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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER
0-22582
TBA ENTERTAINMENT CORPORATION
(Name of Small Business Issuer in its Charter)
DELAWARE 62-1535897
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
16501 VENTURA BOULEVARD
ENCINO, CALIFORNIA 91436
(Address of principal executive offices) (Zip Code)
(818) 728-2600
(Issuer's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant (based on the closing sale price of such stock as reported on
March 9, 2001 on the American Stock Exchange was approximately $24,323,700.
As of March 9, 2001, 7,461,900 shares of the registrant's Common Stock
were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive Proxy Statement, to be filed
pursuant to Section 14(a) of the Securities Exchange Act of 1934 in connection
with the registrant's 2001 annual meeting of stockholders, have been
incorporated by reference in Part III of this report.
PART I
ITEM 1. BUSINESS.
GENERAL
TBA Entertainment Corporation ("TBA" or the "Company") is a strategic
communications and entertainment company that creates comprehensive programs to
reach and engage audiences worldwide. Since 1997, TBA has provided a broad range
of strategic communications and entertainment services through its four
integrated business segments. TBA believes it has a strong presence in each of
these very fragmented industries and is building an industry-leading integrated
services company. TBA has offices in key markets worldwide to provide local
market presence with global impact.
- Corporate Communications & Entertainment -- Develops and
produces strategic communications, entertainment and special
event services to corporate clients worldwide.
- Entertainment Marketing & Special Events - Creates and executes
innovative entertainment marketing initiatives including music
tours, fairs and festivals, television broadcasts and special
events.
- Artist Management - Develops and implements career strategies
and corporate partnerships for some of the most successful
artists in the entertainment industry.
- Event Merchandising - Creates and executes high-impact
merchandising programs for entertainment and sporting events,
institutional organizations and corporate clients.
The integration of TBA's four business divisions creates competitive
advantages for the Company. TBA believes that while a variety of competitors
exist with each of the Company's divisions, none offer the complete scope of
services provided by TBA. This intra-company synergy provides TBA's clients with
an expanded range of comprehensive services while creating additional sources of
revenues and profits for the Company. For example, in producing corporate
meetings and entertainment marketing programs, the Company creates opportunities
to showcase artist management clients and to provide unique merchandising
programs. Providing entertainment marketing programs and incentive merchandising
programs for corporate clients conversely provides opportunities to cross-sell
client decision makers on other corporate communication and entertainment
events.
The Company's current operating structure is the result of strategic
acquisitions within each of the four business divisions. A brief description of
each of the acquisitions completed since January 1, 1998 is included below in
the detailed description of each of the four business divisions.
The Company was incorporated in Tennessee in June 1993 and
reincorporated in Delaware in September 1997.
CORPORATE COMMUNICATIONS & ENTERTAINMENT
The Corporate Communications & Entertainment division is an industry
leader in the strategic development and production of innovative business
communications, entertainment and special event programs that enable corporate
clients to reach and engage targeted internal and business-to-business audiences
worldwide. TBA utilizes award-winning creative capabilities and state-of-the-art
technology to help corporate clients worldwide deliver targeted messages that
educate, inspire and motivate. The Corporate Communications & Entertainment
division targets clients with recurring needs for business communications and
entertainment services. The Company's client list encompasses a number of
industry sectors including telecommunications, information technology, food
service, insurance and financial services. Representative clients include
BellSouth, SAP, Applied Materials, Microsoft, Motorola, McDonald's Corporation,
State Farm Insurance and CIBC.
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The Corporate Communications & Entertainment division specializes in the
creative development, design, production and staging of a wide range of internal
and business-to-business events including: sales conferences, business meetings
and headline entertainment, product introductions, recognition events,
shareholder meetings, live network broadcasts and webcasts. TBA believes that it
has benefited from the decision by an increasing number of major corporations to
outsource their business communications and entertainment needs. TBA produced
approximately 433 communication and entertainment events in 2000. The recurring
nature of this large number of events serves as a source of more predictable
revenues as they occur on a more regular basis. The large number of events also
provides opportunities for the Company's other divisions, including corporate
event opportunities for TBA's artist management clients and merchandising
activities.
The Corporate Communications & Entertainment division serves its clients
from a growing roster of offices nationwide, including Atlanta, Chicago, Dallas,
London, Nashville, New York, Phoenix, Salt Lake City and San Diego. These
offices were assembled via strategic acquisitions and internal growth over the
past three years.
The Company acquired its first corporate communications and
entertainment company in April 1997 with the acquisition of all of the
outstanding capital stock of TBA Entertainment Group Nashville, Inc., formerly
Avalon Entertainment Group, Inc. ("AEG"), with offices in Nashville and San
Diego. In 1998, the Company acquired all of the outstanding capital stock of TBA
Entertainment Group Chicago, Inc., formerly Corporate Productions, Inc. ("CPI"),
a Chicago-based company, TBA Entertainment Group Phoenix, Inc., formerly Image
Entertainment Productions, Inc. ("Image"), a Phoenix-based company, and TBA
Entertainment Group Dallas, Inc., formerly Magnum Communications, Inc.
("Magnum"), with offices in Dallas and Salt Lake City. In 1999, the Company also
opened offices in Atlanta and New York to service its growing client list.
With the completion of the acquisitions and internal growth described
above, TBA delivers a full range of strategic communications and entertainment
services to its clients. The Corporate Communications & Entertainment division
emphasizes the coordination and allocation of resources and services between the
division's offices. TBA has long-standing relationships with freelance
contractors in various production, technical and creative disciplines, and
supplements its full-time staff with independent contractors where needed.
The Company believes, based on its experience, that the corporate
communications and entertainment industry is highly fragmented. Further, the
Company believes that many of its competitors consist of a number of small,
primarily regional companies that provide only a limited range of services.
However, the Company believes that there are other competitors who have been in
business longer and have larger staffs and whose business, like the Company's,
is full service in scope. The most important competitive factors include
creative and production capabilities, quality and price. The Company believes
that it can compete successfully in this market by utilizing the Company's
production capabilities and existing entertainment relationships to produce an
exceptional event. TBA's commitment to providing exceptional events has
developed a loyal client base. The Company also competes with in-house corporate
communications staffs of existing and potential clients and with staffs of hotel
and convention centers.
Because of the highly fragmented nature of the corporate communications
and entertainment industry, the Company believes that there are a number of
acquisition opportunities available to the Company. The Company believes, based
on its experience with past acquisitions, that some portion of the small,
regional, limited-services companies would welcome the opportunity to provide a
full range of corporate communications and entertainment services that would
result from an association with the Company.
ENTERTAINMENT MARKETING & SPECIAL EVENTS
The Entertainment Marketing & Special Events division links global
business with popular culture through the development, marketing and production
of consumer-focused entertainment events, music marketing initiatives, concert
tours, television broadcasts, recorded music products and brand building
initiatives. This division continually forges new ways for clients to reach
their audiences and realize their marketing objectives. The Entertainment
Marketing & Special Events division specializes in the creative development,
design, production and execution of a broad range of marketing initiatives that
may include: national music tours, fairs and festivals, lifestyle events,
nationally syndicated radio programs, satellite media tours, network television
broadcast specials, point of purchase campaigns, premium/incentive programs,
brand imaging campaigns, sponsorship fulfillment, web casts, experiential
branding initiatives and consumer/trade promotions.
TBA provides companies with the power to reach and engage their
customers in a fresh, contemporary manner utilizing relevant programming and
experiential branding techniques to integrate their company or brand into the
lifestyle of their consumers. The Entertainment Marketing & Special Events
division seeks to develop music-marketing programs that appeal to highly focused
demographic segments. In addition, corporations are increasingly utilizing
entertainment personalities as advertising tools, having
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recognized the effectiveness of concert/tour sponsorship as a cost-effective
means to reach a target audience. The Company has produced sponsored
music-marketing tours for clients that include General Motors, MarsMusic and Red
Lobster. In addition, the Company has produced major television broadcast events
and specials including Music in High Places for RadioShack and MSN on DirecTV,
Turner Sports 1998 Goodwill Games Opening Celebration on CBS, NASCAR Rocks on
TNN, Blockbuster RockFest on MTV, as well as pay-per-view broadcasts for
Viewer's Choice, DirecTV and Primestar. TBA produced entertainment marketing
special events including "The Show" at the NBA All-Star Weekend, produced for
TNT and the NBA, NFL on TNT Tailgate Party and the Montreux Jazz Festival in New
York City. In 2000 and 1999, the Company produced the proprietary event RockFest
in conjunction with Hard Rock Cafe. RockFest counted the Oldsmobile "Alero,"
Circuit City and the Discover Card, among others, as corporate sponsors. The
Entertainment Marketing & Special Events division also provides unique
opportunities for the Company to showcase artist management clients and to
develop high-impact merchandising programs to complement the overall marketing
program. In addition, relationships with corporate sponsors also create
opportunities to sell corporate communications and entertainment services to an
expanded client base.
The Company works with its clients to customize an entertainment
marketing and special event to the exact specifications of that particular
client. Over time, TBA believes existing clients will expand their programs,
both by increasing the scope of existing components of programs and by adding
new components to programs. The Company's Entertainment Marketing & Special
Events division is currently characterized by a relatively small number of
accounts with high revenues per account. As a result, the loss or addition of
any one account could have a material affect on the Company's revenues.
Prior to the year 2000, the Company operated the Entertainment Marketing
& Special Events division both for its own account and through joint venture
arrangements, including Warner/TBA, a strategic joint venture between Time
Warner's Warner Custom Music Group ("Warner") and TBA. The Company's 50%
interest in Warner/TBA was acquired as part of the acquisition of AEG in April
1997. Although the formal joint venture arrangement reached the end of its term
in December 1999, TBA continued to execute programs in 2000 that were developed
by Warner/TBA.
TBA has made two strategic acquisitions in the past three years,
increasing the Company's competitive position in the entertainment marketing
industry. In December 1998, the Company acquired all of the outstanding capital
stock of TKS Marketing, Inc., which specializes in sponsorship fulfillment. In
February 2001, the Company acquired Moore Entertainment, Inc., a producer of
some of the country's most successful music tours and corporate sponsored
events.
In January 2000, the Company became a leader in the strategic
development and production of a broad range of entertainment programs, national
sponsorship initiatives and seasonal programming for many of the country's
largest fairs, festivals and rodeos when it acquired all of the outstanding
common stock of Romeo Entertainment Group, Inc. ("Romeo"). In March 2000, the
Company added the fairs and festivals business of EJD Concert Services ("EJD").
Combined, these programs reach over 17 million consumers annually. The Company
believes that the fairs and festivals industry is in the midst of rapid change.
Together with Romeo and EJD, the Company believes that it will have a tremendous
opportunity to help shape the future of the fairs and festivals industry. The
Company believes that there are a number of other acquisition opportunities
available to the Company to add additional fairs and festivals businesses.
ARTIST MANAGEMENT
The Artist Management division develops and implements career strategies
for music industry artists, including high-profile artists such as Brooks &
Dunn, Kathy Mattea, Chely Wright, Nine Days and Jaci Velasquez. The Company, as
a leader in the production of corporate communications and entertainment
programs, entertainment marketing initiatives, special events sponsorship
procurement and merchandising of entertainment and sporting events, is uniquely
positioned to create opportunities for artists. Management believes that the
Company's familiarity with all facets of the entertainment industry enables it
to help artists create and capitalize on opportunities. With its expertise in
concert production and corporate entertainment events and its relationships with
venue managers, outside concert promoters, broadcasting executives and other
industry professionals, management believes that the Company is uniquely
positioned to offer services, which can significantly enhance the careers of its
clients. The Company develops long-term career strategies and represents music
industry artists in the negotiation of recording, touring, merchandising and
performance contracts. Using these integrated resources, the Artist Management
team is unified around the strategy of creating long-term, sustained success for
the Company's artist management clients.
The Company has made two strategic acquisitions over the past three
years in assembling the Artist Management Division. In June 1998, the Company
acquired all of the equity interests in Titley Spalding & Associates LLC, which
currently manages Brooks & Dunn, Kathy Mattea and Chely Wright, among others. In
December 1999, the Company acquired Mike Atkins Management, Inc.
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("Atkins"), one of the largest artist management companies serving contemporary
Christian music. Atkins manages Christian music artists including Point of Grace
and Jaci Velasquez, among others. In 2000, the Company added additional artist
managers, representing artists such as Nine Days and World Classic Rockers. The
Company continued its growth in January 2001, with the addition of an artist
manager in London, who manages Foreigner and UB40, among others.
