<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15d OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 18, 1995
EVRO CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 0-7870 59-3229961
- ------------------------ -------------- ---------------------
(State of Incorporation) (Commission (I.R.S Employer
File Number) Identification No.)
523 Douglas Avenue
Altamonte Springs, Florida 32714
- --------------------------------------------------------------------------------
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (407) 786-4460
------------------------------
7501 W. Irlo Bronson Memorial Hwy., Suite 105
Kissimmee, Florida 34747
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 18, 1995, EVRO Corporation ("EVRO" and the "Company") filed
Form 8-K reporting that the Company acquired at least 51% of the issued and
outstanding common shares of Channel America Television Network, Inc. ("Channel
America").
The acquisition agreements between the Company and Channel America,
initially signed on July 13, 1995, amended on September 18, 1995, October 10,
1995, October 26, 1995, and February 7, 1996, provide that the Company will, in
a two-step transaction, acquire 100% of the issued and outstanding shares of the
capital stock of Channel America. The Company completed the first step of the
transaction on October 10, 1995, when, in exchange for $1,000,000, the Company
acquired 27,500,000 shares of the common stock of Channel America, which will
represent at least 51% of the issued and outstanding shares of Channel America's
voting stock, after giving effect to the anticipated issuance of additional
shares of Channel America's common stock to its creditors pursuant to the
anticipated conversion of Channel America's indebtedness described below. Of
the $1,000,000 purchase price, $300,000 has been paid as of December 31, 1995,
$300,000 is due and payable on February 29, 1996, and the balance, $400,000, was
paid by the Company's delivery of its promissory note, bearing interest at eight
percent per annum, the principal and accrued interest of which is payable on
March 31, 1996. In the event that the Company defaults in the payment of any
portion of the purchase price, the percentage of Channel America's shares
acquired by the Company will be reduced pro rata with respect to the percentage
of the purchase price actually paid. For accounting purposes, the Company's
acquisition of the 51% interest in Channel America was recorded as of October 1,
1995.
The second step of the Channel America acquisition, wherein the Company
has agreed to issue 48,000 shares of its Series H Convertible Preferred Stock
(the "Series H Preferred"), convertible into 3,000,000 shares of the Company's
common stock, as consideration for the remaining 49% of the shares of Channel
America's common stock held by persons other than the Company, will be closed
once an aggregate of 90% of the note holders of Channel America and holders of
preferred stock, representing a total of $7,768,533 of debt and equity as of
June 30, 1995, agree to convert their debt or preferred stock, as applicable,
into shares of Channel America's common stock. The Series H Preferred has been
issued to an escrow agent, and will be held in escrow, pending: (a) the Company
increasing the number of its authorized shares of common stock; (b) the Company
filing a registration statement with the Securities and Exchange Commission,
registering the shares of common stock underlying the Series H Preferred; and
(c) the agreement being approved by the shareholders of Channel America. If the
second step of the agreement is not closed by December 31, 1995, it may be
canceled by either party. The parties are currently negotiating to extend the
December 31, 1995, deadline.
For accounting purposes, the Company's acquisition of the 51% interest
in Channel America was recorded as of October 1, 1995, using the purchase
method of accounting. The October 10, 1995. The excess of the purchase
price, including transaction costs
2
<PAGE> 3
relating to the acquisition of $350,000, over and above the aggregate
fair value of the assets acquired less the liabilities assumed has been recorded
as goodwill ($7,834,997). Goodwill will be amortized on a straight line basis
over 15 years, the estimated life of Channel America's list of affiliate
television stations and cable companies. No value has been assigned to the
minority interest of Channel America as the net assets acquired, including
goodwill, are equal to the liabilities assumed as of the date of acquisition.
As closing occurred in the middle of the month on October 10, 1995, the
transaction has been recorded as of October 1, 1995, a date which lies within
the date on which the transaction was initiated and the date of closing.
Accordingly, the financial statements of EVRO for the quarter ended December 31,
1995 will reflect the operations of Channel America for the entire three month
period. The cost of acquisition and net income for the period from October 1,
1995 to October 10, 1995 will be reduced by imputed interest of $1,600 using a
10% annual rate of interest.
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements of TSSN and pro-forma financial
information are hereby included as required by Item 7(a) and (b) to Form 8-K.
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Financial Statements of Channel America Television
Network, Inc. and Subsidiary for the years ended
December 31, 1994 and 1993 F-1 F-21
Unaudited Financial Statements of Channel America
Television, Inc. and Subsidiary for the nine months ended
September 30, 1995.
Consolidated Balance Sheet F-22 F-23
Consolidated Statement of Operations F-24
Consolidated Statement of Stockholders'
Equity Deficit F-25
Consolidated Statement of Cash Flows F-26
Notes to Consolidated Financial Statements F-27
(B) PROFORMA FINANCIAL INFORMATION:
Balance Sheet as of September 30, 1995 F-28
Proforma Statement of Operations for the year
ended December 31, 1994 F-29
Proforma Statement of Operations for the nine
months ended September 30, 1995 F-30
</TABLE>
(C) EXHIBITS
2.1 Fourth Amended Agreement to Stock Purchase Agreement, Agreement
of Plan and Merger, and Escrow Agreement by and among Channel America
Television Network, Inc., EVRO Corporation and Scolaro, Shulman,
Cohen, Lawler & Burstein, P.C. dated February 7, 1996.
4
<PAGE> 5
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.
Date: February 27, 1996
EVRO CORPORATION
By: /s/ O. Don Lauher
-----------------------
O. Don Lauher
Chief Financial Officer
5
<PAGE> 6
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page to Page
------------
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 . .
FINANCIAL STATEMENTS:
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3 . . F-4
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5 . .
Consolidated Statements of Stockholders' Equity (Deficit) . . . . . . . . . . . . . . . . . F-6 . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7 . . F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-9 . . F-19
FINANCIAL STATEMENT SCHEDULES:
Report of Independent Auditors on Financial Statement Schedules . . . . . . . . . . . . . . F-20 .
Schedule II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . F-21 .
</TABLE>
. . . . . . . . . .
F-1
<PAGE> 7
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
Channel America Television Network, Inc.
We have audited the accompanying consolidated balance sheets
of Channel America Television Network, Inc. and subsidiary as of December 31,
1994 and 1993, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended December 31, 1994. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of Channel America Television Network, Inc. and subsidiary as of
December 31, 1994 and 1993, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, 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 2 to the consolidated financial statements, the Company's
working capital deficit, accumulated deficit and history of operating losses
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 2.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Mortenson and Associates, P.C.
----------------------------------
MORTENSON AND ASSOCIATES, P.C.
Certified Public Accountants.
