UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2008
[ ] 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 000-52051 | ||
THE MINT LEASING, INC. (Exact Name of Registrant as Specified in Its Charter) | ||
Nevada (State or Other Jurisdiction of Incorporation or Organization) | 87-0579824 (IRS Employer Identification No.) | |
323 N. Loop West, Houston, Texas (Address of Principal Executive Offices) | 77008 (Zip Code) | |
(713) 665-2000 (Registrant’s Telephone Number, Including Area Code) | ||
LEGACY COMMUNICATIONS CORPORATION 210 North 1000 East, St. George, Utah 84770 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) |
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. þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o Accelerated Filer o
Non-Accelerated Filer o Smaller reporting companyþ
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
As of August 12, 2008, there were outstanding 81,929,504 shares of the registrant’s common stock, $.001 par value per share.
PART I
FINANCIAL INFORMATION
Item1. Financial Statements.
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2008 | December 31, 2007 | |||||||
(Unaudited) | ||||||||
CURRENT ASSETS | ||||||||
Assets of discontinued operations | $ | 1,214,373 | $ | 1,360,012 | ||||
TOTAL ASSETS | $ | 1,214,373 | $ | 1,360,012 |
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
June 30, 2008 | December 31, 2007 | |||||||
(Unaudited) | ||||||||
CURRENT LIABILITIES | ||||||||
Notes payable – current | $ | 78,548 | $ | 78,548 | ||||
Accrued interest payable | 36,453 | 31,740 | ||||||
Liabilities of discontinued operations | 4,881,492 | 4,601,854 | ||||||
Total Liabilities | 4,996,493 | 4,712,142 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Preferred stock; 5,000,000 shares authorized at $0.001 par value, 40,000 and 0 shares outstanding, respectively | 40 | - | ||||||
Common stock, 50,000,000 shares authorized at $0.001 par value, 868,958 shares issued and outstanding, respectively | 869 | 869 | ||||||
Additional paid-in capital | 5,043,040 | 5,003,080 | ||||||
Accumulated deficit | (8,826,069 | ) | (8,356,079 | ) | ||||
Total Stockholders’ Equity (Deficit) | (3,782,120 | ) | (3,352,130 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 1,214,373 | $ | 1,360,012 |
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
REVENUE FROM CONTINUING OPERATIONS | $ | - | $ | - | $ | - | $ | - | ||||||||
EXPENSES FROM CONTINUING OPERATIONS | - | - | - | - | ||||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | - | - | - | - | ||||||||||||
OTHER INCOME (EXPENSE) FROM CONTINUING OPERATIONS | ||||||||||||||||
Interest expense | (4,713 | ) | (4,713 | ) | (2,596 | ) | (2,356 | ) | ||||||||
Total Other Income (Expense) From Continuing Operations | (4,713 | ) | (4,713 | ) | (2,596 | ) | (2,356 | ) | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (4,713 | ) | (4,713 | ) | (2,596 | ) | (2,536 | ) | ||||||||
Income tax | - | - | - | - | ||||||||||||
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS | (465,277 | ) | 805,034 | (254,409 | ) | (194,264 | ) | |||||||||
NET INCOME (LOSS) | $ | (469,990 | ) | $ | 800,321 | $ | (257,005 | ) | $ | (196,620 | ) | |||||
BASIC AND FULLY DILUTED GAIN (LOSS) PER SHARE | ||||||||||||||||
Continuing Operations | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
Discontinued Operations | (0.53 | ) | 0.94 | (0.30 | ) | (0.23 | ) | |||||||||
$ | (0.54 | ) | $ | 0.93 | $ | (0.30 | ) | $ | (0.23 | ) | ||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 868,959 | 860,181 | 868,959 | 860,181 |
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, | ||||||||
2008 | 2007 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | (469,990 | ) | $ | 800,321 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Gain on sale of station | - | (1,886,349 | ) | |||||
Disposition of assets | - | (1,562 | ) | |||||
Depreciation and amortization | 95,692 | 94,814 | ||||||
Shares issued pursuant to loan agreement | - | 5,000 | ||||||
Changes in assets and liabilities: | ||||||||
(Increase) decrease in escrow deposits | - | 200,000 | ||||||
(Increase) decrease in prepaid expenses | 35,320 | (14,078 | ) | |||||
(Increase) decrease in deposits/other assets | 5,560 | 14,865 | ||||||
(Increase) decrease in deferred tax asset | - | 193,084 | ||||||
