<PAGE> 1
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 fiscal year ended July 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)
Delaware 13-3545304
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 NW 44th Street, #2H, Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
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 No X Simultaniously with this filing hereof, the registrant is
bringing all required filings up-to-date.
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 fiscal year, ended July
31, 1996 were $ -0- . The aggregate value of the voting stock of the registrant
held by non affiliates as of February 7, 1997 was $ 5,065,145 based on the
reported average closing bid and asked price of $ .35 on that day. Indicate the
number of shares outstanding of each of the registrant classes of common stock,
as of the latest practicable date: 14,471,756 shares of Common Stock of February
7, 1997.
<PAGE> 2
PART I
ITEM 1. BUSINESS
Recent Developments
Winners All International, Inc. (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 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. See "Certain Relationships and Related
Transactions".
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 February 4, 1997, Perma Seal entered into a Letter of Intent with
Envio Dynamics Corporation. Perma Seal International, Inc. will acquire a 75%
stock interest, amounting to 3,750,000 shares, of the authorized common voting
stock of Envio Dynamics Corporation in exchange for $750,000.
On February 7, 1997, 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 at $ .50 cents a share.
The option can be exercised within 120 days after date of grant. No effect will
be given, to these consolidated financial statements, until the issuance and
exercise date of the stock and options has been determined.
Perma Seal is a Florida corporation in its initial stages of
development, which 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.
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The International Distribution Agreement was executed between Envio
Dynamics Corporation and Perma Seal on January 27, 1997. The product line is
being developed and will be manufactured by Envio Dynamics Corporation, which is
a non-affiliated Griffin-Georgia based, privately-held 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, in short, 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 Corporation,
the manufacturer, include:
Bus and Trailer Coatings
Automobile Undercoatings
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 intends to pursue sales in various geographic areas. Perma
Seal received a letter from a builder's supply chain in Mexico with over 2,000
stores confirming its interest in the products. However, the Company is aware
and no assurance has been given that such interest will culminate into a
purchase agreement.
Recently, Perma Seal entered into a Letter of Intent for the purchase
of seventy five (75%), amounting to 3,750,000 shares, of the authorized common
stock of Envio Dynamics Corporation. Subject to the final execution of the
Purchase Agreement, 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, patent pending formulae, and manufacturing processes.
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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 Corporation ("Envio") has leased a manufacturing
facility, previously used to make chemical products, on a five acre parcel of
land in Georgia, with an option to purchase the facility. The facility is
equipped with mixing machines, offices, lab room, raw material space,
distribution facility, and is adjacent to an active railroad track.
Mr. Earle Jonas, the founder of Envio, will be staying on as Chief
Operating Officer 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 on Gross Sales up to $100 million dollars.
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 business was discontinued so that the business of the Company
was entirely that of Winners All Limited, which business 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.
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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.
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%.
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Subsequent to July 31, 1995, WinNet 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 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 Systems, 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 abandoned its agreement to merge with UC'NWIN Systems Corporation.
Subsequent thereto, certain major shareholders of the registrant agreed to
exchange their shares of the registrant for UC'NWIN Sysytems Corporation shares
on a one-for-four basis. This agreement was ultimately cancelled and all shares
of stock of the registrant that were to be exchanged, during this period,
were returned to the shareholders of the registrant.
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, in short, 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.
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Employees
The Company as of January 28, 1996 has no salaried employees. During
the Company's reorganizational process, approximately six persons are working as
independent contractors on a part-time basis. The Company expects, by March 1,
1997, to have four or more employees.
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.
ITEM 3. LEGAL PROCEEDINGS
(A) 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.
(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. 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.
(C) 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 $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.
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The Company had entered into a five-year employment agreement, with the
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 hares of the Company's common stock; (3) For
transactions involving approximately $250,000 for services redeemed by certain
unrelated 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.
An action, Brian A. Travis v. WIN Network, LLC and Winners All
International, Inc. on or about July 3, 1995. 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.
Defendants motion is now pending before the Court. 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 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 and anticipates no further legal actions.