The Company believes that the artist management industry is
highly-fragmented and its competitors consist primarily of small independent
artist managers with a limited roster of clients, although there are several
participants in the industry that have capabilities and resources comparable to
and, in certain respects, greater than those of the Company. Because of the
highly fragmented nature of the artist management industry, the Company believes
that there are a number of acquisition opportunities available to the Company,
both within the country music genre as well as in other music genres, including
pop and rock.
EVENT MERCHANDISING
The Event Merchandising division develops and executes merchandising
programs for entertainment and sporting events, institutional organizations and
corporate clients. This division creates, designs, and executes merchandising
programs as well as promotional and for-sale items. As a leader and innovator in
the industry, TBA has created and executed exclusive merchandising programs for
a broad range of events. These events include the Olympic games, the world's
premier sporting event, the Association of Volleyball Professionals, the world's
premier men's beach volleyball tour, U.S. Women's Figure Skating Championship,
and the Ericsson Open Tennis Tournament, a world-class tennis championship.
In addition, through the Event Merchandising division, TBA can deliver
the added benefit of a merchandising program to any artist management client,
integrated entertainment marketing initiative, special event, corporate
communications program or business imaging campaign. This integrated strategy
serves TBA's clients by building positive public awareness while generating
additional profitability for the Company.
The Company has made three strategic acquisitions over the past four
years in assembling its Event Merchandising division. In July 1997, the Company
acquired 51% of Eric Chandler Merchandising, Inc. ("ECM"). ECM, a Los
Angeles-based company, specializes in executing merchandising for large-scale
entertainment and sporting events, such as the 1996 Summer Olympic Games in
Atlanta, Georgia. The remaining 49% of ECM was acquired by TBA in May 1998. In
August 1998, the Company acquired all of the outstanding stock of Corporate
Incentives, Inc. ("CII"), in connection with its acquisition of CPI. CII
implements corporate merchandising programs. In March 1999, the Company acquired
all of the outstanding stock of Karin Glass & Associates, Inc. and affiliated
companies, which were later merged and renamed TBA Merchandising, Inc.
("Merch"). Merch, an Indianapolis-based company, is a full-service merchandising
company specializing in merchandise design, production and fulfillment.
DISCONTINUED OPERATIONS
In 1998, the Company began to focus its growth in certain segments of
the entertainment sector and, in accordance with this strategy, divested itself
of businesses that were not a part of the future growth plans of the Company. In
May 1998, the Company sold its 51% interest in Avalon West Coast ("AWC"), a
group of affiliated entities engaged primarily in concert promotion and
amphitheater operations on the West coast, to New York-based SFX Entertainment,
Inc. In August 1998, the Company sold all of its interest in The Village at
Breckenridge Acquisition Corp., Inc. and Property Management Acquisition Corp.,
Inc., the wholly-owned subsidiaries of the Company that owned the Village at
Breckenridge Resort located in Breckenridge, Colorado, and the associated
property management business operating in Breckenridge (the "Breckenridge
Resort"), to Vail Summit Resorts, Inc., an affiliate of Vail Resorts, Inc.
("Vail"). In December 1998, the Company completed the sale of its Nashville
Country Club Restaurant.
The Company utilized a portion of the $24 million of proceeds (before
applicable transaction costs) from the sale of these assets to fund its growth
strategy in 1998, 1999, 2000, and in January 2001.
BUSINESS SEGMENT INFORMATION
The Company classifies its operations into the four major business
segments discussed above. See Note 11 to the consolidated financial statements
contained in Item 8 of this Annual Report on Form 10-K for summarized financial
information concerning the Company's reportable segments.
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COMPETITION
In addition to the competitive factors outlined above for each of the
Company's four business divisions, the success of the Company's entertainment
operations are dependent upon numerous factors beyond the Company's control,
including economic conditions, amounts of available leisure time, transportation
costs, lifestyle trends and weather conditions.
SEASONALITY
The Company experiences quarterly fluctuations in revenue, operating
income and net income as a result of many factors, including the timing of
clients' meetings and events, timing of artists' tours and recording releases,
weather related issues, delays in or cancellation of clients' entertainment
marketing programs, as well as changes in the Company's mix among the various
services offered.
TRADEMARKS
The Company has filed Intent-To-Use Trademark Applications for the TBA
Entertainment Corporation mark for the various classes of goods and services in
which the Company's mark will be utilized. In addition, the Company has filed or
intends to file Intent-To-Use Trademark Applications for other proprietary
programs developed by the Company. There can be no assurance, however, that
these trademarks will proceed to registration, and if so registered, that the
trademarks, in any one or more classes, will not violate the proprietary rights
of others, that any registration of the trademarks or the Company's use thereof
will be upheld if challenged, or that the Company will not be prevented from
using the trademarks.
REGULATION AND LICENSES
The Company is subject to federal, state and local laws affecting its
business, including various health, sanitation and safety standards. The
Company's entertainment operations are subject to state and local government
regulation, including regulations relating to live music performances. Each live
concert performance must comply with regulations adopted by federal agencies and
with licensing and other regulations enforced by state and local health,
sanitation, safety, fire and other departments. Difficulties or failures in
obtaining the required licenses or approvals can delay and sometimes prevent the
promotion of live concerts. The failure to receive or retain, or delay in
obtaining, a license to serve alcohol and beer in a particular location could
adversely affect the Company's operations in that location and impair the
Company's ability to obtain licenses elsewhere. The failure or inability of the
Company to maintain insurance coverage could materially and adversely affect the
Company.
EMPLOYEES
As of December 31, 2000, the Company had approximately 210 full-time and
part-time employees. It is the Company's intention to manage its growth
consistent with its ability to attract and retain qualified employees to manage
its operations. Over the course of any given event or program, the Company
evaluates the production personnel requirements and determines the extent to
which it must supplement its available employee base with the use of independent
contractors or part-time employees. The Company believes that its relationship
with its employees and independent contractors is good.
The Company has no full-time employees whose employment is covered by
collective bargaining or similar agreements with unions; however, the Company
does from time to time independently contract with or hire part-time union
personnel, especially during the production of a particular entertainment
marketing program and, accordingly, the Company is a party to certain agreements
with unions governing the hiring and terms of employment of such personnel.
ITEM 2. PROPERTIES.
The Company has offices located in Hickory Valley, Tennessee in a
building owned by a limited partnership, the general partner of which is a
corporation owned by Thomas J. Weaver III and Frank A. McKinnie Weaver, Sr.,
each an officer and director of the Company, and of which they also are limited
partners. The limited partnership does not charge the Company rent for its
Hickory Valley, Tennessee offices. The fair market rental value for this office
space is not material to the Company's consolidated results of operations.
The Company and/or its subsidiaries have entered into lease agreements
with respect to leased office space in numerous cities in which the Company
operates. These leases expire at various dates through September 2006. The
Company's wholly-owned subsidiary,
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TBA Entertainment Group Dallas, Inc., owns the building in which its offices and
production facilities are located, as well as certain vacant land adjacent to
such building. The building is encumbered with an approximately $245,000 first
lien mortgage indebtedness.
TBA believes that the properties and facilities it owns or leases are
suitable and adequate for the Company's current business and operations. The
Company anticipates that as it expands, it will require additional office space
to support such growth and believes that suitable space will be available as
needed on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS.
On July 31, 1997, the Company acquired a 51% partnership interest in the
Irvine Meadows Amphitheater Partnership, a California general partnership, which
owned and managed the Irvine Meadows Amphitheater in Irvine, California. The
Company acquired such 51% partnership interest from a corporate affiliate of a
member of the Board of Directors of the Company (the "Seller"). In order to
effectuate such sale, the Seller affiliate acquired an aggregate 49% partnership
interest in the Irvine Meadows Amphitheater Partnership from two of its existing
partners. On October 23, 1998, the two partners that sold their partnership
interests to the Seller, along with their controlling shareholders
(collectively, the "Plaintiffs"), filed a complaint in the Los Angeles Superior
Court against the Company and the Seller. Certain other defendants were also
named in the complaint. In such complaint, the Plaintiffs allege that, in
connection with their sale, the Seller breached certain contractual obligations,
breached his fiduciary duty to them as partners, and fraudulently induced them
to sell their respective partnership interests. The Plaintiffs further allege
that the Company aided and abetted the alleged breach of fiduciary duty and the
fraud in the inducement. The Company denies all of the allegations and is
vigorously defending this action. A state court in California has ruled that
this litigation is to be settled by binding arbitration. An arbitrator has been
assigned to the case, and pre-arbitration discovery is continuing. Management
does not believe that the outcome of this litigation will have a material
adverse effect on the consolidated financial condition or results of operations
of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the Company's shareholders
during the fourth quarter of the fiscal year ended December 31, 2000.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) The Common Stock is listed for trading on The American Stock
Exchange under the symbol "TBA". Prior to December 26, 2000, the Common Stock
was quoted on the Nasdaq National Market under the symbol "TBAE." On March 9,
2001, the last reported sale price of the Common Stock was $3.95 per share. The
following table sets forth the range of high and low sales prices of the Common
Stock as reported on the American Stock Exchange and the range of high and low
bid prices of the Common Stock as reported by the Nasdaq National Market during
each quarterly period within the two most recent fiscal years.
HIGH LOW
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2000
First Quarter $ 5.38 $ 3.88
Second Quarter 4.75 3.56
Third Quarter 4.44 3.56
Fourth Quarter 4.50 3.38
1999
First Quarter $ 5.31 $ 3.88
Second Quarter 4.94 3.88
Third Quarter 4.50 3.88
Fourth Quarter 5.50 3.94
(b) The approximate number of holders of record of Common Stock on March
9, 2001 was 162.
(c) The Company has not paid or declared cash distributions or dividends
and does not intend to pay cash dividends on the Common Stock in the foreseeable
future. The Company currently intends to retain all earnings to finance the
development and expansion of its operations. The declaration of cash dividends
in the future will be determined by the Board of Directors based upon the
Company's earnings, financial condition, capital requirements and other relevant
factors.
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ITEM 6. SELECTED FINANCIAL DATA
STATEMENTS OF OPERATIONS DATA (1): 2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
Revenues $ 89,031,900 $ 48,163,900 $ 27,272,700 $ 6,437,100 $ --
Costs related to revenues 62,123,900 31,863,400 18,468,700 4,705,600 --
------------ ------------ ------------ ------------ ------------
Gross profit margin 26,908,000 16,300,500 8,804,000 1,731,500 --
Selling, general and administrative expenses 23,313,100 12,962,600 6,969,000 1,888,600 302,000
Depreciation and amortization 2,794,000 1,790,300 679,400 148,900 1,400
Minority interest -- -- (36,000) -- --
Equity in income of Joint Venture and other income (272,700) (173,000) (343,700) (78,900) --
Net interest expense (income) 172,300 (266,200) (144,500) 153,000 700
------------ ------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income taxes 901,300 1,986,800 1,679,800 (380,100) (304,100)
Provision for income taxes (800,000) (790,000) (189,700) -- --
------------ ------------ ------------ ------------ ------------
Income (loss) from continuing operations 101,300 1,196,800 1,490,100 (380,100) (304,100)
Income (loss) from discontinued operations -- 329,200 1,180,900 782,400 (2,823,200)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 101,300 $ 1,526,000 $ 2,671,000 $ 402,300 $ (3,127,300)
============ ============ ============ ============ ============
EBITDA (2) $ 3,867,600 $ 3,510,900 $ 2,214,700 $ (78,200) $ (302,000)
============ ============ ============ ============ ============
Income (loss) from continuing
operations - basic $ 0.01 $ 0.14 $ 0.19 $ (0.07) $ (0.09)
Income (loss) from continuing
operations - diluted $ 0.01 $ 0.14 $ 0.18 $ (0.06) $ (0.09)
Weighted average common stock
outstanding - basic 8,055,100 8,495,200 7,851,600 5,680,300 3,575,900
Weighted average common stock
outstanding - diluted 8,070,000 8,540,000 8,243,500 6,324,600 3,575,900
BALANCE SHEET DATA (1):
Working capital (3) $ 281,300 $ 7,838,600 $ 12,381,900 $ 1,122,000 $ --
Goodwill, net 25,750,500 19,383,700 16,008,600 3,494,100 --
Net assets of discontinued operations -- 54,100 2,552,000 20,273,000 11,797,662
Total assets 40,332,500 43,149,500 40,445,200 27,401,600 13,428,200
Long-term debt (4) 4,429,400 3,719,600 4,755,700 2,036,700 --
Treasury stock (5,500,700) (2,062,100) (724,500) -- --
Stockholders' equity 25,242,500 27,858,800 28,515,700 20,720,400 12,213,300
(1) Prior to 1998, the Company acquired and operated certain businesses that
were sold in 1998. The sale of these businesses has resulted in the
reclassification of the operating results and net assets and liabilities of
these businesses to discontinued operations for all periods presented.
