-----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, P+cJMRKVhrtLkF5YYkoXq0eC1bzteoh00iQle9BDwEhltJ6uwsdGTJzRy3PzZ0JB RBejaMt516AS8pT5jsWgdw== 0000950133-98-001660.txt : 19980504 0000950133-98-001660.hdr.sgml : 19980504 ACCESSION NUMBER: 0000950133-98-001660 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980501 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHOICES ENTERTAINMENT CORP CENTRAL INDEX KEY: 0000822935 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-VIDEO TAPE RENTAL [7841] IRS NUMBER: 521529536 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-17001 FILM NUMBER: 98607524 BUSINESS ADDRESS: STREET 1: 836 W TRENTON AVE STREET 2: STE 205 CITY: MORRISVILLE STATE: PA ZIP: 19067 BUSINESS PHONE: 2154281000 MAIL ADDRESS: STREET 1: 836 W TRENTON AVE CITY: MORRISVILLE STATE: PA ZIP: 19067 FORMER COMPANY: FORMER CONFORMED NAME: DATAVEND INC DATE OF NAME CHANGE: 19900401 10KSB/A 1 AMENDMENT NO. 1 ON FORM 10-KSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-KSB/A NO. 1 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-17001 ------- Choices Entertainment Corporation - ----------------------------------------------------------------------------- (Name of small business issuer in its charter) Delaware 52-1529536 - ------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. employer identification no.) incorporation or organization) 509 Kinsale Road, Timonium, Maryland 21093 - ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (410) 643-2967 --------------------- Securities registered under Section 12(b) of the Exchange Act: None ------------ Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.01 per share. --------------------------------------- (Title of class) Check whether the issuer (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 ----- ----- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [ ] 2 Issuer's revenues for the year ended December 31, 1997: $2,115,622. Aggregate market value of the voting stock held by non-affiliates of the registrant based upon a price of $ .025 per share, the average of the inside bid and ask prices of the registrant's Common Stock at March 5, 1998: $524,069. For purposes of this calculation, all directors and officers of the registrant have been considered affiliates. Number of outstanding shares of the registrant's Common Stock at March 5, 1998: 22,004,395 shares. Transitional Small Business Disclosure Format (check one): Yes No x -------- -------- 3 AMENDMENT NO. 1 The Registrant hereby amends its 1997 Annual Report on Form 10-KSB, by filing herewith the complete text of ITEMS 9 through 12 of Part III thereof, consisting of: ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act ITEM 10. Executive Compensation ITEM 11. Security Ownership of Certain Beneficial Owners and Management ITEM 12. Certain Relationships and Related Transactions 2 4 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The directors and executive officers of the Company are as follows:
Year First Year First Became an Became a Executive Name Age Position Director Officer ---- --- -------- ---------- --------- John Boylan.......... 56 Chairman of the Board, 1992 1988 Chief Executive Officer and President Fred E. Portner...... 53 Director 1988 -- James D. Sink........ 47 Director 1997 --
John Boylan was first appointed Chairman of the Board, President, and Chief Executive officer on April 1, 1992. He resigned as Chairman in November 1994, while continuing as a Director. On September 8, 1995, Mr. Boylan was re-appointed Chairman of the Board. Upon entering into a consulting agreement with the Company on August 15, 1996, Mr. Boylan resigned from all positions with the Company. On April 16, 1998, Mr. Boylan was re-appointed Chairman of the Board, President, and Chief Executive Officer. Mr. Boylan joined the Company as its Senior Vice President - Franchise Development in November 1987 and was appointed a Director in November 1988. In June of 1990, Mr. Boylan was designated the Company's Senior Vice President - Business Development. Fred E. Portner has served as a director since July 1988. Since January 1992, Mr. Portner has served as President of Portner Consulting Services, a mortgage banking consulting company, wholly-owned by Mr. Portner. Mr. Portner also served as Executive Vice President and Chief Financial Officer of M.D.S. Bankmark Company, a residential mortgage company, from September 1993 to January 1996. James D. Sink, M.D. has served as a director since February 1997. Since March 1996, Dr. Sink has been affiliated with Allegheny University Hospitals in Philadelphia, Pennsylvania, where he is Professor of Cardiothoracic Surgery. Prior to joining Allegheny University Hospitals, Dr. Sink was, for more than five years, affiliated