ITEM 1. BUSINESS
General
The Company was incorporated on January 15, 1949 in the state of Utah under the name of Oil Securities Company, Inc. In July 1984, the Company changed its domicile to the State of Nevada by merger. In July 1996, the Company merged with Miller & Benson International, Ltd. ("M&B") and changed its name to Digital Technologies Media Group, Inc. ("DTG"). The combined Company's name was changed to Digital Technologies Media Group, Inc.
Voluntary Reorganization
On January 26, 1999, the Company filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code ("Code") BK. N SV 99-10944-GM in Woodland Hills, California, (the "Petition"). The Petition sought to reorganize the Company by satisfying all of the allowed claims of creditors, or rights to payment, with securities issued by the Company to such creditors under the terms of a plan of reorganization approved by the Bankruptcy Court, said plans Final Order was approved on August 17, 2000, and was made effective May 8, 2000 (the "Plan"). Unless the context indicates otherwise, the term "Company" refers to the operations of Central Capital Venture Corporation following the confirmation of the Third Amended Chapter 11 Reorganization Plan. Reference to the Company after approval of the Plan is sometimes as the "Reorganized Debtor." See "Business Combination."
A. The Company's Confirmed Chapter 11 Reorganization Plan
The Reorganized Company operates as a closed end mutual fund specifically designed to engage in investments of startup companies, a Business Development
Corporation. The Company notified the Securities and Exchange Commission that it elected, pursuant to the provisions of Section 54(a) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), to be subject to the provisions of Sections 55 through 65 of the Investment Company Act on June 19, 2000.
Following the Company's inceptive investment in DataNet Information Systems, Inc. ("Data") the Company's first Investee company, it may be desirable for the Company to make additional follow-on investments. If working capital is not available for such purposes through public or private equity offerings of the Company's securities or securities of Data, the Company may use its assets to guarantee borrowings by it or Data.
B. The Business Activity Of The Company.
The Company has no independent investment advisor. The Company's investment decisions are made by its officers, in accordance with the Company's established investment policies and objectives, subject to oversight by its Board of Directors. The Company focuses its' business operations on assisting small corporations (defined in the Investment Company Act as companies with sales of less than $50 million annually) in capital formation. The Company will service two types of companies: "Investment Companies" and "Client Companies."
An Investment Company is defined as a company in which the Company has equity position and which meets the Company's investment objective. An Investment Company typically expects its common stock to be publicly traded at some point in the near future. As part of its growth strategy, an Investment Company expects with the Company's assistance, to prepare and file a registration statement with the Securities and Exchange Commission to raise additional equity capital for its growth.
A Client Company is defined as a company that contracts for the Company's financing and/or selected services on a fee for services basis. The Company supports its Client Companies by offering significant management assistance through a complete range of management and business consulting services. The Company, acts as a management incubator for new and development stage business, and will seek to work with larger companies whose products and services have better acceptance in the marketplace. The Company will consistently follow its business plan by incorporating the following services: (1) Capital Formation Services, (2) Merger and Acquisition Services, (3) Management Consulting Services charged to the Investment Companies and client companies, (4) Corporate Partnering, (5) and if available profit from the selective sale of the Investment Companies securities it maintains in its portfolio.
CERTAIN NON-COMPLIANCE BY PORTFOLIO COMPANIES
Although the Company's agreements with its portfolio companies require those companies to furnish the Company with periodic and/or annual financial statements, certain of its portfolio companies fail to supply intentionally (or are anticipated by the Company to fail to supply) the financial statements or to otherwise comply with the covenants required of them. The Company will deal with these failures on a case-by-case basis, and the exercise the business sense associated with each remedy, utilizing the judgment of the Company's Board of Directors, or the appropriate the legal requirement, for the action the Company may take.
C. Regulation of The Company, A Business Development Company.
The Company is a closed-end, non-diversified investment company that has elected to be regulated as a Business Development Company under the 1940 Act and, as such, is subject to regulation under that Act. Among other things, the 1940 Act contains prohibitions and restrictions relating to transactions between the Company and its affiliates, principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the Company's directors be persons other than "interested persons," as defined in the 1940 Act. In addition, the 1940 Act prohibits the Company from changing the nature of its business so as to cease to be, or to withdraw its election as, a Business Development Company unless so authorized by the vote of the holders of a majority of its outstanding voting securities.
A Business Development Company is permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock having rights as to voting, liquidation and dividends which are senior to the Company's common stock (collectively, "Senior Securities," as defined in the 1940 Act) if the asset coverage, as defined in the 1940 Act, of any Senior Security is at least 200% immediately after each such issuance and certain other conditions are met. Also, while Senior Securities constituting preferred stock are outstanding (other than preferred stock), provision must be made to prohibit any distributions to shareholders or the repurchase of such securities or shares unless the applicable asset coverage ratios are met at the time of the distribution or repurchase. The Company may also borrow amounts from banks evidenced by notes not to be publicly distributed or for temporary purposes if the borrowing does not exceed 5% of the value of its total assets. A loan is presumed to be for temporary purposes if it is repaid within sixty days and is not extended or renewed.
Under the 1940 Act, a Business Development Company may not acquire any asset, other than assets of the type listed in Section 55(a) of the 1940 Act ("Qualifying Assets") unless, when the acquisition is made, such Qualifying Assets represent at least 70% of its total assets. The principal categories of Qualifying Assets relevant to the business of the Company are the following:
(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer is an eligible portfolio company. An "eligible portfolio company" is defined, in pertinent part, in the 1940 Act as any issuer which:
(a) is organized under the laws of, and has its principal place of business in, the United States;
(b) is not an investment company other than another SBIC that is wholly-owned by the Company;
(c) and does not have any class of securities with respect to which margin credit may be extended under federal law.
(2) Securities of any eligible portfolio company that is controlled by the Business Development Company.
(3) Securities received in exchange for or distributed on or with respect to securities described in items (1) or (2) above, or pursuant to the exercise of options, warrants or rights relating to such securities.
(4) Cash, cash items, government securities, or high quality debt securities maturing in one year or less from the time of investment.
In addition, a Business Development Company must have been organized (and have its principal place of business) in the United States for the purpose of making investments in the types of securities described in items (1) or (2) above and, in order to count the securities as Qualifying Assets for the purpose of the 70% test, the Business Development Company must either control the issuer of the securities or make available to the issuer of the securities significant managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby a Business Development Company, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company;
The Investment Company Act prohibits or restricts the Company from investing in certain types of companies, such as Broker/Dealers (with the exception that they are wholly-owned subsidiaries of the BDC), insurance companies, investment banking firms and investment companies (with exception to wholly owned Small Business Investment Companies licensed by the Small Business Administration).
The Investment Company Act also limits the type of assets that the Company may acquire to qualifying assets and certain other assets necessary for its operations (such as office furniture, equipment and facilities) if, at the time of the acquisition, less than 70% of the value of the Company's assets consist of qualifying assets. Qualifying assets include:
a. Securities of companies that were eligible portfolio companies at the time that the Company acquired their securities, b. Securities of bankrupt or insolvent companies that are not otherwise eligible portfolio companies, c. Securities acquired as follow-on investments in companies that were eligible portfolio companies, provided that the Company has maintained a substantial portion of its initial investment in those companies, d. Securities received in exchange for or distributed on or with respect to any of the foregoing, and,
e. Cash items, U.S. Government securities and Investment quality short-term debt securities.
The Investment Company Act also places restrictions on the nature of the transactions in which, and the persons from whom, securities can be purchased for the securities to be considered as qualifying assets.
The Company thus may sell its portfolio securities at a price that is below the prevailing net asset value per share only upon the approval of the holders of a majority of its voting securities held by nonaffiliated persons, at its last
annual meeting or within one year prior to the transactions. In addition, the Company may from time to time repurchase its common stock subject to the restrictions of the Investment Company Act and the corporate laws of the state of its incorporation.
A Business Development Company may issue limited amounts of warrants, options and rights to purchase its securities to its directors, officers and employees (and provide loans to those persons for the exercise thereof) in connection with an executive compensation plan, if certain conditions are met. These conditions include the approval of:
a. A majority of the Company's voting securities, b. A majority of the independent members of its Board of Directors, c. A majority of the directors who have no financial interest in the transaction.
