UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from to
Commission File No. 33-55254-29
STERLING WORLDWIDE CORPORATION
(formerly Koala Capital Corporation)
(Exact name of Registrant as specified in its charter)
NEVADA 87-0438649
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2200 NW BOCA RATON BOULEVARD
SUITE 220
BOCA RATON, FLORIDA 33431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 367-8565
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of September 30, 1996
- ------------------------------------ ------------------------------------
$.001 Par Value Class A Common Stock 11,100,000 SHARES
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BASIS OF REPRESENTATION
General
The accompanying unaudited financial statements, as of September 30, 1996,
have been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information and footnotes necessary for a complete
presentation, of financial position, results of operations, cash flows and
stockholders' equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Operating results for the quarter ended September 30, 1996, are not necessarily
indicative of the results that can be expected for the year ending December 31,
1996.
In addition to the unaudited financial statements, as of September 30,
1996, attached hereto, the Company has elected to include an interim audited
financial statement prepared from the Company's books and records as of October
31, 1996. This added statement reflects certain changes which have occurred in
the Company's make up as a result of a letter of intent entered into on
September 25, 1996 to acquire control of Travelnet International and its
subsidiary, Sterling Travel.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Acquisition
On September 25, 1996 the Company entered into a non-binding letter of
intent with the controlling shareholder of Travelnet International. The
agreement provides that upon closing, which shall occur on or before December
25, 1996, the Company will own not less than 80% of Travelnet International.
Travelnet International owns and operates Sterling Travel. Sterling Travel is an
operating travel agency with unique characteristics and profit generating
aspects. Sterling actively recruits outside, independent travel consultants.
Presently, about 1,000 Sterling Travel affiliates use Sterling's licenses,
memberships and bonding to introduce and sell travel products to their corporate
and individual clients nationwide.
The travel affiliate receives up to 70% of the commission, with 30% or more
being retained by Sterling. Sterling also generates earnings from the sale of
commercial sabre software, professional travel reference materials, training
seminars, long distance services, internet virtual mall sites (retail store
fronts), and other high profit products carried by Sterling cruise and tour
departments. Management of the Company believes that the positive aspects of
Sterling, which include economies of scale, available financing for continued
growth, higher margin products that are available generally in the travel
industry, high quality management and demonstrated successful financial
management make Travelnet and Sterling Travel desirable targets for an
acquisition. The letter of intent calls for 10,000,000 common restricted shares
to be issued in the name of Lauri Gladstone, the controlling shareholder of
Travelnet International, to be deposited in escrow and be delivered to Lauri
Gladstone upon closing of the transaction. The shares have been issued in Lauri
Gladstone's name and are currently held in escrow by Jim Barber, the Company's
counsel.
<PAGE>
Change in Corporate Officers and Directors.
As part of the business combination and reorganization created by the
letter of intent described above, David Yeaman and Krista Nielson have resigned
as officers and directors of the Company. At the same time Mark Colacurcio was
appointed as the Company's sole officer and director, and currently fills the
role of President, Chairman of the Board and Corporate Secretary. The Company
filed Form 8-K with the Securities and Exchange Commission describing this
change.
Capital Requirements.
Travelnet International, the designated subsidiary of the Company, must
have capital to achieve its business plan which calls for growth from its
present level of 1,000 travel affiliates to 10,000 travel affiliates by the end
of 1998 and an increase in revenue from its current annualized level of about
$10,000,000 to an annualized level of about $100,000,000 in two to three years.
In order to obtain the necessary capital, Travelnet International has undertaken
a private placement offering to raise $1,000,000. This offering is currently
under way and sufficient monies have been raised to break escrow and further the
business of Travelnet International and Sterling Travel. At the time of
publication of this report, slightly less than $500,000 has been raised.
Travelnet International expects that it will raise the entire $1,000,000 prior
to closing the business combination between the Company and Travelnet
International, scheduled to be on or before December 25, 1996.
Participation in Prize Fight.