with Presbyterian Medical Center, in Philadelphia, Pennsylvania, where he was Chief of Cardiothoracic 3 5 Surgery at the Philadelphia Heart Institute of Presbyterian Medical Center. Directors of the Company hold their offices until the next annual meeting of the Company's stockholders, until their successors have been duly elected and qualified or until their earlier resignation, removal from office or death. Officers of the Company serve at the pleasure of the Board of Directors and until the first meeting of the Board of Directors following the next annual meeting of the Company's stockholders and until their successors have been chosen and qualified or until their earlier resignation, removal from office or death. There are no family relationships among the present executive officers and directors of the Company. ITEM 10. EXECUTIVE COMPENSATION The following table sets forth certain information relating to the compensation awarded to, earned by or paid to the Chief Executive Officer (the "Named Executive Officer") for services in all capacities during 1997, 1996 and 1995 (there being no other executive officer of the Company whose total annual salary and bonus exceeded $100,000 during 1997). SUMMARY COMPENSATION TABLE
Long-Term Compensation Annual Compensation Awards ------------------- ------------ Securities Underlying All Other Name and Principal Options Compensation Position Year Salary($) (#) ($)(2) - ----------------------- ---- --------- ------------ ------------ Ronald W. Martignoni 1997 $ 92,884 (1) -0- $ 353 Chairman, Chief 1996 98,557 -0- 529 Executive Officer 1995 115,914 -0- 529 and President - -------------
(1) Includes $15,000 received under the terms of a consulting agreement.(See below). (2) Includes term life insurance premiums paid by the Company. 4 6 Mr. Martignoni resigned as Chairman of the Board, Chief Executive Officer and President of the Company on April 16, 1998, after the appointment of Mr. Boylan to the Board of Directors of the Company on that same day.(SEE ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT). As previously reported, Mr. Martignoni had taken a position with an unrelated company, effective October 6, 1997, and continued as the Company's Chairman, President and Chief Executive Officer, under a consulting agreement pursuant to which his compensation had been reduced accordingly. Under the consulting agreement, Mr. Martignoni released the Company from all obligations and liabilities, including any obligations under the severance agreement between him and the Company referred to below. The consulting agreement provided for a monthly consulting fee of $5,000 per month, which was payable through April 1998,unless extended by the Company, in exchange for services provided. Mr. Martignoni received payments through March 1998 under this agreement; however he has continued to provide services to the Company without compensation. In April 1992, the Company entered into a severance agreement with Mr. Martignoni which provided, under certain circumstances, that the Company would pay him upon his severance an amount equal to one full year's base salary in the event that his affiliation with the Company ceased within either one or two years (depending upon the circumstances) following a "change in control" of the Corporation, as that term is defined under the Company's Stock Option and Appreciation Rights Plan of 1987. In November 1993, the Board of Directors adopted an amendment to the severance agreement for Mr. Martignoni, which principally increased the amount to be paid on severance from one full year's base salary to two full years' base salary, as well as contained certain other provisions, including a provision for the continued registration of option stock following termination of his affiliation with the Company. Stock Options Held At Fiscal Year-End The following table sets forth the aggregate options to purchase shares of Common Stock of the Company held by the Named Executive Officer at December 31, 1997. No options were exercised during the year ended December 31, 1997 by the Named Executive Officer, and there were no in-the-money unexercised options held by the Named Executive Officer at December 31, 1997. 5 7
Number of Securities Underlying Unexercised Options Held at December 31, 1997(#) -------------------------- Name Exercisable Unexercisable ---- ----------- ------------- Ronald W. Martignoni 1,425,000 -0-