The issuance of options warrants or rights to directors who are not also officers or employees of the Company requires the prior approval of the Securities and Exchange Commission. As defined in the Investment Company Act, the term majority of the Company's outstanding voting securities mean the lesser of the vote of:
1. 67% or more of the Company's common stock present at a meeting, if holders of more that 50% of the outstanding common stock are present or represented by proxy, or 2. More than 50% of the Company's outstanding common stock.
Under the Investment Company Act, as applied to a Business Development Company, most transactions involving the Company and its affiliates (as well as affiliates of those affiliates) require the prior approval of a majority of the Company's independent directors and a majority of the directors having no financial interest in such transactions.
Some transactions involving certain closely affiliated persons of the Company, including its directors, officers, and employees require the prior approval of the Securities and Exchange Commission. In general, (a) any person who owns, controls or those holders with power to vote more than 5% of the Company's outstanding common stock, (b) any director, executive officer or general partner or that person, and (c) any person who directly or indirectly controls, is controlled by, or is under common control with that person, must obtain the prior approval of a majority of the Company's independent directors, and in some situations, the prior approval of the Securities and Exchange Commission, before engaging in certain transactions involving the Company or any company controlled by the Company. The Investment Company Act generally does not restrict transactions between the Company and its Investment Companies.
In accordance with Section 18-56(a) of the Investment Company Act, a majority of the members of the Company's Board of Directors must not be interested persons of the Company as that term is defined in Section 18-2(a)(19) of the Investment Company Act. Generally, interested persons of the Company include all affiliated persons of the Company and members of their immediate families, any interested person of an Underwriter or of an Investment Advisor to the Company, any person who has acted as legal counsel to the Company within the last two fiscal years, or any broker or dealer, or any affiliate of a Broker/Dealer.
It is likely that in some cases the Company may be deemed to be an affiliate of the companies in which it invests by virtue of sharing control of those
companies, as a result of its stockholdings, the positions of its officers and directors who also serve a directors and officers of such Investment Companies, or for other reasons. Additional restriction on the ability of the Company to sell or transfer securities of its Investment Companies could also be severely limited by the nature of the insider trading rules imposed under the Investment Company Act.
D. Risks of the Company
In addition to the above-described provisions of the Investment Company Act, there are a number of other provisions of the federal securities laws that affect the ongoing operations of the Company. Restrictions imposed by federal and state securities laws, in addition to possible contractual provisions, may affect adversely the ability of the Company to sell or otherwise to distribute its portfolio securities.
Most, if not all securities, in which the Company acquires as venture capital investments will be restricted securities within the meaning of the Securities Act of 1933, as amended, and will not be permitted to be resold without compliance of the Securities and Exchange Act. Thus, the Company will not be permitted to resell portfolio securities unless a registration statement has been declared effective, or unless the Company is able to rely on an available exemption from such registration requirements. In most cases, the Company will endeavor to obtain from its Investment Companies registration rights pursuant to which the Company will be able to demand that an Investment Company register the securities owned by the Company at the expense of the Investment Company. Even if the Investment Companies bear this expense, however, the registration of the securities owned by the Company is likely to be a time consuming process, and the Company always bears the risk, because of these delays, that it will be unable to resell such securities, or that it will not be able to obtain an attractive price for the securities, Additionally, the Company may never be able to distribute the securities of certain Investment Companies to stockholders in certain states because the Investment Companies may not qualify for registration in those states, pursuant to each individual state blue sky laws.
Sometimes the Company will not register portfolio securities for sale but will seek to rely upon an exemption from registration. In most cases, the expenses associated with seeking exemptive relief will be borne by the Company. The most likely exemption available to the Company is section 4(1) of the Securities Act of 1933, which in effect, exempts sales of securities not involving a distribution of the securities. This exemption will likely be available to permit a private sale of portfolio securities, and in some cases a public sale, if the provisions of Rule 144 promulgated under the Securities Act of 1933 are satisfied. In general, under Rule 144 affiliates may, in certain circumstances, sell within any three-month period a number of shares not to exceed the greater of (a) 1% of the then outstanding shares of common stock, or (b) the average weekly trading volume of the common stock during the previous four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain provisions, notice requirements and the availability of public information about the issuer. A person who is not deemed to have been an affiliate of the issuer at any time during the three months preceding a sale and who also has beneficially owned his shares for at least three years would be entitle to sell such shares under Rule 144 without regard to the volume limitation, manner of sale provisions, notice requirements or the availability of public information requirement otherwise applicable.
The Company may elect to distribute in-kind securities of Investment Companies to its stockholders. Prior to any such distributions, the Company expects that it will need to file, and cause the issuers of such distributed securities to file, a registration statement or in the alternative, an information statement which will permit the distribution of such securities and also permit distributed stockholders of the Company to sell such distributed securities. Notwithstanding the forgoing and the filing of a registration statement, stockholders in certain states may not be eligible to receive certain in-kind distributions due to state securities law restrictions.
E. Marketing
Since there was negative revenue during the six months ended June 30 2000, there is no marketing of any product or service during the reporting periods.
F. Government and Other Regulation
The Company was solely engaged in bringing its books and records up to reporting standards, and complying with the other basic requirements of the provisions of Section 54(a) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), specifically the provisions of Sections 55 through 65 of the Investment Company Act and had no employees except that of part time and occasional labor, and had no compliance issues with any federal and state governmental agencies.
G. Business Combination
The Company did not engage in any business combination during the reporting periods.
H. Employees
Currently, the Company has one employee; it's President Lewis I. Williams, IV, who has elected not to accept a salary. During the period from January 1, 2000 until June 19, 2000 the Company had two employees and administrators; Ely J. Mandell and David A. Kekich, who were also officers and directors of the Predecessor Company (a Debtor in Possession), the Bankruptcy Court allowed both administrators to service the Plan of Reorganization for the Company.
I. Competition
The Company is presently engaged as a Business Development Company, a closed end mutual fund designed to invest in start-up venture capital situation the company is aware that there is at least twelve publicly traded Business Development Company's all with greater resources than that of the Company, as well as a multitude of private Venture Capital Funds all with greater resource, larger deal flow, and more capitalization that that of the Company.
J. Facilities, Personnel
The Company's principal executive offices, consisting of approximately 1,500 square feet, are located at 310 Village Park, 2660 Townsgate Road, Westlake Village, California 91361. The Company occupies these offices, and subleases a portion of the office space to its Investee Company's pursuant to several sublease agreements. Additionally, its past President personally guarantees the
Company's office space; therefore it has entered into a sublease agreement with Jande International, Holdings, LLC. (of which Mr. Ely Jay Mandell a major shareholder of the Company, is a principal). The lease commenced July 2000 for a term of two years at a monthly rate of $1,900, each sublease is herein described: DataNet Information Systems, Inc. $500.00 per month, Digi Commerce Corporation $500.00 per month, Jande International Holdings, Llc.$200.00 per month. The Company believes that its office space is adequate for its current needs.
As of June 30, 2000, the Company had no full-time employees. The Company has from time to time engaged the services of part time employee and occasional labor independent consultants as and when needed. The Company considers its relations with employees to be satisfactory.
ITEM 2
ITEM 2 - INVESTMENTS
For a complete financial description of the investments as of June 30, 2000 see Page item 7
Initial Transactions By the Company.
The Company's initial Investee Company was DataNet Information Systems, Inc. ("Data"), the Company's second Investee Company; Digi Commerce Corporation was formed upon Plan confirmation.
(i) Acquisition of Data
Data was the initial Investee Company of the Company. The Company had with approval of the Bankruptcy Court, acquired 1,000,000 shares of Data common stock (representing 100% of Data's total stock outstanding) from First Portland Corporation (30% shareholder), Bernie Budney (55% shareholder) and Jande International Holdings LLC (15% shareholder) by issuing such shareholders of Data one share of the Company's Class A Preferred Stock for every ten shares of Data common stock owned. The purchase of 100% of the Data common stock resulted in Data's shareholders holding 100,000 shares of the Class A Preferred Stock of the Company. The acquisition of Data also required a $100,000 capital contribution from the Company, and a total capital contribution of $1,000,000 over a two-year period.