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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
four quarterly periods ended July 31, 1996:
<TABLE>
<CAPTION>
Common Stock Redeemable Warrants
------------ -------------------
Period High Low High Low
------ ---- --- ---- ---
<S> <C> <C> <C> <C>
August 1, 1995 - 11/16 7/16 -- --
October 30, 1995 11/32 7/32 -- --
November 1, 1995 - 3/8 7/32 -- --
January 31, 1996 3/32 5/64 -- --
February 1, 1996 - 7/64 5/64 -- --
April 29, 1996 5/64 1/32 -- --
May 1, 1996 3/32 3/64 -- --
July 31, 1996 1/8 3/32 -- --
</TABLE>
As of the close of business on August 16, 1996, there were 126 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>
YEARS ENDED YEARS ENDED YEARS ENDED
JULY 31, 1996 JULY 31, 1995 JULY 31, 1994
------------- ------------- -------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ 2,014,576
Costs and expenses 453,396 3,250,648 2,890,007
Net Loss from
Operations (453,396) (3,250,648) (875,431)
Net Loss from
Operations Per Share (0.55) (0.52) (0.07)
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1996 JULY 31, 1995 JULY 31, 1994
------------- ------------- -------------
<S> <C> <C> <C>
Total Assets $ -- $ -- $ 3,699,622
Total Current Liabilities 870,078 426,361 247,986
Long-Term Debt -- -- --
Stockholders' Equity (870,078) $ (426,361) $ 3,451,636
</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.
In January, 1997, the Company acquired Perma Seal International, Inc.
(Perma Seal). In February, 1997, pursuant to a letter of intent, Perma Seal
entered into negotiations to acquire 75% of the authorized common voting stock
of Envio Dynamics Corporation. These transactions are described elsewhere in
this Form 10K.
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In January, 1997, the Board of Directors approved a reserve of $200,000
for contingencies. The Company incurred $253,396 of General and Administrative
expenses to wind down the affairs of historical operations.
General and Administrative expenses also included 100,000 shares for
Executive Compensation, at current market value.
(b) Historical Operations
<TABLE>
<CAPTION>
Year Ended July 31, 1994
------------------------
<S> <C>
Revenues for the year ended July 31, 1994 comprise the following:
Sale of license to Winners All Asia Pacific $2,000,000
Other revenues 15,000
----------
$2,015,000
==========
</TABLE>
The Company sold rights to certain Pacific Rim countries and received
$1,000,000 in cash and notes of $1,000,000. The notes were paid prior to
November 30, 1994.
In connection with the sale of the license for the Pacific Rim to
Winners All Asia Pacific, the Company recorded costs of sales. Cost of sales of
$481,000 was recorded in connection with this sale representing 20% of the
original license, management's estimate of the proportion of the value of the
original purchase applicable to the Pacific Rim.
Royalty expense increased to approximately $583,000 from $292,000 in
the prior year. Such royalties are paid to UC'NWIN. The increase is the result
of the year ended July 31, 1994 having a full year of expense. Depreciation and
amortization increased to approximately $243,000 from $162,000 as a result of
the Company having a full year amortization of both the UC'NWIN System license
and certain equipment.
General and administrative expense increased to approximately
$1,582,000 from $400,000 as a result of the following factors:
a. The expenses of the London office increased under the administration of
Mr. M. Anthony Joyce. However, marketing and development of the system
in that office did not justify the increased cost. With the cessation
of Joyce's employment, various costs that he incurred were written off.
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b. In September 1993, with the Recapitalization relating to Natural Child
Care, Inc., the Company became a public company with various attendant
costs. The Company had significant professional and other costs
relating to its being public.
The royalty and amortization expenses are expected to continue at the
current level. When the proposed joint venture between the Company and UC'NWIN
described below is operational, the Company's actual general and administrative
expenses are expected to be substantially reduced and maintained at a minimal
level. However, the Company will continue to have a share of the joint venture
which could result in a level of expense in the future equivalent to that of the
year ended July 31, 1994.
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 abandonment 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 Corporation without raising
capital either from borrowing or from the sale of additional shares. The Company
expects to raise $1,000,000 by February 28, 1997.
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The Company is raising additional financing through the sale of shares
of common stock. 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.
(b) Historical
Year Ended July 31, 1994
The Company at July 31, 1994, did not have the liquidity or capital
resources to develop the UC'NWIN System without raising capital either from
borrowings or from the sale of additional shares. The Company is raising
additional financing through the sale of shares of common stock. The Company
expects to raise approximately $3,000,000 by December 31, 1994.
The Company has no formal credit lines or sources or borrowing. The
Company intends to negotiate vendor financing and permanent financing for the
acquisition and installation of UC'NWIN Systems.
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. See "Business-Historical Information".
