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) September 6, 2000
WORLDCAST INTERACTIVE, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 0-24283 65 062 3427
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(State or other jurisdiction (Commission File (IRS
Employer or incorporation) Number) Identification No.)
2821 East Commercial Boulevard, Suite 202, Fort Lauderdale, Florida 33308
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (954) 771-7950
--------------
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
WorldCast Interactive, Inc. ("WorldCast") and its wholly-owned
subsidiary, ConvergIT, Inc. ("ConvergIT"), have entered into an Agreement and
Plan of Merger, originally dated May 8, 2000 ("Merger Agreement") with Cable
Tech, Inc. ("Cable Tech") and Cable Tech's wholly-owned subsidiary, Lyncs
Technologies, Inc. ("Lyncs Technologies"). The Merger Agreement provided, among
other things that upon the terms and subject to conditions therein, for the
merger of ConvergIT into Cable Tech. Cable Tech, the surviving corporation,
became a wholly-owned subsidiary of WorldCast. Cable Tech and ConvergIT made the
appropriate filings to complete the Merger Agreement with the State of
California and State of Florida on August 31, 2000 and August, 17, 2000,
respectively.
Under the Merger Agreement, all of the shares of capital stock of Cable
Tech issued and outstanding are exchanged for 865,067 shares of Series B
Convertible Preferred Stock of WorldCast. The owners of Series B Convertible
Shares are entitled to convert those preferred shares to common shares on a
semi-annual basis. Each preferred share has voting rights equivalent to 4.6245
shares of WorldCast common stock and shall be converted into 4.6245 shares of
WorldCast common stock upon the election of the preferred shareholder. Preferred
shareholders are also provided with liquidation preferences in the amount equal
to $9.25 per share, adjusted to reflect a price increase of 10% per annum,
compounded daily, plus any and all accrued and unpaid dividends. The preferred
shareholders shall elect a majority of WorldCast's board of directors if
WorldCast fails to obtain the following requirements by June 30, 2001:
1) obtaining of $5,000,000 of funding;
2) increase Cable Tech's "run rate" by $5,000,000 during the 12
month period ended June 30, 2001;
3) obtain a listing of WorldCast's common stock on the OTC
bulletin Board; and
4) settle all Cable Tech's debts and obligations secured by
personal guarantee or surety agreements existing as of June
30, 2000.
If WorldCast fails to obtain the requirements by June 30, 2001, the
preferred shareholders will retain the right to elect a majority of the board of
directors until the Company satisfies the above requirements.
In connection with the execution of the Merger Agreement, WorldCast,
Perrins Management Corporation ("Consultant") and Robert H. Perrins, Jr.,
entered into a Consulting Agreement ("Consulting Agreement"). Under this
Agreement, the Consultant shall provide consulting services to WorldCast for a
period of one year commencing July 1, 2000. In consideration of the services,
Mr. Perrins shall be granted and issued 4,000,000 and 3,760,000 units of
WorldCast share appreciation rights ("SAR") convertible into 7,760,000 shares of
common stock of WorldCast at a conversion ratio of 1:1 or, at the sole election
of Mr. Perrins, each SAR unit may be converted into cash at the rate of $.40 per
2
<PAGE>
SAR unit, subject to a claw-back provision set forth in the Consulting
Agreement. The claw-back provision provides that in the event that the share
price of common stock of WorldCast is $2.00 per share or more on July 1, 2001
(or 90 days prior thereto), then 3,000,000 of the 7,760,000 SAR units issued to
Bob Perrins will be canceled and the total consideration Bob Perrins is entitled
will be the remaining SAR units. In further consideration of the services to be
provided by the Consultant, WorldCast shall pay the Consultant a consulting fee
of $20,833.00 per month for an additional term of 2 years.
In addition, WorldCast, Perrins Management Corporation, and Robert H.
