8-K 1 w42949e8-k.txt FORM 8-K - SELECT MEDIA COMMUNICATIONS, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 18, 2000 -------------------------- SELECT MEDIA COMMUNICATIONS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its chapter) New York 000-24706 13-3415331 ------------------------------- --------------------- ------------------- (State or other jurisdiction of (Commission File No.) (IRS Employer incorporation or organization) Identification No.) 44 E. 32nd Street, New York City, NY 10016 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 584-1900 ----------------- 666 Third Avenue, New York, NY 10015 ------------------------------------------------------------- (Former name or former address, if changed since last report) 2 ITEM 1. CHANGES IN CONTROL OF REGISTRANT. Not Applicable ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On January 18, 2000, Select Media Communications, Inc. acquired all of the outstanding shares of capital stock of Sigma Sound Services, Inc. ("Sigma") for $1,000,000 in cash from Joseph Tarsia. Mr. Tarsia will continue to act as president of Sigma and the assets acquired will continue to be used in that business. This transaction was accounted for as a purchase. The assets purchased in this transaction include: Recording equipment Furniture and fixtures Computer and office equipment Leasehold improvements The Registrant obtained financing for this transaction from Lloyds Bahamas Securities, LTD in the form of convertible notes, which were subsequently converted into shares of the Registrant's common stock at $0.50 per share. ITEM 3. BANKRUPTCY OR RECEIVERSHIP. Not Applicable ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT. Not Applicable ITEM 5. OTHER EVENTS Not Applicable ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS Not Applicable ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENT AND EXHIBITS (A) Audited Financial Statements of Sigma Sound Services, Inc. (B) Pro Forma Financial statements for Select Media Communications, Inc. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SELECT MEDIA COMMUNICATIONS, INC. By: /s/ MITCH GUTKOWSKI -------------------------------- Mitch Gutkowski, President Date: November 22, 2000 4 CONTENTS -------------------------------------------------------------------------------- SIGMA SOUND SERVICES, INC. Page ---- INDEPENDENT AUDITORS REPORT F-1 FINANCIAL STATEMENTS Balance Sheet F-2 Statement of Operations and Retained Earnings F-3 Statement of Cash Flows F-4 NOTES TO FINANCIAL STATEMENTS F-5 - F-7 SELECT MEDIA COMMUNICATIONS, INC. PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) F-8 Balance Sheet as of December 31, 1999 F-9 Statement of Operations for the Year Ended December 31, 1999 F-10 NOTES TO PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS F-11

5 INDEPENDENT AUDITORS REPORT To the Stockholders of Sigma Sound Services, Inc. We have audited the accompanying balance sheet of Sigma Sound Services, Inc. as of December 31, 1999 and the related statements of operations, accumulated 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sigma Sound Services, Inc. as of December 31, 1999 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. s/ Marcum & Kliegman LLP March 27, 2000 F-1 6 SIGMA SOUND SERVICES, INC. BALANCE SHEET December 31, 1999 -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $ 1,400 Accounts receivable 34,517 --------- Total Current Assets $ 35,917 PROPERTY AND EQUIPMENT, Net 104,600 --------- TOTAL ASSETS $ 140,517 ========= LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Accounts payable $ 58,685 Accrued expenses 46,336 --------- Total Current Liabilities $ 105,021 CONTINGENCIES STOCKHOLDERS' DEFICIENCY Common stock, no par value, 5,000 shares authorized, 20 issued and outstanding 1,000 Additional paid-in capital 865,002 Accumulated deficit (830,506) --------- TOTAL STOCKHOLDERS' DEFICIENCY 35,496 --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 140,517 =========

The accompanying notes are an integral part of these financial statements. F-2 7 SIGMA SOUND SERVICES, INC. STATEMENT OF OPERATIONS ACCUMULATED DEFICIT For the Year Ended December 31, 1999 -------------------------------------------------------------------------------- SALES $ 502,791 COST OF SALES 210,198 GROSS PROFIT $ 292,593 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 479,070 --------- OPERATING LOSS (186,477) OTHER INCOME 41,850 --------- NET LOSS (144,627) ACCUMULATED DEFICIT - Beginning (685,879) --------- ACCUMULATED DEFICIT - Ending $(830,506) =========

The accompanying notes are an integral part of these financial statements. F-3 8 SIGMA SOUND SERVICES, INC. STATEMENTS OF CASH FLOWS For the Year Ended December 31, 1999 -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(144,627) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation $ 39,427 Decrease in accounts receivable 18,833 Increase in accounts payable 3,477 Increase in accrued expenses 7,936 --------- TOTAL ADJUSTMENTS 69,673 --------- NET CASH USED IN OPERATING ACTIVITIES (74,954) CASH FLOWS USED IN INVESTING ACTIVITIES Acquisitions of property and equipment (18,104) CASH FLOWS FROM FINANCING ACTIVITIES Contributed capital 89,049 --------- NET DECREASE IN CASH (4,009) CASH - Beginning 5,409 --------- CASH - Ending $ 1,400 =========