Cranford, New Jersey
December 15, 1995
F-2
<PAGE> 8
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1994 1993
------ ------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash $ 35,638 $ 3,332
Cash in Escrow -- 1,398,592
Accounts Receivable (Less Allowance for Doubtful Accounts
of $75,517 and $38,001, Respectively) 4,575 35,075
Program Rights (Less Amortization of $139,703 and
$62,882, Respectively) 110,948 6,218
Other Current Assets -- 2,300
--------- -----------
TOTAL CURRENT ASSETS 151,161 1,445,517
--------- -----------
PROPERTY AND EQUIPMENT:
Furniture and Equipment 66,424 44,647
Broadcast Equipment 55,276 49,526
Film Library 55,730 54,125
--------- -----------
Totals - At Cost 177,430 148,298
Less: Accumulated Depreciation and Amortization 146,652 127,827
--------- -----------
PROPERTY AND EQUIPMENT - NET 30,778 20,471
--------- -----------
OTHER ASSET:
Deposits 7,500 6,167
--------- -----------
TOTAL ASSETS $ 189,439 $ 1,472,155
========= ===========
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-3
<PAGE> 9
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1994 1993
------ ------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
CURRENT LIABILITIES:
Notes Payable - Related Parties $ 2,197,180 $ --
Notes Payable - Others 3,806,943 68,161
Accounts Payable 1,863,238 1,885,457
Accrued Expenses 112,917 92,958
Accrued Interest Payable 224,132 62,202
Other Current Liabilities 73,388 49,990
------------ -------------
TOTAL CURRENT LIABILITIES 8,277,798 2,158,768
------------ -------------
OTHER LIABILITIES:
Notes Payable - Related Parties -- 2,569,680
Notes Payable - Others -- 3,363,375
Net Liabilities of Discontinued Operations 118,983 274,903
------------ -------------
TOTAL OTHER LIABILITIES 118,983 6,207,958
------------ -------------
COMMITMENTS AND CONTINGENCIES -- --
------------ -------------
STOCKHOLDERS' EQUITY (DEFICIT):
Series A Preferred Stock - $.01 Par Value, Cumulative,
Authorized 200,000 Shares; Issued and Outstanding
135,962 Shares and 128,266, respectively, $1,359,620
and $1,282,660 Liquidation Value, respectively 1,360 1,283
Additional Paid-in Capital - Preferred Stock 1,358,260 1,281,377
Common Stock $.01 Par Value; Authorized 100,000,000
Shares; Issued and Outstanding 3,411,959 Shares and
1,886,465 Shares, respectively 34,120 18,864
Additional Paid-in Capital - Common Stock 10,317,610 9,635,418
Accumulated (Deficit) (19,918,692) (17,831,513)
------------ -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (8,207,342) (6,894,571)
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 189,439 $ 1,472,155
============ =============
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-4
<PAGE> 10
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
DECEMBER 31,
--------------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
REVENUE $ 1,639,811 $ 1,577,983 $ 1,676,320
OPERATING EXPENSES:
Direct Operating and Programming 2,058,623 1,832,260 1,962,033
Selling, General and Administrative 1,254,792 629,551 605,421
Debt Restructuring Costs 53,213 312,709 --
Bad Debt Expense 53,241 15,372 62,287
------------ ------------ -------------
TOTAL OPERATING EXPENSES 3,419,869 2,789,892 2,629,741
------------ ------------ -------------
OTHER INCOME (EXPENSE):
Interest Income 14,461 11,454 15,068
Interest Expense (482,062) (535,743) (510,913)
------------ ------------ -------------
TOTAL OTHER (EXPENSE) - NET (467,601) (524,289) (495,845)
------------ ------------ -------------
(LOSS) FROM CONTINUING OPERATIONS (2,247,659) (1,736,198) (1,449,266)
------------ ------------ -------------
DISCONTINUED OPERATIONS:
Gain (Loss) on Disposal of Discontinued Operations 237,440 (230,806) (1,047,052)
------------ ------------ -------------
NET (LOSS) $ (2,010,219) $ (1,967,004) $ (2,496,318)
============ ============ =============
(LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE $ (.73) $ (1.94) $ (2.54)
============ ============ =============
NET (LOSS) PER COMMON SHARE $ (.65) $ (2.20) $ (4.37)
============ ============ =============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,077,164 893,822 571,211
============ ============ =============
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-5
<PAGE> 11
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL
----------
PAID-IN TOTAL
------- -----
PREFERRED CAPITAL COMMON ADDITIONAL STOCKHOLDERS'
--------- ------- ------ ---------- -------------
STOCK PREFERRED PREFERRED STOCK COMMON PAID-IN ACCUMULATED EQUITY
----- --------- --------- ----- ------ ------- ----------- ------
SHARES STOCK STOCK SHARES STOCK CAPITAL (DEFICIT) (DEFICIT)
------ ----- ----- ------ ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - JANUARY 1, 1992 -- $ -- $ -- 571,211 $ 5,712 $ 9,411,573 $(13,368,191) $(3,950,906)
Net (Loss) -- -- -- -- -- -- (2,496,318) (2,496,318)
-------- ------ ---------- --------- ------- ----------- ------------ -----------
BALANCE - JANUARY 1, 1993 -- -- -- 571,211 5,712 9,411,573 (15,864,509) (6,447,224)
Issuance of Stock for
Services Rendered -- -- -- 887,200 8,872 35,988 -- 44,860
Issuances of Stock for
Exercise of Warrants -- -- -- 43,200 432 468 -- 900
Issuance of Stock for
Restructure of Debt 128,266 1,283 1,281,377 384,854 3,848 187,389 -- 1,473,897
Net (Loss) -- -- -- -- -- -- (1,967,004) (1,967,004)
-------- ------ ---------- --------- ------- ----------- ------------ -----------
BALANCE - DECEMBER 31, 1993 128,266 1,283 1,281,377 1,886,465 18,864 9,635,418 (17,831,513) (6,894,571)
Issuance of Stock for
Exercise of Warrants -- -- -- 100,800 1,009 1,092 -- 2,101
Issuance of Stock for
Conversion of Debt -- -- -- 1,384,000 13,840 661,160 -- 675,000
Issuance of Stock for
Services Rendered -- -- -- 25,676 257 12,581 -- 12,838
Issuance of 6% Preferred
Stock Dividend 7,696 77 76,883 -- -- -- (76,960) --
Issuance of Stock for
Restructure of Debt -- -- -- 15,018 150 7,359 -- 7,509
Net (Loss) -- -- -- -- -- -- (2,010,219) (2,010,219)
-------- ------ ---------- --------- ------- ----------- ------------ -----------
BALANCE - DECEMBER 31, 1994 135,962 $1,360 $1,358,260 3,411,959 $34,120 $10,317,610 $(19,918,692) $(8,207,342)
======== ====== ========== ========= ======= =========== ============ ===========
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-6
<PAGE> 12
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------
DECEMBER 31,
---------------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (Loss) from Continuing Operations $ (2,247,659) $ (1,736,198) $ (1,449,266)
------------ ------------ ------------
Adjustments to Reconcile Net (Loss) from Continuing
Operations to Net Cash (Used) for Operating Activities:
Depreciation and Amortization 18,825 21,487 29,174
Use of Program Rights 76,821 20,583 16,314
Issuance of Stock for Services Rendered 12,838 44,860 --
Issuance of Stock for Restructure of Debt -- 1,473,897 --
Other Non-Cash Restructuring Activity - Net -- (932,905) --
Bad Debt Expense (Recovery) 53,241 15,372 (25,941)
Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable (22,739) (9,715) 10,591
Program Rights (181,553) -- --
Other Current Assets 2,300 34,205 (30,076)
Increase (Decrease) in:
Accounts Payable After Restructuring 91,125 233,525 986,214
Accrued Expenses After Restructuring 19,959 84,700 86,708
Accrued Interest Payable After Restructuring 388,891 431,250 354,592
Other Current Liabilities 23,398 (14,405) 64,395
------------ ------------ ------------
Total Adjustments 483,106 1,402,854 1,491,971
------------ ------------ ------------
NET CASH - CONTINUING OPERATIONS - FORWARD (1,764,553) (333,344) 42,705
------------ ------------ ------------
DISCONTINUED OPERATIONS:
Net Income (Loss) from Discontinued Operations -- -- --
Adjustments to Reconcile Net Income (Loss) to Net
Cash Generated by (Used for) Discontinued Operations:
Changes in Net Assets, Liabilities and Losses -- -- 875,955
Estimated Gain (Loss) on Disposal of
Discontinued Operations 237,440 (230,806) (1,047,052)
------------ ------------ ------------
NET CASH GENERATED BY (USED FOR) DISCONTINUED
OPERATIONS - FORWARD 237,440 (230,806) (171,097)
------------ ------------ ------------
INVESTING ACTIVITIES - CONTINUING OPERATIONS:
Purchase of Property and Equipment (29,132) -- --
Security Deposit (1,333) -- (2,667)
------------ ------------ ------------
NET CASH - INVESTING ACTIVITIES - CONTINUING
OPERATIONS - FORWARD (30,465) -- (2,667)
------------ ------------ ------------
NET CASH - INVESTING ACTIVITIES - DISCONTINUED
OPERATIONS - FORWARD $ -- $ -- $ --
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-7
<PAGE> 13
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------
DECEMBER 31,
---------------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
NET CASH - CONTINUING OPERATIONS - FORWARDED $ (1,764,553) $ (333,344) $ 42,705
------------ ----------- ----------
NET CASH GENERATED BY (USED FOR) DISCONTINUED
OPERATIONS - FORWARDED 237,440 (230,806) (171,097)
------------ ----------- ----------
NET CASH - INVESTING ACTIVITIES - CONTINUING
OPERATIONS - FORWARDED (30,465) -- (2,667)
------------ ----------- ----------
NET CASH - INVESTING ACTIVITIES - DISCONTINUED
OPERATIONS - FORWARDED -- -- --
------------ ----------- ----------
FINANCING ACTIVITIES - CONTINUING OPERATIONS:
Proceeds from Exercise of Warrants 2,101 900 --
Proceeds from Series 1 Debentures -- 350,000 --
Proceeds from Series 2 Debentures -- 325,000 --
Proceeds from Senior Convertible Notes 226,000 1,250,000 --
Proceeds from Other Loans 5,000 62,303 184,354
Payments of Debt (41,809) (73,240) --
------------ ----------- ----------
NET CASH - FINANCING ACTIVITIES - CONTINUING
OPERATIONS 191,292 1,914,963 184,354
------------ ----------- ----------
NET CASH - FINANCING ACTIVITIES - DISCONTINUED
OPERATIONS -- -- --
------------ ----------- ----------
NET (DECREASE) INCREASE IN CASH (1,366,286) 1,350,813 53,295
CASH - BEGINNING OF YEARS 1,401,924 51,111 (2,184)
------------ ----------- ----------
CASH - END OF YEARS $ 35,638 $ 1,401,924 $ 51,111
============ =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the years for:
Interest $ 5,580 $ -- $ --
Income Taxes $ -- $ -- $ --
</TABLE>
SUPPLEMENTAL INFORMATION OF NONCASH FINANCING ACTIVITIES:
See accompanying notes and consolidated financial statements for further
details on noncash financing activities.
