UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT under section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT under section 13 or 15(d) of the Exchange Act For the
transition period from __________ to ___________
Commission File Number: 33-25889-LA
CHANNEL i INC.
(Formerly Channel i Limited)
(Exact name of small business issuer as specified in its charter)
NEVADA 33-0264030
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
P. O. Box 35625 , Tucson, Arizona
(Address of principal executive offices)
602-544-0145
(Registrant's telephone number, including area code)
109 The Chambers, Chelsea, Harbour, London SW10 OFX
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes _____ No __X__
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court. Yes ___ No ___ N/A
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
On June 30, 1996, 5,184,559 shares of the Registrant's Common Stock were
issued and outstanding.
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CHANNEL i INC.
FORM 10-QSB
For the Period Ended March 31, 1996
INDEX
Page
PART I
FINANCIAL INFORMATION ............................... 3
Item 1. Financial Statements ................................ 3
Balance Sheets ............................. 4
Statements of Operations ................... 5
Statements of Cash Flows ................... 6
Notes to Financial Statements .............. 7
Item 2 Management's Discussion and Analysis or
Plan of Operation ................................... 10
PART II. OTHER INFORMATION ................................... 16
Item 6. Exhibits and Reports on Form 8-K .................... 15
Signature ........................................... 15
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The Financial statements for the three months ended June 30, 1996 and
1995 include, in the opinion of the Company, all adjustments (which consist only
of normal recurring adjustments) necessary to present fairly the results of
operations for such periods. Results of operations for the three months ended
June 30, 1996, are not necessarily indicative of results of operations which
will be realized for the year ending December 31, 1996. The financial statements
should be read in conjunction with the Company's Form 10-KSB for the year ended
December 31, 1995.
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Channel i, Inc.
(Formerly Channel i Limited)
( A Development Stage Company)
Balance Sheets
Quarter Ending June 30, 1996
<TABLE>
June 30, 1996 December 31, 1995
(Unaudited) (Audited)
--------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and Equivalents ......................... $ 682 $ 12,158
Deposit ...................................... 5,500 5,500
Trade Name .................................. 22,189 22,189
Other ........................................ -- 28,726
------------ ------------
Total Current Assets $ 28,371 $ 68,573
------------ ------------
EQUIPMENT
Equipment and Fixtures ....................... $ 27,712 $ 99,927
Less Accumulated depreciation ............... (8,636) (43,367)
------------ ------------
Net Equipment ........................... $ 19,076 $ 56,560
------------ ------------
Total assets ......................... $ 47,447 $ 125,133
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts Payable ............................. $ 84,054 $ 104,904
Contingent Liabilities ....................... 50,494 21,730
Loan Payable-Affiliate ....................... -- 2,657
Advance on sale of stock .................... -- 455,057
Capitalized leases payable-current ........... -- 5,985
------------ ------------
Total Current Liabilities ............... $ 134,548 $ 590,333
------------ ------------
LONG TERM LIABILITIES
Capitalized leases payable ................... $ -- $ 7,005
------------ ------------
Total liabilities ........................ $ 134,548 $ 597,338
============ ============
STOCKHOLDER'S EQUITY
Preferred stock, $.00001 par value:
authorized 5,000,000 shares: issued
and outstanding 0 shares as of
June 30, 1996 and December 31,1995 ............ $ -- $ --
Common Stock $.001 par value;
authorized 50,000,000 shares; issued
and outstanding 5,184,559 and
4,606,601 shares at June 30,1996 and
December 31,1995, respectively ................ 5,185 4,606
Paid in capital .............................. 2,496,574 1,998,612
Accumulated deficit .......................... (2,588,860) (2,475,423)
------------ ------------
Total Stockholder's Equity .............. $ (87,101) $ (472,205)
------------ ------------
------------ ------------
Total Liabilities and Stockholder's Equity .... $ 47,447 $ 125,133
============ ============
</TABLE>
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Channel i, Inc.