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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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT ....................................................... 15-16
CONSOLIDATED BALANCE SHEETS ........................................................ 17
CONSOLIDATED STATEMENTS OF OPERATIONS .............................................. 18
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY .................................... 19-21
CONSOLIDATED STATEMENTS OF CASH FLOWS .............................................. 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ......................................... 23-38
</TABLE>
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 July 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' (deficit), and cash
flows for the two years then ended. 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. The
consolidated financial statements of Winners All International, Inc., as of July
31, 1994, were audited by other auditors whose report dated November 29, 1994,
expressed an unqualified opinion on those statements.
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 July 31, 1996 and 1995, and the
results of its operations and its cash flows for the two years then ended 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
February 5, 1997
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<PAGE> 16
[FELDMAN RADIN & CO., P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
December 13, 1994
To the Board of Directors
Winners All International, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Winners All
International, Inc. and Subsidiaries as of July 31, 1994 and 1993 and the
related consolidated statements of operations and retained earnings and cash
flows for the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Winners All International, Inc.
and Subsidiaries at July 31, 1994 and 1993 and the results of its operations and
cash flows for the two years then ended in conformity with generally accepted
accounting principles.
/s/Feldman Radin & Co., P.C.
Feldman Radin & Co., P.C.
Certified Public Accountants
-16-
<PAGE> 17
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<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 $ 426,361
----------- -----------
Total Current Liabilities 870,078 426,361
----------- -----------
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
at July 31, 1995, 112,500
Shares Unconverted at July 31, 1994 (Less
Offering Costs of $7,465) 55,035 55,035
Common Stock $.01 Par Value,
60,000,000 shares Authorized;
14,471,756 Shares Issued & Outstanding
July 31, 1995, 12,166,760 Shares Issued
& Outstanding July 31, 1994 144,717 144,717
Additional Paid-In-Capital 8,026,114 8,026,114
Accumulated (Deficit) (9,095,944) (8,652,227)
----------- -----------
Total Stockholders' (Deficit) Equity (870,078) (426,361)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
AND ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-17-
<PAGE> 18
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
--------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES $ -- $ -- $ 2,014,576
------------ ------------ ------------
Cost and Expenses
Cost of Sales -- -- 481,122
Royality Expense -- 233,920 583,332
General and Administrative 253,396 1,263,378 1,582,114
Depreciation and Amortization -- -- 243,439
Bad Debts -- 307,371 --
Share of Winnet Loss -- 1,470,751 --
------------ ------------ ------------
253,396 3,250,648 2,890,007
------------ ------------ ------------
(Loss) Before other Expenses (253,396) (3,250,648) (875,431)
------------ ------------ ------------
Other (Expense):
Reserve for Contingencies (200,000)
Loss on Disposal of Assets -- (1,992,011) --
Loss on Investments -- (1,817,413) --
------------ ------------ ------------
Total Other (Expense): (200,000) (3,809,424) --
------------ ------------ ------------
Net (Loss) $ (453,396) $ (7,060,072) $ (875,431)
============ ============ ============
NET LOSS PER COMMON SHARE $ (0.031) $ (0.52) $ (0.07)
============ ============ ============
AVERAGE SHARES OUTSTANDING 14,471,756 13,487,258 12,055,413
============ ============ ============
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT AND
ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-18-
<PAGE> 19
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
AS OF JULY 31, 1996, 1995, 1994
<TABLE>
<CAPTION>
Stock Common Stock
Amount Amount Stock
Preferred Par Value Par Value Paid-In Subscription Accumulated
Shares $1.00 Shares $0.01 Capital Receivable Deficit Subtotal
------ ------ ------ ------- ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1993 -- -- 10,159,998 101,599 3,378,401 (135,970) (716,724) 2,627,306
Receipt of Stock Subscription
Receivable -- -- -- -- -- 135,970 -- 135,970
Issuances of Stock -- -- 77,135 771 255,211 -- -- 255,982
Issuance of Common Stock
Pursuant to Recapitalization 617,500 610,035 1,874,597 18,746 978,577 -- -- 1,607,358
Conversion of Series A
Preferred Stock to Common Stock (505,000) (505,000) 181,800 1,818 503,182 -- -- --
Acquisition and Retirement of
Treasury Stock -- -- (176,750) (1,768) (297,783) -- -- (299,551)
Net (Loss) for the Year -- -- -- -- -- -- (875,431) (875,431)
