-----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, TjWMGBQ3mlf4kvUx0Y7m07S01W6QXhEuur3AvzGWOjY5fhreiMCHjVwK4yHlG88h D6VOyltJB4Q4MY2lWnulCw== 0001038838-98-000171.txt : 19980814 0001038838-98-000171.hdr.sgml : 19980814 ACCESSION NUMBER: 0001038838-98-000171 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: 98686546 BUSINESS ADDRESS: STREET 1: 4001 WEST 104TH TERRACE CITY: OVERLAND PARK STATE: KS ZIP: 66207 BUSINESS PHONE: 9134691662 MAIL ADDRESS: STREET 1: 4001 WEST 104TH TERRACE CITY: OVERLAND PARK STATE: KS ZIP: 66207 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 Section1 3 or 15(d) of the Securities Exchange Act of 1934, For the Quarter Ended June 30, 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 of other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 4001 West 104th Terrace, Overland Park, KS 66207 (Address of principal executive offices) 913-469-1662 (Registrant's telephone no., including area code) 10670 North Central Expressway, Suite 235 Dallas, Texas 75231 (Former name, former address, and former fiscal year, if changed since last report) 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 June 30, 1998: 2,000,000 shares of $.001 par value Common Stock 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 June 30, 1998 Dec. 31, 1997 ------------- ------------- CURRENT ASSETS: Cash $ 263,001 $10,434 Accounts Receivable - 8 Notes Receivable 1,250,000 - Total Current Assets 1,513,001 10,442 --------- ------ PROPERTY AND EQUIPMENT (NET) - 24,680 OTHER ASSETS: Deposits - 125 Total Other Assets - 125 - --- TOTAL ASSETS $1,513,001 $35,247 ========== ======= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) June 30, 1998 Dec. 31, 1997 ------------- ------------- CURRENT LIABILITIES: Accounts payable $ 216 $ 2,510 Unearned Revenue - 388 Total Current Liabilities 216 2,898 ------------ ------ STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock; authorized 5,000,000 shares at $0.001 par value; 2,350,000 shares issued and outstanding 2,350 Common stock; authorized 50,000,000 shares at $0.001 par value; 2,000,000 shares issued and outstanding 2,000 1,600 Additional paid-in Capital 1,601,691 104,041 Deficit accumulated during the development stage (93,256) (73,292) Total Stockholders' Equity 1,512,785 32,349 --------- ------ TOTAL LIABILITIES & EQUITY $1,513,001 $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. 2
EMPIRE COMMUNICATIONS CORPORATION (Formerly Litigation Economics, Inc. and Subsidiary) [Development Stage Companies] CONDENSED STATEMENT OF OPERATIONS [Unaudited] For the Three For the Three Months Months Ended Ended June 30, 1998 June 30, 1997 ------------- ------------- REVENUE $ 0.00 $ 0.00 Cost of Goods Sold $ - - Total Revenue $ 0.00 $ 0.00 -------- ------ EXPENSES General and Administrative Expenses 216 $15,924 Depreciation Total Expenses $216 $15,924 ------- INCOME FROM OPERATION ($216) ($15,924) OTHER INCOME Loss on sale of asset ($0.00) - Interest income - - TOTAL OTHER INCOME ($0.00) - NET INCOME ($216) ($15,924) NET LOSS PER SHARE ($0.00009) ($0.0067) 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. and Subsidiary) [Development Stage Companies] CONDENSED STATEMENT OF OPERATIONS [Unaudited] For the Six For the Six Months Ended Months Ended June 30, 1998 June 30, 1997 ------------- ------------- REVENUE $13,206 $ 0.00 Cost of Goods Sold (1,200) - Total Revenue $12,006 $ 0.00 ------- ------ EXPENSES General and Administrative Expenses 17,622 $15,924 Depreciation 2,313 Total Expenses $19,935 $15,924 ------- ------- INCOME FROM OPERATION ($7,929) ($15,924) OTHER INCOME Loss on sale of asset ($12,035) - Interest income - - TOTAL OTHER INCOME ($12,035) - NET INCOME ($19,964) ($15,924) NET LOSS PER SHARE ($0.001) ($0.0067) Weighted Average Number of Shares Outstanding 2,370,555
The accompanying notes are an integral part of these financial statements. 4
EMPIRE COMMUNICATIONS CORPORATION (Formerly Litigation Economics, Inc.) [A Development Stage Companies] Consolidated Statements of Stockholders' Equity Capital In Deficit Common Stock Preferred Excess of Accumulated During the Development Shares Amount Shares Amount Par Value 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., 500,000 500 -- -- 4,141 -- Inc. 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 -- -- 99,000 -- Net loss for the year ended December 31, 1997 -- -- -- -- -- (68,275) BALANCE, December 31, 1997 1,600,000 1,600 -- -- 104,041 (73,292) 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 period ended June 30, 1998 -- -- -- -- -- (19,964) BALANCE, June 30, 1998 2,000,000 (2,000) 2,350,000 2,350 1,600,091 (93,256)
5 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 June 30, 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 when it acquired all of the outstanding stock of GEC, Inc., for 1,000,000 shares of the Company's common stock valued at $.001 per share which represented the capital contributed to GEC by its founders. The acquisition of GEC was recorded as a recapitalization of GEC, whereby the acquired company is treated as the surviving entity for accounting purposes. GEC was formed on July 31, 1996 in the State of Idaho, and was engaged in the field of economic advising and consulting and commenced principal business operations as of June 2, 1997. On March 16, 1998, Empire Financial Investments LLC, a Texas limited liability company ("Empire"), purchased 2,350,000 shares of the Company'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 was a controlled subsidiary of Empire Financial Corporation ("EFC"), a Texas-based merchant banking and investment firm headquartered in Dallas, Texas. 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 carry forward 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 6 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 GEC was sold to Mr. and Mrs. Cornelius Hofman. Inter-company transactions have been eliminated. Revenue Recognition -- Revenue will be recognized upon the completion of consulting and advising services. 