UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(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, 2004
|_| 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 0-10039
Mediavest, Inc.
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(Formerly eB2B Commerce, Inc.)
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(Name of Small Business Issuer in its Charter)
New Jersey 22-2267658
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
153 East 53rd Street, 48th Floor, New York, New York 10022
- ---------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(212) 521-5181
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(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $.0001 Per Share
----------------------------------------
(Title of Class)
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |_| No |X|
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. |X|
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |X| No |_|
The Issuer's revenues for the fiscal year ended December 31, 2004 were
$3,750,000. The aggregate market value of the Issuer's voting common equity held
by non-affiliates of the Issuer as of November 30, 2005 was $2,800.
Check whether the Issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes |_| No |X|
As of November 30, 2005, the Issuer had 4,000,000 shares of its $.0001 par value
per share common stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
Mediavest, Inc.
ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 2004
TABLE OF CONTENTS
PART I ....................................................................1
ITEM 1. DESCRIPTION OF BUSINESS.............................................1
ITEM 2. DESCRIPTION OF PROPERTY.............................................5
ITEM 3. LEGAL PROCEEDINGS...................................................5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................5
PART II ....................................................................6
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES................6
ITEM 6. MANAGEMENT'S PLAN OF OPERATION......................................7
ITEM 7. FINANCIAL STATEMENTS...............................................19
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
FINANCIAL DISCLOSURE...............................................35
ITEM 8A. CONTROLS AND PROCEDURES............................................35
ITEM 8B. OTHER INFORMATION..................................................35
PART III ...................................................................36
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT..................36
ITEM 10. EXECUTIVE COMPENSATION.............................................37
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS....................................38
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................39
ITEM 13. EXHIBITS...........................................................40
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................41
i
PART I
ITEM 1. DESCRIPTION OF BUSINESS
History and Organization
DynamicWeb Enterprises, Inc. was incorporated in the State of New Jersey on July
26, 1979.
eB2B Commerce, Inc. was incorporated in the State of Delaware on November 6,
1998.
On April 18, 2000, eB2B Commerce, Inc., a Delaware corporation, merged with and
into DynamicWeb Enterprises, Inc., a New Jersey corporation and a Securities and
Exchange Commission ("SEC") registrant. The surviving company changed its name
from DynamicWeb Enterprises, Inc. to eB2B Commerce, Inc. Pursuant to the
agreement and plan of merger between DynamicWeb and the former eB2B, the
shareholders of DynamicWeb retained their shares in our company, while the
shareholders of the former eB2B received shares, or securities convertible into
shares, of common stock of our company representing approximately 89% of our
equity, on a fully diluted basis. At the time of the merger (i) DynamicWeb was
engaged in the provision of services and software that facilitated
business-to-business e-commerce between buyers and sellers of direct goods and
(ii) the former eB2B was a development stage company formed to provide
Internet-based business-to-business e-commerce services for manufacturers and
retailers to conduct cost-effective electronic commerce transactions. Prior to
the merger, the former eB2B primarily devoted its operations to the recruitment
and training of employees, development of its business strategy, design of a
business system to implement its strategy, and development of business
relationships with retailers and suppliers.
The April 2000 merger was accounted for as a reverse acquisition, a "purchase
business combination," in which the former eB2B was the accounting acquirer and
DynamicWeb was the legal acquirer. The management of the former eB2B remained as
our management. As a result of the April 2000 merger (i) the financial
statements of the former eB2B are our historical financial statements, (ii) the
results of our operations include the results of DynamicWeb after the date of
the merger, (iii) acquired assets and assumed liabilities were recorded at their
estimated fair market value at the date of the merger, (iv) all references to
our financial statements apply to the historical financial statements of the
former eB2B prior to the April 2000 merger and to our consolidated financial
statements subsequent to the April 2000 merger, (v) any reference to the former
eB2B applies solely to eB2B Commerce, Inc., a Delaware corporation, and its
financial statements prior to the merger, and (vi) our year-end is December 31,
that of the accounting acquirer, the former eB2B.
On February 22, 2000, prior to the April 2000 acquisition of DynamicWeb
Enterprises, the former eB2B completed its acquisition of Netlan Enterprises,
Inc. and its subsidiaries. At the time of the acquisition, Netlan was engaged in
website development for clients and software and other technical training for
clients. Pursuant to the agreement and plan of merger, Netlan's stockholders
exchanged 100% of their common stock for 8,334 shares of our common stock.
Additionally, 13,334 shares of our common stock were issued, placed into an
escrow account, and released to certain former shareholders of Netlan upon
successful completion of escrow requirements. The purchase price of the Netlan
acquisition was approximately $5,230,000. We recorded approximately $4,896,000
of goodwill and approximately $334,000 of other intangibles in connection with
this transaction.
In January 2002, we acquired Bac-Tech Systems, Inc., a New York City-based,
privately-held e-commerce business, through a merger. Pursuant to the merger
agreement, we paid an aggregate of $250,000 in cash and issued an aggregate of
200,000 shares of common stock and 95,000 shares of Series D preferred stock to
the two stockholders of Bac-Tech. In November 2002, the Series D preferred stock
automatically converted into an aggregate of 333,334 shares of common stock. The
Company also issued secured notes to the Bac-Tech stockholders in the aggregate
amount of $600,000, payable in three equal installments in 2004 and 2005. In
connection with the acquisition, we employed the two Bac-Tech stockholders,
Robert Bacchi and Michael Dodier for a period of three years. Bac-Tech offered
comprehensive EDI and web-based services to a portfolio of nationally known
suppliers.
Recent Developments
In September 2002, we discontinued our Training and Educational Services
business segment. We were unable to find a buyer for this business segment and
determined that it was in the best interest of our shareholders to discontinue
such operations rather than continue to fund the working capital needs and
operating losses. For the years ended December 31, 2004 and 2003, our
discontinued operations contributed no net sales.
On April 14, 2004, we filed an 8-K disclosing that the Company's Senior Secured
Convertible Noteholders had declared us in default of our interest payments of
approximately $432,000 and as a result were demanding acceleration of
$3,200,000, the face value of the Senior Secured notes, plus accrued interest.
As we had insufficient cash to satisfy the claims of our Noteholders, good faith
negotiations ensued to resolve the issue to the benefit of our shareholders.
Ultimately we were unable to negotiate a settlement prior to our filing a
reorganization as described below. On October 27, 2004, and as amended on
December 17, 2004, we filed a plan for reorganization (the "Plan") under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy Court
for the Southern District of New York. The Plan, as confirmed on January 26,
2005, provided for: (1) the net operating assets and liabilities to be
transferred to the holders of the secured liabilities in satisfaction of the
Senior Secured notes and accrued interest, (2) $400,000 to be transferred to a
liquidation trust and used to pay administrative costs and creditors, (3)
$100,000 to be retained by us to fund the expenses of remaining public, (4) 3.5%
of our new common stock (140,000 shares) to be issued to the holders of record
as of January 26, 2005 of our preferred stock in settlement of their liquidation
preferences, (5) 3.5% of our new common stock (140,000 shares) to be issued to
common stockholders of record as of January 26, 2005 in exchange for all of our
old common stock, and (6) 93% of our new common stock (3,720,000 shares) to be
issued to the Plan sponsor, Trinad Capital, L.P. ("Trinad"), in exchange for
$500,000.
There were no funds available to pay any of the liquidation preference of the
preferred stock which shares were cancelled, in exchange for 3.5% of the new
common stock of the company, as part of the Plan.
The distribution of the new common stock to Trinad (93%), holders of record of
our preferred stock as of January 26, 2005 (3.5%), and holders of record of our
common stock as of the same date (3.5%) was completed in August 2005. In
addition, on February 8, 2005, Robert S. Ellin became the Chairman of the Board
of Directors, our Chief Executive Officer, and President, Jay A. Wolf became a
Director, our Chief Financial Officer, Chief Operating Officer, and Secretary,
and Barry Regenstein became a Director. Certain information with respect to
Messrs. Ellin, Wolf and Regenstein is set forth in "Item 9. Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act" of this Form 10 KSB. We are now capitalized with $100,000 of the
$500,000 Trinad has paid, with the $400,000 having been transferred to the
liquidation trust.
Trinad has advised us that it will seek to raise additional capital (which will
dilute the ownership interests of all stockholders) with a view to making us an
attractive vehicle with which to acquire a business. It will then seek a
suitable acquisition candidate. No additional capital has been raised and no
such business has been identified and we will be subject to a number of risks,
including that any acquisition consummated by us may turn out to be
unsuccessful, investors in us will not know what operating business, if any,
will be acquired, including the particular industry in which the business
operates and whether dilutive financing will be required therewith, the
historical operations of a specific business opportunity may not necessarily be
indicative of the potential for the future, we may acquire a company in the
early stage of development causing us to incur further risks, we may be
dependent upon the management of an acquired business which has not proven its
abilities or effectiveness, we will be controlled by a small number of
stockholders and such control could prevent the taking of certain actions that
may be beneficial to other stockholders, and our common stock will likely be
thinly traded and the public market may provide little or no liquidity for
holders of our common stock.
