SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 1, 2003
Amended as of July 16, 2003
SCIENCE DYNAMICS CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 0-10690 22-2011859
(STATE OR OTHER JURISDICTION (COMMISSION FILE NO.) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
7150 N. Park Drive, Suite 500
Pennsauken, NJ 08109
(Address of principal executive offices)
Registrant's telephone number, including area code (856) 910-1166
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
FINANCIAL STATEMENTS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Modern Mass Media, Inc. - Audited Balance Sheet for the year ended
December 31,2002; Audited Statements of Operations for the year ended
December 31, 2002; Audited Statement of Cash Flows for the year ended
December 31, 2002 and Notes to the Financial Statements.Unaudited
Balance Sheet for the period ended March 31, 2003 and Unaudited
Satements of Operations for the period ended March 31, 2003.
(b) Pro Forma Financial information
Science Dynamics Corp. and Subsidiaries Unaudited combined Pro Forma
Balance Sheet as of March 31, 2003, unaudited combined Pro Forma
Statement of Operations for the three months ended March 31, 2003;
Unaudited combined Pro Forma statement of Operations for the year ended
December 31, 2002.
(c) Exhibits
Exhibit 99.01 (1) Press Release
Exhibit 99.02 (1) Purchase agreement between M3 ACQUISITION CORP.
("M3" or "Buyer") A subsidiary of Science
Dynamics Corporation ("SDC") and
Modern Mass Media, Inc. ("MMM" or "Seller")
Exhibit 99.03 (1) Employment Agreement with Chip Del Coro
(1) Incorporated by reference from the Registrant's Form 8-K filed
April 15, 2003.
UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS
On March 31, 2003, Science Dynamics Corp. (the "Company") through its newly
formed majority owned subsidiary, M3 Acquisition Corp., acquired certain
Business assets and assumed certain liabilities of Modern Mass Media, Inc.
for $600,000.The acquisition was funded through an additional Purchase and
Security Agreement between Laurus Master Fund, Ltd. and the Company. Laurus
Master Funds, Ltd. agrees to make advances and investments available to the
Company in the aggregate amount of up to $1,000,000.The Company issued a
convertible note on March 31, 2003, for the advancement of $247,750 in
connection with the acquisition.
Upon execution of the Purchase Agreement between the Company and Modern Mass
Media, Inc. an initial payment of $100,000 was due at closing and a further
payment of $100,000 due sixty days after the first payment. Multi Mass Media
retained $100,000 to cover the initial payment and a holdback reserve of
$55,000 to cover any outstanding checks or open items. The balance on account
was remitted to M3 Acquisition .The remaining portion of the purchase price
will be paid out over the next sixty months in increments of $80,000 per
year, plus interest equivalent to the "Cost of Living" index, in cash or
stock or a combination of both at the Buyer's discretion.
The following unaudited pro forma combined financial statements of the
Company presents the unaudited combined balance sheet as of
March 31, 2003 and the unaudited combined statements of operations for
the year ended December 31, 2002, and the three months ended
March 31, 2003, as if the acquisition of Modern Mass Media had occurred
January 1, 2002.
The acquisition will be accounted for as a purchase, with the assets
acquired and the liabilities assumed recorded at fair values, and the
results of Modern Mass Media's, Inc. operations included in the
Company's combined financial statements beginning April 1, 2003.
The pro forma adjustments represent, in the opinion of management, all
adjustments necessary to present the Company's pro forma combined financial
position and results of its combined operations in accordance with Article 11
of SEC Regulation S-X based upon available information and certain
assumptions considered reasonable under the circumstances.
The unaudited pro forma combined financial statements presented herein is for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the purchase had
been consummated on such dates, nor is it necessarily indicative of future
operating results or financial position. The unaudited pro forma combined
financial statements should be read in conjunction with the audited financial
statements of the Company and the notes thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SCIENCE DYNAMICS CORPORATION
BY: /s/ Alan C. Bashforth
---------------------
CEO/President
DATED: July 16, 2003
--------------
SCIENCE DYNAMICS
INDEX TO FINANCIAL STATEMENTS
Pages
-----
Audited financial statements:
Report of independent certified public Accountants 1
Balance sheet as of December 31, 2002 2
Statement of operation for the year ended December 31, 2002 3
Statement of cash flow for the year ended December 31, 2002 4
Statement of changes in stockholders' equity for the year
ended December 31, 2002 5
Notes to financial statements 6 - 9
Pro Forma Combined Statement of Operations for the year
ended December 31, 2002 10
Pro Forma Combined Balance Sheet as of March 31, 2003 11
Pro Forma Combined Statement of Operations for the
period ended March 31, 2003 12
Notes to Unaudited Pro Forma Combined Financial Statements 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors
Modern Mass Media, Inc..