Perrins, Jr., entered into a financial accommodation agreement pursuant to which
WorldCast will issue Mr. Perrins 1,187,104 shares of WorldCast common stock, in
lieu of and in full satisfaction of a repayment of a loan payable to Mr. Perrins
in the amount of $454,008.39.
The foregoing summaries of the Merger Agreement and Consulting
Agreement are qualified in their entirety by reference to the full text of such
agreements, a copy of which are filed hereto.
ITEM 7. Financial Statements, Unaudited Pro Forma Financial Information and
Exhibits.
The following financial statements, unaudited pro forma financial information
and exhibits are filed as part of this report.
a. Financial Statements
Cable Tech, Inc. and its subsidiary Lyncs Technologies
Report of Independent Certified Public Accountants
1999 and 2000 Financial Statements:
o Consolidated Balance Sheet as of February 29,2000
o Consolidated Statement of Operations for the two years
ended February 29,2000 and February 28,1999
o Consolidated Statement of Stockholders Deficit for the
two years ending February 29,2000
o Consolidated Statement of Cash Flows for the two years
ended February 29,2000 and February 28,1999
Notes to Financial Statements
b. Unuadited Pro Forma Financial Information.
The unaudited pro forma financial information of the Company for the
indicated periods is attached hereto as Attachment 7(b) and is
incorporated herein by this reference.
3
<PAGE>
c. Exhibits
1(a)* Agreement and Plan of Merger dated May 8, 2000 by and
among WorldCast Interactive, Inc., ConvergIT, Inc.,
Cable Tech, Inc., and Lyncs Technologies, Inc.
1(b)* Amendment to Agreement and Plan of Merger dated
June 30, 2000.
1(c)* Second Amendment to Agreement and Plan of Merger dated
July 24, 2000.
2(a)* Consulting Agreement between WorldCast Interactive,
Inc., Perrins
Management Corporation and Robert H. Perrins, Jr.,
dated May 8, 2000.
2(b)* Addendum to Consulting Agreement dated June 30, 2000.
2(c)* Certificate of Determination of Share Appreciation
Rights.
3(a)* Articles of Amendment to the Articles of Incorporation
designating Series B Preferred Stock.
3(b)* Articles of Merger filed with State of Florida.
3(c)* Merger Agreement filed with the State of California.
* Incorporated herein by reference and filed as an exhibit to the
Company's Current Report on Form 8-K,dated September 6,2000
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.
WORLDCAST INTERACTIVE, INC.
By: /s/ Robert S. Kelner
-----------------------------
Robert S. Kelner, President
DATED: December 15, 2000
4
<PAGE>
Attachment 7(a)
Report of Independent Certified Public Accountants
Board of Directors
Cable Tech, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Cable Tech, Inc.
and its wholly-owned subsidiary Lyncs Technologies, Inc. as of February 29,
2000, and the related consolidated statements of operations, stockholder's
deficit, 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 auditing standards generally accepted
in the United States of America. 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 consolidated financial position of the Company as of
February 29, 2000, and the consolidated results of their operations and their
consolidated cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
----------------------
San Jose, California
June 9, 2000, except for Note 10
as to which the date is August 17, 2000
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Cable Tech, Inc.:
We have audited the accompanying statements of operations, stockholders' deficit
and cash flows of Cable Tech, Inc. (a corporation) for the year ended February
28, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion of 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 results of the operations and the cash flows of Cable
Tech, Inc. for the year ended February 28, 1999, in conformity with generally
accepted accounting principles.
March 18, 2000, except
for Note 10 as to which
the date is August 17, 2000
/s/ HAYASHI & WAYLAND
-----------------------
ACCOUNTANCY CORPORATION
F-2
<PAGE>
Cable Tech, Inc.
