-----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, BDjW1p+zBGrApUjiMas8aaqiU6uDv3UBHQ1PehMHCU6V/6qw/sBRFtTl5lP8VwvK cQKFk+MlRz/a7TdzTv1Tlg== 0000950148-95-000658.txt : 19951016 0000950148-95-000658.hdr.sgml : 19951016 ACCESSION NUMBER: 0000950148-95-000658 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19951013 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALL-COMM MEDIA CORP CENTRAL INDEX KEY: 0000014280 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 880085608 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-16730 FILM NUMBER: 95580641 BUSINESS ADDRESS: STREET 1: 400 CORPORATE POINTE STREET 2: SUITE 780 CITY: CULVER CITY STATE: CA ZIP: 90230 BUSINESS PHONE: 310-342-2800 MAIL ADDRESS: STREET 1: 400 CORPORATE POINTE SUITE 780 CITY: CULVER CITY STATE: CA ZIP: 90280 FORMER COMPANY: FORMER CONFORMED NAME: SPORTS TECH INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL HOLDINGS INC DATE OF NAME CHANGE: 19920518 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL GAMING CORP DATE OF NAME CHANGE: 19890518 10-K405 1 ANNUAL REPORT 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended June 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________________ to __________________ Commission file number 0-16730 ALL-COMM MEDIA CORPORATION -------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 88-0085608 - -------------------------------------- -------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.] of incorporation or organization) 400 Corporate Pointe, Suite 780 Los Angeles, California 90230 - -------------------------------------- ------------------------- (Address of principal executive offices] (Zip Code)
Registrant's telephone number, including area code: (310) 342-2800 -------------- Securities registered pursuant to Section 12(b) of the Act: None -------------- Securities registered pursuant to Section 12(g) of the Act: None -------------- Common Stock, par value $.01 per share -------------------------------------- (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of October 10, 1995, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $7,992,000. As of October 10, 1995 there were 3,016,293 shares of the Registrant's common stock outstanding. 2 PART I ITEM 1 - BUSINESS General The business of All-Comm Media Corporation (the "Company" or "All-Comm Media"), previously known as Sports-Tech, Inc., ("Sports-Tech") arises out of the recent merger between Alliance Media Corporation ("Alliance") and a wholly owned subsidiary of the Company, and the concurrent acquisition of Stephen Dunn & Associates, Inc. (SD&A), a leading telemarketing and telefundraising company that specializes in direct marketing services for the arts, educational and other institutional tax-exempt organizations. The change in the Company's name was approved at a special shareholders meeting held on August 22, 1995. It was made to reflect the new corporate vision and direction and the change in management and board of directors. On April 25, 1995 the former management and directors of Sports-Tech resigned in favor of a merger with Alliance Media Corporation and its plan to build a specialized direct marketing, information and media services company with a focus on providing integrated marketing services through a single source organization. The Company's shares are traded on the NASDAQ Small Cap Market under the symbol "ALCM". The Company's principal executive offices are located at 400 Corporate Pointe, Suite 780, Culver City, CA 90230. Its telephone number is (310) 342-2800. The Company's Strategy The Company's strategy is to become a fully integrated direct marketing and media services company. Direct marketing has become an increasingly important advertising medium and an integral component of marketing programs that combine multiple forms of communication, such as direct mail, telemarketing, print, television, radio, electronic media, information kiosks, CD-ROM and Internet World-Wide Web sites. Initially, the Company intends to expand through the acquisition of companies in the direct marketing and media services industry which can provide core capabilities for the direct marketing process. The Company believes that technological innovation will continue to increase the effectiveness of direct marketing. As such, potential acquisitions may include providers of information-based products and direct marketing services companies that would enable the Company to deliver effective marketing programs through electronic, telephonic and print mediums. A key element of the Company's growth strategy is to target companies with a demonstrated record of earnings and/or market penetration in these areas. Also of particular interest are businesses which potentially increase market entry, access new channels of distribution and are capable of providing additional direct marketing and information management services that may be used to create customer lists with specific, identifiable attributes and to facilitate the production and execution of specialized marketing programs that statistically track and analyze market responses. Stephen Dunn & Associates, Inc. ("SD&A") SD&A, which was acquired on April 25, 1995, was formed in 1983 and had revenues of more than $15 million for the twelve month period ended June 30, 1995. Clients of SD&A include many of the larger symphony, theatre and musical arts companies, public broadcasting stations, universities and endowments, such as New York Philharmonic Orchestra, American Conservatory Theater, Carnegie Hall, Modern Museum of Art, New York University, Duke University, National Audubon Society and Simon Weisenthal Center. SD&A has its 2 3 headquarters in Los Angeles, California and operates a telemarketing calling center in Berkeley, California. History and Prior Activities The Company was originally incorporated in Nevada in 1919 under the name of Bristol Silver Mines Company and was engaged in the mining business until 1971. The Company conducted minimal activity between 1971 and 1979, when it sold substantially all of its assets. From 1979 until 1981, the Company did not conduct any business. In 1981, it became a holding company named Bristol Gaming Corporation (subsequently changed to Bristol Holdings, Inc.) which the prior management utilized for making investments in the securities of companies in the gaming industry. In conjunction with this activity, the Company acquired undeveloped land in Nevada which was intended, and subsequently became zoned, for the development of a gaming casino. Prior to, and as a condition of the merger with Alliance, the Company was required to divest its securities investments in the gaming industry, which have since been liquidated. The Company still owns the undeveloped parcel of land in Laughlin, Nevada through its wholly-owned subsidiary, Bullhead Casino Corporation (to be renamed Laughlin Holdings, Inc.) and has been formally listed for sale. (See Bullhead Casino Corporation ("Bullhead") herein for a description of this investment and the terms of its listing for sale.) During 1991, under the prior management, the Company acquired a 100% interest in Sports-Tech International, Inc. ("STI") and changed its name to Sports-Tech, Inc. In June 1993, the Company acquired the business of High School Gridiron Report ("HSGR"). (See STI and HSGR for descriptions of business and disposition). In November, 1994, after a failed business strategy, the prior management of the Company discontinued these operations through the sale of STI and the cessation of the HSGR operation. STI and HSGR supplied information technology and services as well as academic, athletic and video data to high school, professional and college coaches and student athletes. Recent Developments Merger with Alliance Media Corporation: On April 25, 1995, STI Merger Corporation ("Merger Sub"), a wholly owned subsidiary of Sports-Tech, Inc., was merged (the "Merger") with and into Alliance Media Corporation. The Merger was effected pursuant to the terms of an Acquisition Agreement, dated as of February 7, 1995, as amended. Pursuant to the terms of the Acquisition Agreement, upon consummation of the Merger, the then current members of the Board of Directors of the Company resigned and a new Board was appointed, consisting of persons designated by Alliance. (See Executive Officers and Directors of the Registrant and Significant Employees.) As a result of the Merger, Alliance became a wholly owned subsidiary of the Company and the former shareholders of Alliance received 1,025,000 shares of the Company's common stock valued at $2,745,000 constituting approximately 39.6% of the Company's common stock (on a fully diluted basis, taking into account shares issuable upon exercise of warrants delivered in payment of various fees incurred in connection with the Merger). These shares have registration rights commencing December 1, 1995. The assets of Alliance acquired by the Company consisted primarily of: (i) all of the issued and outstanding stock of Stephen Dunn & Associates, Inc., which Alliance had acquired effective April 25, 1995 pursuant to a Stock Purchase Agreement, dated as of 3 4 January 31, 1995, between Alliance and Mr. Stephen Dunn (the "Dunn Agreement"); (ii) a five-year covenant not to compete with the former owner of SD&A; and (iii) the cash proceeds (net of certain payments, including the payment of $1.5 million required pursuant to the terms of the Dunn Agreement) of a private placement of equity securities by Alliance, which securities, upon consummation of the Merger, were converted into shares of the Company's common stock. Pursuant to the terms of the Dunn Agreement, the purchase price for SD&A was $1.5 million in cash plus $4.5 million in long term obligations, yielding prime rate (9.0% at June 30, 1995) to be paid over a four-year period. Additional contingent payments of up to $850,000 per year over the period ending June 30, 1998, may be required based on the achievement of defined results of operations of SD&A after its acquisition. At the Company's option, up to one half of the additional contingent payments may be made with restricted common shares of the Company. The seller can demand registration of shares received commencing in September, 1997. Alliance and SD&A entered into an operating covenants agreement, dated April 25, 1995, relating to the operation of SD&A whereby, for a limited period of time, Alliance has pledged the shares of SD&A to collateralize its obligations under that agreement to insure for continuing working capital of SD&A. The assets of SD&A, upon its acquisition by Alliance (and simultaneously obtained by the Company upon consummation of the merger), consisted primarily of cash and cash equivalents, accounts receivable and furniture, fixtures and equipment. These acquisitions were accounted for using the purchase method. The purchase price was allocated to assets acquired based on their estimated fair value. This treatment resulted in approximately $6.3 million of costs in excess of net assets required, after recording a covenant not to compete of approximately $1.0 million. Such excess, which may increase for any further contingent payments, is being amortized over the expected period of benefit of 40 years. The operating results of these acquisitions are included in the consolidated results of operations from the date of acquisition, April 25, 1995. Pending Acquisition of Forms Direct, Incorporated: On September 28, 1995, the Company signed a non-binding letter of intent to acquire Forms Direct, Incorporated ("FDI"). FDI is a private company based in Frederick, Maryland, with annualized sales in excess of $20 million. FDI provides direct mail services in the fields of sophisticated target marketing and complex personalization. Terms of the acquisition call for cash, notes and stock, as well as contingent payments based on operating profits and performance. Consummation of the acquisition is subject to a number of conditions, including the negotiation of a definitive agreement and completion of financing arrangements. Accordingly, no assurance can be given that the acquisition will be consummated. The acquisition is scheduled to close by December 31, 1995. FDI is a full-service direct mail marketing company which provides services for a variety of well known industrial and financial companies and public sector tax-exempt organizations. Since the early 1980's FDI has provided its customers with total full-service print to mail outsource facilities management capability and continues to produce direct mail marketing campaigns for Fortune 2000 companies and their advertising agencies, along with affinity organizations and advocacy groups throughout the U.S. Located in Frederick, Maryland, the production facility occupies approximately 80,000 square feet of light industrial space. 4 5 Stock Split and Change in Authorized Common Shares: Effective August 22, 1995, the Company's Board of Directors approved a one-for-four reverse stock split of the Company's authorized and issued common stock. Fractional shares were rounded up to whole shares. After the reverse stock split, approximately 3,016,000 shares are outstanding. The Board also approved the reduction in the number of authorized shares of common stock to 6,250,000, with a par value of $.01 per share, for the 25,000,000 common shares previously authorized. All share and per share data in this Report on Form 10-K reflect the effect of the reverse stock split. Private Placement of Common Stock: On May 31, 1995, the Company completed a private placement of 413,759 restricted shares of its common stock at $2.68 per share, for a total of $1,108,875 ($1,018,675 net after offering costs) in order to replenish cash resources which were reduced prior to the merger with Alliance, as a result of losses and dispositions of assets prior to the merger. (See Discontinued Operations and Events Prior to the Merger with Alliance Media Corporation.) These shares have registration rights commencing December 1, 1995. Discontinued Operations and Events Prior to the Merger with Alliance Media Corporation Sports-Tech International, Inc. and High School Gridiron Report: On December 7, 1994, the Company entered into a definitive agreement for the sale of Sports-Tech International, Inc. ("STI") to Dainichi Electronics, Inc. ("Dainichi"). The proposed purchase price for STI's operations was $1,100,000, of which $300,000 was paid as of the agreement date. Payments of $100,000 per month were due on the 7th of each month from January, 1995, through August, 1995, at which time the sale was to close. The agreement also called for Dainichi to provide all working capital required by STI prior to the closing in August. By mutual agreement, the Company and Dainichi agreed to accelerate the closing date for the sale of STI to March 9, 1995. Proceeds from the sale were reduced to $800,000, a reduction of $300,000 on the original sales price, out of which $80,000 was paid by the Company as a commission to the former president of STI. The former president of STI also received $38,750 in common stock, and warrants to purchase 2,500 shares of the Company's common shares at $8.00 per share. The Company realized a gain on the sale of $322,000. STI was acquired in 1992 from Florida Gaming for $1,400,000 in cash and 660,000 shares of Sports-Tech, valued at $936,600. Acquisition costs totaled $342,000. Concurrent with the sale of STI, the Company ceased the High School Gridiron Report ("HSGR") operations. HSGR was acquired on June 11, 1993, in exchange for 15,000 common shares of the Company, valued at $255,000, forgiveness of a note receivable of $161,000 and assumption of liabilities totaling $29,000. The sale of STI and the closing of HSGR operations by the prior management have been accounted for as discontinued operations and, accordingly, the consolidated financial statements contained in this Report on Form 10-K have been reclassified to report separately this segment's net assets, operating results, gain on disposition and cash flows. 