We have audited the accompanying balance sheet of Modern Mass Media, Inc. as
of December 31, 2002 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Modern Mass Media, Inc.
as of December 31, 2002 and results of their operations and their cash flows
for the year then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the financial statements, the Company had losses for the past
several years and requires additional capital to continue operations. These
conditions raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Peter C. Cosmas Co., CPAs
370 Lexington Ave.
New York, NY 10017
July 2, 2003
- -1-
Modern Mass Media, Inc.
Balance Sheet
For the Year Ended December 31, 2002
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 503,963
Accounts receivable 500,414
Inventories 95,732
Prepaid income taxes 7,863
----------
Total current assets 1,107,972
Plant, Property and equipment, net of
accumulated depreciation $1,069,775 59,369
OTHER ASSETS
Security and other deposits 23,379
----------
Total assets $1,190,720
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Line of Credit Merrill Lynch $ 256,511
Accounts payable and accrued expenses 579,172
Income taxes payable 34,000
Customer deposits 117,053
Deferred income 58,038
----------
Total current liabilities 1,044,774
Long term debt 50,000
----------
Total liabilities 1,094,774
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY
and issued, 32,500 shares outstanding 400,000
Accumulated comprehensive gain 4,311
Retained earnings 1,272,870
----------
1,677,181
Less: Treasury stock, 67,500 shares, at cost (1,581,235)
----------
Total stockholders' equity 95,946
----------
Total liabilities and stockholders' equity $1,190,720
==========
See accompanying notes to financial statements
- -2-
Modern Mass Media, Inc.
Statement of Operations
For the Year Ended December 31, 2002
Net sales $4,763,160
Cost of sales 3,802,890
---------
Gross profit on sales 960,270
Operating Expenses
Selling expenses 709,785
General and administrative expenses 1,075,302
---------
Total costs and expenses 1,785,087
LOSS FROM OPERATIONS (824,817)
OTHER INCOME/(EXPENSES):
Interest expense (93,839)
Gain on sale of Land and Building 480,062
Realized loss on sale of marketable securities (67,028)
---------
Total other income/(expenses) 319,195
---------
LOSS BEFORE INCOME TAXES (505,622)
INCOME TAX 36,824
NET LOSS (542,446)
OTHER COMPREHENSIVE INCOME
Unrealized loss on marketable securities (2,010)
---------
COMPREHENSIVE (LOSS) $ (544,456)
==========
See accompanying notes to financial statements
- -3-
Modern Mass Media, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2002
Cash flows from the operating activities:
Net loss $(542,446)
Adjustments to reconcile net loss to net
cash provided by operating actives:
Depreciation 94,098
Gain on sale (480,062)
Changes in assets and liabilities:
Accounts receivable 356,951
Inventories 267,099
Security deposits (3,199)
Prepaid expenses and other current assets 30,943
Accounts payable and accrued expenses (278,455)
Income tax payable 34,000
Deferred income 45,597
Customer deposits 117,053
--------
Net cash provided by operating activities (358,421)
--------
Cash flows from investing activities:
Marketable securities 445,283
--------
Net cash provided by investing activities 445,283
--------
Cash flows from financing activities:
Line of credit Merrill Lynch 256,511
Loan proceeds SBA 50,000
Repayment from shareholders loan 182,658
Repayment of long-term debt (147,580)
--------
Net cash provided by financing activities: 341,589
NET INCREASE IN CASH AND CASH EQUIVALENTS 428,451
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 75,512
CASH AND CASH EQUIVALANTS, END OF PERIOD $503,963
========
Supplemental disclosures of cash flow information
Cash paid during the year for :
Interest 25,513
Taxes 1,886
See accompanying notes to financial statements
- -4-
Modern Mass Media, Inc.