The Company intends to distribute thirty percent (30%), 300,000 shares of common stock, of the Data securities owned by it to shareholders who are to receive securities under the Third Amended Plan of Reorganization on a Pro Rata basis based upon Units held. The Company had agreed to provide Data $1,000,000 (of which $100,000 has already been paid) over a two year period for operational purposes including marketing, sales and development. However since the Company has been in operation for approximately eleven months, the sales of Data and account receivables have declined approximately 30% due to various factors. The Company is now negotiating with Data's management to reduce the Company's required investment; until such time a new Business Plan is produced, (i) as to exact use of proceeds, (ii) improvement of management and operational techniques, (iii) improvement of collection techniques, (iv) and improvement of sales.
The Class A Preferred Stock issued in exchange for Data common stock will not be issued pursuant to Section 1145 of the Bankruptcy Code. It is anticipated
that the Data Common Stock will be registered within one year of Plan Confirmation. As defined by the Plan, "Class A Preferred Stock" means One Hundred Thousand (100,000) shares of Class A Preferred Stock issued by the Company, however the holders of the Class A Preferred Stock have modified the Class A Preferred Stock in terms voluntarily. The Class A Preferred Stock shall be convertible into common stock of Data held by the Company upon the earlier to occur: (i) an investment totaling $1,000,000 is made in Data by the Company, or (ii) a registration with the Securities and Exchange Commission of Data's stock becomes effective. The Class A Preferred Stock shall be convertible into Data common stock pursuant to the following formula: the converted shares shall be equal to 68% of the total Data common shares (3.4 million shares) to be issued after conversion. Twelve percent (12%) of the issued Data common shares (600,000 shares) shall be reserved for private placements and other stock issuances and 20% of the Data common shares (1,000,000 shares) will remain with the Company. Thus, if all of the Preferred Class A Stock is converted to the Common Stock of Data, the Company will retain 20% of the Data common stock (1,000,000 shares) and Company's Creditors and Interest Holders will hold a total of 6% (300,000 shares) upon registration of the DataNet Common Stock. Therefore, upon conversion control of Data will shift to the holders of the Class A Preferred Stock.
Data owns the product and distribution rights to the Pocket MLS. The Pocket MLS provides instant access to current, affordable and portable multiple-listing real property information instantaneously whether the user is in the office, at home or on the road. The current product is a very basic personal digital assistant (PDA) called a "Reader" that realtors can use to search and view current MLS information. There are approximately 5,600 Readers, 1,400 of which are currently in the field. The Reader, along with the software, replaces the traditional MLS printed catalogue and is updated on a daily basis. Data's products include the Reader and a PCMCIA card burner and SCCI card which together make up the "loader." The loader is attached to a personal computer which is updated daily through its modem by Data's master server. DataNet owns the Info Reader, DataNet Infopak and Infocard, the technology used for the Pocket MLS and PCMCIA card, and United States patents are currently pending with respect to such technology. DataNet has no reason to believe that its rights with respect to this technology are subject to challenge.
Data's management team consists of Ely Jay Mandell and Bernie Budney. Bernie Budney currently is Data's President; Ely Jay Mandell currently serves as Data's Secretary/Director and Executive Vice President.
Data was formed December 1999 as a Nevada corporation. Data acquired its assets from (i) the voluntary foreclosure on the assets of DataNet Enterprises, LLC and (ii) the purchase of the assets of Millennium Information Systems Inc. ("Millennium"). DataNet Enterprises, LLC and Millennium were unrelated entities pursuing the same business objectives. Millennium was a separate company from DataNet Enterprises, LLC and was financially sound. Millennium was the distributor of DataNet Enterprises, LLC in Western Canada.
The operating costs experienced by DataNet Enterprises, LLC have been reduced by Data by over 50% as a result of restructuring of debt into equity and by transferring its call center and computer operations center to Canada to take advantage of the favorable exchange rates between the Canadian and United States dollar and very competitive phone rates. The foreclosure on DataNet Enterprises, LLC's assets was voluntary and at the request of Data to insure that Data received clean title to the assets.
(ii) Digi Commerce Corporation
Digi Commerce Corporation was formed under the laws of the State of Nevada on May 8, 2000, as part of the Third Amended Plan of Reorganization. Digi is a start-up E-commerce travel reservations World Wide Web design Assistance Company with Internet Service Provider aspects. Digi according to its business plan will provide web design and access assistance to merchants in a mall or portal type of setting for specific travel destinations where Digi intends to open its cafes. Digi has also assumed certain assets from the Reorganized Debtor under the Third Amended Plan of Reorganization such as the digi-commerce.net and digi-commerce.com, web sites, which will sell various products, including sporting good products in accordance with the Fogdog Sports contract over the Internet, and the Places to Stay.Com sales associate Contracts, as well as other business assets and leases of the predecessor.
Digi has 20,000,000 authorized Shares of Common Stock and 10,000,000 authorized Shares of Preferred Stock. 4,000,000 Shares of Common Stock, of Digi Commerce Corporation, which constitutes 100% of issued Digi common stock, were issued to the Company in exchange for $100,000 and transfer of some of the Predecessor Company's assets excluding the Rights of Action. The Company intends to distribute thirty percent (30%) of the Digi stock to parties who are to receive securities under the Plan on a Pro Rata basis. The Digi Stock shall be registered and will not be issued pursuant to Section 1145 of the Code. Ely Jay Mandell currently serves as President and sole Director of Digi. Other officers will be named upon full operation of Digi.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any legal proceedings, nor to its knowledge, is any material litigation threatened against the Company or its assets. The Company has never been named as a defendant in any material litigation.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to shareholders during the second quarter of the fiscal year ended June 30, 2000.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is not traded on any market and has not traded for the past nine years.
(a) Holders: The approximate number of holders of record of Common Shares as of June 30, 2000, was 194.
(b) Dividends: The Company has not paid cash dividends on its common stock since its inception. At the present time, the Company's anticipated working capital
requirements are such that it intends to follow a policy of retaining any earnings in order to finance the development of its business, however the Company does intend on spinning off to shareholders portions of its portfolio from time to time in the form of dividends.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
See Summary of Financial Information for the periods ended June 30, 2000, 127 Days for the Predecessor Company ended May 7, 2000 and 365 Days for the Predecessor Company ended December 31, 1999 on the following page:
CENTRAL CAPITAL VENTURE CORPORATION
SUMMARY OF FINANCIAL INFORMATION
Periods Ending, ------------------------------------------------ Company Predecessor Predecessor June 30 127 Days 365 Days 2000 Ending Ending 5/7/2000 12/31/2000
STATEMENT OF OPERATIONS DATA Total income .................... $0 $0 $0 Total expenses .................. $ 32,163 $ 118,258 $ 143,240 Net realized gains (losses) on disposition of investments ...... $0 $0 $0 Net income (loss) ............... $ (57,163) $(118,258) $(143,240) Earnings (loss) per share ....... $(.01) $(.03) $(.04) Weighted average number of shares outstanding .................... 2,685,224 3,790,627 3,790,627 NET ASSET VALUE PER SHARE $1.03
BALANCE SHEET DATA Current Assets ................. $ 27,851 704 Investment portfolio............. $2,600,000 0 Fixed Assets..................... $ 1,993 Total assets .................... $2,629,844 704
Current Liabilities ............. $ 25,777 127,293 Due to Related Party............. 7,227 Loan Payable- Related Party...... 1,000 Pre-petition liabilities ........ 565,549 Total Liabilities $ 25,777 701,069 Common stock (including additional paid-in capital) .. $2,661,230 534,436 Accumulated deficit ......... $ (57,163) (1,234,801) Total shareholders' equity .. $2,604,067 (700,365)
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read together with the financial statements and notes thereto included elsewhere herein.
