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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [Fee Required]
For the period of five months ended December 31, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee Required)
WINNERS ALL INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 13-3545304
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
600 NW 44th Street, #2H, Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (954) 561-0009
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 per value, Redeemable Warrant to Purchase One share of Common
Stock
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 month (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 [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The registrant's revenues for its most recent period, ended December
31, 1996 were $ -0- . The aggregate value of the voting stock of the registrant
held by non affiliates as of March 31, 1997 was $ 9,208,406 based on the
reported average closing bid and asked price of $ .50 on that day. Indicate the
number of shares outstanding of each of the registrant classes of common stock,
as of the latest practicable date: 18,416,813 shares of Common Stock on March
31, 1997.
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PART I
ITEM 1. BUSINESS
Recent Developments
On February 17, 1997, Winners All International, Inc. (the "Company")
made a determination to change its former fiscal year of July 31, to December
31. The Form 10-K report for the five months ended December 31, 1996 will cover
the transition period.
The Company was operationally inactive from August 1, 1995 to January
26, 1997. The Company has been holding regular Board meetings to restructure its
operations, transact business to rebuild shareholder value, settle outstanding
former legal matters, and bring its Securities Exchange Commission filing
requirements and records current.
On January 29, 1997, a Special Meeting of the Board of Directors,
recognized and resolved, that as a result of the permanent impairment of
operational assets a measurement date of January 29, 1997 was established, to
abandon former operations effective for year ended July 31, 1995.
On January 28, 1997, the Company entered into an Acquisition Agreement
with Perma Seal (Perma Seal), wherein the Company purchased all of the issued
and outstanding capital stock of Perma Seal consisting of 1,000 shares of common
stock, with a par value of $.01 per share, in exchange for 2,100,000 shares of
common stock of the Company.
On February 23, 1997, the Company, pursuant to a January 28, 1997
acquisition agreement with Perma Seal International, Inc. ("Perma Seal"),
authorized the issuance of 2,100,000 shares of common stock of the Company in
exchange for all of the issued and outstanding capital stock of Perma Seal
consisting of 1,000 shares, $ .01 par value, of common stock. Accordingly, Perma
Seal is a wholly-owned subsidiary of the Company.
On February 21, 1997, pursuant to a February 4, 1997 letter of intent,
Perma Seal completed negotiations, which resulted in a stock purchase agreement,
with Envio Dynamics Corporation ("Envio Dynamics"). Perma Seal will acquire a
75% stock interest, amounting to 3,750,000 shares, of the authorized common
voting stock of Envio Dynamics in exchange for $750,000. As of April 30, 1997,
approximately $450,000 has been paid. The 3,750,000 shares have been placed in
escrow until the remaining $300,000 is paid. Accordingly, the $450,000
previously paid by Perma Seal to Envio Dynamics will be recorded as a deposit on
the books of Perma Seal until the
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shares are released from escrow. Upon the exchange of the shares, Envio Dynamics
will be accounted for as a majority (75%) owned subsidiary of Perma Seal.
Perma Seal, a Florida corporation in its initial stages of development,
has as its sole asset an exclusive sales and distribution agreement for the
marketing and distribution of a new line of sealant and coating products. The
exclusive marketing and distribution rights cover the territories including
Europe, Caribbean, South America, Latin America and Mexico. Perma Seal will
receive a 10% commission on all sales within their territories.
The International Distribution Agreement was executed between Envio
Dynamics and Perma Seal on January 27, 1997. The product line will be developed
and manufactured by Envio Dynamics, a Griffin-Georgia based corporation in its
initial stages of development. The product line uses a patent pending "recycled"
rubber process to create "rubberized" sealant and coating materials, with no new
original rubber being used. Instead, the pure recycled rubber is derived from
existing resources of used tires.
The process involves, using pure recycled crumb rubber from used tires.
The pure recycled crumb rubber is mixed with a specially developed formula to
create a new "rubberized" sealant and coating material for the marketplace.
One of the new products is a Single Ply Spray On Roofing System that is
seamless. The color is white, which enables the product to reflect almost 90% of
the heat with a high insulation rating. Like pure rubber, the products will
contract and expand, unlike a chemical product that may dry and crack. The
products are estimated to have 5 to 10 times the life of existing similar
products. Other products planned for development by Envio Dynamics, the
manufacturer, include:
Bus and Trailer Coatings
Automobile Undercoating
Moisture Barrier Basements and Above Ground
Seamless Floors
Mobile Home Roofing
Heavy Duty Tank Linings
Block Filler Sealant
Anti Slip Coatings
Stucco Type Finish
Perma Seal has been in negotiations with several interested parties in
Mexico and its other exclusive territories and has received two letters of
intent evincing interest for the purchase of up to 1.5 million gallons annually
of its roofing sealant, subject to receipt of samples and confirmation of test
applications. The first letter of intent is from Major Paints, a large
distributor of paint and coating materials that sells to major retail chains and
the Mexican government. The second letter of intent is from IPSEAL de
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MEXICO, S.A., de C.V. ("IPSEAL"), a major construction company that does work
for the Mexican government. Subsequently, Perma Seal received a purchase order
from IPSEAL for delivery of 1,000,000 gallons over a ten month period at an
anticipated gross sales price of $18 million.
Subject to the final closing of the Stock Purchase Agreement between
Envio Dynamics and Perma Seal, Perma Seal will control the business affairs of
the manufacturer of the products. Perma Seal will then control the United States
and international markets, for the sale and distribution of the developing
product line, formulae, and manufacturing processes. Perma Seal plans to work
with other leading manufacturing facilities around the world for the licensing
of the process and distribution of the products. Perma Seal will be electing
three (3) directors to the five (5) member Board of Directors of Envio Dynamics
Corporation.
Envio Dynamics subleases through Perma Seal a manufacturing facility,
previously used to make chemical products, on a five acre parcel of land in
Georgia. The facility is equipped with mixing machines, offices, lab room, raw
material space, distribution facility, and is adjacent to an active railroad
track. Perma Seal has negotiated to acquire these facilities.
Mr. Earle Jonas, Founder and minority owner (25%), will be staying on
as Chief Operating Officer and Director, to ensure the product development and
manufacturing process. Mr. Jonas will have a five year Employment Agreement with
an annual salary of $120,000 plus commissions of 1% on the first $50 million of
gross sales and -1/2 % on the next $50 million of gross sales. In addition, Mr.
Jonas has an option to acquire an additional 100,000 shares at $8.00 per share,
during the term of this agreement.
On March 21, 1997, Perma Seal entered into a purchase and sale
agreement with the Essex Chemical Corporation ("Essex Chemical") to acquire the
land, building, and equipment, located at 1521 Industrial Drive, Griffin,
Georgia, for $375,000, with a closing date of May 1, 1997. The current expected
closing, as amended, is anticipated to be no later than May 30, 1997, unless
extended by mutual agreement by both parties.
On February 20, 1997, the Company adopted a "1997 Non-Statutory Stock
Option Plan" (the "Plan") to aid in attracting and retaining persons to assist
in the development and success of the Company. This Plan provides for the
issuance of non-statutory stock options and is not intended to qualify as
"Incentive Stock Options" within the meaning of section 422 of the Internal
Revenue Code. The purchase price of each share of stock within this Plan shall
not be less than 20% of the fair marker value of such share on the date the
option is granted. The fair market value of a share on a particular date shall
be deemed to be the average of the high bid and high asked price. Pursuant to
the Plan, the Company entered into a contract with Stanley Merdinger to perform
business, consulting and related services for the Company. In consideration
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for his services, he will receive one million shares of stock with an option to
purchase two million additional shares.
On April 4, 1997, the Board of Directors of the Company authorized
management to commence negotiations to acquire 100% of the outstanding common
stock of Designer Wear, Inc. Designer Wear, Inc., a Florida corporation, is a
privately held development stage company, organized August 1996, which has as
its principal business and sole assets a) a worldwide license for use of the
name, likeness and image of the late American actor "James Dean" on socks; and,
b) a joint venture for the worldwide promotion, development and marketing of the
trademark "Smith and Wesson" on apparel and accessories. Howard Weiser, officer
and director of the Company, is also an officer, director and major stockholder
of Designer Wear, Inc.
Historical Information
Pursuant to a Stock Purchase Agreement dated August 25, 1993, the
Company, then known as Natural Child Care, Inc., acquired all of the issued and
outstanding shares of Winners All Limited, a company incorporated under the laws
of the Isle of Jersey, Channel Islands, United Kingdom in exchange for
10,262,983 shares of the Company's common stock (adjusted for a one-for-two
reverse split which became effective June 10, 1994). The Company thereupon
changed its name to Winners All International, Inc., and Winners All Limited
remained its wholly-owned subsidiary.
The assets of the former company, Natural Child Care, Inc., were
liquidated and its former business discontinued so that the new business of the
Company was the development, marketing, installation and operation of the
"UC'NWIN System".
Winners All Limited was controlled by Mr. M. Anthony Joyce who was the
record owner of 80.9% of the outstanding common stock of the Company following
the closing of the Stock Purchase Agreement and who became President of the
Company with the power to nominate a majority of the Company's Board of
Directors. On July 13, 1994, Brian A. Travis became Chairman of the Board of
Directors and Chief Executive Officer of the Company.