(2) EBITDA is earnings from continuing operations before interest income and
expense, income taxes and depreciation and amortization. EBITDA is
presented supplementally because management believes it allows for a more
complete analysis of results of operations. This information should not be
considered as an alternative to any measure of performance or liquidity as
promulgated under accounting principles generally accepted in the United
States (such as net income or cash provided by or used in operating,
investing or financing activities), nor should it be considered as an
indicator of the overall financial performance of the Company. The
Company's calculation of EBITDA may be different from the calculation used
by other companies and, therefore, comparability may be limited.
(3) Working capital represents total current assets (excluding net short-term
assets of discontinued operations) less total current liabilities
(excluding net short-term liabilities of discontinued operations).
(4) Long-term debt excludes notes payable and current portion of long-term debt
totaling $3,423,500, $3,328,000, and $759,600 as of December 31, 2000, 1999
and 1998, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of the following discussion and analysis is to explain the major
factors and variances between periods of the Company's results of operations.
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the historical consolidated
financial statements and notes thereto included in Item 8, beginning on page 15.
Introduction
The Company is a diversified communications and entertainment services company
that produces a broad range of business communications, meeting production and
entertainment services for corporate meetings, develops and produces integrated
music
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marketing programs and special events, manages music artists and develops and
executes merchandising programs for large-scale entertainment and sporting
events.
In April 1997, the Company acquired its first corporate communications and
entertainment company, TBA Entertainment Group Nashville, Inc., formerly Avalon
Entertainment Group, Inc. ("AEG"), including a 50% interest in the Warner/TBA
(formerly Warner/Avalon) joint venture. In 1998, the Company grew its operations
through the acquisition of several additional corporate communications and
entertainment services businesses, including Titley Spalding & Associates, LLC
("TSA"), TBA Entertainment Group Chicago, Inc., formerly Corporate Productions,
Inc. ("CPI"), Corporate Incentives, Inc. ("CII"), TBA Entertainment Group
Phoenix, Inc., formerly Image Entertainment Productions, Inc. ("Image"), TBA
Entertainment Group Dallas, Inc., formerly Magnum Communications, Inc.
("Magnum"), and TKS Marketing, Inc. ("TKS") (collectively, the "1998
Acquisitions"). In 1999, the Company also completed the acquisition of Karin
Glass & Associates, Inc. and affiliated companies, later renamed TBA
Merchandising, Inc. (collectively, "Merch") and Mike Atkins Management, Inc.
("Atkins") (collectively, the "1999 Acquisitions"). In 2000, the Company
completed the acquisitions of Romeo Entertainment Group, Inc. ("Romeo") in
January and of EJD Concert Services, Inc. ("EJD") in March (collectively, the
"2000 Aquisitions"). In February 2001, the Company also completed the
acquisition of Moore Entertainment, Inc. ("Moore").
General
The Company classifies its operations into four major business segments. See
Note 11 to the consolidated financial statements contained in Item 8 of this
Annual Report on Form 10-K for summarized financial information concerning the
Company's reportable segments.
The Company continues to derive a majority of its revenues (62%, 71%, and 86%
for the years ended December 31, 2000, 1999 and 1998, respectively) from the
production of business communications and entertainment events for corporate
clients. The Company works with its clients in the strategic development and
production of innovative business communications, entertainment and special
event programs that enable the client to reach and engage targeted internal and
business-to-business audiences. The Company receives a fee for providing these
services, which may include developing creative content; designing audio/visual
presentations and arranging for live entertainment and related production
services. Typically, the Company receives the majority of its fees prior to the
start of the event. These amounts are recorded as deferred revenue until the
date of the event. Revenue is recognized when the services are completed for
each event. Costs of producing the events are also deferred until the event
occurs.
The remainder of the Company's revenues are generated from entertainment
marketing (22%, 3%, and 3% of total revenues for the years ended December 31,
2000, 1999 and 1998, respectively), event merchandising (12%, 20%, and 5% of
total revenues for the years ended December 31, 2000, 1999 and 1998,
respectively), and artist management (4%, 6%, and 6% of total revenues for the
years ended December 31, 2000, 1999 and 1998, respectively).
Beginning in the year 2000, the Company began recognizing all revenues and
expenses associated with entertainment marketing programs that were previously
executed by the Warner/TBA joint venture. In addition, the Company expanded into
the fairs and festivals business with the January 2000 acquisition of Romeo and
the March 2000 addition of EJD. Accordingly, the Company experienced a
significant increase in entertainment marketing revenue, as a percent of total
Company revenue, in the year 2000. Entertainment marketing revenues and cost of
revenues are recognized when the services are completed for each program or, for
those programs with multiple events, apportioned to each event and recognized as
each event occurs. Event merchandising revenue increased dramatically in 1999 as
a result of the acquisition of KGA in March 1999. Event merchandising revenue is
recognized when the merchandise is shipped or sold to the customer. Cost of
sales includes the direct cost of acquiring or producing the merchandise. Artist
management revenue, which generally consists of commissions received from
artists' earnings, is recognized in the period in which the artist earns the
revenue. There are generally only minimal direct costs associated with
generating artist management revenue.
Discontinued Operations
Prior to 1998, the Company acquired and operated certain businesses that were
sold in 1998. These businesses included the Nashville Country Club Restaurant,
the Village at Breckenridge Resort and a 51% controlling interest in AWC. In
accordance with accounting principles generally accepted in the United States,
the sale of these businesses has resulted in the reclassification of the
operating results of these businesses to discontinued operations for all periods
presented. Operating results of these businesses and other information for
discontinued operations appear in the notes to consolidated financial statements
captioned "Dispositions" (Note 7).
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11
Results of Operations for the years ended December 31, 2000 and 1999
For the 2000 period, results of operations of Romeo and EJD are included from
their respective acquisition dates. Results of operations of each of the 1999
Acquisitions are included from the corresponding acquisition dates in 1999.
Revenues increased $40,868,000, or 85%, to $89,031,900 for 2000 from $48,163,900
for 1999. The Corporate Communications & Entertainment division increased its
revenues $21,075,800, or 62%, from 1999 to 2000. The increase is attributable to
an increase in the average revenue per event, offset by a decrease in the actual
number of events produced. This division produced 433 corporate meeting
production and entertainment events in 2000, compared to 583 events in 1999.
However, the average revenue per event increased dramatically to $127,600 per
event for 2000, compared to $58,600 per event for 1999. The Company continues to
expand its sales force and aggressively pursue larger corporate entertainment
and meeting events with Fortune 1000 companies. In addition, the Company has
been successful in expanding its relationships with its existing client base. In
2000, the Company produced 48 events with revenues in excess of $250,000, versus
28 such events in 1999.
The Entertainment Marketing and Special Events division increased its revenues
$18,208,900, from 1999 to 2000. $8,384,400 of the increase is attributable to
the Company's expansion into the fairs and festivals business through the
acquisitions of Romeo and EJD in 2000. In addition, the Company recognized
$8,864,800 of revenues in 2000 from programs previously produced by the
Warner/TBA joint venture. Prior to 2000, the Company accounted for the
Warner/TBA joint venture on the equity method of accounting. The remaining
increase is attributable to commissions generated on sponsorship sales,
primarily from the Earth Escapes, LLC, which was formed in 2000.
The Event Merchandising division increased its revenues $946,400, or 10%, from
1999 to 2000. The increase is primarily attributable to increased sales of
promotional items, offset by a decrease in event merchandise sales. The Artist
Management division increased its revenues $636,900, or 22%, from 1999 to 2000.
The increase is primarily attributable to the acquisition of Atkins in December
1999.
Cost of revenues increased $30,260,500, or 95%, to $62,123,900 for 2000 from
$31,863,400 for 1999. The increase is attributable to the overall increase in
revenues across all four business segments from 1999 to 2000. Cost of revenues,
as a percentage of revenues, increased, resulting in a decrease in gross profit
margin to 30% for 2000 from 34% in 1999. The decrease is primarily attributable
to lower gross profit margins generated by programs developed by the Warner/TBA.
As part of the termination of the Warner/TBA joint venture in December 1999, TBA
agreed to complete production of a number of large-scale entertainment marketing
programs in 2000. While the Company was able to control expenses, these programs
resulted in low gross profit margins due to lower than expected revenues
generated by the events. The Company also experienced a decrease in gross margin
in the Event Merchandising division primarily due to increased sales of
lower-margin promotional items and lower margins on event sales.
Selling, general and administrative expenses increased $10,350,500, or 80%, to
$23,313,100 for 2000 from $12,962,600 for 1999. The overall increase in selling,
general and administrative expenses is attributable to increased personnel and
operating expenses associated with the overall increase in revenues across all
four business segments from 1999 to 2000, including the acquisitions of Atkins
in December 1999 and Romeo and EJD in 2000. In addition, the Company continued
to add personnel to its sales force and artist manager ranks in 2000, with the
intention that these additions will generate revenues beginning in 2001. The
increase in 2000 is further explained by a full year of personnel and related
expenses incurred to develop an administrative and accounting infrastructure to
manage the Company's growth. However, selling, general and administrative
expenses, as a percentage of revenues, decreased to 26% in 2000 from 27% in
1999, as the Company began to leverage fixed office and administrative costs
over increased revenues.
Depreciation and amortization expense increased $1,003,700, or 56%, to
$2,794,000 for 2000 from $1,790,300 for 1999. The increase results primarily
from the amortization of goodwill associated with the 2000 Acquisitions and the
1999 Acquisitions. Amortization of goodwill totaled $1,885,500 in 2000, as
compared to $1,193,200 for 1999. The remainder of the increase is attributable
to increased depreciation on asset additions, primarily computer and office
equipment.
In 2000, the Company entered into a limited liability company agreement, Earth
Escapes LLC, which provided for the Company to receive a percentage of the gross
revenues, as defined, of the limited liability company. For the year 2000, the
Company recognized $272,700 of income from this arrangement. In 1999, equity
income from AEG's 50% joint venture interest in Warner/TBA was $173,000.
Effective December 31, 1999, the formal joint venture agreement with Warner
reached the end of its term. In 1999, the Company recognized a gain of $250,000
related to the distribution of the net assets of Warner/TBA, which amount is
included in Equity in income of Joint Venture in the accompanying consolidated
statements of operations.
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12
For 2000, net interest expense was $172,300 versus net interest income of
$266,200 for 1999. The change is attributable primarily to increased outstanding
debt associated with the 1999 Acquisitions and 2000 Acquisitions and lower
interest income from decreasing cash balances resulting from the use of cash for
investing and financing activities.
The provision for income taxes, as a percentage of income from continuing
operations before income taxes, was 89% for 2000 compared to 40% for 1999 and
reflects statutory tax rates adjusted for estimated permanent book/tax
differences. The primary reason contributing to the increase in the provision
for taxes over statutory tax rates is the non-deductibility for tax purposes of
a portion of the Company's goodwill amortization expense.
Results of Operations for the years ended December 31, 1999 and 1998
For the 1999 period, results of operations of Merch and Atkins are included from
their respective acquisition dates. For the 1998 period, results of operations
of each of the 1998 Acquisitions are included from the corresponding acquisition
dates in 1998.
Revenues increased $20,891,200, or 77%, to $48,163,900 for 1999 from $27,272,700
for 1998. $10,712,800 of the increase resulted from the production of 177
additional corporate entertainment and meeting production events, to 583 events
in 1999 compared to 406 events produced in 1998. The increase in the number of
shows is primarily attributable to an increase in the Company's sales force and
the inclusion of a full year of operations of CPI, Image and Magnum, which were
acquired in the third and fourth quarters of 1998. The average revenue per event
increased from $57,800 in 1998 to $58,600 in 1999. In 1999, the Company produced
28 events with revenues in excess of $250,000, versus 20 such events in 1998.
However, the impact of the increase in the number of larger events was offset by
the impact of a higher number of lower revenue events produced by one of the
1998 Acquisitions. In general, the Company is aggressively pursuing larger
corporate meeting and entertainment events with Fortune 1000 companies.
Event merchandising revenue increased $8,292,800 for the 1999 period from the
1998 period, due to the addition of merchandising activities through the
acquisition of Merch in March 1999. Merch produces and sells merchandise for a
number of large sporting events and corporate fulfillment programs. Revenue from
the artist management division increased $1,155,000 in 1999. The increase
results primarily from a full year of revenues from TSA, which was acquired in
June 1998. The remaining revenue increase of $730,600 results from a full year
of revenues from TKS, which was acquired in December 1998 and from revenues
generated by the For the Record program.
