<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, 1995.
( ) 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
(State or other jurisdiction of 13-3545304
incorporation or organization) (I.R.S. Employer Identification No.)
600 NW 44th Street, #2H, Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
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 the 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, 1995 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 rubber from used
tires 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 Inconcant, 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 $j10,000,000. 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, 1995:
<TABLE>
<CAPTION>
Common Stock Redeemable Warrants
------------ -------------------
Period High Low High Low
------ ---- --- ---- ---
<S> <C> <C> <C> <C>
August 1, 1994 - 3 1/8 3 1/8 -- --
October 28, 1994 4 1/4 4 -- --
November 1, 1994 - 4 1/4 4 -- --
January 31, 1995 5 4 5/8 -- --
February 1, 1995 - 4 13/16 3 3/4 -- --
April 28, 1995 1 13/16 1 7/16 -- --
May 1, 1995 1 3/4 1 1/2 -- --
July 31, 1995 11/16 7/16 -- --
</TABLE>
As of the close of business on September 30, 1996, there were 127 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
YEARS ENDED YEARS ENDED YEARS ENDED
JULY 31, 1995 JULY 31, 1994 JULY 31, 1993
------------- ------------- --------------
Revenue $ -- $ 2,014,576 $ 137,454
Costs and expenses 3,250,648 2,890,007 854,178
Net Loss from
Operations (3,250,648) (875,431) (716,724)
Net Loss from
Operations Per Share (0.52) (0.07) (0.08)
JULY 31, 1995 JULY 31, 1994 JULY 31, 1993
------------- ------------- -------------
Total Assets $ -- $3,699,622 $2,863,575
Total Current Liabilities 426,361 247,986 263,268
Long-Term Debt -- -- --
Stockholders' Equity $ (426,361) $3,451,636 $2,627,307
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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(b) Historical Operations
Year Ended July 31, 1993
The year-ended July 31, 1993 was the initial year of the Company. As
the Company had few employees and minimal activities, general and administrative
expenses were limited to approximately $400,000.
During this year, the Company acquired a license to the UC'NWIN System.
For this license, the Company paid $2,160,000 in cash plus common shares of the
Company valued at $500,000. The money was raised from the sale of securities and
issuance of debt which debt was ultimately exchanged for stock in the Company.
The license is being amortized over fifteen years with amortization of
approximately $130,000 during this year. The amortization is based on a fifteen
year life, after giving effect to the extension of the license.
As a result, for the year ended July 31, 1993, the Company lost
approximately $717,000.
The financial statements for the year ended July 31, 1993 have been
revised for the effect of the change to amortization resulting from the
extension of the license.
Year Ended July 31, 1994
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
----------
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.
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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.
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.
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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:
Asset Operations Amount
----- ---------- ------
Accounts Receivable Bad Debts $ 307,371
License Loss on Disposal $ 1,992,011
Joint Venture Loss on Investments $ 1,817,413
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. 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.
(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 .............................. 23-28
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.
</TABLE>
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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, 1995, and the related
consolidated statements of operations, stockholders' (deficit), and cash flows
for the year 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 and 1993, 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, 1995, and the results of
its operations and its cash flows for the year 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 12, 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.
CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF DFK INTERNATIONAL 805 Third Avenue
WITH OFFICES IN PRINCIPAL New York, NY 10022-7513
CITIES THROUGHOUT THE WORLD (212) 593-3100
--------
TELECOPIER
(212) 355-3631
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, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
----------- -----------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ -- $ 108,037
Accounts Receivable-Trade -- 3,908
Note Receivable -- 1,000,000
Prepaid Royalties -- 293,247
Prepaid Expense -- 18,612
Other Current Assets -- 49,957
----------- -----------
Total Current Assets -- 1,473,761
----------- -----------
Property and Equipment, Net -- 309,915
----------- -----------
Other Assets:
License, Net of Accumulated Amortization -- 1,903,661
Other Current Assets -- 12,285
----------- -----------
Total Other Assets -- 1,915,946
----------- -----------
$ -- $ 3,699,622
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable
and Accrued Expense $ 426,361 $ 229,428
Other Current Liabilities -- 18,558
----------- -----------
Total Current Liabilities 426,361 247,986
----------- -----------
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) 55,035 105,035
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 144,717 121,168
Additional Paid-In-Capital 8,026,114 4,817,588
Accumulated (Deficit) (8,652,227) (1,592,155)
----------- -----------
Total Stockholders' (Deficit) Equity (426,361) 3,451,636
----------- -----------
$ 0 $ 3,699,622
=========== ===========
</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,
-----------------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
REVENUES $ -- $ 2,014,576 $ 137,454
------------ ------------ -----------
Cost and Expenses
Cost of Sales -- 481,122 --
Royalty Expense 233,920 583,332 291,667
General and Administrative 1,238,606 1,582,114 400,272
Depreciation and Amortization -- 243,439 162,239
Bad Debts 307,371 -- --
Share of WinNet Loss 1,470,751 -- --
------------ ------------ -----------
3,250,648 2,890,007 854,178
------------ ------------ -----------
(Loss) Before other Expenses (3,250,648) (875,431) (716,724)
------------ ------------ -----------
Other (Expense):
Loss on Disposal of Assets (1,992,011) -- --
Loss on Investments (1,817,413) -- --
------------ ------------ -----------
Total Other (Expense): (3,809,424) -- --
------------ ------------ -----------
Net (Loss) $ (7,060,072) $ (875,431) $ (716,724)
============ ============ ===========
NET LOSS PER COMMON SHARE $ (0.52) $ (0.07) $ (0.08)
============ ============ ===========
AVERAGE SHARES OUTSTANDING 13,487,258 12,055,413 8,912,940
============ ============ ===========
</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, 1995, 1994, 1993
<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
------ ------ ------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1992 -- $-- -- $ -- $ -- $ -- $ --
Sale of Common Stock -- -- 3,744,998 37,450 785,550 -- --
Issuance of Common in
Connection with the
License Purchase -- -- 200,000 2,000 498,000 -- --
Issuance of Stock for
Conversion of Debt -- -- 5,653,434 56,534 1,639,496 -- --
Sale of Common Stock,
Shares not Issued -- -- 108,333 1,083 323,917 -- --
Stock Subscription
Receivable -- -- 453,233 4,532 131,438 (135,970)
Net (Loss) for the Year -- -- -- -- -- -- (716,724)
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
Subtotal Shares Amount Total
-------- ------ ------ -----
<S> <C> <C> <C>
Balance at July 31, 1992 $ -- -- $-- $ --
Sale of Common Stock 823,000 -- -- 823,000
Issuance of Common in
Connection with the
License Purchase 500,000 -- -- 500,000
Issuance of Stock for
Conversion of Debt 1,696,030 -- -- 1,696,030
Sale of Common Stock,
Shares not Issued 325,000 -- -- 325,000
Stock Subscription -- -- -- --
Receivable
Net (Loss) for the Year (716,724) -- -- (716,724)
-------------------------------------------------
</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, 1995, 1994, 1993
<TABLE>
<CAPTION>
Stock Common Stock
Amount Amount
Preferred Par Value Par Value Paid-In
Shares $1.00 Shares $0.01 Capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1993 -- -- 10,159,998 101,599 3,378,401
Receipt of Stock Subscription
Receivable -- -- -- -- --
Issuances of Stock -- -- 77,135 771 255,211
Issuance of Common Stock
Pursuant to Recapitalization 617,500 610,035 1,874,597 18,746 978,577
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)
Net(Loss) for the Year -- -- -- -- --
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Stock
Subscription Accumulated Treasury Stock
Receivable Deficit Subtotal Shares Amount Total
---------- ------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1993 (135,970) (716,724) 2,627,306 -- -- 2,627,306
Receipt of Stock Subscription
Receivable 135,970 -- 135,970 -- -- 135,970
Issuances of Stock -- -- 255,982 -- -- 255,982
Issuance of Common Stock
Pursuant to Recapitalization -- -- 1,607,358 336,000 (273,000) 1,334,358
Conversion of Series A
Preferred Stock to CommonStock -- -- -- -- -- --
Acquisition and Retirement of
Treasury Stock -- -- (299,551) (336,000) 273,000 (26,551)