2
Trinad has agreed that it will not dispose of any of its common stock until an
acquisition transaction has been consummated and a Current Report on Form 8-K
setting forth the terms of the acquisition and audited financial statements of
the acquisition target have been filed with the SEC.
In connection with the reorganization, on March 8, 2005 we filed a Restated
Certificate of Incorporation with the Treasurer of the State of New Jersey.
On April 13, 2005, we filed an Amendment to our Restated Certificate of
Incorporation with the Treasurer of the State of New Jersey. The Amendment (i)
changed the name of the Company from eB2B Commerce, Inc. to Mediavest, Inc. and
(ii) decreased the total number of shares of capital stock that the Company is
authorized to issue from 120,000,000 shares (consisting of 119,000,000 shares of
common stock, par value $.0001 per share, and 1,000,000 shares of preferred
stock, par value $.0001 per share) to 20,000,000 shares (consisting of
19,000,000 shares of common stock, par value $.0001 per share, and 1,000,000
shares of preferred stock, par value $.0001 per share).
Our Business
Until January 26, 2005, we were a provider of business-to-business transaction
management services designed to simplify trading between buyers and suppliers.
We used proprietary software to automate, integrate, and enable electronic
trading processes to take place between business partners. Our technology
platform was designed to allow these partners to initiate, communicate, and
respond to business documents, regardless of the differences in the partners'
respective computer systems.
Through our service offerings and technology, we:
o received business documents including, but not limited to, purchase
orders, purchase order acknowledgments, advanced shipping notices
and invoices in any data format,
o ensured that the appropriate data had been sent,
o translated the documents into any other format readable by the
trading partner,
o transmitted the documents correctly to the respective trading
partner,
o acknowledged the flow of transactions to each partner,
o allowed the partners to view and interact with other supply chain
information,
o alerted the partners to time-critical information.
We provided access to our services via the Internet and traditional
communications methodologies. Our software was maintained on both on-site
hardware and remotely hosted hardware.
We also provided professional services and consulting services to tailor our
software to our customers' specific needs with regard to automating the
customers' transactions with their suppliers, as well as to assist businesses
that wished to build, operate or outsource the transaction management of their
business-to-business trading partner relationships and infrastructure.
In light of the fact that we do not have any operating assets after the
effective date of our Plan, very little of what is included in this Annual
Report on Form 10-KSB is relevant to investors in the ongoing business as it
pertains primarily to our historical operations as they existed prior to the
effective date of the Plan and the market related and other non-operational
result information relates to information concerning the year ended December 31,
2004. However, this report is being filed to comply with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
3
ITEM 2. DESCRIPTION OF PROPERTY
Before the reorganization, we operated out of a single facility in New York, New
York. The following table sets forth information on the property:
Principal Address Square Footage Owned/Leased Purpose
- ----------------- -------------- ------------ -------
665 Broadway 5,000 Leased Corporate
New York, NY 10012 Headquarters/Offices
As a result of the reorganization, the lease for this space was assumed by the
secured noteholders as part of their acquisition of our net assets of the
Company in satisfaction of their outstanding debt. Currently, we are utilizing
the office space of our Plan sponsor, Trinad, at no cost to us until an
acquisition is consummated or a business is established. The amount of office
space currently utilized by us is insignificant.
ITEM 3. LEGAL PROCEEDINGS
On August 14, 2004, the Company received notice from the legal representative of
the Company's Senior Secured Noteholders indicating their intention to
accelerate payment of $3,200,000 of Senior Secured Convertible Notes issued in
our January 2002 and July 2002 financings, as a result of the Company's default
on its interest payments. At December 31, 2003, the Company owed the Noteholders
$377,000, which it was unable to pay.
At September 30, 2004, the Company owed the Noteholders interest in the amount
of $544,762. As a result of the Company's continued inability to satisfy the
interest owed in cash or shares of the Company's stock, the Company reached
agreement with its Noteholders to pursue a restructuring under Chapter 11 of the
U.S. Bankruptcy Code. Accordingly, as stated above and discussed below, we filed
a petition for reorganization with the U.S. Bankruptcy Court in the Southern
District of New York on October, 27, 2004.
The Company had also received notice from the legal representative of one of the
Bac-Tech principals to accelerate payment of $300,000 on a Promissory Note
related to the January 2002 acquisition of Bac-Tech, which is secured by the
Intellectual Property related to the acquisition. As of December 31, 2003, the
Company had an obligation to pay the aforementioned party $100,000 on January 1,
2004, which it was unable to pay. This claim was settled and mutual releases
signed in August 2004. Under the terms of the settlement, a one-time, discounted
payment satisfied the Promissory Note in full.
As described under "Item 1. Description of Business," the Company filed the Plan
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York. The Plan, as confirmed
on January 26, 2005, provided for: (1) the net operating assets and liabilities
to be transferred to the holders of the secured liabilities in satisfaction of
the notes and accrued interest, (2) $400,000 to be transferred to a liquidation
trust and used to pay administrative costs and creditors, (3) $100,000 to be
retained by the Company to fund the expenses of remaining public, (4) 3.5% of
the new common stock of the Company (140,000 shares) to be issued to the holders
of record as of January 26, 2005 of the Company's preferred stock in settlement
of their liquidation preference, (5) 3.5% of the new common stock of the Company
(140,000 shares) to be issued to common stockholders of record as of January 26,
2005 in exchange for all the old common stock of the Company, and (6) 93% of the
new common stock of the Company (3,720,000 shares) to be issued to the Plan
sponsor in exchange for $500,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
4
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
As a result of the Plan, holders of record of our common and preferred stock as
of January 26, 2005 were entitled to receive an aggregate of 7% of our common
stock, with 3.5% going to each. The remaining 93% was issued to Trinad. Such
distribution of new common stock was completed in August 2005.
Our common stock was quoted on the Nasdaq SmallCap Market under the symbol
"EBTB" from August 15, 2000 to August 26, 2002. After that time, our common
stock was quoted on the Over-the-Counter Bulletin Board maintained by the
National Association of Securities Dealers. Since September 21, 2004, our common
stock has traded on the "Pink Sheets" under "penny stock" rules and trades
sporadically.
Any investor who purchases our common stock is not likely to find any liquid
trading market for our common stock and there can be no assurance that any
liquid trading market will develop. There is no assurance that the stock will be
approved for trading on the Over-the-Counter Bulletin Board or will be liquid as
a result of our reorganization and the issuance of the new common stock in
exchange for the old common and preferred stock.
The following table reflects the high and low closing quotations of our common
stock for the two years ended December 31, 2004.
Fiscal 2004 High Low
----------- ---- ---
First quarter $ 0.066 $ 0.065
Second quarter $ 0.000 $ 0.000
Third quarter $ 0.000 $ 0.000
Fourth quarter $ 0.002 $0.0018
Fiscal 2003 High Low
----------- ---- ---
First quarter $ 0.07 $ 0.07
Second quarter $ 0.05 $ 0.05
Third quarter $ 0.045 $ 0.04
Fourth quarter $ 0.035 $ 0.02
There has never been a public trading market for any of our securities other
than our common stock.
Holders
As of November 28, 2005, there were 531 holders of record of the common stock.
There were also an undetermined number of holders who hold their stock in
nominee or "street" name.
Dividends
We have not declared cash dividends on our common stock since our inception and
we do not anticipate paying any cash dividends in the foreseeable future.
5
Securities Authorized for Issuance Under Equity Compensation Plans
As a result of the reorganization, all of the outstanding securities authorized
for issuance under equity compensation plans were cancelled. Accordingly, a
description of such securities as of December 31, 2004 would not be useful in
determining whether to make an investment in our stock.
ITEM 6. MANAGEMENT'S PLAN OF OPERATION
MANAGEMENT'S PLAN OF OPERATION
As described under "Item 1. Description of Business," we filed the Plan under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York. The Plan, as confirmed on January
26, 2005, contemplated that the primary source of cash for distributions be the
cash contribution of Trinad, the Plan sponsor. Trinad contributed $500,000 in
cash to us in exchange for 93% of the new common stock issued under the Plan,
with the remaining 7% of the new common stock issued to the holders of record of
our preferred stock and our common stock as of January 26, 2005, with 3.5% going
to each. Of such $500,000 from Trinad, $400,000 has been added to the funds used
to pay administrative costs and creditors. The remaining $100,000 has been
retained by us to fund the expenses of remaining public. The Plan contemplated
that all cash (other than the $100,000 retained by the reorganized debtor) be
placed in a liquidation trust and, after the payment of administrative costs,
used to pay our liabilities. It also contemplated that if there was any
remaining cash, it would be used to settle a small portion of the aggregate
$23,290,450 liquidation preference to which the preferred stockholders were
entitled. There were no funds available to pay any of the liquidation preference
of the preferred stock which shares were cancelled, in exchange for 3.5% of the
new common stock of the company, as part of the Plan.