Anthony Joyce continued as President and a Director of the Company
until he resigned from all positions on November 7, 1994. He has also disposed
of all but 350,000 post-split shares of his common stock in the Company through
private transactions. On July 13, 1994, Brian A. Travis became Chairman of the
Board of Directors and Chief Executive Officer of the Company.
On May 12, 1995, Brian A. Travis and Mark Schindler resigned as
Chairman of the Board of Directors and Chief Executive Officer and Treasurer,
respectively.
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As a result of cessation of operations and activities, a measurement
date of January 29, 1997, and an abandonment date of July 31, 1995, has been
established by the Board of Directors for the former business of the Company.
The former business of the Company revolved around the UC'NWIN System,
which was licensed worldwide (except for the United States), in September, 1992,
by Winners All Limited from UC'NWIN Systems, Inc. Winners All Limited acquired
that license in exchange for payment of $2,160,000, plus 200,000 shares of its
post-split common stock. Pursuant to the License Agreement, Winners All Limited
agreed to pay royalties equal to approximately 7% of revenues. The term of the
License Agreement was until September 30, 2009, provided that Winners All
Limited was in full compliance with the terms and conditions of the License
Agreement.
The UC'NWIN System was an in-store marketing system which offered
consumers a free chance to play games to win coupons and prizes. Each UCNWIN
Machine allowed consumers to win merchandise, prizes, cash or "cents off"
coupons based on the use of a free access card passed or swiped through a card
reader in the UC'NWIN Machine. The card set in motion one of a number of
colorful games of chance.
In November, 1993, the Company agreed to sublicense the UC'NWIN System
to a non-affiliated company, Winners All Asia Pacific Ltd. ("Asia Pacific"). The
sublicense agreement, as amended, included an initial fee of $2,000,000, which
was paid to the Company, and royalty payments of approximately 10% of pre-tax
profits until 2003. The territory sub-licensed to Asia-Pacific includes those
countries generally referred to as comprising the Pacific Rim. In negotiating
with Asia-Pacific, the Company requested UC'NWIN Systems, Inc. to waive certain
rights including the right to prior notice of sublicenses or locations
negotiated by Asia-Pacific, as well as any inconsistencies between the agreement
with Asia-Pacific and the License Agreement.
Under an agreement made as of December 1, 1994, and as subsequently
amended in June 1995, UC'NWIN Systems Corporation's subsidiary, UC'NWIN Systems,
Inc. and Winners All International, Inc.'s subsidiary Winners All Limited (WAL),
formed WIN Network, LLC ("WinNet"), a limited liability company under the laws
of the state of New York to minimize operation costs and maximize the
exploitation of the UC'NWIN System. UC'NWIN Systems, Inc. and Winners All
Limited contributed the tangible and intangible rights to UC'NWIN System (other
than those sublicensed to Winners Asia Pacific) with UC'NWIN Systems, Inc.
owning 51% of WinNet and Winners All Limited owning the remaining 49%.
Subsequent to July 31, 1995, WinNet has lost approximately an
additional $975,000. Recurring losses, no marketable activities, and numerous
litigation have caused WinNet to abandon operations. As a result of the
permanent impairment of WinNet, the Board of Directors of the Company recognized
the carrying value of the joint venture investment as non-existent, with no
projected future cash flows, and it
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shall be accounted for as abandoned. Accordingly, effective for the year ended
July 31, 1995, $1,817,413 has been reflected as a loss on joint venture
investment in the consolidated statements of operations.
Limited Liability Companies are a creation of state law. LLC's are
owned by members, who aren't personally liable for the LLC's debts or
obligations.
On July 20, 1994, the Company entered into an agreement to merge with
UC'NWIN Systems Corporation, formerly UC'NWIN System, Ltd., the parent of
UC'NWIN Systems, Inc. UC'NWIN Systems, Inc. was the Licensor to WAL of the
worldwide rights (except United States) to the patent and technology comprising
the UC'NWIN systems. The Company had filed a registration statement with the
Securities and Exchange Commission by which the Company would register and issue
one of its shares for each share of UC'NWIN Systems Corporation. In 1996, the
Company terminated its agreement to merge with UC'NWIN Systems Corporation.
Activities related to this merger and any shares of stock that were exchanged,
during this period, were negated and all shares returned.
As a result of total cessation of operations and activities, a
measurement date of January 29, 1997, and an abandonment date of July 31, 1995,
has been established by the Board of Directors, for the write-off of WAL, a
wholly-owned subsidiary of the Company.
Competition
New Business
The Company is not aware of any other company manufacturing or selling
a product line using a pure "recycled" rubber process to create "rubberized"
sealant and coating materials, with no new original rubber being used.
The process involves using pure recycled crumb rubber from used tires.
The pure recycled crumb rubber is mixed with a specially developed formula to
create a new "rubberized" sealant and coating material for the marketplace.
See "Business-Recent Developments".
Employees
The Company as of April 30, 1997 has no salaried employees. During the
Company's reorganization process, approximately six persons are working as
independent contractors on a part-time basis. The Company expects, by June 30,
1997, to have six or more employees.
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ITEM 2. PROPERTY
The Company owns no property. The Company currently occupies office
space at 600 NW 44th Street, #2H, Fort Lauderdale, Florida 33309. The Company is
actively seeking to lease facilities for permanent office space. Perma Seal
obtained the lease for the manufacturing facilities from Envio Dynamics under a
separate agreement. The lease with the Essex Chemical Corporation is a
month-to-month lease. Perma Seal has entered into an agreement to acquire such
facilities. See Business - Recent Developments.
ITEM 3. LEGAL PROCEEDINGS
(A) Stanley Farber, Plaintiff, filed a complaint in the Circuit Court
of the Seventeenth Judicial Circuit in and for Broward County, Florida on July
25, 1996. Plaintiff is suing the Company and Davidoff and Molito, former legal
counsel for the Company, for breach of purported executive employment contract.
As a result of the absence of counsel on behalf of the Company, a motion for
final default judgment was granted and a hearing date of June 19, 1997 was
established to determine damages. The Company has hired new counsel to negotiate
a settlement or appeal the judgment. Management belives potential damages to
between $50,000 to $150,000. The outcome of these proceedings cannot be
determined at the present time.
(B) Several lawsuits in Florida and Georgia have been recorded against
WinNet, a member of the WinNet joint venture, and the Company. Management is of
the opinion these lawsuits are without merit and expects to file a motion to
dismiss plaintiff's complaint.
(C) On March 22, 1996, Raymond Kalley, as trustee of the EB Trust and
PB Trust (Plaintiff), sued the following in the Southern District of Florida
(Miami Division): The Company, UC'NWIN Systems Corporation, a consultant to
UC'NWIN Systems Corporation and a beneficiary to the EB and PB Trusts. In this
five-count complaint, Plaintiff sued the Defendants for alleged violations of
Section 18 of the Securities Act of 1934. Plaintiff alleges that the Defendants,
singly and in concert, filed misleading reports under the Securities Exchange
Act of 1934, including without limitation, the filing of Form 10K. Plaintiff
failed to identify which Form 10K was allegedly misleading or how Plaintiff has
been damaged by this alleged misleading statement. Although Plaintiff alleges
that it purchased stock in UC'NWIN Systems Corporation for approximately
$1,000,000, the Plaintiff does not identify the damage that it allegedly
incurred. The Company believes this lawsuit is without merit and intends to
defend this lawsuit vigorously and expects file a motion to dismiss Plaintiff's
complaint. The outcome cannot be determined at the present time.
(D) On April 17, 1995, AG Industries sued Winners All International,
Inc. and UC'NWIN Systems, Inc. for a breach of contract and causes of action for
unjust enrichment and breach of implied contract. AG Industries seeks damages in
excess of
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$400,000. On August 22, 1995 the Company filed a Motion to Dismiss and
Alternative Motion for a Change of Venue. AG Industries has responded and
opposed the Defendants' motion but the Court has not yet ruled on it. There has
been no discovery and the outcome cannot be determined at the present time.
(E) The Company had entered into a five-year employment agreement, with Brian
Travis, a former president, who was a major stockholder, expiring August 31,
1998. the employment agreement provides for a base salary of $90,000. In May
1995, the Company and the former president mutually agreed to terminate his
employment agreement.
In June 1995, the company engaged outside counsel to make inquiries
concerning certain unauthorized transactions of the Company involving possible
irregular payments during 1995: (1) of compensation and commissions to Brian
Travis, the former president, and his affiliate (Arrow Capital) aggregating
approximately $400,000; (2) Involving other unauthorized activities of the
former president as principal of WinNet, an affiliated entity in which the
Company has a 49% equity interest, wherein such affiliate made unauthorized
purchases of approximately 50,000 shares of the Company's common stock; (3) For
transactions involving approximately $250,000 for services rendered by certain
unrelated third party entities.
On July 26, 1995, the Company initiated a lawsuit against the former
president and Arrow Capital to recover unauthorized payments of commission;
related to the sale of REG S stock, in the amount of $364,675.