(Formerly Channel i Limited)
( A Development Stage Company)
Statements of Operations
Quarter Ending June 30, 1996
<TABLE>
<CAPTION>
Inception
Six Months Ended (August 6
---------------- 1987) to
Quarter Ended June 30 June 30, June 30,
--------------------------- --------------- ------------
1996 1995 1996 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES
Administrative services ....... $ -- $ -- $ -- $ 1,366 $ 5,304
Interest Income ............... -- 375 -- 3,812 14,452
Other Income .................. -- 3,600 -- 6,605 3,812
----------- ----------- ----------- ----------- -----------
Total Revenue ................. $ -- $ 3,975 $ -- $ 11,783 $ 23,568
----------- ----------- ----------- ----------- -----------
EXPENSES
Salaries and Benefits ......... $ -- $ 34,630 $ 1,239 $ 65,313 $ 327,706
Professional fees ............. -- 30,747 16,712 64,100 224,536
Interest ...................... -- -- -- 943 9,564
Consulting fees ............... 14,832 108,573 38,238 170,766 944,949
Research and Development ..... -- -- -- 7,800 85,698
Administrative cost-other ..... 38,131 55,851 57,279 105,579 957,369
Depreciation .................. -- 10,053 -- 29,337 62,636
----------- ----------- ----------- ----------- -----------
TOTAL EXPENSE ................. $ 52,963 $ 239,854 $ 113,468 $ 443,838 $ 2,612,459
=========== =========== =========== =========== ===========
Net (Loss) .................... $ (52,963) $ (235,879) $ (113,468) $ (432,055) $(2,588,891)
=========== =========== =========== =========== ===========
Income (loss ) per share ...... $ (0.01) $ (0.05) $ (0.02) $ (0.10) $ (2.20)
=========== =========== =========== =========== ===========
Weight Average Number of Common
Shares Outstanding ........... 5,184,559 4,553,588 5,184,559 4,529,956 1,174,491
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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Channel i, Inc.
(Formerly Channel i Limited)
( A Development Stage Company)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Inception (August
6, 1987) to
Six Months Ended June 30 June 30
--------------------------- -------
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) ....................................... $ (113,468) $ (432,055) $(2,588,891)
Adjustments to reconcile net (loss) to cash ..... -- -- --
Depreciation .................................... -- 29,337 62,636
Loss on sale of fixed assets .................... 37,484 -- 83,649
Increase in deposits ............................ -- -- (5,500)
Increase in trade name .......................... -- -- (22,189)
Decrease (increase) in other assets ............. 28,726 (25,159) --
Increase (decrease) in accounts payable ......... (20,850) (37,079) 91,554
Increase (decrease) in accrued liabilities ...... 28,795 (22,843) 50,525
----------- ----------- -----------
Net Cash Flows Used for Operating Activities . $ -- $ (487,799) $(2,328,216)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment ....................... $ -- $ (32,996) $ (164,326)
Organizational Costs ........................... -- -- (1,035)
----------- ----------- -----------
Net Cash Flows Used for Investing Activities . $ -- $ (32,996) $ (165,361)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from Affiliate ............................ (2,657) -- 9,799
Payment of loans from Affiliate ................. (7,005) (2,685) (16,804)
Proceeds from lease obligations ................. -- -- 58,820
Payments on lease obligations ................... (5,985) -- (51,815)
Advance on sale of stock ....................... (455,057) -- --
Sale of stock, net of offering costs ............ 498,541 200,000 2,494,259
----------- ----------- -----------
Net Cash Flows Provided by Financing Activities $ 27,837 $ 197,315 $ 2,494,259
----------- ----------- -----------
Net increase in cash ............................. $ (11,476) $ (323,480) $ 682
Cash and cash equivalents-beginning of period .... 12,158 329,908 --
----------- ----------- -----------
Cash and cash equivalents-end of period .......... $ 682 $ 6,428 $ 682
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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Channel i, Inc.
(Formerly Channel i Limited)
( A Development Stage Company)
Notes to Financial Statements
June 30,1996 and December 31, 1995
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Channel i Inc. (formerly Channel i Limited) (the Company) was incorporated on
August 6, 1987 under the laws of the State of Nevada. The Company is a
development stage company. On November 4, 1993 the Company acquired 100 percent
of the issued and outstanding shares of Channel i PLC (PLC) , a public limited
company incorporated under the laws of England and Wales, which resulted in PLC
being a wholly owned subsidiary of the Company.
Basis of Accounting
The Company utilizes the accrual basis of accounting which conform to generally
accepted accounting standards. PLC financial statements have been prepared using
accounting principles generally accepted in England and Wales.
Depreciation on equipment, furniture and fixtures is provided on the
straight-line method with asset lives of five to seven years for the assets
placed in service. Depreciation expense for the quarter ended June 30, 1996 and
the year ended December 31, 1995 was $0 and $25,107. Depreciation was not taken
in this quarter because the majority of assets were liquidated at a significant
loss.