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-8
<PAGE> 14
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BUSINESS
(A) CURRENT OPERATIONS - Channel America Television Network, Inc. (the "Company
or Channel America") operates a broadcast television network.
Until May 1994, the Company was called Channel America LPTV Holdings, Inc. and
originally served predominantly low power television ("LPTV") stations and the
home satellite dish market. The Company has sought as affiliates principally
full power television stations and direct cable affiliates. The Company's
network encompasses 69 affiliates consisting of full power independent
broadcast stations, LPTV stations and local origination cable systems.
(B) DISCONTINUED OPERATIONS - The Company initially decided to own and operate
LPTV stations in connection with the operation of its broadcast network and
acquired or constructed 16 licensed operating LPTV stations, acquired options
to buy additional stations, obtained 17 construction permits from the United
States Federal Communications Commission (the "FCC") to build stations, and
entered into eight program affiliate/lease agreements to operate LPTV stations
owned by others. In 1992, based on the Company's financial condition and the
costs involved and constructing LPTV stations, the Company discontinued its
broadcast station operations. The Company decided to sell all its LPTV
licenses, stations and construction permits and to terminate its program
affiliate/lease agreements and to concentrate on being a network comprised of
affiliate stations. The Company's former broadcast station operations
including its licenses, permits and affiliate/lease agreements, are reflected
in these consolidated financial statements as discontinued operations.
(2) REALIZATION OF ASSETS
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company has
sustained substantial losses and has a working capital deficiency of $8,126,637
and net deficiency of assets of $8,207,342 at December 31, 1994. In addition,
the Company expects to incur substantial expenditures in the operation of its
business, including expenditures relating to the acquisition and production of
programming and marketing. The Company may need substantial financing from
outside parties for working capital since the necessary funds are not being
generated from operations. The amount of funds needed by the Company is
dependent upon the Company's success at generating revenues and the rate of
growth of its operations.
There is a proposed acquisition of the Company by Evro Corporation ("Evro")(see
Notes 13 & 14). Pursuant to that proposed acquisition, Evro has advanced funds
to the Company in 1995. The Company has been able to meet its 1995 working
capital needs through such funds. If the acquisition of the Company by Evro is
not consummated, there can be no assurance that the Company will be successful
in generating the needed level of revenue or cash flows to sustain operations.
In view of the matters described in the preceding paragraph, recoverability
of the recorded asset amounts shown in the accompanying balance sheet is
dependent upon continued operations of the Company, which, in turn, is
dependent upon the Company's future operations. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue in
existence.
F-9
<PAGE> 15
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #2
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) CONSOLIDATION - The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary. All material intercompany
accounts and transactions have been eliminated. The Company is pursuing the
sale of owned LPTV stations and, in accordance with opinion No. 30 of the
Accounting Principles Board, amounts relative to the sales of such stations are
shown separately in the accompanying consolidated financial statements as
discontinued operations. This disposition is described in the following note
and data presented in all other notes are exclusive of owned LPTV station
operations.
(B) REVENUE RECOGNITION - The Company derives operating revenues from paid
programming, affiliate fees and per-inquiry fees. The Company also generates
non-cash revenues from barter transactions. Paid programming represents
revenue earned for broadcasting customer generated programming and (to a lesser
extent) paid spot advertising (e.g. 30-second commercials). Affiliate fees are
monthly charges to affiliated stations for the right to belong to the broadcast
network. The Company may from time to time waive all or a portion of such fees
to attract and maintain affiliates. Per inquiry fees represent fees generated,
on a direct response basis, when a customer uses air time to sell directly to
viewers who then place orders with the customer. Barter (nonmonetary)
transactions generally are used by the Company to acquire programming. In a
typical barter transaction, the Company is given programming rights in exchange
for air time. The estimated fair value of programming rights is recognized as
revenue and programming expense when the air time is used. As is the general
accounting practice in this industry, no gain or loss is recognized on barter
transactions. Therefore, barter transactions increase both revenue and
expenses, but do not affect cash flow. Although the Company does not receive
any cash in barter transactions, such transactions alleviate cash expenditures
by the Company to acquire programming.
The following summarizes revenue:
<TABLE>
<CAPTION>
Years ended
--------------------
December 31,
--------------------
Revenue Source: 1994 1993 1992
- --------------- ------ ------ ------
<S> <C> <C> <C>
Barter Programs $ 1,055,850 $ 953,700 $ 732,150
Paid Programming and Paid Spots 411,839 431,550 709,675
Per Inquiry Revenue 80,004 111,136 109,122
Affiliate Fees 92,118 81,597 125,373
------------- ------------- ------------
TOTAL REVENUE $ 1,639,811 $ 1,577,983 $ 1,676,320
============= ============= ============
</TABLE>
(C) FILM LIBRARY AND EQUIPMENT - Film library and equipment are stated at cost.
Depreciation and amortization is computed using the straight-line method over
the estimated useful lives ranging from 5 to 11 years. Depreciation and
amortization expense amounted to $20,225, $21,487 and $29,174 for the years
ended December 31, 1994, 1993 and 1992, respectively.
(D) PROGRAM RIGHTS - Program rights relate to rights purchased for broadcast
materials. The costs are amortized over the estimated number of future
showings unless the program is licensed for an unlimited number of showings in
which case it is amortized over the contract period. Amortization expense for
the years ended December 31, 1994, 1993 and 1992 was $76,821, $20,583 and
$16,314, respectively. These rights are classified as current or long-term
based upon their anticipated usage.
(E) CASH EQUIVALENTS - The Company considers cash equivalents to be certain
highly liquid investments with a maturity of three months or less when
purchased. The Company had no cash equivalents at December 31, 1994. At
December 31, 1993, the Company had cash balances at financial institutions
which exceeded FDIC insurance limits by approximately $1,300,000. Cash in
escrow is related to the sale of debentures described in Note 5. Pursuant to
the terms of the debentures, the cash became available for company working
capital purposes in March 1994.
F-10
<PAGE> 16
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #3
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
(F) ACCOUNTS RECEIVABLE - A provision for doubtful accounts is charged to
operations based on management's evaluation of potential losses in trade
receivables. This evaluation includes an analysis of current and past due
accounts, past experience, and any other relevant information available.
(G) LOSS PER SHARE - Loss per share has been computed based upon the weighted
average number of common shares outstanding after giving retroactive treatment
to the one-for-fifty reverse stock split (see Note 5A). No dual presentation
of earnings (loss) per share is presented because inclusion of any of the
Company's common stock equivalents would decrease the loss per share and thus
would be antidilutive.
(4) DISPOSITION OF OWNED LPTV STATIONS
The Company's owned LPTV stations ceased operating near the end of 1991. As a
result, the Company decided as of the beginning of 1992, to sell its owned LPTV
stations (see Note 13A).
The estimated gain (loss) on disposal of such operations, which comprise "Gain
(Loss) on Disposal of Discontinued Operations" on the accompanying consolidated
statements of operations, follows:
<TABLE>
<CAPTION>
Years ended
----------------------------------------------
December 31,
----------------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Estimated Gain (Loss) on Disposal of Owned
LPTV Station Operations $ 237,440 $ (230,806) $ (1,047,052)
============= ============ =============
</TABLE>
The gain estimated on disposal of the LPTV business segment has been
established in accordance with current forecasts and plans, as well as from
actual sales of stations. However, there can be no assurance that the ultimate
gain or loss on disposition of the remaining stations will not be more or less
than the amounts presently estimated. The actual sale of unsold LPTV stations
in future years for amounts different then those established above will be
recognized in the year of the sale.
