UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-KSB/A
AMENDMENT NO. 1
(to the Annual Report For Fiscal Year Ended
May 31, 1996, Submitted August 29, 1996)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1934 FOR THE FISCAL YEAR ENDED
May 31, 1996
COMMISSION FILE NUMBER: 0-19796
INTERACTIVE TECHNOLOGIES CORPORATION, INC.
(Exact name of registrant as specified in charter)
Wyoming 98-0120805
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
104 SOUTH HARBOR CITY BOULEVARD
SUITE A
MELBOURNE, FLORIDA 32901
(Address of Principal Executive Offices)
Registrant's telephone number including area code: 407-953-4811
Securities Registered Under Section 12(b) of the Exchange Act: NONE
Securities Registered Under Section 12(g) of the Exchange Act:
COMMON STOCK, $0.01 PAR VALUE.
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes_X_ No___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. _X_
The Registrant's operating revenues for its most recent fiscal year were:
$56,532.
The aggregate market value of voting stock held by non-affiliates of
the Registrant, based on the average of the closing bid and asked prices of
the Registrant's Common Stock in the NASDAQ market as reportedby NASDAQ on May
31,1996, was approximately $30,095,220. Shares of voting stock held by each
officer and director and by each person who owns 5% or more of the outstanding
voting stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily
conclusive.
As of May 31, 1996, 11,742,044 shares of Common Stock, $0.01 par value,
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
LOCATION OF EXHIBIT INDEX
The index of exhibits is contained in PART IV, Item 13 herein on page no. _____
<PAGE>
TABLE OF CONTENTS
PART I:
Item 1. Description of Business
Item 2. Description of Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II:
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Item 6. Management's Plan of Operation
Item 7 Financial Statements
Item 8 Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III:
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the
Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Item 12. Certain Relationships and Related Transactions
PART IV:
Item 13. Exhibits, and Reports on Form 8-K
SIGNATURES
1
<PAGE>
PART I
Item 1. Description of Business.
a. Business Development.
Interactive Technologies Corporation, Inc. (the Company) was
incorporated in the state of Wyoming on August 8, 1991. At that time, the
Company was engaged in the business of exploiting its rights under a license
(the "License") granted by CST Entertainment Imaging, Inc. ("CST"), which gave
the Company the exclusive right to use CST's coloring process to convert to
color black-and-white film and videotape, including black-and-white theatrical
films and television programs, produced for distribution in Europe. The Company
also had exclusive right to use CST's technology to provide digital special
visual effects for new film and video productions produced for distribution
primarily in the European territory. The Company ceased this effort on October
18, 1995.
On October 20, 1995, the Company entered into an agreement to acquire
assets of Syneractive, Inc. (SI), a Florida Corporation. SI's assets included
intellectual property consisting of a television production and a trademark
known as Rebate TV(TM), a marketing and sales medium for a wide variety of
products and services. They also included license rights from the Federal
Communications Commission (FCC) to operate interactive and data service systems
in the Charleston -North Charleston, SC, and Melbourne-Titusville- Palm Bay, FL
metropolitan areas.
The Company issued 5,700,000 shares of common stock to its current sole
director and officer in exchange for these assets of SI.
In May, 1996, the Company closed an agreement for the acquisition of
television studios, post production facilities, satellite links and remote
production equipment located in Princeton, N.J. The Company acquired a fully
operational studio and post production facility and C and Ku Band Satellite
Links from Studiolink Corporation in exchange for $1.1 million dollars.
The acquisition was made under a lease purchase agreement in the amount
of $1,100,000.00. This amount is payable monthly (with payments calculated as
this principal with interest amortized over the lease period at a rate of 11%
interest per annum) on a lease purchase basis over five years beginning May 1,
1996 to Studiolink Corporation, the seller of the equipment. The Company has the
option to purchase the equipment at the end of the term for a nominal sum.
Studiolink Corporation is unrelated to the Company. The Company provided
additional collateral under the lease of 250,000 common shares.
The equipment was used previously to make available television
production, post production and satellite uplink services on a limited basis to
consumers of such services and to process business of the private owner of the
Studiolink Corporation.
The Company expects to utilize these facilities in the production and
distribution of its own television shows as well as to offer these services to
users throughout the television and broadcast industry. The Company has agreed
to take over the existing facility at 13 Rozel Road, Princeton, New Jersey and
expand it to 9,934 square feet under lease. The Company expects to begin
operating this as a new business without depending upon previous business.
On April 9, 1996, the Company formed a wholly owned subsidiary,
Satellite Network Television, (SNT), a Nevada corporation, to enhance the
Company's television programming, production and broadcasting capabilities, and
vertically integrate certain of the broadcast activities involved in the
television programming segments of its business. The Company has acquired rights
to a FCC license and owns the antenna and other equipments necessary to provide
satellite uplink for television broadcasting.
The Company's Principal Executive Offices are located at 104 South
Harbor City Boulevard, Suite A, Melbourne, Florida 32901, and its telephone
number is (407) 953-4811.
2
<PAGE>
b. Business of Registrant.
(1) Principal Products or Services and Their Markets.
Interactive Technologies Corporation, Inc. ("ITC") is a developer and
producer of television, interactive television and interactive digital media
programming. These programs are developed in various interactive formats for
cable, broadcast and direct broadcast satellite television and for Internet
distribution.
Programming. ITC's principal interactive programming product is its
Rebate TV(TM) program. Rebate TV(TM) is a marketing and sales network which airs
one half-hour of programming a day on WIRB/Channel 56 in the central Florida
market which serves a population of 2,176,100. Rebate TV(TM) first aired April
15, 1996, and has been on the air daily since that time. The Company expects
later network growth to see distribution via communications satellite to cable
television headends and other local distribution systems across the country.
Rebate TV(TM) is a television program which incorporates interactive
media and computer data management to allow the retail vendors to communicate
their message to the consumer, to allow the consumer to verify his or her
purchase, and to receive a cash rebate from the Company.
The television program which airs one half hour a day, seven days a
week is divided into 14 one minute retail information segments which are
utilized by advertisers to provide information about their company and a brief
description of the cash rebate offered to the consumer. The balance of the
program consists of information segments, rebate reviews and instructional
segments. Retailers represent a broad spectrum of business including grocery
chains, furniture stores, tire service stores, retail banks, restaurants, car
dealers and various specialty businesses.
