UNITED STATES
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): August 30, 1996
JUNGLE STREET, INC.
(Exact name of registrant as specified in its charter)
Utah 0-27390 87-0368236
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
215 Yakima Street, Wenatchee, WA 98801
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number,
including area code: (509) 664-9004
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- -----------------------------------------
(a) Financial Statements of Business Acquired
Pages 2 through 8 of this Form 8-K/A contain the audited financial
statements of the registrant retroactively restated to include audited
financial statements of Televar Northwest, Inc. for the two years ended
June 30, 1996. The registrant's assets, liabilities and operations during
this period were nominal. See Note 1 of Notes to Financial Statements.
(b) Pro Forma Financial Information
The pro forma information required by Item 7(b) is satisfied by the
restated financial statements identified in Item 7(a) above.
(c) Exhibits
None
ITEM 8. CHANGE IN FISCAL YEAR
- -----------------------------
On November 12, 1996, the registrant determined to change its fiscal
year from that used in its most recent filing with the Commission to a year
ended June 30.
<PAGE>
JUNGLE STREET, INC.
including the accounts of its wholly-owned subsidiary
TELEVAR NORTHWEST, INC.
Table of Contents
Independent Auditors' Report .............................................1
Balance Sheet, June 30, 1996............................................2-3
Statements of Operations for the Years
Ended June 30, 1995 and June 30, 1996...................................4
Statements of Stockholders' Deficit for the Years
Ended June 30, 1995 and June 30, 1996.................................5-6
Statements of Cash Flows for the Years
Ended June 30, 1995 and June 30, 1996.................................7-8
Notes to Financial Statements..........................................9-23
<PAGE>
To the Board of Directors
Jungle Street, Inc.
Wenatchee, Washington
We have audited the balance sheet of Jungle Street, Inc., including the
accounts of its wholly-owned subsidiary, Televar Northwest, Inc., as of
June 30, 1996 and the related statements of operations, stockholders'
deficit, and cash flows for the years ended June 30, 1996 and June 30,
1995. 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 Jungle Street, Inc.,
including the accounts of its wholly-owned subsidiary Televar Northwest,
Inc., as of June 30, 1996, and the results of its operations and its cash
flows for the years ended June 30, 1996 and June 30, 1995, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Jungle Street, Inc., and its wholly-owned subsidiary Televar Northwest,
Inc., will continue as a going concern. As discussed in note 17 to the
financial statements, the Company has accumulated losses, negative working
capital, and a net capital deficit as of June 30, 1996, which raise
substantial doubt about the ability to continue as a going concern.
Management's plans in regard to these matters are also described in note
17. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
MANTYLA, MCREYNOLDS & ASSOCIATES
-----------------------------------
Mantyla, McReynolds & Associates
Salt Lake City, Utah
October 24, 1996
1
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
BALANCE SHEET
JUNE 30, 1996
ASSETS
------
<S> <C>
Current Assets
- --------------
Cash $ 9,435
Accounts receivable, net of allowance for doubtful accounts of $38,462 98,132
Employee advances 667
Prepaid insurance 4,275
Deferred expenses - Note 6 50,816
Note receivable - Note 7 20,000
Current portion long-term notes receivable - Note 7 29,234
--------------
Total Current Assets 212,559
Property and Equipment - Note 5
- ----------------------
Equipment and furniture 441,098
Equipment under capital lease 83,877
Vehicles 61,031
Leasehold improvements 12,014
Less: accumulated depreciation (72,693)
--------------
Net Property and Equipment 525,327
Other Assets
- ------------
Goodwill - Note 8 125,405
Deposits 21,224
Notes receivable - Note 7 111,000
Less: current portion of notes receivable (29,234)
--------------
Total Other Assets 228,395
--------------
TOTAL ASSETS $ 966,281
==============
See accompanying notes to financial statements
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
BALANCE SHEET
JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
<S> <C>
Current Liabilities
- -------------------
Accounts payable $ 600,305
Payroll taxes payable 41,117
Wages payable 26,608
Commissions payable 4,125
Unearned fees - Note 6 137,341
Interest payable 3,825
Notes payable - short-term - Notes 9, 10 132,435
Current portion of long-term liabilities - Note 11 75,813
---------------
Total Current Liabilities 1,021,569
Long-Term Liabilities
- ---------------------
Notes payable - Note 11 255,166
Capital leases payable - Note 12 64,247
Less: current portion of long-term liabilities (75,813)
---------------
Total Long-Term Liabilities 243,600
Total Liabilities 1,265,169
Stockholders' Deficit