Net (Loss) for the Year -- (875,431) (875,431) -- -- (875,431)
---------------------------------------------------------------------------------------------
</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, 1995, 1994, 1993
<TABLE>
<CAPTION>
Stock Common Stock
Amount Amount Stock
Preferred Par Value Par Value Paid-In Subscription
Shares $1.00 Shares $0.01 Capital Receivable
------ ------ ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1994 112,500 105,035 12,116,780 121,168 4,817,588 --
Issuance of Stock -- -- 2,336,976 23,369 3,158,706 --
Conversion of Series A
Preferred Stock to Common (50,000) (50,000) 18,000 180 49,820 --
Stock
Net (Loss) for the Year -- -- -- -- -- --
-------------------------------------------------------------------------------------
Balance at July 31, 1995 62,500 $ 55,035 14,471,756 $144,717 $8,026,114 $--
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated Treasury Stock
Deficit Subtotal Shares Amount Total
------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1994 (1,592,155) 3,451,634 -- -- 3,451,634
Issuance of Stock -- 3,182,075 -- -- 3,182,075
Conversion of Series A
Preferred Stock to Common -- -- -- -- --
Stock
Net (Loss) for the Year (7,060,072) (7,060,072) -- -- (7,060,072)
----------------------------------------------------------------------------
Balance at July 31, 1995 $(8,652,227) $ (426,363) $-- $-- $ (426,363)
============================================================================
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT
AND ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 22
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(7,060,072) $ (875,431) $ (716,724)
Adjustments to Reconcile Net Loss to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization -- 243,439 162,239
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) (18,073)
Note Receivable 1,000,000 (1,000,000) --
Other Assets 62,242 (62,242) --
Accounts Payable and Accrued Expenses 178,375 138,993 90,436
Royalties Payable 190,178 (145,833) 145,833
Other Current Liabilities (11,963) 18,559 --
----------- ----------- -----------
Total Adjustments 7,384,387 (580,852) 380,435
----------- ----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 324,315 (1,456,283) (336,289)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments to Acquire Property and Equipment (12,187) (225,426) (257,755)
Payments to Acquire License -- -- (580,000)
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 (837,755)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Preferred Stock -- 105,034 --
Proceeds from Issuance of Common Stock 3,182,075 430,106 1,264,031
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES: 3,182,075 535,140 1,264,031
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (108,037) 18,050 89,987
----------- ----------- -----------
CASH AT THE BEGINNING OF YEAR 108,037 89,987 --
----------- ----------- -----------
CASH AT THE END OF YEAR -- $ 108,037 $ 89,987
=========== =========== ===========
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 50,000 505,000 --
Stock
Common Stock Issued for License -- -- 500,000
Common Stock Issued for Capital -- -- 1,580,000
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, 1995 AND 1994
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 10)
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. (Note 4)
D. Advances made by the Company to UC'NWIN Systems Corporation, formerly UC'NWIN
systems, Ltd., are uncollectable and written off. (Note 10)
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 6)
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 5)
G. All subscriptions receivable have been unfulfilled and written off. (Note 7)
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 13)
-23-
<PAGE> 24
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
I. Disputes with former management shall cease and be considered fully resolved.
(Note 12)
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, 1995 AND 1994
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.
-25-
<PAGE> 26
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
WARRANTS AND OPTIONS
Warrants and options have been recorded at fair market value on the
date of issuance and expensed in the applicable period.
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.
c) Restatement - The economic life of the license was changed from
five years to seventeen years which is the term of the license. The
consolidated financial statements for the year ended July 31, 1993
have been restated to give effect to the increased amortization
period, and amortization decreased by approximately $300,000 for the
year.
-26-
<PAGE> 27
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
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.
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 $(8,652,227) and
a shareholders (deficit) of $(426,360). 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.
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.
-27-
<PAGE> 28
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
NOTE 3 - RECAPITALIZATION (CONTINUED)
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.