CONSOLIDATED BALANCE SHEET
February 29, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets
Cash $ 98,000
Accounts receivable, net of allowance for doubtful accounts of $40,000 784,000
Other receivables 5,000
Prepaid expenses 3,000
Total current assets 890,000
Property and equipment, net 26,000
Other assets 93,000
-----------
Total assets $ 1,009,000
===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Line of credit $ 578,000
Current portion of long-term debt 606,000
Accounts payable 497,000
Accrued expenses 170,000
Deferred compensation 1,083,000
-----------
Total current liabilities 2,934,000
Long-term debt, less current portion 435,000
Stockholder's deficit
Common stock: no par value, 1,000,000 shares authorized, 5,000 shares
issued and outstanding 20,000
Accumulated deficit (2,380,000)
-----------
Total stockholder's deficit (2,360,000)
-----------
Total liabilities and stockholder's deficit $ 1,009,000
===========
</TABLE>
See acocmpanying notes to consolidated financial statements.
F-3
<PAGE>
Cable Tech, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended February 29, 2000 and February 28, 1999
2000 1999
----------- -----------
Net sales $ 5,927,000 $ 6,327,000
Cost of sales 3,523,000 4,515,000
----------- -----------
Gross profit 2,404,000 1,812,000
Operating expenses 2,183,000 2,406,000
----------- -----------
Income (loss) from operations 221,000 (594,000)
Other income (expense):
Interest expense (237,000) (219,000)
Other 10,000 19,000
----------- -----------
Total other income (expense) (227,000) (200,000)
----------- -----------
Net loss before income taxes (6,000) (794,000)
Income tax benefit -- 93,000
----------- -----------
Net loss $ (6,000) $ (701,000)
=========== ===========
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Cable Tech, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
For the two years ended February 29, 2000
<TABLE>
<CAPTION>
Common Stock Accumulated
Shares Amount Deficit Total
------ ------ ------- -----
<S> <C> <C> <C> <C> <C>
Balances at March 1, 1998 5,000 $ 20,000 $(1,673,000) $(1,653,000)
Net loss -- -- (701,000 (701,000)
----------- ----------- ----------- -----------
Balances at February 28, 1999 5,000 20,000 (2,374,000) (2,354,000)
Net loss -- -- (6,000) (6,000)
----------- ----------- ----------- -----------
Balances at February 29, 2000 5,000 $ 20,000 $(2,380,000) $(2,360,000)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Cable Tech, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended February 29, 2000 and February 28, 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,000) $(701,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 14,000 24,000
Provision for doubtful accounts -- 25,000
Gain on disposal of property and equipment (1,000) (1,000)
Changes in operating assets and liabilities:
Accounts receivable (49,000) 345,000
Other receivables 93,000 (94,000)
Perpaid expenses 19,000 3,000
Other assets (45,000) (24,000)
Accounts payable (87,000) 238,000
Accrued expenses 46,000 (224,000)
--------- ---------
Net cash used in operating activities (16,000) (409,000)
Cash flows from investing activities:
Proceeds from the disposal of property and equipment 16,000 1,000
Cash flows from financing activities:
Change in bank overdraft (59,000) 59,000
Net (payments on) borrowings from line of credit (71,000) 235,000
Proceeds from borrowings on long-term debt 435,000 200,000
Principal payments on long-term debt (84,000) (35,000)
Deferred compensation payments (123,000) (108,000)
--------- ---------
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
Net cash provided by financing activities 98,000 351,000
--------- ---------
Net change in cash 98,000 (57,000)
Cash at beginning of year -- 57,000
--------- ---------
Cash at end of year $ 98,000 $ --
========= =========
Supplemental disclosure of cash flow information:
-------------------------------------------------
Cash paid during the year for:
Interest $ 229,000 $ 219,000
Income taxes
-- 14,000
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
Cable Tech, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000 and February 28, 1999
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cable Tech, Inc. (the "Company") was incorporated in California on March 5,
1984. The Company is engaged primarily in the sale and installation of data
and telecommunication cable and equipment to companies and governmental
agencies located primarily in the United States of America.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Lyncs Technologies, Inc., which was
incorporated on March 1, 1999. All significant intercompany accounts and
transactions have been eliminated.