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
Shares Amount Total
------ ------ -----
<S> <C> <C> <C>
Balance at July 31, 1993 -- -- 2,627,306
Receipt of Stock Subscription
Receivable -- -- 135,970
Issuances of Stock -- -- 255,982
Issuance of Common Stock
Pursuant to Recapitalization 336,000 (273,000) 1,334,358
Conversion of Series A
Preferred Stock to Common Stock -- -- --
Acquisition and Retirement of
Treasury Stock (336,000) 273,000 (26,551)
Net (Loss) for the Year -- -- (875,431)
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
AND ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-19-
<PAGE> 20
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
AS OF JULY 31, 1996, 1995, 1994
<TABLE>
<CAPTION>
Stock Common Stock
Amount Amount Stock
Preferred Par Value Par Value Paid-In Subscription Accumulated
Shares $1.00 Shares $0.01 Capital Receivable Deficit Subtotal
------ ------ ------ ------ ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1994 112,500 105,035 12,116,780 121,168 4,817,588 -- (1,592,155) 3,451,634
Issuance of Stock -- -- 2,336,976 23,369 3,158,706 -- -- 3,182,075
Conversion of Series A
Preferred Stock to Common Stock (50,000) (50,000) 18,000 180 49,820 -- -- --
Net (Loss) for the Year -- -- -- -- -- -- (7,060,072) (7,060,072)
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
Shares Amount Total
------ ------ -----
<S> <C> <C> <C>
Balance at July 31, 1994 -- -- 3,451,634
Issuance of Stock -- -- 3,182,075
Conversion of Series A
Preferred Stock to Common Stock -- -- --
Net (Loss) for the Year -- -- (7,060,072)
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
AND ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-20-
<PAGE> 21
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
AS OF JULY 31, 1996, 1995, 1994
<TABLE>
<CAPTION>
Stock Common Stock
Amount Amount Stock
Preferred Par Value Par Value Paid-In Subscription Accumulated
Shares $1.00 Shares $0.01 Capital Receivable Deficit Subtotal
------ ------- ------ ------- ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1995 62,500 55,035 14,471,756 144,715 8,026,114 -- (8,652,227) (426,363)
Net (Loss) for the Year -- -- -- -- -- -- (453,396) (453,396)
------ ------- ---------- -------- ---------- --- ----------- ---------
Balance at July 31, 1996 62,500 $55,035 14,471,756 $144,715 $8,026,114 $-- $(9,095,944) $(870,080)
====== ======= ========== ======== ========== === =========== =========
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
Shares Amount Total
------ ------ -----
<S> <C> <C> <C>
Balance at July 31, 1995 -- -- (426,363)
Net (Loss) for the Year -- -- (453,396)
--- --- ---------
Balance at July 31, 1996 $-- $-- $(870,080)
=== === =========
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
AND ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-21-
<PAGE> 22
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
--------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(453,396) $(7,060,072) $ (875,431)
Adjustments to Reconcile Net Loss to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization -- -- 243,439
Sale of Intangibles -- -- 481,122
Write Down of Fixed Assets -- -- 42,804
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 (3,908)
Prepaid Expense and Other Current Assets -- 374,101 (293,786)
Note Receivable -- 1,000,000 (1,000,000)
Other Assets -- 62,242 (62,242)
Accounts Payable and Accrued Expenses 453,396 178,375 138,993
Royalties Payable -- 190,178 (145,833)
Other Current Liabilities -- (11,963) 18,559
--------- ----------- -----------
Total Adjustments -- 7,384,387 (580,852)
--------- ----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES -- 324,315 (1,456,283)
--------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments to Acquire Property and Equipment -- (12,187) (225,426)
Payments to Acquire License -- -- --
Investment in Win Network LLC -- (3,602,240) --
Cash Acquired in Reverse Acquisition -- -- 1,164,619
--------- ----------- -----------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES -- (3,614,427) 939,193
--------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Preferred Stock -- -- 105,034
Proceeds from Issuance of Common Stock -- 3,182,075 430,106
--------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES: -- 3,182,075 535,140
--------- ----------- -----------
NET INCREASE (DECREASE) IN CASH -- (108,037) 18,050
--------- ----------- -----------
CASH AT THE BEGINNING OF YEAR -- 108,037 89,987
--------- ----------- -----------
CASH AT THE END OF YEAR -- -- $ 108,037
========= =========== ===========
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 -- 50,000 505,000
Common Stock Issued for License -- -- --
Common Stock Issued for Capital Contribution of Debt -- -- --
Assets Acquired from Acquisition -- -- 169,739
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT AND ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
-22-
<PAGE> 23
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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)
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)
-23-
<PAGE> 24
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996 AND 1995
I. Disputes with former management shall cease and be considered fully resolved.
(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.
