<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 5, 1996
STRUTHERS INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-2707 73074655
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1875 Century Park East, Suite 200, Los Angeles, CA 90067
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 557-1875
-----------------------------
Struthers Oil & Gas Corp., 601 Oneok Plaza, 100 Fifth Street, Tulsa, OK 74103
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
Attached are the restated financial statements of World
Interactive Network, Inc. and subsidiaries for the year ended
December 31, 1995.
(b) Proforma financial information.
Also attached is revised proforma financial information adjusted
as a result of the restated World Interactive Network, Inc.'s
financial statements as of December 31, 1995.
<PAGE> 3
SIGNATURES
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.
STRUTHERS INDUSTRIES, INC.
By: /s/ Richard Wade
--------------------------------
Richard Wade, Vice President
Dated: February 28, 1997
<PAGE> 4
WINCOM CORP.
(PREVIOUSLY WORLD INTEGRATED NETWORK OF COMPANIES, INC.) AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent auditors' report.................................................................... F-2
Audited financial statements for the years ended
December 31, 1994 and 1995
Balance sheet............................................................................... F-3
Statement of operations..................................................................... F-5
Statement of stockholders' equity........................................................... F-6
Statement of cash flows..................................................................... F-7
Notes to financial statements............................................................... F-10
Unaudited financial statements
Balance sheet at June 30, 1996 (unaudited)................................................. F-27
Statement of operation for six months ended June 30, 1995 and 1996 (unaudited)............. F-29
Statement of changes in stockholders' equity for the period January 1, 1996 through
June 30, 1996 (unaudited)............................................................... F-30
Statement of cash flows for the six months ended
June 30, 1995 and 1996 (unaudited)...................................................... F-34
Notes to financial statements.............................................................. F-37
</TABLE>
F-1
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of World Interactive Network, Inc.
We have audited the accompanying balance sheet of World Interactive Network,
Inc. and Subsidiaries (a development stage company) as of December 31, 1995, and
the related statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1995 and for the period from inception (June 9,
1993) to December 31, 1995. 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.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of World Interactive Network, Inc.
and Subsidiaries as of December 31, 1995, and the results of its operations and
its cash flows for the year ended December 31, 1995 and for the period from
inception (June 9, 1993) to December 31, 1995 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 14 to the
financial statements, the Company has agreed to sell substantially all of its
assets to a public company in exchange for ninety-five percent of the public
company's common stock. The majority of the Company's asset acquisitions are
contingent upon the closing of that sale. Should the sale not close, those
transactions could be rescinded, the assets returned to the seller and the
Company's stock canceled; yet the Company could still be subject to significant
liabilities. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters also are
described in Note 14. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
February 9, 1996, except for Notes 14 and
15, which are as of March 15, 1996 and except
for Note 17, which is as of September 6, 1996
F-2
<PAGE> 6
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
Pro Forma
Historical (see Note 17)
December 31, 1995 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 330,767 $ 330,767
Inventory (Note 3) 438,654 438,654
Prepaid expenses (Note 2) 656,689 656,689
Loans receivable 6,175 6,175
- -------------------------------------------------------------------------------------------------
Total current assets 1,432,285 1,432,285
- -------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net (Note 7) 206,831 206,831
- -------------------------------------------------------------------------------------------------
OTHER ASSETS
Broadcast licenses (Note 17) - 79,048,589
Contract for broadcast equipment build out (Note 17) - 4,600,080
Real estate held for investment (Notes 16 and 17) 4,349,762 28,431,335
Annuities (Note 4) 6,643,427 6,643,427
Investment in unconsolidated related company (Note 6) 615,973 615,973
Other licenses (Note 9) 232,497 232,497
Trust deed receivable 49,151 49,151
Loans receivable from related company 13,850 13,850
Intellectual property rights (Note 8) - -
- -------------------------------------------------------------------------------------------------
Total other assets 11,904,660 119,634,902
- -------------------------------------------------------------------------------------------------
$13,543,776 $121,274,018
- -------------------------------------------------------------------------------------------------
</TABLE>
F-3
<PAGE> 7
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
Pro Forma
Historical (see Note 17)
December 31, 1995 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,080,444 $ 1,080,444
Accrued commissions 1,328,024 1,328,024
Accrued officer compensation 93,742 93,742
Payroll taxes 469,002 469,002
Accrued interest 134,503 468,814
Loans from related parties 8,500 8,500
Debentures payable (Note 10) 115,300 115,300
Demand loans payable (Note 10) 562,215 562,215
Contract obligation (Note 17) - 12,500,000
- --------------------------------------------------------------------------------------------
Total current liabilities 3,791,730 16,626,041
- --------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Installment obligations to FCC (Note 17) - 16,457,650
- --------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 12 and 15)
- --------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Notes 11 and 17)
Common stock 55,342 55,342
Additional paid-in capital 699,690 699,690
Preferred stock
Series "A" 10,834,089 10,834,089
Series "B" 13,389,007 19,989,032
Series "C" 15,018,868 93,967,500
Shares issued for future obligations (4,529,639) (4,529,639)
Shares issued to entities with a major
investment in the Company's stock (Note 5) (10,892,992) (10,892,992)
Deficit accumulated during development stage (14,822,319) (21,932,695)
- --------------------------------------------------------------------------------------------
Total stockholders' equity 9,752,046 88,190,327
- --------------------------------------------------------------------------------------------
$13,543,776 $121,274,018
- --------------------------------------------------------------------------------------------
</TABLE>
See independent auditors' report and notes to financial statements.