Revenue Recognition
-------------------
The Company recognizes revenues as goods are shipped and services are
delivered.
Inventories
-----------
Materials and supplies are primarily ordered for specific installations
and the cost is charged in full to each installation. Surplus materials
and supplies remaining from each installation are assigned no value.
Property and Equipment
----------------------
Property and equipment consists primarily of warehouse and office
equipment and automobiles. Depreciation is calculated based on estimated
useful lives, ranging from 4 to 7 years, using the straight-line and
double declining balance methods. Leasehold improvements are amortized
over the shorter of the lease term or the estimated useful life of the
improvement.
Income Taxes
------------
Income taxes are computed using an asset and liability method. Under an
asset and liability method, deferred income tax assets and liabilities
are determined based on the differences between the financial reporting
and tax bases of assets and liabilities and are measured using currently
enacted tax rates and laws. A valuation allowance is provided when
deferred tax assets are not expected to be realized.
Fair Value of Financial Instruments
-----------------------------------
The fair value of cash, trade receivables, trade payables and bank debt
approximates carrying value due to the short maturity of such
instruments. The fair value of related party debt is not determinable
given the related party nature of such debt. The fair value of the cash
surrender value of life insurance approximates market value due to the
terms of similar policies.
F-8
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
----------------
The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the Company's management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Concentrations
--------------
The Company provides credit to its customers, who are located primarily
in the United States of America. The Company maintains reserves for
potential credit losses and such losses have not exceeded management's
expectations. One customer accounted for approximately 13% and 15% of net
sales for the years ended February 29, 2000 and February 28, 1999,
respectively. Another customer accounted for approximately 11% of net
sales for the year ended February 28, 1999.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Office equipment $ 127,000
Machinery and equipment 49,000
Automobiles and trucks 21,000
Leasehold improvements 14,000
-------------
211,000
Less accumulated depreciation and amortization (185,000)
-------------
$ 26,000
=============
NOTE 3 - OTHER ASSETS
Other assets consists of the following:
Cash surrender value of life insurance $ 87,000
Deposits 6,000
-------------
$ 93,000
=============
F-9
<PAGE>
NOTE 4 - LINE OF CREDIT
The Company has a $700,000 line of credit facility with a financial
institution that bears interest at prime (8.75% at February 29, 2000) plus
1.5% and expires in July 2000. The line is collateralized by the Company's
accounts receivable and property and equipment, and is guaranteed by the
Company's sole stockholder. As of February 29, 2000, the Company had
$122,000 available for additional borrowing. The agreement with the
financial institution stipulates that upon acquisition of the Company the
line will not automatically transfer to the acquiring company (see Note 10).
NOTE 5 - LONG-TERM DEBT
<TABLE>
<CAPTION>
<S> <C>
Long-term debt consists of the following:
Note payable to a financial institution, with principal due in monthly
installments of $3,333, plus interest bearing at prime plus 0.75%. The
note matures in November 2003. $ 150,000
Note payable to a former stockholder of the Company, due in monthly
installments of $5,232, including interest bearing at 8% per annum, through
January 2011. 456,000
Note payable to the Company's sole stockholder, with interest bearing at 8%
per annum. The principal and accrued interest is due upon final maturity
in February 2003. 435,000
-------------
1,041,000
Less current portion (177,000)
-------------
Long-term debt $ 864,000
=============
</TABLE>
The note payable to a financial institution is guaranteed by the Company's
sole stockholder. The acquisition of the Company, as described in Note 10,
is an event of default in accordance with the terms of the note agreement
and stipulates that the entire amount outstanding becomes immediately due
and payable. As such, the Company has classified the entire amount due on
this note at February 29, 2000 as a current liability.
The note payable to a former stockholder was issued in February 1996 in
connection with the Company repurchasing and retiring the former
stockholder's shares of the Company's common stock. The note has been
subsequently converted into equity in connection with the acquisition of the
Company, as described in Note 10.