On or about July 3, 1995, Brian A. Travis, initiated a lawsuit against
WIN Network, LLC and Winners All International, Inc. In this action, Mr. Travis
seeks to enforce a purported employment agreement which he claims was entered
into between WIN Network, LLC and Mr. Travis in which Mr. Travis claims he is
entitled to a ten-year employment term and damages of $10,000,000. Mr. Travis
also sues Winners All International, Inc. as a purported guarantor to the
agreement. WIN Network, LLC is comprised of UC'NWIN Systems, Inc. and Winners
All Ltd., a subsidiary of Winners All International, Inc.
On March 5, 1996, both defendants filed a motion to dismiss the Travis
action on the ground that the purported employment agreement violated applicable
provisions of the New York Limited Liability Corporation Law, the WIN Network,
LLC operating agreement, and the Winners All International, Inc. by-laws. As a
result of financial restrictions, no further legal activities were performed by
the Company.
On January 29, 1997, the Board of Directors of the Company due to
financial restraints ratified that all past and current litigation and inquiries
against Brian Travis, shall cease. The Board recognized that all current and
future resources should be directed towards achieving the objective of obtaining
and operating future profitable ventures. Although no formal settlement has been
signed, management is of the
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opinion that all litigation between the Company and Brian Travis has been
mutually terminated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the range of the high and low bid prices
for the Company's common stock and warrants to purchase common stock for the
five months ended December 31, 1996:
<TABLE>
<CAPTION>
COMMON STOCK REDEEMABLE WARRANTS
------------ -------------------
PERIOD HIGH LOW HIGH LOW
------ ---- --- ---- ---
<S> <C> <C> <C> <C>
August 1, 1996 - .06 .06 -- --
August 31, 1996 .04 .04 -- --
September 1, 1996 - .04 .04 -- --
September 30, 1996 .04 .04 -- --
October 1, 1996 - .02 .02 -- --
October 31, 1996 .02 .02 -- --
November 1, 1996 - .02 .02 -- --
November 30, 1996 .02 .02 -- --
December 1, 1996 - .02 .02 -- --
December 31, 1996 .06 .06 -- --
</TABLE>
As of the close of business on March 31, 1997, there were 160 and 1
holder of record, respectively, of the Common Stock and Redeemable Warrants. The
Company believes it has over 300 beneficial owners of its Common Stock.
The Company has paid no cash dividends in respect of its Common Stock.
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ITEM 6. SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FIVE MONTHS ENDED FIVE MONTHS ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 JULY 31, 1996 JULY 31, 1995
----------------- ----------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenue $ -0- $ -0- $ -0- $ -0-
Costs and expenses $ -0- $ 624,353 453,396 3,250,648
Net Loss from
Operations $ -0- $ (624,353) (453,396) (3,250,648)
Net Loss from
Operations Per Share $ -0- $ (0.05) (0.55) (0.52)
<CAPTION>
FIVE MONTHS ENDED FIVE MONTHS ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 JULY 31, 1996 JULY 31, 1995
----------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Total Assets $ -0- $11,110,419 $ -0- $ -0-
Total Current Liabilities $ 870,078 $ 5,947,774 $ 870,078 $ 426,361
Long-Term Debt $ -0- $ -0- $ -0- $ -0-
Stockholders' Equity $(870,078) $ 5,162,675 $(870,078) $ (426,361)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
(a) Current Operations
The Company was operationally inactive from August 1, 1995 through
January 26, 1997. On January 29, 1997, a Special Meeting of the Board of
Directors was held. Discussions centered on reorganizing the affairs of the
Company, transacting business in an effort to rebuild shareholder value, settle
all outstanding matters, and to bring business records up to date. During that
same meeting, the Board of Directors recognized and resolved, that as a result
of the permanent impairment of former operational assets, a measurement date of
January 29, 1997 was established to abandon former operations effective for the
year ended July 31, 1995.
In January, 1997, the Company acquired Perma Seal. In February, 1997,
pursuant to a letter of intent, Perma Seal completed negotiations to acquire 75%
of the authorized common voting stock of Envio Dynamics. These transactions are
described elsewhere in this Form 10K.
(b) Historical Operations
Year Ended July 31, 1996
In January, 1997, the Board of Directors approved a reserve of $200,000
for contingencies for former operations. The Company incurred $253,396 of
General and Administrative expenses to wind down the affairs of historical
operations.
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General and Administrative expenses also included 100,000 shares for
Executive Compensation, at current market value of $17,500.
Year Ended July 31, 1995
The Board of Directors, recognized and resolved, that as a result of
permanent impairment of operational assets a measurement date of January 29,
1997 was established, to abandon former operations effective for year ended July
31, 1995.
The Company had no revenues. Royalty expense to UC'NWIN decreased to
approximately $234,000 from $583,000 in the prior year as a result of
diminishing activities. The Company had no liquidity to fund the minimum royalty
expense reimbursements and ceased abiding to the conditions of the License
Agreement.
General and Administrative expenses decreased to approximately
$1,238,000 from $1,582,000 as a result of the joint venture absorbing costs. In
addition, costs were expended for legal services incurred for litigation against
former management, international travel to supervise London operations and
Professional fees for financial statement and filing requirements.
The Company's 49% interest in the joint venture resulted in a loss of
approximately $1,470,000. As a result of the actions of the Board of Directors,
asset values were written off as follows:
<TABLE>
<CAPTION>
Asset Operations Amount
----- ---------- ------
<S> <C> <C>
Accounts Receivable Bad Debts $ 307,371
License Loss on Disposal $1,992,011
Joint Venture Loss on Investments $1,817,413
</TABLE>
Liquidity and Capital Resources
(a) Current
The Company, currently does not have the liquidity or capital resources
to fund Perma Seal or Envio Dynamics without raising capital either from
borrowing or from the sale of additional shares of stock. In 1997, the Company
has raised approximately $500,000 through the registration and sale of
additional shares of common stock. The Company is raising further financing
through the sale of additional shares of stock. Management is continuing to
negotiate with vendors to resolve all claims resulting from former operations.
The Company also anticipates further sources of financing from letters
of credit. These letters of credit are related to the ten month delivery
schedule for 1,000,000 gallons of sealant product. Pursuant to a purchase order,
the anticipated order gross sales price will be $18 million. This transaction is
described elsewhere in this 10K.
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(b) Historical
Year Ended July 31, 1996
The Company, currently, does not have the liquidity or capital
resources to fund Perma Seal or Envio Dynamics without raising capital either
from borrowing or from the sale of additional shares of stock.
The Company is raising additional financing through the sale of shares
of common stock and management believes that such financing is feasible.
Management intends to negotiate with vendors to resolve all claims resulting
from former operations.
The Company increased liabilities of $253,396, for costs incurred, in
the winding down of historical operations. Liabilities also included 100,000
shares, of Executive Compensation, at current market value of $17,500.
Year Ended July 31, 1995
The Company received proceeds of $3,182,075, net of expenses, from the
issuance of additional shares of stock, which was utilized to fund WinNet, the
joint venture.
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ITEM 8. FINANCIAL STATEMENTS
FORM 10-K - ITEM 8
WINNERS ALL INTERNATIONAL, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
PAGE
----
INDEPENDENT AUDITORS' REPORT .......................................... 15
CONSOLIDATED BALANCE SHEETS ........................................... 16
CONSOLIDATED STATEMENTS OF OPERATIONS ................................. 17
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ....................... 18
CONSOLIDATED STATEMENTS OF CASH FLOWS ................................. 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ............................ 20-38
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable, and therefore have been omitted.
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JOEL S. BAUM, CPA, P.A.
4310 SHERIDAN STREET, SUITE 202
HOLLYWOOD, FLORIDA 33021
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Winners All International, Inc.
We have audited the accompanying consolidated balance sheet of Winners All
International, Inc. and Subsidiaries as of December 31, 1996, and the related
consolidated statements of operations, stockholders' (deficit), and cash flows
for the five months ended December 31, 1996 and the two years ended July 31,
1996 and 1995. These 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtained
reasonable assurance about whether the consolidated financial statements are
free of material misstatements. 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 statements presentation. We believe that our audit
provides 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 Winners
All International, Inc. and Subsidiaries as of December 31, 1996 and the results
of its operations and its cash flows for five months ended December 31, 1996 and
the two years ended July 31, 1996 and 1995 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 described in Note 2 to the
consolidated financial statements, the Company has suffered recurring loses, has
discontinued former operations, and is in the process of seeking additional
capital, whose outcome cannot currently be determined, for the new business
activities of the Company. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding these
matters are described in Note 2. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As described in Note 11, the Company has been named in a number of lawsuits,
many of which cannot be reasonably determined at the present time.
s/Joel S. Baum, CPA, P.A.
- -------------------------------
Joel S. Baum, CPA, P.A.