- ---------------------
Common stock - 50,000,000 shares authorized, $0.001 par,
1,697,420 shares issued and outstanding - Notes 1,4,10,16,19 1,697
Additional paid-in capital 376,057
Stock held in trust - Note 1 (70,000)
Accumulated deficit (606,642)
---------------
Total Stockholders' Deficit (298,888)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 966,281
===============
See accompanying notes to financial statements
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
1996 1995
----------------- -----------------
<S> <C> <C>
Revenues - Note 3 $ 1,697,104 $ 392,803
Cost of sales 1,453,733 370,105
----------------- -----------------
Gross profit 243,371 22,698
Selling, general and administrative expenses 578,600 130,718
----------------- -----------------
Net loss from operations (335,229) (108,020)
Other Income/(Expense):
- -----------------------
Interest income -0- 414
Interest expense (53,690) (12,001)
Other income 21,655 11,662
Other expense -0- (11,930)
----------------- -----------------
Total Other Income/(Expense) (32,035) (11,855)
----------------- -----------------
Loss from continuing operations
before income taxes (367,264) (119,875)
Provision for income taxes -0- -0-
Loss from continuing operations (367,264) (119,875)
Discontinued Operations:
- ------------------------
Loss from discontinued operations -0- (56,019)
Gain from disposal of discontinued
operations -0- 69,562
Total Discontinued Operations -0- 13,543
Net loss $ (367,264) $ (106,332)
================= =================
Loss per share:
Loss from continuing operations $ (.34) $ (.24)
Discontinued operations -0- .03
----------------- -----------------
Net loss $ (.34) $ (.21)
================= =================
Weighted Average Number of Shares Outstanding 1,069,261 500,300
================= =================
See accompanying notes to financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
ADDITIONAL STOCK
COMMON COMMON PAID-IN HELD ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL IN TRUST DEFICIT DEFICIT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 500,300 $ 500 $ 78,931 $ 0 $ (133,045) $ (53,614)
Issued shares in exchange for
services 100 0 100 100
Stock split 979,700 98 (98) 0
Issued shares for purchase of
equipment 20,000 2 19,998 20,000
Net loss for the year ended
June 30, 1995 (106,332) (106,332)
Adjustment to reflect the retro-
active restatement of capital
resulting from the merger of
Jungle Street, Inc. with Televar
Northwest, Inc. (999,800) (100) 100
- --------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1995 500,300 $ 500 $ 99,031 $ 0 $ (239,377) $ (139,846)
Issued shares to officers &
shareholders for services 150,418 15 1,489 1,504
Issued shares to employees for
services 49,000 5 485 490
Purchase of shares to be held
in trust as security for a note
payable (70,000) (70,000)
Issued shares in exchange for
services 752,250 75 9,175 9,250
Issued shares for retirement
of debt 511,665 51 306,927 306,978
Issued shares in exchange for
personal guaranty 150,000 15 (15) 0
Issued shares for cash 30,000 3 29,997 30,000
Redemption of shares to retire a
receivable (326,667) (33) (69,967) (70,000)
Net loss for the year ended
June 30, 1996 (367,264) (367,264)
See accompanying notes to financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
ADDITIONAL STOCK
COMMON COMMON PAID-IN HELD ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL IN TRUST DEFICIT DEFICIT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjustment to reflect the retro-
active restatement of capital
resulting from the merger of
Jungle Street, Inc. with Televar
Northwest, Inc. (1,316,666) $ (132) $ 132 $ 0
Issued shares of Jungle Street,
Inc. common stock for services 1,197,120 1,197 (1,197) 0
- ------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 1,697,420 $ 1,697 $ 376,057 $(70,000) $ (606,642) $ (298,888)
==============================================================================================================================
See accompanying notes to financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
1996 1995
---------------- -----------------
<S> <C> <C>
CASH FLOWS PROVIDED/(USED) BY OPERATING
ACTIVITIES
Net loss $ (367,264) $ (106,332)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 75,137 16,335
Issued common stock in exchange for services and interest 41,104 100
VAR notes received for territorial rights (131,000) 0
Redeemed shares of common stock to retire receivable (70,000) 0
Allowance for bad debt 28,027 10,615
Loss/(gain) on sales of assets (344) 6,605
(Increase)/decrease in:
Accounts receivable (71,207) (2,132)
Employee advances (667) 300
Inventory 0 63,306
Prepaid insurance (2,744) (1,531)
Deferred expenses (50,816) 0
Deposits (19,000) (1,777)
(Decrease)/increase in:
Accounts payable 506,232 24,924
Payroll taxes payable 37,134 (5,431)
Sales tax payable 0 (3,687)
Wages payable 25,133 (7,525)
Accrued commissions 4,125 0
Unearned fees 137,341 0
Accrued interest payable 3,498 324
---------------- -----------------
NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES $ 144,689 $ (5,904)