F-4
<PAGE> 8
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
Year Ended Year Ended (June 9, 1993) to
December 31, December 31, December 31,
1995 1994 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ 11,530 $ - $ 11,530
- -------------------------------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE
Compensation and related 1,314,721 358,765 1,762,938
Management fee - - 610,000
Consulting and contract labor 2,337,618 564,667 3,027,269
Financing commissions 2,150,939 - 2,150,939
General operating 1,175,144 279,469 1,472,070
Lodging, meals and entertainment 721,029 212,965 1,039,097
Office occupancy 134,923 211,100 390,980
Real estate operations 420,570 - 420,570
Research and development 161,141 - 161,141
Reserve on real estate held for
investment (Note 5) 1,223,935 - 1,223,935
- -------------------------------------------------------------------------------------------------------------------
Total general and administrative 9,640,020 1,626,966 12,258,939
- -------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (9,628,490) (1,626,966) (12,247,409)
- -------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 143,427 - 143,427
Other deductions (23,641) (2,509,339) (2,542,080)
Interest expense (160,770) (15,487) (176,257)
- -------------------------------------------------------------------------------------------------------------------
Total other income (expense) (40,984) (2,524,826) (2,574,910)
- -------------------------------------------------------------------------------------------------------------------
NET LOSS $ (9,669,474) $4,151,792 $(14,822,319)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See independent auditors' report and notes to financial statements.
F-5
<PAGE> 9
<TABLE>
<CAPTION>
Common Stock Paid-In Series "A"
Shares Amount Capital Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT, inception from (June 9, 1993)
to December 31, 1995 -- $ -- $ -- -- $ --
Issued common stock for expenses paid by
sole shareholder and related parties 10,000 100 609,900 -- --
Net loss from inception (June 9, 1993) to
December 31, 1993 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1993 10,000 100 609,900 -- --
Common stock issued in exchange for:
License 5,990,000 59,900 (59,900) -- --
Debt 50,000 500 139,360 -- --
Preferred stock issued in exchange for:
Debentures -- -- -- 25,675 428,000
Related party debt -- -- -- 149,970 2,500,000
Sold preferred stock -- -- -- 63,170 1,052,982
Net loss for year -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1994 6,050,000 60,500 689,360 238,815 3,980,982
Reduced common stock par value from $.01
to $.001 per share -- (39,580) 39,580 -- --
Common stock issued in exchange for:
Services and security 4,672,000 4,672 500 -- --
LNN Communications 29,750,000 29,750 (29,750) -- --
Earl S. Kim 625,000 625 12,499,375 -- --
Common stock redeemed:
Earl S. Kim (625,000) (625) (12,499,375) -- --
Sold preferred stock -- -- -- 182,692 2,927,788
Preferred stock issued in exchange for:
Investment in entities with a major
investment in the Company's stock -- -- -- 59,988 1,000,000
Acquisition of assets -- -- -- 39,593 660,015
Payment of expenses -- -- -- 24,746 412,516
Future obligations -- -- -- 111,145 1,852,788
Net loss for year -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1995 55,341,992 $ 55,342 $ 699,690 656,979 $ 10,834,089
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-6
<PAGE> 10
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FROM INCEPTION (JUNE 9, 1993) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Preferred Stock
-----------------------------------------
Series "B" Series "C"
--------------------- ----------------- Other Accumulated
Shares Amount Shares Amount Items Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT, inception from (June 9, 1993)
to December 31, 1995 -- $ -- -- $ -- $ -- $ -- $ --
Issued common stock for expenses paid by
sole shareholder and related parties -- -- -- -- -- -- 610,000
Net loss from inception (June 9, 1993) to
December 31, 1993 -- -- -- -- -- (1,001,053) (1,001,053)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1993 -- -- -- -- -- (1,001,053) (391,053)
Common stock issued in exchange for:
License -- -- -- -- -- -- --
Debt -- -- -- -- -- -- 139,860
Preferred stock issued in exchange for:
Debentures -- -- -- -- -- -- 428,000
Related party debt -- -- -- -- -- -- 2,500,000
Sold preferred stock -- -- -- -- -- -- 1,052,982
Net loss for year -- -- -- -- -- (4,151,792) (4,151,792)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1994 -- -- -- -- -- (5,152,845) (422,003)
Reduced common stock par value from $.01
to $.001 per share -- -- -- -- -- -- --
Common stock issued in exchange for:
Services and security -- -- -- -- (284) -- 4,888
LNN Communications -- -- -- -- -- -- --
Earl S. Kim -- -- -- -- -- -- 12,500,000
Common stock redeemed:
Earl S. Kim -- -- -- -- -- -- (12,500,000)
Sold preferred stock -- -- 8,409 140,179 -- -- 3,067,967
Preferred stock issued in exchange for:
Investment in entities with a major
investment in the Company's stock 263,527 4,392,992 329,934 5,500,000 (10,892,992) -- --
Acquisition of assets 444,557 7,410,748 369,781 6,164,237 -- -- 14,235,000
Payment of expenses 11,110 185,205 116,254 1,937,947 -- -- 2,535,668
Future obligations 83,987 1,400,062 76,575 1,276,505 (4,259,355) -- --
Net loss for year -- -- -- -- -- (9,669,474) (9,669,474)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1995 803,181 $13,389,007 900,953 $15,018,868 $(15,422,631) $(14,822,319) $ 9,752,046
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See independent auditors' report and notes to financial statements.