The Company has obtained a minority interest in the upcoming prize fight
between Sugar Ray Leonard and Macho Comacho, to be held in Atlantic City, New
Jersey in February, 1997. The Company will participate in profits generated from
ticket sales, product sales, local and worldwide television distribution, etc.
The Company's designated subsidiary, Sterling Travel, will benefit from
international exposure as a named sponsor in all press releases, promotional
material, television and printed press presentations and other material
regarding the fight.
Name Change
Pursuant to the letter of intent and in preparation to closing the
transaction described in the letter of intent, the Company changed its name on
October 28, 1996 from Koala Capital Corporation to Sterling Worldwide
Corporation.
3
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits Page
2 Letter of Intent L-1
99-1 Financial Statements as of September 30, 1996. F-1
99-1 Financial Statements as of October 31, 1996. E-1
Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 30, 1996 an 8-K was filed
to announce the signing of a letter of intent between the
Company and Travelnet International Corporation. The 8-K
also announced the resignation of two (2) directors and
appointment of a new director, as well as the announcement
of change in control of the Registrant. The 8-K was dated
August 27, 1996 and signed October 12, 1996.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STERLING WORLDWIDE CORPORATION
Dated: November 11, 1996 /s/ Mark Colacurcio
-------------------
Mark Colacurcio
President, Chairman of the Board,
Corporate Secretary and Director
5
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
ASSETS (unaudited)
------ ----------- ------------------
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 51,585 $ 50,000
------------------ ------------------
TOTAL CURRENT ASSETS 51,585 50,000
OTHER ASSETS
Investment (Note 5) 10,000 0
------------------ ------------------
$ 61,585 $ 0
================== ==================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Payable - officer (Note 6) $ 2,000 $ 0
------------------ ------------------
TOTAL CURRENT LIABILITIES 2,000 0
STOCKHOLDERS' EQUITY Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 11,100,000 shares
(1,100,000 at 12/31/95) 11,100 1,100
Additional paid-in capital 50,900 50,900
Deficit accumulated during the
development stage (2,415) (2,000)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 59,585 50,000
------------------ ------------------
$ 61,585 $ 50,000
================== ==================
</TABLE>
See Selected Notes to Financial Statements.
F - 1
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
5/2/86
(Date of
Three Months Ended Nine Months Ended inception) to
9/30/96 9/30/95 9/30/96 9/30/95 9/30/96
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Sales $ 0 $ 0 $ 0 $ 0 $ 0
Cost of sales 0 0 0 0 0
----------------- -------------- ------------- ------------- ------------------
GROSS PROFIT 0 0 0 0 0
General and administrative expenses 415 0 415 0 2,415
----------------- -------------- ------------- ------------- ------------------
NET INCOME (LOSS) $ (415) $ 0 $ (415) $ 0 $ (2,415)
================= ============== ============= ============= ==================
Net income (loss) per weighted average share $ .00 $ .00 $ .00 $ .00
================= ============== ============= =============
Weighted average number of common shares
used to compute net income (loss) per
weighted average share 2,186,957 1,000,000 1,464,964 1,000,000
================= ============== ============= =============
</TABLE>
See Selected Notes to Financial Statements.