Increase (decrease) in accounts payable | 38,106 | (62,101 | ) | |||||
Increase (decrease) in accrued expenses | 148,623 | (47,937 | ) | |||||
Increase (decrease) in income tax payable | - | 180,784 | ||||||
Increase (decrease) in accrued interest payable | 100,960 | 19,294 | ||||||
Increase (decrease) in other liabilities | 3,051 | (5,842 | ) | |||||
Proceeds from sale of fixed assets | - | 2,500,000 | ||||||
Purchase of station assets | - | (104,403 | ) | |||||
Increase (decrease) in deposits on station sales | - | (750,000 | ) | |||||
Net Cash Provided (Used) by Operating Activities | (42,678 | ) | 1,135,890 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | - | - | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Bank overdraft | 1,386 | - | ||||||
Proceeds from preferred stock issuance | 40,000 | - | ||||||
Proceeds from related parties – short term notes payable | 9,849 | (96,795 | ) | |||||
Repayment to related parties – short term notes payable | (7,249 | ) | 11,500 | |||||
Repayment of notes payable | (1,646 | ) | (1,837,038 | ) | ||||
Proceeds from notes payable | - | 800,622 | ||||||
Net Cash Provided (Used) by Financing Activities | 42,340 | (1,121,711 | ) | |||||
INCREASE (DECREASE) IN CASH | (338 | ) | 14,179 | |||||
CASH AT BEGINNING OF PERIOD | 338 | 36,059 | ||||||
CASH AT END OF PERIOD | $ | - | $ | 50,238 |
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Six Months Ended June 30, | ||||||||
2008 | 2007 | |||||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
CASH PAID FOR: | ||||||||
Interest | $ | 29,599 | $ | 67,314 | ||||
Income taxes | $ | 1,924 | $ | 1,000 |
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 1 – BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company’s most recent audited financial statements and notes thereto included in its December 31, 2007 Annual Report. Operating results for the six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES – PROVISION FOR TAXES
Income Taxes:
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other portions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with the tax positions taken that exceed the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income.
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2008
Income Taxes (Period of Adoption)
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2001.
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of Interpretation 48, the Company does not recognize an increase in the liability for unrecognized tax benefits. No unrecognized tax benefits are being reported for the quarter ended June 30, 2008.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
NOTE 3 – RELATED PARTY BALANCES
At June 30, 2008, the Company had the following balances due to related parties:
Various other payables due to shareholders | $ | 106,000 | ||
Accrued interest on payables due to shareholders ranging from 5.1% to 7.5% | 87,719 | |||
Related Party Balance – Net Liability | $ | 193,719 |
NOTE 4 – NOTES PAYABLE – RELATED PARTIES
At June 30, 2008, the Company had the following notes payable due to related parties:
Various notes due to shareholders, non-interest bearing, unsecured and due on demand. | $ | 52,000 | ||
Short term notes due to President, bearing interest at 10.50%, unsecured and due on demand. | 188,975 | |||
Notes due to shareholder, bearing interest at 8.00%, unsecured and due on demand. | 210,000 | |||
Notes due to shareholder, bearing interest at 8.00%, unsecured and due on demand. | 18,000 | |||
Notes due to Officers, bearing interest at 12.00%, unsecured and due on demand. | 85,000 | |||
Notes due to shareholder, bearing interest at 10.50%, unsecured and due on demand. | 41,400 | |||
Notes due to shareholder, bearing interest at 10.50%, unsecured and due on demand. | 30,000 | |||
Notes due to shareholders, bearing interest at 8.00%, unsecured and due on demand. | 60,000 | |||
Total Notes Payable – related party | $ | 685,375 |
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 5 – SUBSEQUENT EVENTS
On July 18, 2008, the Company entered into the following simultaneous transactions, more fully described in this Report:
· | Entered an Assumption and Novation Agreement with holders of $4,881,492 of ongoing principal obligations and accrued interest whereby the obligations were assumed by Legacy Media Corporation, a wholly owned subsidiary of the Company, and the Company was released from any further liability in connection with such obligations. |
· | Declaration of a 20:1 reverse stock split (the “Reverse Stock Split”) of the Company’s Common Stock, $.001 par value per share, outstanding as of July 16, 2008 (the “Pre-Combination Common Stock”); |
· | Amendment and Restatement of the Company’s Articles of Incorporation to increase the authorized capital of the Company to 500,000,000 shares, $.001 par value per share, of which 480,000,000 are Common Stock, $.001 par value per share (the “Post-Combination Common Stock”), and 20,000,000 are Preferred Stock, $.001 par value per share; |
· | Issuance and sale of 145,000 shares of the Company’s Series A Cumulative Redeemable Preferred Stock, $.001 par value per share (the “Series A Preferred Stock”), in a private placement to Ongoing Solutions, LLC, as a nominee for various persons, none of whom are the beneficial owner of more than 4.99% of the issued and outstanding Series A Preferred Stock, pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”) for an aggregate purchase price of $145,000; |
· | Amendment of the Company’s Amended and Restated Articles of Incorporation to change the name of the Company from Legacy Communications Corporation to The Mint Leasing, Inc.; |
· | Adoption of a Certificate of Designations for the Company’s Series B Cumulative Preferred Stock, $.001 par value per share (the “Series B Preferred Stock”) having voting rights equal to the voting rights of all other shares of voting stock plus one vote; |
· | Effective August 18, 2008 Anacelia Olivarez resigned as Chief Financial Officer and Treasurer and was replaced by Jerry Parish who assumed the offices of Chief Financial and Accounting Officer in addition to his other offices of President, Chief Executive Officer, and Secretary. |
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2008
· | Acquisition of all of the outstanding shares of The Mint Leasing, Inc., a Texas corporation (“Mint Texas”), from private stockholders in exchange for 70,365,000 shares of Post-Combination Common Stock and 2,000,000 shares of Series B Cumulative Preferred Stock, $.001 par value per share (the “Series B Preferred Stock”) pursuant to the terms of an Agreement and Plan of Reorganization (the “Reorganization Agreement”); |
· | Exchange 13,654,316 shares of the Company’s Pre-Combination Common Stock owned by E. Morgan Skinner, Jr., Lavon Randall, Jeffrey B. Bate, R. Michael Bull, and trusts which they control (the “Major Stockholders”) for all of the issued and outstanding shares of Legacy Media Corporation pursuant to the terms of a Trust Receipt, Irrevocable Instruction and Irrevocable Proxy (the “Trust Receipt”); |
· | Election of a new board of directors and new officers; |
· | Issuance of warrants to purchase 2,100,000 shares at prices of $0.10, $0.50, $1.00, $1.50 and $2.00 per share to two consultants in connection with consulting agreements executed with Mint Texas as of June 1, 2007 and assumed by Mint Nevada on the closing date; and |
· | Conversion of $78,548 in principal and $ 36,453 in accrued interest under outstanding promissory notes into 11,028,872 shares of Common Stock. |
All references to common stock have been retroactively restated for the Reverse Stock Split. As a result of the transactions on July 18, 2008, Jerry Parish, individually and as trustee, acquired control of the Company and the Company disposed of all of its operations relating to the acquisition, development, ownership and sale of radio stations and commenced the business of leasing automobiles and fleet vehicles, primarily in the State of Texas.
The following is a summary of discontinued operations.
ASSETS
June 30, 2008 | December 31, 2007 | |||||||
CURRENT ASSETS | ||||||||
Cash | $ | - | $ | 338 | ||||
Prepaid expenses | 500 | 35,820 | ||||||
Total Current Assets | 500 | 36,158 | ||||||
PROPERTY AND EQUIPMENT – NET | 512,603 | 561,312 | ||||||
OTHER ASSETS | ||||||||
FCC licenses – Net | 459,914 | 506,897 | ||||||
Deposits | 475 | 6,035 | ||||||
Construction in progress | 240,881 | 249,610 | ||||||
Total Other Assets | 701,270 | 762,542 | ||||||
TOTAL ASSETS | $ | 1,214,373 | $ | 1,360,012 |
THE MINT LEASING, INC.