CASH FLOWS PROVIDED/(USED) BY INVESTING
ACTIVITIES
Purchases of equipment $ (399,052) $ (24,345)
Purchases of vehicles (61,031) (28,038)
Purchases of leasehold improvements (5,456) (4,832)
Proceeds from disposal of assets 24,340 38,000
Loans made 0 (4,379)
Collections on loans 4,379 59,387
Goodwill (128,255) 0
---------------- -----------------
NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES $ (565,075) $ 35,793
See accompanying notes to financial statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
1996 1995
---------------- -----------------
<S> <C> <C>
CASH FLOWS PROVIDED/(USED) BY FINANCING
ACTIVITIES:
New borrowings $ 558,994 $ 91,276
Debt reduction (100,609) (113,086)
Purchase of treasury stock (70,000) 0
Issued shares of common stock for cash 30,000 0
---------------- -----------------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES $ 418,385 $ (21,810)
CASH AT BEGINNING OF YEAR 11,436 3,357
---------------- -----------------
CASH AT END OF YEAR $ 9,435 $ 11,436
================ =================
SUPPLEMENTAL DISCLOSURES
Noncash investing and financing transactions:
Equipment acquired by capital lease $ 0 $ 83,878
Equipment acquired by issuing shares of common stock 0 20,000
Notes payable retired by issuing shares of common stock 277,118 0
Interest paid $ 50,191 $ 14,245
Income taxes paid 0 0
See accompanying notes to financial statements.
</TABLE>
8
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 1 Summary of Significant Accounting Policies
------------------------------------------
Company Background/Basis of Presentation
----------------------------------------
Jungle Street, Inc. was incorporated July 10, 1980, under the laws
of the state of Utah. In August 1980, Jungle Street, Inc. acquired
Utah real estate using the proceeds of a limited public offering
conducted in Utah. From inception, Jungle Street, Inc. suffered
losses from its real estate operations, and, in 1993, Jungle Street
sold all of its Utah real estate and became an inactive
corporation.
On August 29, 1996 Jungle Street, Inc. merged with Televar
Northwest, Inc., a Washington corporation. The merger was
accomplished through Jungle Street, Inc.'s wholly owned subsidiary,
a recently formed Washington corporation with the same name. The
subsidiary was the Surviving corporation in the merger. However,
because Jungle Street's assets, liabilities and operations are
nominal, these financial statements include the activity of both
Televar Northwest, Inc. and Jungle Street, Inc., retroactively
restated to the beginning of the periods covered herein. Unless
otherwise specifically stated, the combined companies are hereafter
collectively referred to as the "Company."
The Company is in the business of providing Internet access and
long distance telephone service. The Company markets its services
primarily through a network of Value Added Resellers ("VAR") in
the geographical region of the northwestern United States. The VARS
are assigned a specific territory from which they market the
Company's services.
In February, 1995, the Company disposed of its telephone equipment
and servicing business. The Company has also been involved as a
wholesaler of cellular telephone access. However, the Company's
contract with its cellular telephone access provider has
terminated. Although the Company may re-enter this segment of
business, it is currently emphasizing Internet access and
long-distance telephone service.
Cash
----
Cash consists of cash on hand and on deposit in commercial banks.
9
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 1 Summary of Significant Accounting Policies [continued]
------------------------------------------------------
Depreciation
------------
Property and equipment are stated at cost. Depreciation is provided
using the straight-line basis over the useful lives of the related
assets. The amounts reported as depreciation expense and
accumulated depreciation include the amortization expense and
accumulated amortization of equipment under capital lease.
Expenditures for maintenance and repairs are charged to expense as
incurred.
Loss Per Share
--------------
Loss per common share is based on the weighted average number of
common shares outstanding. Common stock equivalents have not been
included in the computation as their effect would be antidilutive.
Additional Paid-In Capital
--------------------------
The amount shown on the financial statements as additional paid-in
capital consists of proceeds from the sale or issuance of common
stock in excess of its par value, reduced by any direct expenses of
such sales or issuances.
Stock Held in Escrow
--------------------
The Company repurchased 326,666 shares of its common stock from a
founding shareholder. The consideration given for said shares was
$70,000. These shares are held in escrow as collateral for the
repayment of a note with an original principal balance of $63,000
($70,000 less a down payment of $7,000) and a remaining principal
balance of $57,155 at June 30, 1996. See note 11.