5 6 Florida Gaming Corporation Warrant Exercise: In July 1991, in connection with the acquisition of 57.7% of the outstanding common stock of STI from Florida Gaming Corporation ("Florida Gaming"), the Company also acquired, for $40,000, a warrant (the "FGC Warrant") to acquire a number of shares, which at the time, represented 33% of the outstanding common stock of Florida Gaming, for an aggregate exercise price of $1,000,000. On July 27, 1994, under the prior management of the Company, the Company and the Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering of the State of Florida (the "Division") entered into a consent order (the "Consent Order") which permitted the Company to acquire shares in Florida Gaming through the exercise of its warrants. Florida Gaming owns and operates a jai-alai fronton and Pari-Mutuel wagering facility located in Fort Pierce, Florida. Pari-Mutuel wagering must be conducted in compliance with the applicable Florida Statutes and regulations of the Division. Pursuant to such applicable Florida statutes, a holder of 5% or more of the common stock must be approved by the Division. On July 28, 1994, the Company exercised the FGC Warrant, in full, and received 651,752 shares of Florida Gaming common stock. The exercise price of the FGC Warrant was financed with a $1,000,000 loan, and the shares of Florida Gaming common stock were pledged to collateralize the repayment of the loan. The parties to the loan included, among others, the Company's former chairman, former president, a former director and a shareholder, who each provided $200,000. The other lenders were non-affiliates. The lenders received the repayment of the $1,000,000 loan with interest at 7.75%, totaling $9,000 and a $300,000 commitment fee from the proceeds of the subsequent stock sale. In fiscal 1995, the Company sold all the common shares of Florida Gaming stock it had acquired and recognized a gain of $1,580,000. Direct Marketing Industry Overview Advances in communications technology and a growing availability of complex consumer data are causing marketers to use the new information technologies and media capabilities to more efficiently target their customers. As a result, direct marketing has become an important advertising and selling medium and is now incorporated as an integral component of many companies' overall marketing programs. The use of direct marketing by businesses to target and communicate with potential customers has steadily been increasing due, in part, to the relative cost efficiency of direct marketing, as compared to other advertising methods, as well as the rapid development of affordable computer technology. Over the next decade, the impact of radio, television, database and on-line or electronic marketing will have a significant effect on marketing methodologies. Major corporations are beginning to invest in distribution channels that provide direct access to their customers, providing the most cost effective and efficient means for targeting specific audiences and developing long term customer relationships. The shift from broadcasting and mass marketing to personalized pointcasting and targeted marketing enables advertising and marketing programs to be evaluated and adjusted through measurable results. Prior to and during much of the 1970's, the costs associated with selling products and services, either through mass marketing or through personal sales calls, were relatively low, while the costs of database development were prohibitive for all but the largest businesses. In the 1980's the costs of developing and implementing computer technologies to analyze 6 7 and target potential customers declined while the costs of traditional marketing increased significantly. In addition, concerns have been raised about the efficacy of traditional forms of marketing. Direct marketing remains one of the few advertising media allowing an accurate measure of results through a review of response rates thereby increasing the effectiveness of the selling effort. Companies use direct marketing for a variety of purposes, including: prospecting for new customers, enhancing existing customer relationships and evaluating the potential for new products and services. Direct marketing allows companies to interact with customers and accurately measure the response to the message. This ability to measure responses allows direct marketing campaigns to be continually refined to further enhance their effectiveness. Such programs enhance a company's ability to generate revenues, directly and indirectly, from specific audiences across a wider market and through more personalized access to consumers. The Company believes that technological innovation will continue to increase the effectiveness of direct marketing. As a result, direct marketing has become an increasingly important driver for integrated marketing programs that combine multiple forms of communications such as direct mail, telemarketing, print, television, radio, video, CD-ROM, educational symposia and other interactive and multimedia formats. Industry Consolidation Most advertising, marketing and public relations firms, along with internal corporate marketing departments rely on outside vendors to execute their requirements for implementing marketing programs. These vendors provide specialized services, such as market data analysis, creation of private databases, development and management of information systems supporting marketing programs, direct mail production and tracking, fulfillment of products, telemarketing support and the creation and distribution of video or digital image processing and conversation. Agencies or corporate marketing departments often lack this type of technical expertise and control over each step of the process. Consequently, there are many different service providers involved in a marketing campaign. The direct marketing and media services industry is highly fragmented. The majority of the participants are small regional firms, offering limited or single services that support the direct marketing process. As postal, production and operating costs (including technological enhancements) have increased, and major corporations continue to increase their use of direct marketing, merger and acquisition activity has accelerated, providing economies of scale that result from larger, stronger firms which possess a greater ability to execute increasingly complex marketing programs. Line of Business Stephen Dunn & Associates, Inc. provides a variety of telemarketing and telefundraising services to clients in the tax-exempt sector. Since its inception in 1983, SD&A has worked with over 150 tax-exempt organizations, located in over thirty states, and has developed expertise in working with a broad range of tax-exempt organizations, including those which support the arts, such as theaters, operas, symphonies and ballets, as well as museums, colleges and universities, public television stations and advocacy groups. Campaigns are conducted either "on-site" at, or near, the client's premises or "off-site" at SD&A's full service calling center, located in Berkeley, California (the "Berkeley Calling Center" or "BCC"). 7 8 SD&A's revenues are derived primarily from fees and commissions from telemarketing campaigns and telefundraising efforts. Telemarketing Campaigns. Telemarketing campaigns are highly focused marketing efforts designed to sell ticket series or subscriptions to patrons for multiple performances or a portion of a season of performances at live theatres, symphonies, operas, ballets, musical theatres and similar performing arts venues. The campaigns are tailored to fit the clients' specific needs, generally range from 8 to 26 weeks, and may be conducted at or near the clients' premises or at the Berkeley Calling Center. The design of each campaign includes evaluating and segmenting the target population using database analysis programs, often in combination with demographic and psychographic screening programs, to estimate the sales potential of different groups. Management believes that this approach to telemarketing campaigns is an efficient means to generate sales revenue for its clients and will strengthen the contact and prospect base of the clients, enhance the effectiveness of the clients' public relations as a fundraising tool to develop valuable information-gathering sources, and expand the database of potential patrons. Telefundraising Efforts. The telefundraising efforts fall into three groups: Annual Fund Campaigns, capital campaigns through the SD&A's CapiTEL program and Special Gift Campaigns. While colleges and universities were generally the first organizations to use telemarketing for capital and endowment campaigns, SD&A pioneered the application of these techniques to the performing arts through its CapiTEL program. SD&A provides both program design and management, including personalized direct mail and telefundraising solicitation. Four different types of telefundraising phone/mail campaigns are conducted: Annual Fund Campaigns to renew and acquire donors and increase the level of giving; Membership Campaigns to renew and acquire members to increase the client's membership base; CapiTEL Campaigns designed to solicit three to five-year gifts, typically used for an institutional client's physical "brick and mortar" projects; and Special Gift Campaigns seeking large donations often conducted in conjunction with Annual Fund Campaigns. Government Regulation. Telemarketing sales practices are regulated both federally and at the state level. The federal Telephone Consumer Protection Act of 1991 (the "TCPA") prohibits telemarketing firms from initiating telephone solicitations to residential telephone subscribers before 8:00 a.m. or after 9:00 p.m., local time, and prohibits the use of automated telephone dialing equipment to call certain telephone numbers. In addition the TCPA requires telemarketing firms to maintain a list of residential customers that have stated that they do not want to receive telephone solicitations and, thereafter, to avoid making calls to such consumers' telephone numbers. The federal Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA") broadly authorizes the Federal Trade Commission (the "FTC") to issue regulations prohibiting misrepresentation in telemarketing sales. In August, 1995, the FTC issued updated proposed telemarketing sales rules. Generally, these rules prohibit misrepresentation regarding the cost, terms, restrictions, performance or duration of products or services offered by telephone solicitation and otherwise specifically address other perceived telemarketing abuses in the offering of prizes and the sale of business opportunities or investments. These operating procedures were already standard for SD&A prior to enactment of this federal legislation. 8 9 A number of states have enacted, or are considering, legislation to regulate telemarketing. For example, telephone sales in certain states cannot be final unless a written contract is delivered to, and signed by, the buyer and may be canceled within three business days. At least one state also prohibits telemarketers from requiring credit card payment, and several other states require certain telemarketers to obtain licenses and post bonds. From time to time, bills are introduced in Congress which, if enacted, would regulate the use of credit information. SD&A cannot predict whether this legislation will be enacted and what effect, if any, it would have on the telemarketing industry. Many states regulate fundraising activities performed by professional fund-raisers by requiring them to register and to submit periodic activity reports. Growth Strategies. Management anticipates future revenue growth through assisting current clients to increase the size of existing subscription sales and fundraising campaigns and through obtaining new clients within its existing specializations, and in other areas, such as environmental organizations, hospitals and national health causes. Several programs have been implemented to increase the utilization of the telefundraising staff and the BCC capabilities by existing clients utilizing only telemarketing services. Finally, SD&A is investigating opportunities to provide fundraising services in other tax-exempt areas and creating new telemarketing and telefundraising techniques. To achieve growth, the Company utilizes an in-house marketing group which specifically targets potential clients. Business is also solicited through direct mail, telemarketing and attendance at trade shows and industry conferences. While management believes that these strategies will increase revenues, there can be no assurances that they will be effective. Client Relationships. During the year ended June 30, 1995, SD&A provided telemarketing, telefundraising and consulting services to over ninety clients. SD&A generally operates under month-to-month contractual relationships and is paid for its telemarketing services based on the type of campaign. In the area of performing arts, for both fundraising and subscription sales, SD&A is typically paid a percentage of the total amount raised but, in other instances, the Company is compensated on an hourly basis. Generally, SD&A is compensated for off-site campaigns at a given rate per contract. For the year ended June 30, 1995, approximately 85% of SD&A's revenues were derived from telemarketing and telefundraising and 15% from off-site campaigns. Competition. SD&A competes with other companies that provide similar services, as well as from those providing direct mail, television, radio and other advertising fundraising services. The fundraising industry is very competitive and highly fragmented. Most of SD&A's competitors are small, single facility operations, but SD&A faces its greatest competition from the in-house capabilities of the not-for-profit organizations themselves. Seasonality. Typically, telemarketing and telefundraising campaigns are seasonal in nature with a substantial portion of revenues generated during the 1st and 4th fiscal quarters. Bullhead Casino Corporation (to be renamed Laughlin Holdings, Inc.) In 1979, the Company, through its wholly-owned subsidiary, Bullhead, acquired 6.72 acres of undeveloped land with 560 feet of Colorado River frontage in Laughlin, Nevada, for approximately $560,000. The subject property is zoned to accommodate a 900-room, 13-story hotel with a 116,000 square foot casino and is part of a development project proposed by a local development association for a major hotel/convention center complex. The 9 10 Company's management has no present plans to develop or participate in the development project and has decided to dispose of the property. On October 6, 1995, the Company entered into an option agreement with certain parties unrelated to the Company whereby, in consideration of payment to the Company of $150,000, the option holder may purchase the land for $2,000,000. The term of the option expires on April 8, 1996. Under certain circumstances, the Company has the right to repurchase this option before its expiration. Bullhead is additionally subject to an agreement entered into at the time of the acquisition of the Laughlin property to pay to two unaffiliated individuals an amount equal to 5% each of the net profit from any sale of said property, or if developed into a hotel/casino (which the Company does not intend to do), 5% each of the equity in the property. Such interests were received as consideration for the efforts of such individuals in connection with the acquisition of such land. Employees At October 1, 1995, the Company and SD&A collectively have approximately 1000 employees, of whom approximately 915 are part-time. None of the Company's employees are covered by collective bargaining agreements and the Company believes that its relations with its employees are good. Executive Officers and Directors of the Registrant and Significant Employees The Company's executive officers, directors and significant employees and their positions with All-Comm Media are as follows:
Name Age Position - ---------------------- --- -------------------------------------------------------- Barry Peters 54 Chairman of the Board of Directors and Chief Executive Officer E. William Savage 52 Director, President, Chief Operating Officer, Secretary and Treasurer William E. Chaikin 75 Director H. William Coogan, Jr. 41 Director C. Anthony Wainwright 62 Director Martin S. McDermut 44 Vice President and Chief Financial Officer Scott Anderson 38 Corporate Controller Stephen Dunn 45 President, Stephen Dunn & Associates, Inc. Thomas Scheir 42 Chief Financial Officer, Stephen Dunn & Associates, Inc.