Cost of revenues increased $13,394,700, or 73%, to $31,863,400 for 1999 from
$18,468,700 for 1998. The increase resulted primarily from the production of
additional corporate entertainment and meeting planning events and the addition
of merchandising activities discussed above. Cost of revenues, as a percentage
of revenues, decreased, resulting in an increase in gross profit margin to 34%
for 1999 from 32% for 1998. The increase was due to improved profit margins
related to corporate communications and entertainment events for 1999 as
compared to 1998, increased revenues from artist management, which typically
have minimal direct costs as a percentage of revenue, and improved profit
margins in event merchandising resulting from the acquisition of Merch in March
1999.
Selling, general and administrative expenses increased $5,993,600, or 86%, to
$12,962,600 for 1999 from $6,969,000 for 1998. The increase results primarily
from increased personnel and related operating expenses associated with the
increased number of corporate entertainment and meeting planning events, as well
as general and administrative expenses associated with the 1999 acquisitions and
a full year of operations for the 1998 Acquisitions. Selling, general and
administrative expenses, as a percent of total revenues, increased to 27% for
1999 from 26% for 1998. The increase is primarily due to added sales personnel
and the opening of the Atlanta office in the fourth quarter of 1999.
Depreciation and amortization expense increased $1,110,900, or 164%, to
$1,790,300 for 1999 from $679,400 for 1998. The increase results primarily from
the amortization of goodwill associated with the 1999 Acquisitions and the 1998
Acquisitions. The Company expects that depreciation and amortization expense
will continue to increase in the year 2000 as a result of amortization expense
associated with the Atkins acquisition in December 1999 and the Romeo
acquisition in January 2000.
Equity income from AEG's 50% joint venture interest in Warner/TBA decreased to
income of $173,000 for 1999 from income of $343,700 for 1998. Revenues for
Warner/TBA decreased $673,900, or 8%, to $8,178,600 for 1999 from $8,852,500 for
1998. Operating costs of Warner/TBA, including general and administrative
expenses, increased $167,600, or 2%, to $8,332,600 for 1999 from $8,165,000 for
1998. Net income for Warner/TBA decreased to a loss of $154,000 in 1999 from a
profit of $687,500 in 1998, due to higher talent costs associated with a major
client tour, the cancellation of the NBA All-Star Game in 1999 and lower than
expected sales for the June 1999 RockFest. Effective December 31, 1999, the
formal joint venture agreement with Warner reached the end of its term.
Beginning in the year 2000, the Company recognized 100% of the revenues and
expenses associated with
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13
programs previously recorded by Warner/TBA. In addition, in 1999, the Company
recognized a gain of $250,000 related to the distribution of the net assets of
Warner/TBA.
Net interest income was $266,200 for 1999 versus $144,500 for 1998. The change
is attributable primarily to interest earned on increased cash balances
resulting from proceeds from the sale of certain businesses in 1998, offset by
increased outstanding debt associated with the 1998 Acquisitions. As a result of
acquisitions made by the Company in 1999 and in January 2000, the Company's
long-term debt has increased. Accordingly, the Company expects that net interest
income will decrease in the fiscal year 2000.
The provision for income taxes, as a percentage of income from continuing
operations before income taxes, is 40% for the 1999 period compared to 11% for
1998, and reflects statutory tax rates adjusted for estimated permanent book/tax
differences. The 1998 tax provision was positively impacted by the utilization
of net operating loss carryforwards available to offset taxable income. The
Company has utilized substantially all its federal net operating loss
carryforwards as of December 31, 1999.
Discontinued Operations
In 1999, the Company received the final payment related to the sale of the
Village at Breckenridge Resort. Accordingly, the Company recognized a gain on
the sale of discontinued operations of $329,200 for 1999, net of additional
expenses related to the sale of discontinued operations and net of income taxes
of $399,600. Income from discontinued operations in 1998 included a gain on the
sale of AWC in May 1998 and the discontinued operations of the Village at
Breckenridge Resort through the August 1998 sale date. No gain was recorded on
the sale of the Village at Breckenridge Resort in 1998 due to certain contingent
payments that were not received until 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a positive financial position, funding acquisitions and
working capital needs from net cash proceeds from discontinued operations and
out of operating cash flow. Cash and cash equivalents were $3,750,200 at
December 31, 2000 as compared to $12,847,600 at December 31, 1999. Working
capital was $281,300 at December 31, 2000, versus $7,892,700 at December 31,
1999. The decrease is primarily attributable to the use of cash reserves to fund
the 2000 Acquisitions and the Company's stock repurchase program and to repay
outstanding acquisition financing.
Cash provided by operations was $2,058,700, $1,041,400 and $1,476,900 for 2000,
1999 and 1998, respectively. The fluctuation in cash provided by operations
between years primarily reflects improved operations in each year, offset by the
timing of deferred revenue and prepaid expenses associated with programs
occurring in the following year and the collection of accounts receivables and
payment of accounts payable and accrued liabilities.
Cash used in investing activities was $5,479,500 and $952,400 in 2000 and 1999,
respectively, versus cash provided by investing activities of $15,283,100 in
1998. In 2000, cash was used to acquire Romeo and EJD and to fund additional
earn out payments for TSA and TKS. In 1999, cash was used to acquire Merch and
property and equipment, offset by the remaining payment of $3,000,000 of
proceeds from the sale of the Village at Breckenridge Resort. In 1998, the
Company received proceeds from the sale of AWC, the Village at Breckenridge
Resort and the Nashville Country Club Restaurant, offset by cash used for the
1998 Acquisitions and expenditures for property and equipment.
Cash used in financing activities was $5,676,600, $2,825,200, and $2,154,800 for
2000, 1999, and 1998, respectively, resulting primarily from the purchase of
treasury shares pursuant to the Company's stock repurchase program and the
repayment of debt arising from acquisitions.
The Company has pursued an aggressive growth strategy since its formation in
1993. From the Company's inception through December 31, 1997, the Company
acquired and operated certain businesses that were sold in 1998. The Company
relied on external sources of funds, including public offerings of its common
stock and bank borrowings to finance the acquisition of these businesses and to
fund the general operations of the Company. In 1998, the Company realized net
proceeds of $19,393,800 from the sale of discontinued operations, after
repayment of borrowings associated with these operations and applicable
transaction costs. In 1999, the Company received the final $3,000,000 of net
proceeds from the sale of the Village at Breckenridge Resort.
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14
The Company used a portion of the proceeds from the sale of these operations to
fund part of the purchase price of AEG in 1997, the 1998 Acquisitions, the 1999
Acquisitions, and the 2000 Acquisitions. In addition, the Company used cash
reserves to acquire Moore in 2001. The remainder of the purchase price for these
acquisitions was funded through the issuance of common stock of the Company and
the issuance of acquisition notes payable. The acquisition notes are payable in
various installments of principal plus accrued interest at 8% through April
2005. During 1998 and continuing through a portion of 2003 (the "Earn-out
Period"), the sellers of TSA and TKS will be paid additional sales price
consideration based on the earnings of TSA and TKS during each of the years in
the Earn-out Period, up to a maximum of $6,380,000 additional purchase price.
Generally, the additional purchase price for TSA and TKS will be paid 60% in
cash and 40% in notes payable which are payable in semi-annual installments with
8% interest over a five-year period.
The Company's board of directors authorized the repurchase of up to 2,000,000
shares of the Company's common stock until December 31, 2000. As of December 31,
2000, the Company had repurchased 1,567,100 shares of common stock pursuant to
the stock repurchase program for total consideration of $6,494,500. The Company
utilized cash reserves and cash from operations to fund the repurchases of
common stock.
The Company expects to continue its aggressive growth strategy in the
entertainment industry. The Company anticipates that future business
acquisitions made by the Company will be completed through a combination of
cash, notes payable issued to the sellers and the issuance of common stock of
the Company to the sellers.
The Company believes that cash flow from operations and current cash reserves
are adequate to meet its current working capital requirements. In addition, to
provide any additional funds necessary for the continued pursuit of the
Company's growth strategies, the Company may issue additional equity and debt
securities and may incur, from time to time, additional short- and long-term
bank indebtedness. The availability and attractiveness of any outside sources of
financing will depend on a number of factors, some of which relate to the
financial condition and performance of the Company, and some of which will be
beyond the Company's control, such as prevailing interest rates and general
economic conditions. There can be no assurance that such additional financing
will be available or, if available, will be on terms acceptable to the Company.
To the extent that the Company is able to finance its growth through internal
and external sources of capital, the Company intends to continue to grow its
operations through additional acquisitions. There can be no assurance that the
Company will be able to acquire any additional businesses, that any businesses
that are acquired will be or will become profitable or that the Company will be
able to integrate effectively any such businesses into its existing operations.
Forward Looking Statements
The foregoing discussion may contain certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are intended to be covered by
the safe harbors created by such provisions. These statements include the plans
and objectives of management for future growth of the Company, including plans
and objectives related to the acquisition of certain businesses and the
consummation of future private and public issuances of the Company's equity and
debt securities. The forward-looking statements included herein are based on
current expectations that involve numerous risks and uncertainties. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the Company
believes that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and, therefore, there can
be no assurance that the forward-looking statements included in this Form 10-K
will prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives of the Company will be achieved.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Impact of Interest Rate Changes
The Company's market risk relates to interest rate exposure on short-term
borrowings. The Company does not use financial instruments for trading or other
speculative purposes. Borrowings against lines of credit and various bank term
loans are at variable interest rates. All other borrowings are at fixed rates.
At December 31, 2000, the Company had $1,761,300 on lines of credit and various
bank term loans at variable rates ranging from 8.25 percent to 10.5 percent.
Management believes that a hypothetical adverse movement in the interest rates
of ten percent of such recent rates would not have a material effect on the
Company's consolidated financial position, results of operations or cash flows.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements required by this item are filed
herewith:
PAGE
----
Report of Independent Public Accountants 15
Consolidated Balance Sheets as of December 31, 2000 and 1999 16
Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 17
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998 18
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 19
Notes to Consolidated Financial Statements 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TBA Entertainment Corporation:
We have audited the accompanying consolidated balance sheets of TBA
Entertainment Corporation (a Delaware corporation) and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. 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 audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TBA Entertainment
Corporation and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Los Angeles, California
March 14, 2001
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16
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,750,200 $ 12,847,600
Accounts receivable, net of allowance
for doubtful accounts of $204,600 and $50,000, 4,476,900 3,593,400
respectively
Inventories 401,000 563,300
Deferred charges and other current assets 2,313,800 2,425,400
Net short-term assets from sale of
discontinued operations -- 54,100
------------ ------------
Total current assets 10,941,900 19,483,800
Property and equipment, net 3,112,900 2,937,500
Other assets, net:
Goodwill 25,750,500 19,383,700
Investment in Joint Venture -- 588,700
Other 527,200 755,800
------------ ------------
Total assets $ 40,332,500 $ 43,149,500
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,919,800 $ 3,765,500
Deferred revenue 2,317,300 4,497,600
Notes payable and current portion of long term-debt 3,423,500 3,328,000
------------ ------------
Total current liabilities 10,660,600 11,591,100
Long-term debt, net of current portion 4,429,400 3,719,600
------------ ------------
Total liabilities 15,090,000 15,310,700
------------ ------------
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $.001 par value;
authorized 1,000,000 shares, 2,200 and
2,600, respectively, of Series A
convertible preferred stock issued and
outstanding, total liquidation
preference $100 and
$2,100, respectively 100 100
Common stock, $.001 par value; authorized 20,000,000
shares, 7,507,600 and 8,218,800 shares outstanding,
8,857,100 and 8,714,300 shares issued,
respectively 8,900 8,700
Additional paid-in capital 30,600,700 29,859,900
Retained earnings 133,500 32,200
Less treasury stock, at cost, 1,349,500 and 495,500
shares, respectively (5,500,700) (2,062,100)
------------ ------------
Total stockholders' equity 25,242,500 27,838,800
------------ ------------
Total liabilities and stockholders' equity $ 40,332,500 $ 43,149,500
============ ============
The accompanying notes are an integral part of these consolidated balance
sheets.