General
The Company is the product of a reorganization of two previously unaffiliated companies, Digital Technologies Group, Inc. ("DTG"), which was organized in April 1995, and Miller & Benson International, Ltd. ("M&B"), which was reincorporated in Delaware in January, 1992, subsequent to the confirmation of its Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code. For approximately nine years prior to July 1996, M&B had no operating business. In July 1996, DTG and M&B completed a reorganization (the "Reorganization") in which all of the then outstanding shares of common stock of DTG were exchanged for 4,401,127 shares of the common stock of M&B. As a result of the Reorganization, DTG became a wholly owned subsidiary of M&B. M&B changed its name to "Digital Technologies Media Group, Inc." and the shareholders of DTG immediately prior to the Reorganization became the owners of approximately 81.5% of the outstanding shares of M&B common stock. The Reorganization has been accounted for as a reverse acquisition as if DTG issued 4,401,127 shares of its common stock to acquire the net assets of M&B at the time of the Reorganization.
Digital Technologies Media Group, Inc., a Delaware corporation, filed bankruptcy caused by a voluntary Chapter 11 petition under the U.S. Bankruptcy code on January 26, 1999.
During the fiscal year ended December 31, 1997, the Company ceased operations and cancelled 2,320,000 shares of common stock to reverse an asset purchase of a film entertainment library and related film contracts. The then president of the Company resigned and by year-end, the existing corporate entity had no assets.
The Company remained dormant until it developed a business plan and then filed for bankruptcy to confirm the plan. Pursuant to Bankruptcy Court Order on January 19, 2000 the Company received $310,000 in borrowed funds to pay administrative expenses and purchased one enterprise, DataNet Information Systems, Inc. (a Nevada corporation).
Overview
History of Operations
Unless the context indicates otherwise, the term "Predecessor Company" refers to the operations of DTG prior to Reorganization and "Company" refers to the operations of Central Capital Venture Corporation following the Reorganization. For further information regarding the Reorganization, see Note 2 of Notes to Financial Statements.
The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes appearing elsewhere in the Form10-KSB.
Results of Operations
We believe that period-to-period comparisons of our operating results are not necessarily indicators of future performance. You should consider our prospects
in light of the risks, expenses and difficulties frequently encountered by companies experiencing rapid growth and, in particular, rapidly growing companies that operate in evolving markets. We may not be able to successfully address these risks and difficulties.
Comparisons of the Six months ended June 30 2000, Predecessor Company 127 Days Ended May 7 2000 and Predecessor Company 365 Days December 31, 1999
For the Predecessor Company in both periods there was no revenue, or gross profit as the Company was inactive.
For the Predecessor Company the operating expenses decreased to $143,240 in 1999 for 365 days compared to from $118,258 in May 7, 2000 for 127 days as a result of the Chapter 11 bankruptcy filing. Approximately $71,024 was incurred for accrued legal and administrative services to finalize pre-petition claims (Liabilities) and a plan of reorganization, in the May 7 period. The balance of the expenses was for rent $2,500 and other typical services related to administrative costs. There were no taxes or interest paid. The net loss for the reasons described was $143,240 and $118,258 in 1999 and in May 7, 2000 for 127 days, respectively. All tax losses will be carried forward in compliance with IRS regulations.
As of May 8, 2000, the Company adopted fresh start reporting in accordance with SOP 90-7. Fresh start reporting assumes that a new reporting entity has been created and assets and liabilities should be reported at their fair values as of the effective date (Note 3 of Notes to Financial Statements). The Company had operating expenses of $32,163 for 54 days ending June 30 2000, mainly as a result of the chapter 11 filing and the accrued administrative professional fees associated with it, $17,702 was attributed to Professional fees, accrued from the filing.
Liquidity and Capital Resources
The Company had a bank balance of $25,821 at June 30, 2000, and current liabilities of $777.
The pre-petition liabilities totaling $565,549 as well as the $127,293 of professional fees and post petition administrative claims were converted into common stock under the plan of reorganization as of May 7 2000.
The $310,000 of Debtor Certificates raised by the Company in the course of the Bankruptcy proceedings, were all converted at the option of the note holders into common stock of the Company. The Company paid $100,000 for the working capital infusion of DataNet Information Systems, Inc., $100,000 for the Capital Stock of Digi Commerce Corporation and kept the balance of ($110,000) for administrative expenses.
Liquidity and Capital Resources
Initially, the Registrant funded its operations in previous years through borrowings from private investors, of which all but two investors subsequently converted such loans into common stock of the Predecessor in connection with the reverse acquisition in July 1996.
Since its inception, the Company has experienced losses from operations of $750,061 for the period ended December 31, 1995 and $387,157 for the year ended December 31, 1996. Accordingly, the Company requires additional sales and
collections and/or it needs to raise additional capital to meet its operating needs and to satisfy its outstanding liabilities.
In the event of unanticipated developments during the next few months, or to satisfy future funding requirements, the Company may attempt to fund its operations through a private offering of securities. Additional financing may not be available when needed or on terms acceptable to the Company. If adequate financing is not available, the Company may be required to delay, scale back or eliminate certain of its proposed plans, or to sell either privately or through a public offering securities consisting of Portfolio Securities, or a Private or Public offering of its own Common or Preferred Stock.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Page ---- Table of Contents....................................... F Reports of Independent Accountants...................... Statements of Operations................................ Balance Sheets.......................................... Statements of Cash Flows................................ Statements of Changes in Shareholders' Equity........... Notes to Financial Statements .......................... through
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
At a meeting held on June 19, 2000, the Board of Directors of the Company approved the engagement of Grant Thornton, as its independent auditors for the fiscal year ending June 30, 2000 and in the subsequent interim period to replace Oppenheim & Ostrick, CPA's. The full Board of Directors approved the change in auditors on the same date.
The report of Oppenheim & Ostrick, CPA's, on the Company's financial statements for the past fiscal year did not contain an adverse opinion or a disclaimer of opinion and was not qualified (except that of a going concern) or modified as to uncertainty, audit scope, or accounting principles.
In connection with the audit of the Company's financial statements for the fiscal year ended December 31, 1999, and in the subsequent interim period, there were no disagreements with Oppenheim & Ostrick, CPA's on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Oppenheim & Ostrick, CPA's would have caused Oppenheim & Ostrick, CPA's to make reference to the matter in their report.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors and Executive Officers
The following table sets forth in names, ages and positions of the directors and executive officers of the Company as of June 30 2000. A summary of the background and experience of each of these individuals is set forth after the table.
Name Age Position PERIOD OF SERVICE
Ely J. Mandell 44 President, Since November 1998 Chief Executive Office Resigned June 19, 2000 Director
David A. Kekich 57 Secretary Since July 1996 Director Resigned June 19, 2000
Lewis I. Williams IV 50 President Since June 2000 Chief Executive Officer
Bernie Budney 39 Executive Vice President Since June 2000 Director
Brad Bartilson 42 Secretary Since June 2000 Director
Rex Crim 57 Director Since June 2000
Ely J. Mandell, President, and Chief Executive Officer, still retains his position as Managing Member of Jande International Holdings LLC, a private Merchant Bank specializing in bankruptcy and reorganization investments. Since January 1990, Mr. Mandell served as President of B.D. Brooke & Company, a professional business development-consulting group, whose clients consist of small public companies, (the predecessor of Jande International Holdings, LLC). Mr. Mandell in this capacity had served on several Public Company Board of Directors; from November 1998 until June 2000, Mr. Mandell was responsible for all aspects of the registrants Bankruptcy proceeding, as well as formulating its' Plan of Reorganization. From July 1996 until November 1996 Mr. Mandell was Chief Financial Officer of the Registrant and was responsible for discovering the financial fraud it's past Chief Executive Officer perpetrated on the registrants creditors and shareholders, and directing the registrants Independent Accountant, Legal Counsel, and Board of Directors to that fraud. From August 1990 until March 1993, Mr. Mandell was secretary/director of Conquest Ventures, Inc., a public company traded in the over-the-counter market. From July 1992 until March 1993, Mr. Mandell was secretary/director of System Controls, Inc., a public company traded on the Electronic Bulletin Board. Mr. Mandell has also served as director of Electronic Publishing Technologies, a public company traded on the Electronic Bulletin Board. Mr. Mandell attended Arizona State University, and has obtained a degree from Merrill Lynch Institute, Donald T. Regan School of Advanced Financial management and holds the designation of Certified Financial Manager.