The distribution of the new common stock to Trinad (93%), holders of record of
our preferred stock as of January 26, 2005 (3.5%), and holders of record of our
common stock as of the same date (3.5%) was completed in August 2005. In
addition, on February 8, 2005, Robert S. Ellin became the Chairman of the Board
of Directors, our Chief Executive Officer, and President, Jay A. Wolf became a
Director, our Chief Financial Officer, Chief Operating Officer, and Secretary,
and Barry Regenstein became a Director. Certain information with respect to
Messrs. Ellin, Wolf, and Regenstein is set forth in "Item 9. Directors,
Executive Officers and Control Persons; Compliance with Section 16(a) of the
Exchange Act" of this Form 10-KSB. We are now capitalized with $100,000 of the
$500,000 Trinad has paid, with the $400,000 having been transferred to the
liquidation trust.
Trinad has advised us that it will seek to raise additional capital (which will
dilute the ownership interests of all stockholders) with a view to making us an
attractive vehicle with which to acquire a business. It will then seek a
suitable acquisition candidate. No additional capital has been raised and no
such business has been identified and we will be subject to a number of risks,
including that any acquisition consummated by us may turn out to be
unsuccessful, investors in us will not know what operating business, if any,
will be acquired, including the particular industry in which the business
operates and whether dilutive financing will be required therewith, the
historical operations of a specific business opportunity may not necessarily be
indicative of the potential for the future, we may acquire a company in the
early stage of development causing us to incur further risks, we may be
dependent upon the management of an acquired business which has not proven its
abilities or effectiveness, we will be controlled by a small number of
stockholders and such control could prevent the taking of certain actions that
may be beneficial to other stockholders, and our common stock will likely be
thinly traded and the public market may provide little or no liquidity for
holders of our common stock.
Trinad has agreed that it will not dispose of any of its common stock until an
acquisition transaction has been consummated and a Current Report on Form 8-K
setting forth the terms of the acquisition and audited financial statements of
the acquisition target have been filed with the SEC.
6
In light of our lack of operating assets, the historical financial statements
for the years ended December 31, 2004 and 2003 included in this Annual Report on
Form 10-KSB are irrelevant to any assessment of our operations on an ongoing
basis. Accordingly, readers are advised not to rely on any historical financial
information in considering an investment in or the disposition of our stock.
After our emergence from bankruptcy, we had no liabilities and extremely limited
cash under our new management. The liquidation trust will be entirely for the
payment of administrative costs and allowed claims in accordance with the
provisions of the Plan (there will be no funds available to pay any of the
liquidation preference), and will not be an asset of the corporation.
As described above, our plan of operation is to merge or effect a business
combination with a domestic or foreign private operating entity. We may seek to
raise additional capital first to make ourselves more attractive to acquisition
candidates. We believe that there are perceived benefits to being a "reporting
company" with a class of publicly-traded securities which may be attractive to
private entities. Other than activities relating to such financing and
attempting to locate such a candidate, we do not currently anticipate conducting
any operations.
We may enter into a definitive agreement with a wide variety of private
businesses without limitation as to their industry or revenues. It is not
possible at this time to predict when, if ever, we will enter into a business
combination with any such private company or the industry or the operating
history, revenues, future prospects or other characteristics of any such
company. Trinad intends to raise capital to make us a more attractive
acquisition vehicle and then seek a suitable merger candidate. Trinad has not
identified anyone for acquisition at this juncture.
CRITICAL ACCOUNTING POLICIES
Management's discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements included
elsewhere in this Annual Report, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires that we make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
the related disclosure of contingent assets and liabilities. At each balance
sheet date, management evaluates its estimates, including, but not limited to,
those related to accounts receivable, inventories, and income taxes. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances at the time the estimates are
made. Actual results may differ from these estimates under different assumptions
or conditions. The estimates and critical accounting policies that are most
important in fully understanding and evaluating our financial condition and
results of operations are discussed below
Bankruptcy Accounting
Since the Chapter 11 bankruptcy filing, we have applied the provisions of SOP
90-7, which does not significantly change the application of accounting
principles generally accepted in the United States; however, it does require
that the financial statements for periods including and subsequent to filing the
Chapter 11 petition distinguish transactions and events that are directly
associated with the reorganization from the ongoing operations of the business.
Revenue Recognition
Revenue from transaction processing is recognized on a per transaction basis
when a transaction occurs between a buyer and a supplier. The fee is based on
the volume of transactions processed during a specific period, typically one
month. Revenue from related implementation, if any, annual subscription and
monthly hosting fees are recognized on a straight-line basis over the term of
the contract with the customer. Deferred income includes amounts billed for
implementation, annual subscription and hosting fees, which have not been
earned. For related consulting arrangements on a time-and-materials basis,
revenue is recognized as services are performed and costs are incurred in
accordance with the terms of the contract. Revenues from related fixed-price
consulting or large project arrangements are recognized using either the
7
contract completion or percentage-of-completion method. The revenue recognized
from fixed price consulting arrangements is based on the
percentage-of-completion method if management can accurately allocate (i) the
ongoing costs to undertake the project relative to the contracted price and
projected margin; and (ii) the degree of completion at the end of the applicable
accounting period. Otherwise, revenue is recognized upon customer acceptance of
the completed project. Fixed-price consulting arrangements are mainly short-term
in nature and we do not have a history of incurring losses on these types of
contracts. If we were to incur a loss, a provision for the estimated loss on the
uncompleted contract would be recognized in the period in which such loss
becomes probable and estimable. Billings in excess of revenue recognized are
included in deferred revenue.
Impairment of Long-Lived Assets
The Company adopted the provisions of SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." The Company's long-lived assets,
including property and equipment, are reviewed for impairment whenever events or
changes in circumstances indicate that the net carrying amount may not be
recoverable. When such events occur, the Company measures impairment by
comparing the carrying value of the long-lived asset to the estimated
undiscounted future cash flows expected to result from use of the assets and
their eventual disposition. If the sum of the expected undiscounted future cash
flows were less than the carrying amount of the assets, the Company would
recognize an impairment loss. The impairment loss, if determined to be
necessary, would be measured as the amount by which the carrying amount of the
asset exceeds the fair value of the asset.
Product Development
In accordance with the provisions of Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", the Company capitalizes qualifying computer software costs
incurred during the application development stage. All other costs incurred in
connection with internal use software are expensed as incurred. The useful life
assigned to capitalized product development expenditures is based on the period
such product is expected to provide future utility to the Company. The Company
is amortizing product development costs over 24 months. Amortization of product
development costs was approximately $260,000 and $506,000 for the years ended
December 31, 2004 and 2003, respectively. The Company believes that the
remaining unamortized product development costs at December 31, 2004 will
provide future benefits to any continuing business operations.
Income Taxes
The Company provides for deferred income taxes using the liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and the tax effect of net operating loss carry-forwards. A valuation
allowance is recorded against deferred tax assets if it is more likely than not
that such assets will not be realized.
RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that there are any other recently issued, but not
yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying financial statements.
RISK FACTORS
Cautionary Statements Regarding Forward-Looking Statements
Statements in this Annual Report on Form 10-KSB under the captions "Description
of Business," "Management's Plan of Operation," and elsewhere in this Form
10-KSB, as well as statements made in press releases and oral statements that
may be made by us or any of our officers, directors or employees acting on our
8
behalf that are not statements of historical fact, constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors, including those described in this Form 10-KSB
under the caption "Risk Factors," that could cause our actual results to be
materially different from the historical results or from any future results
expressed or implied by such forward-looking statements. In addition to
statements which explicitly describe such risks and uncertainties, readers are
urged to consider statements with the terms "believes," "belief," "expects,"
"plans," "anticipates," or "intends," to be uncertain and forward-looking. All
cautionary statements made in this Form 10-KSB should be read as being
applicable to all related forward-looking statements wherever they appear.
Investors should consider the following risk factors as well as the risks
described elsewhere in this Form 10-KSB.
We may not be successful in identifying and evaluating suitable business
opportunities or in consummating a business combination.
Trinad intends to raise capital to make us a more attractive acquisition vehicle
and then seek a suitable merger candidate. Trinad has not identified acquisition
candidates at this juncture. There can be no assurance that Trinad will be
successful in raising capital on favorable terms, or at all, or in finding a
suitable merger candidate for us. No particular industry or specific business
within an industry has been selected for a target company. Accordingly, we may
enter into a merger or other business combination with a business entity having
no significant operating history, losses, limited or no potential for immediate
earnings, limited assets, negative net worth or other negative characteristics,
such as dependency on management that has not proven its abilities or
effectiveness. In the event that we complete a merger or other business
combination, the success of our operations will be dependent upon the management
of the target company and numerous other factors beyond our control. There is no
assurance that we will be able to negotiate a merger or business combination on
favorable terms, or at all.
We may be subject to regulation under the Investment Company Act of 1940 if we
were to engage in certain activities or business combinations.
In the event that we engage in a business combination or engage in other
activities that result in our holding passive investment interests in a number
of entities, we could be subject to regulation under the Investment Company Act
of 1940. In such event, we would be required to register as an investment
company and could be expected to incur significant registration and compliance
costs.
We do not anticipate paying dividends.
We have never paid cash or other dividends on our common stock. Payment of
dividends on our common stock is within the discretion of our Board of Directors
and will depend upon our earnings, our capital requirements and financial
condition, and other factors deemed relevant by the Board of Directors. However,
the earliest the Board of Directors would likely consider a dividend is after
the acquisition has occurred if the acquired entity generated excess cash flow.
We may be unable to meet our future capital requirements.