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17
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues $ 89,031,900 $ 48,163,900 $ 27,272,700
Costs related to revenues 62,123,900 31,863,400 18,468,700
------------ ------------ ------------
Gross profit margin 26,908,000 16,300,500 8,804,000
Selling, general and administrative expenses 23,313,100 12,962,600 6,969,000
Depreciation and amortization expense 2,794,000 1,790,300 679,400
Equity in income of Joint Venture and other income (272,700) (173,000) (343,700)
Minority interest -- -- (36,000)
Interest expense (income), net 172,300 (266,200) (144,500)
------------ ------------ ------------
Income from continuing operations
before income taxes 901,300 1,986,800 1,679,800
Provision for income taxes (800,000) (790,000) (189,700)
------------ ------------ ------------
Income from continuing operations 101,300 1,196,800 1,490,100
------------ ------------ ------------
Discontinued operations (Notes 2 and 7):
Loss from operations, including income
tax benefit of $189,900 for 1998 -- -- (15,600)
Gain on disposition of discontinued operations
net of income tax expense of $399,600 for 1999 -- 329,200 1,196,500
------------ ------------ ------------
Income from discontinued operations -- 329,200 1,180,900
------------ ------------ ------------
Net income $ 101,300 $ 1,526,000 $ 2,671,000
============ ============ ============
Earnings per common share - basic:
Income from continuing operations $ 0.01 $ 0.14 $ 0.19
Income from discontinued operations -- 0.04 0.15
------------ ------------ ------------
Net income per common share - basic $ 0.01 $ 0.18 $ 0.34
------------ ------------ ------------
Earnings per common share - diluted:
Income from continuing operations $ 0.01 $ 0.14 $ 0.18
Income from discontinued operations -- 0.04 0.14
------------ ------------ ------------
Net income per common share - diluted $ 0.01 $ 0.18 $ 0.32
============ ============ ============
The accompanying notes are an integral part of these consolidated statements.
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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
-------- -------- ---------- ------- ------------
BALANCES, December 31, 1997 334,300 $ 10,000 7,190,400 $ 7,200 $ 24,892,200
Issuance of common stock
warrants -- -- -- -- 112,800
Issuance of common stock upon
acquisitions -- -- 1,423,300 1,400 5,948,900
Repurchase of common stock -- -- -- -- --
Common stock cancelled -- -- (47,700) (100) (238,400)
Conversion of preferred
stock into common stock (265,500) (7,900) 265,500 300 7,600
Net income -- -- -- -- --
-------- -------- ---------- ------- ------------
BALANCES, December 31, 1998 68,800 2,100 8,831,500 8,800 30,723,100
Issuance of common stock -- -- 7,200 -- 30,000
Issuance of common stock for
employee stock purchase plan -- -- -- -- (13,700)
Repurchase of common stock -- -- -- -- --
Common stock cancelled -- -- (190,600) (200) (881,500)
Conversion of preferred
stock into common stock (66,200) (2,000) 66,200 100 2,000
Net income -- -- -- -- --
-------- -------- ---------- ------- ------------
BALANCES, December 31, 1999 2,600 100 8,714,300 8,700 29,859,900
Issuance of common stock upon
acquisition -- -- 142,400 200 749,800
Issuance of common stock for
employee stock purchase plan -- -- -- -- (9,000)
Repurchase of common stock -- -- -- -- --
Conversion of preferred
stock into common stock (400) -- 400 -- --
Net income -- -- -- -- --
-------- -------- ---------- ------- ------------
BALANCES, December 31, 2000 2,200 $ 100 8,857,100 $ 8,900 $ 30,600,700
======== ======== ========== ======= ============
RETAINED TOTAL
EARNINGS TREASURY STOCK STOCKHOLDERS'
(DEFICIT) SHARES AMOUNT EQUITY
----------- ---------- ----------- -------------
BALANCES, December 31, 1997 $(4,164,800) 4,800 $ (24,200) $ 20,720,400
Issuance of common stock
warrants -- -- -- 112,800
Issuance of common stock upon
acquisitions -- -- -- 5,950,300
Repurchase of common stock -- 239,600 (938,800) (938,800)
Common stock cancelled -- (47,700) 238,500 --
Conversion of preferred
stock into common stock -- -- -- --
Net income 2,671,000 -- -- 2,671,000
----------- ---------- ----------- ------------
BALANCES, December 31, 1998 (1,493,800) 196,700 (724,500) 28,515,700
Issuance of common stock -- -- -- 30,000
Issuance of common stock for
employee stock purchase plan -- (19,200) 79,800 66,100
Repurchase of common stock -- 508,600 (2,299,100) (2,299,100)
Common stock cancelled -- (190,600) 881,700 --
Conversion of preferred
stock into common stock -- -- -- 100
Net income 1,526,000 -- -- 1,526,000
----------- ---------- ----------- ------------
BALANCES, December 31, 1999 32,200 495,500 (2,062,100) 27,838,800
Issuance of common stock upon
acquisition -- -- -- 750,000
Issuance of common stock for
employee stock purchase plan -- (15,100) 62,400 53,400
Repurchase of common stock -- 869,100 (3,501,000) (3,501,000)
Conversion of preferred
stock into common stock -- -- -- --
Net income 101,300 -- -- 101,300
----------- ---------- ----------- ------------
BALANCES, December 31, 2000 $ 133,500 1,349,500 $(5,500,700) $ 25,242,500
=========== ========== =========== ============
The accompanying notes are an integral part of these consolidated statements.
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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------
2000 1999 1998
------------ ------------ ------------
Cash flows from operating activities:
Net income $ 101,300 $ 1,526,000 $ 2,671,000
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 2,794,000 1,790,300 679,400
Loss or disposal of assets 93,400 -- --
Bad debt expense 154,600 -- --
Income from discontinued operations -- (329,200) (1,180,900)
Undistributed earnings of Joint Venture -- (173,000) (343,700)
Deferred tax provision 113,900 (179,900) (547,300)
Changes in operating assets and liabilities, net of
acquisitions:
Increase in accounts receivable (611,100) (537,300) (853,600)
Decrease in inventories 162,300 108,600 --
Decrease (increase) in deferred charges and
other current assets 428,500 (1,090,800) 348,300
Decrease (increase) in other assets 32,100 (58,200) 9,900
Increase (decrease) in accounts payable
and accrued liabilities 969,900 (2,397,900) 1,376,900
(Decrease) increase in deferred revenue (2,180,200) 2,382,800 (683,100)
------------ ------------ ------------
Net cash provided by operations 2,058,700 1,041,400 1,476,900
------------ ------------ ------------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (4,514,400) (3,237,700) (3,242,900)
Net proceeds from dispositions of businesses -- 3,337,100 19,393,800
Expenditures for property and equipment (965,100) (1,051,800) (599,800)
Increase in other current assets -- -- (268,000)
------------ ------------ ------------
Net cash (used in) provided by investing
activities (5,479,500) (952,400) 15,283,100
------------ ------------ ------------
Cash flows from financing activities:
Net (repayments) borrowings on credit lines (23,600) 152,700 --
Proceeds from long-term debt -- 73,000 --
Repayments of long-term debt (2,205,400) (817,900) (1,216,000)
Repurchase of common stock (3,501,000) (2,299,100) (938,800)
Issuance of common stock for employee stock
purchase plan 53,400 66,100 --
------------ ------------ ------------
Net cash (used in) financing
activities (5,676,600) (2,825,200) (2,154,800)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (9,097,400) (2,736,200) 14,605,200
Cash and cash equivalents - beginning of year 12,847,600 15,583,800 978,600
------------ ------------ ------------
Cash and cash equivalents - end of year $ 3,750,200 $ 12,847,600 $ 15,583,800
============ ============ ============
Supplemental Cash Flow Information:
Cash paid during the year for interest $ 332,000 $ 282,400 $ 347,300
============ ============ ============
Cash paid during the year for income taxes $ 930,000 $ 1,435,700 $ --
============ ============ ============
The accompanying notes are an integral part of these
consolidated statements.
19
20
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. The Company
TBA Entertainment Corporation and subsidiaries (the "Company") is a
diversified communications and entertainment company that produces a broad
range of business communications, meeting productions and entertainment
services for corporate meetings, develops and produces integrated music
marketing programs, manages music industry artists and develops and
executes merchandising programs for entertainment and sporting events. The
Company was incorporated in Tennessee in June 1993 and reincorporated in
Delaware in September 1997. The Company primarily operates within the
United States.
2. Basis of Financial Presentation
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Discontinued Operations
Prior to 1998, the Company acquired and operated certain businesses that
were sold in 1998 (Note 7). These businesses included the Nashville Country
Club Restaurant (opened in November 1994 and sold in December 1998), the
Village at Breckenridge Resort ("Breckenridge Resort") (acquired in April
1996 and sold in August 1998) and a 51% controlling interest in a group of
entities (collectively referred to as "AWC") (acquired in July 1997 and
sold in May 1998). The sale of these businesses has resulted in the
reclassification of the operating results of these businesses to
discontinued operations for all periods presented, in accordance with
accounting principles generally accepted in the United States.
3. Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue when services are completed for an event.
For those projects that provide for multiple events, the contract revenue
and costs are apportioned and revenue and profit are recognized as each
event occurs. Deferred revenue represents customer deposits on future
events. Deferred charges represent Company expenditures related to future
events. For merchandise operations, revenue is recognized when the
merchandise is shipped or sold to a customer.
Costs Related to Revenue
Costs related to revenue is comprised of all direct costs associated with
the production of an event, including talent fees, contracted services,
equipment rentals and costs associated with the production of audio-visual
effects. Such costs are deferred until the event occurs. Cost of
merchandise revenue is comprised of the direct costs of the merchandise
sold.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash in banks and highly
liquid investments purchased with an original maturity of three months or
less. Cash and cash equivalents' carrying amounts approximate fair value.
The Company holds its investments in highly qualified financial
institutions.
Inventories
Inventories consist primarily of finished merchandise product, and are
stated at the lower of cost or market, determined using the first-in,
first-out (FIFO) basis.
20
21
Property and Equipment
Property and equipment consists of the following as of December 31, 2000
and 1999:
2000 1999
----------- -----------
Land .................................................. $ 388,000 $ 388,000
Buildings and leasehold improvements .................. 654,300 577,900
Furniture, fixtures and equipment ..................... 3,871,200 2,806,100
----------- -----------
4,913,500 3,772,000
Less - accumulated depreciation and amortization ...... (1,800,600) (834,500)
----------- -----------
Property and equipment, net ........................... $ 3,112,900 $ 2,937,500
=========== ===========
Property and equipment are recorded at cost and are depreciated or
amortized using the straight-line method, over the following estimated
useful lives:
Building and leasehold improvements...................... 3-25 years
Furniture, fixtures and equipment........................ 3-5 years
The Company follows the policy of capitalizing expenditures that materially
increase asset lives and charges ordinary maintenance and repairs to
operations as incurred. No depreciation or amortization is included in Cost
Related to Revenue in the accompanying Consolidated Statements of
Operations.
Goodwill
Goodwill represents the excess of purchase price and related costs over the
value assigned to the net tangible assets of businesses acquired. Goodwill
is being amortized on a straight-line basis over periods ranging from 5 to
20 years. Periodically, the Company reviews the recoverability of goodwill.
The measurement of possible impairment is based primarily on the ability to
recover the net goodwill from expected future operating cash flows on an
undiscounted basis. In management's opinion, no impairment exists at
December 31, 2000. Accumulated amortization was $3,707,900 and $1,822,400
as of December 31, 2000 and 1999, respectively. Amortization expense was
$1,885,500, $1,193,200, and $460,100 for the years ended December 31, 2000,
1999 and 1998, respectively.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consists of the following at
December 31, 2000 and 1999:
2000 1999
---------- ----------
Accounts payable ........................... $2,013,100 $1,511,500
Accrued payroll and related taxes .......... 1,770,000 455,300
Due to sellers of acquired businesses ...... 337,700 522,900
Accrued interest expense ................... 594,800 222,900
Other accrued expenses ..................... 204,200 1,052,900
---------- ----------
$4,919,800 $3,765,500
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Deferred income tax assets and liabilities
are recognized based on enacted tax laws for any temporary differences
between financial reporting and tax bases of assets, liabilities and
carryforwards. Deferred tax assets are reduced by a valuation allowance if
it is more likely than not that some or all of the deferred tax asset will
be realized. (Note 9)
Concentration of Risk
The Company did not have any customers who accounted for more than ten
percent of revenues for the years ended December 31, 2000, 1999 and 1998.
The Company did not have any customers who accounted for more than ten
percent of accounts receivable at December 31, 2000 and 1999.