-24-
<PAGE> 25
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
-25-
<PAGE> 26
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Stock 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.
-26-
<PAGE> 27
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.
-27-
<PAGE> 28
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 which 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.
-28-
<PAGE> 29
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1995 and 1994 were $
-0-, $233,920 and $583,332, respectively.
Amortization expense of the license agreement for the years ending July
31, 1996, 1995 and 1994 were $ -0-, $ -0- and $156,000, respectively.
(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.
-29-
<PAGE> 30
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
-30-
<PAGE> 31
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 loses, 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
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:
-31-
<PAGE> 32
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<S> <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 July 31, 1996, 1995 and 1994.
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 $3.34 per share to the five Board members and an
officer. The stock options for two of the Board members were canceled
in November 1994.
-32-
<PAGE> 33
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1993 114,150 $3.32-$6.66
Granted (Canceled) --
-------
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
=======
</TABLE>
-33-
<PAGE> 34
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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.
-34-
<PAGE> 35
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
The Company had entered into a five-year employment agreement, with the
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 350,000 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 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.
-35-
<PAGE> 36
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 11 - LITIGATION (CONTINUED)
An action, Brian A. Travis v. WIN Network, LLC and Winners All
International, Inc. on or about July 3, 1995. 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. Defendants motion is now pending before
the Court. 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 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, and anticipates no further legal actions, and no
consideration was exchanged.
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.
-36-
<PAGE> 37
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 12 - OTHER MATTERS (CONTINUED)
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 January 28, 1997, with Board of Directors approval, the Company
acquired 100% of the stock of Perma Seal International, Inc.,
(Perma-Seal), a Florida corporation, in exchange for 2,100,000 shares
of common stock. Perma Seal is in an initial stage of development with
no significant assets or liabilities.
On January 27, 1997, Perma Seal entered into an exclusive three-year,
with an option for two years, International Distribution Agreement with
Envio Dynamics Corporation, a Georgia corporation. Perma Seal's sales,
marketing and distribution rights cover territories including Europe,
the Caribbean, South America, Latin America and Mexico. Envio Dynamics
Corporation is developing a product line using a, patent pending,
recycled rubber process to create rubberized sealant and coating
materials.
-37-
<PAGE> 38
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996 AND 1995
NOTE 13 - SUBSEQUENT EVENTS (CONTINUED)
On February 4, 1997, Perma Seal entered into a Letter of Intent with
Envio Dynamics Corporation (EDC). Perma Seal will acquire a 75% stock
interest, amounting to 3,750,000 shares, of the authorized common
voting stock of EDC in exchange for $750,000. In addition, a five year
employment contract was offered to Mr. Earle Jonas, as Chief Operating
Officer, for an annual salary of $120,000, with commissions of one
percent (1%) on the first $50 million and one-half percent (1/2) on the
next $50 million of gross sales. EDC in initial stages of development
has ownership of patent pending formulae, enabling it to manufacture,
using a recycled rubber process, a product line including rubberized
sealant and coating materials.
On February 7, 1997, 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 at $ .50 cents a share. The option can be exercised within 120
days after date of grant. No effect will be given, to these
consolidated financial statements, until the issuance and exercise date
of the stock and options has been determined.
On January 29, 1997, the Board of Directors authorized the issuance of
100,000 shares to the President of the Company for services rendered
for the year ended July 31, 1996.
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.
-38-
<PAGE> 39
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.
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.
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 40 Director
</TABLE>
-39-
<PAGE> 40
Howard Weiser 57 Director
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 (information).
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 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.
-40-
<PAGE> 41
Howard Weiser was recently appointed as a Director to the Company in
connection with the acquisition of Perma Seal, Inc. 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.
Compliance with Section is (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 July 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 of 100,000 shares of stock, at market value of
$17,500, to the President, 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 August 12, 1996, 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-
3671 East Citrus Trace and Director
Davie, FL 33328
</TABLE>
-41-
<PAGE> 42
<TABLE>
<CAPTION>
Percent
Amount of Class
------ --------
<S> <C> <C> <C>
Charles Gargano Director 500,000 .034%
3 Lazare Lane
Islip, NY 11751
Jeffrey Goldstein Director -0-
2080 Vine Drive
Merrick, NY 11566
David Goldblatt Director 100,416 .006%
410 East 80th Street
New York, NY 10024
Howard Weiser Director -0-
8632 NW 54th Street
Coral Springs, FL 33067
Date Corporation Ltd. 900,000 .062%
% Bruce Campbell & Co.
