continued...
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF EXHIBITS
A. INDEPENDENT AUDITORS' REPORT
B. BALANCE SHEET
C. STATEMENT OF OPERATIONS
D. STATEMENT OF CASH FLOWS
E. NOTES TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
Herbert Woll
Certified Public Accountant
2891 Gant Quarters Drive 23611 Chagrin Blvd., Suite 101
Marietta, GA 30068 Beechwood, OH 44122
(770) 565-7299 (216) 292-7505
To the Board of Directors
HOLLYWOOD SHOWCASE TELEVISION NETWORK, INC.
Culver City, CA
I have audited the accompanying Balance Sheet of HOLLYWOOD
SHOWCASE TELEVISION NETWORK, INC. as of December 31, 1997, and the
related Statement of Operations, and Cash Flows for the period then
ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on
these financial statements based on my audit.
I conducted my audit in accordance with generally accepted
auditing standards. These standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures set forth 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. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of HOLLYWOOD
SHOWCASE TELEVISION NETWORK, INC., as of December 31, 1997 and the
results of its operations and its cash flows for the period then ended,
in conformity with generally accepted accounting principles.
/s/ Herbert Woll
Herbert Woll, CPA
Marietta, Georgia 30068
May 13, 1998
BALANCE SHEET
AS AT DECEMBER 31, 1997
ASSETS
Current Assets
Cash in Banks $10,025
Accounts Receivable 13,814
Contract Receivables
- Note 1 1,800,000
Inventory - Note 1, 2 41,012,500
Prepaid Expenses 51,416
Total Current Assets $42,887,755
Property & Equipment
(net of $15,733 Depr
Note 1 & 4) 162,034
Other Assets (Note 1) 4,059,040
Total Assets $47,108,829
LIABILITIES & STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts Payable $100,000
Accrued Expenses 17,588
Current Portion of
Long Term Debt 820,777
Total Current Liabilities $938,365
Long Term Debt $1,463,698
Stockholders' Equity
Common Stock $687
At $.0001 par value.
Issued and outstanding
6,869,500 shares
Paid in Capital 41,396,401
Retained Earnings
December 31, 1997 3,310,678
Total Stockholders' Equity 44,706,766
Total Liabilities &
Stockholders' Equity $47,108,829
The accompanying footnotes are an integral part of these financial
statements
STATEMENT OF OPERATIONS
AS AT DECEMBER 31, 1997
Sales $5,483,334
Other Income 804,983
Less: Cost of Sales 2,215,664
Gross Profit on Sales $4,072,653
Operating Expenses
Auto & Parking $3,124
Bank Charges 2,533
Equipment Rental 9,360
Insurance 1,173
Miscellaneous 5,895
Moving Expenses 4,433
Outside Services 166,791
Professional Fees 39,385
Printing 1,214
Rent & Storage 51,605
Repairs 13,790
Salaries 174,013
Samples 1,530
Stock Transfer 1,981
Supplies - Office 6,877
Taxes - Miscellaneous 1,946
Taxes - Payroll 34,734
Telephone 12,461
Travel & Trade Prom. 48,620
Total Operating Expenses 581,465
Profit before Depreciation $3,491,188
Less: Depreciation 15,733
Profit before Income Tax $3,475,455
Corporate Income Tax -0-
Net Profit on Operations $3,475,455
The accompanying footnotes are an integral part of these
financial statements
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
Cash Flows from Operations
Net Income $3,475,455
Adjustments to reconcile
net income to net cash
provided by operating
activities
Depreciation 15,733
3,491,188
Changes in Operating
Assets & Liabilities
(Increase) in accounts receivable (13,814)
(Increase) in contract receivable (1,800,000)
(Increase) in inventory (41,012,500)
(Increase) in Prepaid Expenses (51,416)
Decrease in Accounts Payable 100,000
Decrease in Accrued Expenses 17,588
Decrease in current portion of Long Term Debt 820,777
(41,939,365)
Net Cash Provided by Operations 45,430,553
Cash Flows form Investments
Additional paid in capital (42,663,152)
Other Assets (4,059,040)
Purchase of Equipment & Furniture (162,034)
(46,884,226)
Financing Activities
Increase in Long Term Debt 1,463,698
Net Cash Increase 10,025
Cash on Hand - 1/1/1997 -0-
Cash on Hand - 12/31/1997 $10,025
The accompanying footnotes are an integral part of these
financial statements
NOTES TO FINANCIAL STATEMENTS
AS AT DECEMBER 31, 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies of Hollywood
Showcase Television Network, Inc. is presented to assist in
understanding the Company's financial statements. The financial
statements and notes are representations of the Company policies
conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Note 1. Contract Receivable
In August 1997, Hollywood Showcase Television Network, Inc.
purchased in a tax free exchange a company named Genesis Group Inc. One
of the assets received is a contract for the sale of certain films. The
terms of the contract call for monthly payments beginning March 1, 1998
in the amount of $100,000 per month for six months and $200,000 per
month for the next 24 months totaling $3,000,000. Beginning October 1,
1999 a licensing fee of $100,000 will be paid to the Company monthly,
until September 1, 2002. Total of contract being $5,400,000. Analysis
of the available records of Genesis Group indicates that the cost of
the 380 films purchased was $2,184,625. This transaction will be
treated as an installment sale, and will be reported for taxation on
the same basis.
Note 2. Inventory
The inventory was acquired from Genesis Group, Inc. and consists
of Movie Films and music tapes and CD ROM Interactive tapes. With the
inventory comes the rights to reconfigure, compile, manufacture,
distribute, license, sell, and lease. Each item is one of a kind. The
company has an appraisal that identifies each item of inventory, and
evaluates it. Inventory is carried at appraised value.
Note 3. Office Furniture & Equipment
Acquired in the same transaction was office furniture and
equipment that cost the company $3,120. Depreciation based on the
remaining useful life of the items will be calculated on the straight
line method beginning September 1, 1997.
Note 4. Stockholders' Equity
The Company has 50,000,000 shares of Stock authorized at $.0001
par value, 6869,500 were issued The assets of Genesis Group Inc. were
acquired by trading 6,869,500 shares of Hollywood Showcase for 100% of
the stock of Genesis. The assets acquired are now shown on the Balance
Sheet.
Note 5. Depreciation
Depreciation has been provided on the same basis for tax and
financial accounting purposes using the straight line method. The
estimated useful lives of the assets are as follows:
Shop Equipment 5-7 Years
Office Furniture & Fixtures 5-10 Years
Leasehold Improvements 3-10 Years
Commitments
The Company is committed under a lease dated October 1, 1997, for
a minimum annual rental (exclusive of real estate taxes, maintenance,
etc.) as follows:
Year ending December 31, 1998 $97,772
1999 19,200
2000 16,000
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements
B. Articles of Incorporation
C. Bylaws
D. 15c2-11
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
GENESIS MEDIA GROUP, INC.
By: /s/ Don Logan
Don Logan, Chairman |