F-6
<PAGE> 11
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
Year Ended Year Ended (June 9, 1993) to
December 31, December 31, December 31,
1995 1994 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,669,474) $ (4,151,792) $ (14,822,319)
Items not affecting cash:
Depreciation 53,166 - 53,166
Amortization of annuity discount (143,427) - (143,427)
Expenditures paid by sole shareholder
and related parties - - 610,000
Loss on exchange of preferred shares - 2,500,000 2,500,000
Expenses paid with issuance of stock 2,570,557 - 2,570,557
Reserve on real estate held for investment 1,223,935 - 1,223,935
Decrease (increase) in assets:
Prepaid expenses 28,341 (135,000) (106,659)
Increase (decrease) in liabilities:
Accounts payable 734,263 314,877 1,080,444
Accrued expenses 1,556,269 - 1,556,269
Payroll taxes payable 469,002 - 469,002
- -------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (3,177,368) (1,471,915) (5,009,032)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used for purchase of equipment (15,000) - (15,000)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (15,000) - (15,000)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repay bank overdraft (57,677) - -
Sale of debentures payable - 465,000 543,300
Proceeds from notes payable 562,215 - 562,215
Net loans from (to) affiliated companies (13,850) - (13,850)
Net loans from (to) others (35,520) 85,160 342,185
Issuance of preferred stock 3,067,967 852,982 3,920,949
- -------------------------------------------------------------------------------------------------------------------
Net cash from financing activities 3,523,135 1,403,142 5,354,799
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE> 12
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
Year Ended Year Ended (June 9, 1993) to
December 31, December 31, December 31,
1995 1994 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH 330,767 (68,773) 330,767
CASH at beginning of year - 11,096 -
- -------------------------------------------------------------------------------------------------------------------
CASH at December 31, 1995 $ 330,767 $ (57,677) $ 330,767
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 26,268 $ 15,487 $ 41,755
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING TRANSACTIONS:
Loans paid by issuing preferred stock $ - $ 200,000 $ 200,000
- -------------------------------------------------------------------------------------------------------------------
Fixed assets acquired by issuing preferred stock
Cost of assets $ 259,997 $ - $ 259,997
Expensed 30,002 - 30,002
Cash paid (15,000) - (15,000)
- -------------------------------------------------------------------------------------------------------------------
Preferred stock issued $ 274,999 $ - $ 274,999
- -------------------------------------------------------------------------------------------------------------------
Common stock issued in exchange for:
Paid-in capital $ - $ - $ 59,900
Loans payable - 139,860 139,860
- -------------------------------------------------------------------------------------------------------------------
Total $ - $ 139,860 $ 199,760
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE> 13
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
Year Ended Year Ended (June 9, 1993) to
December 31, December 31, December 31,
1995 1994 1995
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING TRANSACTIONS: (Continued)
<S> <C> <C> <C>
Preferred stock issued in exchange for:
Real estate held for investment 5,573,697 - 5,573,697
Entities with a major investment in
the Company 10,892,992 - 10,892,992
Annuities 6,500,000 - 6,500,000
Investment in unconsolidated related
company 615,973 - 615,973
Property and equipment 274,999 - 274,999
Future obligations 4,529,355 - 4,957,355
Inventory 438,654 - 438,654
Prepaid expenses 550,030 - 550,030
Other licenses 232,496 - 232,496
Trust deed receivable 49,151 - 49,151
Debentures - 428,000 428,000
- -------------------------------------------------------------------------------------------------------------------
Total $ 29,657,347 $ 428,000 $ 30,513,347
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See independent auditors' report and notes to financial statements.
F-9
<PAGE> 14
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
World Interactive Network, Inc., was incorporated in the State of Delaware
on June 9, 1993 and until August 4, 1994 was named LMN Studios, Inc.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and the following wholly-owned subsidiaries:
<TABLE>
<S> <C>
Bayshore Interactive Partners Mager, Inc.
The Bjorklund Corporation P. Kouri Corp
Capital Hills Development Corporation P.A.W. Inc.
Capital Hills Holding Shaker IVDS Partners, Inc.
D. Huebsch Corp. V.W.Y. Thermal, Inc.
Interactive Innovations Corp. WCI Partners, Inc.
L.C.I. Investments, Inc. Westborn Development
LNN Intellectual Properties
</TABLE>
The consolidated subsidiaries hold ownership of real estate and broadcast
licenses pending the close of the proposed asset sale described in Note
14. They are not actively engaged in business. All significant
intercompany transactions and balances have been eliminated in
consolidation.
NATURE OF OPERATIONS
The Company is currently in the development stage of operations
concentrating its efforts on raising capital, product research and
development, marketing its services, seeking acquisitions, and acquiring
the necessary assets to begin business operations.
The Company has acquired most of its assets by issuing its preferred stock
in acquisitions which are contingent upon the close of an agreement to
sell substantially all of the Company's assets as described in Note 14.
Should that transaction not close, those transactions could reverse,
canceling the preferred stock and returning the assets.
F-10
<PAGE> 15
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
MEDIA LINE OF BUSINESS
The Company intends to create, develop, finance and produce "new media"
entertainment, home shopping and interactive television programming to be
aired over a new network to bear the call letters "WIN". "New media" is
the business of providing audio, video and graphical content for cable,
broadcast, CD-Rom and on-line services for entertainment, information,
merchandising, advertizing and educational services. The Company is
acquiring FCC Low Power Television (LPTV) and Multiple Multi-Point
Distribution Services (MMDS) licenses related to future programming
distribution.