Attn: John Broadbent
Bank of Nova Scotia Bldg
4th Floor
British West Indies
Grand Cayman Islands
Cede & Co. 3,416,658 .236%
PO Box 20
Bowling Green Sta
New York, NY 10025
Lauder International, Ltd. 4,725,000 .326%
PO Box 884
Grand Cayman BWI
Cayman Islands
Officers and Directors as a Group 600,416 .041%
</TABLE>
(1) All of the above shares are owned of record and beneficially.
(2) None of the officers and directors own Unit Warrants.
-42-
<PAGE> 43
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. The Company and Mr. Travis have each initiated litigation
against the other. (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.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the fourth
quarter of the fiscal year ended July 31, 1996.
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
Exhibit No.
2 Acquisition Agreement of Perma Seal International, Inc. by the Company.
99 Letter of Intent between Perma Seal International, Inc. and Envio
Dynamics Corporation.
-43-
<PAGE> 44
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant caused this Year Ended July 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 February 10, 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 February 10,1997
- --------------------------------
Edgar M. Reynolds
Director
Charles Gargano February 10,1997
- --------------------------------
Charles Gargano
Director
/s/ David M. Goldblatt February 10,1997
- --------------------------------
David M. Goldblatt
Director
Jeffrey Goldstein February 10,1997
- --------------------------------
Jeffrey Goldstein
Director
/s/ Howard Weiser February 10,1997
- --------------------------------
Howard Weiser
Director
</TABLE>
-44-
<PAGE> 45
EXHIBIT INDEX
Exhibit No. Description
2 Acquisition Agreement of Perma Seal International, Inc.
by the Company.
99 Letter of Intent between Perma Seal International, Inc.
and Envio Dynamics Corporation.
<PAGE> 1
ACQUISITION AGREEMENT
Agreement and Plan of Reorganization, dated as of January 28, 1997,
between Winners All International, Inc., a Delaware corporation, hereinafter
called "Winners All;" and Perma Seal International, Inc., a Florida corporation,
hereinafter called "Perma Seal."
1. Plan Reorganization. All of the issued and outstanding capital stock of Perma
Seal shall be acquired by Winners All Corporation, consisting of 1,000 shares of
common stock, with a par value of $.01 per share in exchange solely for its
voting stock having a par value.
2. Exchange of Shares. Winners All agrees that all of the outstanding shares of
Perma Seal shall be exchanged with Winners All for 2,100,000 shares of common
stock of Winners All.
Subject to approval of Perma Seal shareholders, such shares shall be issued to
the respective stockholders of Perma Seal or pursuant to their instructions.
3. Delivery of Shares. Subject to the approval of the shareholders of Perma
Seal, on the closing date, the Perma Seal stockholders will deliver certificates
for the shares of Perma Seal duly endorsed with signatures guaranteed so as to
make Winners All the sole owner thereof, free and clear of all claims and
encumbrances; and on such closing date delivery of the Winners All shares will
be made to the Perma Seal stockholders as above set forth.
Delivery by the Perma Seal stockholders will be made to the agent for Winners
All at such place in or about Fort Lauderdale, Florida, or at such other place
as may be determined by the parties. Time is of the essence.
4. Representations of Stockholders. Perma Seal represents and warrants as
follows: That the shares shall be acquired by Perma Seal stockholders for their
own beneficial account and will hold such shares of common stock of Winners All
for Investment and not with a view to the unlawful distribution thereof and
acknowledges that the certificates for the shares shall contain a restrictive
legend thereon, restricting sale, transfer or hypothecation thereof unless the
shares are the subject of an effective registration statement duly filed with
the Securities and Exchange
<PAGE> 2
Commission under the Securities Act of 1933, as amended (the "Act"), or the
issuer is provided, with an opinion of counsel, satisfactory to it, that
registration is not required under the Act.
(a) As of the closing date the Perma Seal stockholders will be the sole
owners of the shares of Perma Seal appearing of record in their names; such
shares will be free from claims claims, liens, or other encumbrances and such
shareholders will have the unqualified right to transfer such shares.
(b) The shares to be delivered by Perma Seal stockholders constitute
validly issued shares of Perma Seal, fully paid and nonassessable.