We need to raise additional funds in order to make ourselves a more attractive
acquisition vehicle. There is no assurance that we will be able to consummate
the financing on favorable terms or at all. Any such financing will dilute the
percentage ownership of existing stockholders.
We currently do not have any full-time employees and are dependent on Trinad,
independent contractors and consultants for the operation of our business.
We are currently a "shell" company with no operations or employees. We are
controlled by Trinad, our majority stockholder, and our officers and directors
are affiliated with Trinad. Trinad provides certain services to us without
remuneration and we hire independent contractors or consultants for certain
9
services. There is no assurance that we will be able to hire employees qualified
for the work required, or that such qualified employees could be hired and
retained at a reasonable level of compensation.
We are controlled by one stockholder.
Trinad currently owns 93% of our common stock and controls our Board of
Directors. Such control could prevent the taking of certain actions that may be
beneficial to other stockholders.
The trading of our common stock is limited and sporadic.
Our common stock has been traded on the "pink sheets" under the symbol
"EBTBQ.PK". The trading volume of our common stock is limited and sporadic, and
with only limited and minimal interest by market makers. The holders of record
of our common and preferred stock as of January 26, 2005, received an aggregate
of 7% of the new common stock with the remaining 93% balance going to Trinad.
There is no assurance that any liquid trading market will emerge. The price at
which our common stock will trade in the future may be highly volatile and may
fluctuate as a result of a number of factors, including, without limitation,
announcements concerning potential acquisitions, quarterly variations in our
operating results, other business partners and opportunities, as well as the
number of shares available for sale in the market.
"Penny stock" rules may restrict the market for our common stock.
Our common stock is subject to rules promulgated by the SEC relating to "penny
stocks," which apply to companies whose shares are not traded on a national
stock exchange or on the Nasdaq SmallCap or National Market Systems, trade at
less than $5.00 per share, or who do not meet certain other financial
requirements specified by the SEC. These rules require brokers who sell "penny
stocks" to persons other than established customers and "accredited investors"
to complete certain documentation, make suitability inquiries of investors, and
provide investors with certain information concerning the risks of trading in
such penny stocks. These rules may discourage or restrict the ability of brokers
to sell our common stock and may affect the secondary market for our common
stock. These rules could also hamper our ability to raise funds in the primary
market for our common stock.
10
ITEM 7. FINANCIAL STATEMENTS
Mediavest, Inc.
(Formerly eB2B Commerce, Inc.)
(Debtor-in-Possession)
Index to Consolidated Financial Statements
Page
----
Reports of Independent Registered Public Accounting Firms 20-21
Consolidated Balance Sheet as of December 31, 2004 22
Consolidated Statements of Operations for the years ended December 31, 2004 and 2003 23
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2004
and 2003 24
Consolidated Statements of Cash Flows for the years ended December 31, 2004 and 2003 25
Notes to the Consolidated Financial Statements 26
11
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Stockholders of Mediavest, Inc.
We have audited the accompanying consolidated balance sheet of Mediavest,
Inc. (formerly eB2B Commerce, Inc.), Debtor-in-Possession, as of December 31,
2004 and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. 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 statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Mediavest, Inc. as of December 31, 2004 and the results of its consolidated
operations and cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States.
/s/ Most & Company, LLP
-----------------------
Most & Company, LLP
New York, New York
October 24, 2005
12
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
eB2B Commerce, Inc.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit) and cash flows of eB2B Commerce, Inc. (the
"Company") for the year ended December 31, 2003. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of the Company's operations and its cash
flows for the year ended December 31, 2004 in conformity with accounting
principles generally accepted in the United States of America.
/s/ MILLER, ELLIN & COMPANY, LLP
New York, New York
April 1, 2004
13
MEDIAVEST, INC.
(Formerly eB2B COMMERCE, INC.)
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 2004
ASSETS
Current Assets
Cash and cash equivalents $ 386
Accounts receivable, net of allowance of $200 492
Other current assets 9
-----------
Total current assets 887
Property and equipment, net 29
Product development costs 187
Other assets 35
-----------
Total assets $ 1,138
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities Not Subject to Compromise
Accounts payable and accrued expenses $ 159
Deferred revenue 282
-----------
441
-----------
Liabilities Subject to Compromise
Note payable - debtor-in-possession 100
Secured notes payable 3,738
Accounts payable, accrued expenses and other current liabilities 809
Accrued interest payable 614
-----------
5,261
-----------
Total liabilities 5,702
-----------
Stockholders' Deficit
Preferred stock, convertible Series A - $.0001 par value; 2,000 shares
authorized; 7 shares issued and outstanding --
Preferred stock, convertible Series B - $.0001 par value; 4,000,000 shares
authorized; 1,736,568 shares issued and outstanding --
Preferred stock, convertible Series C - $.0001 par value; 1,750,000 shares
authorized; 524,506 shares issued and outstanding --
Common stock - $.0001 par value; 200,000,000 shares authorized; 7,964,170
shares issued and outstanding --
Additional paid-in capital 157,322
Accumulated deficit (161,886)
-----------
Total stockholders' deficit (4,564)
-----------
Total liabilities and stockholders' deficit $ 1,138
===========
See accompanying notes to consolidated financial statements.
14
MEDIAVEST, INC.
(Formerly eB2B COMMERCE, INC.)
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Years Ended December 31,
---------------------------------
2004 2003
-------------- --------------
Revenue $ 3,750 $ 4,013
-------------- --------------
Costs and Expenses:
Cost of revenue 584 844
Marketing and selling 81 216
Amortization of product development costs 256 506
Amortization of other intangibles 149 489
General and administrative 2,467 2,078
Settlement of licensing liability -- (575)
Gain on settlements of debt (474) (205)
Stock-based compensation expense -- 31
Interest and other expenses, net 561 661
-------------- --------------
Total costs and expenses 3,624 4,045
-------------- --------------
Income (loss) from continuing operations before reorganization items,
income taxes and discontinued operations 126 (32)
-------------- --------------
Reorganization items:
Professional fees 207 --
Adjustments to creditors' claims 381 --
-------------- --------------
588 --
-------------- --------------
Loss before income taxes (462) (32)
Income taxes (42) --
-------------- --------------
Loss from continuing operations (504) (32)
Income from discontinued operations -- 160
-------------- --------------
Net (loss) income $ (504) $ 128
============== ==============
Net (loss) income per common and common equivalent share:
Basic:
Loss per common share from continuing operations $ (0.10) $ (0.01)
Income per common share from discontinued operations -- 0.05
-------------- --------------
Net (loss) income per common $ (0.10) $ 0.04
============== ==============
Diluted
Loss per common share from continuing operations *
Income per common share from discontinued operations 0.01
--------------
Net income per common $ 0.01
==============
Weighted average number of common shares outstanding:
Basic 4,927,186 3,518,388
============== ==============
Diluted 25,478,378
==============
* Less than $0.01 per share
See accompanying notes to consolidated financial statements.
15
MEDIAVEST, INC.
(Formerly eB2B Commerce, Inc.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands except share data)
Preferred Stock Preferred Stock Preferred Stock
Series A Series B Series C
-------------------------- --------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 1, 2003 7 $ -- 2,211,675 $ -- 732,875 $ --
Conversion of Series B Preferred -- -- (208,001) -- -- --
Conversion of Series C Preferred -- -- -- -- (71,485) --
Issuance of common stock to
settle vendor and other obligations -- -- -- -- -- --
Stock based compensation -- -- -- -- -- --
Private placement -- -- -- -- -- --
Net income -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2003 7 -- 2,003,674 -- 661,390 --
Conversion of Series B Preferred -- -- (267,106) -- -- --
Conversion of Series C Preferred -- -- -- -- (136,884) --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2004 7 $ -- 1,736,568 $ -- 524,506 $ --
=========== =========== =========== =========== =========== ===========
Common Stock Additional Unearned Total
-------------------------- Paid-in stock Accumulated Equity
Shares Amount Capital based comp Deficit (Deficit)
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 1, 2003 3,053,470 $ -- $ 157,287 $ -- $ (161,510) $ (4,223)
Conversion of Series B Preferred 331,970 -- -- -- -- --
Conversion of Series C Preferred 989,217 -- -- -- -- --
Issuance of common stock to
settle vendor and other obligations 170,015 -- 4 -- -- 4
Stock based compensation -- 31 -- 31
Private placement -- -- -- -- -- --
Net income -- -- -- -- 128 128
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2003 4,544,672 -- 157,322 -- (161,382) (4,060)
Conversion of Series B Preferred 521,725 -- -- -- -- --
Conversion of Series C Preferred 2,897,773 -- -- -- -- --
Net loss -- -- -- -- (504) (504)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2004 7,964,170 $ -- $ 157,322 $ -- $ (161,886) $ (4,564)
=========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
16
MEDIAVEST, INC.
(Formerly eB2B COMMERCE, INC.)