The assets and liabilities of the business being sold are shown as "Net
Liabilities of Discontinued Operations" separately on the accompanying
consolidated balance sheets and consist of the following:
<TABLE>
<CAPTION>
December 31,
------------
1994 1993
------ ------
<S> <C> <C>
Notes Receivable $ 215,000 $ 94,880
Broadcast Equipment Estimated at Net Realizable Value 2,800 20,000
Liabilities (336,783) (389,783)
--------------- --------------
NET LIABILITY $ (118,983) $ (274,903)
=============== ==============
</TABLE>
(5) RECAPITALIZATION AND RESTRUCTURING
In June 1993, the Company adopted a plan of restructuring (the
"Recapitalization") of a substantial portion of its indebtedness. In
furtherance of that Plan, on December 31, 1993, the Board of Directors formally
ratified and approved the following:
(A) REVERSE STOCK SPLIT - Subject to stockholder approval, which approval was
obtained in March 1994, a one-for-fifty reverse stock split was authorized
converting the then outstanding approximately 168,500,060 shares of the
Company's common stock to approximately 3,371,000 shares. The $.01 par value
of the common stock did not change, therefore, common stock was decreased and
paid-in capital was increased by $1,651,920 as a result of the reverse split.
All share data were adjusted for the reverse stock split. Options, warrants,
conversion rights and other rights of whatever nature to purchase common shares
prior to the split were adjusted to reflect the revised proportional
relationship caused by the split.
F-11
<PAGE> 17
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #4
(5) RECAPITALIZATION AND RESTRUCTURING (CONTINUED)
(B) PREFERRED STOCK - In 1993, a new class of preferred stock ("Preferred
Stock") having a liquidation value of $10 per share was authorized for
issuance to certain creditors. For the first twelve months after issuance, the
Company had the option to pay the 6% dividend in kind by issuing additional
shares of Preferred Stock. As of December 31, 1994, the Company issued 7,696
shares in payment of the 6% dividend due on that date.
After the third anniversary of the issuance of the Preferred Stock (i.e. after
December 31, 1996), the dividend shall be increased to 17% and a sinking fund
for the redemption of the Preferred Stock on the 10th anniversary of issuance
will commence. Upon the failure of the Company to pay two consecutive
dividends, the holders of the Preferred Stock have the right to gain control of
the Board of Directors of the Company and convert their shares of Preferred
Stock into an aggregate of 50% of the Company's outstanding common stock. The
Preferred Stock is redeemable by the Company, at its option, at any time at a
redemption price of 105% of par, provided that the certain secured notes have
been fully paid.
(C) RESTRUCTURING OF INDEBTEDNESS (THE "RESTRUCTURE") - A description of the
indebtedness restructuring that occurred during 1994 is as follows:
Accrued interest of $300,256 was converted into 10% fixed rate notes in the
amount of $32,070, 10% subordinated notes of $262,700 and a 10% note payable of
$5,486.
Series 1 and 2 Subordinated Convertible Debentures aggregating $675,000 were
converted into 1,224,000 shares of common stock (see Note 6).
After being authorized in 1993, management issued (i) $641,328 of 10% secured
promissory notes due 1996; (ii) $2,530,515 of 10% subordinated debentures due
2000; (iii) $524,230 of 10% promissory notes due 1995 to existing noteholders;
and (iv) $438,666 of promissory notes due 1995 issued to trade creditors.
A description of the indebtedness restructuring that occurred as of December
31, 1993, follows:
Fixed rate secured notes (including accrued interest) aggregating $1,923,988
were converted into three year 10% notes amounting to $641,328 and preferred
stock valued at $1,282,660. In connection with the conversion, the Company
issued 188,147 shares of common stock. The $94,078 estimated value of the
common stock has been charged to operations as debt restructuring costs.
Subordinated convertible debentures (including accrued interest) aggregating
$2,411,283 and a financing bonus amount of $119,232 were converted to 10% notes
due December 31, 2000. In connection with the conversion, the Company issued
196,707 shares of common stock. The $98,364 estimated value of the common
stock has been changed to operations as debt restructuring costs, as has the
financing bonus amount.
Accounts payable and other debt instruments (including accrued interest)
amounting to $962,896 was converted to 10% five-year notes of $438,666 and 10%
two-year notes in the amount of $524,230.
F-12
<PAGE> 18
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #5
(6) LONG-TERM DEBT
Long-term debt consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1994 1993
------ ------
Notes Payable Notes Payable
------------- -------------
Related Related
------- -------
Parties Others Parties Others
------- ------ ------- ------
<S> <C> <C> <C> <C>
Senior Convertible Debentures, Due September 30,
1996, 5% Per Annum $ 625,000 $ 625,000 $ 625,000 $ 625,000
Series 2, Subordinated Convertible Debentures,
Due September 30, 1995, 5% Per Annum -- -- 425,000 250,000
Senior Convertible Debentures, Due March 30, 1995,
10% Per Annum 52,500 173,500 -- --
Subordinated Notes, Due December 31, 2000,
10% Per Annum 708,518 2,084,697 708,518 1,821,997
Fixed Rate Notes, Due August 31, 1996,
10% Per Annum 324,319 341,270 324,319 317,009
Five Year Notes, Due 1995 to 2000,
10% Per Annum 20,000 418,205 20,000 229,744
Two Year Notes, Due 1995 to 1996,
10% Per Annum 466,843 97,387 466,843 97,387
Note Payable, Due 1994 to 1995, 10% Per Annum -- 39,582 -- 68,096
Fixed Rate Note Payable on Demand,
15% Per Annum -- 22,302 -- 22,303
Note Payable, Due December 31, 1994,
7% Per Annum -- 5,000 -- --
------------ ------------- ------------- -------------
Totals 2,197,180 3,806,943 2,569,680 3,431,536
Less: Current Portion 2,197,180 3,806,943 -- 68,161
------------ ------------- ------------- -------------
TOTALS $ -- $ -- $ 2,569,680 $ 3,363,375
============ ============= ============= =============
</TABLE>
Maturities of long-term debt as of December 31, 1994 in each of the next five
years are as follows:
<TABLE>
<S> <C>
1995 $ 6,004,123
1996 --
1997 --
1998 --
1999 --
Thereafter --
---------------
TOTAL $ 6,004,123
===============
</TABLE>
F-13
<PAGE> 19
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #6
(6) LONG-TERM DEBT (CONTINUED)
At December 31, 1994, the Company was in default with respect to its long-term
debt. The entire amount, therefore, has been classified as current.
In accordance with certain terms of the proposed acquisition of the Company by
Evro, at least ninety-percent (90%) of all outstanding debtholders must convert
their notes into Company Common Stock to effect the acquisition (see Note 13D).
The Company, during 1994 sold an aggregate of $226,000 of Senior Debentures due
March 31, 1995.
The Company, between October and December 1993, sold an aggregate of $1,250,000
Senior Convertible Debentures due 1996 (the "Senior Debentures"). The Senior
Debentures bear an annual interest rate of 5% payable quarterly commencing
December 31, 1995. The Senior Debentures are convertible into common stock on
the basis of $.014705 (representing approximately 34% of the outstanding shares
of common stock of the Company) if converted prior to September 30, 1996 or
$.018382 (representing 29% of the shares of the common stock of the Company) if
converted thereafter, subject to antidilution adjustment. Such shares are
entitled to certain "demand" and "piggy-back" registration rights.
The Company, between May and September 1993, sold an aggregate of $350,000
principal amount of Series 1 Secured Convertible Debentures due 1993 (the
"Series 1 Debentures"). In connection with the issuance of the Series 1
Debentures, the Company issued 160,000 shares of common stock to the holders
thereof on a pro rata basis. The Series 1 Debentures bore an interest rate of
10% from and after July 7, 1993 and were secured by the Company's film and
television program library. The Series 1 Debentures were convertible into 6%
of the shares of common stock of the Company. In October 1993, pursuant to
their terms, the Series 1 Debentures were converted into an equal amount of
Series 2 Subordinated Convertible Debentures due 1995 ("Series 2 Debentures").
The Company, between October and December 1993, sold an aggregate of $325,000
Series 2 Debentures. The Series 2 Debentures bore an annual interest rate of
5% payable quarterly commencing December 31, 1995 and were secured by the
Company's film and television program library. The terms of the Series 2
Debentures provided that so long as 70% of the Series 2 Debentures were
outstanding, the holders had the right to elect a majority of the members of
the Company's Board of Directors and had the right to vote on any issue brought
before the stockholders of the Company for approval. As a result of these
provisions, Thomas Kempner, Howard White, and Mark Hershhorn were elected to
the Board of Directors of the Company in December 1993. In addition, the
holders had a right of first refusal with respect to third party offers to
purchase securities of the Company. All of the Series 2 Debentures were
automatically converted upon the completion of the Restructure in 1994 into
1,224,000 shares of common stock, with 634,667 shares issuable to the holders
of Series 2 Debentures that were issued in exchange for Series 1 Debentures and
589,333 shares issued to the holders of the remaining Series 2 Debentures on a
pro-rata basis. Such shares are entitled to certain "demand" and piggy-back"
registration rights.