(c) Perma Seal is a start-up company with no substantial liabilities,
either fixed or contingent, other than contracts or obligations in the usual
course of business; and no such contracts or obligations in the usual course of
business or liens or other liabilities which, if disclosed, would pose any
substantial changes in the financial condition of Perma Seal.
(e) Perma Seal is not involved in any pending litigation or governmental
investigation or proceeding not reflected in such financial statements or
otherwise disclosed in writing to Winners All and, to the knowledge of Perma
Seal, no litigation or governmental investigation or proceeding is threatened
against Perma Seal.
(f) As of the closing date, Perma Seal will be in good standing as a
Florida corporation.
5. Representations of Acquiring Corporation. Winners All represents and warrants
as follows:
(a) As of the closing date, the Winners All shares to be delivered to
the Perma Seal stockholders will constitute the valid and legally issued shares
of Winners All, fully paid and nonassessable, and will be legally equivalent in
all respects to the common stock of Winners All issued and outstanding as of
date hereof.
<PAGE> 3
(b) The officers of Winners All are duly authorized to execute this
agreement pursuant to authorization of its Board of Directors, a certified copy
of the resolution of which will be provided to Perma Seal at closing.
(c) Winners All is a publicly traded company that filed its last 10K
report on July 3 1, 1994. At this time, all of the back 10K and 10Q reports are
being prepared for filing by the accounting firm of Joel S. Baum, C.P.A. Winners
All represents that subject to its Board of Director's approval, any and all of
the Company's past operating history, including all assets, will be written off
and starting new operations.
(d) Winners All is not involved in any governmental investigation or
proceeding not disclosed in writing to the Stockholders.
(e) As of the closing date, Winners All will be in good standing as a
Delaware corporation.
(f) The shares of Perma Seal are being acquired by Winners All for an
investment, and there is no present intention on the part of Winners All to
dispose of such shares.
6. Conditions of Closing.
(a) The closing date herein referred to shall be on or prior to January
28, 1997, or such other date as the parties hereto may mutually agree upon;
(b) All representations and covenants herein made shall survive the
closing;
(c) At the closing the Perma Seal stockholders shall designate,
nominate, constitute, and appoint Michael T. Adams as their agent to accept
delivery of the certificates of Winners All stock to be issued in their
respective names, and to give a good and sufficient receipt and acquittance for
the same, and in connection therewith to make delivery of their stock in Perma
Seal to Winners All;
<PAGE> 4
(d) The obligations of Winners All hereunder are not conditioned upon
its obtaining a permit from any regulatory authority, for the issuance of its
common stock to Perma Seal stockholders as hereinabove provided;
(e) The obligations of both Perma Seal and Winners All are not
conditioned upon the receipt of a favorable tax ruling regarding the tax free
character of the reorganization under I.R.C. Section 368(a)(1)(B);
7. Prohibited Acts. Perma Seal agrees not to do any of the following things
prior to the closing date, and subject to their approval, will cause the Perma
Seal stockholders to agree that prior to the closing date they will not request
or to the extent practicable, permit Perma Seal to do any of the following
things:
(a) Declare or pay any dividends or other distributions on its stock or
purchase or redeem any of its stock;
(b) Issue any stock or other securities increasing the total number of
shares outstanding (in excess of 1,000 shares), including any right or option
to purchase or otherwise acquire any of its stock, or issue any notes or other
evidences of indebtedness not in the usual course of business;
(c) Make capital expenditures in excess of an aggregate of $25,000
except with the consent of Winners All.
8. Delivery of Records. The Stockholders agree that on or before the closing
date they will cause to be delivered to Winners All such corporate records or
other documents of Perma Seal as Winners All may reasonably request.
9. Assignment. This Agreement may not be assigned by any party without the
written consent of the other party hereto.
<PAGE> 5
10. Notices. Any notice which any of the parties hereto may desire to serve upon
any of the other parties hereto shall be in writing and shall be conclusively
deemed to have been received by the party to whom addressed, if mailed, postage
prepaid, United States Registered Mail, to the following addresses:
Winners All Corporation
Attention of Edgar M. Reynolds, President
600 NW 44th Street, #2H
Fort Lauderdale, Florida 33321
Perma Seal International, Inc.
Attention of Barry M. Weinberg, President
3320 Pinewalk Drive North, Suite #1717
Margate, Florida 33063
11. Successors. This Agreement shall be binding upon and inure to the benefit of
the parties, their successors, and assigns.