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended December 31,
-----------------------------------
2004 2003
--------------- ---------------
Cash flows from operating activities:
Loss from continuing operations $ (504) $ (32)
Adjustments to reconcile net loss from continuing
operations to
net cash provided by (used in) operating activities:
Depreciation and amortization 406 1,071
Provision for doubtful accounts (3) 27
Stock-based compensation expense -- 31
Writeoff of deferred financing costs 279 --
Non-cash interest expense 468 422
Adjustment of creditors' claims 381 --
Gain on settlement of debt (474) (780)
Changes in operating assets and liabilities, net (166) (910)
--------------- ---------------
Net cash provided by (used in) operating activities
before reorganization items 387 (171)
Cash used for reorganization expenses (48) --
--------------- ---------------
Net cash provided by (used in) operating activities 339 (171)
--------------- ---------------
Cash flows from investing activities:
Purchases of property and equipment (37) (12)
Product development expenditures (162) (339)
--------------- ---------------
Net cash used in investing activities (199) (351)
--------------- ---------------
Cash flows from financing activities:
Proceeds from note payable - debtor-in-possession 100 --
Payments on borrowings -- (50)
Proceeds from borrrowings and issuance of convertible
notes -- 275
--------------- ---------------
Net cash provided by financing activities 100 225
--------------- ---------------
Net cash provided by (used in) continuing operations 240 (297)
Net cash used in discontinued operations -- (18)
--------------- ---------------
Net change in cash and cash equivalents 240 (315)
Cash and equivalents - beginning of period 146 461
--------------- ---------------
Cash and equivalents - end of period $ 386 $ 146
=============== ===============
See accompanying notes to consolidated financial statements.
17
MEDIAVEST, INC.,
(Formerly eB2B COMMERCE, INC.)
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
NOTE 1. ORGANIZATION AND OPERATIONS
Mediavest, Inc. (the "Company") was originally incorporated in the State of
Delaware on November 6, 1998 under the name eB2B Commerce, Inc. On April 18,
2000, it merged into DynamicWeb Enterprises Inc., a New Jersey corporation, the
surviving company, and changed its name to eB2B Commerce, Inc. On April 13,
2005, the Company changed its name to Mediavest, Inc. Through January 26, 2005,
the Company and its subsidiaries were engaged in providing business-to-business
transaction management services designed to simplify trading between buyers and
suppliers.
NOTE 2. PETITION FOR RELIEF UNDER CHAPTER 11, ORGANIZATION AND OPERATIONS
On October 27, 2004 and as amended on December 17, 2004, the Company filed a
plan (Plan) for reorganization under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Southern District of New
York. The Plan, as confirmed on January 26, 2005, provided for: (1) the net
operating assets and liabilities to be transferred to the holders of the secured
notes in satisfaction of the principal and accrued interest thereon; (2)
$400,000 to be transferred to a liquidation trust and used to pay administrative
costs and certain preferred creditors; (3) $100,000 to be retained by the
Company to fund the expenses of remaining public; (4) 3.5% of the new common
stock of the Company (140,000 shares) to be issued to the holders of record of
the Company's preferred stock in settlement of their liquidation preferences;
(5) 3.5% of the new common stock of the Company (140,000 shares) to be issued to
common stockholders of record as of January 26, 2005 in exchange for all of the
outstanding shares of the common stock of the Company; and (6) 93% of the new
common stock of the Company (3,720,000 shares) to be issued the plan sponsor in
exchange for $500,000 in cash.
There will be no funds available to pay the liquidation preferences of the
preferred stock.
As of December 31, 2004, the Company paid reorganization expenses of $48,000.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bankruptcy Accounting
Subsequent to the Chapter 11 petition for reorganization filing, the Company has
applied the provisions of SOP 90-7, which does not significantly change the
application of accounting principles generally accepted in the United States;
however, it does require that the financial statements for periods including and
subsequent to filing the petition distinguish transactions and events that are
directly associated with the reorganization from the ongoing operations of the
business.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All material intercompany balances and transactions have been
eliminated.
18
Revenue Recognition
Revenue from transaction processing is recognized on a per transaction basis
when a transaction occurs between a buyer and a supplier. The fee is based
either on the volume of transactions processed during a specific period,
typically one month, or calculated as a percentage of the dollar volume of the
purchase related to the documents transmitted during a similar period. Revenue
from related implementation, if any, and monthly hosting fees are recognized on
a straight-line basis over the term of the contract with the customer. Deferred
income includes amounts billed for implementation and hosting fees, which have
not been earned.
For related consulting arrangements on a time-and-materials basis, revenue is
recognized as services are performed and costs are incurred in accordance with
the billing terms of the contract. Revenues from related fixed price consulting
arrangements are recognized using the percentage-of-completion method, unless
the extent of progress toward completion cannot be reliably determined. Progress
towards completion is measured using the efforts-expended method based upon
management estimates. To the extent that efforts expended and costs to complete
cannot be reasonably estimated, revenues are deferred until the contract is
completed. The Company does not have a history of incurring losses on these
types of contracts. If the Company were to incur a loss, a provision for the
estimated loss on the uncompleted contract would be recognized in the period in
which such loss becomes probable and estimable. Billings in excess of revenue
recognized are included in deferred income.
Cash and Cash Equivalents
Cash and cash equivalents include cash, money market investments and other
highly liquid investments with original maturities of three months or less.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization, and are depreciated or amortized using the straight-line method
over their estimated useful lives as follows:
Computer and communications equipment........ 2 to 3 years
Purchased software........................... 2 years
Office equipment and furniture............... 4 to 5 years
Leasehold improvements....................... Shorter of useful life or
lease term
Intangible Assets
Intangibles previously acquired with an acquisition included a software
platform, customer list and below market lease. These intangible assets had
definite lives that had been amortized on a straight-line basis over their
estimated useful lives. During the years ended December 31, 2004 and 2003,
amortization totaled approximately $149,000 and 489,000, respectively.
Impairment of Long-Lived Assets
The Company's long-lived assets, including property and equipment, are reviewed
for impairment whenever events or changes in circumstances indicate that the net
carrying amount may not be recoverable. When such events occur, the Company
measures impairment by comparing the carrying value of the long-lived asset to
the estimated undiscounted future cash flows expected to result from use of the
assets and their eventual disposition. If the sum of the expected undiscounted
future cash flows were less than the carrying amount of the assets, the Company
would recognize an impairment loss. The impairment loss, if determined to be
necessary, would be measured as the amount by which the carrying amount of the
asset exceeds the fair value of the asset.
19
Product Development
The Company capitalizes qualifying computer software costs for internal use
incurred during the product development stage. All other costs incurred in
connection with internal use software are expensed as incurred. The useful life
assigned to these capitalized costs are based on the period such product is
expected to provide future utility to the Company, which is estimated to be 24
months. The Company believes that the remaining unamortized product development
costs at December 31, 2004 approximates their fair value and will provide future
benefits to any continuing business operations.
Income Taxes
Deferred income taxes are provided for temporary differences between financial
statement and income tax reporting under the liability method, using expected
tax rates and laws that are expected to be in effect when the differences are
expected to reverse. A valuation allowance is provided when it is more likely
than not, that the deferred tax assets will not be realized.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts receivable, accounts
payable, accrued expense and accrued interest payable approximate fair value due
to the short maturities of such instruments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk are cash and cash equivalents and accounts receivable. Cash and cash
equivalents are deposited with high credit quality financial institutions. The
Company's accounts receivable are derived from revenue earned from customers
located in the United States of America.
Portions of the Company's accounts receivable balances are settled either
through customer credit cards or electronic fund transfers. The Company
maintains an allowance for doubtful accounts based upon the estimated
collectibility of accounts receivable.
In the years ended December 31, 2004 and 2003, one customer accounted for
approximately 12% and 21%, respectively, of the Company's revenue. As of
December 31, 2004 and 2003, one customer and two customers accounted for
approximately 11% and 32% of accounts receivable, respectively.
20
Net Income (Loss) per Common Share
Basic net income or loss per common share ("Basic EPS") is computed by dividing
the net income or loss attributable to common shareholders by the
weighted-average number of common shares outstanding during the year. Diluted
net income per common share ("Diluted EPS") is computed by dividing the net
income attributable to common shareholders by the weighted-average number of
common shares and dilutive common share equivalents and convertible securities
outstanding during the year. For 2004, diluted net loss per share was not
presented, as it was anti-dilutive. There were 20,389,362 stock options and
warrants excluded from the computation of Diluted EPS for the year ended
December 31, 2003, as their effect on the computation of Diluted EPS would have
been anti-dilutive. Additionally, for the year ended December 31, 2003, there
were 2,665,071 shares of our convertible preferred stock outstanding,
convertible into 21,366,507 shares of the Company's common stock. In addition,
the Company had debt outstanding which was convertible into 34,286,000 shares at
December 31, 2003.
Stock-Based Compensation
Compensation costs for stock options issued to employees are based on the fair
value method, determined by using the Black-Scholes method.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Significant estimates made by management include, but are not limited to, the
allowance for doubtful accounts and the valuation of intangible assets.
New Accounting Pronouncements
Management does not believe that there are any other recently issued, but not
yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying financial statements.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year
presentation.
21
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31, 2004:
(in thousands):
Computer and communications equipment ... $ 2,488
Purchased software ...................... 2,568
Office equipment and furniture .......... 793
------------
5,849
Accumulated depreciation and amortization (5,820)
------------
$ 29
============
Depreciation expense for 2004 and 2003 was $17,000 and $92,000, respectively.