Compensation of Directors The Company currently has no standard arrangements pursuant to which non-employee directors are compensated for services provided as directors. On February 13, 1997, three non-employee directors, Messrs. James D. Sink, Joseph DeSaye and Fred E. Portner, were granted, respectively, nonqualified options to purchase 200,000, 200,000 and 50,000 shares of the Company's Common Stock, exercisable on or after August 13, 1997, at an exercise price of $.05 per share, the price of the Company's Common Stock on the date of grant, which options expire on February 13, 2002. Mr. DeSaye has since resigned as a director, and no options have been exercised. ITEM 11. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding ownership of the Company's Common Stock and Series C Preferred Stock (the "Preferred Stock"), as of April 17, 1998, by: (i) each person who is known by the Company to own beneficially shares of Common Stock and/or Preferred Stock to which are attributable more than five percent of the combined number of votes attributable to all shares of Common and Preferred Stock outstanding on that date, (ii) each director (Messrs. Boylan, Portner and Sink), (iii) the Named Executive Officer (Ronald W. Martignoni) and (iv) all executive officers and directors as a group. 6 8
No. of Votes Attributable No. of Shares of Common No. of Shares of to Common Stock and Name and Address Stock Beneficially Owned, Preferred Stock Preferred Stock of Beneficial Owner including Percentage Beneficially Owned, Beneficially Owned, ------------------- Owned (1) including including --------- Percentage Owned(1) Percentage Owned (1) (2) -------------------------- ------------------------ Attel & Cie, S.A. Via Nassa 58 6901 Lugano, Switzerland 2,601,112 (11.8%) -- 2,601,112 (11.1%) John Maioriello 3416 The Strand Manhattan Beach, CA 90266 1,826,000 (7.8%)(3) -- 1,826,000 (7.3%) John A. Boylan 509 Kinsale Road Timonium, MD 21093 1,442,000 (6.2%)(4) -- 1,442,000 (5.8%) Ronald W. Martignoni 6 Chadwick Court Voorhees, NJ 08043 1,425,000 (6.1%)(5) -- 1,425,000 (5.7%) James D. Sink 220 Curwen Road Rosemont, PA 19010 1,041,650 (4.7%) -- 1,041,650 (4.4%) Fred E. Portner 121 Montgomery Place Alexandria, VA 22314 190,000 *(6) -- 190,000 * Shareholder Committee 13,861,119 (51.6%)(7) 107.4 (98.4%)(7) 13,861,119 (51.6%) All executive officers and directors as a Group (three 2,673,650 (12.3%) -- 2,673,650 (11.5%) persons)
- ------------------ * Less than 1%. (1) Beneficial Ownership is determined in accordance with the rules of the Securities Exchange Commission and generally includes voting or investment power with respect to securities. A person is also deemed to be the beneficial owner of securities if that person has the right to acquire beneficial ownership of such securities, such as Common or Preferred Stock, through the exercise of options or warrants that are currently exercisable or exercisable within 60 days. Any securities not outstanding, which are subject to such options or warrants, shall be deemed outstanding for purposes of computing the percentage ownership of the person holding such options or warrants, but shall not be deemed outstanding for purposes of computing the percentage ownership of any other person. Except as may be indicated otherwise, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of Common and Preferred Stock shown as beneficially owned by them. (2) Each share of Preferred Stock is entitled to vote on all matters submitted to a vote of the Company's stockholders together with the Common Stock and not as a separate class, unless otherwise required by law, with each share of Preferred Stock entitled to 40,000 votes. (3) Includes 1,500,000 shares of Common Stock issuable upon exercise of fully-vested nonqualified stock options. (4) Includes 1,000,000 shares of Common Stock issuable upon exercise of 7 9 fully-vested 1991 Management Options and 375,000 shares of Common Stock issuable upon exercise of fully-vested 1994 Management Options. (5) Includes 1,050,000 shares of Common Stock issuable upon exercise of fully-vested 1991 Management Options and 375,000 shares of Common Stock issuable upon exercise of fully-vested 1994 Management Options. (6) Represents 100,000 shares of Common Stock issuable upon exercise of fully-vested nonqualified stock options and 90,000 shares of Common Stock issuable upon exercise of fully-vested 1994 Management Options. (7) The Shareholder Committee may be deemed to constitute a group under the rules of the Securities and Exchange Commission. The following table sets forth certain information regarding the ownership of shares of the voting stock owned beneficially by the members of the Shareholder Committee, as contained in the Schedule 14-A filed by the Committee on April 17, 1998, as well as the percentage Stock owned by each, and together as a group, on April 17, 1998. The Company assumes no responsibility for the accuracy of the information contained in the table below at the date of this report.(See ITEM 12. Certain Relationships and Related Transactions.)