Statement of Stockholder's Equity
For the Year Ended December 31, 2002
Accumulated
Common Stock Treasury Stock Comprehensive
Retained Income
Shares Amount Shares Amount Earnings Account Total
------ ------ ------ ------ -------- ------- -----
Balances, January 1, 2002 32,500 $400,000 67,500 $(1,581,235) $1,815,316 $6,321 $ 640,402
Net loss (542,446) $(542,446)
Unrealized loss on
marketable securities (2,010) $ (2,010)
------ ------- ------ --------- --------- ------ --------
Balances, December 31, 2002 32,500 $400,000 67,500 $(1,581,235) $1,272,870 $4,311 $ 95,946
====== ======= ====== ========= ========= ====== ========
See accompanying notes to financial statements
- -5-
MODERN MASS MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently
applied in the Preparation of the accompanying financial statements
are as follows:
Organization and Business
- -------------------------
Modern Mass Media, Inc. (the"Company") was organized under the laws
of the State of New Jersey in 1970.The company is a distributor of
audio-video presentation equipment including design, fabrication
and installation of media systems.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect 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.
Inventories
- -----------
Inventories are the stated at the lower of cost (first-in, first-
out method) or market.
Plant, Property and Equipment
- -----------------------------
The cost of the plant, property and equipment are depreciated over
the estimated useful lives of the related assets. Depreciation is
computed utilizing principally the straight-line method for
financial reporting purposes and on various cost recovery methods
for income tax purposes.
Maintenance and repairs were charged to operations. Improvements
and renewals are capitalized. When plant, property, and equipment
are sold or otherwise disposed of, the asset account and related
accumulated depreciation account are relieved, and any gain or loss
is included in operations.
Comprehensive Income
- --------------------
Comprehensive income is the total of (1) net income plus (2) all
other changes in net assets arising from the no owner sources,
which are referred to as other comprehensive income. The Company
has presented a statement of operations that includes other
comprehensive income. An analysis of changes in components of
accumulated other comprehensive income is presented in the
statement of stockholders' equity.
- -6-
Income Taxes
- ------------
The Company has elected to be taxed under the provisions of Sub-
Chapter S of the Internal Revenue Code. Pursuant thereto, the
Company does not provide for federal and state income taxes, since
such taxes are the obligation of the respective shareholders.
Statement of Cash Flows
- -----------------------
For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months or
less.
Basis of Financial Statement Presentation
- -----------------------------------------
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company has generated losses over the past several years. Due
to recent economic conditions in the business environment sales and
profitability have continued to fall short of projections. These
factors indicate that the Company's continuation, as a going
concern is dependent upon its ability to obtain adequate
financing.
NOTE 2- INVENTORIES
Inventories consisted of finished goods and parts aggregating
$95,732
NOTE 3- PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment consisted of the following:
Furniture and equipment $737,830
Leasing and rental equipment 214,128
Auto equipment 100,947
Video and post production equipment 76,239
---------
1,129,144
Less: Accumulated Depreciation 1,069,775
---------
$ 59,369
Depreciation expense totaled $94,098 for the year ended December
31,2002.
NOTE 4- LINE OF CREDIT
Pursuant to a financing agreement, the Company has a line of credit
totaling $325,000. The agreement provides for interest at the rate
of Prime plus 3.15%. The Company maintains an account with $105,629
of funds secured for this line. The line is payable on demand. At
December 31, 2002, the outstanding balance was $256,511.
NOTE 5-LONG TERM DEBT
Note payable-Small Business Administration
In June 2002 the Company was granted a $50,000 four year note in
connection with the September 2001 disaster. The note bears an
interest rate of 4%. Principal and interest payments are deferred
for 25 months. The note is secured by the shareholders personal
residence.
- -7-
NOTE 6- COMMITMENTS AND CONTINGINCIES
Lease Agreements
- ----------------
The Company leases space in Jersey City, New Jersey for sales office
facilities and in Florham Park, New Jersey for its corporate office. The
lease commenced on January 1, 1996 and terminates December 31, 2005 with
annual incremental minimum rent requirements ($56,800 at commencement),
plus certain common area operating charges. The Company signed a one-year
leasing contract commencing January1, 2003 for the Florham Park office.
Future minimum rents under this lease are as follows:
December 31,
2003 $157,834
2004 75,264
2005 75,264
--------
$308,362
--------
NOTE 7- RETIREMENT PLAN
The Company maintained a profit-sharing retirement plan for
eligible employees, as defined by the plan, up to December 31,
1995. As of January 1, 1996 the company converted the Profit
Sharing Plan to a 401(k) Plan under applicable Internal Revenue
Service regulations. Pursuant to the 401(k) Plan, the employees may
make voluntary contributions thereunder and employer contributions,
which are discretionary, are allocated to the employee accounts in
accordance with the formula defined in the terms of the 401(k)
Plan. As of December 31, 2002, the company contributed $3,502 to
the 401(k) plan for the 2002 plan year.