21
22
Recently Issued Accounting Standards
In June 1998 and June 1999, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Investments and Hedging Activities," and SFAS
No. 137, which delayed the effective date of SFAS No. 133. In June 2000,
the FASB issued SFAS No. 138, which provided additional guidance for the
application of SFAS NO. 133 for certain transactions. Although, the Company
has adopted the statement in January 2001, SFAS No. 133 does not apply to
its current operations and management does not expect the adoption of this
statement to have a material impact on the Company's financial position or
results of operations.
In December 1999, the Securities and Exchange Commissions (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101
provides additional guidance on the recognition, presentation and
disclosure of revenue in financial statements. The Company has reviewed
this bulletin and believes that its current recognition policy is
consistent with the guidance of SAB No. 101.
Earnings per Common Share
The following table sets forth the computation of basic and diluted
earnings per common share for the years ended December 31, 2000, 1999 and
1998:
2000 1999 1998
---------- ---------- ----------
Basic Earnings Per Common Share:
Net income from continuing operations ................ $ 101,300 $1,196,800 $1,490,100
Weighted average common stock outstanding ............ 8,055,100 8,495,200 7,851,600
---------- ---------- ----------
Basic earnings per common share ...................... $ 0.01 $ 0.14 $ 0.19
========== ========== ==========
Diluted Earnings Per Common Share:
Net income from continuing operations ................ $ 101,300 $1,196,800 $1,490,100
---------- ---------- ----------
Weighted average common stock outstanding ............ 8,055,100 8,495,200 7,851,600
Additional common stock resulting from
dilutive securities:
Preferred stock .................................... 2,200 2,600 224,200
Weighted average contingent common stock issued
in acquisition ................................... -- -- 163,500
Stock options and warrants ......................... 12,700 42,200 4,200
---------- ---------- ----------
Weighted average common stock and dilutive
securities outstanding ............................. 8,070,000 8,540,000 8,243,500
---------- ---------- ----------
Diluted earnings per common share .................... $ 0.01 $ 0.14 $ 0.18
========== ========== ==========
Options and warrants to purchase 3,064,700, 1,886,500, and 2,519,000 shares
of common stock in 2000, 1999 and 1998, respectively, were not considered
in calculating diluted earnings per share as their inclusion would have
been anti-dilutive.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 reported period. Actual results could differ from those
estimates.
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23
4. Debt
Long-term debt of the Company consists of the following as of December 31,
2000 and 1999:
2000 1999
----------- -----------
Acquisition notes payable, interest at 8%, due in quarterly, semi-annual
or annual installments through 2005, unsecured ................................. $ 6,076,100 $ 4,580,600
Note payable to a bank, interest at the bank's prime rate plus
0.25% (9.75% at December 31, 2000), due in monthly installments
with a balloon payment in June 2001, secured by a pledge of the
common stock of a subsidiary .................................................. 1,040,000 1,516,700
Mortgage note payable to a bank, interest at 8.25%, due in monthly
installments through December 2011, secured by land and building ............... 244,800 311,500
Equipment notes payable, interest ranging from 7.57% to 11.58%,
due in monthly installments with various maturity dates through
July 2003, secured by equipment ................................................ 132,000 315,500
----------- -----------
7,492,900 6,724,300
Less-current portion ........................................................... (3,063,500) (3,004,700)
----------- -----------
$ 4,429,400 $ 3,719,600
=========== ===========
Future annual maturities of long-term debt consists of the following as of
December 31, 2000:
YEAR ENDING
DECEMBER 31,
- -------------
2001 .............................................. $3,063,500
2002 .............................................. 1,735,300
2003 .............................................. 1,467,600
2004 .............................................. 961,100
2005 .............................................. 123,100
Thereafter ........................................ 143,300
----------
$7,493,900
==========
Three of the Company's subsidiaries have entered into revolving lines of
credit with different banks. Two lines provide for maximum borrowings of
$500,000, while the third line provides maximum borrowing of $75,000, to be
used for working capital purposes of the respective subsidiaries.
Borrowings on each facility accrue interest at the bank's prime rate, prime
+.75%, or prime +1% (9.5%, 10.25%, and 10.5% at December 31, 2000) and are
secured by all business assets of the subsidiary. Each of the lines of
credit mature in 2001. As of December 31, 2000 and 1999, $360,000 and
$323,300, respectively were outstanding under the Company's lines of
credit, which amounts are included in notes payable and current portion of
long-term debt in the accompanying consolidated balance sheets. The
weighted average interest rate for the lines-of-credit was 9.66% and 8.50%
at December 31, 2000 and 1999, respectively.
The Company recognized interest expense of $668,900, $443,100, and $307,700
related to long-term debt for the years ended December 31, 2000, 1999 and
1998, respectively.
5. Investment in Warner/TBA Joint Venture
Through December 31, 1999, the Company owned a 50% interest in a joint
venture with Warner Custom Music Corp. ("Warner"). The joint venture,
Warner/TBA (formerly Warner/Avalon), developed and coordinated live,
sponsored music entertainment marketing tours and programs and related
projects and generated revenues primarily from third party corporate
sponsorships. Warner/TBA recognized revenue by amortizing the contract
sponsorship funds over the life of the related programs, which ranged from
single day events to tours lasting several months.
Effective December 31, 1999, the formal joint venture agreement with Warner
reached the end of its term. Pursuant to an agreement with Warner, the net
assets of Warner/TBA were distributed to TBA. In 2000, TBA continued to
execute entertainment marketing programs previously developed by
Warner/TBA. In 1999, the Company recognized a gain of $250,000 related to
the distribution of the net assets of Warner/TBA, which amount is included
in Equity in income of Joint Venture in the accompanying consolidated
statements of operations.
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24
Through December 31, 1999, the Company accounted for the investment in
Warner/TBA using the equity method of accounting. Summary unaudited
statements of operations data of Warner/TBA are as follows:
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1999 1998
----------- ----------
Revenues ......................... $ 8,178,600 $8,852,500
Net (loss) income ................ $ (154,000) $ 687,500
Summary unaudited balance sheet data of Warner/TBA consists of the
following as of December 31, 1999:
1999
--------
Current assets .......... $619,900
Non-current assets ...... 155,900
Current liabilities ..... 211,500
Partners' capital ....... $564,300
During 1999, the two largest customers accounted for 51% and 30% of gross
revenues of Warner/TBA. In 1998, affiliates of Warner accounted for 60% of
the gross revenues of Warner/TBA. The next two largest customers accounted
for 21% and 16% of gross revenues of Warner/TBA.
6. Acquisitions
During 2000, 1999 and 1998, the Company completed the following
acquisitions:
VALUE OF NUMBER
CASH ACQUISITION COMMON STOCK OF SHARES
COMPANY DATE ACQUIRED CONSIDERATION NOTES PAYABLE ISSUED ISSUED
- ------- ------------- ------------- ------------- ------------ ---------
2000 Acquisitions:
Romeo Entertainment Group, Inc. ................. January 2000 $3,475,000 $2,525,000 $ 750,000 142,300
EJD Concert Services, Inc. ...................... April 2000 540,000 60,000 -- --
1999 Acquisitions:
Karin Glass & Associates, Inc. and affiliated ... March 1999 2,300,000 -- -- --
Companies
Mike Atkins Management, Inc. ("Atkins") ......... December 1999 700,000 700,000 -- --
1998 Acquisitions:
Titley Spalding & Associates, LLC ("TSA") ........ June 1998 1,000,000 -- 754,700 175,000
TBA Entertainment Group Chicago, Inc. ............ August 1998 1,450,000 1,550,000 2,000,000 414,000
(formerly Corporate Productions, Inc.)
TBA Entertainment Group Phoenix, Inc. ............ September 1998 687,000 458,000 230,000 60,000
(formerly Image Entertainment
Productions, Inc.)
TBA Entertainment Group Dallas, Inc. ............. October 1998 1,273,000 900,000 1,087,000 307,000
(formerly Magnum Communications, Inc.)
TKS Marketing, Inc. ("TKS") ...................... December 1998 625,000 -- -- --
During the period commencing on the respective acquisition dates and
continuing through a portion of 2003 (the "Earnout Period"), the sellers of
TSA and TKS will be paid additional sales price consideration based on the
earnings of TSA and TKS during each of the years in the Earnout Period. The
maximum additional purchase price is $5,755,000 for TSA and $625,000 for
TKS. Subsequent to 1998, the additional purchase price will be paid 60% in
cash and 40% in notes payable which are payable in semi-annual installments
with 8% interest over a 5-year period. Additional consideration paid during
the Earnout Period will be recorded as goodwill and amortized over the
remaining period of the original 10-year amortization period, which
commenced on the respective acquisition date. For 1998, additional purchase
price payable to the sellers of TSA totaled $546,500 and was paid entirely
in cash in 1999. Additional purchase price payable to the sellers of TSA
and TKS totaled $756,800 and $114,700, respectively for 1999, and $544,600
and $17,900, respectively, for 2000 and are included in accrued liabilities
and long-term debt in the accompanying consolidated balance sheets.
On January 3, 2000, the Company acquired 100% of the common stock of Romeo
Entertainment Group, Inc. ("Romeo"), for a maximum purchase price of
$6,750,000. The purchase price paid at closing included a cash payment of
$3,475,000, the issuance of 142,300 shares of common stock of the Company
valued at $750,000 and the issuance of two promissory notes totaling
$2,525,000. The promissory notes accrue interest at 8% and are payable in
four equal annual installments of principal plus
24
25
accrued interest, commencing April 30, 2001. In March 31, 2000, the Company
also acquired 100% of the common stock of EJD Concert Services, Inc. for a
purchase price of $600,000.
The $700,000 promissory note payable to Atkins and $2,025,000 of the
promissory notes payable to Romeo are subject to reduction based on the
earning of Atkins and Romeo during the period 2000 through 2004. As of
December 31, 2000, there were no reductions on the promissory notes payable
to Atkins or Romeo.
The accounting for the above-mentioned acquisitions is in accordance with
the purchase method of accounting. The operations of the acquired
businesses are included in the accompanying consolidated statements of
operations from their respective acquisition dates. The purchase price for
each acquisition has been allocated to the assets acquired and liabilities
assumed based on their estimated fair values on the respective acquisition
date. Substantially the entire purchase price has been allocated to
goodwill, as the net tangible assets of these companies acquired were not
significant at the date of the acquisition.
Operating results of each of the 2000 Acquisitions, 1999 Acquisitions and
the 1998 Acquisitions are included in the accompanying consolidated
statements of operations from their respective acquisition dates. The
following unaudited pro forma financial information represents the
consolidated results for the year ended December 31, 1999, as if the 1999
Acquisitions and the 2000 acquisition of Romeo had occurred as of January
1, 1999. The pro forma results reflect certain adjustments, including
amortization of the excess purchase price over fair value of net assets
acquired, interest expense on the acquisition debt and adjustments to
salaries and ownership distributions to former owners. The pro forma
amortization of the excess purchase price over fair value of net assets
acquired was $1,709,500.
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisitions had been completed as of the beginning of
each of the periods presented, nor are they necessarily indicative of
future consolidated results. The pro forma consolidated results for 2000
were not materially different from the 2000 consolidated financial
statements.
1999
--------------
(UNAUDITED)
Total revenues ....................... $ 56,906,118
Income from continuing operations .... $ 1,245,316
Earnings per common share from
continuing operations:
Basic ............................ $ 0.14
Diluted .......................... $ 0.14
The above calculations of pro forma basic and diluted earnings per common
share assumes that the following number of weighted average shares were
outstanding:
1999
---------
(UNAUDITED)
Basic ................................... 8,637,600
Diluted ................................. 8,682,300
7. Dispositions
AWC
Effective July 31, 1997, the Company acquired a 51% controlling interest in
AWC. The remaining 49% of AWC was owned by a group of individuals who
became officers and stockholders of the Company in 1997. The purchase price
included a $7 million cash payment with proceeds from the Company's 1997
stock offering. Including acquisition costs, the total purchase price for
AWC was $7,862,900. The acquisition was accounted for using the purchase
method of accounting and, accordingly, the purchase price was allocated to
the assets acquired and the liabilities assumed based on their estimated
fair values on the date of acquisition.
On May 13, 1998, the Company sold its 51% controlling interest in certain
of the AWC businesses to an unaffiliated third party (the "buyer") for
$9,915,000 in cash before applicable transaction expenses. The individuals
that owned the remaining 49% of AWC also sold their interest in these
businesses to the buyer. The Company recognized a one-time pre-tax gain of
$1,445,000 as a result of the sale of its interest in these businesses.