10 11 BARRY PETERS, CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Prior to the merger with the Company, Mr. Peters was Managing Director of Vector Holdings, Inc., an investment concern which specialized in sponsoring leveraged buyouts and management groups. He was a founding Vice President of Integrated Resources, Inc. where, upon joining the company in 1970, he was instrumental in financing its acquisitions and corporate development program. Mr. Peters began his career as a Financial Analyst for RCA Corporation and was assigned to NBC and the RCA Record Division. He holds an MBA in Finance from The Baruch School of Business and a BA, Magna Cum Laude, in Economics from Hofstra University. E. WILLIAM SAVAGE, PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR. Prior to the merger with the Company, Mr. Savage was President of Movie Theatre Associates, Inc., a general partner of limited partnerships that own multiplex cinemas, and was previously President of Public Storage Capital Markets Group where, for 11 years, he was responsible for general management and formation of several publicly traded entities. Mr. Savage was Executive Vice President of H.S. Group, Inc., and Vice President of Shareholder's Management Co., a publicly owned mutual fund management firm. He began his career as senior investment analyst with The Prudential Insurance Company. He holds an MBA from the Wharton School of Finance and Commerce and a BA in English from Pomona College. WILLIAM E. CHAIKIN, DIRECTOR is a private investor and Managing Partner for Fund of Feature Films I & II, a private partnership established for the acquisition and distribution of classic films. He is a member of the Academy of Motion Picture Arts & Sciences, was formerly President and Chief Executive Officer of Avco/Embassy Pictures, Inc. and was a director of Caesars World, Inc. from 1984 to 1995. H. WILLIAM COOGAN, JR., DIRECTOR is President and Chief Executive Officer of Southern Title Insurance Company, Inc. and Southern Capital Corporation, a privately owned investment firm. He was a founding partner of Libra Investments and, previously, Managing Director of Corporate Finance for Wheat First Securities and Managing Director at First Boston. C. ANTHONY WAINWRIGHT, DIRECTOR is Chairman and Chief Executive Officer of the advertising firm Harris Drury Cohen, Inc., and a former senior executive with Cordient PLC's Compton Partners, Saatchi & Saatchi, and previously Chairman and Chief Executive Officer of the Saatchi & Saatchi unit Campbell Mithun Esty in New York. He is also a director of Gibson Greetings, Inc., Del Webb Corporation, American Woodmark Corporation and Specialty Retail Group, Inc. MARTIN S. MCDERMUT, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. From 1975 to 1993, Mr. McDermut was associated with the firm of Coopers & Lybrand, the last 5 years of which were as a Partner engaged primarily in the Entrepreneurial Advisory Services Group, providing accounting, finance, tax and consulting services to fast growing private companies. Prior to joining the Company, he was Vice President and Chief Financial Officer for Pet Metro, Inc. from January, 1994 to June, 1995. Pet Metro, Inc. filed for voluntary bankruptcy protection in April, 1995. Mr. McDermut is a Certified Public Accountant and holds an MBA from the University of Chicago; and a BA in Economics from the University of Southern California. SCOTT ANDERSON, CORPORATE CONTROLLER. Prior to joining the Company, Mr. Anderson was associated with the firm of Deloitte & Touche, LLP, as a manager in the assurance department in the Los Angeles, California office for eight years and the Riyadh, Saudi Arabia office for six years. He served clients in banking and investment services, insurance, manufacturing and 11 12 service industries. Mr. Anderson is a Certified Public Accountant and holds a BS degree in Business Administration, with honors, from California State University, Long Beach. STEPHEN DUNN, PRESIDENT, STEPHEN DUNN & ASSOCIATES, INC. Mr. Dunn has served as President of Stephen Dunn & Associates, Inc. since its founding in 1983. Prior to this, Mr. Dunn served as a consultant for the Los Angeles Olympic Organizing Committee for the Olympic Arts Festival and as Director of Marketing for the New World Festival of the Arts and the Berkeley Repertory Theater. He holds a BA in English from Duke University. THOMAS SCHEIR, CHIEF FINANCIAL OFFICER, STEPHEN DUNN & ASSOCIATES, INC. Mr. Scheir joined Stephen Dunn & Associates, Inc. in 1983. Prior to this, he was with the San Francisco Symphony. He holds a B.A. in art from Yale University. ITEM 2 - PROPERTIES The Company, through Bullhead, owns the property identified in Item 1. Also, the Company leases approximately 2,000 square feet of office space in Culver City, California. The lease runs through April 30, 1998, and includes an option to lease an adjacent 1,204 square feet at the same rate as the prior lease. SD&A leases approximately 5,500 square feet of office space in Venice, California from its founder and president, 5,500 square feet in Berkeley, California, and 250 square feet in Patterson, New York. These leases range from month to month to three years and include options to renew. The Company believes its facilities are suitable and adequate for the purposes for which they are used and are adequately maintained. ITEM 3 - LEGAL PROCEEDINGS The Company is party to minor legal proceedings. The outcome of these legal proceedings are not expected to have a material adverse effect on the consolidated financial condition, liquidity or expectations of the Company, based on the Company's current understanding of the relevant facts and law. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 12 13 PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The common stock of the Company previously traded on the NASDAQ Small-Cap Market under the symbol SPTK. As approved by the shareholders on August 22, 1995, the Company changed its name to All-Comm Media Corporation and the symbol was changed to ALCM. The following table reflects the high and low sales prices for the Company's common stock for the fiscal quarters indicated, as furnished by the NASD, adjusted for the one-for-four reverse stock split:
Common Stock --------------- Low Sales Price High Sales Price --------------- ---------------- Fiscal 1995 Fourth Quarter $ 6.50 $ 9.50 Third Quarter 5.38 7.50 Second Quarter 3.50 5.75 First Quarter 3.00 5.50 Fiscal 1994 Fourth Quarter $ 2.50 $15.50 Third Quarter 14.00 23.50 Second Quarter 15.50 25.00 First Quarter 14.50 25.00
Such over-the-counter market quotations reflect inter-dealer prices adjusted for the one-for-four reverse split, effective August 22, 1995, without retail mark-up, mark-down or commission and may not necessarily reflect actual transactions. As of July 10, 1995 there were approximately 900 registered holders of record of the Company's common stock. (This number does not include investors whose accounts are maintained by securities firms in "street name".) The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain earnings for use in the operation and expansion of its business and, therefore, does not anticipate paying any cash dividends in the foreseeable future. Also, see Management's Discussion and Analysis and the Long Term Debt footnote to the Consolidated Financial Statements for a description of restrictions that limit the ability of SD&A to pay dividends to the All-Comm Media Corporation. 13 14 ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA The consolidated statement of operations data set forth below with respect to the years ended June 30, 1995, 1994 and 1993, and the consolidated balance sheet data at June 30, 1995 and 1994 are derived from, and are qualified by reference to, the audited consolidated financial statements included elsewhere in this Report on Form 10-K. The consolidated statement of operations data for the years ended June 30, 1992 and 1991 and the consolidated balance sheet data at June 30, 1993, 1992 and 1991, are derived from audited financial statements not included in this Report on Form 10-K. This data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto appearing elsewhere in this Report on Form 10-K.
As of and for the years ended June 30, ---------------------------------------------------------------------------- 1995 (1) 1994 1993 1992 1991 ---------- ---------- ----------- ----------- ---------- OPERATING DATA: (2)(3) Sales $3,630,828 Loss from operations (1,255,924) $(844,417) $(1,992,500) $(1,515,754) $(914,432) Gains (losses) from sales of securities 1,579,539 937,365 3,177,203 59,331 (82,983) Interest expense and loan commitment fee (394,200) (7,165) (43,604) (24,292) (927) Income (loss) from continuing operations (130,859) 86,807 979,457 (1,060,460) (531,696) Net income (loss) 110,397 (2,809,887) (1,115,338) (1,863,779) (531,696) Income (loss) per share: (4)(5) Continuing operations (0.07) 0.06 0.71 (1.03) (0.61) Net income (loss) 0.06 (1.91) (0.81) (1.81) (0.61) Weighted average common shares and equivalents 1,807,540 1,468,747 1,373,160 1,032,442 876,996 BALANCE SHEET DATA: (3) Working capital (188,842) (233,572) 818,792 921,603 1,247,881 Total assets 11,824,491 1,639,733 2,657,561 4,319,038 3,596,380 Long-term obligation, net of current portion 3,000,000 Stockholders' equity 5,164,532 665,917 2,119,618 2,649,157 2,984,398
__________________ (1) Reflects operations of Alliance and SD&A for the period beginning with the acquisition on April 25, 1995 to June 30, 1995. (2) The Company has not paid cash dividends during the five years ended June 30, 1995. (3) See Description of Business and Management's Discussion and Analysis for discussion of businesses discontinued and acquired - 1995. (4) Certain of the above amounts have been restated to reflect discontinued operations as well as a one-for-four reverse stock split effective August 22, 1995. (5) Primary and fully diluted income (loss) per share are the same in all fiscal years, except 1993. Fully diluted income per share from continuing operations and net loss in fiscal 1993, was $.70 and $(.79), respectively. 14 15 ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity/cash flow of the Company for the three year period ended June 30, 1995. This should be read in conjunction with the financial statements and notes thereto, included in this Report on Form 10-K. As more fully described in Footnote 3 to the consolidated financial statements, on April 24, 1995, the Company purchased 100% of the stock of Alliance Media Corporation which had simultaneously acquired Stephen Dunn & Associates, Inc. These acquisitions have been reflected in the consolidated financial statements using the purchase method of accounting. Accordingly, the Consolidated Statement of Operations and Consolidated Statement of Cash Flows include the operations of Alliance and SD&A from April 25, 1995 through June 30, 1995. Also in fiscal 1995, the Company discontinued the operations of Sports-Tech International, Inc. and High School Gridiron Report. In December, 1994 the Company agreed to sell Sports-Tech International and closed the HSGR operation. The ultimate sale of STI resulted in a gain of approximately $322,000. The Consolidated Financial Statements have been reclassified to report the net assets, operating results, gain on disposition and cash flows of these operations as discontinued operations. With the disposition of the STI operations, closure of the HSGR operations and the acquisition of Alliance, the Company is now operating in a completely new industry segment - direct marketing. Results of Operations 1995 compared to 1994 Continuing Operations: Sales and cost of sales totaled approximately $3,631,000 and $2,434,000, respectively for the year ended June 30, 1995 (the "current fiscal year") as compared with no similar amounts incurred in the fiscal year ended June 30, 1994 (the "prior fiscal year"). These increases are due to the inclusion of SD&A operations from the date of acquisition, April 25, 1995. In this period, net sales from telemarketing and telefundraising totaled $3,122,000 and sales from off-site campaigns totaled $509,000. Cost of sales represents labor and telephone expenses directly related to telemarketing, telefundraising and off-site campaign services. As a percentage of relative net sales, gross profit relating to telemarketing and telefundraising and off-site campaigns totaled 30% and 48%, respectively. Selling, general and administrative expenses include all selling, general and administrative expenses of SD&A and represent the expense of central services the Company provides to manage its divisional operations, SD&A and its discontinued operations, STI and HSGR, and include senior corporate management, accounting and finance, general administration and legal services. As a result of the Company's new direction, it now also includes expenses relating to the identification and evaluation of potential acquisitions. Corporate general and administrative expenses increased $1,559,000 to $2,382,000 in the current fiscal year as compared with $823,000 in the prior fiscal year. Approximately $750,000 of the increase resulted from the inclusion of SD&A selling, general and administrative expenses from the date of acquisition, April 25, 1995. Severance 15 16 payments made to the prior management totaled $105,000, and $135,000 of the increase related to salary expenses associated with the new management and employees who joined the Company upon resignation of the prior management and board. Legal expenses increased $240,000 in the current fiscal year primarily due to the filing of a registration statement required as part of a settlement reached by prior management, maintenance of the Company's NASDAQ Small Cap stock listing, preparation of a proxy statement regarding the Company's name change, and planning and execution of the new corporate strategy. Accounting and tax fees have increased approximately $100,000 due to reporting requirements surrounding the acquisition of Alliance and SD&A and disposition of STI. The directors and officers insurance premium increased approximately $110,000 due to the purchase of additional coverage. Discounts given to induce the exercise of stock options totaled approximately $128,000 in the current year, an increase of $42,000 as compared with the prior fiscal year. Miscellaneous other expenses increased approximately $77,000 resulting from the increased activity of the Company. Sales, cost of sales and selling, general and administrative expenses will increase in fiscal 1996 as compared with fiscal 1995 due to the inclusion of SD&A's operations for an entire year. Related party charges decreased $15,000, to $6,000 in the current fiscal year, as compared with $21,000 in the prior fiscal year. The decrease is due to the termination of a consulting agreement on October 1, 1993, offset by fees incurred in the current year relating to the sale of STI. The consulting contract was canceled in 1993 because the business activities of the Company no longer required the investment banking services provided. Amortization of intangible assets totaled approximately $65,000 in the current fiscal year and related to the amortization of the covenant-not-to-compete and goodwill, over 5 years and 40 years, respectively, acquired in the Alliance and SD&A transaction. This expense will increase in fiscal 1996 as compared with the current year due to continued amortization of these assets over an entire year. The net gain from sales of securities totaled $1,580,000 in the current fiscal year and resulted from the exercise by the Company of a common stock purchase warrant held as an investment. In July, 1994, the Company borrowed $1,000,000 to fund the exercise of the warrant. The loan was collateralized by a pledge of the warrant shares pursuant to the terms of a pledge agreement. The parties to the $1,000,000 loan included, among others, the Company's former chairman, former president, a former director and a shareholder, who each provided $200,000. The other lenders were non-affiliates. The lenders received the repayment of the $1,000,000 loan, interest at 7.75% totaling $9,000 and a $300,000 commitment fee from the proceeds of the subsequent stock sales. The Company subsequently sold all these securities and recognized a net gain of $1,580,000. The $300,000 loan commitment fee was paid as an inducement to this group of investors to provide the money necessary to exercise the covenant before its expiration on July 31, 1994. The Company's prior management had been unable to obtain the funds to exercise the warrant at more favorable terms. Interest expense increased approximately $87,000 in the current fiscal year and related to the acquisition of $4,500,000 of debt in the Alliance and SD&A acquisition as of April 25, 1995, and the borrowings made to exercise the common stock purchase warrant previously discussed. Interest expense will increase in fiscal 1996 as compared with the current year due to the inclusion of this debt for an entire year. 16 17 In the current year, the income tax provision on continuing operations totaled $75,000 on losses from continuing operations of $55,000. The provision resulted from state and local taxes incurred on taxable income at the subsidiary level not reduced by losses incurred at other levels on which no tax benefits were available. Discontinued Operations: The loss from discontinued operations relates to the STI and HSGR operations which were either sold or closed in fiscal 1995. The loss from discontinued operations totaled approximately $81,000 in fiscal 1995, as compared with almost $2,900,000 in fiscal 1994. The decrease of $2,819,000 is due to the inclusion of the results of these operations for a partial year, and lower losses due to reduced business activity and non recurrence of the HSGR goodwill write off of $310,000 and a contract termination settlement of $544,000. The gain on the sale of discontinued operations which totaled approximately $322,000 relates to the sale of STI and is addressed in Note 5 of the Notes to Consolidated Financial Statements. Results of Operations 1994 compared to 1993 Continuing Operations: Corporate, general and administrative expenses decreased approximately $163,000 in fiscal 1994, as compared with fiscal 1993, due to the reduced new business acquisition activities as follows: $26,000 due to termination without replacement of a public relations firm; $50,000 decrease in pension expenses due to elimination of the pension plan benefit; $30,000 decrease in rent due to reduction in space; $22,000 decrease in salary, director fees and benefits; and decreases in miscellaneous other expenses of $35,000. Related party charges decreased by $63,000 in fiscal 1994 compared to fiscal 1993 due to the termination of a consulting agreement on October 1, 1993, because the business activities no longer required the investment banking services previously provided. Litigation settlement and expense decreased approximately $924,000 in fiscal 1994. The 1993 litigation expense related to the settlement agreement reached in 1993 with certain shareholders and holders of convertible debentures of an entity in which the Company held an equity investment. Other income (expense) decreased by approximately $2,324,000 in fiscal 1994, primarily as a result of the net effects of the following: a reduction in interest and other income, net, of approximately $51,000, decrease in gains in sales of marketable equity securities of $2,240,000, decrease in dividends received of $70,000 due to sale of the securities, $29,000 reduction of accrued interest receivable owed by the Company's former president and the early payment of related note, and offset by a decrease in interest expense of approximately $37,000 due to the pay off of a line of credit. The credit tax provision of $13,600 in fiscal 1994 resulted from the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". In fiscal 1993, the provision resulted from taxable income from continuing operations. 