Executed in multiple counterparts, each of which shall be deemed a duplicate
original, as of the date first above written.
WINNERS ALL CORPORATION
by /s/ Edgar M. Reynolds
-----------------------------
Edgar M. Reynolds
President
PERMA SEAL INTERNATIONAL, INC.
by /s/ Howard Weiser
-----------------------------
Howard Weiser
Executive Vice President
<PAGE> 1
LETTER OF INTENT FOR THE
STOCK PURCHASE OF 75% (3,750,000 SHARES)
OF ENVIO DYNAMICS CORPORATION
FOR $750,000 BY PERMA SEAL INTERNATIONAL, INC.
This letter sets forth a commitment to purchase 75% of the of the
authorized common stock in ENVIO DYNAMICS CORPORATION, by PERMA SEAL
INTERNATIONAL, INC. in accordance with the terms set forth below.
The contemplated purchase is expected to be negotiated and closed in a
prompt manner. The closing is subject to the appropriate approval by the Boards
of Directors of the respective companies regarding the proposed purchase
transaction. The terms of the transactions are:
PARTIES TO TRANSACTION
Perma Seal International, Inc. ("PSI")
Perma Seal International, Inc. Shareholders (collectively "PSI Principals")
Envio Dynamics Corporation ("EDC")
1. FORMULA, MANUFACTURING FACILITY AND EQUIPMENT
EDC represents that it has ownership of patent pending formulas enabling it to
manufacture and produce a complete line of products in its plant using a
"recycled" rubber process to create "rubberized" sealant and coating
materials. A list of the products are as follows:
A. Bus and Trailer Coating
B Automobile Undercoating
C. Moisture Barrier Basements and Above Ground
D. Seamless Floors
E. Mobile Home Roofing
F. Heavy Duty Tank Linings
G. Block Filler Sealant
H. Anti-Slip Coatings
I. Stucco Type Finish
J. Spray on Roofing Residential & Industrial
2. CONSIDERATION
A. CASH: PSI agrees to pay $750,000 to EDC for 75% (3,750,000 shares) of the
authorized common voting stock of EDC.
B. PAYMENT SCHEDULE: To be provided by PSI as follows:
1) $100,000 within 14 days from the execution of the Purchase
Agreement.
2) $650,000 within 45 days from the execution of the Purchase
Agreement.
C. COMMITMENT OF SHARES: EDC agrees to hold the 75% of the shares in its
treasury until the Purchase Agreement is executed.
Page 1
<PAGE> 2
3. EMPLOYMENT AGREEMENT
PSI agrees to the execution of a 5 year Employment Agreement with Mr. Earl Jonas
under the following terms and conditions:
A. Annual Salary of $120,000
B. Bonus on Sales as follows:
i. 1% on the first $50,000,000
ii. 1/2% on the next $50,000,000
C. Position of Chief Operating Officer
4. SUBSTANTIAL INVESTMENT MADE BY THE JONAS' FAMILY
PSI recognizes that substantial costs have been paid by the founding
stockholders of EDC during the start-up period of EDC for investment purposes.
PSI agrees to permit advances not to exceed $400,000 against the Bonuses
described in Section 3. B., in amounts determined by the Board of Directors of
EDC from time to time, to assist the Jonas' family in their personal financial
situation.
5. TIMING OF PURCHASE AGREEMENT
The parties will make every effort to complete the transactions contemplated
herein and enter into a final Purchase Agreement by February 6, 1997.
6. EDC BOARD OF DIRECTORS
EDC agrees and undertakes to take all appropriate action, so that PSI Principals
have three members on the five member Board of Directors.
IN CLOSING, this Letter of Intent represents the current good faith intention of
the parties to negotiate and enter into a final Purchase Agreement regarding the
purchase of a 75% interest in EDC by PSI. Sign and date this Letter of Intent in
the space provided below to confirm our mutual understandings and agreements as
set forth herein.
CONFIRMED, AGREED AND EXECUTED AS OF THE DATE SET FORTH BELOW:
PERMA SEAL INTERNATIONAL, INC. ENVIO DYNAMICS CORPORATION
/s/ Howard Weiser /s/ Earl Jonas
- ------------------------------ ------------------------------
Howard Weiser Earl Jonas
President President
February 4, 1997 February 4, 1997
- ------------------------------ ------------------------------
Date Date
Page 2
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
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55,035
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<TOTAL-LIABILITY-AND-EQUITY> 0
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