The consumer, after watching Rebate TV(TM), shops at one or more of the
participating retailers and makes a purchase of items of product or in dollar
amounts which carry the rebate offered by each particular retailer, (i.e. a $5
rebate on a purchase of $50 or more, or $10 rebate on the purchase of a brake
package, etc.) The consumer then goes home and calls the toll free telephone
number, 1-888-2REBATE, which connects him to the Company's computer data base,
and he then registers the Rebate TV(TM) number on the bottom of the receipt. At
the end of the month, the Company sends a check to the Rebate TV(TM) customer
for a total of all rebates processed during that month. These rebates are in
addition to coupons or other promotional offers by the vendor. Rebate TV(TM) had
approximately 4,000 subscribers by the end of the fiscal year.
The Company collects point-of-sale information from the vendors who
participate in Rebate TV(TM), and processes that data along with Rebate TV(TM)
customer call-in data, then credits rebates to customer accounts as they are
verified. The Company manages escrow accounts for retail vendors so that rebates
are transferred to a general customer escrow fund as they are credited, and
issues checks at the end of each month to Rebate TV(TM) customers.
The Company receives revenues of two types from Rebate TV(TM). First,
retail vendors pay an initial production fee to the Company for the production
of the information segment that becomes part of the television show. Secondly,
the retail vendors pay the company a transaction fee based upon verified sales.
The amount of the transaction fee varies with the type of retailer and the
frequency of purchase of its products, i.e. the transaction fee for a automobile
sale is much higher than a grocery store because of the size and frequency of
purchase.
Rebate TV(TM) is designed to utilize existing communication
technologies for consumer responses - it now uses the telephone and the Internet
as return links. However, it is also designed to easily accommodate the emerging
interactive television systems as they come into use, such as Interactive Video
and Data Services (IVDS) and Interactive Television (via fiber optic cable/
telephone cable etc.)
3
<PAGE>
PROGRAM MARKET EXPANSION
The Company's roll out plan provides for Rebate TV(TM) to open in the
Atlanta market following the Orlando market. The Company has hired a General
Manager for the Atlanta office who began with the Company on April 1, 1996. The
Company's plan also includes the completion of an interface for Interactive
Video and Data Services (IVDS) return links during the next 12 months.
Overall, during the next 18-36 months, the Company's plan calls for the
market expansion of Rebate TV(TM). The program is scheduled to expand into 25 of
the top national markets within three years from the date of first broadcast.
The Company expects to hire as many as 50 additional employees over the next 24
months to support the operation of this programming and to continue to develop
and refine the programming as the Company adds markets for these services.
PROGRAM DEVELOPMENT
The Company's research and development efforts consumed the technical
efforts of the Company from October 1995 through the airing of Rebate TV(TM) on
April 15, 1996, and involved two basic areas: the television programming for the
shows, and the data management and computer interface development efforts for
the interaction with the retailers and the consumers. None of this expense will
be borne directly by the retailers or the consumers, but will be recouped
through profits as the Company expands its markets.
Development of Rebate TV(TM) basic programming by ITC has been done
during the fiscal year with Century III at Universal Studios, Florida.
Established in 1976, Century III has serviced a widely diverse client base with
high production values utilizing the latest and finest in production and
post-production hardware. This includes local, regional, national and
international projects for all four broadcast television networks, national
cable networks such as Nickelodeon and HBO, major independent producers,
advertising agencies and major corporate and governmental organizations such as
Digital Equipment Corporation, Harris Corporation, General Electric, NCR, AT&T,
Kodak, Polaroid, Walt Disney World, Harcourt Brace Jovanovich, FPL Group,
Westinghouse, McDonnell Douglas, Martin Marietta, Reebok, International and
NASA. The creative director for Rebate TV(TM) is Michael Hamilton who has
designed, directed and produced such television series as "Magnum P.I., "Simon &
Simon", "Wings" and "The Twilight Zone". His commercial experience includes such
clients as Cadillac(TM), Texaco, Coca Cola(TM), Heineken, American Airlines,
Donna Karan, Elizabeth Arden, QVC, Business Technology Management and the Family
Channel.
The computer development efforts related to Rebate TV(TM) were done at
the Company's engineering offices in Melbourne, Florida, where the hardware and
software designs and specifications were developed, tested and implemented
during the current fiscal year, to:
o manage the large amounts of data and transactions involved in
collecting and verifying sales information from the Rebate TV(TM)
retailers;
o calculate the rebates, record the credits, and issue the checks
to the consumer;
o accommodate and record the telephone rebate requests, and
provide automated participation information to the public.
ITC looks to Rebate TV(TM) to attract its share of the Communications
Industry end-user market estimated to be $189.3 billion by 1998. Interactive
digital media is projected to remain the fastest growing category in the
industry.1
Internet Access. ITC's Internet home pages for use with Rebate TV(TM)
allow viewers to access the program's data base through the Internet. It allows
them to view the status of their accounts, enter vendor rebate claims, and later
will allow viewers to access a variety of products and services associated with
Rebate TV(TM) which the Company expects to include. The Company's home page is
located at http://www.INET-USA.com/RTV.
Network Operations. ITC is in development and production of its own television
channel and is scheduled to distribute its Rebate TV(TM) video programming in
this format to customers. The Company's distribution plan currently provides for
distribution of this programming started in the central Florida markets to
expand from there. Overall, during the next 18-36 months, the Company's plan
calls for the Rebate TV(TM) to expand into 25 of the top national markets within
--------------------------
1. The Veronicas,Shudder & Assoc. Communications Industry Forecast, July 1994
4
<PAGE>
three years from the date of first broadcast. The Company expects to hire as
many as 50 additional employees over the next 24 months to support the operation
of this programming and to continue to develop and refine the programming as the
Company adds markets for these services. The Company currently maintains a sales
office in Atlanta, GA, and has announced a on-air date for that market of
January 6, 1997. In addition, plans include the exploitation of the Company's
wholly-owned subsidiary, SNT's, satellite uplink capabilities to expand it's
programming to a potentially worldwide market.
Satellite Network Television (SNT). The company formed Satellite
Network Television, Inc. (SNT) a Nevada corporation, to operate its
facilities in Princeton, New Jersey. These facilities consist of three basic
segments:
Studio Operations:Complete studio and control room facilities including
studio cameras, XY lighting, preset lighting board and recording
facilities.
Post Production: Equipped Video and audio edit rooms for on and off
line edits. 3-D Graphics and Paintbox edit rooms, voice
over and audio facilities and control equipment.
Satellite Links: Fully redundant C band and Ku band satellite uplinks
and downlinks with support and playback equipment.
These facilities were acquired to provide the Company the ability to
completely produce and distribute its own programming in-house. However, the
Company operates this facility as a full-service studio and broadcast facility
available to the business community and realizes revenues from providing
contract services from its facilities and from remote sports and general subject
broadcasts. (These include such services as video conferencing, and television
and video program production for educational, commercial and corporate videos.)