25
26
Net operations attributable to those businesses of AWC included in the sale
to the buyer from January 1, 1998 through the May 13, 1998 sale date, are
included in discontinued operations in the accompanying consolidated
statements of operations. The following is a summary of the revenue and
expenses related to these businesses for the year ended December 31, 1998:
1998
-----------
Revenues ............................... $ 2,462,800
Operating expenses ..................... 3,579,000
Depreciation and amortization .......... 261,600
Interest expense, net .................. 36,600
Income tax benefit ..................... (189,800)
Minority interest in net loss AWC ...... (552,100)
-----------
Net loss from discontinued
operations attributable to the
Company ................................ $ (672,500)
===========
Breckenridge Resort
In July 1998, Village at Breckenridge Acquisition Corp. ("VABAC"), a wholly
owned subsidiary of the Company and owner and operator of the Breckenridge
Resort, entered into an agreement with an unaffiliated third party
developer (the "Development Agreement"). Pursuant to the Development
Agreement, VABAC agreed to sell a portion of the assets comprising the
Breckenridge Resort to the Developer for $10,000,000. The sale was
contingent upon the developer receiving approval of the development plan.
The sale of these assets was completed in April 1999.
In a simultaneous transaction, the Company entered into an agreement to
sell 100% of the common stock of VABAC to Vail Summit Resorts, Inc.
("Vail") for $34,000,000. Vail, by virtue of its acquisition of VABAC, also
acquired the rights and obligations of the Development Agreement. The sale
of the common stock of VABAC was consummated on August 12, 1998. The
proceeds from the sale were distributed as follows: $19,762,300 to repay
indebtedness at the Breckenridge Resort, $3,000,000 to an escrow account,
$11,013,170 to the Company and the remainder to pay closing costs. The
Company received the $3,000,000 held in escrow in April 1999 and,
accordingly, recognized a gain of $329,200 related to the sale of VABAC,
net of expenses related to the sale of discontinued operations and net of
income taxes.
Nashville Restaurant
In December 1998, the Company sold substantially all of the assets of the
Nashville restaurant to an unaffiliated third party for $3,450,000. The
assets included the Company's leasehold interest in land on which the
Nashville restaurant was located, the building and equipment and an
adjacent parking structure. The Company recognized a loss on the sale of
the Nashville restaurant of $248,500 in 1998.
As a result of the sale of the Breckenridge Resort and the Nashville
restaurant, together, which previously comprised the Company's Resort
Division, the operations of the Resort Division for 1998 have been
reclassified to discontinued operations. The following is a summary of the
revenues and expenses related to the Resort Division for the year ended
December 31, 1998:
1998
-----------
Revenues .................................... $16,350,400
Operating expenses .......................... 13,925,100
Depreciation and amortization ............... 710,200
Interest expense, net ....................... 1,058,200
-----------
Net income from discontinued operations ..... $ 656,900
===========
8. Stockholders' Equity
Preferred Stock
The Company is authorized to issue 1,000,000 shares of $.001 par value
preferred stock. The Company has designated 557,100 shares of the
authorized preferred stock as Series A Convertible Preferred Stock ("Series
A Preferred Stock"), of which 334,300 shares were previously issued and are
non-voting. The shares are convertible into common stock on a one-for-one
basis. In 2000,
26
27
1999 and 1998, 400, 66,200 and 265,500 shares, respectively, of Series A
Preferred Stock were converted into shares of common stock. As of December
31, 2000, 2,200 shares of Series A Preferred Stock remain outstanding.
Common Stock and Common Stock Warrants
In April 1996, the Company completed an offering of 1,351,500 units, each
consisting of two shares of common stock and one redeemable common stock
purchase warrant. The redeemable warrants are detachable and separately
transferable. Each redeemable warrant entitles the holder to purchase one
share of common stock at a price of $6.25 per share until April 2001, and
is redeemable by the Company at $0.50 per warrant under certain conditions.
In connection with this offering, the underwriter was also granted a
warrant to acquire up to 120,000 units at $15.50 per unit. The warrants
issued in 1996 were outstanding at December 31, 2000.
In July 1997, the Company issued 2,600,000 shares of its common stock in a
public offering. In connection with this offering, the underwriter was
granted a warrant to acquire up to 130,000 shares of common stock at $4.20
per share until July 2002. These warrants were outstanding as of December
31, 2000.
At December 31, 2000, the Company also had other outstanding warrants to
purchase 75,000 shares of common stock at an exercise price of $4.38 per
share, expiring in September 2002.
In August 1998, the board of directors authorized the repurchase, at
management's discretion, of up to 1,000,000 shares of the Company's common
stock until August 1999, which was later extended to December 31, 1999. In
2000, the board of directors increased the number of shares authorized to
be purchased to 2,000,000 and extended the stock repurchase program until
December 31, 2000. As of December 31, 2000, the Company had repurchased
1,567,100 shares of common stock pursuant to the stock repurchase program
for a total consideration of $6,494,500. The Company's repurchases of
shares of common stock are recorded as treasury stock and result in a
reduction of stockholders' equity.
Stock Options
In 1995 and 1996, the Company granted 80,000 non-qualified options to key
employees and directors of which 40,000 have been cancelled as of December
31, 2000. In 1997, 1998, and 2000 the Company established three stock
option plans that provide for the granting of either incentive stock
options or non-qualified stock options to key employees, officers and
directors of the Company. Under the three plans, the Company may grant a
total of 1,400,000 stock options at prices not less than the fair market
value on the date of grant, with expiration dates not exceeding ten years.
As of December 31, 2000, the Company has granted 1,315,750 outstanding
incentive stock options pursuant to the three plans.
Information relating to stock options is as follows:
SHARES UNDER WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
------------ ----------------
Options outstanding at December 31, 1997 .... 350,000 5.31
Cancelled ................................ (298,000) 5.38
Granted .................................. 520,000 4.12
---------
Options outstanding at December 31, 1998 .... 572,000 4.23
Cancelled ................................ (2,000) 5.50
Granted .................................. 235,750 4.21
---------
Options outstanding at December 31, 1999 .... 805,750 4.22
Cancelled ................................ (60,000) 4.61
Granted .................................. 610,000 4.38
---------
Options outstanding at December 31, 2000 .... 1,355,750 4.28
=========
Options exercisable at December 31, 2000 .... 996,600 4.24
=========
As of December 31, 2000, the exercise price of options outstanding ranged
from $3.75 to $5.50 and the weighted average remaining contractual life of
the options was 6.6 years.
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The Company applies APB Opinion No. 25 ("Accounting for Stock Issued to
Employees") and related interpretations in accounting for stock options;
accordingly, no compensation cost has been recognized in the accompanying
consolidated statements of operations for options issued. Had compensation
cost been determined based on the fair value of the stock options at grant
date consistent with the method of Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), the Company's net income from continuing
operations and net income per share would have been the unaudited pro forma
amounts indicated below:
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
2000 1999 1998
------------- ------------- -------------
Net income (loss) from continuing operations:
As reported ............................. $ 101,300 $ 1,196,800 $ 1,490,100
Pro forma (unaudited) ................... (20,200) 929,000 1,250,600
Basic earnings per common share:
As reported ............................. 0.01 0.14 0.19
Pro forma (unaudited) ................... -- 0.11 0.16
Diluted earnings per common share:
As reported ............................. 0.01 0.14 0.18
Pro forma (unaudited) ................... -- 0.11 0.15
As required by SFAS 123, the Company provides the following disclosure of
hypothetical values for these awards. The weighted-average grant-date fair
value of options granted during 2000, 1999 and 1998 was estimated to be
$2.12, $1.83 and $1.70, respectively.
The fair value of each option grant was estimated on the date of grant
using a Black-Scholes option-pricing model with the following weighted
average assumptions for 2000, 1999 and 1998, respectively; risk free
interest rates of 6.19, 6.67 and 5.67 percent; expected lives of 5, 3 and 3
years; volatility of 45 percent, 55 percent and 64 percent and no assumed
dividends. Additional adjustments are made for assumed cancellations and
expectations that shares acquired through the exercise of options are held
during employment.
9. Income Taxes
The provision for income taxes consists of the following:
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
2000 1999 1998
-------- --------- ---------
Current
Federal .... $583,200 $ 816,800 $ 373,200
State ...... 102,900 144,100 363,800
Deferred
Federal .... 96,800 (145,300) (465,300)
State ...... 17,100 (25,600) (82,000)
-------- --------- ---------
Total ......... $800,000 $ 790,000 $ 189,700
-------- --------- ---------
A reconciliation of the difference between the statutory federal tax rate
and the Company's effective tax rate is as follows:
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
2000 1999 1998
-------- --------- -----------
Income taxes at statutory federal rate .......... $306,400 $ 675,500 $ 1,085,400
State income tax, net of federal tax benefit .... 52,600 99,300 191,500
Non-deductible goodwill amortization ............ 429,800 250,900 189,400
Change in valuation allowance ................... -- (174,900) (1,415,100)
Other ........................................... 11,200 (60,800) 138,500
-------- --------- -----------
Income tax provision ............................ $800,000 $ 790,000 $ 189,700
======== ========= ===========
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Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Realization of the future tax benefits related to the deferred tax assets
is dependent on many factors, including the Company's ability to generate
taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to
the valuation allowance for financial reporting purposes. The income tax
effect of temporary differences comprising the deferred tax assets and
liabilities as of December 31, 2000 and 1999 are as follows:
2000 1999
--------- ---------
Deferred tax assets:
Net operating loss carryforwards .... $ 296,800 $ 249,300
Accrued payroll related costs ....... 238,700 62,100
Deferred costs ...................... -- --
Accrued professional fees ........... 38,800 85,000
Other ............................... (39,700) 111,200
--------- ---------
534,600 507,600
Deferred tax liabilities:
Accelerated depreciation for tax .... (4,300) (91,200)
--------- ---------
Net deferred tax asset ....................... 530,300 416,400
Valuation allowance .......................... (40,000) (40,000)
--------- ---------
$ 490,300 $ 376,400
========= =========
Current and net long-term deferred tax assets are included in other current
assets and other assets in the accompanying Consolidated Balance Sheets.
During 1999, the valuation allowance for net deferred tax assets was
reduced by $174,900 due to the use of net operating loss carryforwards.
10. Commitments and Contingencies
Operating Leases
The Company leases office space under non-cancelable operating lease
agreements expiring in various years through 2006.
Commitments for operating leases:
2001 ....................................... $ 912,000
2002 ....................................... 827,600
2003 ....................................... 741,200
2004 ....................................... 602,000
2005 ....................................... 371,700
Thereafter ................................. 843,300
----------
$4,297,800
==========
The Company incurred rent expense of approximately $1,080,500, $680,200 and
$285,300 for the years ended December 31, 2000, 1999 and 1998,
respectively.
Contingencies
The Company is a party to legal proceedings incidental to its business.
Certain claims, suits or complaints arising out of the normal course of
business have been filed or were pending against the Company. Although it
is not possible to predict the outcome of such litigation, based on the
facts known to the Company and after consultation with legal counsel,
management believes that such litigation will not have a material adverse
effect on its financial position or results of operations.
11. Business Segment and Geographic Information
Segment information has been prepared in accordance with SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." The
Company classifies its operations into four major business segments within
the entertainment services industry: corporate communications &
entertainment, entertainment marketing & special events, artist management
and event merchandising. The corporate communications & entertainment
division provides a broad range of business communications, meeting
production, entertainment and event production services. The entertainment
marketing & special events division creates and executes innovative
entertainment marketing and special event initiatives including music
tours, fairs and festivals, television broadcasts and syndicated radio
specials. The artist management division manages the negotiation of
recording, touring, merchandising and performance contracts, and the
development of long-term career strategies for music industry artists. The
event merchandising division creates and executes high-impact merchandising
programs for entertainment and sporting events,
29
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institutional organizations and celebrity clients. Substantially, all
revenues and long-lived assets of the Company for the three years ended
December 31, 2000, were derived from United States based companies.
Each of the business divisions is managed separately and offers different
products and services. The Company does not internally report separate
identifiable assets by division. The Company evaluates performance of each
division based on several factors, of which the primary financial measure
is EBITDA, including equity in earnings of joint ventures. EBITDA is
defined as earnings before interest, taxes and depreciation and
amortization. The accounting policies of the divisions are the same as
those described in the summary of significant accounting policies.