Principles of Consolidation
The consolidated financial statements for the quarter ended June 30, 1996 and
the year ended December 31, 1995 include the accounts of Channel i, Inc. and
Channel i PLC. All significant intercompany transactions and account balances
have been eliminated.
Research and Development Costs
Research and development costs are expensed as incurred.
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated into
United States dollars using the average rate of exchange in effect at June 30,
1996. Revenue and expense transaction gains and losses are recorded at the
exchange rates prevailing at the time the transaction took place. Currency
transaction gains and losses are included in general and administrative
expenses.
Cash and Statement of Cash Flows.
For purposes of the Statement of Cash Flow, cash equivalents are defined as
investments with maturities of three months or less.
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Note: 2 ACQUISITION
On November 4, 1993, the Company acquired 100% of the 1,000,000 shares of common
stock outstanding of PLC in exchange for the Company issuing 400,000 shares of
common stock valued at $2,500. The transaction was accounted for as a purchase
under Accounting Principles Board Opinion No. 16. As part of the transaction the
parties agreed to place the 400,000 shares of common stock into an escrow
account, whereby the escrowed shares would be released over a period of time
based upon performance. During 1994, 349,998 of the escrowed shares were
released. The remaining 50,002 shares were canceled in April, 1996 because the
relevant conditions of the escrow agreement were not met.
Note 3: LOAN PAYABLE AFFILIATE
Loan payable-affiliate represented the amount of unsecured loans outstanding to
the directors of PLC. As of June 30, 1996 the note was settled.
Note 4: CAPITALIZED LEASE PAYABLE
During April 1996, PLC terminated the leases forfeiting its rights and leasehold
improvements to a new tenant. All rent owing and other costs were deducted from
the original lease deposit. The PLC currently does not owe any funds to the
former leasing agents.
Note 5: STOCKHOLDER'S EQUITY
Common Stock
On November 4, 1993, the Company issued 800,000 shares of common stock valued at
$5,000 to officers for prior services. On November 15, 1993, the Company entered
in a private placement agreement to raise at least $250,000 though the sale of
500,000 shares of its common stock.
During the year ended December 31, 1994, the Company issued 3,218,181 shares of
common stock through three private placements in exchange for $1,667,642 net of
issuance costs of $34,858.
During the year ended December 31, 1995, the Company raised $200,000 through a
private placement of 100,000 shares of its common stock. In addition, cash was
received in advance of stock sales totaling $455,057.
During the quarter ending March 31, 1996, the company received cash totaling
$43,483. in advance of stock sales.
During the quarter ending June 30, 1996, the Company closed the offering of
shares and issued 628,500 shares of common stock for the advances of $455,057
and $43,483. Also, 50,002 shares were canceled in April, 1996 because the
relevant conditions of a performance agreement were not met.
8
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Note 6: COMMITMENTS
As of June 30, 1996, the Company was obligated under a noncancelable lease for
office space in Chicago, Illinois, which expired on December 31, 1995. The
Company had entered into a sublease for the office space effective January to
December 31, 1995. The Company has incurred a unpaid rent liability of $8,838
less a refundable deposit of $5,500. As of June 30, 1996 the liability is owed.
Channel i, PLC, the Company's wholly owned subsidiary operating in the United
Kingdom, owns no real estate or other income-producing properties. Channel i,
PLC leases its office space at 109-110 The Chambers, Chelsea Harbour, London
SW10 OGX. During April, 1996, PLC agreed with the lessor to relinquish all
rights under the lease, including leasehold improvements, allowing the office to
become rented out and all expenses, including pastdue rent to be withheld from
the original security deposit. PLC does not owe any funds to the leasing agent
or for any other lease agreements.
Rent expense charged to operations for the quarter ended June 30,1996 was $ 0.
and for the year ended December 31, 1995 was $46,643.
The Company entered into employment and consulting agreements with various
parties. Under these agreements, the parties were granted option to purchase
1,340,000 shares of the Company's common stock at prices ranging from $4 to $6.
The options expired between 1999 and 2000. No agreements currently exist
stipulating cash payments of any nature. During the quarter ending June 30,
1996, the outstanding options of 1,340,000 were voluntarily canceled by the
optionees.
On February 12, 1996 the Company approved the issuance of 200,000 options to
officers of the company. The options were also canceled during the quarter
ending June 30, 1996.
Note: 7 INCOME TAXES
The Company incurred a loss for the quarter ended June 30, 1996 and the year
ended December 31, 1996 of $52,963. and $316,312.