The Company, between September and December 1992, borrowed an aggregate of
$150,000 from eight individuals (the "Bridge Loans"). The Bridge Loans were
evidenced by promissory notes that bore interest at 10% per annum and matured
in one year. In connection with the Bridge Loans, the Company issued warrants
to purchase an aggregate of 144,000 shares of common stock at an aggregate
exercise price of $3,000. All such options were exercised between May 1993 and
March 1994.
F-14
<PAGE> 20
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #7
(7) INCOME TAXES
The Company has net operating loss carryovers of approximately $19,810,000 as
of December 31, 1994, expiring in the years 2003 through 2009. However, based
upon present Internal Revenue regulations governing the utilization of net
operating loss carryovers where the corporation has issued substantial
additional stock, most of this loss carryover may not be available to the
Company.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," effective January 1, 1993. The adoption of
SFAS No. 109 did not have a material impact to the financial statements. SFAS
No. 109 requires the establishment of a deferred tax asset for all deductible
temporary differences and operating loss carryforwards. Assuming all operating
loss carryforwards will be available (which is unlikely) the Company would have
a deferred tax asset of approximately $7,924,000. This amount represents an
increase of approximately $804,000 over the prior year amount. Because of the
uncertainty that the Company will generate income in the future sufficient to
fully or partially utilize these carryforwards, a valuation allowance of
$7,924,000 has been established pursuant to SFAS No. 109. Accordingly, no
deferred tax asset is reflected in these financial statements.
(8) STOCKHOLDERS' EQUITY
(A) AUTHORIZED STOCK - The Company is authorized to issue 100,000,000 shares of
common stock and 1,000,000 shares of preferred stock.
(B) STOCK ISSUANCES - During 1994 and 1993, 25,676 shares and 887,200 shares,
respectively, of common stock were issued for services rendered. Such issuance
has been reflected by a charge to operations of $12,838 and $44,860 during 1994
and 1993, respectively.
During 1994, the Company issued 7,696 shares of preferred stock in payment of
the 6% dividend (see Note 5B).
In March 1994, the Series 1 and 2 Subordinated Convertible Debentures, due
September 30, 1995, aggregating $675,000 were converted into 1,224,000 shares
of the common stock of the Company. In connection with this conversion, an
additional 160,000 bonus shares were issued by the Company.
(C) STOCK OPTIONS AND WARRANTS
STOCK OPTIONS - The following is a summary of Company common stock options:
<TABLE>
<CAPTION>
Shares Under Options
--------------------
Years ended
--------------------------------------
December 31,
--------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Outstanding Beginning of Years 128,000 206,200 206,200
Offered During Years 5,000 -- --
Exercised During Years 100,800 43,200 --
Terminated During Years -- 35,000 --
------- ------- -------
OUTSTANDING AND EXERCISABLE END OF PERIODS (1) 32,200 128,000 206,200
======= ======= =======
</TABLE>
(1) With an exercise price per share ranging from $.02 to $25.00 giving effect
to the one-for-fifty reverse stock split.
WARRANTS - At December 31, 1994 and 1993, the Company had underwriter warrants
(related to a 1990 stock offering) to purchase 19,200 shares of the Company's
common stock at approximately $29 per share. The warrants expired February 2,
1995.
F-15
<PAGE> 21
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #8
(9) COMMITMENTS AND CONTINGENCIES
(A) PENDING LITIGATION - The Company is currently involved in a litigation
proceeding involving breach of contract of a sales representative agreement.
The case is presently awaiting trial. Management believes the lawsuit is
totally without merit. If the plaintiff prevails in this action, damages can
range from $60,000 for unpaid first year contract fees to millions of dollars
for commissions based upon theoretical advertising sales. Counsel are unable
to predict the outcome of this case (see Note 14B).
(B) LEASES - The Company leases its operating facilities in Darien, Connecticut
for a term of three years under an operating lease. The future minimum annual
rental commitments under the lease for the years ending December 31 are
approximately as follows:
<TABLE>
<S> <C>
1995 $ 47,000
1996 50,000
1997 17,000
------------
TOTAL $ 114,000
============
</TABLE>
Rent expense for years ended December 31, 1994, 1993 and 1992 was approximately
$40,800, $37,100 and $28,900, respectively.
(C) EMPLOYMENT AGREEMENTS - On November 1, 1993, the Company entered into a
three-year employment agreement with its Chief Executive Officer ("CEO"). The
agreement may be terminated by the Company as a result of death or disability
or for cause. If the CEO terminates his agreement for cause during the first
year, the Company will be required to pay salary and earned bonus, if any, pro
rata for one year. If such termination occurs after the first year, the
Company is required to pay salary and earned bonus, if any, for two years (see
Note 13A).
(D) 1994 STOCK COMPENSATION PLAN - The Company's 1994 Stock Compensation Plan
(the "1994 Plan") permits the granting of incentive options, non-qualified
stock options, stock appreciation rights, performance share units, restricted
stock and for other awards of restricted stock in lieu of cash bonuses to
Company employees, advisors, consultants and outside directors. Under the 1994
Plan, the term of any stock option may not exceed ten years and the stock
option purchase price of an incentive stock option may not be less than the
fair market value of the common stock on the date of the stock option grant.
The maximum number of shares of common stock provided for grants under the 1994
Plan is 650,000 shares. The 1994 Plan is administered by the Compensation and
Stock Option Committee appointed by the Board of Directors, which has the
authority to select optionees, designate the number of shares to be covered by
each option and, subject to certain restrictions, specify other terms of the
options. No grants have been made under the 1994 Plan. The 1994 Plan was
approved by the Board of Directors on December 13, 1993 and adopted by the
Stockholders of the Company on March 17, 1994, and replaces the Company's 1988
Stock Option Plan, which had not been approved by the Company's stockholders
(see Note 13A).
(E) STOCK OPTIONS - On December 29, 1994, 5,000 stock options, at an exercise
price of $.02 per share, were issued to a holder of an unsecured note payable.
F-16
<PAGE> 22
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #9
(10) CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS - BROADCAST SERVICES
AND PROGRAMMING
GTE Spacenet Corporation ("GTE") provided satellite communication services to
the Company on GTE's Spacenet H satellite, through August 1994. The Company
incurred monthly service charges ranging between $20,000 and $40,000 during the
term of the agreement.
In August 1994, the Company was able to obtain satellite communication services
on a short-term basis from Vista Satellite Communications. The Company
incurred monthly service charges of $45,000 (see Note 13E).
On September 15, 1992, the Company entered into a five year agreement with IDB
Communications Group, Inc., which provides stereo tape play-back of Channel
America programming, uplink transmission facilities to Spacenet II and
occasional downlink turnaround service which enables the Company to selectively
choose programming from other satellites and transmit it back to Spacenet II
for transmission to the Company's network. Prior to its entering into this
agreement, the Company was receiving these services under an agreement with
Reception Specialists Company, a wholly-owned subsidiary of IDB ("RSC"). The
Company owed RSC an aggregate of $400,000 for services previously rendered.
IDB has agreed to forgive this amount provided that the Company perform its
obligations under the new agreement. As this forgiveness is contingent upon
the future performance of the Company, the obligation remains in these
financial statements at the full amount. At December 31, 1994 and 1993,
respectively, $753,559 and $721,135 due to IDB is included in accounts payable.
Under the agreement, the Company is required to pay a monthly fee for primary
services of $40,750 per month as of December 31, 1994. The monthly fee will
increase to $42,790 for the period September 15, 1995 to September 15, 1996.
Additional services such as downlink turnaround service and other services will
be provided by IDB at an hourly rate ranging from $65 per hour to $187.50 per
hour.
In order to permit the Company to arrange for new financing and improve its
cash flow, the agreement provided that IDB would accept partial payment of its
service fees until March 15, 1994. To recoup the deferred amounts, the
agreement provided for a 25% surcharge on amounts billed for the period
September 15, 1994 to September 15, 1995 and 50% for the period September 15,
1995 to September 15, 1996 until such deferred amounts are repaid in full. If
the agreement is terminated or a change in control of the Company occurs prior
to the expiration of the agreement, the entire unpaid balance due under the
agreement plus the $400,000 previously due to RSC shall become immediately
payable.
(11) RELATED PARTIES
As part of the loans made to the Company in October and November 1990, Harold
Gelb, a former director of the Company, loaned to the Company $22,917; David
Post, Chairman of the Board and Chief Executive Officer of the Company, loaned
to the Company $47,667; and Katlean de Monchy, the wife of David Post, loaned
to the Company $35,667.