The Company began major renovations to these facilities in May, 1996, and has
been operating at a reduced level during renovations. The renovations are
scheduled to be complete in September of 1996.
Interactive Video and Data Services. As part of ITC's commitment to the
evolution of interactive television, its Federal Communications Commission
Interactive Video and Data Services (IVDS) radio station licenses in the
Charleston-North Charleston, SC, and Melbourne-Titusville-Palm Bay, FL service
areas represent an additional enhancement to the Company's programming
distribution. These licenses have a duration of an initial five years, and are
renewable if all conditions of the license are met. IVDS, a two way
communications system, will allow viewers to take an active role in systems
delivered through broadcast television, cable television, wireless cable, direct
broadcast satellite or other future television delivery methods. IVDS is
regulated as a personal radio service under the rules of the FCC which has
allocated spectrum in the 218-219 MHz range for its use. IVDS systems are
designed to operate with a hand-held remote control device that controls the
interactive set top device on the subscriber's television set. A viewer would
interact with the TV station through a radio signal using an IVDS frequency.
The Company has purchased equipment for its Charleston-North
Charleston, SC license, which is at the date of this report in transit to
Melbourne, Florida, and will be stored until the Company is ready for
installation in Charleston. The Company has under contract the sale of 90% of
this ownership of this license and equipment and has reserved rights to provide
programming to this license area when it is in operation.
The Company is reviewing alternative uses and equipment proposals for
its Melbourne-Titusville-Palm Bay, FL license and expects to proceed to install
a system for this license within the next 24 - 36 months.
Although ITC will run its Rebate TV(TM) and other programs on its own
service area systems, the programs it develops are intended for use on various
interactive delivery systems and are not specific to Interactive Video and Data
Services systems. They are marketed to all of these various delivery systems.
For broadcast of Rebate TV(TM) programming the Company currently uses and plans
to use standard video media distribution methods such as cable, broadcast
stations, wireless cable and direct broadcast satellite. Although the Company
has designed its programs to utilize an IVDS return link (a "return link" is the
method by which data is sent from the consumer or viewer back to the originator
of the program), they are also designed to accommodate other return links such
5
<PAGE>
as the telephone. The Company has purchased equipment and software to provide a
telephone return link as an interim return link for its own license areas as
well as other areas where it is providing programming, to be utilized where IVDS
is not available; until the installation an operation of the IVDS equipment as a
return link is completed as well as for use with non subscribers to IVDS.
Intellectual Content. The Company has developed a plan for the
accumulation and sale of intellectual content. This content takes several forms,
including completed television and video programming, both developed and
produced by the Company and by third parties; property rights to written scripts
and publications for the purpose of producing or having produced television or
motion picture products; and program ideas, concepts and designs.
This plan commenced during the last month of the fiscal year. In
addition to the Rebate TV(TM) programs, the company has filed and had accepted
Trademark applications with the United States Patent and Trademark Office for
"Rebate TV" and for "DEAL! DEALS! DEALS!" (a direct shopping program which the
Company has produced).
The Company has produced in conjunction with Nightwing Entertainment
Group, Inc./Petsville USA a series of direct sale pet product shows which it
expects to air during the 4th quarter of 1996 and beyond.
Subsequent to the end of the fiscal year, the Company acquired movie
and television rights for one year to Special Treatment a novel currently in
print.
The Company through its SNT subsidiary currently has in development and
preproduction a series of Bowling Tournament shows produced in conjunction with
the New Jersey Bowling Proprietors Association scheduled to air fourth quarter
of 1996 and/or first quarter of 1997.
The Company has in addition under this plan a number of projects
under consideration and review. To date, revenue from these activities has
been limited to the Rebate TV(TM) television program, and to a limited showing
of its DEAL! DEALS! DEALS! program. There is associated with each of these
shows and projects a lead time or advance period necessary for development and
scheduling. In addition, the company may elect to sell outright or resell
any of these properties.
The Company does not expect to receive material revenues from these
projects other than Rebate TV(TM) program until calendar year 1997.
As of May 31, 1996, the Company has 12 ITC and 5 SNT employees, all of
which are full-time.
The Company's fiscal year runs from June 1 to May 31 of each year.
Item 2. Description of Properties.
The Company currently has executive and engineering offices at 104
South Harbor City Boulevard, Suite A, Melbourne, Florida; programming and media
offices at Century III at Universal Studios, 2000 Universal Studios Plaza, Suite
100, Orlando, Florida; and marketing offices at 228 Park Avenue North, Suite J,
Winter Park, Florida, and 111 Chickering Parkway Roswell, Georgia. In addition,
the Satellite Network Television (SNT) facilities are located at 13 Rozel Road,
Princeton, New Jersey.
The Melbourne facility consists of 1,250 square feet of office and
engineering space, and is leased from The Network Group, for a term of one year,
with automatic renewal for an additional 12 months unless either Landlord or
Tenant is notified in writing by the other party at least 60 days prior to
termination date. Monthly lease payments are $1,250.00 plus applicable Florida
sales tax.
The Company's Century III office at Universal Studios consists of
approximately 250 square feet of office space and use of common areas. The cost
of this space is included in invoicing for production work Century III is
performing for the Company.
The Winter Park facility consists of 1080 square feet of office space.
It is leased from Williams-Builder Partnership for a term of two years with
monthly base lease payments of $1,301.40, plus applicable Florida sales tax, and
pro rata common area maintenance fees estimated to be approximately $200 per
month.
The Roswell office currently exists at the residence of the General
Manager in the Atlanta area, for which the Company neither compensates nor
6
<PAGE>
reimburses. The Company anticipates a requirement for a corporate sales and
administrative office in Atlanta within six months.
The SNT facility consists of 7,050 square feet of television studio,
and 1,783 square feet of office and administrative space for which the Company
pays a minimum monthly rent of $9,572.50, plus electric, for Year 1, and
$10,948.75, plus electric, for Years 2 - 5 of a five year lease. The SNT
facility is leased from LLB Realty, L.L.C./Keller, Dodds and Woodworth, Inc.