17 18 Discontinued Operations: The loss in fiscal 1994 increased approximately $152,000 as compared to fiscal 1993. The increase is due to the write-off totaling $310,000 of HSGR goodwill, determined not to be recoverable from future cash flows and $544,000 contract termination fees paid to a marketing company providing marketing services to STI, partially offset by a reduction in other expenses resulting from decreased business operations. Capital Resources and Liquidity During fiscal 1994 and 1993, the Company used net cash in operations of $2,186,000 and $4,101,000, respectively. Net investing activities of discontinued operations in each of those years totaled approximately $42,000. In 1994, approximately $106,000 was used to repurchase common shares of the Company for the treasury and approximately $200,000 in cash and investments was used to repay a note payable. In 1993 $131,000 of cash was used to acquire HSGR and $700,000 was used to repay a bank loan. Historically, the Company has financed these cash needs through the following: Sales of equity investments which totaled $1,244,000 in 1994 and $3,949,000 in 1993, proceeds from the exercise of stock options and issuances of stock of $1,126,000 in 1994 and $331,000 in 1993 and new short term borrowings of $500,000 in 1994 and $200,000 in 1993. In fiscal 1995, the Company used net cash in operating activities of approximately $2,128,000. Due to new and seasonal increases in sales, accounts receivable relating to the SD&A operations have increased $378,000 since acquisition. Trade accounts payable have decreased $147,000 due to payment of liabilities assumed in the Alliance and SD&A acquisition. Cash used in discontinued operations totaled $153,000. Additional cash was used to repay $350,000 of related party borrowings, a $150,000 bank loan and a $350,000 line of credit acquired with the SD&A acquisition. To finance these cash out flows the Company generated net cash proceeds totaling $1,600,000 from the exercise of a common stock purchase warrant and $800,000 from the sale of Sports-Tech, International. Additionally, a private placement of restricted common stock yielded net proceeds of $1,000,000 and the exercise of stock options and warrants yielded $207,000. Capital expenditures relating to continuing operations totaled approximately $44,000 in fiscal 1995 and resulted from the purchase of furniture and equipment for the new corporate offices and SD&A. The Company anticipates spending approximately $100,000 over the next year for equipment to support expansion of SD&A's Berkeley Calling Center. On April 25, 1995 Alliance and SD&A were acquired for issuance of 1,025,000 common shares valued at $2,745,000 and approximately $500,000 of acquisition costs. Liabilities acquired totaled $6,694,000 including a $4,500,000 long term obligations yielding prime rate (9.0% at June 30, 1995) to be paid over a four year period. The obligation resulted from the acquisition of SD&A by Alliance and is payable to the former owner and founder of SD&A. Payments due in fiscal 1996 total $1,500,000. Additional contingent payments of up to $850,000 per year over the three year period ending June 30, 1998 may be required based on achievement of defined results operations of SD&A after its acquisition. At the Company's option up to one half of the additional contingent payments may be made with restricted common shares of the Company. All outstanding common shares of SD&A are pledged to collateralize the notes. Also, with these obligations, an operating covenant agreement requires 18 19 that SD&A have a minimum level of working capital and cash levels before dividends can be made to the Company. On October 12, 1995 the long term obligations were revised such that the October 1, 1995 payment of $375,000 and interest payments due in the second quarter of fiscal 1996 will be paid over a twelve month period commencing January 1996 together with interest at 10%. The deferred interest payment is due earlier if the Company completes certain financing by December 31, 1995. On October 6, 1995 the Company entered into an option agreement whereby in consideration of payment to the Company of $150,000, the option holder may purchase, up to April 8, 1996, the Company's undeveloped land in Laughlin, Nevada, for $2,000,000. The Company is also currently negotiating with a lender to borrow approximately $1,500,000 using this land as collateral. The Company believes that funds available from operations, from the potential sale of or borrowing against the Laughlin, Nevada land, and the ability to raise funds through a private placement of equity securities will be adequate to finance its operations and meet interest and debt obligations in fiscal 1996. Additional financing may be required thereafter to meet potential contingent acquisition payments if defined results are achieved, as well as operating requirements and debt payments. There can be no assurance, however, that such capital will be available at terms acceptable to the Company, or at all. The Company has announced a non-binding letter of intent to purchase Forms Direct, Inc., a direct mail services company. The Company is also currently involved in acquisition discussions with other entities. The Company expects these acquisitions will require cash payments, plus issuances of common stock and notes payable to the sellers, as well as contingent payments based on future operating profits and performance. Depending on market conditions, the Company intends to finance the cash portions of the purchase prices of these acquisitions, as well as to obtain additional working capital, through the issuance of common or preferred stock and/or indebtedness. The Company intends to finance additional acquisitions in a similar manner. Although the Company believes that it will be successful in obtaining the financing necessary to complete the acquisitions now contemplated, and those in the future, there can be no assurances that such capital will be available at terms acceptable to the Company, or at all, or that the acquisitions will be completed. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements required by this Item 8 are set forth as indicated in the index following Item 14(a)(1). ITEM 9 - CHANGES IN, AND DISAGREEMENTS WITH, ACCOUNTING AND FINANCIAL DISCLOSURE On July 18, 1995, the Company engaged Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the independent auditor for the Company and its subsidiaries for the year ending June 30, 1995, replacing Arthur Andersen LLP ("Arthur Andersen"). The change in the Company's auditor on July 18, 1995 was in conjunction with the relocation of the Company's corporate offices to Culver City, California, the merger with Alliance and related acquisition of SD&A and change in the Board of Directors and management of the Company. During the two fiscal years in the period ended June 30, 1994, and the period preceding the change of auditors, there were no disagreements with Arthur Andersen on any matters of accounting principles or practices, financial statement disclosures or auditing 19 20 scope or procedures, which disagreements, if not resolved to Arthur Andersen's satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report. Reference is made to the Form 8-KA report dated July 21, 1995, for more information and exhibits thereto containing the accountants' letter. 20 21 PART III The information required by this Part III (items 10, 11, 12 and 13) is hereby incorporated by reference from the Company's definitive proxy statement which is expected to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934 not later than 120 days after the end of the fiscal year covered by this report. Certain information, with respect to the Company's executive officers, is set forth in Part I, under the caption "Business-Executive Officers and Directors of the Registrant and Significant Employees." 21 22 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K PRIOR TO MERGER (a)(1) Financial statements - see "Index to Financial Statements and Financial Statement Schedules" on page F-1. (2) Financial statement schedules - see "Index to Financial Statements and Financial Statement Schedules" on page F-1. (3) Exhibits: 3 (i) Amended and Restated Articles of Incorporation (B) 3 (ii) Certificate of Amendment to the Amended and Restated Articles of Incorporation of the Company (B) 3 (iii) Certificate of Amendment to the Articles of Incorporation (A) 3 (iv) By-Laws (B) 10.1 1991 Stock Option Agreement (C) 10.2 Operating Covenants Agreement, dated April 25, 1995, between Alliance Media Corporation and Mr. Stephen Dunn (D) 10.3 Pledge Agreement, dated as of April 25, 1995, between Alliance Media Corporation and Mr. Stephen Dunn (D) 10.4 Option Agreement (A) 11. Statement re: computation of per share earnings 22.1 List of Company's subsidiaries (A) 27 Financial Data Schedule (A)
(A) Incorporated herein. (B) Incorporated by reference from the Company's Registration Statement on Form S-4, Registration Statement No. 33-45192. (C) Incorporated by reference to the Company's Registration on Form S-8, Registration Statement 33-43520 (D) Incorporated herein by reference to Form 8-K Current Report of All-Comm Media Corporation dated April 25, 1995 (b) Reports on Form 8-K. On April 20, 1995, the Company filed a Memorandum regarding the amendment to the Acquisition Agreement with Alliance Media Corporation, dated February 7, 1995. On April 25, 1995, the Company filed the Amendment No. 1 to the Acquisition Agreement with Alliance Media Corporation; the Merger Agreement, dated April 21, 1995 between STI Merger Corporation and Alliance Media Corporation; the Stock Purchase Agreement, dated as of January 3, 1995, between Alliance Media Corporation and Mr. Stephen Dunn; Operating Covenants Agreement, dated April 21, 1995 between Alliance Media Corporation and Mr. Stephen Dunn; and the Pledge Agreement, dated April 25, 1995, between Alliance Media Corporation and Mr. Stephen Dunn. 22 23 On May 26, 1995, the Company filed an amendment to the Form 8-K dated March 9, 1995, incorporating by reference the required financial statements regarding the sale of Sports-Tech International, Inc. included in the March 31, 1995 Form 10-Q. On June 12, 1995, the company filed a notification of the completion of a private placement on May 31, 1995. On June 26, 1995, the Company filed an amendment to the Form 8-K dated April 25, 1995, submitting the required financial statements and pro forma information regarding the acquisition of Alliance Media Corporation and Stephen Dunn & Associates, Inc. On July 21, 1995, and as amended on August 9, 1995, the Company disclosed the change in the Company's accountants. On August 23, 1995, the Company disclosed a one-for-four reverse stock split and the change in the Company's name. (c) Reference is made to Item 14(a)(3) above. (d) Reference is made to Item 14(a)(2) above. 23 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALL-COMM MEDIA CORPORATION. (Registrant) BY /s/ Barry Peters ----------------------------------- Barry Peters Chairman of the Board and Chief Executive Officer Date: October 12, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Barry Peters Chairman of the Board and October 12, 1995 - -------------------------- Chief Financial Officer Barry Peters /s/ E. William Savage President and October 12, 1995 - -------------------------- Chief Operating Officer E. William Savage /s/ Martin S. McDermut Vice President and October 12, 1995 - -------------------------- Chief Financial and Martin S. McDermut Accounting Officer /s/ William E. Chaikin. Director October 12, 1995 - -------------------------- William E. Chaikin. /s/ H. William Coogan, Jr. Director October 12, 1995 - -------------------------- H. William Coogan, Jr. /s/ C. Anthony Wainwright Director October 12, 1995 - -------------------------- C. Anthony Wainwright
The foregoing constitute all of the Board of Directors. 24 25 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES [Items 8 and 14(a)]
(1) FINANCIAL STATEMENTS: Page ---- Reports of Independent Public Accountants 26, 27 Consolidated Balance Sheets June 30, 1995 and 1994 28 Consolidated Statements of Operations Years Ended June 30, 1995, 1994 and 1993 29 Consolidated Statements of Stockholders' Equity Years Ended June 30, 1995, 1994 and 1993 30 Consolidated Statements of Cash Flows Years Ended June 30, 1995, 1994 and 1993 31-32 Notes to Consolidated Financial Statements 33-43
(2) FINANCIAL STATEMENT SCHEDULES: I. Condensed Financial Information of Registrant. 44-46 All other financial statement schedules are omitted because of the absence of the conditions under which they are required or because the required information is given in the consolidated financial statements or the notes thereto. 25 26 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS The Stockholders of All-Comm Media Corporation We have audited the accompanying consolidated financial statements and the financial statement schedule of All-Comm Media Corporation and Subsidiaries listed in Items 8 and 14(a) of this Form 10-K. These financial statements and financial statement schedule are the responsibility of All-Comm Media Corporation's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of All-Comm Media Corporation and Subsidiaries as of June 30, 1995, and the consolidated results of their operations and their cash flows for the year ended June 30, 1995, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included herein. /s/ COOPERS & LYBRAND L.L.P. Los Angeles, California October 10, 1995 26 27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS The Stockholders of All-Comm Media Corporation We have audited the accompanying consolidated balance sheet of All-Comm Media Corporation, (a Nevada corporation) (formerly Sports-Tech, Inc.) and Subsidiaries as of June 30, 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended June 30, 1994. These financial statements are the responsibility of All-Comm Media Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of All-Comm Media Corporation and Subsidiaries as of June 30, 1994, and the results of their operations and their cash flows for each of the two years in the period ended June 30, 1994, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Las Vegas, Nevada September 23, 1994, except with respect to the matters discussed in Note 5 and the one-for-four reverse stock split discussed in Note 14 as to which the date is October 10, 1995 27 28 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - JUNE 30, 1995 AND 1994
1995 1994 ---- ---- ASSETS - ------ Current assets: Cash and cash equivalents $ 1,217,772 $ 419,149 Accounts receivable, net of allowance for doubtful accounts of $40,552 in 1995 2,067,977 Other current assets 116,468 34,894 Net assets of discontinued operations 286,201 ----------- ---------- Total current assets 3,402,217 740,244 Property and equipment at cost, net 344,154 67,596 Land held for sale at cost 766,651 756,125 Intangible assets at cost, net 7,272,769 Other assets 38,700 75,768 ----------- ---------- Total assets $11,824,491 $1,639,733 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Note payable to bank $ 49,694 $ 150,000 Note payable other 72,000 144,000 Trade accounts payable 365,638 4,474 Accrued salaries and wages 641,507 57,003 Other accrued expenses 683,954 268,339 Income taxes payable 94,565 Current portion of long term obligations to related party 1,500,000 Related party payables 183,701 350,000 ----------- ---------- Total current liabilities 3,591,059 973,816 Long term obligations to related party less current portion 3,000,000 Other liabilities 68,900 ----------- ---------- Total liabilities 6,659,959 973,816 ----------- ---------- Commitments and contingencies Stockholders' equity: Class B convertible preferred stock - authorized 50,000 shares of $.01 par value; none issued Common stock - authorized 6,250,000 shares of $.01 par value; 3,028,092 and 1,436,833 shares issued, respectively 30,281 14,368 Additional paid-in capital 10,300,847 5,928,542 Accumulated deficit (5,031,127) (5,141,524) Less 11,800 shares of common stock in treasury, at cost (135,469) (135,469) ----------- ---------- Total stockholders' equity 5,164,532 665,917 ----------- ---------- Total liabilities and stockholders' equity $11,824,491 $1,639,733 =========== ==========