Amount and Nature of Name of Beneficial Owner (a) Beneficial Ownership (b) Percent of Class (c) - ------------------------------------------------- ------------------------ -------------------- Thomas Renna 165,500 (d) * George Pursglove Cary Palulis 268,000 (e) 1.0% Harold Hamburg 490,000 (f) 1.8 William M. Goatley 1,073,500 (g) 4.4 Mark and Barbara Raifman 1,154,900 (h) 4.6 Carl Shaifer 2,037,000 (I) 8.2 Frank H. Harvey 401,000 (j) 1.6 P. L. Anderson, Jr. 405,000 (k) 1.6 Gail A. Ramey 644,000 (l) 2.5 Kenneth Hiniker 1,064,500 (m) 4.0 Leon Barnard 108,300 * Alberta Tabony 44,000 * Margaret Stone 134,000 * Franklin A. Stone 399,450 1.5 Maurice and Susan Matson 250,000 * Gary Welchman 193,000 * Max Scheuerer 362,000 1.4 David Beckman 245,100 * Coleman Goldberg 77,200 * D.J. Stone 111,250 * Philip Mumford 159,872 * Jerome Neidfelt 400,000 1.5 Beverly L. Fader 202,000 * Gerald Bing 80,000 * Wendell and Grazina Standridge 90,000 * Fred and Sandy Borke 39,500 * Robert E. Lapides 84,200 * Peter Rena 20,000 * Gail Faifman 166,800 * Thomas Povinelli and Anna Saras 106,123 * Al Riccardi 655,170 2.5 Madeline Esposito 57,534 * Kenneth Stilger 506,500 1.9 George Cannan 350,000 1.3 Anna Tolson 20,000 * Carmen Malagisi 41,000 *
8 10
Amount and Nature of Name of Beneficial Owner Beneficial Ownership Percent of Class - ------------------------ -------------------- ---------------- Carmen Malagisi R. Neil and Gale F. Lively 47,500 * Kathy Travis 1,833 * Michael Desaye 86,000 * Stacy Cannan 54,100 * Caroline P. Costante 33,287 * Rudy and Carlene Kreutzans 99,000 * Joseph and Fullenkamp 40,000 * H. Bryan Lewis 60,000 * Jonathan Votel 70,000 * Larry Feeney 200,000 * Richard D. Hollingworth 15,000 * Mark K. Van Ness 90,000 * ------- - Totals 13,756,119 51.25% ---------- ------
- - Represents beneficial ownership of less than 1% of the outstanding shares of the Voting Stock. (a) The address of the beneficial owner is c/o the Committee, 10770 Wiles Road, Coral Springs, Florida 33076-4681. (b) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of voting stock subject to stock options and warrants currently exercisable or exercisable within 60 days are deemed to be outstanding for calculating the percentage ownership of the person holding such options and the percentage ownership of any group of which the holder is a member, but are not deemed outstanding for calculating the percentage of any other person. Except as indicated by footnote, and except for voting or investment power held jointly with a person's spouse, the persons named in the above table have sole voting and investment power with respect to all shares of capital stock shown beneficially owned by them. (c) Percentage is calculated based upon 26,364,395 shares of voting stock outstanding on April 17, 1998. (d) Includes warrants to acquire 1.8 shares of Series C Preferred Stock ("Preferred Stock"). (e) Includes 3.2 shares of Preferred Stock and warrants to acquire .3 shares of Preferred Stock. (f) Includes 9.6 shares of Preferred Stock and warrants to acquire .9 shares of Preferred Stock. (g) Includes 24 shares of Preferred Stock and warrants to acquire 2.25 shares of Preferred Stock. (h) Includes 16 shares of Preferred Stock and warrants to acquire 1.5 shares of Preferred Stock. (i) Includes 36.8 shares of Preferred Stock and warrants to acquire 3.45 shares of Preferred Stock. 9 11 (j) Includes 6.4 shares of Preferred Stock and warrants to acquire .6 shares of Preferred Stock. (k) Includes 4.8 shares of Preferred Stock and warrants to acquire .45 shares of Preferred Stock. (l) Includes 6.4 shares of Preferred Stock and warrants to acquire .6 shares of Preferred Stock. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On November 25, 1997, a group of stockholders demanded that they be given control of the Company and on December 10, 1997, this group filed preliminary solicitation material with the Securities and Exchange Commission, seeking to remove and replace two of three members of the Company's Board of Directors. On February 11, 1998 and April 17, 1998, revised preliminary solicitation material was filed by an expanded group of stockholders (the "Shareholder Committee") in connection with the solicitation of written consents, also to remove and replace two directors. The Company believes that the solicitation material, as filed, contains materially misleading statements and omissions of material facts