As of December 31, 1995 and 1994 the Company had net operating loss carry
forward of $1,338,318 and $1,022,001 which expire between the years 2005-2010.
NOTE: 8 GOING CONCERN
At June 30, 1996 and December 31, 1995, the Company has not generated revenues
from operations. No additional capital was obtained during the quarter ending
June 30,1996. Management plans to raise additional capital through stock sales
to support further research and development costs.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion is intended to assist in an understanding of
the Company's financial position and results of operations for the quarter
ending June 30, 1996 and the year ended December 31, 1995. The Company's
financial statements and the information contain detail that should be referred
to in conjunction with the 10K report for the period ended December 31, 1995.
Background
Prior to November 1993, the Company had no operations or active
business. The Company, then known as Athena Ventures, Inc., was organized to
engage in any lawful activity other than the banking business. In November 1993,
the Company's prior management resigned and the Company changed its name to
Channel i Limited. The new management entered into an acquisition agreement with
Channel i PLC, a United Kingdom corporation, thereby acquiring its present
business of establishing an interactive multimedia kiosk network to provide
consumers with convenient access to an array of products and services.
Common and Preferred Shares
The Company's outstanding shares of Common Stock, par value $.001 per
share ("Common Stock"), are traded under the symbol "CHLI" in the
over-the-counter market on the OTC Electronic Bulletin Board by the National
Association of Securities Dealers, Inc. As of June 30, 1996, there were
5,184,559 shares of common stock outstanding and no preferred stock had been
issued.
Employees
As of June 30, 1996, the Company had no full time employees and only
employs consultants. The company intends to employ the officers as soon as it
has the financial resources. The Company believes that its relationship with its
consultants and officers is satisfactory. None of the Company's employees or
consultants are covered by a collective bargaining agreement.
Property
The Company owns no real estate or other income-producing properties.
It leased approximately 800 square feet of office space in Chicago, Illinois at
20 No. Clark Street.. As of January 1, 1995, the Company ceased use of this
office and subleased the same to a third party for $900 per month through the
remaining term of the lease. As of January 1, 1996, the lease had expired and
the Company has incurred an unpaid rent liability of $8,838 less a refundable
deposit of $5,500. As of June 30, 1996, the liability is currently owed.
Channel i, PLC, the Company's wholly owned subsidiary operating in the
United Kingdom, owns no real estate or other income-producing properties. During
the quarter ending June 30, 1996, PLC terminated the leases forfeiting its
rights and leasehold improvements to a new tenant. All rent owing and other
costs were deducted from the original lease deposit. The PLC currently does not
owe any funds to the former leasing agents.
During the quarter ending June 30,1996, the Company has forfeited
leasehold improvements or sold equipment having a depreciated value of $37,484.
Currently, the Company owns assets with a depreciated value of $19,076
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London Underground Contract
On June 21, 1994, the Company entered into an agreement with the London
Transport Authority's London Underground Limited ("LUL") transit authority to
install a minimum of 100 multimedia kiosks at selected, heavily trafficked
stations. The Company viewed its agreement with LUL as crucial since it provided
both a launch site for the Company's kiosks and a visible, highly regarded
position in the world of electronic mercantile networks.
The failure of the project was due to various reasons including the
inability of software vendors to produce an efficient and timely project,
management's changing of hardware vendors, software developers and project
mangers and lack of substantial financial resources. With the Company's
insufficient financial resources, creditors were not willing to assume any long
term commitments. All available human resources became focused on raising funds
instead of implementing the contract.
A letter of agreement was signed with Logica, a leading British
software company. Logica agreed to assume the liabilities owed the LUL and
Barcrest in return for the transfer of the Company's rights to the contract and
LUL signing a new contract with Logica. LUL signed an letter of intent to novate
the contract to Logica. Under the arrangement, Channel i would also be entitled
to the opportunity to participate in the commercial applications of the project
where appropriate.
There are no assurances that Logica will finalize a contract with LUL
and if that does not happen, the liabilities owed to LUL and Barcrest would
revert to the Company. Also, there are no assurances or guarantees that if the
contract between Logica and LUL is signed, the contract would produce any
revenue to the Company or that the Company would to be in a position to
participate in any commercial application.
The failure of the LUL project has had a material adverse effect on the
Company's long and short range business strategy.