See Notes to Consolidated Financial Statements. 28 29 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1995, 1994 AND 1993
1995 1994 1993 ---------- ----------- ----------- Sales $3,630,828 Cost of sales 2,434,011 ---------- Gross profit 1,196,817 Operating Expenses: Selling general and administrative (2,381,912) $ (823,417) $ (984,628) Service fees of related parties (5,728) (21,000) (84,000) Amortization of intangible assets (65,101) Litigation settlement and expenses (923,872) ---------- ----------- ----------- Loss from operations (1,255,924) (844,417) (1,992,500) ---------- ----------- ----------- Other income (expense): Gain from sales of securities 1,579,539 937,365 3,177,203 Loan commitment fee (300,000) Dividends 7,237 77,030 Interest income 13,679 26,263 Interest expense (94,200) (7,165) (43,604) Other, net 1,047 (19,813) 5,147 ---------- ----------- ----------- Total 1,200,065 917,624 3,242,039 ---------- ----------- ----------- Income (loss) from continuing operations before income taxes (55,859) 73,207 1,249,539 Credit (provision) for income taxes (75,000) 13,600 (270,082) ---------- ----------- ----------- Income (loss) from continuing operations before discontinued operations (130,859) 86,807 979,457 Gain on sale of discontinued operations 322,387 Loss from discontinued operations, net of income tax benefit of $649,482 in 1993 (81,131) (2,896,694) (2,094,795) ---------- ----------- ----------- Net income (loss) $ 110,397 $(2,809,887) $(1,115,338) ========== =========== =========== Income (loss) per share: From continuing operations $(.07) $ .06 $.71 From discontinued operations .13 (1.97) (1.52) ----- ------ ----- Income (loss) per share $ .06 $(1.91) $(.81) ===== ====== ===== Weighted average common and common equivalent shares outstanding 1,807,540 1,468,747 1,373,160 ========= ========= =========
Primary and fully diluted income (loss) per share are the same in fiscal years 1995 and 1994. Fully diluted income (loss) per share from continuing operations, discontinued operations and net loss in fiscal 1993 was $.70, $(1.49) and $(.79) respectively. See Notes to Consolidated Financial Statements. 29 30 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED JUNE 30, 1995, 1994 AND 1993
Common Stock Additional Treasury Stock ------------------- Paid-in Accumulated -------------------- Receivable Shares Amount Capital Deficit Shares Amount for Shares Totals --------- ------- ----------- ----------- ------- --------- ---------- ---------- Balance June 30, 1992 1,197,559 $11,976 $4,161,719 $(1,216,299) (20,550) $(108,239) $(200,000) $2,649,157 Issuance of treasury shares for HSGR acquisition 175,980 15,000 79,020 255,000 Shares issued upon exercise of stock options 54,633 546 330,253 330,799 Net loss (1,115,338) (1,115,338) --------- ------- ----------- ----------- ------- --------- ---------- ---------- Balance June 30, 1993 1,252,192 12,522 4,667,952 (2,331,637) (5,550) (29,219) (200,000) 2,119,618 Issuance of restricted shares for litigation settlement 25,000 250 249,750 250,000 Purchase of shares - cash (6,250) (106,250) (106,250) Receivable paid - at discount (66,667) 200,000 133,333 Shares issued upon exercise of stock options and warrants 159,641 1,596 991,173 992,769 Discounts granted on exercise of options 86,334 86,334 Net loss (2,809,887) (2,809,887) --------- ------- ----------- ----------- ------- --------- ---------- ---------- Balance June 30, 1994 1,436,833 14,368 5,928,542 (5,141,524) (11,800) (135,469) -- 665,917 Issuance of restricted shares for litigation settlement 37,500 375 149,625 150,000 Issuance of restricted shares for merger with Alliance Media Corporation 1,025,000 10,250 2,734,750 2,745,000 Issuance of restricted shares as finders fees 42,500 425 138,325 138,750 Private placement of shares - cash 413,759 4,138 1,014,537 1,018,675 Shares issued upon exercise of stock options and warrants 72,500 725 207,193 207,918 Discounts granted on exercise of options 127,875 127,875 Net income 110,397 110,397 --------- ------- ----------- ----------- ------- --------- ---------- ---------- Balance June 30, 1995 3,028,092 $30,281 $10,300,847 $(5,031,127) (11,800) $(135,469) $ -- $5,164,532 ========= ======= =========== =========== ======= ========= ========== ==========
See Notes to Consolidated Financial Statements. 30 31 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1995, 1994 AND 1993
1995 1994 1993 ---------- ----------- ----------- Operating activities: Net income (loss) $110,397 $(2,809,887) $(1,115,338) Adjustments to reconcile loss to net cash used in operating activities: Gains from sales of securities (1,579,539) (937,365) (3,177,203) Gain on sale of STI (322,387) Depreciation 52,348 39,306 37,515 Amortization 65,101 Deferred income tax (13,600) (324,400) Loss on disposal of assets 30,319 Discount on exercise of options 127,875 86,334 Issuance of stock and note for consultant termination settlement 394,000 Changes in assets and liabilities net of effects from acquisition: Accounts receivable (377,631) Income tax refund receivable 55,000 496,504 Other current assets (16,844) (3,778) 1,294 Other assets 20,519 61,959 (40,083) Trade accounts payable (147,360) 1,689 2,785 Accrued expenses and other current liabilities 6,757 3,784 (310,323) Income taxes payable 55,000 Discontinued operations, net (152,662) 936,564 327,777 ---------- ----------- ----------- Net cash used in operating activities (2,128,107) (2,185,994) (4,101,472) ---------- ----------- ----------- Investing activities: Proceeds from sales of investments in securities 2,682,811 1,244,090 3,949,470 Purchase of investment in securities (1,063,272) Proceeds from sale of STI 800,000 Proceeds from sales of fixed assets 11,000 Acquisition of Alliance Media Corporation, net of cash acquired of $567,269 259,088 Acquisition of High School Gridiron Report (131,000) Purchase of property and equipment (43,905) (6,653) (4,971) Land development costs (10,526) Investing activities of discontinued operations, net (42,271) (41,507) ---------- ----------- ----------- Net cash provided by investing activities 2,635,196 1,195,166 3,771,992 ---------- ----------- ----------- Financing activities: Proceeds from (repayments of) bank loans (513,059) 150,000 (700,000) Proceeds from issuances of common stock 1,226,593 992,769 330,799 Proceeds from note payable other 1,000,000 200,000 Repayments of note payable other (1,072,000) (200,000) Related party borrowing (repayment) (350,000) 350,000 Repurchases of common stock (106,250) Proceeds from receivable for shares 133,333 Financing activities of discontinued operations (19,350) (17,130) ---------- ----------- ----------- Net cash provided by (used in) financing activities 291,534 1,300,502 (186,331) ---------- ----------- ----------- Net increase (decrease) in cash and cash equivalents 798,623 309,674 (515,811) Cash and cash equivalents at beginning of year 419,149 109,475 625,286 ---------- ----------- ----------- Cash and cash equivalents at end of year $1,217,772 $ 419,149 $ 109,475 ========== =========== ===========
31 32 Supplemental disclosures of cash flow data: Cash paid (received) during the year for: Interest $60,422 $ 20,771 S 57,627 Financing charge $300,000 Federal income tax paid (refunded) $15,000 $ (55,000) $ (675,920)
Supplemental schedule of non cash investing and financing activities: In 1995 the Company purchased all of the capital stock of Alliance Media Corporation for 1,025,000 shares of common stock valued at $2,745,000. Additionally, 37,500 shares of common stock valued at $100,000 were issued as finders fee. Other direct costs of the acquisition totaled approximately $400,000. In conjunction with the acquisition, net assets acquired and liabilities assumed, less payments prior to year end, were: Working capital, other than cash $601,729 Property and equipment (326,320) Costs in excess of net assets of companies acquired (7,337,870) Other assets (23,451) Long term debt 4,500,000 Common stock issued 2,845,000 ---------- $ 259,088 ==========
Five thousand shares of common stock valued at $38,750 were issued as a commission on the sale of STI during 1995. The Company issued 37,500 shares of common stock valued at $150,000 in 1995 in settlement of a 1994 liability for early termination of a consulting agreement. See Notes to Consolidated Financial Statements. 32 33 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL: All-Comm Media Corporation ("The Company") was formerly known as Sports-Tech, Inc. The name change was approved at a Special Meeting of Shareholders held on August 22, 1995. On April 25, 1995, the Company, through a wholly-owned subsidiary, was merged with Alliance Media Corporation ("Alliance") and its wholly-owned subsidiary, Stephen Dunn & Associates, Inc. ("SD&A"). The shareholders of Alliance received 1,025,000 shares of the Company's common stock. Upon consummation of the merger, the members of the board of directors of the Company resigned and a new board was appointed. Through SD&A, the Company currently operates in one industry segment, providing telemarketing and telefundraising to not-for-profit arts and other organizations. The Company's mission is to create a growth-oriented direct marketing and media services company through acquisitions and internal growth. The Company also currently owns approximately seven acres of undeveloped land in Laughlin, Nevada. Prior to the merger with Alliance, the Company's principal activities were the investigation of non-gaming acquisitions. In fiscal 1992, the Company acquired a 100% interest in Sports-Tech International ("STI"), and in fiscal 1993 acquired a 100% of the assets and certain liabilities of High School Gridiron Report ("HSGR"). STI was engaged in the development, acquisition, integration and sale of advanced computer software, computer equipment and computer aided video systems used by sports programs at the professional, collegiate and high school levels. HSGR provided academic and video date to aid in pre-qualifying high school athlete to colleges and universities. In fiscal 1995, the Company discontinued the operations of STI and HSGR. The Company believes that funds available from operations, from the potential sale of or borrowing against the Laughlin, Nevada land, and the ability to raise funds through a private placement of equity securities will be adequate to finance its operations and meet interest and debt obligations in fiscal 1996. Additional financing may be required thereafter to meet potential contingent acquisition payments if defined results are achieved, as well as operating requirements and debt payments. There can be no assurance, however, that such capital will be available at terms acceptable to the Company, or at all. 2. SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation: The consolidated financial statements include the accounts of All-Comm Media Corporation and its wholly-owned subsidiaries, Bullhead Casino Corporation ("Bullhead"), B H Acquisitions, Inc. ("B H"), Sports-Tech International, Inc. ("STI") and High School Gridiron Report, Inc. ("HSGR"), Alliance Media Corporation ("Alliance"), Stephen Dunn & Associates, Inc. ("SD&A") and BRST Mining Company. All material intercompany accounts and transactions are eliminated in consolidation. Cash and Cash Equivalents/Statement of Cash Flows: Highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Land held for Sale: The cost of acquiring, improving and planning the development of land is capitalized. Costs related to development are written off when such plans are abandoned. Interest cost is capitalized in periods in which activities specifically related to the development of the land takes place. Property and Equipment: Property and equipment is recorded at cost less accumulated depreciation. Maintenance and repairs are expensed as incurred. The cost and related accumulated depreciation and amortization of property and equipment sold or retired are removed from the accounts and resulting gains or losses are included in current operations. Depreciation and amortization 33 34 are provided on a straight line basis over the useful lives of the assets involved, limited as to leasehold improvements by the term of the lease, as follows: Equipment 5 years Furniture and fixtures 2 to 5 years Leasehold improvements 3 to 5 years
Intangible Assets: Excess of cost over net assets acquired in connection with the Alliance and SD&A acquisitions are being amortized over the period of expected benefit of 40 years. Covenants not to compete are stated at cost and are amortized over the period of expected benefit of five years. For each of its investments, the Company assesses the recoverability of its goodwill, by determining whether the amortization of the goodwill balance over its remaining life can be recovered through projected undiscounted future cash flows over the remaining amortization period. If projected future cash flows indicate that unamortized goodwill will not be recovered, an adjustment will be made to reduce the net goodwill to an amount consistent with projected future cash flows discounted at the Company's incremental borrowing rate. Cash flow projections are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. Revenue recognition: Sales represent fees earned by SD&A which are recorded when pledged cash is received for on-site campaigns and when services are provided for off-site campaigns. Income taxes: Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates and laws applicable to the years in which the differences are expected to reverse. Valuation allowances, if any, are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. Concentration of Credit Risk: Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of temporary cash investments and trade receivables. The Company restricts investment of temporary cash investments to financial institutions with high credit standing. Credit risk on trade receivables is minimized as a result of the large and diverse nature of the Company's customer base. Earnings (loss) per share: Earnings (loss) per share is computed based on the weighted average number of common shares outstanding and common share equivalents attributable to the effects, if dilutive, of the assumed exercise of outstanding stock options. Reclassifications: Certain accounts in the 1994 and 1993 consolidated financial statements and notes have been reclassified to conform to the 1995 presentation. 3. ACQUISITION OF ALLIANCE MEDIA CORPORATION AND STEPHEN DUNN & ASSOCIATES, INC.: On April 25, 1995, the Company, through a statutory merger, acquired all of the outstanding common shares of Alliance. The purchase price was approximately $2,745,000, consisting of issuance of 1,025,000 restricted common shares of the Company to former shareholders of Alliance valued at $2.68 per common share. These shares have registration rights as of December 1, 1995. Direct costs of the acquisition approximated 34 35 $500,000. Pursuant to the terms of the merger agreement, upon consummation of the merger the then current members of the Company's board of directors resigned, and a new board consisting of six persons designated by Alliance was appointed. The assets of Alliance acquired by the Company consisted primarily of (i) all the issued and outstanding stock of Stephen Dunn & Associates, Inc. ("SD&A"), which Alliance had acquired simultaneously with the merger, (ii) a five year covenant not to compete with the former owner of SD&A, and (iii) the cash proceeds of $1,509,750 (net of certain payments, including the payment of $1.5 million made pursuant to the acquisition of SD&A) of a private placement of equity securities of Alliance, which securities, upon consummation of the merger, were converted into the Company's common stock. The purchase price of SD&A paid by Alliance was $1.5 million in cash, plus $4.5 million in long term obligations, yielding prime rate (9.0% at June 30, 1995), payable over four years. Additional contingent payments of up to $850,000 per year over the period ending June 30, 1998 may be required based on the achievement of defined results of operations of SD&A after its acquisition. At the Company's option, up to one half of the additional contingent payments may be made with restricted common shares of the Company. These additional shares have demand registration rights commencing in September 1997. Alliance and SD&A have entered into an operating covenant agreement relating to the operations of SD&A and Alliance has pledged all of the common shares of SD&A acquired to collateralize its obligations under that agreement. The assets of SD&A acquired by Alliance (and therefore by the Company upon consummation of the merger) consisted primarily of cash and cash equivalents, accounts receivable and furniture, fixtures and equipment. These acquisitions were accounted for using the purchase method. The purchase price was allocated to assets acquired based on their estimated fair value. This treatment resulted in approximately $6.3 million of costs in excess of net assets required, after recording a covenant not to compete of approximately $1.0 million. Such excess, which may increase for any further contingent payments, is being amortized over the expected period of benefit of 40 years. The operating results of these acquisitions are included in the consolidated results of operations from the date of acquisition. The following summary, prepared on a pro forma basis, combines the consolidated results of operations as if Alliance and SD&A had been acquired as of the beginning of the period presented, after including the impact of certain adjustments, such as: amortization of intangibles, increased interest on the acquisition debt, and adjustment of officer salary for new contract.