F - 2
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
Par Value $0.001 Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balances at 5/2/86 (Date of inception) 0 $ 0 $ 0 $ 0
Issuance of common stock (restricted)
at $.002 per share at 8/7/86 1,000,000 1,000 1,000
Net loss for period (1,950)
------------------ --------------- ----------------- ------------------
Balances at 12/31/86 1,000,000 1,000 1,000 (1,950)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/87 1,000,000 1,000 1,000 (1,960)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/88 1,000,000 1,000 1,000 (1,970)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/89 1,000,000 1,000 1,000 (1,980)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/90 1,000,000 1,000 1,000 (1,990)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/91 1,000,000 1,000 1,000 (2,000)
Net income for year 0
------------------ --------------- ----------------- ------------------
Balances at 12/31/92 1,000,000 1,000 1,000 (2,000)
Net income for year 0
------------------ --------------- ----------------- ------------------
Balances at 12/31/93 1,000,000 1,000 1,000 (2,000)
Net income for year 0
------------------ --------------- ----------------- ------------------
Balances at 12/31/94 1,000,000 1,000 1,000 (2,000)
Issuance of common stock (restricted)
at $.50 per share at 12/1/95 100,000 100 49,900
Net income for year 0
------------------ --------------- ----------------- ------------------
Balances at 12/31/95 1,100,000 1,100 50,900 (2,000)
Issuance of common stock (restricted) at $.001
per share at 9/20/96 (Note 5) 10,000,000 10,000
Net loss for period (415)
------------------ --------------- ----------------- ------------------
Balances at 9/30/96 11,100,000 $ 11,100 $ 50,900 $ (2,415)
================== =============== ================= ==================
</TABLE>
See Selected Notes to Financial Statements.
F - 3
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
5/2/86
(Date of
Three Months Ended Nine Months Ended inception) to
9/30/96 9/30/95 9/30/96 9/30/95 9/30/96
------- ------- ------- ------- -------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net income (loss) $ (415) $ 0 $ (415) $ 0 $ (2,415)
Adjustments to reconcile net income
(loss) to cash used by operating
activities:
Amortization 0 0 0 0 50
----------------- -------------- ------------- ------------- ------------------
NET CASH (USED) BY
OPERATING ACTIVITIES (415) 0 (415) 0 (2,365)
INVESTING ACTIVITIES
Organization costs 0 0 0 0 (50)
----------------- -------------- ------------- ------------- ------------------
NET CASH USED BY
INVESTING ACTIVITIES 0 0 0 0 (50)
FINANCING ACTIVITIES
Proceeds from sale of common stock 0 0 0 0 52,000
Payable - officer 2,000 0 2,000 0 2,000
----------------- -------------- ------------- ------------- ------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,000 0 2,000 0 54,000
----------------- -------------- ------------- ------------- ------------------
INCREASE IN CASH
AND CASH EQUIVALENTS 1,585 0 1,585 0 51,585
Cash and cash equivalents at beginning
of period 50,000 0 50,000 0 0
----------------- -------------- ------------- ------------- ------------------
CASH & CASH EQUIVALENTS
AT END OF PERIOD $ 51,585 $ 0 $ 51,585 $ 0 $ 51,585
================= ============== ============= ============= ==================
</TABLE>
SUPPLEMENTAL INFORMATION
During the period ended September 30, 1996, the Company (pursuant to a letter of
intent) issued 10,000,000 shares of its restricted common stock to acquire
500,000 shares of Travelnet International Corporation ("Travelnet"). The
transaction has been recorded at par value of the stock issued. It is
anticipated that in the near future, Travelnet will become an operating
subsidiary of the Company and consolidated financial statements will be
prepared.
See Selected Notes to Financial Statements.
F - 4
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
SELECTED NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Methods
The Company recognizes income and expenses based on the accrual method
of accounting.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends.
Organization Costs
The Company amortized its organization costs over a five year period.
Income Taxes
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Tax credits are recorded in the year realized. Since the Company has
not yet realized income as of the date of this report, no provision
for income taxes has been made.
The Company utilizes the liability method of accounting for income
taxes as set forth in Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109"). Under the liability
method, deferred taxes are determined based on the difference between
the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse. An allowance against deferred tax assets is
recorded when it is more likely than not that such tax benefits will
not be realized.