FORMERLY
LEGACY COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2008
LIABILITIES AND STOCKHOLDERS’ EQUITY
June 30, 2008 | December 31, 2007 | |||||||
CURRENT LIABILITIES | ||||||||
Bank overdraft | $ | 1,386 | $ | - | ||||
Accounts payable | 433,049 | 348,930 | ||||||
Accrued liabilities | 1,124,743 | 1,030,862 | ||||||
Other liabilities | 84,597 | 84,702 | ||||||
Other liabilities – related party | 193,719 | 190,563 | ||||||
Deposits on station sales | 6,000 | 6,000 | ||||||
Income tax payable | 24,752 | 24,752 | ||||||
Notes payable – related parties | 685,375 | 682,775 | ||||||
Notes payable – current | 1,327,763 | 1,326,877 | ||||||
Accrued interest payable – related parties | 235,702 | 229,862 | ||||||
Accrued interest payable | 745,435 | 655,029 | ||||||
Total Current Liabilities | 4,862,521 | 4,580,352 | ||||||
LONG-TERM LIABILITY | ||||||||
Notes payable | 18,971 | 21,502 | ||||||
Total Long-Term Liability | 18,971 | 21,502 | ||||||
Total Liabilities | 4,881,492 | 4,601,854 | ||||||
STATEMENT OF OPERATIONS
Six Months Ended June 30 | Three Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
REVENUE | ||||||||||||||||
Gain on sale of station | - | 1,886,349 | $ | - | $ | - | ||||||||||
Other revenue | 15,000 | 1,562 | 15,000 | 1,562 | ||||||||||||
Broadcast revenue | 7,100 | 1,999 | 3,600 | 1,414 | ||||||||||||
Total Revenue | 22,100 | 1,889,910 | 18,600 | 2,976 | ||||||||||||
EXPENSES | ||||||||||||||||
Depreciation and amortization | 95,692 | 94,814 | 47,846 | 48,437 | ||||||||||||
General and administrative | 98,724 | 332,329 | 71,613 | 175,742 | ||||||||||||
Salaries and personnel costs | 126,419 | 145,960 | 58,242 | 52,082 | ||||||||||||
Total Expenses | 320,835 | 573,103 | 177,701 | 276,261 | ||||||||||||
INCOME (LOSS) FROM OPERATIONS | (298,735 | ) | 1,316,807 | (159,101 | ) | (273,285 | ) | |||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest expense | (164,618 | ) | (136,905 | ) | (95,308 | ) | (59,622 | ) | ||||||||
Total Other Income (Expense) | (164,618 | ) | (136,905 | ) | (95,308 | ) | (59,622 | ) | ||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (463,353 | ) | 1,179,902 | (254,409 | ) | (332,907 | ) | |||||||||
Income tax | 1,924 | 374,868 | - | (138,643 | ) | |||||||||||
NET INCOME (LOSS) | (465,277 | ) | 805,034 | $ | (254,409 | ) | $ | (194,264 | ||||||||
Item 2. Management’s Discussion and Analysis or Plan of Operations.
This Management’s Discussion and Analysis contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of forward-looking terminology such as, “may”, “believe”, “expect”, “intend”, “anticipate”, “estimate” or “continue” or the negative thereof or other variations thereon or comparable terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors with respect to any such forward-looking statements include, but are not limited to, the risk factors described in the Company’s Annual Report on Form 10-KSB and in this report. The following discussion of the results of operations and financial condition should be read in conjunction with the Financial Statements and related Notes thereto included herein and in conjunction with our Annual Report on Form 10-KSB for the year ended December 31, 2007.