COMMUNICATIONS LINE OF BUSINESS
The Company is acquiring FCC Interactive Video and Data Services (IVDS)
licenses to offer services with utility based applications, cable
television applications and direct broadcast satellite applications.
REAL ESTATE
The Company has invested in California real estate, as a capital reserve,
with the intent of either disposing of the properties or using the
properties as collateral for investment capital to fund future operations.
USE OF 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 reported amount of the revenues and expenses
during the period. Actual results could differ from those estimates.
INVENTORY
Inventory is valued using the first-in, first-out (FIFO), lower of cost or
market method.
F-11
<PAGE> 16
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LICENSES
FCC licenses are amortized using the straight-line method over the
original license term beginning when they are placed in service.
FURNITURE AND EQUIPMENT
Furniture and equipment is stated at cost, depreciation is computed using
straight-line methods of depreciation over the estimated useful lives of
the assets which range from three to seven years.
INVESTMENTS IN UNCONSOLIDATED RELATED COMPANIES
The Company records its investment in a real estate limited liability
company at cost, adjusted for the Company's proportionate share of its
undistributed earnings or losses (equity method). The Company's investment
in Innovative Marketing Ventures, Inc. and Command Performance Network,
Inc. have been recorded, at cost, as an offset to stockholder's equity
because those companies' major assets are World Interactive Network, Inc.
preferred stock.
INTANGIBLES
All intangibles are amortized using the straight-line method and are
continually evaluated by management based upon the estimated discounted
cash flow expected from the intangible to determine if its carrying value
will be realized.
FINANCIAL INSTRUMENTS AND CREDIT RISK
The Company is currently dependent on its ability to raise and maintain
capital. It is entering a media and technology based development stage
market and will be subject to a competitive industry throughout the United
States.
In addition, the Company is a party to financial instruments, which
include marketable securities, investment in and loans to/from related
companies, a trust deed, and an annuity in an unrated insurance company.
Those instruments involve, to varying degrees, elements of credit risk.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument is represented by the amount
recognized on the financial statement. The Company does not have a policy
of requiring collateral to support financial instruments subject to credit
risk.
F-12
<PAGE> 17
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109. Deferred income taxes are provided
on timing differences between financial statement and income tax
reporting. The Company's temporary differences are due to capitalization
and amortization of start-up costs, net operating losses and depreciation
of fixed assets.
CASH
Consists of demand deposit accounts only.
2. PREPAID EXPENSES
Prepaid expense consists of the following amounts at December 31, 1995:
<TABLE>
<CAPTION>
Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Printing expense $ 250,000
Rental expense 166,667
Officer's and director's insurance 127,500
Consulting retainer 112,522
- -------------------------------------------------------------------------------------------------------------------
$ 656,689
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
3. INVENTORY
The Company has acquired certain artwork and commemorative collectors'
edition books to be marketed through the Company's planned home shopping
programming. The artwork was acquired in exchange for issuance of shares
of the Company's Cumulative Convertible Preferred Stock. The summary of
the acquisitions is as follows:
<TABLE>
<CAPTION>
Series of
Preferred
Seller Type Stock Shares Cost
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Energex Corporation Salvadore Dali Prints A 3,600 $ 60,012
Len Garon Limited Edition Prints B 12,036 200,640
Shane International Commemorative Books C 10,678 178,002
---------
$ 438,654
---------
</TABLE>
F-13
<PAGE> 18
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
4. ANNUITIES
On March 27, 1995, the Company purchased an Annuity from Keyes
International Insurance for 389,922 shares of the Company's Series "B"
7.5% Cumulative Convertible Preferred Stock valued at $6,500,000. The
annuity is due and payable on March 28, 2000 at its maturity value of
$7,500,000. Management expects to hold the annuity to maturity and is
amortizing the discount over the life of the contract.
Keyes International Insurance is an offshore insurance company which is
presently unrated. No collateral is provided under the annuity contract.
Management has estimated that the recoverable value of the annuity is
equal to the recorded value. However, it is reasonably possible that the
estimated value may change in the near term.
5. SHARES ISSUED TO ENTITIES WITH A MAJOR INVESTMENT IN THE COMPANY'S STOCK
The Company has acquired stock of two companies by exchanging shares. As a
result of these transactions, those companies have a significant
investment in the Company's stock as one of their major assets, the cost
has been reflected as an offset to the equity section. The transactions
are as follows:
INNOVATIVE MARKETING VENTURES
The Company acquired 30% of the outstanding stock of Innovative Marketing
Ventures on May 28, 1995 by issuing 200,000 shares of the Company's Series
"B" 7.5% Cumulative Convertible Preferred Stock valued at $3,334,000. The
transaction was accounted for as a purchase.
Innovative Marketing Ventures manufactures and distributes water boards,
snow boards, skateboards and related apparel products. Their total assets
as of June 30, 1995 total approximately $4,700,000 and their stockholder's
equity is approximately $4,100,000. Included in their assets and equity is
$3,334,000 World Interactive Network stock, $360,000 is intangibles and
$851,000 is a 5 year maturity annuity.
COMMAND PERFORMANCE NETWORK (CPN)
The Company issued 59,988 shares of its Series "A" Cumulative Convertible
Preferred Stock and 329,934 shares of its Series "C" Cumulative
Convertible Preferred Stock for a total consideration of $6,500,000 in
connection with a memorandum of understanding dated June 7, 1995.
CPN is also a development stage company and is preparing to produce a
sports information channel for cable television, satellite broadcast and
the internet.