Baum and Company
Certified Public Accountants
Hollywood, Florida
April 30, 1997
15
<PAGE> 16
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND JULY 31, 1996
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 JULY 31
---------- ----------
<S> <C> <C>
Current Assets:
Total Current Assets $ -- $ --
---------- ----------
Property and Equipment, Net -- --
---------- ----------
Other Assets:
Total Other Assets -- --
---------- ----------
$ -- $ --
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable
and Accrued Expense $ 870,078 $ 870,078
---------- ----------
Total Current Liabilities 870,078 870,078
---------- ----------
Commitments and contingencies
Stockholders' (Deficit) Equity:
Preferred Stock, $1.00 Par Value,
2,000,000, Shares Authorized;
Series A Convertible, 750,000 Shares Authorized;
Issued & Outstanding, 62,500 Shares Unconverted 55,035 55,035
Common Stock $.01 Par Value,
60,000,000 shares Authorized;
14,471,756 Shares Issued & Outstanding 144,717 144,717
Additional Paid-In-Capital 8,026,114 8,026,114
Accumulated (Deficit) (9,095,944) (9,095,944)
---------- ----------
Total Stockholders' (Deficit) Equity (870,078) (870,078)
---------- ----------
$ -- $ --
========== ==========
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
AND ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16
<PAGE> 17
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FIVE MONTHS ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 JULY 31, 1996 JULY 31, 1995
----------------- ------------- -------------
<S> <C> <C> <C>
REVENUES $ -0- $ -0- $ -0-
----------- ----------- -----------
Costs and Expenses
Cost of Sales $ -0- $ -0- $ -0-
Royalty Expense $ -0- $ -0- $ 233,920
General and Administrative $ -0- $ 253,396 $ 1,263,378
Depreciation and Amortization $ -0- $ -0- $ -0-
Bad Debts $ -0- $ -0- $ 307,371
Share of WinNet Loss $ -0- $ -0- $ 1,470,751
----------- ----------- -----------
$ -0- $ 253,396 $ 3,250,648
----------- ----------- -----------
(Loss) Before other Expenses $ -0- $ (253,396) $(3,250,648)
----------- ----------- -----------
Other (Expense):
Reserve for Contingencies $ -0- $ (200,000) $ -0-
Loss on Disposal of Assets $ -0- $ -0- $(1,992,011)
Loss on Investments $ -0- $ -0- $(1,817,413)
----------- ----------- -----------
Total Other (Expense) $ -0- $ (200,000) $(3,809,424)
----------- ----------- -----------
Net (Loss) $ -0- $ (200,000) $(3,809,424)
----------- ----------- -----------
NET LOSS PER COMMON SHARE $ -0- $ (0.031) $ (0.52)
----------- ----------- -----------
AVERAGE SHARES OUTSTANDING 14,471,756 14,471,756 13,487,258
----------- ----------- -----------
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT AND
ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17
<PAGE> 18
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
AS OF DECEMBER 31, 1996, JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
Stock Common Stock
Amount Amount Stock
Preferred Par Value Par Value Paid-In Subscription
Shares $1.00 Shares $0.01 Capital Receivable
------ ------ ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1994 112,500 105,035 12,116,780 121,168 4,817,588 --
Issuance of Stock -- -- 2,336,976 23,369 3,158,706 --
Conversion of Series A
Preferred Stock to Common Stock (50,000) (50,000) 18,000 180 49,820 --
Net (Loss) for the Year -- -- -- -- -- --
-------------------------------------------------------------------------------------
Balance at July 31, 1995 62,500 55,035 14,471,756 144,715 8,026,114 --
Net (Loss) for the Year -- -- -- -- -- --
-------------------------------------------------------------------------------------
Balance at July 31, 1996 62,500 $ 55,035 14,471,756 $ 144,715 $ 8,026,114 $ --
Net (Loss) for the Five Months -- -- -- -- --
Balance at December 31, 1996 62,500 $ 55,035 14,471,756 $ 144,715 $ 8,026,114 $ --
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Treasury Stock
Deficit Subtotal Shares Amount Total
------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1994 (1,592,155) 3,451,634 -- -- 3,451,634
Issuance of Stock -- 3,182,075 -- -- 3,182,075
Conversion of Series A
Preferred Stock to Common Stock -- -- -- -- --
Net (Loss) for the Year (7,060,072) (7,060,072) -- -- (7,060,072)
--------------------------------------------------------------------
Balance at July 31, 1995 (8,652,227) (426,363) -- -- (426,363)
Net (Loss) for the Year (453,396) (453,396) -- -- (453,396)
--------------------------------------------------------------------
Balance at July 31, 1996 $ (9,095,944) $ (870,080) -- -- $ (870,080)
Net (Loss) for the Five Months -- -- -- -- --
Balance at December 31, 1996 $ (9,095,944) $ (870,080) -- -- $ (870,080)
- ------------------------------------------------------------------------------------------------------
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
AND ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18
<PAGE> 19
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
5 MONTHS ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 JULY 31, 1996 JULY 31, 1995
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ -- $ (453,396) $(7,060,072)
Adjustments to Reconcile Net Loss to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization -- -- --
Sale of Intangibles -- -- --
Write Down of Fixed Assets -- -- --
Share of WinNet Loss -- -- 1,470,751
Loss on Disposal of Intangible Assets -- -- 1,992,011
Loss on Investments -- -- 1,817,413
Bad Debt Expense -- -- 307,371
Changes in Assets and Liabilities:
Accounts Receivable-Trade -- -- 3,908
Prepaid Expense and Other Current Assets -- -- 374,101
Note Receivable -- -- 1,000,000
Other Assets -- -- 62,242
Accounts Payable and Accrued Expenses -- 453,396 178,375
Royalties Payable -- -- 190,178
Other Current Liabilities -- -- (11,963)
-------------------------------------------
Total Adjustments -- -- 7,384,387
-------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES -- -- 324,315
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments to Acquire Property and Equipment -- -- (12,187)
Payments to Acquire License -- --
Investment in Win Network LLC -- -- (3,602,240)
Cash Acquired in Reverse Acquisition -- --
-------------------------------------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES -- (3,614,427)
-------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Preferred Stock -- --
Proceeds from Issuance of Common Stock -- -- 3,182,075
-------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES: -- -- 3,182,075
-------------------------------------------
NET INCREASE (DECREASE) IN CASH -- -- (108,037)
-------------------------------------------
CASH AT THE BEGINNING OF YEAR -- -- 108,037
-------------------------------------------
CASH AT THE END OF YEAR -- --
===========================================
Supplemental Cash Flow Data:
Non-Cash Operating Activities
Loss on Disposal of Intangible Assets $ -- $ -- $ 1,992,011
Loss on Investments -- -- 2,090,333
Non-Cash Financing Activities -- -- --
Conversion of Preferred Stock to Common Stock -- -- 50,000
Common Stock Issued for License -- -- --
Common Stock Issued for Capital Contribution of Debt -- -- --
Assets Acquired from Acquisition -- -- --
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT AND ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
19
<PAGE> 20
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
The Company was incorporated in October 1989 as Natural Child Care, Inc. In
September 1993, Natural Child Care, Inc. (NCC) purchased Winners All Limited
(WAL), a development-stage company, organized under the laws of the Isle of
Jersey, Channel Island, United Kingdom. This acquisition has been treated as a
recapitalization. Following the recapitalization, the shareholders of WAL
obtained a majority of the voting rights in NCC and as a result the
recapitalization was accounted for as a reverse acquisition, with WAL the
successor. On October 27, 1993, the legal name was changed to Winners All
International, Inc.
Winners All International, Inc. (the Company) was operationally inactive from
August 1, 1995 through January 26, 1997, On January 29, 1997 a special meeting
of the Board of Directors was held. Discussions centered on reorganizing the
affairs of the Company, transacting business in an effort to rebuild shareholder
value, settle all outstanding matters, and to bring business records up to date
to continue as a going concern. The Board of Directors ratified, retroactive to
the year ended July 31, 1995, certain resolutions as follows:
A. Accounts receivable were uncollectable and written off. (Note 9)
B. Prepaid expenses have no future value and are to be expensed.
C. Property and equipment have no future recoverable or salvage value and are to
be accounted for as an abandonment.
D. Advances made by the Company to UC'NWIN Systems Corporation, formerly UC'NWIN
systems, Ltd., are uncollectable and written off. (Note 9)
E. WIN Network, LLC., a 49% joint venture investment, has ceased all operations.
Investments in the joint venture have no carrying value, no expected future
recovery and are written off. (Note 5)
F. A 1992 seventeen year licensing agreement has no projected future cash flows.
The value of this agreement is non-existent and shall be accounted for as a loss
from disposal of a long-lived asset. (Note 4)
G. All subscriptions receivable have been unfulfilled and written off. (Note 6)
20
<PAGE> 21
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
H. Winners All, Ltd., a wholly-owned subsidiary of the Company, has ceased all
operations. A measurement date of January 28, 1996 and an abandonment date of
July 31, 1995 has been established. (Note 12)
I. I. Disputes with former management shall cease. (Note 11)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist
in understanding these consolidated financial statements. The
consolidated financial statements and notes are representations of
management who is responsible for their integrity and objectivity. The
accounting policies used conform to generally accepted accounting
principles and have been consistently applied in the preparation of
these consolidated financial statements.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary. All material
intercompany items and transactions have been eliminated
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has adopted Statement of Financial Accounting Standards No.
107 "Disclosure About Fair Value of Financial Instruments", which
requires the disclosure of the fair value of off-and-on balance sheet
financial instruments. Unless otherwise indicated, the fair values of
all reported assets and liabilities, which represent financial
instruments (none of which are held for trading purposes), approximate
the carrying values of such amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
21
<PAGE> 22
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at historical cost. Depreciation of
property and equipment is provided on the straight-line method over the
estimated useful lives of the related assets.