Note 2 Discontinued Operations
-----------------------
On February 28, 1995, the Company discontinued its telephone
equipment and servicing division by selling all of the assets, net
of the related liabilities, of this division. There are no
remaining assets or liabilities related to this division as of June
30, 1996. Any taxable gains reported in conjunction with this
transaction are offset by net operating losses.
10
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 3 Significant Concentrations of Risk
----------------------------------
Credit Risk - The Company's primary operations are currently in the
geographical region of the northwestern United States. Customers of
the Company consist primarily of individuals who utilize the
Internet access capabilities offered by the Company. The accounts
receivable of the Company are unsecured.
Revenue/Supplier Risk - Revenues for the year ended June 30, 1996
were from the following sources:
Long Distance $ 646,884
Internet Access 549,563
Value Added Resellers 447,940
Cellular Access 43,724
Other 8,993
----------------
$ 1,697,104
The Company's long distance business is dependant on its supplier
of wholesale long distance service. Should the supplier terminate
the Company's access capability, the Company would be forced to
seek another supplier. In addition, the Company has located Value
Added Resellers ("VAR") to market its Internet access in various
geographical territories. The Company has received significant fees
in conjunction with the VAR agreements sold for the year ended June
30, 1996. The Company's revenue from this segment is contingent on
the Company's ability to continue to attract VARs.
Netscape Communications provides the Internet software (See note
13) the Company includes with its Internet installation package for
its Internet Customers. Should the Company lose its rights to
distribute this software, the Company would be required to
substitute other Internet software which may not be as widely
accepted as the Netscape software.
Note 4 Related Party Transactions
--------------------------
In conjunction with the merger described in notes 1 & 16, Jungle
Street, Inc. issued 1,125,000 shares to consultants, who were
shareholders of Jungle Street, Inc prior to the merger and who
provided financial and other services to Jungle Street, Inc. The
Company also agreed to reserve 750,000 shares of its common stock
to be issued as commission to a consulting firm, which is owned and
managed by shareholders of the Company, along with a payment of
11
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 4 Related Party Transactions [continued]
--------------------------------------
$50,000 cash, in the event capital raising services performed by
the consulting firm result in net proceeds to the Company of at
least $1,000,000.
On October 2, 1996, the Company loaned its president $12,000. The
unsecured loan bears interest at 10 % per annum, payable in 26
equal semi-monthly installments of $515, commencing October 15,
1996, until paid in full. Said payments will be withheld from the
President's semi-monthly payroll checks. There is no prepayment
penalty.
Note 5 Property and Equipment
----------------------
The major classes of assets as of the balance sheet date are as
follows:
<TABLE>
<CAPTION>
Accumulated
Asset Class Cost Depreciation Method/Life
---------------------------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
Equipment & furniture $ 441,098 $ 46,862 SL/5 & 10 years
Equipment under capital lease 83,877 19,731 SL/5 years
Vehicles 61,031 4,563 SL/5 years
Leasehold improvements 12,014 1,537 SL/life of lease
------------ -----------
Total $ 598,020 $ 2,693
============ ===========
</TABLE>
Note 6 Deferred Expenses/Unearned Income
---------------------------------
Deferred Expenses - The Company pays commissions to its VARs at the
time the monthly, quarterly, or annual fees are received by
customers located in the VARs' assigned territory. These
commissions are subject to offset if the underlying customers
terminate Internet access service during a quarter or year for
which the customer has prepaid and is due a refund. The Deferred
Expenses account is comprised of those commissions still subject to
offset. The Company recognizes the commission expenses paid when
such commission is no longer subject to offset. Since all
commissions will be paid within one year, the entire amount is
considered a current asset.
Unearned Income - The Company collects fees for its Internet access
service under monthly, quarterly and annual billing programs. The
Company has established an unearned fees account for recording the
advance payments, which are amortized into earnings on a monthly
basis as the services are provided.
12
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 7 Notes Receivable
----------------
The Company has long and short-term notes receivable from VARS who
have purchased rights to various territories. The notes are
summarized as follows:
<TABLE>
<CAPTION>
Short-Term
----------
Date of Monthly Interest Original Balance
Note Payment Rate Balance 6/30/96
-------- ------- -------- -------- -------
<S> <C> <C> <C> <C>
5/31/96 $500 0% $20,000 $20,000
</TABLE>
This note has a balloon payment of $17,500 due December 15, 1996.