and that the Shareholder Committee has failed to file a Schedule 13D in accordance with the requirements of the Securities Exchange Act of 1934. John E. Maioriello, a former Chairman of the Board and a principal stockholder of JD Store Equipment, Inc. ("JD"), is deemed under rules of the Securities and Exchange Commission to be the beneficial owner of more than five percent of the Company's Common and Preferred Stock voting together. See ITEM 11. Securities Ownership of Certain Beneficial Owners and Management. On November 4, 1994, the Company and JD entered into a letter of intent (the "JD Letter of Intent"), providing for a merger of the Company and JD (the "JD Merger"). In connection with the JD Letter of Intent, JD arranged for the issuance on its credit of a $100,000 letter of credit to a vendor of the Company, which letter of credit expired in accordance with its terms on April 15, 1995. Upon expiration of the letter of credit, Mr. Maioriello personally guaranteed a line of credit provided by said vendor to the Company in an amount of approximately $250,000. In accordance with the JD Letter of Intent and in contemplation of the JD Merger, John Maioriello was appointed Chairman of the Board of the Company. Also in contemplation of 10 12 the JD Merger, the Company and JD incurred certain costs in connection with the Company's plans to acquire certain retail video store chains. In connection with the JD Letter of Intent, the Company and JD also reached an agreement for the payment of finder's fees, in the event the JD Merger was not consummated, with respect to any completed merger or acquisition which Mr. Maioriello was responsible for having introduced to the Company from the date of the JD Letter of Intent until such time as it was publicly announced that the JD Merger would not be consummated (September 11, 1995). Any finder's fees paid are to consist of warrants to purchase shares of the Company's Common Stock in an amount based upon 10% of the consideration issued or paid by the Company in said merger or acquisition. The exercise price of the warrants is to be at a 20% discount to the bid price of the Company's Common Stock, generally calculated on the date of the letter of intent for said merger or acquisition. The warrants are to have a five-year term and are to include piggy-back registration rights. The Company and JD entered into an Agreement and Plan of Reorganization and Merger (the "Merger Agreement"), dated as of July 19, 1995, as amended, which provided, inter alia, for the JD Merger, through the merger of a newly formed California corporation, formed as a wholly-owned subsidiary of the Company, with and into JD, as a result of which, JD, as the surviving corporation in the merger, would become a wholly-owned subsidiary of the Company. On September 8, 1995, JD notified the Company that it was terminating the Merger Agreement in accordance with its terms and, in connection therewith, Mr. Maioriello resigned as Chairman of the Board of the Company. Previously, on December 6, 1994, JD agreed that in the event that the then contemplated merger between JD Store Equipment and the Company (the "JD Merger") was not consummated, JD Store Equipment would pay to the Company legal fees billed to the Company by the above law firm. That law firm resigned as counsel to the Company shortly after JD Store Equipment notified the Company that it was terminating the JD Merger in September 1995. Subsequently, the Company made a demand for payment upon JD Store Equipment for all fees and disbursements in the amount of $793,281 billed to it by the law firm, of which $439,482 has to date been paid by the Company. JD Store Equipment has responded with a suggestion of a counter claim in an unspecified amount for losses allegedly incurred in connection with the acquisition program. To avoid the uncertainties associated with litigation and with collecting any judgment that may be obtained, the Company has attempted to reach a settlement with JD Store Equipment and the law firm, pursuant to which JD Store Equipment would pay unpaid fees to the law firm, the Company would release 11 13 JD Store Equipment from any obligation to pay the $793,281 of legal fees billed to the Company and the Company would be released by JD Store Equipment and the law firm. Although discussions have taken place regarding such a settlement, there is no assurance that any settlement