Maintenance and repairs are charged to operations. Additions and
betterments, which extend the useful lives of the assets, are
capitalized. Upon retirement or disposal of the property and equipment,
the cost and accumulated depreciation are eliminated from the accounts,
and, the resulting gain or loss is reflected in operations.
INTANGIBLE ASSETS
Intangible assets (License) are recorded at historical cost.
Amortization of the distribution license is provided on the
straight-line method over an estimated useful life of seventeen years.
JOINT VENTURE INVESTMENT
The 49% investment in WIN Network, LLC has been accounted for under the
equity method.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
which requires the establishment of a deferred tax asset or liability
for the recognition of future deductions or taxable amounts, and
operating loss and tax credit carryforwards. Deferred tax expense or
benefit is recognized as a result of the change in the deferred asset
or liability during the year. If necessary, the Company will establish
a valuation allowance to reduce any deferred tax asset to an amount
which will, more likely than not, be realized.
WARRANTS AND OPTIONS
Warrants and options have been recorded at fair market value on the
date of issuance and expensed in the applicable period.
22
<PAGE> 23
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSACTION
Through July 31, 1995, the Company has accounted for the activities of
its foreign subsidiary with the U.S. dollar as the functional currency.
Any exchange gains or losses during the period were insignificant.
PER SHARE DATA
Per share data is calculated based on average number of shares
outstanding. Stocks options and warrants are considered to be common
stock equivalents, but are excluded from earnings per share
computations because of immateriality or anti-dilution.
RESTATEMENTS
a) Recapitalization - The consolidated financial statements give
retroactive effect to the recapitalization of the par value on the
common stock (Note 3).
b) Stock Split - August 3, 1993, the Board of Directors declared a 1.2
for one stock split, effected in the form of a stock dividend, to
common stock shareholders of record on August 16, 1993, payable
September 23, 1993. In June 1994, the Board of Directors declared a 1
for 2 reverse stock split of common stock. Accordingly, the number of
common shares outstanding and per share data, for all periods, have
been restated to reflect stock splits. The par value of the shares of
common stock in connection with the stock splits has been recorded to
common stock and a like amount against additional paid-in capital.
NOTE 2 - GOING CONCERN
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which
considers continuation of the Company as a going concern.
23
<PAGE> 24
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 2 - GOING CONCERN (CONTINUED)
Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a
reasonable length of time. As shown in the consolidated financial
statements, the Company has suffered recurring losses, from previous
operations, resulting in an accumulated deficit of $(9,095,944) and a
shareholders (deficit) of $(870,078). In addition, management of the
Company has established a "measurement date" of January 29, 1997 to
discontinue former operations, The Company must also obtain a
significant amount of capital for the future development of new
activities. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
Management believes that the discontinuance of former operations is the
first step necessary in restructuring the Company towards future
profitable activities. In the opinion of management, the acquisition of
Perma Seal, and other possible acquisitions of start-up companies, will
generate significant revenues in future years. The Company plans to
raise significant capital through the issuance of additional shares of
stock.
The consolidated financial statements do not include any adjustments
that might result from these uncertainties.
24
<PAGE> 25
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 3 - RECAPITALIZATION
Effective September 23, 1993, the Company acquired the stock of Winners
All Limited (WAL), in a reverse acquisition, in which WAL's
shareholders acquired voting control of the Company. The acquisition
was accomplished through an exchange of stock in which the Company
exchanged 2,140,220.36 shares of newly issued Series A Convertible
Preferred Stock for 100% of the outstanding stock of WAL. Such
preferred stock was converted into 10,261,983 shares of common stock or
9 shares of common stock for each share of preferred stock. Upon
completion of this transaction, the shareholders of WAL controlled
approximately 86% of the voting rights of the combined Company.
For financial reporting purposes, WAL is deemed to be the acquiring
entity. The merger has been reflected in the accompanying consolidated
financial statements as a recapitalization of WAL and an issuance of
shares by Winners All International, Inc.
In the recapitalization, WAL is deemed to have issued 10,261,983 shares
of common stock.
The operations of Winners All International, Inc. since September 23,
1993 have been included in the operations of the Company. Prior to
consummating the acquisition, NCC discontinued the operations of its
previous business in June 1993. NCC executed an agreement to sell its
product line to an unrelated party for approximately $313,000. NCC
received approximately $23,000 in cash and a $290,000 promissory note.
The purchaser subsequently made certain claims with respect to the
product inventory and related liabilities. The two parties reached a
settlement that is $125,000 less than the face amount of the note. In
addition, NCC was relieved of financial responsibility for possible
product returns. Accordingly, the note balance was written down by
$125,000 to reflect the final settlement and an accrued product returns
allowance of $13,500 was eliminated. The adjusted note balance of
$165,000 was paid in full on March 1, 1994. The subsequent write down
of the note has been treated as a reduction of the proceeds received by
the Company for the shares issued to the former shareholders of NCC.
25
<PAGE> 26
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 3 - RECAPITALIZATION (CONTINUED)
Reconciliation of shareholders' equity for the reverse acquisition of
NCC and WAL is as follows:
<TABLE>
<S> <C>
NCC shareholders' equity at July 31, 1993 $ 1,536,350
Net loss to September 23, 1993 (76,992)
Write down of NCC note receivable (125,000)
-----------
Adjusted NCC shareholder's equity
at September 30, 1993 $ 1,334,358
===========
</TABLE>
NOTE 4 - LICENSE AGREEMENTS
(A) On September 30, 1992, as amended on December 9, 1992, WAL entered
into a seventeen year, worldwide, exclusive of the United States,
master license agreement with UC'NWIN Systems, Inc. (UCW), a
wholly-owned subsidiary of UC'NWIN Systems Corporation, formerly known
as UC'NWIN Systems, Ltd., for the UC'NWIN System. In consideration for
the aforementioned rights, WAL paid $2,660,000, of which $1,580,000 was
paid on its behalf by WAL's principal shareholder. A portion of the
consideration, $500,000, was paid by the issuance of 200,000 shares of
common stock of the Company.
Royalty expense for the years ended July 31, 1996 and 1995 were $ -0-
and $233,920, respectively.
Amortization expense of the license agreement for the years ending July
31, 1996 and 1995 $ -0-.
(B) On July 1, 1994, WAL sold an exclusive license, for certain Pacific
Rim countries known as the "Asia Territory", of the UC'NWIN System, to
Winners All Asia Pacific Limited, for $2,000,000; $1,000,000 was paid
prior to July 31, 1994, and subsequently the balance of $1,000,000 was
received. Of the master license, (see Note 5-A) 20% was charged to the
sale, representing management's estimate of the value of the master
license applicable to the Asia Territory.
26
<PAGE> 27
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 4 - LICENSE AGREEMENTS (CONTINUED)
Mr. Brian A. Travis, former chairman and chief executive officer of the
Company, was also chief executive officer of the Licensee. However,
there was no commonality of ownership between the Company and the
Licensee.
(C) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" requires that management, with authority to approve the
action, has committed to a plan to dispose of the assets, whether by
sale or abandonment, and establish the value of the assets, at the
lower of carrying amount or fair market value, less cost to sell.
As a result of the permanent impairment of the master license, due to
ceased operations, the Board of Directors of the Company recognized the
carrying value of the master license agreement as non-existent, with no
projected future cash flows, and shall be accounted for as abandoned.
Accordingly, effective for the year ended July 31, 1995, $1,994,931 has
been reflected as a loss on disposal of assets in the consolidated
statements of operations.
NOTE 5 - JOINT VENTURE INVESTMENT IN WIN NETWORK, LLC
In December 1994, and as subsequently amended in June 1995, WAL, the
wholly-owned subsidiary of the Company, and UC'NWIN Systems, Inc.,
created WIN Network, LLC (WinNet), a limited liability company, to
exploit the UC'NWIN System. WAL and UC'NWIN Systems, Inc. contributed
the tangible and intangible rights to the UC'NWIN system (other than
those sub-licensed to Winners All Asia Pacific Limited). WAL owns 49%
of WinNet and UC'NWIN Systems, Inc. the remaining 51%. From inception
through July 31, 1995, WinNet has lost $2,823,287 of which $1,470,751
has been shown as a loss on the consolidated financial statements of
the Company. Amounts shown as investment in WinNet represents the
carrying value of certain assets contributed and amounts expended on
behalf of WinNet since its formation.
27
<PAGE> 28
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 5 - JOINT VENTURE INVESTMENT IN WIN NETWORK, LLC (CONTINUED)
Subsequent to July 31, 1995, WinNet has lost approximately an
additional $975,000. Recurring losses, no marketable activities, and
numerous litigation has caused WinNet to abandon operations. As a
result of the permanent impairment of WinNet, the Board of Directors of
the Company recognized the carrying value of the joint venture
investment as non-existent, with no projected future cash flows, and it
shall be accounted for as abandoned. Accordingly, effective for the
year ended July 31, 1995, $1,817,413 has been reflected as a loss on
joint venture investment in the consolidated statements of operations.
Limited liability Companies are a creation of state law. LLC's are
owned by members, who aren't personally liable for the LLC's debts or
obligations. (See Note 11)
NOTE 6 - STOCKHOLDERS' EQUITY
(A) Preferred Stock - The Board of Directors reduced the number of
authorized shares of Series A, $1.00 par value preferred stock, from
2,000,000 share to 750,000 shares, leaving 1,250,000 shares to be
designated a series of distinction and issued by the Board. Each share
of the Series A preferred stock entities its holder to convert it into
.36 shares of common stock, as adjusted in the event of future
dilution; to receive $1.000 per share in the event of voluntary or
involuntary liquidation, to have the same voting rights as the common
stock, and to share equally in payments of any dividends declared by
the Board of Directors.