Long-Term
---------
<TABLE>
<CAPTION>
Date of Monthly Interest Original Balance Current
Note Payment Rate Balance 6/30/96 Portion
-------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
6/28/96 $3,227 10% $100,000 $100,000 $ 27,452
5/31/96 442 10% 11,000 11,000 1,782
-------- -------- --------
$111,000 $111,000 $ 29,234
</TABLE>
Note 8 Goodwill
--------
In February, 1996, the Company entered into an agreement with a
third party to purchase certain assets, primarily computer
equipment, telephone equipment, and customer lists. The purchase
price was $147,125, with $18,870 allocated to tangible assets and
$128,255 to intangible assets (Goodwill). Goodwill, is specifically
classified in this transaction as the customer base purchased by
the Company. The useful life of the goodwill is determined to be 15
years, with amortization calculated accordingly. The balance as of
June 30, 1996 is $125,405, net of accumulated amortization of
$2,850. A down payment of $60,000 was made at the closing, with the
adjustable balance of $87,125 to be paid over a term of thirty-six
months at nine percent (9%) interest. See note 11.
Note 9 Notes Payable - Short-Term - Banks
----------------------------------
The Company had a short-term note payable to a bank in the
principal amount of $55,413, due August 15, 1996, and bears
interest at 1.5% above the bank's index rate which was 9% at the
loan's inception and 8.25% on March 20, 1996. The original note was
entered into on June 8, 1995, with a maturity date of October 15,
1995. The note was renewed on October 15, 1995, January 15, 1996,
and April 15, 1996, which resulted in the current due date of
August 15,
13
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 9 Notes Payable - Short-Term - Banks [continued]
----------------------------------------------
1996. Under the terms of the note, the interest rate would not
decrease below 9%. The Company refinanced this note with a loan
from another lender prior to the note's due date. See note 16. This
note was secured by all accounts receivable, including all local,
state, and federal tax refunds which may become due, and equipment
then owned by the Company, or subsequently acquired. The security
agreement was formalized with a financing statement [UCC-1]. The
note was personally guaranteed by two officers/shareholders of the
Company.
The Company also had a short-term note payable to a bank in the
original amount of $29,533, bearing interest at 11.99%, and
requiring payments of $577 per month for a period of 72 months. The
balance outstanding on June 30, 1996 was $4,272. The security for
this loan was a vehicle. In January, 1996, an employee of the
Company was involved in an accident with the vehicle wherein the
vehicle was completely destroyed. The insurance company has made
its final adjustment on the loss by making a joint payment to the
Company and the secured bank. The shortfall from the insurance
payment was $4,272 and was paid to the bank subsequent to June 30,
1996.
Note 10 Notes Payable - Short-Term - Individuals
----------------------------------------
The Company has two short-term notes payable to individuals. One
note was issued December 1, 1995, in the principal amount of
$52,750, and bears interest at an effective rate of 22%, with the
entire principal and interest due on March 1, 1996. The note was
renewed for $52,750, and bears interest at 18% with the entire
amount of principal and interest due August 31, 1996. When the note
was renewed, a provision was added allowing for the conversion of
the principal and interest of the note, in whole or in part, for
common stock of the Company, at a conversion rate of $2.50 per
share. Subsequent to June 30, 1996, the Company satisfied the note
in full by paying $12,497.50 in cash and issuing 45,000 shares of
common stock.
The second note was issued on April 25, 1996, in the principal
amount of $20,000, and bears interest at 18%, with entire principal
and interest due on October 26, 1996. The note provides for the
conversion of the principal and interest of the note, in whole or
in part, for common stock of the Company, at the conversion rate of
$2.50 per share, at the option of the note holder. If the note is
held to maturity, the note could be converted for up to 8,720
shares of common stock. The Company is in default with respect to
payments due under the note.
14
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 11 Notes Payable - Long Term
-------------------------
The Company has several long term notes payable as follows:
Note payable to an individual in the original amount of $63,000,
bearing interest at 10%, and secured by 326,666 shares of the
Company's common stock, which are held in escrow pending full
payment of the note. The note requires monthly payments of $1,338
for a 60-month period December 1, 1995 and continuing through
November 1, 2000. The outstanding balance at June 30, 1996 was
$57,155.
Unsecured note payable to a company in the original amount of
$85,000, bearing interest at 8%, requiring monthly payments of
$1,325 for an 84-month period beginning July 1, 1993 and continuing
through June 1, 2000. The outstanding balance at June 30, 1996 was
$54,267
Note payable to a company in the original amount of $87,125,
bearing interest at 9%, and partially secured by certain assets
acquired under the agreement. The note requires monthly payments of
$2,771 for a 36-month period commencing June 10, 1996 and
continuing through May 10, 1999. The outstanding balance at June
30, 1996 was $85,454.