The note payable to the Company's sole stockholder was issued in December
1999 in order to provide the Company with working capital and to pay off
other debt obligations of the Company. The note has been subsequently
converted into equity in connection with the acquisition of the Company, as
described in Note 10.
F-10
<PAGE>
NOTE 5 - LONG-TERM DEBT (continued)
The aggregate maturities of debt are as follows:
Year ending February 28,
2001 $ 177,000
2002 30,000
2003 467,000
2004 35,000
2005 37,000
Thereafter 295,000
-------------
$ 1,041,000
=============
NOTE 6 - DEFERRED COMPENSATION AGREEMENT
The Company has a deferred compensation agreement with a former stockholder
of the Company. Contractual payments under this obligation, subject to the
terms of the agreement, are due as follows:
Year ending February 28,
2001 $ 240,000
2002 240,000
2003 240,000
2004 240,000
2005 238,000
Thereafter 261,000
-------------
$ 1,459,000
=============
At February 29, 2000, the present value of the remaining contractual
payments was $1,083,000, which has been computed using a discount rate of
10%. The balance of the remaining contractual payments has been subsequently
converted into equity in connection with the acquisition of the Company, as
described in Note 10.
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company sponsors a profit sharing plan for its nonunion employees. The
Company made no matching contributions for the years ended February 29, 2000
and February 28, 1999.
The Company's union employees are covered by a union pension plan. In
addition, the Company sponsors a savings and retirement 401(k) plan for
union employees. The Company contributed $8,000 and $5,000 to this 401(k)
plan during the years ended February 29, 2000 and February 28, 1999,
respectively.
F-11
<PAGE>
NOTE 8 - INCOME TAXES
No provision for federal and state income taxes has been recorded in 2000 as
the Company has a net operating loss for the year ended February 29, 2000.
In 1999, the Company reported a current tax benefit of $93,000 related to
the recovery of previously paid taxes. The following table sets forth the
primary components of deferred tax assets at February 29, 2000:
Net operating loss and credit carryforwards $ 275,000
Deferred compensation not deducted for taxes 431,000
Other non-deductible reserves and expenses 67,000
-------------
Gross deferred tax assets 773,000
Valuation allowance (773,000)
--------------
$ -
=============
The Company believes sufficient uncertainty exists regarding the
realizability of the deferred tax assets such that a full valuation
allowance is required. The valuation allowance provided against the deferred
tax assets decreased by $3,000 during the year ended February 29, 2000 and
increased by $165,000 during the year ended February 28, 1999. At February
29, 2000, the Company had approximately $676,000 of federal net operating
loss carryforwards for tax reporting purposes available to offset future
taxable income; such carryforwards will expire in 2019. Additionally, the
Company has approximately $509,000 of state net operating loss carryforwards
for tax reporting purposes which will expire in 2004.
NOTE 9 - COMMITMENTS
The Company leases automobiles, equipment and facilities under operating
lease agreements. Rental expense was $102,000 and $99,000 for the years
ended February 29, 2000 and February 28, 1999, respectively. Minimum future
lease payments under the Company's operating leases are as follows:
Year ending February 28,
------------------------
2001 $ 41,000
2002 5,000
2003 3,000
2004 3,000
2005 1,000
F-12
<PAGE>
NOTE 10 - ACQUISITION
On August 17, 2000 the Company completed a merger with WorldCast
Interactive, Inc. ("WorldCast") whereby WorldCast has acquired all of the
outstanding common stock of the Company in exchange for 865,067 shares of
WorldCast Series B convertible preferred stock.
Upon the closing of the merger, the amount then outstanding under the note
payable to the Company's sole stockholder was converted into 1,187,104
shares of WorldCast common stock, and the note payable to a former
stockholder and the deferred compensation agreement were converted into (i)
416,000 shares of WorldCast Series A mandatorily redeemable convertible
preferred stock, and (ii) 51,185 units of WorldCast stock appreciation
rights.