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 4 - COMMON STOCK In October of 1996, the Board of Directors adopted the 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. There are 500,000 shares reserved and available for distribution under the Plan. 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 GEC, Mr. and Mrs. Cornelius Hofman, surrendered 1,200,000 shares of common stock that are now held as treasury shares. On March 16, 1998, Empire Financial Investment 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 Effective on July 14, 1998, the Company, Empire Financial Investment LLC, and Mr. and Mrs. Cornelius Hofman all agreed to rescind the transactions whereby Empire had invested in the Company and assigned to it valuable contract rights, and whereby Mr. and Mrs. Hofman had purchased the Company's GEC subsidiary. All consideration given by any of the parties to each other was returned and title to all rights and property was returned to status quo ante. Item 2 Management's Discussion and Analysis Summary The Company was incorporated on April 27, 1995. During its approximately three years of operations, the Company has generated no significant revenues and continues to be considered a development stage company. The Company raised funds at first from its founders, and then from a public 7 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. This effort proved unsuccessful. During the first quarter of 1998, a change in name and control of the Company took place and was announced, together with several related material corporate actions. During the second quarter, the Company received informal word that Empire Financial Corporation desired to rescind its controlling investment in the Company's convertible preferred stock and also desired to rescind its assignment to the Company of the contract rights for the acquisition of PaperDirect, Inc. and Current Social Expressions, businesses that are engaged in the wholesale distribution of specialty paper and related products and greeting cards to the United States business community. The Company was amenable to the rescissions and they became effective July 14, 1998. In that connection, the Company also announced that it had reacquired its former operating subsidiary, GEC and rescinded the transaction with Mr. and Mrs. Cory Hofman whereby they had acquired GEC from the Company for stock and cash. The Company has moved its executive offices to Overland Park, Kansas in space provided by the Company's new Chief Executive Officer and sole Director, Norman Petersen. Further details concerning the rescission of the PaperDirect and GEC transactions can be found in the Report on Form 8-K filed by the Company with the Commission on July 20, 1998. Results of Operations The Company had no operations in the second quarter of 1998, a time when it was concentrating its efforts on the PaperDirect and Current Social Expressions acquisitions, including an abortive private placement of the Company's common stock. Modest expenses were incurred in the quarter in accounting costs associated with the aborted private placement. Legal and other expenses associated with the aborted PaperDirect and Current Social Expressions acquisitions are expected to be billed during the third quarter and will be recorded as expenses at that time. With the reacquisition of its GEC subsidiary, which was the Company's sole business operation during 1997 and the first quarter of 1998, the Company expects to return to the general level of operations experienced at that time. The Company has never experienced a profit from operations to date. Financial Condition and Liquidity Total assets at June 30, 1998 were $1.55 million, made up almost totally of the $1,500,000 investment made in the Company by Empire Financial Investment LLC., together with the $10,000 cash paid to the Company by Mr. and Mrs. Hofman for their purchase of GEC. Otherwise, total assets were substantially the same as at the end of the first quarter. On July 14, 1998, the Empire's investment in the Company was rescinded and refunded, as was the Hofmans' purchase of GEC. 8 Liabilities were cut in half between March 31, 1998 and June 30, 1998, and remain insignificant. With the reacquisition of its GEC operating subsidiary, the Company expects to incur additional short-term liabilities. Stockholders equity at June 30, 1998 remained high, reflecting the Empire Financial equity purchase. With the rescission of the Empire investment on July 14, 1998, 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 June 30, 1998, the Company had accumulated losses of $93,256, which will be available to be applied against some of the future profits of the Company, if any, as a shelter against corporate income taxes. At June 30, 1998, the Company's only asset of value, other than its cash, was its contract to acquire PaperDirect and Current Social Expressions. With the rescission of these planned acquisitions and the Company's prior sale of its GEC subsidiary on July 14, 1998, the Company's only asset will be GEC and the consulting business that can be done through that entity. The Company does not have sufficient cash on hand to cover expected costs of operating the Company during the remainder of 1998. It is likely that the Company will have to attempt to raise additional equity through one or more offerings of its common stock unless GEC is able to generate sufficient cash from its operations to pay such expenses. 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 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. 9 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 None. Item 5 Other Information None Item 6 Exhibits and Reports on Form 8-K No Exhibits A Form 8-K Report was filed on May 20, 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 /s/ Norman Petersen Date: 8/12/98 -------------------------- By Norman Petersen President and Chief Executive Officer EX-27 2 FDS --
5 6-MOS DEC-31-1998 JUN-30-1998 263,001 0 1,250,000 0 0 1,513,001 0 0 1,513,001 216 0 0 2,350 2,000 0 1,512,785 0 0 1,200 1,200 17,406 0 0 (19,964) 0 (19,964) 0 0 0 (19,964) (0.001) (0.001)
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