Note payable to a finance company in the original amount of
$30,375, bearing interest at 11%, and secured by a vehicle. The
note requires monthly payments of $581 for a 72-month period
commencing April 15, 1996 and continuing through March 15, 2002.
The outstanding balance at June 30, 1996 was $29,148.
Note payable to a finance company in the original amount of
$30,370, bearing interest at 10.9%, and secured by a vehicle. The
note requires monthly payments of $579 for a 72-month period
commencing April 15, 1996 and continuing through March 15, 2002 .
The outstanding balance at June 30, 1996 was $29,142.
15
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 11 Notes Payable - Long Term [continued]
-------------------------------------
The following table sets forth the Company's principal obligations
on long term notes payable for the coming five years:
<TABLE>
<CAPTION>
Finance
Year Individual Company Company Total
---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
1996-97 $ 10,807 $ 38,624 $ 7,512 $ 56,943
1997-98 11,944 42,118 8,725 62,787
1998-99 13,199 43,750 9,735 66,684
1999-00 14,584 15,230 10,633 40,447
2000-01 6,620 -0- 12,090 18,710
Thereafter -0- -0- 9,595 9,595
------------- ----------- ---------- -----------
$ 57,154 $ 139,722 $ 58,290 $ 255,166
</TABLE>
Note 12 Capital Leases Payable
----------------------
The Company has three capital leases which were utilized for the
purchase of computer and telephone equipment used in their
operations:
Equipment Monthly
Under Lease Payment
------------ --------
Lease 1 $ 18,047 $ 582
Lease 2 19,637 490
Lease 3 46,193 1,243
------------ --------
$ 83,877 $ 2,315
The purchase option at the conclusion of each of the above lease
arrangements are 10% of the leased equipment cost at inception
($1,805), one dollar, and one dollar, respectively. Amortization on
capital lease assets for 1995-96 totaled $16,776. Accumulated
amortization through June 30, 1996 totaled $19,731.
16
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 12 Capital Leases Payable [continued]
----------------------------------
The following table is a schedule by years of future minimum lease
payments under the capital leases, together with the present value
of the net minimum lease payments as of June 30, 1996:
Year ending June 30:
1997 $ 27,779
1998 24,866
1999 19,549
2000 4,900
2001 -0-
-----------
Total minimum lease payments 77,094
Less: Amount representing interest (12,847)
Present value of net minimum lease payments $ 64,247
===========
Note 13 License Agreement
-----------------
The Company has a non-exclusive, non-transferrable license
("License") from Netscape Communications to distribute Netscape
Internet software in conjunction with the Company's Internet access
service. The License authorizes the Company to distribute a minimum
of 2,500 copies of said software during the one-year initial term
of the agreement. At the conclusion of the initial year (Contract
entered into December 8, 1995), the License shall automatically
renew for successive one year periods, if, during the immediately
preceding twelve months, the Company has paid Netscape for the
minimum number of copies. As of the auditors' report date, the
Company had already complied with the terms of the License for the
initial year. Additional copies of the software may be licensed
upon payment for said software in advance. After the initial year
of the License, either party may terminate the License for
"convenience" upon at least sixty days prior written notice.
Note 14 Miscellaneous Income
--------------------
Miscellaneous income is comprised primarily of income received as a
result of the settlement of a dispute with one of the Company's
suppliers and rental income from a sublease of previously occupied
office space.
17
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 15 Operating Leases
----------------
The Company has a lease agreement for its principal offices at an
initial rate of $1,800 per month, commencing March 15, 1995 and
terminating March 15, 2005. The lease is renewable for an
additional two years, providing the Company notifies lessor no
later than thirty (30) days prior to March 15, 2000.
Monthly rent payments shall increase by 5% on each anniversary date
of the lease. Future minimum lease payments under this agreement
are as follows:
Year Amount
------------- -----------
1996-97 $ 13,058
1997-98 24,211
1998-99 25,421
1999-00 26,693
2000-01 28,027
Thereafter 115,113
-----------
$ 242,523
===========
The Company vacated offices at a previous location during 1995.
There is currently a dispute with the landlord, that claims the
Company is liable for lease payments through the term of the lease.
As of the auditors' report date, no agreement had been reached, nor
had a lawsuit been filed. The Company has accrued a provision of
$40,000 in its accounts payable to cover any contingent liability
associated herewith. Management contends that the landlord failed
to work with willing and able successor tenants and continually
failed to use reasonable efforts to mitigate damages. Management
intends to vigorously contest liability under the lease agreement.