F-13
<PAGE>
Attachment 7(b)
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Financial Information gives effect to
the consummation of the Acquisition of Cable Tech, Inc. and its subsidiary
(accounted for as a purchase for financial accounting purposes), the issuance of
Series B Convertible Preferred Stock, the conversion of certain debt due the
former sole shareholder of Cable Tech into the Common stock of the WorldCast
Interactive, Inc. and the consulting agreement between the former shareholder of
Cable Tech and WorldCast Interactive, Inc. in each case as if they had been
consummated: (i) on June 30, 2000 in the case of the Unaudited Pro Forma
Combined Balance Sheet; and (ii) on January 1, 1999 and 2000 respectively ,the
first days of WorldCast's fiscal year, in the case of the Unaudited Pro Forma
Combined Statements of Operations for the fiscal year ended December 31, 1999
and the six months ended June 30, 2000.
The following Unaudited Pro Forma Combined Financial Information is presented
for illustrative purposes only and does not purport to be indicative of the
Company's actual financial position or results of operations as of the date here
of or for any other future date and is not necessarily indicative of what the
Company's actual financial position or results of operations would have been had
the Transactions been consummated on the above-referenced dates, nor does it
give effect to (i) any transaction other than the Transactions and those
described in the Notes to the Unaudited Pro Forma Combined Information or (ii)
WorldCast's-Cable Tech's results of operations since June 30, 2000.
In the preparation of the following Unaudited pro Forma Combined Financial
Information, it has generally been assumed that the historical value of Cable
Tech's assets and liabilities approximate the fair value thereof as an
independent valuation thereof has not been completed. The Company is required to
determine the fair value of the assets and liabilities of Cable Tech, Inc. and
subsidiary (including intangible assets). The valuation will be completed in the
near term. Although such determination of the fair value is not presently
expected to result in values that are materially greater or less than the value
assumed in the preparation of the following Unaudited Pro Forma Combined
Financial Information, there can be no assurance with respect thereto.
The Unaudited Pro Forma Combined Balance Sheet at June 30, 2000 is based upon
WorldCast's and Cable Tech's financial positions at June 30, 2000. The Unaudited
Pro Forma Combined Statement of Operations for the year ended December 31, 1999
is based on WorldCast's and Cable Tech's results of operations for the year
ended December 31, 1999. The Unaudited Pro Forma Combined Statement of
Operations for the six months ended June 30, 2000 is based on WorldCast's and
Cable Tech's results of operations for the six months ended June 30, 2000.
F-14
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
BALANCE SHEET
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
WORLDCAST CABLETECH ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS $ 54,283 $ 118,294 $ 172,577