(B) In January 1995, the Company received subscriptions to purchase
shares of stock at prices ranging from $2.00 to $3.33 a share. Of the
total of approximately $4,378,000 subscribed, $3,646,750 was paid by
April 30, 1995. The remainder of approximately $731,250 remained
unfulfilled. The subscriptions and sales were accounted as follows:
28
<PAGE> 29
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<S> <C> <C>
Total Subscribed $3,646,750
Less: Commission to Affiliate of
Former Chief Executive
Officer of the Company 364,675
Professional Fees 100,000
----------
Total Proceeds $3,182,075
==========
</TABLE>
Accordingly, the average selling price, of 2,336,976 issued, amounted
to $1.56 per share. On August 22, 1995, Robinson, Brog, Leinwand,
Reich, Genovese & Gluck, P.C. (See Note 11) reported on the activities
of former management. Subsequently, the Board of Directors of the
Company acknowledged the offering as permanently closed, and that, any
subscription receivables unfulfilled shall be accounted for, as
canceled, in the consolidated financial statements, effective for the
year ended July 31, 1995.
NOTE 7 - STOCK OPTIONS AND WARRANTS
(A) Stock Option Plan - On July 26, 1991, the Company adopted an
Incentive and Non-Qualified Stock Option Plan whereby options to
purchase 120,000 shares of common stock may be granted until July 25,
2001. The plan is administered and terms of stock purchases are
established by the Board of Directors. Qualified options, under the
plan, may be granted to management and key employees at a price equal
to the fair market value at the date of grant (110% of fair market
value if the employee owns more than 10% of the Company's voting
stock). Non-qualified options may be exercised at any time during the
five-year period following the date the options becomes exercisable,
which date is established by the Board of Directors when the option is
granted. The total stock options outstanding under the stock-option
plan were 24,150 as of December 31, 1996 and July 31, 1996 and 1995.
On June 1, 1993, the Board of Directors awarded six 3-year options,
outside the Plan, to purchase 15,000 shares of common stock (a total of
90,000 shares) at $3.32 per share to the five Board members and an
officer. The stock options for two of the Board members were canceled
in November 1994.
29
<PAGE> 30
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 7 - STOCK OPTIONS AND WARRANTS (CONTINUED)
In conjunction with NCC's initial public offering in April 1992,
redeemable warrants were issued to purchase 450,000 shares of common
stock at an exercise price of approximately $6.66 per share. These
warrants were set to expire on April 28, 1994. The warrants' expiration
date was extended to January 27, 1996.
Additionally, the 37,500 units, held by the underwriter to purchase
common stock and warrants, were renegotiated in September 1993 due to
certain anti-dilution provisions included in their unit agreement. The
underwriters now have warrants to purchase up to 90,000 units, each
unit consists of two shares of common stock and a warrant to purchase
one share of common stock, at an exercise price of $14.52. Such
warrants expiring April 27, 1997 are exercisable at 6.66 per share.
The following table summarizes the change in options and the related
price ranges for shares of the Company's common stock: (including the
stock-option plan).
STOCK OPTIONS
<TABLE>
<CAPTION>
SHARES OPTION PRICE
------ ------------
<S> <C> <C>
Outstanding @ July 31, 1994 114,150 $3.32-$6.66
-----------
Granted(Canceled) --
-----------
Outstanding @ July 31, 1995 114,150 $3.32-$6.66
-----------
Granted(Canceled) --
-----------
Outstanding @ July 31, 1996 114,150 $3.32-$6.66
-----------
Granted(Canceled) --
-----------
Outstanding @ December 31, 1996 114,150 $3.32-$6.66
===========
</TABLE>
30
<PAGE> 31
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 8 - INCOME TAXES
The Company has net operating tax loss carryforwards of approximately
$7,600,000 in the United States and $1,500,000 in the United Kingdom,
of such loss carryforwards, approximately $3,000,000 represents
carryforwards of a predecessor, the utilization of which will be
credited to additional paid-in capital. The Company is not current with
its corporate income tax filings.
NOTE 9 - BAD DEBTS
The Board of Directors of the Company recognized $272,920 of advances
to UC'NWIN Systems Corporation, and other receivables of $34,451, as
uncollectable. Accordingly, effective for year ended July 31, 1995,
$307,371 has been reflected as a bad debt in the consolidated financial
statements.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company currently has no long-term leases for the rental of
facilities.
NOTE 11 - LITIGATION
(A) Several lawsuits, in Florida and Georgia, have been recorded
against WinNet, UC'NWIN Systems Corporation and the Company, as members
of the LLC. Management is of the opinion these lawsuits are without
merit and expects to file a motion to dismiss plaintiff's complaints.
(B) On March 22, 1996, Raymond Kalley, as trustee of the EB Trust and
PB Trust (Plaintiff), sued the following in the Southern District of
Florida (Miami Division): The Company, UC'NWIN Systems Corporation, a
consultant to UC'NWIN Systems Corporation and a beneficiary to the EB
and PB Trusts. In this five-count complaint, Plaintiff sued the
Defendants for alleged violations of Section 18 of the Securities Act
of 1934. Plaintiff alleges that the Defendants, singly and in concert,
filed misleading reports under the Securities Exchange Act of 1934,
including without limitation, the filing of Form 10K. Plaintiff failed
to identify which Form 10K was allegedly misleading or how Plaintiff
has been damaged by this alleged misleading statement. Although
Plaintiff alleges that it purchased stock in UC'NWIN Systems
Corporation for approximately $1,000,000, the Plaintiff does not
identify the damage that it allegedly incurred.
31
<PAGE> 32
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 11 - LITIGATION (CONTINUED)
The Company believes this lawsuit is without merit and intends to
defend this lawsuit vigorously and expects file a motion to dismiss
Plaintiff's complaint. The outcome cannot be determined at the present
time.
(C) On April 17, 1995, AG Industries sued Winners All International,
Inc. and UC'NWIN Systems Corporation for a breach of contract and
causes of action for unjust enrichment and breach of implied contract.
AG Industries seeks damages in excess of $400,000. On August 22, 1995
the Company filed a Motion to Dismiss and Alternative Motion for a
Change of Venue. AG Industries has responded and opposed the
Defendants' motion but the Court has not yet ruled on it. There has
been no further discovery and the outcome cannot be determined at the
present time.
(D) The Company had entered into a five-year employment agreement, with
Brian Travis, a former president, who was a major stockholder, expiring
August 31, 1998. The employment agreement provides for a base salary of
$90,000. In May 1995, the Company and the former president mutually
agreed to terminate this agreement and he disposed of all but 500,000
shares of common stock.
In June 1995, the Company engaged outside counsel to make inquiries
concerning certain unauthorized transactions of the Company: (1) of
compensation and commissions to Brian Travis, the former president, and
his affiliate (Arrow Capital) aggregating approximately $400,000;
(2) of unauthorized activities of the former president as principal of
WinNet, an affiliated entity, in which the Company has a 49% equity
interest, wherein such affiliate made unauthorized purchases of
approximately 50,000 shares of the Company's common stock; (3) for
transactions involving approximately $250,000, for services rendered by
certain unrelated third parties.
On July 26, 1995, the Company initiated a lawsuit, against the former
president and Arrow Capital, to recover unauthorized payments of
commissions, related to the sale of Regulation S stock, in the amount
of $364,675.
32
<PAGE> 33
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 11 - LITIGATION (CONTINUED)
On or about July 3, 1995, Brian A. Travis initiated a lawsuit against
WIN Network, LLC and Winners All International, Inc. In this action,
Mr. Travis seeks to enforce a purported employment agreement which he
claims was entered into between WIN Network, LLC and Mr. Travis in
which Mr. Travis claims he is entitled to a ten-year employment term
and damages of $10,000,000. Mr. Travis also sues Winners All
International, Inc. as a purported guarantor to the agreement. WIN
Network, LLC is comprised of UC'NWIN Systems, Inc. and Winners All
Ltd., a subsidiary of Winners All International, Inc.
On March 5, 1996, both defendants filed a motion to dismiss the Travis
action on the grounds that the purported employment agreement violated
applicable provisions of the New York Limited Liability Corporation
Law, the WIN Network, LLC operating agreement and Winners All
International, Inc.'s by-laws. As a result of financial restrictions,
no further legal activities were performed by the Company and there has
been no further discovery.
On January 29, 1997, the Board of Directors of the Company, due to
financial restraints, ratified that all past and current litigation,
and inquiries, against Brian Travis, shall cease. The Board recognized
that all current and future resources should be directed towards
achieving the objective of obtaining and operating future profitable
ventures. Although no formal settlement has been signed, management is
of the opinion that all litigation between the Company and Brian Travis
has been mutually terminated.