will be concluded. Moreover, the law firm has notified the Company that it intends to file a lawsuit against the Company in connection with its outstanding invoices. Mr. Maioriello has also requested indemnification for legal fees and expenses incurred in the defense of the previously concluded stockholder litigation in California, which are substantial and material in amount. The Company has denied the former director's request as it does not believe that it has any obligation for indemnification of such legal fees and expenses. However, it is contemplated that any settlement reached with JD Store Equipment, as described above, would include a release by the former director of any indemnification claims that he may have against the Company. There is no assurance, however, that any such settlement will be concluded or, if concluded, as to what would be the terms of such a settlement. The Company's 5% unsecured promissory notes (the "Notes"), in the principal amount of $680,000, matured on September 11, 1997, leaving the holders thereof with the sole remedy of converting such notes into shares of the Company's Series C Preferred Stock (valued at $.25 per share of Common Stock). The Holders of such Notes have, in accordance with the terms of the Notes, converted such Notes into 68 shares of the Company's Series C Preferred Stock. In addition, because of its severely distressed financial condition, the Company elected to issue 3.6833 shares of its Series C Preferred Stock to the holders of the Notes, in payment of $36,833 of accrued interest due such noteholders in September, 1997, in accordance with the terms of such Notes. Certain members of the Shareholder Committee, named in the Beneficial Ownership Table, are the holders of such Preferred Stock. See ITEM 11. Securities Ownership of Certain Beneficial Owners and Management. John A. Boylan, an officer and director, is deemed under the rules of the Securities and Exchange Commission to be the beneficial owner of more than five percent of the Company's Common and Preferred Stock voting together. See ITEM 11. Securities Ownership of Certain Beneficial Owners and Management. As previously reported, on August 15, 1996, the Company entered into an eleven-month consulting agreement with Mr. Boylan, under which he received $3,500 on a bi-weekly basis, had use of a car, already under lease by the Company, and received health insurance benefits for a period of one year. The Company entered into this agreement as part of a severance agreement with Mr. Boylan, pursuant to which he resigned from employment and from all 12 14 positions with the Company, released the Company from all obligations and liabilities, including any obligations under an existing severance agreement between him and the Company, and agreed to the cancellation of certain fully-vested options to purchase 291,667 shares of Common Stock. Mr. Boylan was re-appointed to the Company's Board of Directors and named President and Chief Executive Officer of the Company on April 16, 1998. On July 12, 1994, Max Scheuerer, a member of the Shareholder Committee, loaned the Company $50,000, and on December 7, 1994, loaned the Company $100,000, which loans are evidenced by two 10% promissory notes. The aggregate principal amount owing on the promissory notes was reduced to $120,000 from $150,000 as a result of a $30,000 payment by the Company on November 30, 1995, following the filing of a lawsuit against the Company by Mr. Scheuerer seeking collection of said notes. The lawsuit was withdrawn following said $30,000 payment without prejudice to its being reinstated if the balance owing on the notes was not paid in full prior to March 15, 1996. As previously reported, on September 18, 1996, a lawsuit was filed against the Company in which Mr. Scheuerer sought to obtain a judgment against the Company for amounts owing under the two aforementioned promissory notes. The lawsuit was dismissed with prejudice on June 25, 1997, upon the payment by the Company to Mr. Scheuerer of $145,230, in full settlement of all amounts owed to Mr. Scheuerer. 13 15 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this Amendment to its 1996 Annual Report on Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized. CHOICES ENTERTAINMENT CORPORATION By:/s/ John Boylan -------------------- John Boylan Chief Executive Officer April 28, 1998 14 -----END PRIVACY-ENHANCED MESSAGE-----