UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of
1934
Report for Event: February 7, 1996
INDENET, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-18034 68-0158367
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
1640 N. Gower Street, Los Angeles, CA 90028
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213)
466-6388
Not applicable
(Former name and address)
Item 7. Financial Statements and Exhibits.
Historical Financial Statements for Starcom for the years
ended December 31, 1995 and 1994 and auditor's report.
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.
INDENET, INC.
Date: April 22, 1996 By: /s/ Lewis K. Eisaguirre
Lewis K. Eisaguirre
Its: Chief Financial Officer
and Secretary
JAY J. SHAPIRO, C.P.A.
A Professional Corporation
16501 Ventura Boulevard
Suite 650
Encino, California 91436
Tel: (818) 990-4878 Fax: (818) 990-4944
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Starcom Television Services, Inc.:
I have audited the accompanying balance sheet of Starcom
Television Services, Inc. (the "Company"), as of December 31,
1995 and 1994, and the related statements of operations,
accumulated deficit and cash flows for each of the years then
ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion
on these financial statements based on my audit.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I 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. I believe that my
audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
Company as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years then ended,
in conformity with generally accepted accounting principles.
April 12, 1996 Jay J. Shapiro, C.P.A.
A Professional Corporation
STARCOM TELEVISION SERVICES, INC.
Balance Sheet - December 31, 1995 and 1994
ASSETS 1995 1994
Current Assets:
Accounts receivable, less allowance
for doubtful accounts of $150,000
and $559,000 for 1995 and 1994,
respectively $ 441,613 $741,665
Inventory 109,400 109,400
Other 33,963
Total Current Assets 551,013 885,028
Fixed Assets:
Equipment and furnishings 1,794,700 1,386,787
Capitalized leases 230,000 260,000
Total fixed assets 2,024,700 1,646,787
Less accumulated depreciation
and amortization (548,600) (313,400)
Fixed assets - Net 1,476,100 1,333,387
Deposits and other assets 146,700 157,993
TOTAL ASSETS: $2,173,813 $2,376,408
See notes to financial statements.
STARCOM TELEVISION SERVICES, INC.
Balance Sheet (cont'd) - December 31, 1995 and 1994
LIABILITIES AND STOCKHOLDERS'
DEFICIT 1995 1994
Current Liabilities:
Bank overdraft $ 89,770 $ 431,622
Accounts payable and
accrued expenses 1,469,258 1,828,265
Royalty payable 259,270 100,000
Line of credit 856,664 1,035,510
Capitalized lease obligations 209,753 230,030
Note payable - Credit Lyonnais 81,198 100,000
Note payable - Earth Station 91,322 ----
Settlement liability 275,479 ----
Total Current Liabilities 3,332,714 3,725,427
Long-Term Debt, Net 1,858,181 1,046,000
Total Liabilities: 5,190,895 4,771,427
Stockholders' Deficit:
Common stock, no par value:
authorized 5,000 shares;
1,429 shares issued and
outstanding $ 769,000 $ 776,000
Accumulated deficit (3,786,082) (3,171,019)
Total Stockholders' Deficit (3,017,082) (2,395,019)
Total Liabilities and
Stockholders' Deficit $2,173,813 $2,376,408
See notes to financial statements.
STARCOM TELEVISION SERVICES, INC.
Statement of Operations and Accumulated Deficit
For the Years Ended December 31, 1995 and 1994
Revenues: 1995 1994
Distribution of syndicated $3,795,831 $3,941,015
programs
Film conversion 883,115 1,288,147
Infomercials 478,660 567,151
Duplication 364,921 1,890,461
Total Revenues 5,522,527 7,686,774
Expenses:
Cost of services and sales 3,564,320 5,917,222
Bad debt provision 266,000 615,000
General and administrative 1,493,416 2,055,107
Selling 194,071 215,732
Depreciation and amortization 271,000 278,000
Total expenses 5,788,807 9,081,061
Loss from Operations: (266,280) (1,394,287)
Interest expense (348,783) (303,622)
Net Loss: (615,063) (1,697,909)
Accumulated Deficit,
Beginning of Period (3,171,019) (1,473,110)
Accumulated Deficit,
End of Period ($3,786,082) ($3,171,019)
See notes to financial statements.