F-14
<PAGE> 19
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
5. SHARES ISSUED TO ENTITIES WITH A MAJOR INVESTMENT IN THE COMPANY'S STOCK
(Continued)
COMMAND PERFORMANCE NETWORK (CPN) (Continued)
On November 17, 1995, the Company agreed to accept CPN Series "A"
preferred shares that are convertible into two common shares for each
preferred share when either (i) CPN is able to liquidate all of the
preferred stock it has received from the Company or (ii) the Company
redeems for cash its preferred stock for $6.00 per share. In consideration
for this change, the Company was relieved of its obligation to provide any
additional financing.
As of July 31, 1995, the assets and stockholders' equity of Command
Performance Network, Inc. were comprised primarily of the World
Interactive Network, Inc. stock and Command Performance Network, Inc.
subscriptions receivable.
6. INVESTMENT IN UNCONSOLIDATED RELATED COMPANY
The Company acquired 50 percent ownership in a limited liability company
which holds real estate. The other 50 percent member is the manager of the
company. The original cost of the investment was recorded at the
liquidation value of the shares issued to acquire the Company's interest.
7. PROPERTY AND EQUIPMENT
The property and equipment is comprised as follows:
<TABLE>
<CAPTION>
Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Vehicles $ 259,997
Less accumulated depreciation 53,166
- -------------------------------------------------------------------------------------------------------------------
$ 206,831
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
8. INTELLECTUAL PROPERTY RIGHTS
On April 5, 1994, the Company was granted a non-exclusive right to utilize
certain technology referred to as the "Vault" in connection with its
specialized interactive television programming. The license is for the
full duration of the existence of the licensed technology. The Company
issued 5,990,000 shares of common stock to its then sole shareholder to
acquire the license.
On June 30, 1995, the Company acquired the underlying intellectual
property rights for the "Vault" technology by issuing 29,750,000 shares of
common stock to its majority stockholder to acquire LNN Intellectual
Properties, Inc.
F-15
<PAGE> 20
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
8. INTELLECTUAL PROPERTY RIGHTS (Continued)
Generally accepted accounting principles require that the license and the
underlying intellectual property rights, referred to above, be valued at
the lower of predecessor cost (not including research and development
costs) or recoverable value. The shareholder has represented that its cost
in the technology was substantially research and development; therefore,
generally accepted accounting principles require these assets be recorded
at zero.
9. OTHER LICENSE
On July 26, 1995, the Company purchased a license from Demand
Communications, Inc. to be the sole and exclusive provider of TV generated
content pertaining to direct response products and sources, including but
not limited to television direct response formats and/or promotions which
are to be reformatted for Internet Dial-Up (On Line) service, via the
"MindWire" Network which license grants WIN-TV the exclusive right to list
itself, through a dedicated "WIN" button, on the MindWire Network
Navigator. The MindWire Network Navigator is a utility application used to
assist end users in navigating MindWire Servers which have volunteered to
become part of the MindWire Network. The MindWire Network is a linking of
MindWire servers throughout the world via a feature called WIPLINK and the
Internet.
As consideration for the license, the Company agreed to issue 14,997
shares of its Series "C" Cumulative Convertible Preferred Stock valued at
$232,497. In addition, the Company will pay a royalty on all promotions
advertised on the WIN-TV MindWire. The royalty is approximately 5% of the
net sales price.
10. DEBENTURES AND DEMAND LOANS PAYABLE
DEBENTURES PAYABLE
During 1994 and 1993 the Company issued $543,300 12% participating
debentures due one year from the issue date. During 1994 $428,000 of these
debentures were exchanged for 25,675 Preferred Shares of Series "A"
Cumulative Preferred Stock. The remaining debentures are due on demand
with interest payable monthly.
DEMAND LOANS PAYABLE
The Company has borrowed from various individuals with no stated interest
or payment terms, and are due on demand.
F-16
<PAGE> 21
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
11. STOCKHOLDERS' EQUITY
The Company has authorized common and three series of preferred shares as
follows:
COMMON STOCK
During 1995 the Company increased the number of authorized shares of
common stock from 25,000,000 shares to 75,000,000 shares for purposes of
carrying out its business plan and to award certain key officers,
directors and consultants equity interests in the Company as partial
compensation for services rendered. Of these shares, 4,672,000 were
awarded as compensation totaling $5,172. In addition, the Company changed
its par value from .01 to .001.
As of December 31, 1995, the issued and outstanding shares totaled
55,341,992 shares. The Company has reserved 19,500,000 shares of common
stock for issuance upon conversion of the Series "A", "B", and "C"
preferred shares described below.
A certificate for an additional 625,000 shares was issued in December 1995
and was immediately contractually redeemed by the Company in an agreement
to exchange $12,500,000 in market value of restricted common stock upon
the closing of the transaction described in Note 14. The exchange of
shares will result in the $12,500,000 becoming minority interest in the
consolidated assets.
PREFERRED "A" STOCK
On April 4, 1994, the Company authorized 900,000 shares of its $16.67
Series "A" Cumulative Convertible Preferred Stock. There were 656,979
shares issued and outstanding at December 31, 1995. Each Series "A" share
is convertible into two common shares. The shares accrue dividends at 10%
per year. The Board of Directors has not authorized payment of accrued
dividends.
PREFERRED "B" STOCK
On March 23, 1995, the Company authorized 1,200,000 shares of its "B"
Cumulative Convertible Preferred Stock with an annual dividend of 7.5%.
Each share is convertible into one and one-half common shares. As of
December 31, 1995, 1,199,103 shares of the Series "B" Preferred Stock was
issued and outstanding.