In connection with the Bridge Loans made to the Company between September and
December 1992, Mr. Post, Mr. Gelb, Walnut Capital Corp., a corporation of which
Burton W. Kanter, (a director of the Company) is Chairman and President
("Walnut") and the brother of Thomas L. Kempner, (a director of the Company),
loaned $20,000, $12,500, $25,000 and $25,000, respectively, and were issued
stock options to purchase 19,200, 12,000, 24,000 and 24,000 shares of common
stock to the Company. These options were exercised by December 31, 1994 (see
Note 8C).
F-17
<PAGE> 23
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #10
(11) RELATED PARTIES (CONTINUED)
In connection with the sale of the Series 1 Debentures, Global Inversiones,
S.A., a corporation of which Howard White, Vice Chairman of the Board of
Directors of the Company, is an officer and a shareholder ("Inversiones"), and
the brother of Mr. Kempner purchased $275,000 and $25,000 of the Series 1
Debentures, respectively. In connection with the issuance of the Series 1
Debentures, Inversiones and Mr. Kempner's brother were issued 125,714 and
11,429 shares of common stock, respectively. The Series 1 Debentures held by
Inversiones and Mr. Kempner's brother were converted into a like amount of
Series 2 Debentures. Upon the completion of the Recapitalization, the Series 2
Debentures held by Inversiones and Mr. Kempner's brother were automatically
converted into 498,667 and 45,333 shares of common stock, respectively.
In connection with the sale of the Senior Convertible Debentures, several
trusts for the benefit of various family members of Thomas Kempner with respect
to which Mr. Kempner is a co-trustee (the "Kempner Trusts") purchased $500,000
Senior Debentures.
In consideration of the efforts of Robert Moore and Howard White in the
placement of the Series 1, Series 2 and Senior Debentures, the Company issued
to 273,600 shares of common stock to Mr. Moore and 159,600 shares of common
stock to Inversiones.
In 1994, 14,676 shares of common stock were issued to Allen Rosenblatt, acting
controller, in consideration of past services to the Company.
In connection with the sale of the Senior Debentures due March 31, 1995, Burton
Kantor and the brother of Thomas Kempner purchased $32,500 and $20,000,
respectively, of the Senior Debentures at December 31, 1994.
In fiscal 1993, 318,260, 59,333 and 12,000 shares of common stock was issued to
Mr. Post, Mr. Kanter and Mr. Feltner, respectively, in consideration of their
past services as directors of the Company.
In connection with the restructuring of debt in 1993, amounts that were listed
as accrued expenses in 1992 were converted into two year 10% notes. These
included advances from Elvin Feltner and Burton Kanter of $195,000, and
$40,000, respectively, accrued salary to David Post of $123,731 and consulting
fees due Allen Rosenblatt of $7,500. Randolph Pace, a stockholder, acting as
President of KAM Consulting, performed $20,000 worth of services for the
Company, which was converted into a 5 year note payable at December 1993.
Additional amounts of accrued interest on these notes were also converted into
two-year 10% notes.
As part of the Recapitalization:
(1) $142,669 of Subordinated Debentures and 10,842 shares of common stock were
issued to Mr. Gelb, $71,335 of Subordinated Debentures and 5,421 shares of
common stock were issued to Ms. de Monchy, $106,968 of Subordinated Debentures
and 8,451 shares of common stock were issued to the brother of Mr. Post,
$35,656 of Subordinated Debentures and 2,817 shares of common stock were issued
to Pinpoint Partners I, a general partnership of which Mr. Kempner is a
managing general partner, $213,937 of Subordinated Debentures and 16,901 shares
of common stock were issued to the Kempner Trusts, and $290,602 of Subordinated
Debentures and 229,557 shares of common stock were issued to Walnut.
(2) $24,959 of secured notes, 4,992 shares of preferred stock and 6,595 shares
of common stock were issued to Mr. Post, $19,197 of Secured Notes, 3,839 shares
of preferred stock and 5,673 shares of common stock were issued to Ms. de
Monchy, an aggregate of $135,000 of secured notes, 27,000 shares of preferred
stock and 39,892 shares of common stock were issued to the Kempner Trustees,
$51,949 of secured notes, 10,389 shares of preferred stock.
F-18
<PAGE> 24
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #11
(12) NEW AUTHORITATIVE PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," effective July 1, 1993. The adoption of
SFAS No. 109 did not have a material impact on the Company's financial position
or results of operations. Since that implementation, the Financial Accounting
Standards Board has issued fifteen (15) new authoritative accounting
pronouncements ("SFASs"). These new pronouncements either do not apply to the
Company, or will be implemented when the Company engages in applicable
transactions. The Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants has issued Statement of Position
("SOP") 94-6 "Disclosure of Certain Risks and Uncertainties." SOP 94-6, which
may require some additional disclosures, is effective for fiscal years ending
after December 15, 1995. None of these potentially applicable accounting
pronouncements is anticipated to have a material impact on the Company's
financial statements.
(13) SUBSEQUENT EVENTS
(A) DISPOSITION OF OWNED LPTV STATIONS - As of December 15, 1995, the Company
had three LPTV stations remaining to be sold. The Company is pursuing the sale
of these stations and contemplates their sale in 1996 (see Note 4).
(B) EMPLOYMENT AGREEMENT AND STOCK COMPENSATION PLAN - On January 3, 1995, the
Company entered into a three-year employment agreement with the Senior Vice
President of programming, including a revenue participation plan. The Company
also issued to him 68,238 stock options at an exercise price of $.02 per share
effective January 3, 1995. In addition, upon conversion of senior debt holder
notes into equity, the Company will issue him an additional 34,000 stock
options at an exercise price of $.02.
(C) STOCK OPTIONS - Effective January 3, 1995, the Company issued 34,119 stock
options at an exercise price of $.02 per share to Clear Water Entertainment,
Inc. ("Clear Water") in connection with services performed for the Company. In
addition, upon conversion of senior debt holder notes into equity, the Company
will also issue to Clear Water an additional 17,000 stock options at an
exercise price of $.02.
(D) ACQUISITION BY EVRO CORPORATION - In June 1995, the Board of Directors
authorized management to issue Common Stock in exchange for all outstanding
notes and Preferred Stock in anticipation of Evro purchasing a 51% controlling
interest in the Company. The Company entered into a stock purchase agreement
with Evro on July 13, 1995, whereby Evro will eventually acquire 100% of the
Company. In accordance with certain terms of the proposed acquisition of the
Company by Evro, at least ninety-percent (90%) of all outstanding debtholders
and Preferred Stockholders must convert their notes and Preferred Stock into
Company Common Stock to effect the acquisition.
(E) BROADCAST SERVICES - In 1995, the Company entered into a satellite
communication agreement with AT&T, whereby the Company will incur monthly
service charges of between $125,000 and $140,000.
(14) SUBSEQUENT EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF THE
INDEPENDENT AUDITORS
(A) ACQUISITION BY EVRO CORPORATION - Various amendments have been made to the
stock purchase agreement with Evro. As of February 15, 1996, the Company has
received advances from Evro and Evro has paid outstanding obligations of the
Company in the aggregate amount of $1,522,000.
(B) LITIGATION - On January 16, 1996, the litigation described in Note 9A was
adjudicated. A civil judgement was entered against the Company in the amount
of $167. The plaintiff in the litigation may file an appeal of the decision.
F-19
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENTS SCHEDULES
To the Stockholders and Board of Directors of
Channel America Television Network, Inc.
Our report in the consolidated financial statements of Channel
America Television Network, Inc. is included on page F-2 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement Schedule II.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
/s/ Mortenson and Associates, P.C.
----------------------------------
MORTENSON AND ASSOCIATES, P.C.
Certified Public Accountants.