STARCOM TELEVISION SERVICES, INC.
Statement of Cash Flow
For the Years Ended December 31, 1995 and 1994
Operating Activities: 1995 1994
Loss ($615,063) ($1,697,909)
Adjustments to reconcile net loss
to reconcile to net cash used by
operating activities:
Depreciation and amortization 271,000 278,000
Provision for bad debts 266,000 615,000
Changes in operating assets
and liabilities:
(Increase) decrease in
Accounts receivable 34,000 65,800
Other 45,256 12,400
Increase (decrease) in
Accounts payable and
accrued expenses 415,000 (175,801)
Other ( 10,341) ( 2,000)
1,020,915 793,399
Net cash used by operating
activities: 405,852 (904,510)
Investing Activities:
Acquisition of business property (413,000) (618,000)
Net cash used in investing
activities (413,000) (618,000)
Financing Activities:
Shareholder advances 472,000 846,000
Credit line advances ------ 350,000
Debt repayment (123,000) -----
Net cash used by financing
activities (349,000) 1,196,000
Increase (decrease) in cash 341,852 326,510
Net cash (deficiency)
beginning of period (431,622) (105,112)
Net cash (deficiency)
end of period ($89,770) ($431,622)
See notes to financial statements.
STARCOM TELEVISION SERVICES, INC.
Notes to Financial Statements - See Accountant's Report)
1. Summary of Significant Accounting Policies and General
Matters
Nature of Business - Starcom Television Services, Inc.
("Starcom" or the "Company"), a Delaware corporation, acquired
the assets of Western World Television Services, Inc. in July
1993. The Company and its wholly-owned subsidiary, Starcom
Entertainment, deliver syndicated television programming,
duplicate videotapes, convert film for broadcast and broadcast
movies including The Best Picture Show ("BPS") and special
programming over satellite.
Principles of Consolidation - The consolidated financial
statements include the accounts of Starcom and Starcom
Entertainment. All significant intercompany balances and
transactions are eliminated in consolidation.
Concentrations of Credit Risk - Financial instruments which
potentially subject the Company to concentrations of credit risk
consist principally of trade receivables. Concentrations of
credit risk with respect to trade receivables under normal credit
terms are limited due to the large number of customers comprising
the Company's customer base, and their dispersion across many
different geographical areas. The Company enters into certain
barter arrangements with national sales representatives and major
advertising agencies.
Fixed Assets - Fixed assets acquired after July 15, 1993
(date of acquisition) are recorded at cost. Depreciation and
amortization over an estimated useful life of five to seven years
is computed using the straight-line method.
Income Taxes - The Company has net operating loss
carryforwards of approximately $2,800,000 and $1,400,000
available to offset future Federal and California taxable income,
respectively.
Operations - The Company has experienced significant
operating loss for the fiscal year ended December 31, 1995. In
addition, the Company has a working capital deficit of
approximately $3.2 million at December 31, 1995 and is delinquent
relative to most of its required monthly payments on long-term
debt and capitalized lease obligations. The Company has
negotiated a large group of vendor payables for a settlement
amount of $615,000. The financial statements have been prepared
assuming the Company will continue to operate as a going concern
which contemplates the realization of assets and the settlement
of liabilities in the normal course of business. No adjustment
has been made to the recorded amount or classification of
liabilities which would be required if the Company were unable to
continue its operations. As discussed in Note 7, management has
consummated several transactions which will generate sufficient
cash to meet its obligations in the normal course of business.
2. Line of Credit
The Company has a revolving line of credit with a finance
company which permits borrowings up to $1,000,000, subject to
certain limitations, as defined. The balance outstanding as of
12/31/95 and 12/31/94 was $856,664 and $1,035,510, respectively.