Additional square footage in the facility is available, and the Company plans to
expand to a total of 9,934 square feet for its use.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company did not submit any matters to a vote of the security holders
during its fiscal year June 1, 1995 through May 31, 1996.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
a. Market Information
Interactive Technologies, Inc. common shares are traded on the National
Association of Securities Dealers Automated Quotation Systems (NASDAQ) SmallCap
Market under the symbol "ITNL". The Company's shares were traded on the NASDAQ
exchange beginning April 30, 1996. High and low quotes for the last quarter of
the Company's fiscal year when the shares began trading on NASDAQ were:
High Low
Fiscal Year 1996 4th Quarter 5 4 7/8
Prior to being traded on the NASDAQ exchange, the Company's common
shares were traded in the "over-the-counter" or "Bulletin Board" market. The
following quotes represent the quarterly high and low quotes available through
the quarter ending 12/29/95. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions: Fiscal Year 1996
High Low
Quarter Ending 3/29/96 4 3/4 3 7/8
Quarter Ending 12/29/95 4 2 1/2
Prior to the quarter ending 12/29/95 of the Company's FY 96, and during
the previous FY 95, to the best of the Company's knowledge, no trading occurred
in the Company's common stock.
b. Holders
As of August 5, 1996, there were approximately 941 record holders of
the Company's Common Stock.
c. Dividends
The Company has never paid any cash dividends on its Common Stock and
has no present intent to pay any cash dividends in the foreseeable future. The
declaration of cash dividends will depend on future earnings, if any, the
financial needs of the Company, and other pertinent factors. Further, the
declaration of dividends will be at the discretion of the Company's Board of
Directors.
Item 6. Management's Plan of Operation.
a. Plan of Operation
The Company had no significant revenues from operations over the
previous two fiscal years. It began generating revenue from operations at the
end of the development period for Rebate TV(TM) during the last quarter of FY
95, and at the same time began realizing revenues from SNT operations.
7
<PAGE>
The Company's primary show, "Rebate TV" began to air for one half hour
twice daily, seven days a week April 15, 1996 at 6:30 and 9:00 p.m. on Paxson
Broadcasting's WIRB/Channel 56 serving the central Florida market, and continues
to air. The Company expects to receive revenues from these operations and from
its SNT operations over the coming year.
The Company acquired $1,040,800 in working capital during the past
fiscal year, through loans and private stock sales. The Company believes that it
can meet its cash requirements during the first quarter of the fiscal year but
expects to require additional funds over the next 12 months for the expansion
and addition of markets for its product and for operations. Although the Company
currently has no written commitments for additional funds, it believes that it
can raise additional cash required from private sources.
The Company continually accumulates data in the operation of its Rebate
TV(TM), and examines this data with regard to indicated changes in its
programming. The Company expects to continue research and development of its
products based upon the collection of this data.
Item 7. Financial Statements:
TURNER, STONE, & COMPANY
Certified Public Accounting
A Registered Limited Liability Partnership
12700 Park Central Dr., Suite 1610
Dallas, Texas 75251
Telephone (214) 239-1660
Facsimile (214) 239-1665
Independent Auditor's Report
Board of Directors
Interactive Technologies Corporation, Inc.
Melbourne, Florida
We have audited the accompanying consolidated balance sheet of Interactive
Technologies Corporation, Inc. and subsidiary as of May 31, 1996 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then. 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 audit. The financial statements of Interactive
Technologies Corporation, Inc. as of May 31, 1995 and the year then ended were
audited by other auditors whose report dated August 11, 1995, expressed an
unqualified opinion on those statements and included an explanatory paragraph
that described substantial doubt about the Company's ability to continue as a
going concern.
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 the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the 1996 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Interactive
Technologies Corporation, Inc. and subsidiary at May 31, 1996 and the results of
its operations and its cash flows for the aforementioned period in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company has no prior operating
history in its new industry and the success of its new business operations are
dependent upon adequate financing to fund its operations, all of which raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are describes in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
TURNER, STONE & COMPANY, LLP
Certified Public Accountants
8
<PAGE>
Interactive Technologies Corporation, Incorporated
And Subsidiary
Consolidated Balance Sheets
May 31, 1996 and 1995
Assets
1996 1995
--------- -----------
Current Assets:
Cash $ 63,114 $ 11,745
Accounts receivable, trade 31,792 -
Prepaid expenses and other assets 49,153 -
---------- -----------
Total current assets 144,059 11,745
---------- -----------
Property and equipment, at cost, net of
$35,255 of accumulated depreciation 1,256,344 -
---------- -----------
Other Assets:
Organizational costs, net of $ 1,534 of
accumulated amortization $ 2,466 -
License rights, net of $ 246,084 of
accumulated amortization 718,916 -
Proprietary software and trademark,
net of $97,519 of accumulated amort 5,363,524 -
---------- -----------
6,084,906 $ -
---------- -----------
Total Assets $ 7,485,309 $ 11,745
========== ===========
Accompanying notes are an integral part of the financial statements.
9
<PAGE>
Interactive Technologies Corporation, Incorporated
And Subsidiary
Consolidated Balance Sheets
May 31, 1996 and 1995
Liabilities and Stockholders' Equity
1996 1995
----------- ----------
Current Liabilities:
Accounts payable, trade $ 362,802 $ -
Accrued expenses 119,670 20,000
Contract of sale deposit 401,901 -
Loan Payable, related party - 656,831
Current portion of long-term
liabilities 348,295 -
---------- ----------
Total current liabilities 1,232,668 676,831
Long-term liabilities:
License rights payable 731,573 -
Capital lease obligation 873,070 -
Convertible debentures payable 500,000 -
---------- ----------
2,104,643 $ 0
Commitments and contingencies: - -
Stockholders' equity:
Common Stock $.01 par value; 12,500,000
shares authorized, 11,742,044 and
5,689,544, respectively, shares issued
and outstanding 117,420 56,895
Paid-in capital in excess of par 8,392,240 3,192,082
Accumulated deficit (4,361,662) (3,914,063)
----------- -----------
4,147,998 (665,086)
----------- -----------
$ 7,485,309 $ 11,745
============ ===========
Accompanying notes are an integral part of the financial statements.
10
<PAGE>
Interactive Technologies Corporation, Incorporated
And Subsidiary
Consolidated Statements of Operations
Years Ended May 31, 1996 and 1995
1996 1995
------------ ------------
Revenue $ 56,532 $ -
------------- ------------
Operating expenses:
Depreciation 34,741 -
Amortization 210,569 -
General and administrative 916,652 20,810
Management fee-shareholder 16,666 50,000
Interest expense:
Stockholder 27,368 65,491
Other - -
------------ ------------
1,205,996 136,301
------------ ------------
------------ ------------
Loss from operations (1,149,464) (136,301)
Gain on disposition of joint
venture interest 701,865 -
----------- ------------
Loss before income taxes (447,599) (136,301)
Provision for income taxes - -
----------- ------------
Net Loss $ (447,599) $(136,301)
=========== ============
Net loss per share
Primary $ 0.05 $ 0.02
Diluted $ 0.05 $ 0.02
Accompanying notes are an integral part of the financial statements.