David A. Kekich has served as Secretary and a Director of the Company since April 1995. Mr. Kekich is currently President and founder of Red Tree International, a marketing and financial consulting company located in Johnstown, Pennsylvania. From 1985 to 1992, Mr. Kekich was engaged in the public securities markets as a result of his forming and registering three "blind pool" companies. Mr. Kekich holds a Bachelor of Science Degree from Pennsylvania State University and has been licensed in the insurance and real estate fields in the State of California.
Lewis I. Williams 4th - President and Chief Executive Officer has been a Director and Chief Executive Officer of Arch-Will Enterprises,
Incorporated alternatively ("AWE") since 1985. AWE is a minority owned holding company committed to the establishment and development of an effective economic and/or financial infrastructure within the disadvantaged and minority communities by promoting and supporting a diverse range of minority owned, private sector business development initiatives with AXXESS Paradigm Partners serving as (a) a merchant banking operation providing management consulting, investment banking and corporate finance advisory, and (b) as a financial, marketing and operations management company providing development, distribution, and operations management services on a contractual basis. Mr. Williams is also a Partner serving as Chief Financial Officer for Corbis/NewCo, the first minority owned insurance and financial services brokerage operation with nationwide and international distribution and support capabilities. Mr. Williams has served as an independent management and financial consultant to the manufacturing, engineering services, and financial services industries. Past engagements have included: corporate finance transaction advisory; management consulting; designing and implementing cash management, managerial accounting, project management and financial planning and control systems. Mr. Williams is experienced in providing accounting and production management systems, strategic planning services and structuring and securing equity and debt financing facilities for middle market businesses. As a corporate finance generalist Mr. Williams had primary responsibilities for the communications, insurance/financial services, transportation and public utilities industrial sectors. Past transaction related engagements have included: acquisitions, determination of optimal capital structure, divestitures, mergers, and private placements, re-capitalization and valuations. Mr. Williams, educational background consists of an AB from Stanford University, a SM in Management from the Massachusetts Institute of Technology, and a MA (Economics) and an ABD (Accounting and Information Systems) from Northwestern University.
Bernie Budney - Executive Vice President, Director - Bernie Budney, had been the President of Millennium Information Systems Inc. (formerly a division of Telus Advertising Services, now DataNet Information Systems Inc., (an Investee of the Company) since 1995. From 1993 until 1995 he was President of OK Tires & Affordable Auto Center. Mr. Budney's educational credentials include an Honors Economic Degree from the University of Alberta in 1984. He is also a member of the Society of Registered Industrial Accountants, RIA Program.
Brad Bartilson - Director - has over 18 years of business experience in computer technology, cultivated in an environment in which his team has patented technologies and transferred the technology into products. Mr. Bartilson holds nine Patents to his own credit in areas including thermal, power and interconnect technologies. Mr. Bartilson is currently employed (since February, 2000) at Lightchip, Inc., as Senior Market Development Manager, and has previously held management positions at Raytheon, Compaq, and Cray Research. His educational background consists of a BSME degree from the University of Wisconsin and a MSME degree from the University of Minnesota.
Rex Crim -Director -has had been a merchant and mortgage banker for 20 years. Placing debt and equity for real estate and business transactions, Mr. Crim is President of Texas Equity, Inc., a private merchant bank located in Dallas, Texas. Mr. Crim has owned and operated his own mortgage banking firm and several business ventures; and during the last five years he has focused on assisting and consulting to small and new businesses, assisting them in raising capital, going public and securing debt structured financing. Mr. Crim holds a BA Degree in Business Administration from Southern Methodist University
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons who beneficially own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent shareholders are required by Exchange Act regulations to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Form 5 was required for such persons, the Company believes that, other than as disclosed below, during the fiscal year ending June 30 2000, all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.
NONE
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Company had no employees except contract labor and part time employees during the reporting periods. However, the Bankruptcy Court appointed Mr. Ely Jay Mandell and Mr. David A. Kekich as Administrators of the Predecessor Company or Debtor in Possession. Mr. Mandell and Mr. Kekich have each accrued the sum of $3,500 per month from January 27, 1999 (a total of $53,967.74 through the period ending May 8, 2000 including $39,064.51 paid through 12-31-99). The sums paid were paid in stock in lieu of cash pursuant to the Plan of Reorganization, 215,871 Units to Jande International Holdings, LLC for Mr. Mandell's services and 215,871 Units to Red Tree International, LLC for Mr. Kekich's services.
The Company intends to pay directors' fees of $500 each for each meeting of the Board of Directors. The Company has an employment contract with Lewis I Williams, IV in which all payments in lieu of contractual rights have been waived by the employee, and implemented a Year 2000 Stock Bonus Plan for Employees and Consultants for 250,000 shares of stock none of which has yet to be granted.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of the Company on June 30, 2000 by each director and Named Executive Officer, by all directors and executive officers as a group and by all persons known by the Company to be the beneficial owners of more than five percent of the Company's Common Stock.
Number of Shares Percent of Name and Address Beneficially Held Ownership ---------------- ----------------- ---------- Brad Bartilson 68,000 (1) 2.53% 56 Floyd Road Derry, NH 03038
David A. Kekich 312,587 (1)(4)(5)(6)(7) 11.64% 1533 Via Leon Palos Verdes, Estates, CA 90274
Ely Jay Mandell 374,788 (2)(1)(3) 13.95% 310 Village Park 2660 Townsgate Road Westlake Village, CA 91361
Frank J. Nigro, III 400,000 (1) 14.87% 12 Dutch Village Menands, NY 12204
Thomas Marshall Ward 151,735 (1) 5.651% 36 Pinehurst Circle Little Rock, AR 72212
All directors and executive 28.12%(1) officers (as a group, 3 persons)
---------------------------
(1) The Beneficial Owner owns and amount equivalent to his Common Shares, of Class A Common Stock Purchase Warrants. If exercised the Beneficial Owner could purchase Common Stock pursuant to the terms of the Warrants at $5.00 per share until June 30, 2001. With exercise of the Class A Common Stock Purchase Warrant the Holder receives one share of Common Stock of the Company and a Class B Stock Purchase Warrant to Purchase if exercised a Share of the Common Stock at $10.00 per share by August 30, 2002.
(2) Mr. Mandell Indirectly owns 368,388 Common Shares and 368,388 Class A Stock purchase warrants through Jande International Holdings, Llc. Jande International Holdings, Llc. is a Limited liability Company controlled by Mr. Ely J. Mandell, which he is Managing Member, and maintains a 33.3% ownership interest, and 66.6% voting control.
(3) Mr. Mandell directly owns 6,400 Common Shares, and 6,400 Class A Stock Purchase Warrants.
(4) Mr. Kekich directly owns 4,000 Common Shares, and 4,000 Class A Stock Purchase Warrants.
(5) Mr. Kekich Indirectly owns 80,000 Common Shares and 80,000 Class A Stock purchase warrants through Lions Holding Company. Lions Holding Company is a Domestic Delaware Business Trust; controlled by J. C. Chisum, Trustee. Mr. Kekich is President of Red Tree International, Llc and Lions Holding Company is the majority owner (99%) of Red Tree International.
(6) Mr. Kekich Indirectly owns 9,916 Common Shares and 9,916 Class A Stock purchase warrants through The Arkad Group, LLC. Mr. Kekich is President of Red Tree International, Llc, The Arkad Group, LLC, is the predecessor Company to Red Tree International, LLC.
(7) Mr. Kekich Indirectly owns 218,671 Common Shares and 218,671 Class A Stock purchase warrants through Red Tree International, LLC. Mr. Kekich is President of Red Tree International, Llc.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements:
See Item 8 of Part II hereof.
(b) Reports on Form 8-K.