The interest rate on the line of credit is based on prime
interest rate plus 10% (approximately 18.75% at 12/31/95).
Payments of interest are due monthly. The line of credit is
subject to renewal annually on July 12. The agreement provides
for restrictions on change in ownership, disposal of assets,
capital expenditures and investments. Substantially all the
assets of the Company are pledged as collateral for the line of
credit. The Company is in default relative to certain terms of
this credit facility and has repaid this line in full with the
Coast Financing. (See Note 7).
3. Long-Term Debt
Long-term debt consists of the 1995 1994
following:
Subordinated notes payable to share-
holders, due in monthly installments
of approximately $19,000 plus interest
at 6%, subordinated to the line of credit
and the note payable to an individual,
due at varying dates through April
1999 (Note 7) $1,318,462 $846,000
Note payable to a bank, due in monthly
installments of $4,500 including
interest at 1.5% above the bank's
prime rate of interest (approximately
10.25% at December 31, 1995),
collateralized by substantially all
assets of the Company, due October
1996 91,322 105,000
Note payable to a bank, due in monthly
installments of $3,134 including
interest at 8.5%, due November 1996 81,198 100,000
Settlement liability (see Note 1) 615,198
Note payable to an individual, due
in monthly installments of $4,167
plus interest at 10%, due
April 1999 200,000 200,000
Total Debt 2,306,180 1,251,000
Less Current Portion (447,999) (205,000)
Long-Term Debt, Net 1,858,181 1,046,000
3. Long-Term Debt (cont'd)
Aggregate maturities of long term debt are as follows:
1996 $ 448,243
1997 1,342,262
1998 424,586
1999 91,333
Total $2,306,424
The Company was delinquent in its required monthly payments
under most of the debt above and has repaid or refinanced some
debt subsequent to December 31, 1995.
4. Capitalized Lease Obligations
The Company has a capitalized lease obligation payable to a
finance company for the purchase of equipment. Monthly
installments of $8,131 including interest at 10% are due through
February 1997. Payments including 1995 delinquent payments as of
December 31, 1995 are as follows:
1995 $ 106,092
1996 97,576
1997 24,395
228,063
Amount representing
interest: (19,063)
Total $ 209,000
5. Commitments
The Company leases its various facilities and certain
automobiles and equipment including transponder space under
operating leases. The Company is responsible for property taxes,
utilities and other normal operating costs. The leases expire at
various months through April 1999. Lease annual expenses
totalled approximately $334,000. Minimum future rental
commitments including some 1995 delinquent payments and without
the annual transponder commitment of $120,000, were as follows:
1995 $ 83,000
1996 234,000
1997 131,000
Total $ 448,000
The Company has warrants outstanding at December 31, 1995 which
allow an investment banker to purchase up to 30 shares of the
Company's common stock at $1.667 per share. The warrants expire
September 1996.
6. Litigation
The Company is a defendant in several lawsuits arising out of
the ordinary course of business. Management believes that the
cases are without merit and, accordingly, no provision for any
losses has been recorded in the financial statements.
7. Management Plans
Management expects that operations will be adequate to
finance the fiscal 1996 cash flow requirements. Management has
developed alternative plans which include obtaining additional
debt and equity financing whereby it became a wholly-owned
subsidiary of another company. The Company obtained a $1 million
new credit line payable in two years at prime + 4.50 interest.
In addition, the Company took ownership of the Pacific
Syndication assets (net value of $306,000) which were previously
managed.
8. Financing and Sales Agreement
During February 1995, the Company entered into an agreement
with a company to issue 429 shares of its common stock for a
total consideration of $4,290. The Company previously borrowed
$275,000 ($271,000 outstanding at December 31, 1995) from this
shareholder at 6.00% interest. Such debt is payable in monthly
installments of $5,700 with interest through May 1998. An
accrual of $120,000 is recorded for the use of this entity's
transponder time as of December 31, 1995.