NOTE 5. LIABILITIES SUBJECT TO COMPROMISE
Under bankruptcy law, claims by creditors to collect indebtedness the Company
owes prior to the petition date are stayed and certain other pre-petition
contractual obligations may not be enforced against the Company or its
subsidiaries. The Company has received approval from the Court to pay certain
pre-petition liabilities including employee salaries and wages, benefits and
other employee obligations. Except for secured debt, all pre-petition
liabilities have been classified as "Liabilities Subject to Compromise," as of
December 31, 2004. Adjustments to these claims may result from negotiations,
payments authorized by Court order, rejection of executory contracts including
leases, or other events.
NOTE 6. NOTE PAYABLE - DEBTOR-IN-POSSESSION
A holder of one of the secured claims under the reorganization proceedings
provided $100,000 in financing under a debtor-in-possession facility. The
facility provided for the accrual of interest at the rate of fifteen percent,
per annum, payable monthly, on the last calendar day of each month. Under the
Plan, the facility was repaid on a pro rata basis equal with the holders of the
general unsecured claims, if any.
NOTE 7. SECURED NOTES PAYABLE
At December 31, 2004, secured notes payable consisted of:
Bac-Tech acquisition note $ 300
7% senior subordinated notes 2,263
July notes 1,175
------
$3,738
======
The Bac-Tech acquisition note was due on demand without interest.
22
The 7% senior subordinated secured convertible notes ("7% Notes") were due to be
repaid in January 2007 and were convertible into an aggregate of 934,922 shares
of common stock at a price of $2.42 per share, prior to adjustments for dilutive
financings.
The five-year 7% senior subordinated secured notes (the "July Notes") were
convertible into shares of common stock of the Company at the trading price on
the prior day, $0.01 per share, as of December 31, 2004.
The secured notes were collateralized by substantially all of the assets of the
Company. At December 31, 2004, all the secured notes were in default.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Leases
The Company was committed under a lease for office space through 2008, requiring
minimum lease payments of $118 in 2005, $121 in 2006, $125 in 2007 and $21 in
2008.
Under the Plan, the lease was assumed by the holders of the 7% Notes and the
July notes.
Under the Plan, all the Company's employment contracts were terminated.
Litigation
A vendor had commenced an action against the Company alleging that the Company
acquired certain software from the vendor upon the authorization of the
Company's former chief information officer. The vendor was seeking damages of
approximately $856,000. The Company has filed an answer denying the material
allegations of the complaint, believes it has meritorious defenses to the
allegations made in the complaint and intends to vigorously defend the action.
Under the Plan, the claim of the vendor was treated as an unsecured creditors'
claim, which were not expected to receive any settlement.
NOTE 9. PREFERRED STOCK
Series A
Each share of Series A is convertible into the number of shares of common stock
by dividing the purchase price for the Series A by the conversion price then in
effect. The Series A have anti-dilution provisions, which can change the
conversion price in certain circumstances if additional shares of common stock
were to be issued by the Company. The holders had the right to convert the
shares of Series A at any time into common stock. Upon liquidation, dissolution
or winding down of the Company, the holders of the Series A are entitled to
receive $1,000 per share (for an aggregate liquidation value of $7,000), before
distributions to any holder of the Company's common stock. As of December 31,
2004, the outstanding shares of Series A could have been converted into 620
shares of the Company's common stock.
Series B
Each share of Series B is convertible into the number of shares of common stock
dividing the purchase price by the conversion price then in effect. The Series B
have anti-dilution provisions, which can change the conversion price in certain
circumstances if additional securities were to be issued by the Company. The
holders had the right to convert the shares of Series B at any time into common
stock. Upon liquidation, dissolution or winding down of the Company, the holders
of the Series B are entitled to receive $10.00 per share (for an aggregate
liquidation value of $17,365,680), before distributions to any holder of the
Company's common stock. As of December 31, 2004, the outstanding shares of
Series B could have been converted into approximately 3,108,450 shares of the
Company's common stock.
23
Series C
The Series C had weighted average anti-dilution protection and a liquidation
preference of $13.33 per share (for an aggregate liquidation value of
$6,991,665). Under certain circumstances, each share of Series C could have been
automatically converted by the Company into common stock. As of December 31,
2004, the outstanding shares of Series C have been converted into approximately
14,187,900 shares of the Company's common stock.
Under the Plan, the holders of record of all of the Company's preferred stock
received 3.5% of the shares of the new common stock, 140,000 shares.
NOTE 10. WARRANTS
The following table summarizes the status of warrants at December 31, 2004:
Warrants exercisable and outstanding
-----------------------------------------------------------------
Weighted average
Range of exercise Number of shares (in remaining life
price per share thousands) (in years)
-----------------------------------------------------------------
Original Bridge Warrants $0.10 9,483 1.8
Credit Line Warrants 1.4 218 1
Series C Agent Warrants - Preferred 1.2 1,397 1.3
Other 0.20 - 58.65 377 2.3
--------------
Total 11,475
==============
Under the Plan, all warrants were cancelled.
NOTE 11. STOCK OPTION AND DEFINED CONTRIBUTION PLANS
Stock option plans
On March 17, 2003, an aggregate of 766,000 stock options were issued to the
Company's employees. The options were valued at the fair value of the option of
approximately $31,000.
The Company has stock-based compensation plans under which outside directors,
certain employees and consultants received stock options and other equity-based
awards. The shareholders of the Company approved the 2000 Stock Option Plan (the
"Option Plan"). Stock options under the Option Plan are generally granted with
an exercise price equal to 100% of the market value of a share of common on the
date of the grant, have 10 year terms and vest within 2 to 4 years from the date
of the grant. Subject to customary antidilution adjustments and certain
exceptions, the total number of shares of common stock authorized for option
grants under the Option Plan was approximately 8 million at December 31, 2004.
Presented below is a summary of the status of the Company employee and director
stock options and the related transactions for the years ended December 31, 2004
and 2003:
24
Weighted Average
Shares Exercise Price
(in thousands) Per Share
-------------- --------------
Options outstanding at December 31, 2002 3,852 $ 0.21
Granted/assumed 766 0.10
Forfeited/expired (739) 0.21
-------------- --------------
Options outstanding at December 31, 2003 3,879 0.21
Forfeited/expired (1,257) 0.42
-------------- --------------
Options outstanding at December 31, 2004 2,622 $ 1.10
============== ==============
The following table summarizes information about stock options outstanding and
exercisable as of December 31, 2004:
Options Outstanding Options Exercisable
---------------------------------------------- ---------------------------------
Weighted Weighted Weighted-
Average Average Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices (in thousands) Contractual Price (in thousands) Price
- --------------- -------------- ----------- ----- -------------- -----
$0.10-$0.19 2,311 7.5 $ 0.12 770 $ 0.12
$3.45 37 6.0 $ 3.45 37 $ 3.45
$7.95 - $8.25 267 5.5 $ 8.10 267 $ 8.10
$48.75 7 4.5 $ 48.75 7 $ 48.75
----------- ------------
2,622 1,081
=========== ============
Under the Plan, all stock options were cancelled
Defined contribution plan
The Company has a defined contribution savings plan, which qualifies under
Section 401(k) of the Internal Revenue Code. Participants may contribute up to
20%, of their salary, subject to a limitation set by Internal Revenue Service
regulations. The defined contribution savings plan provides for discretionary
contributions to be made by the Company as determined by its Board of Directors.
During the years ended December 31, 2004 and 2003, the Company did not make any
contributions to the defined contribution savings plan.
Under the Plan, the defined contribution savings plan was terminated and assets
distributed to the participants.
25
NOTE 12. INCOME TAXES
The Company and its subsidiaries file separate Federal, state and local income
tax returns.
As of December 31, 2004, the Company had approximately $37 million of net
operating loss (NOL) carryforwards to reduce future Federal income tax, expiring
in various years ranging from 2019 to 2024. During 2000 and in January 2006, the
Company may have experienced ownership changes as defined by the Internal
Revenue Service, whereby such an ownership change may subject the NOL's to
annual limitations which could reduce or defer the use of the NOL's.
As of December 31, 2004, realization of the Company's net deferred tax assets of
approximately $23.4 million were not considered more likely than not and,
accordingly, a valuation allowance of approximately $23.4 million has been
provided. During the year ended December 31, 2004, the valuation allowance
increased by $600.
The components of the net deferred tax asset as of December 31, 2004 consisted
of the following (in thousands):
Net operation loss carryforwards $ 15,000
Compensation 8,200
Other 200
Valuation allowance (23,400)
------------
$ --
============
The provision for income taxes differs from the amount computed by applying the
statutory Federal income tax rate to income before the provision for income
taxes, as follows (in thousands):
Year Ended December 31,
------------------------------
2004 2003
------------ ------------
Federal income tax, at statutory rate $ (200) $ 44
State income tax, net of federal benefit (40) 10
Other (360) 193
Prior years' state income taxes 42 --
Change in valuation allowance 600 (247)
------------ ------------
Income taxes, as recorded $ 42 $ --
============ ============
NOTE 13. DISCONTINUED OPERATIONS
During 2003, the Company realized a $160,000 gain through the settlement of
related outstanding liabilities of $160,000.