ACCOUNTS RECEIVABLE, NET $ -- $ 2,485,118 $ -- $ 2,485,118
OTHER RECEIVABLES $ -- $ 5,000 $ -- $ 5,000
PREPAID EXPENSES $ -- $ 25,311 $ -- $ 25,311
TOTAL CURRENT ASSETS $ 54,283 $ 2,633,723 $ -- $ 2,688,006
INVESTMENT IN SUBSIDIARY $ 259,323 $ -- 1 $ (259,323) $ 0
PROPERTY PLANT AND EQUIPMENT (NET) $ 46,931 $ 22,484 $ -- $ 69,415
OTHER ASSETS $ -- $ 92,749 $ -- $ 92,749
GOODWILL (NET) $ -- $ -- 1 $ 4,490,009 $ 4,490,009
TOTAL ASSETS $ 360,537 $ 2,748,956 $ 4,230,686 $ 7,340,179
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 991,885 $ 2,077,238 $ -- $ 3,069,123
DEFERRED INCOME $ -- $ 90,000 $ -- $ 90,000
NOTES PAYABLE - RELATED PARTY $ 30,000 $ -- $ 30,000
LINE OF CREDIT $ -- $ 600,978 $ -- $ 600,978
CURRENT PORTION OF LONG-TERM DEBT $ -- $ 205,303 2 $ (205,303) $ --
DUE TO OFFICERS $ 23,687 $ -- $ 23,687
WARRANTY LIABILITY $ 365,167 $ -- $ -- $ 365,167
TOTAL CURRENT LIABILITIES $ 1,410,739 $ 2,973,519 $ (205,303) $ 4,178,955
LONG-TERM DEBT $ -- $ 1,852,424 2 $ (248,705) $ 1,603,719
TOTAL LIABILITIES $ 1,410,739 $ 4,825,943 $ (454,008) $ 5,782,674
PREFERRED STOCK $ -- $ -- 1 $ 865 $ 865
COMMON STOCK $ 51,959 $ 20,000 1,2 $ (18,813) $ 53,146
PAID-IN CAPITAL $ 8,385,401 $ -- 1,2,7 $ 2,965,656 $ 11,351,057
NOTES RECEIVABLE OFFICERS $ (1,682,374) $ -- $ -- $ (1,682,374)
UNAMORTIZED CONSULTING FEES ATTRIBUTABLE TO SARS 7 $ (360,000) $ (360,000)
RETAINED EARNINGS $ (7,805,188) $ (2,096,987) 1 $ 2,096,986 $ (7,805,189)
TOTAL STOCKHOLDERS' EQUITY $ (1,050,202) $ (2,076,987) $ 4,684,694 $ 1,557,505
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 360,537 $ 2,748,956 $ 4,230,686 $ 7,340,179
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
F-15
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
WORLDCAST CABLETECH ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
NET SALES $ 132,503 $ 5,686,215 $ -- $ 5,818,718
COST OF GOODS SOLD $ 667,858 $ 3,600,697 $ -- $ 4,268,555
GROSS PROFIT $ (535,355) $ 2,085,518 $ -- $ 1,550,163
SELLING GENERAL AND ADMINISTRATIVE EXPENSES $ 3,173,650 $ 2,100,667 3,4,8 $ 341,349 $ 5,274,317
OPEATING PROFIT $ (3,709,005) $ (15,149) $ (341,349) $ (3,724,154)
INTEREST EXPENSE $ 186,656 $ 230,600 6,7 $ 247,096 $ 426,256
OTHER (INCOME) EXPENSE $ (520) $ 9,454 $ -- $ 8,934
NET EARNINGS $ (3,894,141) $ (255,203) $ (588,445) $ (4,149,344)
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
F-16
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
WORLDCAST CABLETECH ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
NET SALES $ -- $ 5,474,037 $ -- $ 5,474,037
COST OF GOODS SOLD $ -- 3,637,681 $ -- $ 3,637,681
GROSS PROFIT $ -- $ 1,836,356 $ -- $ 1,836,356
SELLING GENERAL AND ADMINISTRATIVE EXPENSES $ 663,311 $ 1,355,049 3,4,8 $ 170,674 $ 2,018,360
OPEATING PROFIT $ (663,311) $ 481,307 $ (170,674) $ (182,004)
INTEREST EXPENSE $ 235,194 $ 118,278 6,7 $ 107,598 $ 353,472
OTHER (INCOME) EXPENSE $ (520) $ 9,454 $ -- $ 8,934
NET EARNINGS $ (898,505) $ 362,007 $ (278,272) $ (536,498)
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
F-17
<PAGE>
(1) The following adjustments give effect to the Cable Tech Acquisition.