(E) Stanley Farber, Plaintiff, filed a complaint in the Circuit Court
of the Seventeenth Judicial Circuit in and for Broward County, Florida
on July 25, 1996. Plaintiff is suing the Company and Davidoff and
Molito, former legal counsel for the Company, for Breach of purported
executive employment contract. As a result of absence of counsel on
behalf of the Company, a Motion for Final Default Judgment was granted
and a hearing date of June 19, 1997 was established to determine
damages. The Company has hired new counsel to negotiate a settlement or
appeal the judgment. Management believes potential damages to range
between $50,000 and $150,000. The outcome of these proceedings cannot
be determined at the present time.
33
<PAGE> 34
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 12 - OTHER MATTERS
On July 20, 1994, the Company entered into an agreement to merge with
UC'NWIN Systems Corporation, formerly UC'NWIN system, Ltd., the parent
of UC'NWIN Systems, Inc. UC'NWIN Systems, Inc. was the Licensor to WAL
of the world-wide rights (except United States) to the patent and
technology comprising the UC'NWIN systems.
The Company had filed a registration statement with the Securities and
Exchange Commission by which the Company would register and issue one
of its shares for each share of UC'NWIN Systems Corporation. In 1996,
the Company terminated its agreement to merge with UC'NWIN Systems
Corporation. Activities related to this merger and any shares of stock
that were exchanged, during this period, were negated and all shares
returned.
As a result of total cessation of operations and activities, a
measurement date of January 28, 1997, and an abandonment date of July
31, 1995, has been established by the Board of Directors, for the
write-off of Winners All Limited, a wholly-owned subsidiary of the
Company.
The Board of Directors authorized the Company's management to establish
a reserve for contingencies in the amount of $200,000.
NOTE 13 - SUBSEQUENT EVENTS
On February 17, 1997, the Company made a determination to change its
former fiscal year of July 31, to December 31.
On January 28, 1997, the Company entered into an Acquisition Agreement
with Perma Seal (Perma Seal), wherein the Company purchased all of the
issued and outstanding capital stock of Perma Seal consisting of 1,000
shares of common stock, with a par value of $.01 per share, in exchange
for 2,100,000 shares of common stock of the Company.
On February 23, 1997, the Company, pursuant to a January 28, 1997
acquisition agreement with Perma Seal, authorized the issuance of
2,100,000 shares of common stock of the Company in exchange for all of
the issued and outstanding capital stock of Perma Seal consisting of
1,000 shares, $ .01 par value, of common stock. Accordingly, Perma Seal
is a wholly owned subsidiary of the Company.
34
<PAGE> 35
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 13 - SUBSEQUENT EVENTS (CONTINUED)
On February 21, 1997, pursuant to a February 4, 1997 letter of intent,
Perma Seal completed negotiations, which resulted in a stock purchase
agreement, with Envio Dynamics Corporation ("Envio Dynamics"). Perma
Seal will acquire a 75% stock interest, amounting to 3,750,000 shares,
of the authorized common voting stock of Envio Dynamics in exchange for
$750,000. As of April 30, 1997, approximately $450,000 has been paid.
The 3,750,000 shares have been placed in escrow until the remaining
$300,000 is paid. Accordingly, the $450,000 previously paid by Perma
Seal to Envio Dynamics will be recorded as a deposit on the books of
Perma Seal until the shares are released from escrow. Upon the exchange
of the shares, Envio Dynamics will be accounted for as a majority (75%)
owned subsidiary of Perma Seal.
On March 21, 1997, Perma Seal entered into a purchase and sale
agreement with the Essex Chemical Corporation ("Essex Chemical") to
acquire the land, building, and equipment, located at 1521 Industrial
Drive, Griffin, Georgia, for $375,000, with a closing date of May 1,
1997. The current expected closing, as amended, is anticipated to be no
later than May 30, 1997, unless extended by mutual agreement by both
parties.
On February 20, 1997, the Company adopted a "1997 Non-Statutory Stock
Option Plan" (the "Plan") to aid in attracting and retaining persons to
assist in the development and success of the Company. This Plan
provides for the issuance of non-statutory stock options and is not
intended to qualify as "Incentive Stock Options" within the meaning of
section 422 of the Internal Revenue Code. The purchase price of each
share of stock within this Plan shall not be less than 20% of the fair
marker value of such share on the date the option is granted. The fair
market value of a share on a particular date shall be deemed to be the
average of the high bid and high asked price. Pursuant to this Plan,
the Company entered into a contract with Stanley Merdinger to perform
business, consulting and related services for the Company. In
consideration for his services, he will receive one million shares of
stock with an option to purchase two million additional shares..
35
<PAGE> 36
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 13 - SUBSEQUENT EVENTS (CONTINUED)
On April 4, 1997, the Board of Directors of the Company authorized
management to commence negotiations to acquire 100% of the outstanding
common stock of Designer Wear, Inc. Designer Wear, Inc., a Florida
corporation, is a privately held development stage company, organized
August 1996, which has as its principal business and sole assets a) a
worldwide license for use of the name, likeness and image of the late
American actor "James Dean" on socks; and, b) a joint venture for the
worldwide promotion, development and marketing of the trademark "Smith
and Wesson" on apparel and accessories. Howard Weiser, officer and
director of the Company, is also officer, director, and stockholder of
Designer Wear, Inc.
Based upon the significant subsequent events relating to the new
business activities of the Company, a condensed, consolidated,
proforma, unaudited financial statement, as of March 31, 1997, is
presented as follows:
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
"PROFORMA"
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31, 1997
<S> <C>
Current Assets:
Cash $ 473
Deposit on Investment 297,750
----------
Total Current Assets 298,223
----------
Property and Equipment, Net
Other Assets:
Investment in Wholly-Owned Subsidiary 1,050,000
Investment in International Distribution Agreement 30,000
----------
Total Other Assets $1,080,000
----------
$1,378,223
==========
</TABLE>
36
<PAGE> 37
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 13 - SUBSEQUENT EVENTS (CONTINUED)
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
"PROFORMA"
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
March 31, 1997
--------------
<S> <C>
Current Liabilities:
Accounts Payable and Accrued Expense $ 848,428
-----------
Total Current Liabilities 848,428
-----------
Commitments and Contingencies -0-
Stockholders' (Deficit) Equity:
Preferred stock, $1.00 par value, 2,000,000
Shares Authorized. Series A Convertible,
750,000 Shares Authorized; Issued; and
Outstanding, 62,500 Shares Unconverted at
March 31, 1997 55,035
Common Stock $ .01 Par Value, 60,000,000
Shares Authorized; 17,279,756 Shares Issued
and Outstanding March 31, 1997 172,787
Additional Paid-in-Capital 9,401,544
Accumulated (Deficit) (9,099,571)
-----------
Total Stockholders' (Deficit) Equity 529,795
-----------
$ 1,378,223
===========
</TABLE>
37
<PAGE> 38
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIVE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 13 - SUBSEQUENT EVENTS (CONTINUED)
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF LOSS
THREE MONTHS ENDED MARCH 31, 1997
"PROFORMA"
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1997
--------------
<S> <C>
Revenues $ -0-
------------
Costs and Expenses:
Royalty Expense -0-
General and Administrative 3,627
Depreciation and Amortization -0-
------------
3,627
------------
Operating (Loss) (3,627)
Other Income (Expense) -0-
------------
Net (Loss) $ (3,627)
============
Net (Loss) Per Common Share $ (0.000)
============
Average Shares Outstanding 15,875,756
============
</TABLE>
38
<PAGE> 39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On January 6, 1997, the registrant has engaged Baum & Company,
Certified Public Accountants, of 4310 Sheridan Street, Hollywood, Florida 33021,
to audit the financial statements of the registrant for the year ended July 31,
1995 and assist management and legal counsel in preparing the Form 10K and the
Management Discussion and Analysis. Prior audits of the financial statements of
the registrant had been completed by Feldman, Radin & Co., P.C., of 805 Third
Avenue, New York, New York 10022. At no time have their been any disagreements
with Feldman, Radin & Co., P.C.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
Board of Directors and Executive Officers
Following the acquisition of Winners All, Ltd., Mr. Joyce became
President and Director of the Company and the Board of Directors was composed of
Mr. Joyce, Alex Larkman, Brian Chandler and Paul Gilkes, all of whom were
nominated by Mr. Joyce, and Mark Schindler, Eugene Stricker and Jules Zimmerman,
all of whom had been directors of Natural Child Care, Inc. Shortly afterwards,
Brian Chandler resigned and Charles Gargano was nominated by Mr. Joyce to take
his place.
In July, 1994, Paul Gilkes resigned and was replaced by Brian A. Travis
who became Chairman of the Board and Chief Executive Officer of the Company. Mr.
Joyce remained as President until he resigned on November 7, 1994. Mark
Schindler served as Treasurer and Eugene Stricker as Secretary of the Company.
Jules Zimmerman, Director, Mr. Schindler, Director, Vice President and
Treasurer, Mr. Stricker, Director and Secretary, all resigned. Howard Weiser was
appointed as Secretary and Treasurer on April 4, 1997.
Samuel Weiss was elected as Secretary and subsequently resigned. Brian
A. Travis resigned as Director, Chairman of the Board, and Chief Executive
Officer. David Karson was elected as President and Treasurer and subsequently
resigned, whereupon Edgar M. Reynolds was elected as President. Jules Zimmerman
resigned as Director.