NOTE 14. SUBSEQUENT EVENT
In April 2005, the Company decreased their authorized preferred shares to
1,000,000, $0.0001 par value, and their authorized common shares to 19,000,000
shares, $0.0001 par value.
26
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE
Prior to filing for bankruptcy, Miller, Ellin & Company, LLP ("Miller") served
as our independent public accounting firm. Miller has not audited any financial
statements of the Company for any date or period subsequent to the year ended
December 31, 2003.
On February 8, 2005, Miller was dismissed as our independent public accounting
firm. The decision to discontinue our relationship with Miller was approved by
the Board of Directors, and was based exclusively on the fact that as a result
of the reorganization of the Company with Trinad as Plan sponsor, Miller was no
longer deemed to be independent. Miller's reports with respect to the financial
statements for the fiscal years ended December 31, 2003 and 2002 did not contain
an adverse opinion or a disclaimer of opinion and were not qualified or modified
with respect to uncertainty, audit scope, or accounting principles except that
Miller's report on its audit of our financial statements for the year ended
December 31, 2003 contained an explanatory paragraph concerning matters that
raised substantial doubt about our ability to continue as a going concern.
During the fiscal years ended December 31, 2002 and 2003 and the subsequent
interim period through the date of Miller's dismissal, there were no
disagreements with Miller on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to Miller's satisfaction, would have caused it to make reference to the
subject matter of the disagreement(s) in connection with its reports on our
consolidated financial statements. We have provided Miller with a copy of this
disclosure and requested that Miller furnish us with a letter addressed to the
SEC stating whether it agrees with the above statements.
On April 1, 2005, we engaged Most & Company, LLP ("Most") as our independent
public accounting firm. The decision to retain Most as our independent public
accounting firm was made by our Board of Directors. We engaged Most to audit our
financial statements for the fiscal year ended December 31, 2004. During the
years ended December 31, 2004 and December 31, 2003 and through April 1, 2005,
neither we nor anyone on our behalf has consulted with Most regarding the
application of accounting principles to a specific transaction, either completed
or proposed, or the type of audit opinion that might be rendered on our
financial statements.
ITEM 8A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. Our principal executive
officer and principal financial officer, after evaluating the effectiveness of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) on December 31, 2004, have concluded that, based on
such evaluation, our disclosure controls and procedures were adequate and
effective to ensure that material information relating to us, including our
consolidated subsidiaries, was made known to them by others within those
entities, particularly during the period in which this Annual Report on Form
10-KSB was being prepared.
(b) Changes in Internal Controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, nor were there any
significant deficiencies or material weaknesses in our internal controls.
Accordingly, no corrective actions were required or undertaken.
ITEM 8B. OTHER INFORMATION.
Not applicable.
27
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Pre-Reorganization Executive officers and directors
The following table sets forth certain information regarding our former
directors and executive officers who are no longer affiliated with us as a of
February 8, 2005 as a result of our reorganization:
Name Age Position
- ---- --- --------
Richard S. Cohan 52 Chairman of the Board of Directors and Chief
Executive Officer
Robert Bacchi 49 Chief Operating Officer
Richard S. Cohan joined our company in May 2001 as President and Chief Operating
Officer. In July 2001, he became Chief Executive Officer of our company, and
relinquished his position as Chief Operating Officer. He became a director in
May 2002 and Chairman of our Board of Directors in June 2003. Mr. Cohan served
as Senior Vice President of WebMD, a health information technology company, from
June 1998 to January 2001. He was also President of The Health Information
Network Company, an e-health consortium of major New York health insurers and
associations of which WebMD was the Managing Partner, from 1998 to 2001. Prior
to joining WebMD, Mr. Cohan spent 18 years at National Data Corporation, with
various titles including Executive Vice President, Healthcare.
Robert Bacchi joined our company in January 2002 as Chief Operating Officer
following our acquisition of Bac-Tech Systems, Inc., a privately-held New York
City based e-commerce company. Mr. Bacchi founded Bac-Tech in 1981 and served as
its President since such date.
Post-Reorganization Board of Directors and Executive Officers
In connection with our reorganization, on February 8, 2005, Robert S. Ellin
became Chairman of our Board of Directors, our Chief Executive Officer, and
President, Jay A. Wolf became a Director, our Chief Financial Officer, Chief
Operating Officer, and Secretary, and Barry Regenstein became a Director.
Robert S. Ellin, age 40. Mr. Ellin is a Managing Member of Trinad, a hedge fund
dedicated to investing in micro-cap public companies. Mr. Ellin is also a
director and officer of Amalgamated Technologies, Inc. ("Amalgamated"), U.S.
Wireless Data, Inc. ("USWD") and Command Security Corporation ("Command"). Prior
to joining Trinad, Mr. Ellin was the founder and President of Atlantis Equities,
Inc., a private investment company. Founded in 1990, Atlantis actively managed
an investment portfolio of small capitalization public companies as well as
select private company investments. Mr. Ellin played an active role in Atlantis
investee companies including Board representation, management selection,
corporate finance and other advisory services. Through Atlantis and related
companies, Mr. Ellin completed a leveraged buyout of S&S Industries, Inc. where
he also served as President from 1996 to 1998. Prior to founding Atlantis
Equities, Mr. Ellin worked in Institutional Sales at LF Rothschild and prior to
that he was the Manager of Retail Operations at Lombard Securities. Mr. Ellin
received a Bachelor of Arts from Pace University.
Jay A. Wolf, age 33. Mr. Wolf is a Managing Director of Trinad, a hedge fund
dedicated to investing in micro-cap public companies. Mr. Wolf is also a
director and officer of Amalgamated, Shells Seafood Restaurants, Inc., Starvox
Communications, Inc and USWD. Mr. Wolf has ten years of investment and
operations experience in a broad range of industries. Mr. Wolf's investment
experience includes: senior and subordinated debt, private equity (including
leveraged transactions), mergers & acquisitions and public equity investments.
Prior to joining Trinad, Mr. Wolf served as the Executive Vice President of
Corporate Development for Wolf Group Integrated Communications Ltd. where he was
responsible for the company's acquisition program. Prior to that he worked at
Canadian Corporate Funding, Ltd., a Toronto based merchant bank, in the Senior
Debt Department, and subsequently for Trillium Growth Capital, the firm's
venture capital fund. Mr. Wolf received a Bachelor of Arts from Dalhousie
University.
28
Barry I. Regenstein, age 49. Mr. Regenstein is the Executive Vice President and
Chief Operating Officer of Command and a director of USWD. Trinad is a
significant shareholder of Command and Mr. Regenstein has served as a consultant
for Trinad. Mr. Regenstein has over 25 years of experience with 21 years of such
experience in the aviation services industry. Mr. Regenstein was formerly Senior
Vice President and Chief Financial Officer of Globe Ground North America
(previously Hudson General Corporation), and previously served as the
Corporation's Controller and as a Vice President. Prior to joining Hudson
General Corporation in 1982, he had been with Coopers & Lybrand in Washington,
D.C. since 1978. Mr. Regenstein is a Certified Public Accountant and received
his Bachelor of Science in Accounting from the University of Maryland and an
M.S. in Taxation from Long Island University.
Audit Committee
We do not currently have an Audit Committee because we are not an operating
company. If and when we find a suitable merger candidate and we successfully
enter into a merger transaction whereby a company with assets and operations
survives, we intend to establish an Audit Committee that fulfills the
independent and other requirements promulgated by the SEC.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers, directors, and persons
owning more than ten percent of a registered class of our equity securities
("ten percent stockholders") to file reports of ownership and changes of
ownership with the SEC. Officers, directors, and ten-percent stockholders are
required by SEC regulations to furnish us with copies of all Section 16(a)
reports they file with the SEC. To the best of our knowledge, based solely on
review of the copies of such reports and amendments thereto furnished to us, we
believe that during our fiscal year ended December 31, 2004, all Section 16(a)
filing requirements applicable to our officers, directors, and ten percent
stockholders were met.
Code of Ethics
We do not currently have a code of ethics because we are not an operating
company. If and when we find a suitable merger candidate and we successfully
enter into a merger transaction whereby a company with assets and operations
survives, we intend to establish code of ethics.
ITEM 10. EXECUTIVE COMPENSATION
On February 8, 2005, Robert S. Ellin became the Chairman of the Board of
Directors, our Chief Executive Officer, and President, Jay A. Wolf became a
Director, our Chief Financial Officer, Chief Operating Officer, and Secretary,
and Barry Regenstein became a Director. None of our current directors and
officers receives any compensation paid by us.
Prior to our reorganization, our former directors and officers received
compensation paid by us. After our emergence from Chapter 11 of the Bankruptcy
Code, none of our former directors and officers have any current affiliation
with us and accordingly do not receive compensation paid by us.
In accordance with the Plan, all of the options and warrants held by our former
directors and officers prior to the reorganization were canceled. None of our
current directors and executive officers hold any options or warrants of our
Company.