11
<PAGE>
Interactive Technologies Corporation, Inc.
And Subsidiary
Consolidated Statement of Stockholders' Equity
Years Ended May 31, 1996 and 1995
Common Stock Add'l Paid Accumulated
Shares Amount In Capital Deficit Total
------- ------- ---------- ---------- -------
Balance at May 31, 1994 5,689,544 $ 56,895 $3,192,082 $(3,777,762) $(528,785)
Net Loss - - - (136,301) (136,301)
--------- -------- ---------- ----------- ---------
Balance at May 31, 1995 5,689,544 56,895 $3,192,082 (3,914,063) (665,086)
Issuance of common stock
in exchange for cash 102,500 1,025 408,975 410,000
Issuance of common stock
in reverse acquisition
transaction 5,700,000 57,000 4,793,683 4,850,683
Issuance of common stock
as security for capital
lease obligation 250,000 2,500 (2,500)
Net loss - - - (447,599) (447,599)
--------- ------ ---------- --------- ----------
11,742,044 $117,420 $8,392,240 $(4,361,662) $4,147,998
========== ======== ========= ============ ==========
Accompaning notes are an integral part of the financial statements.
12
<PAGE>
Interactive Technologies Corporation, Incorporated
And Subsidiary
Consolidated Statement of Cash Flows
Years Ended May 31, 1996 and 1995
1996 1995
---------- ----------
Cash flows from operating activities:
Cash received from customers $ 26,390 $ -
Cash paid to employees (171,974) -
Cash paid to suppliers (278,114) (70,810)
Interest paid:
Stockholder (65,491)
Others (48,847) -
Taxes paid - -
---------- ----------
Net cash used in operating
activities (472,545) (136,301)
Cash flows from investing activities:
Purchase of property and equipment (187,193) -
Capitalized software development (461,043) -
--------- ----------
Net cash used in investing
activities (648,236) -
--------- ----------
Cash flows from financing activities:
Issuance of convertible debentures 630,800 -
Issuance of common stock in reverse
acquisition 20,861 -
Proceeds from note payable
stockholder corporation 1,000 140,481
Contract of sale deposits received 159,351 -
Repayment of capital lease
obligation (49,862) -
Common stock issued for cash 410,000 -
--------- ----------
Net cash provided by financing
activities 1,172,150 140,481
--------- ----------
Net increase in cash 51,369 4,180
Cash at beginning of period 11,745 7,565
--------- ----------
Cash at end of period $ 63,114 $ 11,745
========== ==========
Accompaning notes are an integral part of the financial statements.
13
<PAGE>
Interactive Technologies Corporation, Inc.
And Subsidiary
Consolidated Statement of Cash Flows
Years Ended May 31, 1996 and 1995
Reconciliation of Net Income to Net Cash
Used in Operating Activities
1996 1995
----------- -----------
Net loss $ (447,599) $(136,301)
------------ -----------
Adjustments to reconcile net loss
to net cash used in operating activities:
Amortization 210,569
Depreciation 34,741
Increase in accounts receivable (30,142)
Decrease in prepaid expenses 847
Increase accounts payable 362,802
Increase in accrued expenses 54,068
Increase in accrued management
fees payable, stockholder 16,666
Increase in accrued interest
payable, stockholder 27,368
Gain on disposition of joint
venture interest (701,865)
-------------- ------------
Total adjustments (24,946) -
-------------- ------------
Net cash used in operating
activities $ (472,545) $(136,301)
============== ============
Supplemental Schedule of Non-Cash Investing and
Financing Activities
Issuance of common stock for assets,
net of various liabilities
in reverse acquisition transaction $4,829,822 -
Disposition of joint venture interest
in exchange for note payable and
accrued interest and management fees
payable $ 701,865 -
Capitalized program development costs
incurred for accounts payable, trade $1,100,000 -
Accompaning notes are an integral part of the financial statements.
14
<PAGE>
INTERACTIVE TECHNOLOGIES CORPORATION, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Interactive Technologies Corporation, Inc. (the Company) was incorporated in the
state of Wyoming on August 8, 1991. On October 20, 1995, the Company entered
into a reverse acquisition transaction, described below, with Syneractive, Inc.
(SI). SI was incorporated in the state of Florida on August 31, 1995. Prior to
October 20, 1995, the Company was engaged primarily in the business of
exploiting its rights under a license granted by CST Entertainment Imaging, Inc.
The license gave the Company the exclusive right to colorize black-and-white
film and videotape, including black-and-white theatrical films and television
programs, which were originally produced for distribution primarily within
European countries. However, the Company abandoned the business of exploiting
the license (see Note 3) on October 18, 1995 as a result of being unable to
realize any revenue from the license. SI, which was acquired in a reverse
acquisition, obtained license rights from the Federal Communications Commission
to operate interactive and data service systems in the Charleston - North
Charleston, SC and Melbourne - Titusville, Florida metropolitan areas.
Syneractive, Inc. also acquired proprietary software and a trademark known as
Rebate TV, which is a marketing and sales medium for a wide variety of products
and services. Advertisers on Rebate TV will offer substantial rebates to the
network's viewers through a unique interactive rebate program. Touch-tone phones
will initially interact the network to secured earned rebates, and later the
network will be accessed via wireless digital communications networks currently
under development. The Rebate TV operations commenced April 15, 1996 and serve
customers in the eastern United States. Management expects exploitation of the
FCC licenses to commence in 1997. They intend to hire the necessary management
personnel, raise addition capital and generate profitable operations needed to
continue its existence.
Syneractive, Inc. was dissolved on October 30, 1995.
Reverse acquisition
On October 1, 1995, the Company issued 5,700,000 shares of common stock to its
current sole director and officer in exchange for the net assets of SI. After
the issuance of such stock, the current director and officer effectively
controlled the Company, holding approximately 50.1% of the outstanding common
stock.
Prior to the reverse acquisition, the current sole director and officer of the
Company owned all of the outstanding common stock of SI. Accordingly, the
reverse acquisition has been accounted for at the historical cost of the assets
acquired.
Consolidated principles
On April 9, 1996 the Company formed a wholly owned subsidiary, Satellite Network
Television (SNT), by issuing 1,000,000 common stock share to ITC. SNT operates
television studios, a post production facility and satellite links. It produces
commercials, infomericals, business videos, commercial programming, and remote
broadcasts for both the Company's Rebate TV operations and for outside
customers.