PREFERRED "C" STOCK
On June 25, 1995, the Company authorized 6,000,000 shares of its $16.67
Series "C" Cumulative Convertible Preferred Stock bearing an annual
dividend yield of 7%. Each share is convertible into two shares of common
stock. As of December 31, 1995, the Company had 5,636,924 shares of its
Series "C" Preferred Stock issued and outstanding.
F-17
<PAGE> 22
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
11. STOCKHOLDERS' EQUITY (Continued)
CONVERSION FEATURE
The Series "A", "B" and "C" Cumulative Convertible Preferred Stock shall
be convertible at the option of the holder upon the occurrence of an
initial public offering of common stock underwritten pursuant to a
registration statement filed under the Securities Act of 1933.
ACCUMULATED PREFERRED DIVIDENDS
Total accumulated but undeclared dividends are approximately as follows:
<TABLE>
<CAPTION>
Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Series "A" $ 890,939
Series "B" 1,040,836
Series "C" 468,256
- -------------------------------------------------------------------------------------------------------------------
$2,400,031
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
12. LEASING ACTIVITIES AND OBLIGATIONS
The Company has assumed a lease for corporate office space which expires
December 31, 1997. Lease payments of $7,576 are due monthly for the term
of the lease.
The Company has also leased a property in Los Angeles to provide lodging,
meals and entertainment for visitors doing business with the Company as
well as for key Company executives. The lease is for two (2) years and
expires on October 17, 1996. Rent payments are $180,000 per year payable
annually in advance.
The Company has leased equipment and automobiles under operating leases
with lease periods ranging from two to five years. The monthly payments
total $6,060 for the equipment and $5,260 for the automobiles.
F-18
<PAGE> 23
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
12. LEASING ACTIVITIES AND OBLIGATIONS (Continued)
Total rent expense for 1995 totaled $393,452. Future minimum lease
payments for the operating leases are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
1996 $ 223,297
1997 211,561
1998 99,560
1999 72,717
2000 70,654
- -------------------------------------------------------------------------------------------------------------------
$ 677,789
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
13. INCOME TAXES
As of December 31, 1995, the net deferred income tax asset arising because
of timing difference from the capitalization and amortization of start-up
costs for tax accounting and due to the net operating loss carryforward
was approximately $5,000,000. Because it is more likely than not that the
deferred tax asset will not be realized, a valuation allowance of an equal
amount has been used to offset the recognition in the financial
statements.
14. AGREEMENT TO SELL ASSETS - GOING CONCERN
On May 25, 1995 (as amended on March 15, 1996), the Company agreed to sell
substantially all of its assets to Struthers Industries, Inc. (Struthers)
in exchange for approximately ninety-five percent of Struthers' issued and
outstanding common stock on a fully diluted basis. The sale has not yet
been consummated and is contingent upon a number of matters including;
settlement of two class action lawsuits pending against Struthers and
three (3) of its directors, stockholder approval, the formation of a
liquidating voting trust, the Company's acceptance of Struthers' balance
sheet, a 3:1 reverse stock split, regulatory approval and other matters.
Many of the Company's acquisitions of assets are contingent upon
satisfactory consummation of the sale to Struthers. Should the sale not
close, those transactions could be rescinded, the assets returned to the
seller and the Company's stock returned. This transaction was completed on
September 6, 1996, see note 17.
F-19
<PAGE> 24
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
14. AGREEMENT TO SELL ASSETS - GOING CONCERN (Continued)
Because the Company requires the liquidity resulting from the transaction
to continue to meet its current obligations and continue with its business
plan, this contingency creates an uncertainty about the Company's ability
to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if the Company is unable to
continue as a going concern.
Management has alternative plans to raise the capital needed to continue
its development stage activities and believes that most of those who have
sold assets contingent upon closing the Struthers transaction would accept
an alternative plan on similar terms.
15. COMMITMENTS AND CONTINGENCIES
SHARES ISSUED FOR FUTURE OBLIGATIONS
The Company has issued Series "A", "B" and "C" Cumulative Convertible
Preferred Shares to secure payments of amounts due, as a retainer for
future services or as a guarantee. Those shares are reflected as
outstanding with a corresponding charge to equity until the consideration
for the shares is realized.
The shares issued are summarized as follows:
<TABLE>
<CAPTION>
Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Guarantee Bond - 59,998 shares of the Company's Cumulative Convertible
Preferred Stock has been issued as collateral for a one million dollar
5-year guarantee bond for Innovative Marketing Ventures $ 1,000,000
Legal Fees - The Company issued 24,000 shares of the Company's Series "A"
and 6,000 shares of Series "B" Cumulative Convertible Preferred Stock
as security for legal fees due and payable 500,000
Retainers - The Company issued shares of Series "A", Series "B" and Series
"C" preferred stock and shares of common stock to various individuals as
retainers to guarantee the availability of their
services. As of December 31, 1995, no services have been utilized 3,029,355
- -------------------------------------------------------------------------------------------------------------------
$ 4,529,355
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
F-20
<PAGE> 25
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
15. COMMITMENTS AND CONTINGENCIES (Continued)
AGREEMENT TO DELIVER PUBLICLY TRADED SECURITIES
The Company has entered into agreements whereby the Company has agreed to
deliver, subject to federal and state securities laws, publicly traded
common stock in exchange for services and assets. The agreements require
the stock to have a stated market value when paid. Specific delivery dates
are provided and range from 45 to 90 days after closing on the Struthers
Agreement as described in Note 14.