At December 31, 1995, a deferred tax asset was not recorded due to the
Company's lack of operations to provide income to use the net
operating loss carryover of $2,000 which expires as follows:
Year Ended Expires Amount
--------------------------- -------------------------- ------------------
December 31, 1986 December 31, 2001 $ 1,950
December 31, 1987 December 31, 2002 10
December 31, 1988 December 31, 2003 10
December 31, 1989 December 31, 2004 10
December 31, 1990 December 31, 2005 10
December 31, 1991 December 31, 2006 10
------------------
$ 2,000
==================
A change in control of the Company will most likely eliminate the net
operating loss carryover.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investments with an original maturity of three months or less
when purchased to be cash equivalents.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Utah on
May 2, 1986 as Koala Capital Corporation and has been in the
development stage since incorporation. On December 30, 1993, the
Company was dissolved as a Utah corporation and reincorporated as a
Nevada corporation. On October 28, 1996, the name was changed to
Sterling Worldwide Corporation. The Company intends to enter into the
business of offering travel related services once Travelnet is
acquired.
F - 5
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
SELECTED NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000 shares of its
common stock to Capital General Corporation for $2,000 cash for an
average consideration of $.002 per share. On December 1, 1995, the
Company sold an additional 100,000 shares of its common stock to
Capital General Corporation for $50,000 cash for an average
consideration of $.50 per share. The Company's authorized stock
includes 100,000,000 shares of common stock at $.001 par value.
NOTE 4: RELATED PARTY TRANSACTIONS
The Company neither owns or leases any real property. Office services
through August 1996 were provided, without charge, by Capital General
Corporation. Office services are currently being provided without
charge by Travelnet. Such costs are immaterial to the financial
statements, and, accordingly, have not been reflected therein. The
sole officer and director of the Company is involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available,
such person may face a conflict in selecting between the Company and
his other business interests. The Company has not formulated a policy
for the resolution of such conflicts. Also see Note 6 for other
related party transactions.
NOTE 5: INVESTMENT
The investment is 500,000 shares of the common stock of Travelnet
International Corporation, a private Florida company. The investment
is recorded at a cost of $10,000, represented by par value of the
10,000,000 restricted shares of the Company's stock issued to acquire
the 500,000 shares pursuant to a letter of intent. The letter of
intent needs to be finalized by December 25, 1996. It is anticipated
that in the near future, Travelnet will become an operating subsidiary
of the Company.
NOTE 6: PAYABLE - OFFICER
At September 30, 1996, the Company owes $2,000 to its President for
funds advanced to the Company. The advance is non-interest bearing and
will be repaid in the near future.
NOTE 7: SUBSEQUENT EVENTS
During October, the Company sold 2,000,000 shares of Regulation S
stock for $125,000 cash.
F - 6
<PAGE>
KOALA CAPITAL CORPORATION
3098 South Highland Drive
Salt Lake City, Utah 84106
- --------------------------------------------------------------------------------
August 14, 1996
Board of Directors
Travelnet International Corp.
2200 Northwest Boca Raton Blvd., Suite 220
Boca Raton, FL 33431
Lauri Doll Gladstone
2200 Northwest Boca Raton Blvd., Suite 220
Boca Raton, FL 33431
RE: Proposed reorganization
Dear Prospective Parties:
This letter constitutes a letter of intent issued by Koala Capital Corp. on the
date first above written in contemplation of a reorganization in which Travelnet
International Corp. ("Travelnet"), Lauri Doll Gladstone ("Gladstone") and Koala
Capital Corp. ("Koala") will be parties. The terms of the proposed
reorganization are as follows:
1. Koala offers to acquire 500,000 common shares of Travelnet which are
presently owned beneficially and of record by Gladstone, or such other
number of Travelnet shares as shall constitute not less than 80% of the
total number of Travelnet shares which shall be outstanding on the date of
the closing.
2. As consideration for the aforesaid shares held by Gladstone, Koala will
issue in favor of Gladstone or her designees 10,000,000 One Mil ($.001) par
value common shares of Koala, or such other number of shares as shall, on
the date of the close, constitute not less than 90.0% of the issued and
outstanding shares of Koala.
3. The aforesaid transaction will be structured as a tax fee exchange pursuant
to the provisions of Section 368(a)(1)(B) and 351 of the Internal Revenue
Code of 1954, as amended. A competent tax opinion presented by either party
which opines that either party will suffer a taxable gain in the
contemplated transaction will constitute good cause to terminate or amend
this letter of intent.