Cranford, New Jersey
December 15, 1995
F-20
<PAGE> 26
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------- ---------- --------------------------- ----------- -------------
CHARGED TO
----------
BALANCE AT CHARGED TO OTHER
---------- ---------- -----
BEGINNING COST AND ACCOUNTS DEDUCTIONS BALANCE
--------- -------- -------- ---------- -------
DESCRIPTION OF PERIODS EXPENSES DESCRIBED DESCRIBED END OF PERIOD
----------- ---------- -------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Reserve for Bad Debt $ 38,001 $ 53,241 $ -- $ 15,725(1) $ 75,517
=========== =========== ============ ============ ============
YEAR ENDED DECEMBER 31, 1993:
Reserve for Bad Debt $ 10,857 $ 15,372 $ 11,772(2) $ -- $ 38,001
=========== =========== ============ ============ ============
YEAR ENDED DECEMBER 31, 1992:
Reserve for Bad Debt $ 36,798 $ 62,287 $ -- $ 88,228(1) $ 10,857
=========== =========== ============ ============ ============
</TABLE>
(1) Recoveries of Bad Debt
(2) Writedowns of Uncollectible Accounts
F-21
<PAGE> 27
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
- ---------------
Cash $ 76,007
Accounts Receivable - Less: Allowance
for Doubtful Accounts of $35,356 41,713
Program Rights (Less Amortization of $200,703) 49,948
Other Current Assets 36,558
-----------
TOTAL CURRENT ASSETS 204,226
-------------------- -----------
PROPERTY AND EQUIPMENT
- ----------------------
Furniture and Equipment 53,175
Broadcast Equipment 55,276
Film Library 55,730
-----------
Totals - At Cost 164,181
Less: Accumulated Depreciation 162,612
-----------
PROPERTY AND EQUIPMENT - NET 1,569
---------------------------- -----------
OTHER ASSETS:
- -------------
Deposits 132,500
-----------
TOTAL ASSETS $ 338,295
------------ ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-22
<PAGE> 28
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S> <C>
CURRENT LIABILITIES:
- --------------------
Notes Payable - Related Parties $ 2,197,180
Notes Payable - Other 3,775,943
Accounts Payable and Accrued Expenses 2,597,757
Accrued Interest Payable 584,642
Other Current Liabilities 53,288
Due to Employees 193,420
------------
TOTAL CURRENT LIABILITIES 9,402,230
------------------------- ------------
OTHER LIABILITIES:
- ------------------
Net Liabilities of Discontinued
Operations $ 102,450
------------
COMMITMENTS AND CONTINGENCIES --
- ----------------------------- ------------
STOCKHOLDERS' EQUITY (DEFICIT):
- -------------------------------
6% Preferred Stock, $.01 Par
Value, Authorized 1,000,000
Shares; Issued and Outstanding
135,962 Shares, $1,359,620
Liquidation Value 1,360
Additional Paid-in Capital -
Preferred 1,358,260
Common Stock $.01 Par Value;
Authorized 100,000,000 Shares;
Issued and Outstanding 30,911,960
Shares 309,120
Additional Paid-in Capital - Common 11,042,610
Stock Subscription Receivable- Evro
Corporation (800,000)
Accumulated Deficit (21,077,735)
------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (9,166,385)
- ------------------------------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
- -----------------------------------
EQUITY $ 338,295
------ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-23
<PAGE> 29
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<S> <C>
NET REVENUES $ 1,094,109
- ------------ -----------
OPERATING EXPENSES:
- -------------------
Direct Operating and Programming 1,926,622
Selling, General and Administrative 707,058
Debt Restructure Costs --
Provision For Doubtful Accounts 7,800
-----------
TOTAL OPERATING EXPENSES 2,641,480
- ------------------------ -----------
OTHER INCOME (EXPENSE):
- -----------------------
Interest Income 11
Other Income 410,000
Interest Expense (366,449)
-----------
TOTAL OTHER INCOME (EXPENSES)-NET 43,562
- --------------------------------- -----------
(LOSS) FROM CONTINUING OPERATIONS (1,503,809)
- --------------------------------- -----------
DISCONTINUED OPERATIONS:
- ------------------------
Income (Loss) on Disposal of
Discontinued Operations 281,859
-----------
NET (LOSS) $(1,221,950)
- ---------- ===========
(LOSS) FROM CONTINUING OPERATIONS
- ---------------------------------
PER COMMON SHARE $ (.43)
---------------- ===========
NET (LOSS) PER COMMON SHARE $ (.35)
- --------------------------- ===========
WEIGHTED AVERAGE NUMBER OF
- --------------------------
SHARES OUTSTANDING 3,513,811
------------------ ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-24
<PAGE> 30
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
- ---------------------
Net (Loss) $(1,221,950)
-----------
Adjustments to Reconcile Net (Loss) to Net Cash
(Used) for Operating Activities:
Depreciation and Amortization 15,960
Bad Debt Expense 7,800
Use of Program Rights 61,000
Other Non-Cash Restructuring of Debt (16,533)
Change in Assets and Liabilities:
(Increse) Decrease in:
Accounts Receivable (527)
Property and Equipment 13,249
Other Current Assets (16,433)
Deposits (125,000)
Increase (Decrease) in:
Notes Payable (31,000)
Accounts Payable 689,154
Accrued Expenses (38,181)
Accrued Interest 360,510
Other Current Liabilities 173,320
-----------
Total Adjustments 1,093,319
-----------
NET CASH - OPERATING ACTIVITIES (128,631)
------------------------------- -----------
FINANCING ACTIVITIES:
- ---------------------
Proceeds from Sale of Stock 1,000,000
Less - Stock Subsription Receivable - EVRO
Corporation (800,000)
Payments of Debt (31,000)
-----------
NET CASH - FINANCING ACTIVITIES 169,000
------------------------------- -----------
NET INCREASE IN CASH 40,369
--------------------
CASH - BEGINNING OF PERIODS 35,638
- --------------------------- -----------
CASH - END OF PERIODS $ 76,007
- --------------------- ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- --------------------------------------------------
Cash paid during the period for:
Interest $ 965
Income Taxes --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-25
<PAGE> 31
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Additional
----------
Paid-In
-------
Preferred Capital Common
--------- ------- ------
Stock Preferred Preferred Stock Common
----- --------- --------- ----- ------
Shares Stock Stock (Shares) Stock
------ ----- ----- -------- -----
<S> <C> <C> <C> <C> <C>
BALANCE - January 1, 1995 135,962 $ 1,360 $1,358,260 3,411,960 $ 34,120
- -------------------------
Issuance of Stock -- -- -- 27,500,000 275,000
Dividends on Preferred
Stock
Net (Loss) -- -- -- -- --
------- --------- ---------- ---------- ----------
BALANCE - September 30, 1995 135,962 $ 1,360 $1,358,260 30,911,960 $ 309,120
- ---------------------------- ======= ========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Total
-----
Additional Stockholders'
---------- -------------
Paid-In Accumulated Subscriptions Equity
------- ----------- ------------- ------
Capital (Deficit) Receivable (Deficit)
------- --------- ---------- ---------
<S> <C> <C> <C> <C>
BALANCE - January 1, 1995 $10,317,610 $(19,834,814) -- $(8,123,464)
- -------------------------
Issuance of Stock 725,000 -- $ (800,000) 200,000
Dividends on Preferred
Stock (20,971) (20,971)
Net (Loss) -- (1,221,950) -- (1,221,950)
----------- ------------ ---------- -----------
BALANCE - September 30, 1995 $11,042,610 $(21,077,735) $ (800,000) $(9,166,385)
- ---------------------------- =========== ============ ========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-26
<PAGE> 32
CHANNEL AMERICA TELEVISION NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS OF PRESENTATION
The consolidated balance sheet as of September 30, 1995, the statement
of operations for the nine-months ended September 30, 1995, and the
consolidated statement of cash flow for the nine-month period ended September
30, 1995 have been prepared by the company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flow have been made. The results for the interim periods are not
necessarily indicative of the results for a full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been consolidated or omitted. These consolidated financial
statements should be read in conjunction with the Company's annual report on
Form 10-K for the fiscal year ended December 31, 1994 and its audited financial
statements.
B. LOSS PER SHARE
Loss per share is based on the weighted average number of shares
outstanding during the period.
F-27
<PAGE> 33
EVRO CORPORATION
CONDENSED PROFORMA COMBINING BALANCE SHEET
WITH CHANNEL AMERICA TELEVISION NETWORK, INC.
SEPTEMBER 30, 1995
The Condensed Proforma Combining Balance Sheet shown below has been
prepared as if EVRO had acquired 51% of the outstanding stock of Channel America
as of September 30, 1995. The adjustments reflect (a) the adjustment of the
Channel America program library to fair value, (b) the recording of the
transaction costs of the acquisition, and (c) goodwill relating to the
acquisition. No value has been assigned to the minority interest of Channel
America as the net assets acquired, including goodwill, are equal to the
liabilities assumed as of the date of acquisition.