The accompanying notes are an integral part of these financial statements. F-4 9 SIGMA SOUND SERVICES, INC. NOTES TO FINANCIAL STATEMENTS ------------------------------------------------------------------------------- NOTE 1 - Summary of Significant Accounting Policies Description of the Business Sigma Sound Services, Inc. (the "Company") was incorporated in the Commonwealth of Pennsylvania on September 24, 1991 for the purpose of providing studio space and technology for the recording of audio media for the music, movie and commercial advertising industries. The Company generates substantially all of its revenues from this activity. Revenue Recognition Operating revenue is recorded on the date of each recording session. Accounts Receivable Accounts receivable has been adjusted for all known uncollectible accounts. As such allowance for doubtful has not been recorded. Property and Equipment Property and equipment is stated at cost. Maintenance and repairs are charged to expense as incurred; cost of major additions and betterments are capitalized. When property and equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and resulting gain or loss is reflected in income. Depreciation and Amortization Depreciation is provided for using the straight-line method over the estimated useful lives of the related assets. The cost of leasehold improvements is amortized over the lesser of the estimated useful lives of the assets or the length of the related leases. Income Taxes The Company, with the consent of its shareholders, has elected under the Internal Revenue Code to be an "S" corporation. In lieu of corporate income taxes, the shareholders of an "S" corporation are taxed on their proportionate share of the corporation's taxable income. Cash and Cash Equivalents For the purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. Advertising Costs Advertising costs are expensed as incurred. Advertising expense for the year ended December 31, 1999 was $6,678. F-5 10 SIGMA SOUND SERVICES, INC. NOTES TO FINANCIAL STATEMENTS ------------------------------------------------------------------------------- NOTE 1 - Summary of Significant Accounting Policies, continued Use of Estimates in the Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - Property and Equipment Property and equipment at December 31, 1999 consists of the following:

Depreciation and amortization expense for the year ended December 31, 1999 was $39,427. NOTE 3 - Contingencies Litigation The Company is involved in litigation through the normal course of business. The Company believes that the resolution of these matters will not have a material adverse effect on the financial position or results of operations of the company. NOTE 4 - Related Party Transactions The Company rents its office space from the Company's principal stockholder and chief executive officer (CEO) on a month to month basis. The rent expense for the year ended December 31, 1999 was approximately $76,000. F-6 11 SIGMA SOUND SERVICES, INC. NOTES TO FINANCIAL STATEMENTS ------------------------------------------------------------------------------- NOTE 4 - Related Party Transactions, continued During 1999 the CEO forgave cumulative advances of approximately $89,000. Accordingly, the company recorded the forgiveness as an increment to additional paid in capital. NOTE 5 - Subsequent Event On January 18, 2000, Select Media Communications Inc., a publicly traded entity on the NASDAQ OTC Bulletin Board, purchased all of the issued and outstanding common stock of the Company for $1,000,000. F-7 12 UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following unaudited proforma combined balance sheet as of December 31, 1999, and the unaudited pro forma consolidated statements of operations for the year ended December 31, 1999, are based on the historical financial statements of Selected Media Communications, Inc. and Sigma sound Services, Inc. and give effect to the proforma adjustments described herein as though the acquisition of Sigma Sound Services, Inc. dated January 18, 2000 had been consummated at December 31, 1999 for the unaudited combined balance sheet, and at January 1, 1999 for the unaudited combined statements of operations. The unaudited pro forma combined financial statements should be read in conjunction with the notes thereto and with the historical financial statements of Select Media Communications, Inc., as filed in its annual report on Form 10-K and previously filed Form 10-Q and the historical financial statements of Sigma Sound Services, Inc. included elsewhere herein. The unaudited pro forma combined financial statements are not necessarily indicative of the Company's combined financial position or results of operations that would have been achieved had the acquisition been consummated at December 31, 1999 for the unaudited combined balance sheet, and at January 1, 1999 for the unaudited combined statements of operations. Under the terms of a purchase agreement dated January 1, 2000 Select Media Communications, Inc. purchased all of the issued and outstanding common stock of Sigma Sound Services, Inc. The transaction was accounted for under the purchase method of accounting. F-8 13 SELECTED MEDIA COMMUNICATIONS, INC. PROFORMA COMBINED BALANCE SHEET December 31, 1999 (Unaudited) --------------------------------------------------------------------------------

F-9 14 SELECTED MEDIA COMMUNICATIONS, INC. PROFORMA COMBINED STATEMENT OF OPERATIONS December 31, 1999 (Unaudited) --------------------------------------------------------------------------------

F-10 15 SELECT MEDIA COMMUNICATIONS, INC. NOTES TO PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- (a) To record the receipt of $200,000 from a stockholder of the Company for the purpose of acquiring the common stock of Sigma. (b) To record the acquisition of all of the issued and outstanding common stock of Sigma for $1,000,000 with $400,000 paid at the signing of the Agreement, $200,000 paid at closing and a $400,000 10% secured noted due in two installments of $200,000 plus accrued interest on June 30, 2000 and January 3, 2001. (c) To record the allocation of the excess of the purchase price over the estimated fair value of the net assets acquired. (d) To record the amortization of goodwill over 3 years. (e) To record the accrual of interest on the 10% secured note. F-11

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