NOTE 8- INCOME TAXES
In 1996 the Company elected to be taxed under the provisions of
Sub-Chapter S of the Internal Revenue Code. At the time the Company
had a built in gain of $95,000 on the land and the building. The
Company made an election to defer the tax. In December, 2002 the
Company sold the land and the building to its shareholder. At
which time the Company became liable for the taxes on the built in
gain amounting to approximately $35,000.
NOTE 9- CONCENTRATIN OF CREDIT RISK
The Company's financial instruments that are exposed to
concentration of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable. The Company places its
cash and temporary cash investments in high credit quality
institutions. At times, such investments may be in excess of the
FDIC insurance limit. The Company routinely assesses the financial
strength of its customers and, as a consequence, believes that its
trade accounts receivable credit risk exposure is limited.
NOTE 10- DEFERRED INCOME
The Company sells extended warranty and product maintenance
contracts through distributors. Revenue from those contracts are
deferred and taken into income on a straight-line basis over the
period of the contract. Direct costs to acquire the contracts are
deferred and amortized into expense in proportion to revenue. All
other costs are expensed as incurred.
- -8-
NOTE 11- RELATED PARTY TRANSACTION
In December 2002 the Company sold its building and land to the
shareholder for the assumption of $1,050,000 of debt. The Company
recorded a gain on the sale of $480,062. In addition the
shareholder signed a one-year lease with the Company for $6,800 per
month in rent.
NOTE 12- SUBSEQUENT EVENTS
On April 1, 2003 the Company sold all of its assets to M3
Acquisition Corp. a subsidiary of Science Dynamics Corp. (M3
Acquisition Corp. assumed certain liabilities) of the Company in
consideration of certain payment by M3 as follows: $100,000 at
closing, $100,000 60 days later and $80,000 for the next five years
on the anniversary date of the purchase agreement, payments may be
made in cash or stock or a combination of both.
In the event that Mr. Del Coro's employment is terminated without
cause, termination for disability, or is not continued at the end
of his employment Agreement, the unpaid balance of the purchase is
accelerated and shall be due and payable in full within 10 Days of
such events.
- -9-
Modern Mass Media, Inc.
Pro Forma Combined Statements of Operations
For the Year Ended December 31, 2002
Science Dynamics Modern
Mass Media
Audited Audited Adjustments Combined
2002 2002
---- ----
Net Sales $ 975,473 $ 4,765,055 $ 5,740,528
----------- ---------- ----------
Operating costs and expenses:
Cost of sales 429,933 3,802,890 4,232,823
Research and development 748,501 748,501
Selling, general
and administrative 2,274,019 1,811,777 7,616 (A) 4,093,412
Depreciation (26,295)(C) (26,295)
3,452,453 5,614,667 (18,679) 9,048,441
----------- ---------- ---------- ---------
Operating income (loss) (2,476,980) (849,612) 18,679 (3,307,913)
Other income (expenses):
Interest income - 10,496 10,496
Gain on sale of Building 480,622 480,622
Realized loss on sale of
marketable securities (67,028) (67,028)
Sale of NJ NOL 163,252 163,252
Interest expense (130,631) (78,322) (14,245)(B) (223,198)
Finance Expense (326,731) (326,731)
----------- ---------- ---------- ---------
$ (2,771,090) $ (503,844) $ 4,434 $(3,270,500)
=========== ========== ========== =========
Income Tax 36,404 36,404
Net Loss $ (2,771,090) $ (540,248) $ 4,434 $(3,306,904)
Other Comprehensive Income
Unrealized loss on marketable
securities $ (2,010) $ (2,010)
Comprehensive $ (542,258) $(3,308,914)
See accompanying notes to financial statements
- -10-
Modern Mass Media, Inc.