Each Director holds office until the next annual meeting of
stockholders and until his successor is duly elected and qualified, or until
death, resignation or removal. Officers serve at the discretion of the Board of
Directors.
39
<PAGE> 40
Set forth below is certain background information with respect to the
current directors and officers, including information furnished by them, certain
other directorships held by them and their ages as of the filing of this Report.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Edgar M. Reynolds 73 Chairman, President,CEO
Charles Gargano 58 Director
Jeffrey Goldstein 42 Director
David M. Goldblatt 53 Director
Howard Weiser 57 Director, Secretary, Treasurer
Harry W. Brooks, Jr. 67 Director
</TABLE>
Edgar M. Reynolds was elected Chairman of the Board, President and
Chief Executive Officer on August 22, 1995. Mr. Reynolds attended Columbia
University. Since 1973 until 1994, he has been in an Executive capacity with
Digital Products Corporation, a public company in the field of electronics,
communications, and home monitoring. At various times, he was the CEO and
Director of Digital Products Corporation. Prior thereto he managed a private
consulting firm. Prior thereto for twelve years, he was a financial officer and
director of a public chain of a variety of toy stores. During this period, he
served as a director of two Florida banks. He also served overseas in the United
States Army Intelligence Service to World War II and was employed for a
worldwide import and export firm with extended stays in foreign countries. He is
also conversant in five languages.
Charles Gargano is the Chairman of the Empire State Development
Corporation of New York State. Mr. Gargano also served as the Finance Chairman
of the New York Republic State Committee. From August 1988 through August 1991.
Mr. Gargano served as United States Ambassador to the Republic of Trinidad and
Tobago. A civil engineer, Mr. Gargano has been President of G.M. Development,
Inc. and actively serves on many boards and commissions as Chairman or Director,
including the Children's Developmental Center, Alpha Hospitality Corp. and First
Commercial Bank of Long Island (in formation).
Jeffrey Goldstein is a graduate of Hofstra University in New York. He
is an investor in various businesses.
David M. Goldblatt has over 25 years of experience in trading, selling
and financing United States Government securities and money market instruments.
In 1970, Mr. Goldblatt traded short term U.S. government securities at William
E. Pollack and Co. In 1972, he was hired as Vice President at Cantor Fitzgerald
and Company, where he was required to sell and finance the Firms trading and
matched book positions. In 1976, Mr. Goldblatt was employed by Loeb, Rhodes &
Company, as a Senior Vice President. He was responsible for hiring sales
personnel for the money market department. In addition, he was in charge of
selling and financing the Firm's
40
<PAGE> 41
money market and matched book positions. In 1980, Mr. Goldblatt was a partner in
Resource Management. The Firm specialized in trading U.S. government securities
and short term money market instruments. In 1992, Mr. Goldblatt initiated and
developed the fixed income department at Seaboard Securities. This division
specializes in U.S. government securities. Mr. Goldblatt earned his Master's
Degree from Hunter College in New York City.
Howard Weiser was appointed as a Director to the Company. He worked for
Zales Jewelry Stores for more than 20 years, and helped create its massive
growth from 200 stores to over 1,800 stores. He was involved in all facets of
the business and rose to be Executive Vice President. His experience,
development of store branches and travel all over the world, in addition to his
long list of influential friends and contacts, provides the know-how and drive
for the growth of the sales, marketing and distribution activities forthcoming
by the Company.
Major General Harry W. Brooks, Jr. (retired) was appointed as a
Director to the Company. He is presently Chairman of Brooks International, which
acts as an International Trade Consultant and a direct participant in
international investment/trade. General Brooks previously led Advanced Consumer
Marketing Corporation, from 1985 to 1994, as Chairman and CEO. Prior thereto, he
worked for AMFAC, Incorporated, from 1977 to 1984, in positions ranging from
Vice President of Public Affairs to Executive Vice President. He served 29 years
in the United States Army, rising in rank from Private to Major General. He
received a Korean Presidential Order of National Security Merit, Vietnamese
Cross of Gallantry, six cluster Air Medal, two legions of Merit, two Bronze Star
Medals, and a Distinguished Service Medal. He is presently a Trustee on the
Executive Committee for the Freedom Forum Foundation (formerly the Gannett
Foundation) located in Arlington, VA, a Board of Director on the Freedom Forum
Newseum in Arlington, VA, on the Advisory Council of the Freedom Forum Pacific
Coast Center in San Francisco, CA, on the Advisory Board of Spacevest, Reston,
VA, a Director on the International Diplomacy Council, and a Trustee on the
Monterey Institute of International Studies. General Brooks graduated from the
University of Nebraska, holds a Master's degree from the University of Oklahoma,
and did post graduate studies at Stanford Graduate School of Business-Executive
Program. He also completed studies at U.S. Army Command and General Staff
College, U.S. Army Command and General Staff College, U.S. Army Management
School, and U.S. Army War College.
41
<PAGE> 42
Compliance with Section i6 (a) of the Exchange Act
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than 10% of
a registered class of the company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes of ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16 (a) forms they
file.
To the Company's knowledge, based solely on review of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 1996, all Section 16 (a)
filing requirements applicable to its officers , directors and greater than 10%
beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
The Company is currently in the process of restructuring its
organizational and operational affairs and is considering Executives and the
attendant compensation to fill its various executive positions. The Board of
Directors approved the issuance to the President of 100,000 shares of stock,at
market value of $17,500, for services rendered, for the Year Ended July 31,
1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information based on the
outstanding securities of the Company as of March 31, 1997, with respect to each
director, each beneficial owner of more than 5% of the Company's common stock
and all corporate officers and directors as a group:
<TABLE>
<CAPTION>
Percent
Amount of Class
------ --------
<S> <C> <C> <C>
Edgar M Reynolds Chairman and CEO -0- (3)
3671 East Citrus Trace and Director
Davie, FL 33328
Charles Gargano Director 500,000 .028%
3 Lazare Lane
Islip, NY 11751
Jeffrey Goldstein Director -0-
2080 Vine Drive
Merrick, NY 11566
</TABLE>
42
<PAGE> 43
<TABLE>
<S> <C> <C> <C>
David Goldblatt Director 100,416 .006%
410 East 80th Street
New York, NY 10024
Howard Weiser Secretary, Treasurer 925,000 .051%
8632 NW 54th Street Director
Coral Springs, FL 33067
Cede & Co. 3,441,657 .187%
PO Box 20
Bowling Green Sta
New York, NY 10025
Lauder International, Ltd. 4,725,000 .257%
PO Box 884
Grand Cayman BWI
Cayman Islands
Philadep & Co.
1900 Market Street - 2nd Floor
Philadelphia, PA 19103 1,910,792 .104%
Barry M. Weinberg
3320 Pinewalk Drive North #1717
Margate, Florida 33063 925,000 .051%
Officers and Directors as a Group 1,525,416 .083%
</TABLE>
(1) All of the above shares are owned of record and beneficially.
(2) None of the officers and directors owns Unit Warrants.
(3) Although 100,000 shares were authorized for issuance to Edgar
Reynolds, president, these shares have not been issued as of the
date of this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Brian Travis, former Chairman and Chief Executive Officer of the
Company, was also a principal of Arrow National and Chief Executive Officer of
Asia Pacific Limited. (See Item 3 - Legal Proceedings; See Item 8 - Notes 5 and
11).
Howard Weiser, Officer and 44% shareholder of Perma Seal,
simultaneously became Director of the Company upon acquisition of Perma Seal.
Howard Weiser, is an officer, director and stockholder of Designer Wear, Inc., a
potential candidate for acquisition (See Business - Recent Developments)
43
<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The Company filed a Form 8-K in August 1996, which is hereby
incorporated by reference, regarding the change of the accounting firm for the
Company.
Financial statements and schedules filed as a part of this report are
listed on the "Index to Financial Statements" page herein. All other schedules
are omitted because either (i) they are not required under the instructions,
(ii) they are inapplicable, or (iii) the information is included in the
financial statements.
EXHIBITS
None
44
<PAGE> 45
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant caused this Year Ended December 31, 1996 Form 10K Report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Fort
Lauderdale and State of Florida on May 21, 1997.
WINNERS ALL INTERNATIONAL, INC.
(Registrant)
By: /s/ Edgar M. Reynolds
------------------------------------
Edgar M. Reynolds
President & Chief Executive Officer
Principal Accounting Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant, and in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Date
--------- ----
<S> <C>
/s/ Edgar M. Reynolds May 21, 1997
- -------------------------------------
Edgar M. Reynolds
Director
May , 1997
- -------------------------------------
Charles Gargano
Director
/s/ David M. Goldblatt May 21, 1997
- -------------------------------------
David M. Goldblatt
Director
/s/ Jeffrey Goldstein May 21, 1997
- -------------------------------------
Jeffrey Goldstein
Director
/s/ Howard Weiser May 21, 1997
- -------------------------------------
Howard Weiser
Director, Secretary, Treasurer
May , 1997
- -------------------------------------
Harry W. Brooks, Jr.
Director
</TABLE>
45
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> AUG-01-1996<F1>
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 870,078
<BONDS> 0
0
55,035
<COMMON> 144,717
<OTHER-SE> (1,069,830)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS WAS A CHANGE IN YEAR - FROM A JULY 31 TO DECEMBER 31
</FN>
</TABLE>