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>
-28-
<PAGE> 29
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
NOTE 4 - PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
UC'NWIN Machines $ -- $ 336,044
Vehicles -- 41,221
Furniture and Fixtures -- 34,593
-------- ---------
-- 411,858
-------- ---------
Less: Accumulated Depreciation -- (101,943)
-------- ---------
$ -- $ 309,915
-------- ---------
</TABLE>
NOTE 5 - 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, 1995, 1994 and 1993
were $233,920, $583,332 and $291,667, respectively.
Amortization expense of the license agreement for the years ending
July 31, 1995, 1994 and 1993 were $-0-, $156,000 and $130,000,
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, 1995 AND 1994
NOTE 5 - 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 6 - 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, 1995 AND 1994
NOTE 6 - 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 12)
NOTE 7 - 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 entitles 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:
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<PAGE> 32
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<S> <C> <C>
Total Subscribed $ 3,646,750
Less: Commission to Affiliate of
Former Chief Executive
Officer of the Company 364,675
Professional Fees 100,000
------------
Total Proceeds $ 3,182,075
============
</TABLE>
Accordingly, the average selling price, of 2,336,976 issued,
amounted to $1.56 per share. On August 22, 1995, Robinson, Brog,
Leinwand, Reich, Genovese & Gluck, P.C. (See Note 12) 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 8 - 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, 1995, 1994
and 1993.
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.
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<PAGE> 33
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
NOTE 8 - 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, 1992 55,200
Granted 105,000 $3.34-$6.66
-------
Canceled (92,100)
-------
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
-------
</TABLE>
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<PAGE> 34
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
NOTE 9 - INCOME TAXES
The Company has net operating tax loss carryforwards of
approximately $7,100,000 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 10 - 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 11 - COMMITMENTS AND CONTINGENCIES
The Company currently has no leases for the rental of facilities.
NOTE 12 - 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, 1995 AND 1994
NOTE 12 - 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.
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, 1995 AND 1994
NOTE 12 - 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 13 - OTHER MATTERS
On July 20, 1994, the Company entered into an agreement to merge
with UC'NWIN Systems Corporation, formerly UC'NWIN system, Ltd., the
parent of UC'NWIN Systems, Inc. UC'NWIN Systems, Inc. was the
Licensor to WAL of the world-wide rights (except United States) to
the patent and technology comprising the UC'NWIN systems. The
Company had filed a registration statement with the Securities and
Exchange Commission by which the Company would register and issue
one of its shares for each share of UC'NWIN Systems Corporation. In
1996, the Company terminated its agreement to merge with UC'NWIN
Systems Corporation. Activities related to this merger and any
shares of stock that were exchanged, during this period, were
negated and all shares returned.
-36-
<PAGE> 37
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
NOTE 13 - OTHER MATTERS (CONTINUED)
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 Winners All Limited, a wholly-owned subsidiary of
the Company.
NOTE 14 - 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.
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. Earl 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.
-37-
<PAGE> 38
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
NOTE 14 - SUBSEQUENT EVENTS (CONTINUED)
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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On January 6, 1997, the registrant has engaged Baum & Company, Certified
Public Accountants, of 4310 Sheridan Street, Hollywood, Florida 33021, to audit
the financial statements of the registrant for the year ended July 31, 1995 and
assist management and legal counsel in preparing the Form 10K and the Management
Discussion and Analysis. Prior audits of the financial statements of the
registrant had been completed by Feldman, Radin & Co., P.C., of 805 Third
Avenue, New York, New York 10022. At no time have their been any disagreements
with Feldman, Radin & Co., P.C.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
Board of Directors and Executive Officers
Following the acquisition of Winners All, Ltd., Mr. Joyce became
President and Director of the Company and the Board of Directors was composed of
Mr. Joyce, Alex Larkman, Brian Chandler and Paul Gilkes, all of whom were
nominated by Mr. Joyce, and Mark Schindler, Eugene Stricker and Jules Zimmerman,
all of whom had been directors of Natural Child Care, Inc. Shortly afterwards,
Brian Chandler resigned and Charles Gargano was nominated by Mr. Joyce to take
his place.
-38-
<PAGE> 39
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
Howard Weiser 57 Director
</TABLE>
Edgar M. Reynolds was elected Chairman of the Board, President and Chief
Executive Officer on August 22, 1995. Mr. Reynolds attended Columbia University.