The total amount committed as of December 31, 1995 was $475,000 and
through March 15, 1996 increased to approximately $82,494,000.
REDEMPTION OF PREFERRED SHARES
The Company has agreements with certain preferred stockholders holding
3,834,288 shares of Series "C" Cumulative Convertible Preferred Stock to
exchange each share for two common shares of publicly traded stock after
the closing of the transaction described in Note 14. If the shares are
trading at less than $8.3125 per share, the Company has agreed to issue
additional shares to result in a value of $16.625 per preferred share
exchanged. The redemption would result in a decrease in stockholders'
equity and an increase in the minority interest in consolidated assets.
16. REAL ESTATE HELD FOR INVESTMENT
Real estate held for investment at December 31, 1995 is all located in
California and is summarized as follows:
<TABLE>
<CAPTION>
Name Date Location Type Cost Liens
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Erhart/Walker 05/26/95 Adelanto Lots $ 175,002 $ 55,000
Pismo Beach 07/22/95 San Luis Obispo Lots 1,000,000 190,000
Tulare-Willow Springs 08/11/95 Orosi 91 Lots 864,506 147,750
Tulare Krause 08/04/95 Springville Lots 204,208 33,850
Fresno-Katzman/Krause 06/17/95 Kerman High school 2,000,000 221,000
Fresno BIG 06/27/95 Fresno Elementary school 699,980 -
Adelanto-Brooks 06/06/95 Adelanto Lots 379,992 -
San Bernardino-Penner 07/18/95 San Bernardino Lots 250,009 -
Reserve on real estate
held for investment (1,223,935)
--------------------------
$ 4,349,762 $ 647,600
--------------------------
</TABLE>
F-21
<PAGE> 26
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
In recognition of the potential for continued uncertainty in the
California real estate market the Company has provided for a general
reserve of $1,223,935 against real estate held for investment.
17. SUBSEQUENT EVENTS
Subsequent to year-end, the Company entered into agreements to acquire
approximately $60,292,000 in assets. These assets were acquired through
the issuance of preferred stock or by agreements to issue future publicly
traded securities (see Note 15).
On January 31, 1996, the Company issued 149,970 shares of Series "C"
Cumulative Convertible Preferred Stock to EON Corporation for the
acquisition of equipment. In addition the Company entered into an
agreement with EON Corporation whereby the Company has the rights to
utilize up to 50 percent of the IVDS spectrum currently controlled by EON
Corporation for certain applications. In exchange, EON Corporation is also
granted rights to 50 percent of the bandwidth spectrum covered by the
Company's IVDS licenses.
On February 1, 1996, the Company issued 44,991 shares of Series "C"
Cumulative Convertible Preferred Stock to Low Power TV, Inc. ("LPTV") to
lease air time; in addition the Company has committed to provide LPTV with
$750,000 of equipment.
F-22
<PAGE> 27
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
17. SUBSEQUENT EVENTS (Continued)
On September 6, 1996, the Company consummated the transaction as discussed
in Note 14. The assets and liabilities resulting from transaction are
listed as follows:
REAL ESTATE HELD FOR INVESTMENT
The Company has entered into agreements to acquire real estate assets in
non-cash transactions. A summary of the real estate is as follows:
<TABLE>
<CAPTION>
Name Date Location Type Cost Liens
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fresno-Energex 05/24/95 Fresno House 135,010 -
Capital Hills Holding 08/31/95 Kern Lots 6,860,705 125,000
Capital Hills Dev. 08/31/95 Kern Lots 6,860,705 125,000
The Bjorklund Corp. 08/28/95 Riverside House 850,004 -
P. Kouri Corp. 08/31/95 San Bernardino Lots 1,059,995 70,000
VWY Thermal, Inc. 08/28/95 Los Angeles Various 4,974,995 206,000
L.C.I. Investments 08/31/95 Fresno Lots 2,316,196 130,000
Pudwill Commercial 10/12/95 Santa Maria 4 Office Buildings 2,333,333 1,450,000
Pudwill Lot 10/12/95 Santa Maria Lot 1,399,997 250,000
D. Huebsch Corp. 10/12/95 Rancho Mirage Condo 266,670 -
Karadetian (Deposit) 11/06/95 Belair Lots 100,020 -
Westborn Development 11/10/95 San Marcos Lots 2,600,004 -
Petty Trust 12/27/95 Riverside Lots 1,100,004 -
Reserve on real estate
held for investment (6,776,065)
--------------------------
$24,081,573 $2,356,000
--------------------------
</TABLE>
The liens on the real estate acquired remain the obligation of the seller;
therefore, they are contingent liabilities of the Company.
The Company acquired the real estate described above by issuing shares of
WIN's Series "B" and "C" Cumulative Convertible Preferred Stock.
Management has estimated that the properties can be sold for at least
their recorded value.