The accompanying consolidated financial statements include the general accounts
of the Company and SNT. All material intercompany accounts and balances have
been eliminated in the consolidation.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation of property and equipment is currently be provided by straight line
and accelerated method for financial and tax reporting purposes, respectively,
over estimated useful lives of five years.
Amortization
Organizational costs, which were acquired from Syneractive, Inc. are being
amortized using the straight line method of five years. For the year ended May
31, 1996, amortization expense totaled $466.
15
<PAGE>
License rights are being amortized over the initial five year term of the
licenses. Although they are renewable at no additional consideration, there is
no guarantee the company will renew these licenses. For the year ended May 31,
1996, amortization expense totaled $112,584.
Software and trademark costs will be amortized at an annual amount equal to the
greater of the amount computed using (a) the ration that current gross revenues
bear to the total of current and anticipated future gross revenues or (b) the
straight-line method over a seven year estimated economic life beginning April
18, 1996. For the year ended May 31, 1996, amortization expense totaled $97,519.
Advertising
The Company's advertising costs, which consist of radio airtime for the Rebate
TV operations, are charged to expense when incurred. For the years ended May 31,
1996 and 1995, advertising costs totaled $197,229 and $0, respectively.
Management estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash flow
For purposes of the statement of cash flows, cash includes demand deposits and
time deposits with maturities of less than three months. None of the Company's
cash is restricted.
Earnings per share
Primary and fully diluted earnings per share amounts are based upon 9,558,539
and 5,689,544, respectively, weighted average shares of common stock and common
stock equivalents outstanding. No effect has been given to the assumed exercise
of stock options and warrants and convertible debentures as the effect would be
antidilutive.
2. COMMITMENTS AND CONTINGENCIES
Operating leases
Through October 31, 1995, the Company used office space provided free of charge
by its stockholder, the value of which was not material. The Company presently
leases its facilities in Florida and New Jersey under non-cancelable operating
lease agreements expiring through April 2001. For the years ended May 31, 1996
and 1995, rent expense under these leases totaled $24,603 and $0, respectively.
Minimum future rental payments required under the above operating leases are as
follows:
Year Ending Amount
May 31
1997 $138,113
1998 144,399
1999 131,385
2000 131,385
2001 120,436
$665,718
Capital lease obligations
On March 27, 1996, the Company acquired various studio equipment under a capital
lease obligation payable monthly through March 2001 with imputed interest at
11.0%, secured by the equipment and 250,000 common stock shares of the Company.
As part of the transaction, the stockholder of the lessor/corporation purchased
50,000 common stock shares of the Company for $200,000 cash and received
warrants to purchase 50,000 common stock shares at $2.00 per share. At May 31,
1996, the cost of equipment acquired under this lease and related accumulated
depreciation totaled $1,100,000 and $26,190, respectively.
16
<PAGE>
Minimum future payments required under the above capital lease obligation is as
follows:
Year Ending Total Principal Imputed
May 31 Interest
1997 $287,646 $177,068 $110,578
1998 287,646 198,328 89,318
1999 287,646 222,140 65,506
2000 287,646 248,810 38,836
2001 239,705 203,792 35,913
$1,390,289 $1,050,138 $340,151
License fees payable
The Company, through SI, has acquired licenses from the Federal Communications
Commission to operate interactive video and data service systems in various
metropolitan statistical areas (Note 1). The license rights are payableinterest
only, at 7.7 percent for two years with principal and interest payable monthly
over the remaining three years of the licenses. Interest has been accrued from
the dates the licenses were formally issued.
Future principal payments under the above license right obligations are as
follows:
Year Ending
May 31 Amount
1997 $40,427
1998 246,983
1999 260,446
2000 224,144
2001 -
$772,000
Employment agreement
The Company has entered into an employment agreement, with a director and
principal member of management, which provides for annual compensation equal to
5% of the gross profit from the Rebate TV operations, with a minimum salary for
the first year of $125,000. In addition, the Company provides a monthly
automobile allowance. The agreement expires in October 2005, and provides for
full payment if the employee should be terminated without cause, become
disabled, or die before such date.
The Company's current compensation benefits do not provide any other
post-retirement or post-employment benefits.
3. CONVERTIBLE DEBENTURES
During the year ended May 31, 1996, the Company issued $630,800 of 8%
convertible debentures maturing through April 2001. The bonds are convertible
into shares of the company's common stock at conversion prices of $1.00 to
$3.75. In the event that the Company becomes a private company, the lenders have
the right to immediately require redemption at a rate of 10% of par in the first
year the Company becomes private plus an additional 1% for each year to
redemption.
Sinking fund requirements required under the terms of the convertible debenture
are as follows:
Year Ending
May 31 Amount
1997 $130,800
1998 15,000
1999 50,000
2000 60,000
2001 375,000
$630,800
17
<PAGE>
4. RELATED PARTY TRANSACTIONS
Stockholder
The Company had a 50% interest in a joint venture with another corporation to
exploit its license (Note 1) and accounted for this investment using the equity
method. At May 31, 1995, the joint venture had no assets and the carrying value
of its investment was $0. Also, at May 31, 1995 the Company had available a
$700,000 financing arrangement through a stockholder corporation with an
interest rate of 12.5%. The amount outstanding at May 31, 1995 totaled $656,831.
The stockholder corporation also charged a monthly management fee of $4,167
through September 30, 1995. In October 1995 the Company sold its joint venture
interest in exchange for its release from the amount owed under the financing
arrangement plus accrued interest and management fees through September of 1995,
resulting in a gain of $701,865, the excess of these amounts over the carrying
value of its investment in the joint venture.
During the years ended May 31, 1996 and 1995 interest expense totaling $27,368
and $65,491, respectively, and management fees totaling $16,666 and $50,000
accrued to the stockholder corporation.
5. INCOME TAXES
The Company used the accrual method of accounting for tax and financial
reporting purposes. At May 31, 1996, the Company had net operating loss
carryforwards for financial and tax reporting purposes of approximately
$4,300,000. These carryforwards expire through the year 2010, and are further
subject to the provisions of Internal Revenue Code Section 382.
Pursuant to Statement of Financial Accounting Standards No. 109, the Company has
recognized a deferred tax asset attributable to the net operating loss
carryover, net of a deferred tax liability related to amortization timing
differences, in the amount of $1,469,703 which has been fully offset by a
valuation allowance in the same amount, as follows:
1996 1995
Beginning balance $ 1,330,781 $1,284,513
Increase during period 138,922 46,268
Ending balance $1,469,703 $1,330,781
6. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of its cash, accounts receivable
trade and its convertible payable.