4. Within ten (10) days of the execution of this letter of intent by all the
parties, Koala will cause to be issued certificates representing
10,000,000, or such other number of its One Mil par value common shares, as
shall constitute 90.0% of the shares of Koala outstanding after the close,
registered to Gladstone or such other persons and in such numbers as
Gladstone may have theretofore designated in writing. These certificates
shall be delivered to James N. Barber, Esq., Fourth Floor, Bank One Tower,
50 West Broadway, Salt Lake City, Utah 84111 who shall hold the same as
escrow agent pending the closing. These shares will not, when issued, have
been registered under the Securities Act of 1933, but will have been issued
in reliance on the exemption from registration provided by Section 4(2) of
the Act for transactions by an issuer not involving any public offering.
The certificates representing the shares will bear standard form
restrictive legends. By her signature hereon, Gladstone acknowledges that
she has been advised that the Koala shares to be issued to her in the
exchange will not, when they are issued, have been registered under the
Securities Act of 1933, that they are "Restricted Securities" as that term
is defined by paragraph (b) of SEC Rule 144 under the Act, and that she is
purchasing the shares for investment and not with a view to distribution.
Gladstone consents to the placement of investment legends on the
certificates representing the shares and the placement of stop-transfer
instructions barring transfer of the shares on the books and records of the
corporation until they are registered, or until in the opinion of counsel
for Koala, resale of the shares by their registered owners would be exempt
from registration.
L - 1
<PAGE>
Travelnet International Corp.
Lauri Doll Gladstone
August 14, 1996
Page 2
5. Within Fifteen days of the date first above written, Gladstone shall
deliver to the Escrow Agent certificates representing not less than 80% of
the issued and outstanding common shares of Travelnet.
6. Contemporaneously with the execution of this letter of intent, Koala shall
deliver the following documents to the Escrow Agent:
a. Duly executed resignations of all the present officers of Koala; and
b. Minutes executed by those directors prior to their resignations
appointing Mark Colacurcio, 1725 S.W. 8th Street, Boca Raton, Florida
33486 as the sole interim director, and as President and Secretary of
Koala. Those minutes will also contain a description of this agreement
and a specific authorization directing Colacurcio to execute a formal
plan and agreement of reorganization including the provisions set
forth in this agreement, at the closing.
7. The plan and Agreement of Reorganization contemplated by this Letter of
Intent shall be closed by the signature of the parties, within twenty-five
(25) days of the date hereof, at the offices of James N. Barber at the
address set forth above, at Salt Lake City, Utah.
8. At the closing, James N. Barber shall:
a. Deliver all certificates representing Koala shares which are in his
possession to Gladstone or her written designees; and
b. Deliver the Travelnet certificates in his possession to Koala.
If, as parties to the proposed reorganization, you agree with the terms set
forth herein, please sign this letter at the places indicated and return the
signed letters to the escrow agent at the address listed above, within five (5)
days.
KOALA CAPITAL CORP.
By:
President
Lauri Doll Gladstone
Accepted by Escrow Agent:
James N. Barber
L - 2
<PAGE>
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT............................... E-2
BALANCE SHEETS............................................. E-3
STATEMENTS OF OPERATIONS................................... E-4
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY............... E-5
STATEMENTS OF CASH FLOWS................................... E-6
NOTES TO FINANCIAL STATEMENTS.............................. E-7
E - 1
<PAGE>
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Sterling Worldwide Corporation
(A Development Stage Company)
We have audited the accompanying balance sheets of Sterling Worldwide
Corporation (formerly Koala Capital Corporation) (a development stage company)
as of October 31, 1996 and December 31, 1995 and 1994, and the related
statements of operations, changes in stockholders' equity, and cash flows for
the ten (10) months ended October 31, 1996 and the years ended December 31,
1995, 1994 and 1993 and for the period of May 2, 1986 (date of inception) to
October 31, 1996. 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 audits 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 audits provide 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 Sterling Worldwide Corporation
(formerly Koala Capital Corporation) (a development stage company) as of October
31, 1996 and December 31, 1995 and 1994 and the results of its operations,
changes in stockholders' equity and its cash flows for the ten (10) months ended
October 31, 1996 and the years ended December 31, 1995, 1994, and 1993 and for
the period of May 2, 1986 (date of inception) to October 31, 1996 in conformity
with generally accepted accounting principles.