Note 16 Subsequent Events
-----------------
Merger With Jungle Street, Inc.- On August 29, 1996, Televar
Northwest, Inc. merged with Jungle Street, Inc, a Washington
corporation and wholly owned subsidiary of Jungle Street, Inc. a
Utah corporation. The Washington corporation subsidiary was the
Surviving corporation in this merger, and it changed its name to
Televar, Inc.
18
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 16 Subsequent Events [continued]
-----------------------------
Each common share of Televar Northwest, Inc. outstanding at the
time of the merger was converted to five shares of common stock in
Jungle Street. At the time of the merger, the Company had 2,363,655
shares issued and outstanding, which became 11,818,325 shares in
the merger.
In conjunction with the merger, Jungle Street, Inc. also issued
1,125,000 shares to consultants, who were shareholders of Jungle
Street, Inc prior to the merger and who provided financial and
other services to Jungle Street, Inc. The Company also agreed to
reserve 750,000 shares of its common stock to be issued as
commission to a consulting firm, which is owned and managed by
shareholders of the Company, along with a payment of $50,000 cash,
in the event capital raising services performed by the consulting
firm result in net proceeds to the Company of at least $1,000,000.
Bridge Loan - On September 25, 1996 the Company entered into a loan
agreement with a lender for $500,000 in "bridge" financing. The
loan bears interest at 18 % per annum and is secured by all assets,
tangible and intangible, including trade secrets, either now owned
or hereafter acquired, of the Company. There is no prepayment
penalty. Additional security includes any rights of the Company to
the receipt of money, either now existing or hereafter arising.
Personal guaranties were provided by the Chief Executive
Officer/Chairman and the President of the Company. The agreement
requires a $20,000 loan fee and interest payments as follows:
October 1, 1996 $ 1,250
November 1, 1996 7,500
December 1, 1996 7,500
January 1, 1997 7,500
The entire principal balance, together with all outstanding accrued
interest is due and payable on or before the earlier of: 1) January
1, 1997 or 2) the closing of an offering of common stock and/or
warrants in an amount greater than $2,000,000. However, the Company
may, at its option, extend the due date up to April 1, 1997, if the
Company is not in default under any of the terms or conditions of
the agreement, and the Company pays a third party, designated by
the lender, an extension fee of 1%, 1.5%, and 2% of the then
outstanding balance, respectively, on or before January 1, 1997,
February 1, 1997, March 1, 1997, along with the interest payment of
$7,500.
19
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 16 Subsequent Events [continued]
-----------------------------
In addition to the forgoing, the Company executed a Common Stock
Purchase Warrant, entitling the lender to purchase 65,000 shares of
common stock at an exercise price of $1.81 per share. The warrant
may be exercised, in whole or in part, at any time through
September 25, 2001. The lender has certain registration rights with
respect to the shares.
If the Company defaults on its obligations under the Bridge loan
documents, the lender may convert its unpaid debt to unregistered
and restricted shares of the Company at a rate of $0.75 per share.
Short-Term Bank Loans - On July 1, 1996, the Company received a
$200,000 line of credit from a bank with a maturity date of January
5, 1997. The loan interest rate was variable at 2 % over the bank's
"index" rate, which was 8.25 % at the time of the loan closing.
This loan was secured by all assets, tangible and intangible, of
the Company. Concurrently, the Company received a $60,000 loan from
the same bank, which was utilized to repay in full the bank loan
described in note 9. These loans were paid in full from proceeds of
the Bridge Loan discussed above.
Promissory Note - The Company received a $100,000 loan from an
individual on September 1, 1996. The loan bears interest at 18 %
per annum, and is due and payable on the first day of each month,
beginning October 1, 1996, with a maturity date of January 31,
1997. The lender also has the right to purchase common stock of the
Company at the price of $1.00 per share, exercisable until June 30,
1997.
Lease Agreements - Since June 30, 1996, the Company has entered
into two lease agreements covering equipment used in the Company's
operations. The first lease, executed July 11, 1996, is for a
period of 36 months with monthly payments of $3,707. An option to
purchase the equipment covered under the lease at the end of the
lease term is available at an option price of $4,884. The second
lease, executed August 6, 1996 is for a period of 36 months with
monthly payments of $2,915. An option to purchase the equipment
covered under the lease at the end of the lease term is available
at an option price of $7,796.