Unaudited -------------------------- 1995 1994 ---- ---- Net sales $15,013,000 $12,685,000 Income (loss) from continuing operations (113,911) 235,965 Income (loss) from continuing operations per common share $(.06) $0.16
The unaudited pro forma information is provided for informational purposes only. It is based on historical information and is not necessarily indicative of the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined entities. 35 36 4. ACQUISITION OF HIGH SCHOOL GRIDIRON REPORT: In June, 1993 the Company, through its wholly-owned subsidiary, HSGR, a Nevada corporation, acquired substantially all the assets, and assumed certain liabilities, of High School Gridiron Report in exchange for 15,000 shares of the Company's treasury stock, valued at $17, the NASDAQ closing market value on June 11, 1993. This acquisition was accounted for as a purchase. HSGR assumed $29,000 in liabilities and acquired $40,000 in fixtures and equipment net, $10,000 in other assets, software, net and purchased goodwill of $365,000 that was being amortized over five years. In the fourth quarter of fiscal 1994, it was determined that the unamortized goodwill totaling $310,000 would not be recovered from future cash flows of the related operations and the balance was written off. 5. DISCONTINUED OPERATIONS: On December 7, 1994, the Company entered into a definitive agreement for the sale of the Company's subsidiary, STI. The proposed purchase price for STI's operations was $1,100,000 of which $300,000 was paid as of the agreement date. By mutual agreement, the closing date was accelerated to March 8, 1995, and the purchase price reduced to $800,000, a reduction of $300,000 on the original sales price, out of which $80,000 was paid as a commission to STI's former president. The former president of STI also received $38,750 in common stock and warrants to purchase 2,500 shares of the Company's common stock at $8.00 per share in connection with this transaction. The Company realized a gain on the sale of $322,387. No tax is allocable to this gain. Concurrent with the closing of sale of STI, all operations of HSGR were ceased and all unrecoverable assets were written off, which amounted to approximately $22,000. Accordingly, STI and HSGR are reported as discontinued operations at June 30, 1995, and the consolidated financial statements have been reclassified to report separately the net assets, operating results, gain on disposition and cash flows of these operations. Revenues of these discontinued operations for fiscal 1995, 1994 and 1993 were $1,147,829, $1,743,090 and $2,315,327, respectively. Net assets relating to these discontinued operations at June 30, 1994, primarily working capital and plant and equipment and certain liabilities, have been reclassified to net assets of discontinued operations and are stated at the lower of cost or estimated net realizable value. 6. PROPERTY AND EQUIPMENT: Property and equipment of continuing operations at June 30, 1995 and 1994 consisted of the following:
1995 1994 --------- --------- Office furnishings and equipment $ 246,157 $ 168,896 Leasehold improvements 131,447 72,352 --------- --------- 377,604 241,248 Less accumulated depreciation and amortization (33,450) (173,652) --------- --------- $ 344,154 $ 67,596 ========= =========
36 37 7. LAND HELD FOR SALE: The Company, through its wholly owned subsidiary, Bullhead, owns approximately seven acres of undeveloped land in Laughlin, Nevada, which had a carrying value of $766,651 and $756,125 as of June 30, 1995 and 1994, respectively. During fiscal 1995 the Company capitalized costs of $10,526 for its share of costs incurred by area property owners for development design fees. The Company is additionally subject to an agreement entered into at the time of the acquisition of the Laughlin property to pay to two unaffiliated individuals an amount equal to 5% each of the net profit from any sale of said property, or if developed into a hotel/casino (which the Company does not intend to do), 5% each of the equity in the property. 8. INTANGIBLE ASSETS: Intangible assets at June 30, 1995, consist of the following: Covenant not to compete $1,000,000 Excess of cost over acquired net tangible assets of Alliance and SD&A 6,337,870 ---------- 7,337,870 Less accumulated amortization (65,101) ---------- $7,272,769 ==========
9. NOTES PAYABLE TO BANK: At June 30, 1995, SD&A has a note payable outstanding totaling $49,694 and an unused $350,000 line of credit from a bank. The note payable requires monthly principal repayment of $6,529 plus interest. The note payable and the line of credit bear interest at the bank's prime rate (9% at June 30, 1995), plus 1.75% and 1.25%, respectively. No amounts have been borrowed against the line of credit since the acquisition of SD&A. The line is collateralized by substantially all of SD&A's assets and is personally guaranteed by SD&A's President. Also, the line of credit contains financial covenants, including current ratio and working capital, debt and net worth, capital expenditure limits and cash flows. In June, 1994, the Company borrowed $150,000 from a bank. The loan was collateralized by a $150,000 certificate of deposit and bore interest at 7.25% and was repaid in July, 1994. 10. OTHER ACCRUED EXPENSES: Accrued expenses at June 30, 1995 and 1994 consisted of the following:
1995 1994 -------- -------- Accrued professional fees $287,550 $256,071 Accrued taxes and licenses 116,300 Other 280,104 12,268 -------- -------- Total $683,954 $268,339 ======== ========
37 38 11. LONG TERM OBLIGATIONS TO RELATED PARTY: In connection with the acquisition of SD&A, Alliance issued promissory notes totaling $4,500,000 to SD&A's current President and former sole shareholder. The notes bear interest at prime rate (9% at June 30, 1995) not to exceed 10% or drop below 8% and are payable monthly. Principal payments are due quarterly, and originally matured as follows: 1996 - $1,500,000; 1997 - $1,500,000; 1998 - $1,000,000; 1999 - $500,000. All the outstanding common shares of SD&A are pledged to collateralize these notes. In connection with these notes an operating covenant agreement includes, among other things, provisions requiring that SD&A have a minimum level of working capital and cash levels, subject to periodic increases based on sales, before dividend payments can be made to the parent company. Net restricted assets of SD&A, after "push down" of costs in excess of net assets acquired, totaled approximately $6,650,000 at June 30, 1995. 12. EMPLOYMENT CONTRACTS: Subject to execution of definitive agreements, the Company has entered into three-year employment arrangements with current officers of the Company. The arrangements provide for annual base salaries, base increases, cash and option bonuses which are payable if specified management goals are achieved, and certain termination benefits. The aggregate liability in the event of termination by the Company without cause of these employees is approximately $1,000,000. The Company also had employment contracts with certain members of the prior management of the Company. In fiscal 1995, 1994 and 1993, severance payments totaling approximately $60,000, $40,000 and $165,000, respectively were paid under the contracts. A contract with a prior key member of management also required the issuance of 25,000 shares of the Company's common stock in exchange for a $200,000 non-recourse promissory note receivable. The note receivable was due on November 1, 1994, along with accrued interest at 10.5% per annum. In fiscal 1994, the Company's Board of Directors approved discounting the interest receivable and note receivable by one third. The discount of the interest receivable of $29,166 was charged against operations and the $66,667 discount of the note receivable was charged to additional paid in capital. 13. COMMITMENTS AND CONTINGENCIES: Leases: SD&A leases its corporate business premises from its former owner. The lease requires monthly rental payments of $11,805 through January 1, 1999, with an option to renew. SD&A incurs all costs of insurance, maintenance and utilities. Also, the Company leases its corporate office space, copier, phones and automobiles under long term leases. Future minimum rental commitments under all non-cancelable leases, as of fiscal years ending June 30, are as follows: 1996 $256,144 1997 188,874 1998 178,924 1999 69,048 -------- $692,990 ========
38 39 Rent expense for continuing operations was approximately $89,000, $56,000 and $81,000 for fiscal years ended 1995, 1994 and 1993. Total rent paid by SD&A to its former owner from the date of acquisition to June 30, 1995 was approximately $26,000. Litigation: In 1990, the Company, along with a company in which the Company held an equity investment (the "Investee") and certain officers and directors of the Investee (including certain officers and directors who are or were also officers and directors of the Company), were named defendants in consolidated class action and derivative action suits brought by certain shareholders and holders of convertible debentures of the Investee in 1990. On February 26, 1993, without admitting any wrongdoing, the parties in the litigation matter executed a settlement agreement. This settlement agreement was approved by the United States District Court, District of Nevada, on May 28, 1993 and became effective on June 26, 1993. Pursuant to the terms of the settlement agreement, the Company paid $600,000 on June 10, 1993 towards the total cost of the settlement. Additionally, a $200,000 note collateralized by 10,000 common shares of the Investee's stock was delivered to their attorneys as escrow agent. On January 31, 1994, the Company settled the $200,000 note by signing over the 10,000 common shares collateralizing the note, valued at $133,750, and paying $67,877, which included interest of $1,627. Expenses incurred in fiscal 1993 relating to this matter totaled $923,872, including legal fees of $123,872. Pursuant to a Settlement and Release Agreement dated June 17, 1994 with Membership Development, Inc. ("MDI"), a non-affiliated direct marketing company that was providing marketing services to Sports-Tech International, in fiscal 1994 the Company issued 25,000 shares of Sports-Tech stock valued at $250,000, executed an unsecured non-interest bearing promissory note for $144,000 and in fiscal 1995 issued an additional 37,500 shares of stock valued at $150,000. In May 1995, MDI exercised their right to require the Company to file a registration statement registering these securities for sale. A registration statement was filed but has not yet been declared effective. The entire $544,000 of consideration was expensed in fiscal 1994 and is included in discontinued operations. The Company is party to various minor legal proceedings. The outcome of these legal proceedings are not expected to have a material adverse effect on the financial condition or operation of the Company based on the Company's current understanding of the relevant facts and law. 14. STOCKHOLDERS' EQUITY: Common Stock: The Board of Directors approved a one-for-four reverse stock split of the Company's authorized and issued common stock, effective August 22, 1995. The Board also approved reducing the number of authorized shares of common stock to 6,250,000 with a par value of $.01 per share, from the 25,000,000 common shares previously authorized. Accordingly, all share and per share data, as appropriate, reflect the effect of the reverse split. In May 1995, the Company completed a private placement of 413,759 shares of restricted common stock, at $2.68 per share. These shares have registration rights as of December 1, 1995. Net proceeds from this offering totaled $1,018,675. As discussed in Note 3, in connection with the acquisition of Alliance and SD&A, the Company issued 1,025,000 restricted common shares to the former shareholders of Alliance. These shares have registration rights as of December 1, 1995. Also in connection with the acquisition, the Company issued 37,500 common shares valued at $100,000 and warrants to purchase 43,077 common shares at $6.00-to-$8.00 per share to invest- 39 40 ment banking firms, a shareholder, a director and a law firm which represented the Company. These warrants expire between April 25, 1998 and April 25, 2000. In connection with the sale of Sports-Tech International, Inc., the Company approved issuance of 5,000 common shares valued at $38,750 and warrants to purchase 2,500 shares at $8.00 through April 25, 1995 to its former president. On July 26, 1991, the Company sold warrants to purchase up to 62,500 shares of the Company's common stock to a private investor for $250 in cash, exercisable at $6.00 per share through July 31, 1996. This investor was subsequently elected to the Company's Board of Directors. On January 31, 1994, this Director exercised warrants to purchase 25,000 shares of common stock at $4.00 per share (reduced by Board of Directors Resolution from $6.00 to $4.00) by paying $100,000 to the Company. On June 9, 1994, this Director sold, in a private transaction, 18,750 of these warrants to another shareholder of the Company. In May, 1995, the Board of Directors approved the temporary reduction of the exercise price of these warrants from $6.00 to $2.68 and, on May 31, 1995, these 37,500 warrants were exercised for $100,500 in cash payments. As of June 30, 1995, the Company has the following outstanding warrants to purchase 45,577 shares of common stock:
Exercise Price Shares of Common Per Share of Date Issued Stock upon Exercise Common Stock ----------- ------------------- ------------ April 1995 33,750 $6-8.00 May 1995 11,827 $6 ------ Total as of June 30, 1995 45,577 ======