Pro Forma Combined Balance Sheets
March 31, 2003
Science Dynamics Modern
Mass Media
Unaudited Unaudited Adjustments Combined
--------- --------- ----------- --------
Current assets:
Cash and cash equivalents $ 8,824 $ 515,540 $ (300,551)(a) $223,813
117,750 (b) 117,750
Accounts receivable - trade 99,542 692,382 791,924
Inventories 165,133 81,713 246,846
Other current assets 9,832 39,860 30,000 (c) 79,692
--------- --------- ----------- ---------
Total current assets 283,331 1,329,495 (152,801) 1,460,025
--------- --------- ----------- ---------
Property and equipment,net 448,623 54,799 16,843 (d) 521,944
Deferred Asset 130,434 130,434
Other assets 17,370 23,379 40,749
Goodwill 440,997 (e) 440,997
--------- --------- ----------- ---------
Total assets 879,758 1,407,673 305,039 2,594,149
========= ========= =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term Debt 31,860 100,000 (i) 131,860
Current portion of convertible note 185,500 185,500
Bank Note/Line of Credit 33,550 300,551 (300,551)(a) 33,550
Customer deposits 89,492 223,558 313,050
Short term loan payable 163,192 163,192
Accounts payable 1,194,018 661,485 1,855,503
Accrued expenses 597,667 31,598 19,502 (f) 648,767
--------- --------- ----------- ---------
Total current liabilities 2,295,279 1,217,192 181,049 3,331,422
--------- --------- ----------- ---------
Long term liabilities:
Long term Debt 127,431 127,431
Long Term Payable to Seller 400,000 (g) 400,000
SBA Loan 50,000 50,000
Non current portion of bank note 42,355 42,355
Convertible Note 1,639,309 $ 247,750 (h) 1,887,059
--------- --------- ----------- ---------
Total liabilities $ 4,104,374 $ 1,267,192 $ 466,701 5,838,267
Shareholders' equity -
Common stock - .01 par value,
200,000,000 shares authorized,
41,544,455 and 41,254,455 issued
41,418,655 and 41,128,655 outstanding
in 2003 and 2002 respectively. 415,545 400,000 (400,000)(j) 415,545
Preferred stock, .01 par value,
no shares issued and outstanding
Additional paid-in capital 15,710,757 15,710,757
Reserve for Stock compensation
Retained Earnings/(Deficit) (18,953,085) 1,321,716 (1,342,897)(j) (18,974,266)
--------- --------- ----------- ---------
(2,826,783) (2,847,964)
Common stock held in treasury,
at cost (397,833) (1,581,235) 1,581,235 (j) (397,833)
--------- --------- ----------- ---------
Total shareholders' equity (3,224,616) 140,481 (161,662) (3,245,797)
--------- --------- ----------- ---------
Total liabilities and shareholders'
equity $ 879,758 $1,407,673 $ 305,039 $2,592,470
========= ========= =========== =========
See accompanying notes to financial statements
- -11-
Modern Mass Media, Inc.
Pro Forma Combined Statements of Operations
March 31, 2003
Science Dynamics Modern
Mass Media
Unaudited Unaudited Adjustments Combined
NET SALES $ 476,297 $ 1,139,872 $ 1,616,169
---------- ----------- ---------- -----------
Operating costs and expenses:
Cost of sales 72,807 616,159 688,966
Research and development 121,740 121,740
Selling, general
and administrative 279,142 484,111 16,250(f) 779,503
---------- ----------- ---------- -----------
Depreciation 64,856 4,571 1,679(d) 71,106
538,545 1,104,841 1,661,315
---------- ----------- ---------- -----------
Operating income (loss) (62,248) 35,031 (17,929) (45,146)
Other income (expenses):
Interest Income 4,917 4,917
Miscellaneous Income 2,577 2,577
Interest expense (24,106) (1,200) (3,252)(f) (28,558)
Finance Expense (18,633) (18,633)
---------- ----------- ---------- -----------
$ (104,987) $ 41,325 $ (21,181) $ (84,842)
========== =========== ========== ===========
Income Tax 1,000 1,000
Net Income/Loss After Tax $ (104,987) $ 40,325 $ (21,181) $ (85,842)
---------- ----------- ---------- -----------
See accompanying notes to financial statements
- -12-
Science Dynamics Corporation, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Combined Financial Statements
(a) Represents the payment eliminating the line of
credit at the closing.
(b) Represents the funds transferred after the payments
to the seller were retained.
(c) Represents the legal and closing fees charged by
Laurus Master Fund, Ltd.
(d) Represents the recalculation of depreciation expense
as a result of the fair market value of the fixed assets
to be depreciated on the straight-line method over three
years.
(e) Represents the purchase price, which has initially been
allocated based on estimates of fair value in excess of
the assets acquired recorded as goodwill.
(f) Represents the additional income of the Seller under the
employment agreement entered into as part of the
transaction and the additional interest expense for the
Laurus Master Fund, Ltd. convertible note calculated using
the prime rate plus one.
(g) Represent the long-term obligation to the seller.
(h) Represents the borrowings from the Laurus Master Fund, Ltd.
convertible note to finance the acquisition.
(i) Represents the short term loan to the seller.
(j) Represents the elimination of Modern Mass Media, Inc.
stockholders equity.
- -13-