20
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 16 Subsequent Events [continued]
-----------------------------
Stock Incentive Plan - A Stock Incentive Plan ("Plan") was approved
by the Board of Directors in September, 1996. The Plan has not yet
been ratified by the shareholders of the Company. The purpose of
the Plan is to attract and retain the services of selected
employees, officers, directors, agents, consultants, advisors,
distributors, and independent contractors.
The shares to be offered under the Plan consist of the Company's
common stock. The number of shares that may be issued under the
Plan shall not exceed 3,000,000 shares. Common shares available
under the Plan shall include authorized and unissued shares or
reacquired shares. All awards granted under the Plan shall be
nonassignable and nontransferable. Should any award offered under
this Plan expire, terminate, or be canceled or forfeited, the
unissued shares subject to such award shall again be available
under the Plan.
The duration of the Plan shall continue in effect until the earlier
of: 1) ten years from the date of adoption by the Board of
Directors, or 2) the date on which all shares available for
issuance under the Plan have been issued and all restrictions on
such shares have lapsed. Termination of the Plan shall not affect
any outstanding awards, nor the rights of the Company under the
Plan.
Restrictions: 1) No employee may be granted an award under the Plan
if the aggregate fair market value, on the date of the grant,
exceeds $100,000. 2) Any employee possessing more than 10 % of the
voting power of all classes of stock of the Company may be granted
an award under the Plan only if the option price is at least 110 %
of the fair market value and the award is not exercisable after
five years from the date it is granted. 3) The duration of awards
granted under the Plan shall continue in effect for the period
fixed by the Board of Directors, except that no such award shall be
exercisable after the expiration of 10 years from the dated it is
granted. 4) The option price shall be determined by the Board of
Directors at the time of grant.
21
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 16 Subsequent Events [continued]
-----------------------------
Stock Appreciation Rights: The Board of Directors may grant stock
appreciation rights in conjunction with the grant of a stock option
or as a separate award. The holder of such grant shall be entitled
to receive an amount equal in value to the excess of the fair
market value of the common shares on the date of exercise over the
fair market value on the date of the grant. Such awards may be paid
in the form of common stock of the Company valued at fair market
value, or cash, or a combination of cash and common stock. If stock
appreciation rights are granted in conjunction with stock options,
or vice versa, the grant of one shall be extended only to the same
extent and conditions as the other. Upon the exercise of a stock
appreciation right associated with a stock option, the related
stock option terminates, or vice versa.
Loan to Officer - On October 2, 1996, the Company loaned its
president $12,000. The unsecured loan bears interest at 10 % per
annum, payable in 26 equal semi-monthly installments of $515,
commencing October 15, 1996, until paid in full. Said payments will
be withheld from the President's semi-monthly payroll checks. There
is no prepayment penalty.
Note 17 Liquidity
---------
The Company has incurred substantial losses and has a net working
capital deficit of $809,010 as of June 30, 1996. Financing the
Company's operations to date has been primarily from the sale of
capital stock and borrowings. The Company's ability to achieve a
level of profitable operations and/or additional financing may
impact the Company's ability to continue as it is presently
organized. Resolution of this issue is dependent on management's
plans to raise funding through the sale of its equity securities in
a private placement or public offering.
Note 18 Accounting for Income Taxes
---------------------------
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, which is effective for
fiscal years beginning after December 15, 1992. The Statement
requires the recognition of deferred tax assets and liabilities for
the temporary differences between the financial reporting basis and
tax basis of the Company's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized or
settled. For the year ended June 30, 1996, the Company had no
significant income tax expenses due to operating losses incurred.
Any deferred tax benefit arising from the operating losses carried
forward would be offset entirely by a valuation allowance since it
is less than likely that the Company will be sufficiently
profitable in the future to take advantage of the losses carried
forward.
22
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 19 Directors' Services Agreement
-----------------------------
Three of the Company's outside directors have agreed to serve as
financial consultants of the Company in consideration for shares in
the Company. The individuals received a total of 75,000 (25,000
each) shares in exchange for board services and 675,000 (50,000
each to two of the individuals and 575,000 to one of the
individuals) shares for financial consulting services.
These directors agreed to use their best efforts, expertise and
contacts in the financial community to present potential financing
sources to the Company and to otherwise assist the Company in its
capital-raising efforts.
At the time this agreement was executed, the Company had options to
repurchase the shares issued in conjunction with the financial
consulting services. However, in consideration for the personal
guarantees of these directors on certain debts of the Company, the
repurchase provision of this agreement was waived by the Company.
These directors are now fully vested in these shares.
23
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
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.
JUNGLE STREET, INC.
By: MARK D. HAMILTON
------------------------------------
Mark D. Hamilton, President
Dated: November 12, 1996
24