Subsequent Events
On July 18, 2008, the Company entered into the following simultaneous transactions, more fully described in this Report:
· | Entered an Assumption and Novation Agreement with holders of $4,881,492 of ongoing principal obligations and accrued interest whereby the obligations were assumed by Legacy Media Corporation, a wholly owned subsidiary of the Company, and the Company was released from any further liability in connection with such obligations. |
· | Declaration of a 20:1 reverse stock split (the “Reverse Stock Split”) of the Company’s Common Stock, $.001 par value per share, outstanding as of July 16, 2008 (the “Pre-Combination Common Stock”); |
· | Amendment and Restatement of the Company’s Articles of Incorporation to increase the authorized capital of the Company to 500,000,000 shares, $.001 par value per share, of which 480,000,000 are Common Stock, $.001 par value per share (the “Post-Combination Common Stock”), and 20,000,000 are Preferred Stock, $.001 par value per share; |
· | Issuance and sale of 145,000 shares of the Company’s Series A Cumulative Redeemable Preferred Stock, $.001 par value per share (the “Series A Preferred Stock”), in a private placement to Ongoing Solutions, LLC, as a nominee for various persons, none of whom are the beneficial owner of more than 4.99% of the issued and outstanding Series A Preferred Stock, pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”) for an aggregate purchase price of $145,000; |
· | Amendment of the Company’s Amended and Restated Articles of Incorporation to change the name of the Company from Legacy Communications Corporation to The Mint Leasing, Inc.; |
· | Adoption of a Certificate of Designations for the Company’s Series B Cumulative Preferred Stock, $.001 par value per share (the “Series B Preferred Stock”) having voting rights equal to the voting rights of all other shares of voting stock plus one vote; |
· | Effective August 18, 2008, Anacelia Olivarez resigned as Chief Financial Officer and was replaced by Jerry Parish who assumed the offices of Chief Financial and Accounting Officer in addition to his other offices of President, Chief Executive Officer, and Secretary. |
· | Acquisition of all of the outstanding shares of The Mint Leasing, Inc., a Texas corporation (“Mint Texas”), from private stockholders in exchange for 70,365,000 shares of Post-Combination Common Stock and 2,000,000 shares of Series B Cumulative Preferred Stock, $.001 par value per share (the “Series B Preferred Stock”) pursuant to the terms of an Agreement and Plan of Reorganization (the “Reorganization Agreement”); |
· | Exchange 13,654,316 shares of the Company’s Pre-Combination Common Stock owned by E. Morgan Skinner, Jr., Lavon Randall, Jeffrey B. Bate, R. Michael Bull, and trusts which they control (the “Major Stockholders”) for all of the issued and outstanding shares of Legacy Media Corporation pursuant to the terms of a Trust Receipt, Irrevocable Instruction and Irrevocable Proxy (the “Trust Receipt”); |
· | Election of a new board of directors and new officers; |
· | Issuance of warrants to purchase 2,100,000 shares at prices of $0.10, $0.50, $1.00, $1.50 and $2.00 per share to two consultants in connection with consulting agreements executed with Mint Texas as of June 1, 2007 and assumed by Mint Nevada on the closing date. and |
· | Conversion of $78,548 in principal and $ 36,453 in accrued interest under outstanding promissory notes into 11,028,872 shares of Common Stock. |
As a result of the transactions on July 18, 2008, Jerry Parish, individually and as trustee, acquired control of the Company and the Company disposed of all of its operations relating to the acquisition, development, ownership and sale of radio stations and commenced the business of leasing automobiles and fleet vehicles, primarily in the State of Texas. A pro forma financial statement relating to the acquisition of Mint Texas will be filed as an exhibit to an amended the Current Report on Form 8-K relating to the transactions.
Results of Discontinued Operations
The Company had a loss from discontinued operations of $465,277 for the six months and $254,409 for the three months ended June 30, 2008 compared to income from discontinued operations of $805,034 for the six months and a loss from discontinued operations $194,264 for the three months ended June 30, 2007. The loss from discontinued operations in the six and three months ended June 30, 2008 related primarily to accrued interest on outstanding indebtedness of discontinued operations and the legal fees and other expenses incurred in connection with the negotiation and execution of the Stock Purchase Agreement, and the preparation of a Schedule 14C relating to the declaration of the Reverse Stock Split, the adoption of the Restated Articles of Incorporation, the issuance of the Series A Preferred Stock, the entry into the Reorganization Agreement and the exchange of the shares of Legacy Media Corporation for the shares of the Company held by the Major Stockholders. The Company did not have any revenues during the six months ended June 30, 2008. Income from discontinued operations for the six months ended June 30, 2007 related primarily to the gain on the sale of AM radio station KBET(AM), Winchester, NV, which generated $1,886,349 in revenue and was partially offset by general and administrative expenses of $332,329, depreciation and amortization expenses of $94,814, salaries and personnel costs of $145,960, and interests expenses of $141,618.