(a) Incorporated by reference to the Registrant's Current Report on Form 8-K dated 6/19/2000. (b) Incorporated by reference to the Registrant's Current Report on Form 8-K dated 5/8/2000. (c) Exhibits
Exhibit 99.1 Resignation of David A. Kekich
Exhibit 99.2 Resignation of Ely Jay Mandell
Exhibit 99.3 Resignation of Lewis I Williams, IV
Exhibit 27 Financial Data Schedule
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Central Capital Venture Corporation
Date: November 13, 2000 By: /s/ Rex E. Crim ------------------------ Rex E. Crim Acting President
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ----
/s/ Rex E. Crim Acting President, Chief Executive November 13, 2000 --------------- Officer and Director Rex E. Crim
/s/ Brad Bartilson Secretary and Director November 13, 2000 ------------------- Brad Bartilson
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA [GRAPHIC OMITTED]
Grant Thornton LLP Chartered Accountants Canadian Member Firm of Grant Thornton International
Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Financial Statements (Expressed in United States Dollars) June 30, 2000
Contents
Page ---- Auditors' Report
Statement of Operations
Statement of Assets and Liabilities
Statement of Cash Flows
Statement of Stockholders' Equity
Notes to the Financial Statements -
Grant Thornton LLP Chartered Accountants Canadian Member Firm of Grant Thornton International
Auditors' Report
To the Shareholders of Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.)
We have audited the statement of assets and liabilities of Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) as at June 30, 2000 and the statements of operations, stockholders' equity and cash flows and for the 129 day period ended May 8, 2000, and the 54 day period ended June 30, 2000. 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. Those standards require that we plan and perform an audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2000 and the results of its operations and cash flows for the 129 day period ended May 8, 2000, and the 54 day period ended June 30, 2000, in conformity with accounting principles generally accepted in the United States.
As discussed in Note 4 to the financial statements, the Company has emerged from bankruptcy and applied fresh start accounting, effective May 8, 2000. As a result, the Statement of Assets and Liabilities as of June 30, 2000, and the related statements of operations, stockholders' equity and cash flows for the 54 day period ended June 30, 2000 are presented on a different basis than that for the periods before fresh start, and therefore, are not comparable.
Edmonton, Canada November 3, 2000 Chartered Accountants
2400 Scotia Place 1 10060 Jasper Avenue Edmonton, Alberta T5J 3RB Tel: (780) 422-7114 Fax: (780) 426-3208
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Statement of Operations (Expressed in United States Dollars) Reorganized Company Predecessor Company ----------- ------------------- 54 Days Ended 129 Days Ended Year Ended June 30, May8, December 31, 2000 2000 1999
- --------------------------------------------------------------------------------
Expenses Advertising and promotion $ - $ 1,597 $ - Administrative (not reallocated) - - 143,240 Depreciation 221 - - Lease payments 250 1,250 - Professional fees 42,702 71,024 - Rent 2,400 2,500 - Repairs 1,516 - - Salaries and benefits 1,861 30,865 - Stationary and office 3,767 2,460 - Telephone 146 929 - Travel 4,300 7,633 - ------------- ------------ ---------- 57,163 118,258 143,240 ------------- ------------ ----------
Net loss $ (57,163) $ (118,258) $ (143,240) ============= ============ ==========
- --------------------------------------------------------------------------------
Loss per share $ (0.01) * * =============
* Per share amounts are not meaningful due to reorganization (see Note 2)
See accompanying notes to the financial statements. - --------------------------------------------------------------------------------
Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Statement of Assets and Liabilities (Expressed in United States Dollars) Reorganized Predecessor Company Company June 30, December 31, 2000 1999 - --------------------------------------------------------------------------------
Assets
Investments (Note 6) $ 2,700,000 $ - Fixed assets, net of accumulated depreciation of $221 1,993 - Deposits 2,030 630 Cash and cash equivalents 25,821 74 ---------------- ---------------
$ 2,729,844 $ 704 ================ =============== - -------------------------------------------------------------------------------- Liabilities
Pre-petition liabilities $ - $ 565,549 Loan payable - related party (Note 10) - 1,000 Due to related party - 7,227 Payables and accruals 25,776 127,293 ---------------- --------------- 25,776 701,069 ---------------- ---------------
Stockholders' equity (deficiency) Capital stock (Note 8) 2,526,850 25,732 Additional paid-in capital 234,381 508,704 Deficit (57,163) (1,234,801) ---------------- --------------- 2,704,068 (700,365) ---------------- ---------------
$ 2,729,844 $ 704 ================ =============== - --------------------------------------------------------------------------------
See accompanying notes to the financial statements.
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Statement of Cash Flows (Expressed in United States Dollars) Reorganized Company Predecessor Company ------- ------------------- 54 Days Ended129 Days Ended Year Ended June 30, May 8, December 31, 2000 2000 1999 - -------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents
Cash flows from operating activities Net loss $ (57,163) $ (118,258) $ (143,240) Adjustment to reconcile net loss from continuing operations to net cash used in operating activities Depreciation 221 - -
Increase (decrease) in: Deposits (1,861) 460 (500) Payables and accruals 2,991 99,798 130,676 ---------- ----------- ----------- Net cash used in operating activities (55,812) (18,000) (13,064) ---------- ----------- ----------- Cash flows from financing activities Loans payable - pre-petition debt - 310,000 5,000 Advances from related party - (8,227) 1,000 ---------- ----------- ----------- Net cash provided from financing - 301,773 6,000 activities ---------- ----------- ----------- Cash flows from investing activities Purchase of fixed assets (1,571) (643) - Purchase of investments (200,000) - - ---------- ----------- ----------- Net cash used in investing activities (201,571) (643) - ---------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (257,383) 283,130 (7,064)
Cash and cash equivalents Beginning of period 283,204 74 7,138 ---------- ----------- ----------- End of period $ 25,821 $ 283,204 $ 74 ========== =========== =========== - -------------------------------------------------------------------------------- Supplemental schedule of non-cash investing and financing activities:
Issuance of new capital stock $2,761,231 $ - $ - Cancellation of indebtedness (Note 4) 1,079,855 - - - -------------------------------------------------------------------------------- See accompanying notes to the financial statements.
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Statement of Stockholders' Equity (Expressed in United States Dollars) June 30, 2000 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 1. Nature of operations
On May 8, 2000 the articles of incorporation were amended to change the Company's name to Central Capital Venture Corporation and the place of incorporation to the State of Nevada. The Company also elected to become a "Business Development Company" (BDC) as defined in the Small Business Investment Incentive Act of 1980, which is an amendment to the Investment Company Act of 1940. This change resulted in the Company becoming a specialized type of investment company which plans to derive its income through management consulting fees and profit from the selective sales of the companies contained in its investment portfolio. - -------------------------------------------------------------------------------- 2. Summary of significant accounting policies
Basis of presentation
The Company's accounting and reporting policies conform to generally accepted accounting principles and industry practice in the United States. The amounts reported in these financial statements are in United States dollars.
The Company's plan of reorganization was confirmed April 26, 2000 with the effective date being May 8, 2000 (see Note 3). In accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code", ("SOP 90-7") the Company adopted fresh start reporting as of May 8, 2000. (See Note 3 - Fresh Start Reporting). Accordingly, the financial results of the pre-reorganization Company (the "Predecessor Company") (prior to May 8, 2000) and the results of the post-reorganization Company (the "Reorganized Company") (May 8, 2000 through June 30, 2000) are not prepared on a comparable basis.
Use of estimates
The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses for the reported period. Actual results could differ from those estimates.
Cash and cash equivalents
Consistent with the reporting requirements of a BDC, cash and cash equivalents consist only of demand deposits in banks and cash on hand. Financial statement account categories such as investments, which relate to the Company's activity as a BDC, are included as operating activities in the statement of cash flows.
Financial instruments
The Company's financial instruments consist of cash, investments, and payables and accruals. The fair value of the investments was determined using the
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 2. Summary of significant accounting policies (cont'd)
Appraisal method as described in this note and therefore may not approximate the investments carrying value
Investment valuation
The investment valuation method adopted provides for the Company's Board of Directors to be responsible for the valuation of the Company's investments (and all other assets) based on recommendations of a Valuation Committee of the Board. This committee consists of those persons designated annually by resolution of the Board of Directors at its annual meetings. The Company's Board of Directors shall be responsible for the periodic valuation of the Company's portfolio.