Summarized financial information concerning the Company's reportable
segments is shown in the following table (in thousands):
CORPORATE ENTERTAINMENT
COMMUNICATIONS MARKETING & ARTIST EVENT
& ENTERTAINMENT SPECIAL EVENTS MANAGEMENT MERCHANDISING CORPORATE TOTAL
--------------- -------------- ---------- ------------- ---------- --------
2000:
Revenues $ 55,250 $ 19,777 $ 3,513 $ 10,492 $ -- $ 89,032
======== ======== ======= ======== ======= ========
EBITDA, including equity in
earnings of joint ventures $ 6,219 $ 83 $ 1,500 $ (640) $(3,295) $ 3,868
Depreciation and amortization (1,232) (532) (548) (316) (166) (2,794)
Net interest income (expense) 226 158 (16) (8) (532) (172)
-------- -------- ------- -------- ------- --------
Income from continuing
operations before
income taxes $ 5,213 $ (291) $ 936 $ (964) $(3,993) $ 901
======== ======== ======= ======== ======= ========
1999:
Revenues $ 34,175 $ 1,568 $ 2,876 $ 9,545 $ -- $ 48,164
======== ======== ======= ======== ======= ========
EBITDA, including equity in
earnings of joint ventures $ 3,371 $ (48) $ 1,650 $ 301 $(1,763) $ 3,511
Depreciation and amortization (1,139) (63) (242) (255) (91) (1,790)
Net interest income 106 -- -- 4 156 266
-------- -------- ------- -------- ------- --------
Income from continuing
operations before
income taxes $ 2,338 $ (111) $ 1,408 $ 50 $(1,698) $ 1,987
======== ======== ======= ======== ======= ========
1998:
Revenues $ 23,462 $ 838 $ 1,721 $ 1,252 $ -- $ 27,273
======== ======== ======= ======== ======= ========
EBITDA, including equity in
earnings of joint ventures $ 2,596 $ (84) $ 1,069 $ (208) $(1,158) $ 2,215
Depreciation and amortization (429) (123) (94) (6) (27) (679)
Net interest income 77 -- -- 9 58 144
-------- -------- ------- -------- ------- --------
Income from continuing
operations before
income taxes $ 2,244 $ (207) $ 975 $ (205) $(1,127) $ 1,680
======== ======== ======= ======== ======= ========
12. Quarterly Financial Data (unaudited)
Summary data relating to the results of operations for each quarter of
the years ended December 31, 2000 and 1999 follows:
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
(in thousands - except per share amounts)
December 31, 2000
Revenues $20,302 $18,968 $32,021 $17,741 $89,032
Gross Profit 6,351 6,476 8,332 5,749 26,908
Net income 144 150 613 (806) 101
Earnings per share(1)
Basic 0.02 0.02 0.06 (0.10) 0.01
Diluted 0.02 0.02 0.06 (0.10) 0.01
December 31, 1999
Revenues $11,245 $10,368 $12,858 $13,693 $48,164
Gross Profit 3,812 3,456 4,999 4,034 16,301
Income from continuing operations 328 329 590 (50) 1,197
Earnings per share - continuing operations(1)
Basic 0.04 0.04 0.07 (0.01) 0.14
Diluted 0.04 0.04 0.07 (0.01) 0.14
(1) The sum of the quarterly earnings per share data differs from the
earnings per share data for the year due to the required method of
computing dilution and the weighted average number of shares.
13. Subsequent Events
2001 Acquisition
On February 6, 2001, the Company acquired 100% of the common stock of Moore
Entertainment, Inc. ("Moore"), for a maximum purchase price of $2,200,000.
The purchase price paid at closing included a cash payment of $1,100,000
and the issuance of a promissory note totaling $1,100,000. The principal
amount of the promissory note is subject to reduction based on the earnings
of Moore during each of the years 2001 through 2004. The promissory note
accrues interest at 8% and is payable in four equal annual installments of
principal plus accrued interest, commencing May 1, 2002.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item regarding the directors and
executive officers of the Company will be included in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A in connection with the
Company's 2001 annual meeting of stockholders and is incorporated herein by
reference thereto.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item regarding the directors and
executive officers of the Company will be included in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A in connection with the
Company's 2001 annual meeting of stockholders and is incorporated herein by
reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item will be included in the Company's
definitive Proxy Statement to be filed pursuant to Regulation 14A in connection
with the Company's 2001 annual meeting of stockholders and is incorporated
herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item will be included in the Company's
definitive Proxy Statement to be filed pursuant to Regulation 14A in connection
with the Company's 2001 annual meeting of stockholders and is incorporated
herein by reference thereto.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ---------------------------------------------------------------------------------------------------
2.1(1) -- Merger Agreement between TBA Entertainment Corporation and Avalon Acquisition Corp., Inc. and
Avalon Entertainment Group, Inc.
2.2(2) -- Purchase Agreement between TBA Entertainment Corporation, Titley Spalding & Associates, LLC,
Clarence Spalding and Robert R. Titley dated June 18, 1998.
2.3(3) -- Purchase Agreement between TBA Entertainment Corporation and SFX Entertainment, Inc. and AWC
Acquisition Corp. dated May 13, 1998.
2.4(4) -- Stock Purchase Agreement between TBA Entertainment Corporation, Magnum Communications, Inc,
William R. Cox, Gary A. Larr, Charles A. Barry and Lon M. Hudman dated October 15, 1998.
2.5(5) -- Merger Agreement among TBA Entertainment Corporation, CPI Acquisition Corp., Inc., Richard S.
Smith, Richard W. Perry, Pamela J. Furmanek and Corporate Productions, Inc. dated August 11, 1998.
2.6(6) -- Stock Purchase Agreement among TBA Entertainment Corporation, Kenneth C. Koziol and Image
Entertainment Productions dated September 15, 1998.
2.7(7) Stock Purchase Agreement among TBA Entertainment Corporation, Karin Glass & Associates, Inc., Ink Up,
Inc., KGA, Inc., Karin Glass and Kenneth Glass dated March 18, 1999.
3.1(8) -- Certificate of Incorporation of the Company.
3.2(9) -- Bylaws of the Company.
4.1(10) -- Specimen Common Stock Certificate.
4.2(11) -- Article IX of the Certificate of Incorporation of the Company (included in Exhibit 3.1).
4.3(12) -- Certificate of Designation of Series A Convertible Preferred Stock of the Company.
4.4(13) -- Specimen Warrant Certificate.
10.1(14) -- Purchase and Sale Agreement between TBA Entertainment Corporation and Vail Summit Resorts,
Inc. dated July 10, 1998.
10.2(15) -- Employment Agreement dated as of January 1, 1994 between the Company and Thomas Jackson Weaver
III.
10.3(16) -- Employment Agreement dated as of January 1, 1994 between the Company and Prab Nallamilli.
10.4(17) -- Stock Purchase Warrant dated February 24, 1994 between the Company and Yee, Desmond, Schroeder
& Allen, Inc.
10.5(18) -- Form of Indemnification Agreement between the Company and each of the directors and executive
officers.
10.6(19) -- TBA Entertainment Corporation 1995 Stock Option Plan.
10.7(20) -- Form of Stock Option Agreement for options granted under the 1995 Stock Option Plan.
10.8(21) -- TBA Entertainment Corporation 1997 Stock Option Plan.
10.9(22) -- Form of Stock Option Agreement for options granted under the 1997 Stock Option Plan.
10.10(23) -- Representative's Warrant Agreement dated April 23, 1996 between the Company and H.J. Meyers &
Co., Inc.
10.11(24) -- Warrant Agreement dated April 23, 1996 among the Company, H.J. Meyers & Co., Inc. and American
Stock Transfer & Trust Company.
10.12(25) -- Registration Rights Agreement between the Company, Robert E. Geddes, Greg M. Janese, Thomas
Miserendino, Brian K. Murphy and Marc W. Oswald.
10.13(26) -- Consulting Agreement between Avalon Entertainment Group, Inc. and Robert E. Geddes.
32
33
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ---------------------------------------------------------------------------------------------------
10.14(27) -- Consulting Agreement between Avalon Entertainment Group Inc. and Thomas Miserendino.
10.15(28) -- Employment Agreement between Avalon Entertainment Group, Inc. and Marc W. Oswald.
10.16(29) -- Employment Agreement between Avalon Entertainment Group, Inc. and Greg M. Janese.
10.17(30) -- Placement Agent Warrant Agreement between the Company and Rauscher Pierce Refsnes, Inc.
10.18(31) -- Stock Purchase Agreement among TBA Entertainment Corporation, Robert Romeo and Romeo
Entertainment Group, Inc. dated November 26, 1999.
10.19(32) -- Stock Purchase Agreement among TBA Entertainment Corporation, Mike Atkins and Mike Atkins
Management, Inc. dated December 6, 1999.
10.20(33) -- Stock Purchase Agreement by and among TBA Entertainment Corporation, Edward James Dougherty,
Janet L. Dougherty, John F. Dougherty, John F. Dougherty, Eva Dougherty, The Ed & Jan Dougherty
Charitable Remainder Trust and EJD Concert Services, Inc.
10.21* Stock Purchase Agreement among TBA Entertainment Corporation, Stephen F. Moore and Moore Entertainment,
Inc. dated February 6, 2001
21 -- Subsidiaries of the Company.
99.1* -- Audit Committee Charter
- ----------
* Filed herewith.
(1) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated on April 21, 1997.
(2) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated on June 18, 1998.
(3) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated May 13, 1998.
(4) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated October 18, 1998.
(5) Incorporated herein by reference to Exhibit 2.5 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(6) Incorporated herein by reference to Exhibit 2.6 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(7) Incorporated herein by reference to Exhibit 2.7 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(8) Incorporated herein by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(9) Incorporated herein by reference to Exhibit 3.2 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(10) Incorporated herein by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(11) Incorporated herein by reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(12) Incorporated herein by reference to Exhibit 4.3 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-97890) dated March
15, 1996.
(13) Incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended (June 30, 1998).
33
34
(14) Incorporated herein by reference to Exhibit 10.2 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(15) Incorporated herein by reference to Exhibit 10.3 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(16) Incorporated herein by reference to Exhibit 10.5 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(17) Incorporated herein by reference to Exhibit 10.6 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(18) Incorporated herein by reference to Exhibit 10.9 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(19) Incorporated herein by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(20) Incorporated herein by reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(21) Incorporated herein by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(22) Incorporated herein by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(23) Incorporated herein by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(24) Incorporated herein by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(25) Incorporated herein by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(26) Incorporated herein by reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(27) Incorporated herein by reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(28) Incorporated herein by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(29) Incorporated herein by reference to Exhibit 10.20 to the Company's Current
Report on Form 8-K dated June 20, 1997.
(30) Incorporated herein by reference to Exhibit 10.17 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-29775) dated
June 20, 1997.
(31) Incorporated herein by reference to Exhibit 10.18 to the Company's
Annual Report on Form 10-K, as amended for the fiscal year ended December
31, 1999.
(32) Incorporated herein by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K, as amended for the fiscal year ended December
31, 1999.
34
35
(33) Incorporated herein by reference to Exhibit 10.20 to the Company's
Quarterly Report on Form 10Q for the quarter ended March 31, 2000.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarterly period ended
December 31, 2000.
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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 in the city of Hickory Valley, Tennessee, on the 31st
day of March 2001.
TBA ENTERTAINMENT CORPORATION
By: /s/ THOMAS JACKSON WEAVER III
-------------------------------------
Thomas Jackson Weaver III
Chairman of the Board and
Chief Executive Officer
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS JACKSON WEAVER III Chairman of the Board, March 31, 2001
- ---------------------------------- Chief Executive Officer
Thomas Jackson Weaver III (Principal Executive Officer)
/s/ JOSEPH C. GALANTE Director March 31, 2001
- ----------------------------------
Joseph C. Galante
/s/ FRANK BUMSTEAD Director March 31, 2001
- ----------------------------------
Frank Bumstead
/s/ CHARLES FLOOD Director March 31, 2001
- ----------------------------------
Charles Flood
/s/ S. HERBERT RHEA Director March 31, 2001
- ----------------------------------
S. Herbert Rhea
/s/ W. REID SANDERS Director March 31, 2001
- ----------------------------------
W. Reid Sanders
/s/ FRANK A. McKINNIE WEAVER, SR. Director March 31, 2001
- ----------------------------------
Frank A. McKinnie Weaver, Sr.
/s/ KYLE YOUNG Director March 31, 2001
- ----------------------------------
Kyle Young
/s/ BRYAN J. CUSWORTH Chief Financial Officer March 31, 2001
- ---------------------------------- (Principal Accounting and
Bryan J. Cusworth Financial Officer)
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37
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
10.21 Stock Purchase Agreement among TBA Entertainment Corporation,
Stephen F. Moore and Moore Entertainment, Inc. dated February
6, 2001.
99.1 Audit Committee Charter
37