Cash
The Company maintains its cash in bank deposit and other accounts which, at
times, may exceed federally insured limits. The Company has not experienced any
losses in such accounts, and does not believes it is subject to any credit risks
involving its cash.
Accounts receivable, trade
The Company accounts receivable are unsecured and represent sales not collected
at the end of the year. Management believes these accounts receivable are fairly
stated at estimated not realizable amounts.
Convertible debentures payable
Management believes the carrying value of their debentures payable represents
the fair value of these financial instruments because their terms are similar to
those in the lending market for comparable loans with comparable risks.
7. STOCK OPTIONS AND WARRANTS
During the years ended May 31, 1996, and 1995, the Company issued various stock
options and warrants to employees and others. The options and warrants expire
between January 1999 and May 2001 and are exercisable a prices from $2.00 to
$4.50 per warrant
18
<PAGE>
The following is a schedule of the activity relating to the Company's stock
options and warrants:
1996 1995
Options and warrants outstanding
at beginning of year 25,000 25,000
Options and warrants issued during
year
Officers and directors - -
Employees 65,704 -
Others 103,750 -
Options and warrants exercised
during year:
Officers and directors - -
Employees - -
Others - -
Options and warrants expired
during year (25,000)
Options and warrants outstanding
at end of year 169,454 25,000
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
By unanimous consent of the Board of Directors of the Company on
November 10, 1995, the Registrant engaged the accounting firm of Turner, Stone &
Company of Dallas, Texas as independent accountants for the Registrant for the
fiscal year beginning June 1, 1995, and voted to excuse the accounting firm of
Lumsden & McCormick from further service to the Company after the completion of
its work on the audit for the Registrant for the fiscal year ending May 31,
1995. During the previous two fiscal years ending May 31, 1995, there were no
disagreements with Lumsden & Company on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure or any
reportable events.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
a. Directors and Executive Officers.
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company as of May 31, 1996. A summary of
the background and experience of each of these individuals is set forth after
the table.
The directors and executive officers are:
NAME AGE POSITION
Perry Douglas West 49 Chairman, Chief Executive Officer
Robert J. Poe 42 Chief Operating Officer
The Board of Directors currently consists of two Directors, each
holding office for a term of one year.
Perry Douglas West joined the Company in October 1995, and is Chairman
and Chief Executive Officer of the Company. Mr. West co-founded American
Financial Network in July of l985. Headquartered in Dallas, Texas, American
Financial Network operated a national computerized mortgage loan origination
network. Mr. West served as Executive Vice President/Director and General
Counsel of this public company from 1985 to 1991. Mr. West has practiced law in
Florida since 1974, representing various business institutions in the financial,
computer, natural resources and general business industries and international
transactions. He was graduated with a Bachelor of Arts degree from The Florida
State University in l968 and with a Juris Doctorate degree from The Florida
State University, College of Law in l974.
Robert J. Poe joined the Company as Director of Program Development and
Director in November 1995 and is a veteran of the broadcast industry. Mr. Poe
founded a marketing, media and management consulting firm in 1993, and has been
involved in the genesis of numerous successful broadcasting and entertainment
undertakings, including the WMMO Radio Station in Orlando, Florida, and the
Orlando Magic Professional Basketball Team. He serves on the East Central
Florida Regional Planning Council as a gubernatorial appointee and he is on the
19
<PAGE>
Board of Directors of the Florida Association of Broadcasters. Mr. Poe has
served as president of the National Association of State Radio Networks and
president of the Orlando Radio Broadcasters Association.
b. Significant Employees.
Board of Directors of the Florida Association of Broadcasters. Mr. Poe has
served as president of the National Association of State Radio Networks and
president of the Orlando Radio Broadcasters Association.
b. Significant Employees.
George C. Clark, Ph.D, joined the Company in November 1995 as Director
of Systems Development. He was previously a Senior Scientist in the Advanced
Technology Department in the Electronics Systems Sector of Harris Corporation,
headquartered in Melbourne, Florida from 1964 through 1994. During his tenure at
Harris, Dr. Clark conducted advanced research and development in antennas,
electronic communications systems, statistical communication theory, error
correction coding, computer-aided design of electronic circuits and systems,
object oriented programming methodologies, and modeling of transportation
systems. He also served as Director of the Advanced Technology Department at
Harris, co-authored a graduate level text book on error correction coding, spent
two years as a Visiting Scientist at the MIT Laboratory for Computer Science,
and taught many undergraduate courses in Electronic Engineering, Artificial
Intelligence and in Signal and Systems Theory. Dr. Clark holds a Bachelor of
Science degree in Electrical Engineering from the Massachusetts Institute of
Technology in 1959, a Masters Degree in Physics from the University of Miami in
1961 and a Ph.D. degree in Electrical Engineering from Purdue University in
1965.
Dr. Clark managed the development of the computer software and hardware
systems that form the infrastructure to the operations of Rebate TV(TM), and his
absence from the Company would have an initial adverse effect on operations.
Michael Hamilton joined the Company in April 1996 as Executive Vice
President, Production, in charge of all creative operations and new program
development for the Company. Mr. Hamilton is an entertainment industry veteran,
whose recent credits include developing a Movie of the Week for the ABC network,
a feature in conjunction with Jason Alexander's Daeson Productions, and
transactional programming for QVC. He also designed and directed such television
series as Wings, Murder She Wrote, The Twilight Zone and Magnum P.I., with
experience extending to commercial clients such as Donna Karan, Cadillac(TM) and
Coca-Cola(TM). His absence from the Company would have an initial adverse effect
on programming operations.
c. Family Relationships.
None.
Item 10. Executive Compensation.
Perry Douglas West, Chairman and Chief Executive Officer of the Company
has no employment agreement in force as of May 31, 1996, and receives no current
compensation. Mr. West has agreed to defer compensation and compensation issues
until a future date.
Robert J. Poe, Chief Operating Officer has an employment agreement with
the Company effective November 1, 1995, with an initial term of ten years. Mr.
Poe's agreement calls for him to receive a base salary of $12,500 per month for
the first twelve calendar months of his contract. In addition he is to receive
5% of the gross profits from the operation of the Company's Rebate TV(TM)
television programming, as well as other programming brought into the Company by
Mr. Poe.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
a. Security Ownership of Certain Beneficial Owners.
The Company knows of no persons or groups being the beneficial owner of
more than 5% of the Company's Common Shares.
20
<PAGE>
b. Security Ownership of Management.