These investments are carried at fair value determined in good faith by the Board of Directors. In making such determination the Board of Directors will take into account the restriction to resale of the securities owned by the Company, and will utilize a future value of money computation to clearly discount the then appraised securities during the restriction period. This method shall only be utilized until such time that the securities of the issuer, held in the Company's portfolio, can be easily priced utilizing a truly independent pricing source.
Loss per share
Earnings per share ("EPS") information for the Predecessor Company is not presented because the revision of the Company's capital structure pursuant to the Amended Plan makes such information not meaningful. The company calculated earnings per share for the current period in accordance with SFAS No. 128, "Earnings per share."
Calculating the fully diluted loss per share produces immaterial differences of anti-dilutive results in the period. - -------------------------------------------------------------------------------- 3. Chapter 11 Proceedings
Petition for relief
The Company was organized January 15, 1949 in the State of Utah under the name of Oil Securities Company Inc.. In July 1984, the original corporation was merged into Oil Securities Inc., a Nevada corporation, formed for the sole purpose of effecting the merger. Thereafter, when its oil and gas business failed, the Company filed a Chapter 11 case. The Company emerged from Chapter 11 in or about 1990. On July 30, 1996, the Company merged into Miller & Benson International, Ltd., a dormant Delaware Public Holding Company, which then changed its name to Digital Technologies Media Group, Inc., to facilitate its new business. The new business of the Company was to capitalize on the growth in the distribution of multimedia programming. The Company is a public company whose stock is not currently listed for trading.
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 3. Chapter 11 proceedings (continued)
Digital Technologies Media Group, Inc. was organized in April 1995, as a Delaware corporation for the purpose of funding the development of television programming and to interface with new technologies. In May 1995, the Company acquired certain rights and accounts receivables to distribute the film assets of Communication Services International (CSI) for convertible debt, which was then converted into common stock in 1995. In 1996, the Company's relationship with CSI fell apart over the creditability of the acquired film operation. In 1997, the President of CSI resigned and the Board rescinded the common stock shares of CSI and four other employees. According to management by the end of December 31, 1997, the CSI transaction was rescinded and all of its assets and liabilities were removed from the Company's books. Also at the end of December 1997, the Company had no assets and was not a going concern. The Company filed a Chapter 11 petition (Debtor-in-Possession) with the Bankruptcy court effective January 26, 1999.
The bankruptcy court approved the Company's purchase of Datanet Information Systems Inc. On February 9, 2000, the Company also received $310,000 by issuing Debtor Certificates of Indebtedness. This allowed for the Company to operate for the interim period up to June 30, 2000.
Plan of reorganization
On April 26, 2000, the Bankruptcy Court entered an order confirming reorganization under the third Amended Plan. The effective date of the third Amended Plan was May 8, 2000 and Digital Technologies Media Group, Inc. amended its articles of incorporation to reflect the following changes. The Company was renamed Central Capital Venture Corporation and the place of incorporation became Nevada. The confirmed Amended Plan provided for the following:
Secured claims
The Company's $28,900 of secured debt (secured by liens on property of the estate) was exchanged for two units of the Company's stock for each dollar owed in full and complete satisfaction of their allowed claims for fees. Each unit consist of one share of common stock and one Class A warrant which entitles the holder to purchase one additional common share.
Administrative expenses
The Company's $204,306 of administrative claims owed for services rendered by a law firm and two other individuals was exchanged for four units of the Company's stock for each dollar owed in full and complete satisfaction of their allowed claims for fees. Each unit consist of one share of common stock and one Class A warrant which entitles the holder to purchase one additional common share.
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 3. Chapter 11 proceedings (continued)
Holders of Debtor's Certificates of Indebtedness
The Company's $310,000 of Debtor's Certificates of Indebtedness shall be paid pursuant to terms of the Debtor's Certificate of Indebtedness or in exchange for four units of the Company's stock for each dollar owed in full and complete satisfaction of their allowed claims for fees. Each unit consist of one share of common stock and one Class A warrant which entitles the holder to purchase one additional common share.
General unsecured claims
The Company's $536,649 of unsecured claims was exchanged for one unit of the Company's stock for each dollar owed in full and complete satisfaction of their allowed claims for fees. Each unit consist of one share of common stock and one Class A warrant which entitles the holder to purchase one additional common share.
Common stock
The holders of 3,654,102 units of common stock in the predecessor Company received a pro-rata distribution of 33,551 units of the Company's stock. Each unit consist of one share of common stock and one Class A warrant which entitles the holder to purchase one additional common share.
Additionally the Amended Plan proposes that after the registration of Datanet Information Systems Inc. and Digi Commerce Corporation with the Securities and Exchange Commission, the Reorganized Company will distribute, on a pro-rata basis, 30% of its interest in these securities to the creditors as defined in the Amended Plan. - -------------------------------------------------------------------------------- 4. Fresh start reporting
As of May 8, 2000, the Company adopted fresh start reporting in accordance with SOP 90-7. Fresh start reporting assumes that a new reporting entity has been created and assets and liabilities should be reported at their fair values as of the Effective date.
The reorganization value at June 30, 2000, was determined based upon the Company's estimate of the fair value of its assets as defined in the plan of reorganization which does not assume any sale activity. Accordingly, the reorganization value approximates the fair value of its assets before considering liabilities, which must be assumed and extinguished pursuant to the terms of the reorganization plan, as amended, and represents the Company's estimates of the amount a buyer would pay for the assets after the restructuring.
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 4. Fresh start reporting (cont'd)
The Company's emergence from Chapter 11 proceedings and the adoption of fresh start reporting resulted in the following adjustments to the Company's Statement of Assets and Liabilities.
(1) To record the discharge of debt and other liabilities.
Administrative expenses - legal and management fees $ 204,306 Debtor's certificates of indebtedness 310,000 Secured claims 28,900 General unsecured claims 536,649 --------------- $ 1,079,855 ===============
(2) To eliminate the Predecessor Company's deficit.
(3) To record the issuance of 2,685,224 shares of new common stock (par value $0.01 per share) at the reorganization value.
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 5. Fiscal year change
During the year the Company changed its fiscal year-end from December 31 to June 30. Accordingly, the financial statements include the results of operations for the transition period, which are not necessarily indicative of operations for a full year.
- -------------------------------------------------------------------------------- 6. Investments
Datanet Information Systems Inc. (A Nevada company) (100% owned) $ 2,600,000 Digi Commerce Corporation (100% owned) 100,000 ----------- $ 2,700,000
Under the Amended Plan described in Note 3, the Bankruptcy Court has approved the Company's acquisition of 1,000,000 common stock of Datanet Information Systems Inc., ("Data"), which represents 100% of its outstanding shares in exchange for 100,000 Class A preferred stock and $100,000 cash. The $100,000 contribution was funded from the Debtor's Certificates of Indebtedness described in Note 3. The exchange amount of the transaction was determined to be $2,500,000. The purchase of all Data's common stock will result in Data's shareholders owning 100,000 Class A preferred shares of the Company. Furthermore the Company will provide Data with a commitment to provide $1,000,000 in funding over the next two years.
7. Authorized capital stock
Effective May 8, 2000, the articles of incorporation were revised to reflect the following authorized capital stock.
