,000 shares of common stock. The shares surrendered by Mr. and Mrs. Hofman are now held as treasury shares. NOTE 4 - COMMON STOCK In October of 1996, the Board of Directors adopted the Litigation Economics, Inc., 1996 Stock Option Plan (the "Plan"), allowing the Company to offer its key employees, officers, directors, consultants, and sales representatives and opportunity to acquire a proprietary interest in the Company. The total number of shares reserved and available for distribution under the Plan shall by 500,000 shares. These shares will underlie the Options issued by the Company pursuant to the Plan. The Option holders will not be protected against dilution if the Company should issue additional shares of common stock in the future. Neither the Options, nor the shares underlying the Options have preemptive rights. As of March 31, 1998, no options have been granted or exercised pursuant to the Plan. On March 12, 1998, the Board of Directors of the Company declared a 2 for 1 forward split of the outstanding common stock, in the form of a 100% stock dividend distributed to shareholders of record on March 1, 1998, payable on March 13, 1998. On March 13, 1998, pursuant to the sale agreement for G.E.C., Inc., Mr. and Mrs. Cornelius A. Hofman II, surrendered 1,200,000 shares of common stock that are now held as treasury shares. On March 16, 1998, Empire Financial Investments LLC, a Texas limited liability company purchased 2,350,000 shares of the Registrant's new Series A Convertible Preferred Stock for the purchase price of $1,500,000. Payment terms for the transaction were $250,000 in cash with the remaining balance of $1,250,000 as a note receivable to the company. NOTE 5 - SUBSEQUENT EVENTS The company is currently raising $10.8 million for the acquisition of PaperDirect/Social Expressions transaction, which has not been completed as of May 8, 1998. 6 Item 2. Management's Discussion and Analysis Summary The Company was incorporated on April 27, 1995. During its first approximately three years of operations, the Company generated no significant revenues and is thus considered a development stage company. The Company raised funds at first from its founders, and then from a public offering in July, 1997. During 1997 and early 1998, the Company attempted to develop an economic consulting and expert witness business based on the talents of its then management and a proprietary software program for the analysis of economic damages. During the first quarter of 1998, a change in name and control of the Company took place. Empire Financial Corporation of Dallas, Texas purchased 2,350,000 shares of convertible preferred stock in a private placement on March 16, 1998, and thereby acquired voting and economic control of the Company. The purchase price for the new convertible preferred stock was $1,500,000, represented by $250,000 in cash and a promissory note for the balance of the purchase price. The Company's name was changed to Empire Communications Corporation, and the Company acquired all of Empire Financial Corporation's rights to a purchase contract whereby the Company could acquire two businesses from Deluxe Corporation: PaperDirect, Inc. and Current Social Expressions. These businesses are engaged in the wholesale distribution of specialty paper and related products and greeting cards to the United States business community. In connection with the change of control and name change, a number of actions were taken. The former President and his wife, majority shareholders of the Company, (a) sold 1,200,000 shares of their Company stock back to the Company, to be held as treasury stock, and (b) purchased substantially all of the assets of the Company in return for this surrender of shares and the payment of $10,000 in cash. The Company declared a stock dividend of one new share of common stock for each share owned as of March 1, 1998. This 2-for-1 stock split, in the form of a 100% stock dividend, was effective on March 13, 1998. Also, the Company commenced a private offering of common stock to raise up to $10,800,000 in new equity capital for the purpose of facilitating the acquisition of PaperDirect and Current Social Expressions. The acquisition of PaperDirect and Current Social Expressions is expected to take place on May 29, 1998. Results of Operations The Company lost $19,748 during the first quarter of 1998, resulting in a net loss of $0.001 per common share. There were no operations during the first quarter of 1997 with which to compare the current quarter's performance. 7 The Company expects to have profitable operations after the closing of the PaperDirect and Current Social Expressions acquisitions in the second quarter, although the results for the actual second quarter will be impacted by acquisition related costs, and the Company may not be profitable for the second quarter. Financial Condition and Liquidity Total assets at quarter end were $1,513,595, which is significantly higher than at March 31, 1997 or December 31, 1997. The improved asset size is the result of the new equity subscription from Empire Financial Corporation in March 1998. The purchase price paid by Empire is reflected in the higher cash balance and in the note receivable. Liabilities were significantly reduced for the quarter as a result of insignificant business operations and the acquisition of the former business of the Company by its former President during the quarter. Stockholders equity is higher, reflecting the Empire Financial equity purchase. Without the Empire investment in the Company, shareholders equity would be down from the same quarter last year and from year end as a result of the accumulated losses from operations. As of quarter end, the Company had accumulated losses of $93,040 which will be available to be applied against some of the future profits of the Company, if any. The Company's only asset of value, other than its cash, is its contract to acquire PaperDirect and Current Social Expressions. These business acquisitions will significantly increase the assets and liabilities of the Company. For example, the Company anticipates closing on the purchase of PaperDirect and Current Social Expressions using borrowed funds for substantially the entire purchase price. This could result in up to $ 80,000,000 of new debt to be recorded in the second quarter as a result of the business acquisitions. The Company believes that the revenues to be achieved from the new businesses will be sufficient to pay debt service on the acquisition indebtedness, and that the pending private offering of the Company's common stock will also relieve a significant portion of this acquisition debt. Forward Looking Statements Except for the historical information in this document, the matters described herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. The Company advises readers that various risks and uncertainties could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from those anticipated or projected. These risks and uncertainties include, but are not limited to, those related to: the economic environment, particularly in the regions where the Company operates; competitive products and pricing; changes in prevailing interest rates; fiscal and monetary policies of the U.S. and other 8 governments; regulations; acquisitions and the integration of acquired businesses; technology and associated risks; and other risks and uncertainties affecting the Company's operations and personnel. The Company specifically disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements. PART II OTHER INFORMATION Item 1 Legal Proceedings None Item 2 Changes in Securities During the first quarter, the Company effected a 2-for-1 stock split of its common stock in the form of a 100% stock dividend paid on March 13, 1998 to common shareholders of record on March 1, 1998. Item 3 Defaults on Senior Securities None Item 4 Submission of Matters to a Vote of Security Holders During the first quarter, the Shareholders approved the change in name to Empire Communications Corporation and also approved the sale of substantially all of the assets of the Company to its former President. This was done by written consent as permitted by Nevada law. Item 5 Other Information None Item 6 Exhibits and Reports on Form 8-K Exhibit 3.1 Articles of Amendment to Article of Incorportion (incorporated by reference form Registrant's Form 8-K filing on March 28, 1998) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. Empire Communications Corporation Date: 5/14/98 By /s/ Louis A. Farris, Jr., ----------------------------- President and Chief Executive Officer 9 EX-27 2 FDS --
5 3-MOS DEC-31-1998 MAR-31-1998 263,595 0 1,250,000 0 0 1,513,595 0 2,313 1,513,595 594 0 0 2,350 2,000 0 1,513,595 13,206 13,206 1,200 1,200 (2,035) 0 0 (19,748) 0 0 0 0 0 (19,748) (0.001) (0.001)
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