s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
November 1, 1996
E - 2
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, December 31,
----------------- ---------------------------------------
1996 1995 1994
----------------- ------------------ -----------------
ASSETS
CURRENT ASSETS
<S> <C> <C> <C>
Cash in bank $ 123,489 $ 50,000 $ 0
Receivable - related party (Note 5) 53,750 0 0
Prepaid expense 2,000 0 0
----------------- ------------------ ------------------
TOTAL CURRENT ASSETS 179,239 50,000 0
OTHER ASSETS
Organization costs (Note 1) 0 0 0
Investment (Note 6) 10,000 0 0
----------------- ------------------ ------------------
10,000 0 0
----------------- ------------------ ------------------
$ 189,239 $ 50,000 $ 0
================= ================== ==================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Payable - officer (Note 7) $ 2,000 $ 0 $ 0
----------------- ------------------ ------------------
TOTAL CURRENT LIABILITIES 2,000 0 0
STOCKHOLDERS' EQUITY Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 13,100,000 shares
(1,100,000 at 12/31/95 and 1,000,000
at 12/31/94) 13,100 1,100 1,000
Additional paid-in capital 173,900 50,900 1,000
Earnings (deficit) accumulated during the
development stage 239 (2,000) (2,000)
----------------- ------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 187,239 50,000 0
----------------- ------------------ ------------------
$ 189,239 $ 50,000 $ 0
================= ================== ==================
</TABLE>
See Notes to Financial Statements.
E - 3
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Ten 5/2/86
Months (Date of
Ended Year Ended December 31, inception) to
--------------------------------------------
10/31/96 1995 1994 1993 10/31/96
----------------- -------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Commissions $ 3,750 $ 0 $ 0 $ 0 $ 3,750
Cost of sales 0 0 0 0 0
----------------- -------------- ------------- ------------- ------------------
GROSS PROFIT 3,750 0 0 0 3,750
General and administrative expenses 1,511 0 0 0 3,511
----------------- -------------- ------------- ------------- ------------------
NET INCOME $ 2,239 $ 0 $ 0 $ 0 $ 239
================= ============== ============= ============= ==================
Net income per weighted average share $ .00 $ .00 $ .00 $ .00
================= ============== ============= =============
Weighted average number of common shares
used to compute net income per
weighted average share 2,457,377 1,008,333 1,000,000 1,000,000
================= ============== ============= =============
</TABLE>
See Notes to Financial Statements.
E - 4
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Earnings
(Deficit)
Accumulated
Common Stock Additional During
Par Value $0.001 Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balances at 5/2/86 (Date of inception) 0 $ 0 $ 0 $ 0
Issuance of common stock (restricted)
at $.002 per share at 8/7/86 1,000,000 1,000 1,000
Net loss for period (1,950)
------------------ --------------- ----------------- ------------------
Balances at 12/31/86 1,000,000 1,000 1,000 (1,950)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/87 1,000,000 1,000 1,000 (1,960)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/88 1,000,000 1,000 1,000 (1,970)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/89 1,000,000 1,000 1,000 (1,980)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/90 1,000,000 1,000 1,000 (1,990)
Net loss for year (10)
------------------ --------------- ----------------- ------------------
Balances at 12/31/91 1,000,000 1,000 1,000 (2,000)
Net income for year 0
------------------ --------------- ----------------- ------------------
Balances at 12/31/92 1,000,000 1,000 1,000 (2,000)
Net income for year 0
------------------ --------------- ----------------- ------------------
Balances at 12/31/93 1,000,000 1,000 1,000 (2,000)
Net income for year 0
------------------ --------------- ----------------- ------------------
Balances at 12/31/94 1,000,000 1,000 1,000 (2,000)
Issuance of common stock (restricted)
at $.50 per share at 12/1/95 100,000 100 49,900
Net income for year 0
------------------ --------------- ----------------- ------------------
Balances at 12/31/95 1,100,000 1,100 50,900 (2,000)
Issuance of common stock (restricted) at $.001
per share at 9/20/96 (Note 6) 10,000,000 10,000
Issuance of common stock (Regulation S) at
$.0625 per share for cash at 10/29/96 2,000,000 2,000 123,000
Net income for period 2,239
------------------ --------------- ----------------- ------------------
Balances at 10/31/96 13,100,000 $ 13,100 $ 173,900 $ 239
================== =============== ================= ==================
</TABLE>
See Notes to Financial Statements.