Results of Operations of Continuing Operations
Continuing operations consist solely of indebtedness not assumed by Legacy Media Corporation in the amount of $78,548 as of June 30, 2008 and June 30, 2007. Interest expenses, income before income taxes, and net income consist entirely of interest incurred with respect to this indebtedness in the amount of $4,713 for the six months ended June 30, 2008 and June 30, 2007.
Liquidity and Capital Resources
As of June 30, 2008 the Company had accumulated operating deficits of $8,826,069, a stockholders’ deficit of $3,782,120, and a working capital deficit of $3,782,120. As of December 31, 2007 the Company had accumulated operating deficits of $8,356,079, a stockholders’ deficit of $3,352,130, and a working capital deficit of $3,352,130. During the six months ended June 30, 2008, the Company did not generate a material amount of cash. On April 28, 2008, the Company received $40,000 in connection with the sale of 40,000 shares of our Series A Redeemable Convertible Preferred Stock, which has allowed us to continue operations on a day-to-day basis. See, “Subsequent Transactions” above. As of June 30, 2008 our total liabilities were $4,996,493, of which $4,881,492 relate to discontinued operations and $115,001 relate to continuing operations and are due upon demand or within 12 months. Substantially all of the assets of discontinued operations have been pledged to secure outstanding debt of discontinued operations. All indebtedness of continuing operations is unsecured. As of June 30, 2008, the Company had no available cash resources and continued to operate using borrowings under credit arrangements with its officers, stockholders and third persons. The ability of the Company to continue as a going concern in its historical business is dependent upon its ability to dispose of its broadcast properties on acceptable terms and secure additional funding sources and attaining profitable operations. The financial statements of discontinued operations in Note 5 to the financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
On July 18, 2008, the Company completed the transactions described above under “Subsequent Transactions”. As a result of the transactions on July 18, 2008, the Company disposed of all of its operations relating to the acquisition, development, ownership and sale of radio stations and acquired The Mint Leasing, Inc., a Texas corporation (“Mint Texas”) as a wholly owned subsidiary. Mint Texas is engaged in the business of leasing automobiles and fleet vehicles, primarily in the State of Texas. As of June 30, 2008, Mint Texas had accumulated retained earnings of $15,102,085, stockholders’ equity of $15,666,787, and net working capital of $47,611,762. Mint Texas reported net income of $5,273,788 for the six months ended June 30, 2008 and had total cash balances of $237,096 as of June 30, 2008. In addition, Mint Texas has a $33,000,000 line of credit with commercial banks for the purchase of vehicles for lease, substantially all of which was outstanding as of June 30, 2008. The Company believes that it has adequate committed resources to provide funding for the continued operation of Mint Texas.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 4T. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and our
Principal Accounting and Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. As required by Rule 13a-15 under the Exchange Act, our management, including, our Chief Executive Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2008. Based on that evaluation, management concluded that as of June 30, 2008, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were not effective to satisfy the objectives for which they are intended.
Changes in Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. A system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A material weakness is any deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect all misstatements. As of December 31, 2007, our management concluded that our internal control over financial reporting had material weaknesses relating to inadequate separation of duties between members of our management. Management has made no changes in the company’s internal control over financial reporting during the six months ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.
PART II
OTHER INFORMATION
Item 6. Exhibits.
Exhibit | Description | |
31.1* | Certification required by Rule 13a-14(a) by the Chief Executive Officer | |
31.2* | Certification required by Rule 13a-14(a) by the Chief Financial Officer | |
32.1* | Certification required by Rule 13a-14(b) |
* Filed herewith
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
LEGACY COMMUNICATIONS CORPORATION | ||
Date: August 18, 2008 | By: /s/ Jerry Parish Name: Jerry Parish Title: President and Chief Executive Officer Principal Accounting Officer | |
/s/ Jerry Parish Name: Jerry Parish Title: Principal Financial Officer |
EXHIBIT INDEX
Exhibit | Description | |
31.1* | Certification required by Rule 13a-14(a) by the Chief Executive Officer | |
31.2* | Certification required by Rule 13a-14(a) by the Chief Financial Officer | |
32.1* | Certification required by Rule 13a-14(b) |
* Filed Herewith