Stock Options: In 1991, the Company adopted a non-qualified stock option plan (the 1991 Plan) for key employees, officers, directors and consultants to purchase up to 250,000 shares of common stock. The Plan is administered by the Board of Directors which has the authority to determine which officers and key employees of the Company will be granted options , the option price and exercisability of the options. In no event shall an option expire more than ten years after the grant. The following summarizes the stock option transactions under the 1991 Plan for the two fiscal years ended June 30, 1995 and 1994:
Number Option Price of Shares Per Share --------- ------------ Outstanding at June 30, 1993 193,617 $6.00 to $16.00 Granted 3,000 $22.00 Exercised (70,058) $6.00 to $16.00 Canceled (18,667) $6.00 to $16.00 ------- Outstanding at June 30, 1994 107,892 $6.00 to $22.00 ------- Granted 8,750 $5.24 to $7.00 Exercised (22,500) $2.68 to $5.24 Canceled (3,334) $6.00 ------- Outstanding at June 30, 1995 90,808 $6.00 to $22.00 =======
40 41 All the outstanding options under the 1991 Plan are exercisable and expire as follows: fiscal 1996 - 85,808 and fiscal 2000 - 5,000. All options granted in fiscal years 1995, 1994 and 1993 were issued at fair market value. At June 30, 1995, 13,501 options were available for grant. In May, 1995, a $128,000 discount was given to a former director of the Company to exercise 18,750 options and was recognized as compensation expense. In addition to the 1991 Plan, the Company has other option agreements with former officers, directors, employees and owners of an acquired Company. The following summarizes transactions outside the 1991 Plan for the two fiscal years ended June 30, 1995 and 1994:
Number Option Price of Shares Per Share --------- ------------ Outstanding at June 30, 1993 143,250 $3.00 to $16.00 Granted 18,000 $15.52 to $16.00 Exercised (64,584) $4.00 to $8.00 Canceled (22,875) $7.24 to $15.52 ------- Outstanding at June 30, 1994 73,791 ------- Exercised (12,500) $3.00 Canceled (28,875) $6.00 to $16.00 ------- Outstanding at June 30, 1995 32,416 =======
All the outstanding options under these agreements are exercisable and expire as follows: fiscal 1996 - 30,166, fiscal 1999 - 2,250. A one-third discount, totaling $86,334 was given to non-affiliates when 36,083 options were exercised in January 1994 and was recognized as compensation expense. Common Stock in Treasury: The Company has purchased 26,800 shares of its common stock for a total cost of $214,579 (or an average of $8.00 per share). In connection with the acquisition of the High School Gridiron Report assets, 15,000 shares were issued from the treasury stock. The remaining treasury shares have a total cost of $135,469 (or an average of $11.48 per share). 15. INCOME TAXES: A reconciliation of the Federal statutory income tax rate to the effective income tax rate based on pre-tax income (loss) from continuing operations follows:
1995 1994 1993 ---- ---- ---- Statutory rate (34)% 34% 34% Increase (decrease) in tax rate resulting from: Loss limitations and valuation allowance 38 Utilization of loss carryforwards (53) State income taxes 130 Benefit from stock options (11) Dividend income (1) --- ---- ---- Effective rate 134 % (19)% (22)% === ==== ====
41 42 Effective July 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes". The adoption of SFAS 109 resulted in an income tax benefit of $13,600 in fiscal year 1994.
1995 1994 --------- ---------- Deferred tax assets: Net operating loss carryforwards $ 374,000 $1,541,000 Amortization of intangibles 133,000 Other 158,800 156,000 --------- ---------- Total deferred tax assets 665,800 1,697,000 Valuation allowance (364,400) (1,697,000) --------- ---------- Net deferred tax assets 301,400 --------- Deferred tax liabilities: Cash to accrual adjustment (262,500) Other (38,900) --------- Total deferred tax liabilities (301,400) --------- ---------- Total deferred taxes, net $ -- $ -- ========= ==========
The Company has a net operating loss of $1,069,000 available which expires from 2007 through 2010. These losses can only be offset with future income. For the year ended June 30, 1993, in accordance with Accounting Principles Bulletin No. (11) "Acounting for Income Taxes", the tax effects of timing differences generating deferred income tax and the current provision credited to operations are summarized below: Sales of investments in common stock $(228,000) Deductible (96,400) Current provision (55,000) --------- Total $(379,400) =========
16. GAINS FROM SALE OF SECURITIES: In July, 1994, the Company borrowed $1,000,000 to fund the exercise by the Company of a common stock purchase warrant. The loan was collateralized by a pledge of the warrant shares pursuant to the terms of a pledge agreement. The parties to the $1,000,000 loan included, among others, the Company's former chairman, former president, a former director and a shareholder, who each provided $200,000. The other lenders were non-affiliates. The lenders received the repayment of the $1,000,000 loan, interest at 7.75% totaling $9,493 and a $300,000 commitment fee from the proceeds of the subsequent stock sales. The Company subsequently sold all these securities and recognized a gain of $1,580,000. During the fiscal years ended June 30, 1994 and 1993, the Company realized gains from the sale of an issue of marketable equity securities of $937,365 and $3,177,203, respectively. The Company accounted for its investment in marketable equity securities under the cost method. 17. RELATED PARTY TRANSACTIONS: A former director of the Company is the senior managing director of a private merchant banking firm which was paid approximately $5,700, $21,000 and $84,000 for investment advisory services in 1995, 1994 and 1993, respectively. In connection with the acquisition of 42 43 Alliance, a finders fee totaling $100,000 was paid to the merchant banking firm in fiscal 1995, along with the former director and the other principal owner of the merchant banking firm each receiving 9,375 restricted common shares of the Company valued at $2.67 per share and warrants to purchase 6,250 common shares at $8.00 per share. On June 9, 1994, Bullhead borrowed $350,000 from the Company's former chief executive officer and its former president and pledged its equity interest in the Laughlin land as security for repayment of the loan. The note was due July 31, 1995 with interest at the rate of 7.25% (the Bank of America Nevada prime rate at the time of execution). The promissory note and interest of $8,695 were repaid in advance on October 4, 1994. A former director of the Company, and another person serving as secretary in 1993, were each partners in different law firms that provided legal services for which the Company recognized expenses aggregating approximately $31,000, $11,000, and $21,000 in 1995, 1994 and 1993, respectively. In April 1995, the former chairman of the Company purchased property and equipment owned by the Company with a cost of $160,109 and net book value of $5,870 for a discounted appraised value of $11,000 in cash. Also see footnotes 3, 5, 12, 13 and 14 for additional related party transactions. 18. SUBSEQUENT EVENTS (UNAUDITED): On September 28, 1995, the Company signed a letter of intent to acquire Forms Direct, Incorporated ("FDI"). FDI, a private company based in Frederick, Maryland, provides high quality direct mail services in the fields of sophisticated target marketing and complex personalization, with annual sales of over $20 million. Terms of the acquisition call for cash, notes and stock, as well as contingent payments based on operating profits and performance. Consummation of the acquisition is subject to a number of conditions, including the negotiation of a definitive agreement, additional investigation and obtaining adequate financing, and is expected to be completed by December 31, 1995. On October 6, 1995, the Company entered into an option agreement with certain parties unrelated to the Company whereby, in consideration of payment to the Company of $150,000, the option holder may purchase the land for $2.0 million. The term of the option expires on April 8, 1996. Under certain circumstances, the Company has the right to repurchase this option before its expiration. On October 12, 1995 the long term obligations to related party were revised such that the October 1, 1995 payment of $375,000 and interest payments due in the second quarter of fiscal 1996 will be paid over a twelve month period commencing January 1996 together with interest at 10%. The deferred interest payment is due earlier if the Company completes certain financing by December 31, 1995. 43 44 SCHEDULE I ALL-COMM MEDIA CORPORATION CONDENSED BALANCE SHEET June 30, 1995 ASSETS Current Assets: Cash and cash equivalents $ 479,045 Other current assets 93,781 ---------- Total current assets 572,826 ---------- Property and equipment, at cost 26,992 Accumulated depreciation 3,175 ---------- Net property and equipment 23,817 Investments in and advances to subsidiaries 5,136,786 Other assets 9,355 ---------- Total assets $5,742,784 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable other $ 72,000 Trade accounts payable 167,838 Accrued salaries and wages 75,366 Other accrued expenses 263,048 ---------- Total current liabilities 578,252 ---------- Stockholders' equity: Common stock 30,281 Additional paid-in capital 10,300,847 Treasury shares, at cost (135,469) Accumulated deficit (5,031,127) ---------- Total stockholders' equity 5,164,532 ---------- Total liabilities and stockholders' equity $5,742,784 ==========
44 45 SCHEDULE I ALL-COMM MEDIA CORPORATION CONDENSED STATEMENT OF OPERATIONS Year Ended June 30, 1995 Income: Gains from sales of securities $1,579,539 Equity in net losses of subsidiaries (18,320) ---------- Total 1,561,219 ---------- Costs and expenses: General and administrative 1,390,186 Service fees charged by related parties 5,728 Depreciation 2,956 ---------- Total 1,398,870 ---------- Income from operations 162,349 ---------- Other income (expense): Loan commitment fee (300,000) Interest income 15,446 Interest expense (8,972) Other, net 318 --------- Subtotal (293,208) --------- Loss from continuing operations before income taxes (130,859) Loss from discontinued operations: Gain on sale of discontinued operations 322,387 Loss from discontinued operations (81,131) -------- Net income $ 110,397 ==========
45 46 SCHEDULE I ALL-COMM MEDIA CORPORATION CONDENSED STATEMENT OF CASH FLOWS Year Ended June 30, 1995 Operating activities: Net cash flows used by operating activities $(3,313,795) ----------- Investing activities: Proceeds from sales of investments in securities 2,682,811 Purchase of investment in securities (1,063,272) Proceeds from sale of STI 800,000 Acquisition of Alliance Media Corporation (308,181) Investments in and advances to subsidiaries (36,048) Purchase of property and equipment 19,613 ---------- Net cash provided by investing activities 2,094,923 ---------- Financing activities Proceeds from issuances of common stock 1,226,593 Proceeds from note payable other 1,000,000 Repayments of note payable other (1,072,000) Repayments of other notes payable (350,000) ---------- Net cash provided by financing activities 804,593 ---------- Net increase in cash and cash equivalents 414,279 Cash and cash equivalents at beginning of year 64,766 ---------- Cash and cash equivalents at end of year $ 479,045 ==========
46 EX-3.(III) 2 CERTIFICATE 1 Exhibit 3(iii) CERTIFICATE PURSUANT TO NEVADA REVISED STATUTES SECTION 78.207 OF SPORTS-TECH, INC. The undersigned officers, as designated below after their signatures, of Sports-Tech, Inc., a Nevada corporation (the "Corporation"), in compliance with the provisions of Section 78.207 of the Nevada Revised Statutes, and being authorized and directed so to do, do hereby certify that: (1) Pursuant to Section 78.207 of the Nevada Revised Statutes, the Board of Directors of the Corporation has adopted a resolution whereby it has approved the reduction of the current number of authorized shares of common stock and, concomitantly, the reduction of the current number of issued and outstanding shares of common stock (the "Change"). (2) The current number of authorized shares of common stock of the corporation is 25,000,000 shares with a par value of $.01 per share. The current number of authorized shares of preferred stock of the Corporation is 50,000 shares with a par value of $.01 per share. (3) The authorized number of shares of common stock of the Corporation after the Change will be 6,250,000 shares with a par value of $.01 per share. The authorized number of shares of preferred stock of the Corporation will not be affected by the Change. (4) One share of common stock of the Corporation will be issued after the Change in exchange for each four shares of common stock of the Corporation currently issued. (5) Each shareholder who would have received a fractional share will receive such additional fraction of a share as is necessary to increase the fractional share which the shareholder would have received to one full share of common stock of the Corporation. (6) The Change will be effective at 4:00 p.m. P.D.T., on August 22, 1995. Dated this 21st day of August, 1995. /s/ Martin S. McDermut Vice President /s/ Anne Corrigan Asst. Secretary 47 2 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION (After Issuance of Stock) SPORTS-TECH, INC. We the undersigned Martin S. McDermut, Vice President and E. William Savage, Sec'y of Sports-Tech, Inc. do hereby certify: That the Board of Directors of said corporation at a meeting duly convened, held on the 7th day of July, 1995, adopted a resolution to amend the original articles as follows: Article I is hereby amended to read as follows: The name of the corporation is ALL-COMM MEDIA CORPORATION. The number of shares of the corporation outstanding and entitled to vote on an amendment to the Articles of Incorporation is 12,065,170; that the said change(s) and amendment have been consented to and approved by a majority vote of the stockholders holding at least a majority of each class of stock outstanding and entitled to vote thereon. /s/ Martin S. McDermut Martin S. McDermut, Vice President /s/ E. William Savage E. William Savage, Secretary State of California County of Los Angeles } ss. On August 22, 1995 personally appeared before me, a Notary Public, Martin S. McDermut and E. William Savage, who acknowledged that they executed the above instrument. /s/ Melanie A. Colbert Signature of Notary 48 EX-10.4 3 OPTION AGREEMENT 1 EXHIBIT 10.4 OPTION AGREEMENT AGREEMENT, dated as of October 1, 1995, between All-Comm Media Corporation, a Nevada corporation, having an address at 400 Corporate Pointe, Suite 780, Culver City, California 90230 ("All-Comm"); Joseph LaRocca, an individual ("JL"); Augustus LaRocca, an individual ("AL"); Gerald Yellin, an individual having an address at c/o Bear, Stearns & Co., Inc., 245 Park Avenue, New York, New York 10167 (individually, and as Agent (the "Agent") for JL arid AL, collectively (the "Optionees"). W I T N E S S E T H WHEREAS, All-Comm is the owner of a certain parcel of land (the "Land") in Laughlin, Nevada, as more particularly described on Exhibit A hereto and wishes to grant the Optionees an option to acquire the Land, and the Optionees wish to acquire such option, upon the terms and conditions described herein; WHEREAS, the Optionees have agreed to have Agent act as their agent with respect to this Agreement. IT IS AGREED: 1. All-Comm represents and warrants to the Optionees that it is the sole record and beneficial owner of the Land, free and clear of any mortgage, lien, security interest, encumbrance, restriction, violation, assessment or adverse claim of any nature whatsoever (collectively "Liens") other' than (i) easements, permits, liens, and other restrictions or limitations on the use of property or irregularities in title thereto, in each case which do not, individually or in the aggregate, materially detract from the value of such property or impair the use of such property by All-Comm in the operation of its business and (ii) for current taxes and other assessments or governmental charges or levies on property not yet due and delinquent (collectively "Permitted Liens"); that it has the full right and power to sell the Land to the Optionee; and that the execution, delivery and performance of this Agreement by All-Comm does not and will not conflict with, violate or result in a breach of any terms or conditions of, or constitute a default under, any contract, agreement, or other instrument or obligation or any law, regulation, ordinance, or decree to which All-Comm is a party or by which All-Comm may be bound or affected. 2. Upon the terms and subject to the conditions set forth in this Agreement, Seller hereby grants the Optionees an option (the "Option"), exercisable from the date hereof through April 8, 1996 (the "Exercise Period"), to acquire the Land at an exercise price of $2,000,000 (the "Exercise Price") and the Optionees hereby accept the Option from All-Comm. In consideration for the granting of the Option, the Optionees have paid All-Comm $150,000 by check, receipt of which is hereby acknowledged. If the Option is not exercised, or terminated as provided in this Agreement, prior to the end of the Exercise Period, the Option shall be null and void and of no force or effect. In consideration for the acceptance of the Option, All-Comm will issue the Optionees a warrant (the "Warrant") to acquire 30,000 shares of common stock, par value $0.01 per share, of All-Comm ("Common Stock"), at an exercise price of $2.50 per share, which warrant shall be exercisable for a period of four years from the date hereof. 3. During the term of the Option All-Comm shall hold the Land free and clear of any and all Liens other than Permitted Liens and upon the exercise of the Option and payment of the Exercise Price All-Comm shall deliver title to the Land to the Optionees free and clear of any and all Liens other than Permitted Liens. 4. The Optionees represent and warrant to All-Comm that the execution, delivery and performance of this Agreement by the Optionees do not and will not conflict with, violate or result in a 49 2 breach of any terms or conditions of, or constitute a default under, any contract, agreement or other instrument or obligation or any law, regulation, ordinance or decree to which any of the Optionees is a party or by which any of the Optionees may be bound or affected. The Optionees each agree that the Agent is authorized to act on behalf of each of them and that All-Comm may rely upon the instructions of the Agent without independent investigation. 5. If AlI-Comm desires, during the Exercise Period, to have the right, in its sole discretion, to cancel the Option (the "Call") by paying the Optionees $150,000 (the "Call Price"), All-Comm shall pay the Optionees the sum of $15,000 (the "Call Fee"). Once the Call Fee has been paid, All-Comm may exercise the Call by delivering a notice to the Agent indicating its election to terminate the Option and shall tender payment of the Call Price to the Optionees. Upon such payment, the Option shall he null and void and of no force or effect and the Optionees shall execute an acknowledgment to such effect. 6. If All-Comm does not exercise the Call, the Optionee may, during the last 10 days of the Exercise Period, in their sole discretion, require that All-Comm buy back the Option (the "Put") by paying the Optionee $165,000 (the "Put Price"). In such case the Agent shall deliver a notice (the "Put Notice") to All-Comm indicating the election of the Optionees to sell the Option back to All-Comm. Within twenty (20) days of the receipt of the Put Notice All-Comm shall tender payment of the Put Price to the Optionees. Upon such exercise the Option shall be null and void and of no force or effect and the Optionees shall be entitled to receive solely the buy back price described in this Section 6. 7. In the case of me Call or the Put, the Agent shall direct All-Comm as to the distribution of any cash or shares of Common Stock to the Optionees. 8. As security for the payment of the Put Price, All-Comm shall grant the Optionees a security interest in he Land in the form of the delivery of a mortgage in favor of the Agent (the "Mortgage") in the amount of $150,000 in recordable form which shall be delivered by All-Comm to the Optionees within twenty (20) days of the date hereof. The Agent shall only record the Mortgage in the event All-Comm shall fail to pay the Put Price within twenty-five (25) days of the receipt of the Put Notice. Upon payment of the required termination payment described in Section 5 or payment of the Put Price, the Mortgage shall be returned to All-Comm. 9. The Optionees represent and warrant that they are familiar with the business, financial condition and future prospects of All-Comm and have been granted the opportunity to ask questions of the officers and directors of All-Comm concerning All-Comm and the terms and conditions of this Agreement and to obtain any additional information which All-Comm deemed necessary to determine the merits, risks and consequences of purchasing the Option and acquiring shares of Common Stock. All-Comm has not and shall under no circumstances be deemed to have made any representation or warranty to or for the benefit of the Optionees as to the value of the Land, the value of the shares of Common Stock, or All-Comm's business prospects. The Optionees understand that except as provided in Section 11, any shares of Common Stock issued to the Optionees shall be restricted securities within the means of the Security Exchange Act of 1934, as amended. 10. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, supersedes all existing agreements between the parties concerning such subject matter, and may he modified only by a written instrument duly executed by each party. 11. On or before December 1, 1995, All-Comm shall file with the Securities and Exchange Commission a shelf registration statement promulgated under Rule 415 of the Securities Act of 1933, as amended (the "Act"), to permit the resale of all of We Registrable Securities (as defined below) by the holders thereof on the Nasdaq Stock Market or in privately negotiated transactions (the `Registration Statement"). The Company will use its beat efforts to have the Registration Statement declared effective under the Act as soon as possible after the filing thereof and to keep the Shelf Registration Statement continuously effective through December 31, 1996, The Company will pay all of the expenses relating to the Shelf Registration Statement, other than brokerage discounts, commissions, fees or disbursements in respect of the transfer of any of the Registrable Securities by a holder thereof. The 50 3 Registrable Securities shall mean the shares of Common Stock issued to the Optionees upon exercise of the Warrant (together with any and all shares of Common Stock issued with respect to such shares by way of a stock divided or stock split or any capital stock issued with respect to such shares in connection with a combination of shares, recapitalization, merger, consolidation or reorganization). 12. Any waiver, by either Party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. This Agreement shall be binding upon and inure to the benefit of the Optionees and their heirs and personal representatives, and shall be binding upon and inure to the benefit of All-Comm and its successors and permitted assigns. 13. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested, or delivered against receipt to the party to whom it is to be given at the address of such party set forth at the beginning of this Agreement (or to such other address as the party shall have furnished in writing or in accordance with the provisions of this Section 13). In the case of a notice to All-Comm, a copy of such notice (which copy shall not constitute notice) shall be delivered to Camhy Karlinsky & Stein LLP, 1740 Broadway, New York, New York 10019-4315, Attn. Alan I. Annex, Esq. Notice to the estate of any of the Optionees shall be sufficient if addressed to such Optionees as provided in this Section 13. Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party's address which shall be deemed given at the time of receipt thereof. 14. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the rules of the American Arbitration Association as then in effect. The arbitration shall take place in New York, New York, under the rules of The American Arbitration Association then in effect. Judgment upon the reward rendered by the arbitrators may be entered in any court having jurisdiction thereof. Expenses of the arbitration shall be shared equally by the parties. 15. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. It shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to conflict of laws. IN WITNESS WHEREOF, All-Comm and the Optionees have executed this Agreement as of the day first written above. ALL-COMM MEDIA CORPORATION By: /s/ Barry Peters _____________________________ Name: Barry Peters Title: Chairman and CEO /s/ Gerald Yellin _________________________________ Gerald Yellin _________________________, individually and as agent for Joseph LaRocca and Augustus LaRocca /s/ Gerald Yellin ________________________________ /s/ Joseph LaRocca ________________________________ /s/ Augustus LaRocca ________________________________ 51 EX-11 4 COMPUTATION OF NET INCOME (LOSS) PER SHARE 1 EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE Net income per share was calculated as follows:
Fiscal Year ----------- 1995 1994 1993 ------------------------------------------ Primary: Income (loss) from continuing operations before discontinued operations $ (130,859) $ 86,807 $ 979,457 Income (loss) from discontinued operations 241,256 (2,896,694) (2,094,795) Net income (loss) 110,397 (2,809,887) (1,115,338) Weighted average common shares outstanding 1,804,827 1,334,034 1,207,849 Incremental shares under stock options computed under the treasury stock method using the average market price of the issuer's common stock during the periods 2,713 134,713 165,311 Weighted average common and common equivalent shares outstanding 1,807,540 1,468,747 1,373,160 Income (loss) per share from continuing operations (.07) .06 .71 Income (loss) per share from discontinued operations .13 (1.97) (1.52) Net income (loss) per share .06 (1.91) (.81) Fully diluted: Income (loss) from continuing operations before discontinued operations (130,859) 86,807 979,457 Income (loss) from discontinued operations 241,256 (2,896,694) (2,094,795) Net income (loss) 110,397 (2,809,887) (1,115,338) Weighted average common shares outstanding 1,804,827 1,334,034 1,207,849 Incremental shares under stock options computed under the treasury stock method using the market price of the issuer's common stock at the end of the periods if higher than the average market price 13,565 134,713 196,900 Weighted average common and common equivalent shares outstanding 1,818,392 1,468,747 1,404,749 Income (loss) from continuing operations (.07) .06 .70 Income (loss) per share from discontinued operations .13 (1.97) (1.49) Net income (loss) per share .06 (1.91) (.79)
52 EX-22.1 5 SUBSIDIARIES OF SPORTS-TECH, INC. 1 EXHIBIT 22.1 SUBSIDIARIES OF SPORTS-TECH, INC. B H Acquisitions, Inc. (100%) Bullhead Casino Corporation (100%) BRST Mining Company (100%) High School Gridiron Report, Inc. (100%) Alliance Media Corporation (100%) Stephen Dunn & Associates, Inc. (100%)
53 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF ALL-COMM MEDIA CORPORATION AS OF AND FOR THE YEAR ENDED JUNE 30, 1995 INCLUDED IN THIS REPORT AND FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. U.S. DOLLARS YEAR JUN-30-1995 JUL-01-1994 JUN-30-1995 1 1,217,772 0 2,108,529 (40,552) 0 3,402,217 377,604 (33,450) 11,824,491 3,591,059 3,068,900 30,281 0 0 5,134,251 11,824,491 3,630,828 3,630,828 2,434,011 2,434,011 0 0 94,200 (55,859) 75,000 (130,859) 241,256 0 0 110,397 0.06 0.06
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