<TABLE>
<CAPTION>
CHANNEL PROFORMA
EVRO AMERICA ADJUSTMENTS COMBINED
------------ ------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS:
Current Assets $ 666,157 $ 204,226 $ $ 870,383
Property and Equipment 3,447,965 1,569 1,881,388 5,330,922
Other Assets 3,635,166 132,500 7,634,997 11,402,663
----------- ----------- ------------- ------------
Total Assets $ 7,749,288 $ 338,295 $ 9,516,385 $ 17,603,968
=========== =========== ============= ============
LIABILITIES AND STOCKHOLDERS EQUITY:
Current Liabilities $ 3,604,188 $ 9,402,230 $ 350,000 $ 13,356,418
Other Liabilities 1,421,278 102,450 1,523,728
Stockholders' Equity (Deficit) 2,723,822 (9,166,385) 9,166,385 2,723,822
----------- ----------- ------------ ------------
Total Liabilities and Stockholders' Equity $ 7,749,288 $ 338,295 $ 9,516,385 $ 17,603,968
=========== =========== ============ ============
</TABLE>
F-28
<PAGE> 34
EVRO CORPORATION
CONDENSED PROFORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
The Condensed Proforma Combining Statement of Operations shown below for
the nine months ended September 30, 1994 has been prepared as if EVRO and
Channel America had acquired been acquired by TSSN as of January 1, 1994,
adjusted to reflect an increase depreciation and amortization resulting the
adjustment of the Channel America program library to fair value and resulting
goodwill recorded pursuant to the related acquisitions. The proforma weighted
average number of shares used to compute the proforma loss per share was based
on the actual number of EVRO shares outstanding for the year ended December 31,
1994 increased by the number of common shares issued to STELLAR (500,000
shares) adjusted for the effect of a November 30, 1994 change in the number of
issued shares of TSSN held by STELLAR.
<TABLE>
<CAPTION>
THE SPORTS
& SHOPPING CHANNEL PROFORMA
EVRO NETWORK AMERICA ADJUSTMENTS COMBINED
---- ---------- ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Sales and Revenues $ 1,080,991 $ 48,898 $ 1,639,811 $ $ 2,769,700
Cost of Revenues 582,186 73,325 2,058,623 2,714,134
----------- ----------- ------------ ----------- -----------
Gross Margin 498,805 (24,427) (418,812) 55,566
Operating Expenses 2,648,027 1,597,712 1,361,246 1,044,946 6,651,931
=========== =========== =========== =========== ===========
Operating Loss of Continuing
Operations (2,149,222) (1,622,139) (1,780,058) (1,044,946) (6,596,365)
Other Income (Expenses) (149,132) (81,024) (467,601) (697,757)
----------- ----------- ------------ ----------- -----------
Net Loss of Continuing
Operations $(2,298,354) (1,703,163) $(2,247,659) $(1,044,946) $ (7,294,12)
=========== =========== =========== =========== ===========
Net Loss per share from
Continuing Operations $ (4.23)
===========
Average Number of Common
Shares Outstanding 1,726,172
===========
</TABLE>
F-29
<PAGE> 35
EVRO CORPORATION
CONDENSED PROFORMA COMBINING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
The Condensed Proforma Combining Statement of Operations shown below for
the nine months ended September 30, 1995 has been prepared as if EVRO and
Channel America had acquired been acquired by TSSN as of January 1, 1995,
adjusted to reflect an increase depreciation and amortization resulting the
adjustment of the Channel America program library to fair value and resulting
goodwill recorded pursuant to the related acquisitions. The proforma weighted
average number of shares used to compute the proforma loss per share was based
on the actual number of EVRO shares outstanding, adjusted for the number of
common shares issued to Stellar (500,000 shares).
<TABLE>
<CAPTION>
EVRO
EVRO 1/1/95 TO CHANNEL PROFORMA
AS REPORTED 2/28/95 AMERICA ADJUSTMENTS COMBINED
----------- --------- ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Sales and Revenues $ 1,217,870 $ 174,224 $ 1,094,109 $ $ 2,486,203
Cost of Revenues 740,016 13,665 1,926,622 2,680,303
----------- ---------- ----------- --------- -----------
Gross Margin 477,854 160,559 (832,513) (194,100)
Operating Expenses 2,894,181 197,677 714,858 702,394 4,509,110
----------- ---------- ----------- --------- -----------
Operating Loss of Continuing
Operations (2,416,327) (37,118) (1,547,371) (702,394) (4,703,210)
Other Income (Expenses) (110,261) (20,181) 43,562 (86,880)
----------- ---------- ----------- --------- -----------
Net Loss of Continuing
Operations $(2,526,588) $ (57,299) $(1,503,809) $(702,394) $(4,790,090)
=========== ========== =========== ========= ===========
Net Loss per share from
Continuing Operations $ (2.10)
===========
Average Number of Common
Shares Outstanding 2,276,041
===========
</TABLE>
F-30
<PAGE> 1
EXHIBIT 2.1
FOURTH AMENDED AGREEMENT
TO
STOCK PURCHASE AGREEMENT,
AGREEMENT AND PLAN AND MERGER,
AND
ESCROW AGREEMENT
THIS FOURTH AMENDED AGREEMENT (this "Amendment"), made and entered
into this 7th day of February, 1996, by and among CHANNEL AMERICA TELEVISION
NETWORK, INC., a Delaware corporation (the "Company"), having offices located
in Darien, Connecticut, EVRO CORPORATION, a Florida corporation ("Purchaser"),
having offices located in Kissimmee, Florida, and SCOLARO, SHULMAN, COHEN,
LAWLER & BURSTEIN, P.C., a New York professional corporation, with its
principal place of business located in Syracuse, New York.
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into a certain Stock Purchase
Agreement dated July 13, 1995 (the "Stock Purchase Agreement");
WHEREAS, the parties hereto have entered into a certain Agreement and
Plan of Merger dated July 13, 1995 (the "Merger Agreement");
WHEREAS, the parties hereto have entered into a certain Escrow
Agreement dated July 13, 1995 (the "Escrow Agreement");
WHEREAS, the parties hereto have entered into certain amendments to
the Stock Purchase Agreement, the Merger Agreement and the Escrow Agreement
dated September 18, 1995, October 3, 1995 and October 26, 1995 (the "Prior
Amendments"); and
WHEREAS, the parties hereto desire to further amend the Stock Purchase
Agreement, the Merger Agreement and the Escrow Agreement, as heretofore amended
pursuant to the Prior Amendments (collectively, the "Agreements"), as set forth
herein.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Waiver of Default; Extension of Term. The parties hereto
hereby acknowledge that Purchaser has defaulted in the payment of cash
installments under the Agreements in the sum of $300,000 (the "Default"). In
consideration of the payment by Purchaser, made in consideration of these
premises, (a) to [KEYSTONE/IDB] of the sum of One Hundred Thousand Dollars
($100,000) and (b) to AT&T of outstanding obligations of the Company to AT&T in
the sum of One Hundred and Twenty Five Thousand Dollars ($125,000), and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the
<PAGE> 2
Company hereby irrevocably agrees to waive the Default and to extend the time
of payment of such $300,000 to the close of business on February 29, 1996 (the
"Extension Date"). The parties hereto hereby agree to extend the term of the
Agreements, and the binding legal nature of the respective rights and
obligations created thereunder, through the Extension Date.
2. Entire Agreement. The Agreements, as amended by this
Amendment, contain the entire agreement of the parties regarding the subject
matter thereof, and supersede all prior agreements and understandings, written
and oral, among the parties, or any of them, with respect to the subject matter
hereof. Notwithstanding anything to the contrary contained herein, unless this
Amendment specifically amends a provision contained in the Agreements, the
terms and conditions of the Agreements shall remain in full force and effect.
In case of a discrepancy or conflict between this Amendment and the Agreements,
this Amendment shall be controlling and the parties agree to use their best
efforts to fully implement the spirit and intent of this Amendment.
3. Governing Law. This Amendment and the rights and obligations
of the parties shall be governed by and construed and enforced in accordance
with the substantive laws of the State of Florida.
4. Counterparts and Facsimile Signatures. This Amendment may be
executed in multiple counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument.
Execution and delivery of this Amendment by exchange of facsimile copies
bearing facsimile signature of a party shall constitute a valid and binding
execution and delivery of this Amendment. Such facsimile copies shall
constitute enforceable original documents.
[signature page follows]
2
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been executed effective as of
the date first above written by the parties hereof.
CHANNEL AMERICA TELEVISION
NETWORK, INC.
By: /s/ David A. Post
--------------------------------------
David A. Post, Chairman
EVRO CORPORATION
By: /s/ Daniel M. Boyar
--------------------------------------
Daniel M. Boyar, Authorized Signatory
SCOLARO, SHULMAN, COHEN,
LAWLER & BURSTEIN, P.C.
By: /s/ Stephen H. Cohen
--------------------------------------
Stephen H. Cohen, Partner
3