The aggregate purchase price paid by WorldCast in connection with the
CableTech acquisition and related consideration is summarized below:
AGGREGATE PURCHASE PRICE:
865,067 Shares of Series B Convertible Preferred $ 800,100 (a)
3,760,000 Stock Appreciation Rights $ 1,353,600 (b)
Financial and advisory, accounting, legal
and other costs 259,323
-----------
$ 2,413,023
ALLOCATION OF PURCHASER PRICE
Aggregate purchase price $ 2,413,023
Net equity deficit of acquired company 2,076,986 (c)
-----------
Excess of cost over fair value of net assets acquired $ 4,490,009
-----------
(a) Reflects the issuance of WorldCast Series Convertible preferred stock
in exchange for all of the outstanding shares of Cable Tech common
stock. The holder of the preferred stock is entitled to exchange one
share of the preferred stock for 4.6245 shares of the Company's common
stock. The Company valued the transaction as of the acquisition date
based on the fair market value of its common stock ($.20). Should the
Company fail to meet the following requirements the preferred
shareholders will retain the right to elect a majority of the board of
directors until such requirements are satisfied: 1) Obtain $5,000,000
of "Funding" as defined, 2) Increase Cable Tech's "Run Rate" by
$5,000,000 during the 12 months ended June 30, 2001, 3) Obtain a
listing of the Company's common stock on the OTC bulletin Board and 4)
Settle all of Cable Tech's debts and obligation secured by the
Company's former shareholder personal guarantee and settle the surety
agreements as of June 30, 2000.
(b) Reflects the issuance of 3,760,000 WorldCast's stock appreciation
rights. The SARs were issued in connection with a Consulting agreement
between the Company and Cable Tech's former shareholder. As the rights
granted in the SAR's immediately vested to the benefit of the former
shareholder they were accounted for as part of the purchase price of
Cable Tech by the Company. The SAR's may be converted into Company's
common stock as of July 1, 2001 on a one for one basis. All of the
SAR's can be put to the Company at a price of $.40 per SAR one year
from the date of issuance. Based on the put provision and using a ten
percent discount factor the Company assigned a value of $.36 per SAR.
F-18
<PAGE>
(c) Reflects the Net Equity Deficit of Cable Tech as of June 30,2000 in
accordance with requirements under Regulation S-B
(2) Reflects the issuance 1,187,104 shares of WorldCast common in exchange
for the $454,008 owed to the former shareholder of Cable Tech
(3) Reflects the amortization of the excess of cost over the fair value of
net assets acquired over 15 years for the year ended December 31,1999
and the six months ended June 30,2000 of approximately $331,400 and
$165,700, respectively.
(4) Reflects the net effect of the reduction of wages ($600,000 per year)
and cost of consulting fees ($20,833 per month) resulting from the
resignation of the CEO and hiring of the same as a consultant.
(5) Reflects the reduction of interest expense as a result of the
conversion of the loan to common stock as described in (2) above
(6) Reflects the guarantee fee incurred by the Company under the "Financial
Accommodation Agreement" between the Company and the former Cable Tech
shareholder at a rate of 20,833 per month. Under the terms of the
agreement the fee is to be paid until personal guarantees given on
certain debt due to a financial institution are no longer in effect.
(7) Reflects the issuance of 1,000,000 WorldCast's stock appreciation
rights net of 3,000,000 rights that are subject to the "Claw Back"
provisions as defined. These SARs were issued in connection with an
addendum to the Consulting Agreement between the Company and Cable
Tech's former shareholder discussed in 1(b) above. The addendum calls
for the Consultant to render services in connection with assisting
Cable Tech in identifying acquisition candidates for a period of one
year commencing on July 1,2000. The SAR's may be converted into
Company's common stock as of July 1, 2001 on a one for one basis. If
the Company's common stock share price is $2.00 or more as of July 1,
2001 then the SAR's subject to the Claw Back provision will be canceled
otherwise they will be released. As 3,000,000 of the SAR's are
subjected to a future event they are deemed to be contingent
consideration and the value of the consideration will be determined
when the contingency is resolved. All other SAR's can be put to the
Company at a price of $.40 per SAR one year from the date of issuance.
Based on the put provision and using a ten percent discount factor the
Company assigned a value of $.36 per SAR.
(8) Reflects the amortization of the prepaid consulting expense for the
year ended December 31,1999 and the six months ended June 30,2000 of
approximately $360,000 and $180,000, respectively.
F-19