E - 5
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Ten 5/2/86
Months (Date of
Ended Year Ended December 31, inception) to
--------------------------------------------
10/31/96 1995 1994 1993 10/31/96
----------------- -------------- ------------- ------------- -------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net income $ 2,239 $ 0 $ 0 $ 0 $ 239
Adjustments to reconcile net income
to cash provided by operating activities:
Amortization 0 0 0 0 50
----------------- -------------- ------------- ------------- ------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,239 0 0 0 289
INVESTING ACTIVITIES
Receivable - related party (53,750) 0 0 0 (53,750)
Prepaid expense (2,000) 0 0 0 (2,000)
Organization costs 0 0 0 0 (50)
----------------- -------------- ------------- ------------- ------------------
NET CASH USED BY
INVESTING ACTIVITIES (55,750) 0 0 0 (55,800)
FINANCING ACTIVITIES
Proceeds from sale of common stock 125,000 50,000 0 0 177,000
Payable - officer 2,000 0 0 0 2,000
----------------- -------------- ------------- ------------- ------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 127,000 50,000 0 0 179,000
----------------- -------------- ------------- ------------- ------------------
INCREASE IN CASH
AND CASH EQUIVALENTS 73,489 50,000 0 0 123,489
Cash and cash equivalents at beginning
of year 50,000 0 0 0 0
----------------- -------------- ------------- ------------- ------------------
CASH & CASH EQUIVALENTS
AT END OF PERIOD $ 123,489 $ 50,000 $ 0 $ 0 $ 123,489
================= ============== ============= ============= ==================
</TABLE>
SUPPLEMENTAL INFORMATION
During the period ended October 31, 1996, the Company (pursuant to a letter of
intent) issued 10,000,000 shares of its restricted common stock to acquire
500,000 shares of Travelnet International Corporation ("Travelnet"). The
transaction has been recorded at par value of the stock issued. It is
anticipated that in the near future, Travelnet will become an operating
subsidiary of the Company and consolidated financial statements will be
prepared.
See Notes to Financial Statements.
E - 6
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Methods
The Company recognizes income and expenses based on the accrual method
of accounting.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends.
Organization Costs
The Company amortized its organization costs over a five year period.
Income Taxes
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Tax credits are recorded in the year realized. Since the Company has
not yet realized significant income as of the date of this report, no
provision for income taxes has been made.
The Company utilizes the liability method of accounting for income
taxes as set forth in Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109"). Under the liability
method, deferred taxes are determined based on the difference between
the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse. An allowance against deferred tax assets is
recorded when it is more likely than not that such tax benefits will
not be realized.