LEGAL PROCEEDINGS
In May, 1995, the Company entered into a tentative unsigned agreement
with Ace International Investments Ltd. ("Ace"), a company created under the
laws of the Channel Islands. The Company was to sell up to 70% of the
outstanding stock of the Company to Planet Communications, Inc. ("Planet"), an
affiliate of Ace, and Planet Investments, Inc. Ace had transferred certain
telecommunications rights and licenses to Planet. Channel i was to obtain, for
the sale of shares, the right to participate in the World Telecommunication
Licenses, including the United States, which were given to Ace by TransEurope
Communications Limited, an English company ("TransEurope"). Further to the
agreement two individuals, Tony Joyce and Brian Chandler, were to be added to
the Board of Directors on May 15, 1995.
Subsequently, the Ex-President, Phil McGrane, ordered a wire transfer
of $40,000 ((pound)25,000) directly to an account designated by Ace for the
benefit of TransEurope. The agreement, with Ace and Planet, had not been signed
by Planet or Ace nor was it ratified by Board of Directors of the Company. A
formal demand was made for the return of the funds.
11
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The Company then formed a separate business relationship with
TransEurope. The relationship would have enabled the Company to offer
international voice and facsimile communications to six countries using alleged
materials, technical know-how and relationships developed by TransEurope. The
Company anticipated that its relationship with TransEurope, together with
TransEurope's relationships with major telephone companies, would have permitted
the Company to offer international telecommunication services, at rates that
were competitive with those charged by other telecommunication service
providers. About August, 1995, the Company acquired the United States license,
by paying $100,000 ((pound)65,000) or a licensing agreement to offer
telecommunication services in the United States. This license, later revealed to
be held concurrently by Ace Investment, Ltd., became subject to a legal dispute
described below.
The Company had also deposited $9,500 ((pound)6,000) with TransEurope
((pound)1,000 per Territory) to hold the right to develop its Telecom Business
in the agreed upon Territories through TransEurope.
Agreement with Ace Investments Ltd.
Ace International Investments Ltd., a New York based company, later
discovered to be Registered under the laws of the Channel Islands had also
acquired the right to offer telecommunication services in certain parts of the
world from TransEurope. The Company had paid $140,000 ((pound)90,000) to acquire
the right to offer telecommunications services within the United States, and Ace
asserted a competing claim to the same right. On September 12, 1995, a
settlement agreement was reached between Ace, Planet and the Company pursuant to
which, among other things, (i) Ace received the right to offer telecommunication
services through TransEurope within the United States, (ii) the Company and Ace
agreed to create, and jointly own on an equal basis, a new company which shall
have the right to offer telecommunication services through TransEurope within
India, (iii) Ace agreed to pay the Company $140,000 ((pound)90,000) on or before
October 3, 1995, and (iv) if Ace fails to pay the Company $140,000
((pound)90,000), then Ace's right to offer telecommunication services through
TransEurope within South Africa shall be forfeited to a third company to be
created and equally owned by Ace and the Company, and Ace shall pay the balance
of $70,000 ((pound)45,500) from the first revenue from active operations that
it, or any of its assignees, receive.
Civil Suit against TransEurope Communications
The License Agreements with TransEurope Communications have proved to
be unsatisfactory. It is the Company's firm belief that TransEurope has not
fulfilled their written and verbal promises.
An agreement was made between Phil McGrane, the previous President, on
behalf of the Company to join with ACE International Investments, Ltd. in
bringing a civil suit against TransEurope Communications, Ltd. The Plaintiff's
case is that funds were obtained by fraud from both Plaintiffs either jointly or
separately. Funds were paid to TransEurope by Channel i on behalf of ACE and
(pound)65,000 was paid on or about August 1, 1995, to TransEurope on the
Company's behalf.
During the course of the civil suit, the Company discovered that Ace
International Investments, Ltd., did not exist as a separate company and did not
have financial resources to pay for their share the expenses. The Company
attempted to obtain an agreement with TransEurope to withdraw completely from
the case. TransEurope filed a counter claim alleging that Ace did not have a
reasonable cause of action in the claim and was not a legitimate company
according to English law, therefore could not file a lawsuit on it's behalf. The
counter claim also requested that since both the defendants registered offices
are outside of England, the defendants should be required to pay as security,
the attorney and court costs to date. Also pending payment, the defendants would
be barred from taking any further legal action. The English court awarded the
(pound)6,000 in legal fees to TransEurope as security deposit in event the
plaintiffs withdraw the lawsuit.
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The Company has been financially unable to continue aggressively
pursuing the lawsuit and has had to fund the costs for both the primary
plaintiff, Ace, and the Company. The London attorneys for the Company and Ace,
have not been able to collect Ace's share of the expenses and have successfully
forced the Company to pay Ace's share.