We have no plan for compensating our directors for their service in their
capacity as directors, although such directors are expected in the future to
receive stock options to purchase common shares as awarded by our Board of
Directors or (as to future stock options) a compensation committee which may be
established. Directors are entitled to reimbursement for reasonable travel and
other out-of-pocket expenses incurred in connection with attendance at meetings
of our Board of Directors. Our Board of Directors may award special remuneration
to any director undertaking any special services on our behalf other than
services ordinarily required of a director. No director received or accrued any
compensation for their services as a director, including committee participation
or special assignments.
29
There are no management agreements with our directors or executive officers and
we do not anticipate that written agreements will be put in place in the
foreseeable future.
We have no plans or arrangements with respect to remuneration received or that
may be received by our executive officers to compensate such officers in the
event of termination of employment (as a result of resignation, retirement,
change of control) or a change of responsibilities following a change of
control.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following tables set forth certain information regarding the beneficial
ownership of our common stock as of November 28, 2005, by the (i) named
executive officers (our former executive officers and directors), (ii) all
persons, including groups, known to us to own beneficially more than five
percent (5%) of the outstanding common stock, and (iii) all current executive
officers and directors as a group. A person (or group) is deemed to be a
beneficial owner of common stock that can be acquired by such person or group
within 60 days from November 28, 2005, upon the exercise of warrants, options or
other rights exercisable for, or convertible into, common stock. As of November
28, 2005, there were a total of 3,959,770 shares of common stock outstanding
Except as otherwise indicated, the address of each of the following persons is
c/o Mediavest, Inc., 153 East 53rd Street, 48th Floor, New York, NY 10022.
CERTAIN HOLDERS OF COMMON STOCK
- ---------------------------------------------------------------------------------------
Beneficially Owned as of
November 28, 2005 (1)
- ---------------------------------------------------------------------------------------
Name and Address Number of Shares Percent of Class
of Owner
- ---------------------------------------------------------------------------------------
Trinad Capital, L.P. 3,720,000(2) 93%
- ---------------------------------------------------------------------------------------
Current directors or officers:
- ---------------------------------------------------------------------------------------
Robert S. Ellin -- (2) *
- ---------------------------------------------------------------------------------------
Jay A. Wolf -- (2) *
- ---------------------------------------------------------------------------------------
Barry I. Regenstein -- (2) *
- ---------------------------------------------------------------------------------------
Former directors and officers:
- ---------------------------------------------------------------------------------------
Richard S. Cohan
c/o Enable Corporation
665 Broadway
New York, NY 11003 -- *
- ---------------------------------------------------------------------------------------
Robert Bacchi
c/o Enable Corporation
665 Broadway
New York, NY 11003 1,754 *
- ---------------------------------------------------------------------------------------
All current directors and named executive 3,720,000(2) 93%
officers as a group (three persons)
- ---------------------------------------------------------------------------------------
- ----------
* Represents less than 1% of outstanding shares.
(1) Except as specifically indicated in the footnotes to this table, the persons
named in this table have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them, subject to community
property laws where applicable. Beneficial ownership is determined in accordance
with the rules of the SEC. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, shares of common stock
subject to options, warrants or rights held by that person that are currently
exercisable or exercisable, convertible or issuable within 60 days of November
28, 2005, are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person.
30
(2) Trinad owns 93% of our outstanding common stock. Robert Ellin and Jay Wolf,
two of our directors and executive officers, are principals of Trinad and Barry
Regenstein, our other director, is affiliated with Trinad. Robert Ellin and Jay
Wolf may be deemed to beneficially own the stock that Trinad owns.
Changes in Control
We are unaware of any contract or other arrangement the operation of which may
at a subsequent date result in a change in control of our company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described under "Item 1. Description of Business," the Company filed the Plan
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York. The Plan, as confirmed
on January 26, 2005, provided for: (1) the net operating assets and liabilities
to be transferred to the holders of the secured liabilities in satisfaction of
the notes and accrued interest, (2) $400,000 to be transferred to a liquidation
trust and used to pay administrative costs and creditors, (3) $100,000 to be
retained by the Company to fund the expenses of remaining public, (4) 3.5% of
the new common stock of the Company (140,000 shares) to be issued to the holders
of record as of January 26, 2005 of the Company's preferred stock in settlement
of their liquidation preferences, (5) 3.5% of the new common stock of the
Company (140,000 shares) to be issued to common stockholders of record as of
January 26, 2005 in exchange for all the old common stock of the Company, and
(6) 93% of the new common stock of the Company (3,720,000 shares) to be issued
to the Plan sponsor in exchange for $500,000.
There were no funds available to pay any of the liquidation preference of the
preferred stock which shares were cancelled, in exchange for 3.5% of the new
common stock of the company, as part of the Plan.
In connection with the Plan, on February 8, 2005, Robert S. Ellin became the
Chairman of the Board of Directors, our Chief Executive Officer, and President,
Jay A. Wolf became a Director, our Chief Financial Officer, Chief Operating
Officer, and Secretary, and Barry Regenstein became a Director. Robert S. Ellin
and Jay A. Wolf are the Managing Member and Managing Director of Trinad,
respectively, while Barry Regenstein is an outside consultant to Trinad. Certain
information with respect to Messrs. Ellin, Wolf and Regenstein is set forth in
"Item 9" of this Form 10-KSB.
31
ITEM 13. EXHIBITS
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1 Amended Disclosure Statement filed with the United States Bankruptcy Court
for the Southern District of New York*
2.2 Amended Plan of Reorganization filed with the United States Bankruptcy
Court for the Southern District of New York*
2.3 Order Confirming Amended Plan of Reorganization issued by the United
States Bankruptcy Court for the Southern District of New York*
3.1 Restated Certificate of Incorporation*
3.2 Certificate of Amendment to the Certificate of Incorporation (1)
3.3 Restated Bylaws*
31.1 Certification of Chief Executive Officer *
31.2 Certification of Chief Financial Officer *
32.1 Certification of Principal Executive Officer pursuant to U.S.C. Section
1350 *
32.2 Certification of Principal Financial Officer pursuant to U.S.C. Section
1350 *
- ----------
* Filed herewith.
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated April 13, 2005, and filed with the SEC on August 9, 2005.
32
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table presents fees for professional audit services rendered by
Miller for the audit of our annual financial statements and fees for other
services for the year ended December 31, 2003, and fees for professional audit
services rendered by Most for the audit of our annual financial statements and
fees for other services for the year ended December 31, 2004.
Most Miller
Audit fees:(1) $30,000 $82,207
Audit related fees:(2) $ 0 $ 0
Tax fees:(3) $ 0 $14,393
All other fees:(4) $ 0 $ 0
Total $30,000 $96,600
Policy on Pre-Approval of Audit and Permissible Non-audit Services of
Independent Auditors
Consistent with SEC policies regarding auditor independence, the Board of
Directors has responsibility for appointing, setting compensation and overseeing
the work of the independent auditor. In recognition of this responsibility, the
Board of Directors has established a policy to pre-approve all audit and
permissible non-audit services provided by the independent auditor.
Prior to engagement of the independent auditor for the next year's audit,
management will submit an aggregate of services expected to be rendered during
that year for each of the following four categories of services to the Board of
Directors for approval.
1. Audit services include audit work performed in the preparation of financial
statements, as well as work that generally only the independent auditor can
reasonably be expected to provide, including comfort letters, statutory audits,
and attest services and consultation regarding financial accounting and/or
reporting standards.
2. Audit-Related services are for assurance and related services that are
traditionally performed by the independent auditor, including due diligence
related to mergers and acquisitions, employee benefit plan audits, and special
procedures required to meet certain regulatory requirements.
3. Tax services include all services performed by the independent auditor's tax
personnel except those services specifically related to the audit of the
financial statements, and includes fees in the areas of tax compliance, tax
planning, and tax advice.
4. Other Fees are those associated with services not captured in the other
categories.
Prior to engagement, the Board of Directors pre-approves these services by
category of service. The fees are budgeted and the Board of Directors require
the independent auditor and management to report actual fees versus the budget
periodically throughout the year by category of service. During the year,
circumstances may arise when it may become necessary to engage the independent
auditor for additional services not contemplated in the original pre-approval.
In those instances, the Board of Directors requires specific pre-approval before
engaging the independent auditor.
The Board of Directors may delegate pre-approval authority to one or more of its
members. The member to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Board of
Directors at its next scheduled meeting.
33
Our Board of Directors pre-approved the retention of Miller for all audit,
audit-related and tax services during fiscal 2003, and the retention of Most for
all audit, audit-related and tax services during fiscal 2004.
34
SIGNATURES
In accordance with Section 13 or 15 of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Mediavest, Inc.
Dated: December 2, 2005
By: /s/ Robert S. Ellin
--------------------------
Robert S. Ellin
Chairman of the Board,
Chief Executive Officer
and President
In accordance with the requirements of the Exchange Act, this Report has been
signed below by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
- --------------------- ----------------------------------- ----------------
/s/ Robert S. Ellin Chairman of the Board, Chief December 2, 2005
- ------------------- Executive Officer and President
Robert S. Ellin
/s/ Jay A. Wolf Director, Chief Financial Officer, December 2, 2005
- --------------- Chief Operating Officer and
Jay A. Wolf Secretary
/s/ Barry Regenstein Director December 2, 2005
- --------------------
Barry Regenstein
35