At December 31, 1995, a deferred tax asset was not recorded due to the
Company's lack of operations to provide income to use the net
operating loss carryover of $2,000 which expires as follows:
Year Ended Expires Amount
--------------------------- ----------------------- ------------------
December 31, 1986 December 31, 2001 $ 1,950
December 31, 1987 December 31, 2002 10
December 31, 1988 December 31, 2003 10
December 31, 1989 December 31, 2004 10
December 31, 1990 December 31, 2005 10
December 31, 1991 December 31, 2006 10
------------------
$ 2,000
==================
A change in control of the Company will most likely eliminate the net
operating loss carryover.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investments with an original maturity of three months or less
when purchased to be cash equivalents.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Utah on
May 2, 1986 as Koala Capital Corporation and has been in the
development stage since incorporation. On December 30, 1993, the
Company was dissolved as a Utah corporation and reincorporated as a
Nevada corporation. On October 28, 1996, the name was changed to
Sterling Worldwide Corporation. The Company intends to enter into the
business of offering travel related services once Travelnet is
acquired.
E - 7
<PAGE>
Sterling Worldwide Corporation
(Formerly Koala Capital Corporation)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000 shares of its
common stock to Capital General Corporation for $2,000 cash for an
average consideration of $.002 per share. On December 1, 1995, the
Company sold an additional 100,000 shares of its common stock to
Capital General Corporation for $50,000 cash for an average
consideration of $.50 per share. On October 29, 1996, the Company sold
2,000,000 shares of Regulation S stock for $125,000 cash for an
average consideration of $.0625 per share. The Company's authorized
stock includes 100,000,000 shares of common stock at $.001 par value.
NOTE 4: RELATED PARTY TRANSACTIONS
The Company neither owns or leases any real property. Office services
through August 1996 were provided, without charge, by Capital General
Corporation. Office services are currently being provided without
charge by Travelnet. Such costs are immaterial to the financial
statements, and, accordingly, have not been reflected therein. The
sole officer and director of the Company is involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available,
such person may face a conflict in selecting between the Company and
his other business interests. The Company has not formulated a policy
for the resolution of such conflicts. Also see Notes 5 and 7 for other
related party transactions.
NOTE 5: RECEIVABLE - RELATED PARTY
At October 31, 1996, the Company is owed $53,750 by Richard Gladstone,
the husband of the controlling shareholder of Travelnet. Richard
Gladstone is owed $500,000 for a loan made to the promoters of the
boxing match between Sugar Ray Leonard and Hector Camacho to be held
in February, 1997. The loan bears interest at 24% per annum. $250,000
is due by March 15, 1997 and $250,000 plus all unpaid interest and a
commission of $37,500 is due by April 15, 1997. The loan is secured by
the promoter's sale of foreign transmission rights up to $600,000. The
promoter is also to use and recommend Sterling Travel, controlled by
Gladstone's wife, for as many travel services as possible in
connection with the boxing event. Sterling Travel is a subsidiary of
Travelnet.
During October, the Company purchased 10% of Gladstone's interest in
the receivable for $50,000. A $3,750 commission has been accrued at
October 31, 1996 which represents the Company's 10% share of the
commission.
NOTE 6: INVESTMENT
The investment is 500,000 shares of the common stock of Travelnet
International Corporation, a private Florida company. The investment
is recorded at a cost of $10,000, represented by par value of the
10,000,000 restricted shares of the Company's stock issued to acquire
the 500,000 shares pursuant to a letter of intent. The letter of
intent needs to be finalized by December 25, 1996. It is anticipated
that in the near future, Travelnet will become an operating subsidiary
of the Company.
NOTE 7: PAYABLE - OFFICER
At October 31, 1996, the Company owes $2,000 to its President for
funds advanced to the Company. The advance is non-interest bearing and
will be repaid in the near future.
E - 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contians summary financial information extracted from
Sterling Worldwide Corporation September 30, 1996 financial statements
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000894539
<NAME> Sterling Worldwide Corporation
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 51,585
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,585
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,585
<CURRENT-LIABILITIES> 2,000
<BONDS> 0
0
0
<COMMON> 11,100
<OTHER-SE> 48,485
<TOTAL-LIABILITY-AND-EQUITY> 61,585
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 415
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (415)
<INCOME-TAX> 0
<INCOME-CONTINUING> (415)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (415)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