The following table sets forth information with respect to the share
ownership of Common Stock, par value $0.01, of the Company by its officers and
directors, both individually and as a group, who are the beneficial owner of
more than 5% of the Company's Common Shares.
(1) (2) (3) (4)
Title of Class Name Amount and Percent of
Address of Nature of Class 3
Beneficial Beneficial
Owner1 Ownership2
- ------------------------------------------------------------------------------
Common Perry Douglas West 5,700,000 48.54
1270 Orange Avenue
Suite A
Winter Park, FL 32789
All Directors and 5,728,600 48.78
Officers as a group
NOTES
1 Each person has sole voting and investment power with respect to the
shares indicated as owned beneficially by each person.
2 Except as other wise noted, all shares listed are owned both of record
and beneficially.
3 Based upon 11,742,044 shares of Common Stock outstanding as of May 31,
1996.
c. Changes in Control.
Pursuant to an Asset Purchase Agreement ("Asset Purchase Agreement")
signed on October 20, 1995, among Interactive Technologies Corporation, Inc., a
Wyoming corporation ("Registrant"), Syneractive, Inc., a Florida corporation,
and Perry Douglas West, the Registrant purchased certain assets in exchange for
5,214,464 shares of the Registrant's common stock and agreed to purchase
additional assets for an additional 485,536 shares of the Registrant's common
stock.
Control of the registrant after this transaction was in the hands of
Perry Douglas West who previously owned approximately 47.82% of the outstanding
common stock and owned 50.04% of the outstanding common stock after the
completion of the acquisition of additional assets pursuant to the Asset
Purchase Agreement.
Prior to the transaction, no single shareholder held more than 10% of
the common stock. The directors and officers of the Registrant as a whole owned
l8.69% of the outstanding common stock of the Registrant prior to the
transaction.
Resolutions were delivered at closing electing Perry Douglas West as
Chairman of the Board of Directors and Chief Executive Officer of the
Registrant. At that time Morton J. Glickman resigned as Chairman and Director of
the Board of Directors.
Item 12. Certain Relationships and Related Transactions.
On October l8, l995 the Registrant entered into a Purchase Agreement
("Purchase Agreement") with Jayhead Investments, Ltd. for the sale of a certain
joint venture interest with CST Entertainment Imaging, Inc. in which the
Registrant had contributed its license to colorize black and white film and
videotape and other related features in certain European countries, the terms of
which are set forth in that certain license agreement, as amended, granted by
CST Entertainment Imaging, Inc. to Exergon, S.A., and subsequently assigned to
the Registrant and all proceeds due therefrom. This asset has been written off
of the Registrant's books and carries no value in the Registrant's financial
statements.
This Purchase Agreement provided for the exchange of this asset for the
satisfaction of $701,865 in debt owed by the Registrant to Jayhead Investment,
Ltd., a company which is controlled by a former Director and Officer of the
Company. This interest has been assigned subject to necessary third party
approval and the indebtedness forgiven.
On October 20, 1995, the Registrant executed the purchase of certain
asset pursuant to a Asset Purchase Agreement ("Asset Purchase Agreement") signed
on October 20, 1995 among Interactive Technologies Corporation, Inc., a Wyoming
21
<PAGE>
corporation ("Registrant"), Syneractive, Inc., a Florida corporation and Perry
Douglas West, the Registrant purchased certain assets in exchange for 5,214,464
shares of the Registrant's common stock and has agreed to purchase additional
assets for an additional 485,536 shares of the Registrant's common stock.
The assets purchased consist primarily of all right title and interest
in and to a video program concept and design created for interactive television
known as "Rebate TV(TM)", certain engineering reports and data, contract
receivables and cash in the approximate amount of $50,000 plus equipment
deposits in the amount of $43,875.
The additional assets which the Registrant agreed to purchase upon the
approval of the transfer by the Federal Communications Commission include
Federal Communications Commission Radio Station Licenses for Interactive Video
and Data Services radio service in service areas 137 and 90. These licenses are
subject to amounts due over the period of the licenses (five years) to the
Federal Communications Commission of $540,000 for service area 137 and $232,000
for service area 90. In addition, the license for service area 90 is subject to
a contract agreement which gives a third party the right to purchase, subject to
the retention of an interest in the nature of a 10% royalty, up to 90% of this
license for $500,000. These assets also include the rights to a contract for the
purchase of certain radio station equipment for the license area 90. These are
assets and do not include any current operations. The Registrant has placed the
net value of the total of these assets at $5,700,000.
Perry Douglas West is now Chief Executive Officer, and Director of the
Company.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
The information provided in Item 1(a) above, Business Development,
regarding the acquisition of television studios, post production facilities,
satellite links and remote production equipment located in Princeton, N.J., was
filed on Form 8K dated May 21, 1996, which is herein incorporated by reference.
The information provided in Item 11 (c) above, Change in Control, and
Item 12, Certain Relationships and Related Transactions, was filed on Form 8K
dated November 3, 1995, and amended on Form 8K/A dated December 12, 1995, which
is herein incorporated by reference.
The information provided in Item 8 above, Changes In and Disagreements
With Accountants on Accounting and Financial Disclosure, was filed on Form 8K
dated November 13, 1995, and amended on Form 8K/A dated November 28, 1995, which
is herein incorporated by reference.
22
<PAGE>
EXHIBIT INDEX
Exhibit
Page
3.0 Charter and By-Laws *
10.0 Material Contracts:
10.1 ITC lease with The Network Group, Inc. for Melbourne, Florida
office and engineering space, dated October 25, 1996 (P)
10.2 ITC lease with Williams-Builder Partnership for Winter Park,
Florida office space, dated March 21, 1996 (P)
10.3 ITC Equipment Lease Agreement with Studiolink Corporation,
dated March 27, 1996 (P)
10.4 ITC Employment Agreement with Chief Operating Officer/Director
Bob Poe, dated November 1, 1995 (P)
10.5 Satellite Network Television lease with LLB Realty,
L.L.C./Keller, Dodds & Wentworth for Princeton, New Jersey
television studio and production facility, dated March 1996(P)
21.0 Subsidiaries of the Registrant(P)
21.1 Satellite Network Television Corporate Charter/By-Laws,
filed April 9, 1996 (P)
* This exhibit was previously filed as an exhibit to the Registrant's Form 10
filed January 14, 1992 and is herein incorporated by reference.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Interactive Technologies Corporation, Inc.
by: _________________________________________
Perry Douglas West, Chief Executive Officer
by: _________________________________________
Joseph N. Dambro, Director of Finance
Dated: August ____, 1996