TransEurope is also seeking a secondary claim against Ace and the
Company to stop them from pursing the claim and to force the Plaintiffs to
deposit (pound)50,000 in projected legal fees with the court in order to
continue. If the Plaintiffs cannot present the deposit, or pay the (pound)6,000
previously awarded, the Company will not be able to recoup any of the funds that
it gave TransEurope.
Because of TransEurope's new counter claim, the inability of the
Company and plaintiff's attorney to locate and communicate with Ace, Ace's
inability to pay their share of expenses and the Company's lack of financial
resources, the Company does not expect to recover any of the funds paid.
Furthermore, the Company is jointly and severely liable for the (pound)6,000
award. All indications are that the Company will have to bear the burden of the
judgment.
The Company will have suffered a significant financial loss of the
funds paid for the Licensing Agreements, awarding of the defendants costs, and
ongoing costs.
Telecommunications business
The Company has made a wide range of contacts in this industry and has
completed various business plans for financiers. Because of lack of funding, the
Company was not able to implement a specific plan.
The current Board of Directors has been aggressively seeking suitors
and other individuals that would be interested in merging businesses into the
Company. Management believes that with the contacts it has established in the
United Kingdom and Europe, businesses in the United States seeking European
offices or presence would be willing to discuss the opportunities available to
them. In this effort, management has approached various individuals regarding
the possibilities of acquisitions, mergers, or buy outs. Without company
resources available, the management of the company has personally underwritten
various expenses related to the possibility of the continuation of the Company.
There can be no assurances that Management will succeed in the endeavor
to convince other financiers to acquire or merge businesses into the Company. In
that regard, if a suitor was obtained, there are no assurances that the current
shareholders will be able to recapture any portion of their initial investment.
13
<PAGE>
Recent Developments
Management is aware that it is competing with other companies who are
also attempting to entice mergers and acquisitions. To this endeavor, there
can be no assurances or guarantees that Management will succeed in providing
enough incentives to entice another business to merge.
Because of the number of common shares currently outstanding and the
number of shares needed to provide equity incentives to a suitor, there are no
assurances that there is a sufficient enough percentage of equity remaining to
attract any businesses. There is also a possibility that the opportunities
explored or signed will not be sufficient enough to have the Company succeed or
be able to provide any source of revenue or dividends.
Management has signed a tentative licensing agreement on August ,1996 for the
use of the name and logo to Sunburst, M.C., Ltd. a corporation incorporated
under the laws of the Province of Ontario, Canada. The agreement specifies a
cash payment for use of the name and logo for a period of 10 years for Canada
and all French-speaking countries.
Financial Items
As of June 30, 1996, the Company had available cash of approximately
$682 and current liabilities of $134,548. To date, the Company has not earned
income from operations. Accordingly, the Company will be unable, without
additional financing, to fund its continued operations. The Company is actively
pursuing additional financing through the private placement of equity securities
and separate agreements with other investors or businessmen. However, there can
be no assurance that such financing will be available to the Company, or if
available, that it will be obtained timely. In this regard, the Company's
auditors have issued a qualified opinion about the Company's ability to continue
as a going concern.
Other Financial Items
Since no income is projected, the Company will require equity funding or other
investors to meet its expenses. The Company's operating loss for the year ended
December 31, 1995 was $1,054,085, compared to a loss of $1,215,576 for the year
ended December 31, 1994.
The Company projects expenses for calendar year 1996 to average $5,000 per
month. At this expenditure level, the Company is seeking other opportunities for
shareholder enhancement.
It is anticipated that the majority of the funds for operations during fiscal
year 1996 will be supplied by private placements of equity in the Company. While
the Company has been actively pursuing various private placement alternatives,
it does not currently have such an offering in process and no assurance can be
given that such an offering will be timely completed, if ever, to fund the
Company's continued operations. The Company has no secured creditors, no debt
financing has been established, and it is unlikely that such debt financing will
be available to the Company in the near future.
14
<PAGE>
Part II -Other Information
none
Item 6 . EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Reports on Form 8K During this quarter
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: December 11, 1996
Channel i Inc.
By: /s/ Charlie Rodriguez
-------------------------
Charlie Rodriguez, Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Company and in the capacities and on
the dates indicated.
Date: December 11, 1996
Channel i Inc.
By: /s/ Charlie Rodriguez
-------------------------
Charlie Rodriguez, Chief Financial Officer
15
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