Preferred stock
The preferred stock may be issued from time to time in one or more series, or divided into additional classes and such classes into one or more series. The terms of a class or series, including all rights and preferences, shall be as specified in the resolution or resolutions adopted by the Board of Directors designating such class or series, which resolution or resolutions the Board of Directors is hereby expressly authorized to adopt. Such resolution or resolutions with respect to a class or series shall specify all such of the rights or preferences of such class or series as the Board of Directors shall determine, including the following, if applicable:
a) the number of shares to constitute such class or series and the distinctive designation thereof;
b) the dividend or manner for determining the dividend payable with respect to the shares of such class or series and the date or dates from which dividends shall accrue, whether such dividend shall be cumulative, and if cumulative, the
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 7. Authorized capital stock (cont'd)
date or dates from which dividends shall accumulate and whether the shares in such class or series shall be entitled to preference or priority over any other class or series or stock of the Corporation with respect to payment of dividends;
c) the terms and conditions, including price or a manner for determining the price of redemption, if any, of such class or series;
d) the terms and conditions of a retirement fund or sinking fund, if any, of the shares of such class or series;
e) the amount which the shares of such class or series shall be entitled to receive, if any, in the event of any liquidation, dissolution or winding up of the Corporation and whether such shares shall be entitled to a preference or priority over share of another class or series with respect to amounts received in connection with any liquidation, dissolution or winding up of the Corporation;
f) whether the shares of such class or series shall be convertible into, or exchangeable for shares of stock of any other class or classes or any other series of the same or any other class or classes or stock, of the Corporation and the terms and conditions of any such conversion or exchange;
g) the voting rights, if any of shares of stock of such class or series in addition to those granted herein;
h) the status as to reissuance or sale of shares of such class or series redeemed, purchased or otherwise reacquired, or surrendered to the Corporation upon conversion;
i) the conditions and restrictions, if any, of the payment of dividend of the making of other distributions on or the purchase, redemption or other acquisition by the Corporation or any subsidiary, of any other class or series of stock of the Corporation ranking junior to such shares as to dividends or upon liquidation;
j) the conditions, if any, on the creation of indebtedness of the Corporation, or any subsidiary; and
k) such other preferences, rights, restrictions and qualifications and the Board of Directors may determine.
Common stock
Except as otherwise provided in any resolution or resolutions adopted by the Board of Directors, the common stock shall:
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 7. Authorized capital stock (cont'd)
a) have the exclusive voting power of the corporation;
b) entitle the holders thereof to one vote per share at all meetings of the stockholders of the Corporation;
c) entitle the holders to share ratably, without preference over any other shares of the Corporation, in all assets of the Corporation in the event of any dissolution, liquidation or winding up of the Corporation; and
d) entitle the record holder thereof on such record dates as are determined, from time to time, by the Board of Directors to receive such dividends, if any, as to when declared by the Board of Directors. - -------------------------------------------------------------------------------- 8. Issued capital stock
According to the Amended Plan, on the effective date, all outstanding instruments and securities representing interests in the Company were deemed cancelled.
Preferred stock
Pursuant to the Amended Plan, one hundred thousand shares of preferred stock (par value $.001) were authorized to be issued by the Company pursuant to its Certificate of Incorporation, and designated Class A preferred stock with no voting powers, preferences, and relative participating optional other rights, if any, or the qualifications, limitations or restriction, set forth in such Certificate of Incorporation, and in addition those following:
Designation. The preferred stock shall be designated Class (or Series) A ----------- preferred stock (the "Class A preferred stock").
Dividends. The holders of the shares of the Class A preferred stock shall --------- not be entitled to receive dividends.
Conversion. The Class A preferred stock shall be convertible into common ---------- stock of DataNet Information Systems, Inc. ("Data") a wholly owned subsidiary of the Corporation, upon the earlier to occur:
I) an investment totalling one million dollars ($1,000,000) is made in Data by the Corporation, or
ii) a registration with the Securities and Exchange Commission of Data's stock becomes effective. The Class A preferred stock shall be convertible into Data common stock pursuant to the following formula: the converted shares shall be equal to 68% (3,400,000
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 8. Issued capital stock (cont'd)
Data common shares) of the total Data common shares to be issued after conversion.
Voting right. The Class A preferred stock has no voting rights of the ------------- Corporation, however one designee on the holder of the Preferred A shares shall hold a position a Board member of the Corporation until conversion, as well as one designee on the holder shall have the right to attend all meetings of the Board of Directors of the Company in reference to Data.
Stated value. The Class A preferred stock shall have a stated value of ------------ $2,500,000.
Stock splits. The Class A preferred stock will be treated in the same ------------- manner as all issued Data common stock, in relation to any stock splits.
Common stock
All of the following transactions occurred in accordance with Fresh Start Reporting (see Note 3).
1. On May 8, 2000, 2,651,673 units of common stock were issued in return for the extinguishment of the liabilities of the Company.
2. On May 8, 2000, 33,551 units of common stock were distributed to common interest holders in satisfaction of all rights, interest and claims of such interest holders. - -------------------------------------------------------------------------------- 9. Warrants
One Class A warrant (2,685,224 in total) was issued for each new common share issued under the Amended Plan. The Class A warrants shall allow the warrant holder to purchase one share of common stock of the Company at a price of $5.00 per share at any time up to May 8, 2001. Upon the exercise of the Class A warrants, the warrant holder also shall receive one Class B warrant to purchase the Company's common stock. The terms of the Class B warrants shall be set by the Board of Directors of the Company at least ninety days subsequent to the Effective date of the Amended Plan. - -------------------------------------------------------------------------------- 10. Related party transactions
During the year the $1,000 loan payable was converted into a Debtor's Certificate for Indebtedness for the commitment to raise $310,000 of Debtor's Certificates. The related party is one of the individuals who was approved by the Bankruptcy Court to provide administrative services for $3,500 per month until the plan was confirmed on May 8, 2000.
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 10. Related party transactions (cont'd)
The other individual who also earns $3,500 monthly for administrative services on behalf of his company entered into a rent and equipment lease totalling $750 per month with a year's terms and then payments month to month. As a result of the Company's acquisition of Data the above related party, Jande International Holdings LLC, owns 15% of Data common stock before the exchange into the Company's Class A preferred stock as described earlier.
Both individuals as a result of their administrative duties providing debtor in possession's services to the Company received 7.8% each in common stock in exchange for the Bankruptcy Court approved accrued compensation.
Rent paid to a related party covering utilities and telephone for the six month period ended June 30, 2000 was $4,900 (year ended December 31, 1999 - $6,000). An office equipment lease was also provided totalling $1,500 (1999 - $1,750). - -------------------------------------------------------------------------------- 11. Stockholders' deficiency
With fresh start reporting, the Predecessor Company's stockholders' deficiency was eliminated (see Note 3 - Fresh Start Reporting). As at June 30, 2000, 2,685,224 new common stock shares with a par value of $0.01 were issued in accordance with the Amended Plan. - -------------------------------------------------------------------------------- 12. Income taxes
There was no income tax (benefit) for the period ended June 30, 2000 .
The effects of temporary differences has no net effect on deferred tax assets as the losses incurred were cancelled out entirely by deferred tax valuation reserves because of the inability to project taxable income in the future years.
At June 30, 2000 the company had a net loss of $ 32,163. - -------------------------------------------------------------------------------- 13. Prior year financial statements
The prior year financial statements were audited by another firm of public accountants who expressed an opinion without reservation on those statements in their report dated April 4, 2000.
The accompanying financial statements for the year ended December 31, 1999 were prepared assuming that the Company would continue as a going concern. As further discussed in Note 2 to the financial statements, the Company filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code on January 19, 1999. The reorganization plan was not confirmed by the Bankruptcy Court until April 26, 2000 with the effective date being May 8, 2000. The financial statements for the year ended December 31, 1999 does not include any adjustments that resulted from the outcome of the confirmation.
- -------------------------------------------------------------------------------- Central Capital Venture Corporation (formerly Digital Technologies Media Group, Inc.) Notes to the Financial Statements (Expressed in United States Dollars) June 30, 2000 - -------------------------------------------------------------------------------- 14. Supplemental financial information
The following is a summary of the un-audited financial position and results of operations of the Company's investments:
Digi Commerce Datanet Information Corporation Systems, Inc. Combined June 30, 2000 June 30, 2000 ------------- ------------- Assets $ 91,328 $ 2,156,857 Liabilities 756 694,298 ---------- -------------- Equity $ 90,572 $ 1,462,559 ========== ==============
56 day period ended 205 day period ended June 30, 2000 June 30, 2000
Revenue $ - $ 189,246 Expenses 10,041 159,532 ---------- -------------- $ 10,041 $ 29,714 ========== ==============