Since 1973 until 1994, he has been in an Executive capacity with Digital
Products Corporation, a public company in the field of electronics,
communications, and home monitoring. At various times, he was the CEO and
Director of Digital Products Corporation. Prior thereto he managed a private
consulting firm. Prior thereto for twelve years, he was a financial officer and
director of a public chain of a variety of toy stores. During this period, he
served as a director of two Florida banks. He also served overseas in the United
States Army Intelligence Service to World War II and was employed for a
worldwide import and export firm with extended stays in foreign countries. He is
also conversant in five languages.
-39-
<PAGE> 40
Charles Gargano is the Chairman of the Empire State Development
Corporation of New York State. Mr. Gargano also served as the Finance Chairman
of the New York Republic State Committee. From August 1988 through August 1991.
Mr. Gargano served as United States Ambassador to the Republic of Trinidad and
Tobago. A civil engineer, Mr. Gargano has been President of G.M. Development,
Inc. and actively serves on many boards and commissions as Chairman or Director,
including the Children's Developmental Center, Alpha Hospitality Corp. and First
Commercial Bank of Long Island (in formation).
Jeffrey Goldstein is a graduate of Hofstra University in New York. He is
an investor in various businesses.
David M. Goldblatt has over 25 years of experience in trading, selling
and financing United States Government securities and money market instruments.
In 1970, Mr. Goldblatt traded short term U.S. government securities at William
E. Pollack and Co. In 1972, he was hired as Vice President at Cantor Fitzgerald
and Company, where he was required to sell and finance the Firms trading and
matched book positions. In 1976, Mr. Goldblatt was employed by Loeb, Rhodes &
Company, as a Senior Vice President. He was responsible for hiring sales
personnel for the money market department. In addition, he was in charge of
selling and financing the Firm's money market and matched book positions. In
1980, Mr. Goldblatt was a partner in Resource Management. The Firm specialized
in trading U.S. government securities and short term money market instruments.
In 1992, Mr. Goldblatt initiated and developed the fixed income department at
Seaboard Securities. This division specializes in U.S. government securities.
Mr. Goldblatt earned his Master's Degree from Hunter College in New York City.
Howard Weiser was recently appointed as a Director to the Company in
connection with the acquisition of Perma Seal, Inc. He worked for Zales Jewelry
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.
-40-
<PAGE> 41
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, 1995, all Section 16 (a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
No executive received any compensation during the year ended July 31,
1995, nor was any compensation accrued by the Company. At no time during the
year was there more than one executive officer.
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.
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 September 30, 1995, 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
Charles Gargano Director 100,000 .007%
3 Lazare Lane
Islip, NY 11751
Jeffrey Goldstein Director -0-
2080 Vine Drive
Merrick, NY 11566
David Goldblatt Director 100,416 .007%
410 East 80th Street
New York, NY 10024
</TABLE>
-41-
<PAGE> 42
<TABLE>
<S> <C> <C> <C>
Howard Weiser Director -0-
8632 NW 54th Street
Coral Springs, FL 33067
Date Corporation Ltd. 900,000 .064%
% Bruce Campbell & Co.
Attn: John Broadbent
Bank of Nova Scotia Bldg
4th Floor
British West Indies
Grand Cayman Islands
Cede & Co. 3,229,240 .231%
PO Box 20
Bowling Green Sta
New York, NY 10025
Lauder International, Ltd. 5,125,000 .366%
PO Box 884
Grand Cayman BWI
Cayman Islands
Officers and Directors as a Group 200,416 .014%
</TABLE>
(1) All of the above shares are owned of record and beneficially.
(2) None of the officers and directors own Unit Warrants.
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).
Mark Schindler and Eugene Stricker, Officers and Directors of the
Company, are principals of Madison Venture Partners, which leased office space
to the Company at 505 Park Avenue, New York, New York, on a month to month
lease, at $800 per month for the first six months of 1994. That arrangement is
no longer in effect.
-42-
<PAGE> 43
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, 1995.
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, 1995 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
February ,1997
- ------------------------------
Charles Gargano
Director
/s/ David M. Goldblatt February 10,1997
- ------------------------------
David M. Goldblatt
Director
February ,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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