F-23
<PAGE> 28
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
17. SUBSEQUENT EVENTS (Continued)
BROADCAST LICENSES
The Company has entered agreements to acquire broadcast licenses in
non-cash transactions primarily in exchange for the Company's Series "C"
7% Cumulative Convertible Preferred Stock and assumption of installment
obligations to the FCC. A summary of the licenses acquired along with
their cost is as follows:
<TABLE>
<CAPTION>
Acquisition Shares Debt
Name Date Type No. Issued Assumed Cost
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eagle 08/31/95 IVDS 15 599,880 $ 2,957,000 $ 12,957,000
Earl S. Kim 12/29/95 MMDS 3 Contract
Obligation - 12,500,000
Elleron 07/21/95 IVDS 12 450,240 2,223,000 9,728,501
Shaker Partners 08/31/95 IVDS 9 286,865 2,538,000 7,320,039
Rose Regency 06/09/95 IVDS 9 334,738 1,246,000 6,826,082
Micro-Lite 08/31/95 MMDS 12 359,964 - 6,000,600
WCI 08/31/95 IVDS 3 214,414 1,545,000 5,119,281
21st Century Interactive 08/17/95 IVDS 7 189,516 1,476,000 4,635,232
Interactive Innovations 08/31/95 IVDS 5 160,551 1,100,000 3,776,385
Interactive Control 08/31/95 IVDS 2 160,268 570,000 3,241,667
IVIDCO 08/17/95 IVDS 4 90,343 565,000 2,071,018
WCA 08/31/95 IVDS 8 103,703 296,250 2,024,979
P.A.W. 08/31/95 IVDS 5 76,036 582,000 1,849,521
Mager Corp., Inc. 08/31/95 IVDS 1 59,785 456,000 1,452,616
21st Century Group 08/31/95 IVDS 5 66,143 268,000 1,370,604
Bay Shore 08/31/95 IVDS 3 45,884 262,000 1,026,886
Georgia Felger 08/31/95 IVDS 4 48,135 133,400 935,810
Emerging Tech. 08/31/95 IVDS 1 34,340 240,000 812,448
----------- ------------ ------------
3,280,805 $16,457,650 $ 83,648,669
----------- ------------
Less portion of purchase price allocated to complete the
minimum FCC required broadcast equipment build out 4,600,080
------------
$ 79,048,589
------------
</TABLE>
F-24
<PAGE> 29
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
17. SUBSEQUENT EVENTS (Continued)
The FCC does not allow certain bidding credits granted the original
licensee, the Company has agreed to pay the additional cost for the
license. The bidding credits allowed for the above licenses totaled
$3,915,750. The licenses will not be amortized until they are placed in
service.
The licenses are also subject to certain benchmark requirements
established by the FCC relating to commencing service. The Company has not
met the first benchmark; however, the FCC has waived the requirement.
Should required benchmarks in the future not be met, the licenses involved
could be forfeited.
The Company has recorded the acquisition of the licenses at the
liquidation preference value of the preferred stock issued plus the debt
assumed. Management has estimated that the recoverable value of the
licenses exceeds their recorded value. However, it is reasonably possible
that the estimated value or the useful life of the licenses may change in
the near term.
Transfer of the licenses is dependent upon the sellers' completion of the
build out of the equipment required by the FCC, unless a waiver is
obtained from the FCC. The $4,600,080 of the purchase price allocated to
broadcast equipment is the estimated cost to build out high power
equipment. The cost of that equipment could increase should the
geographical area require low power equipment rather than high power. The
build out of equipment required by the FCC is the obligation of the
original license holder (seller).
Subsequent to year-end the Company and Micro-Lite Television revised the
existing agreement and therefore adjusted the purchase price to
$4,567,580.
LONG-TERM DEBT - INSTALLMENT OBLIGATIONS TO FCC
In connection with the acquisition of broadcast licenses, the Company has
agreed to assume related installment obligations to the FCC. The
obligations are payable in quarterly installments of interest only through
December 31, 1996 and in equal payments of principal and interest through
December 31, 1999. Interest on the obligations varies per license from
7.125 to 7.71 percent.
F-25
<PAGE> 30
WORLD INTERACTIVE NETWORK, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
17. SUBSEQUENT EVENTS (Continued)
The following is a summary of the principal maturity of long-term debt
during the next five years.
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
1997 $ 4,295,347
1998 5,666,582
1999 6,495,721
- -------------------------------------------------------------------------------------------------------------------
$16,457,650
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
F-26
<PAGE> 31
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
- --------------------------------------------------------------------------------
(Unaudited) (Audited)
Pro-Forma
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ -- $ 330,767
Inventory -- 438,654
Prepaid expenses 1,173,589 656,689
Loans receivable 164,371 6,175
- --------------------------------------------------------------------------------
Total current assets 1,337,960 1,432,285
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net (Note 6) 2,536,586 206,831
- --------------------------------------------------------------------------------
OTHER ASSETS
Broadcast licenses (Note 15) -- --
Contract for broadcast equipment
build out (Note 15) -- --
Real estate held for investment
(Note 14) 8,349,779 4,349,762
Property rights and annuity (Note 2) -- 6,643,427
Investment in unconsolidated
companies (Note 5) 8,141,532 615,973
Other licenses (Note 8) 262,497 232,497
Trust deed receivable 49,151 49,151
Loans receivable from related
company (Note 3) 8,065,152 13,850
Trademark - WINCOM 14,500 --
Intellectual property rights
(Note 7) -- --
- --------------------------------------------------------------------------------
Total other assets 24,882,611 11,904,660
- --------------------------------------------------------------------------------
$28,757,157 $13,543,776
- --------------------------------------------------------------------------------
</TABLE>
F-27
<PAGE> 32
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
- --------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,267,474 $ 1,080,444
Accrued commissions -- 1,328,024
Accrued officer compensation -- 93,742
Payroll taxes 90,630 469,002
Accrued interest 134,503 134,503
Loans from related parties -- 8,500
Debentures payable (Note 9) 115,300 115,300
Demand loans payable (Note 9) 142,947 562,215
Contract obligation (Note 15) -- --
Bank overdraft 151,937 --
- --------------------------------------------------------------------------------
Total current liabilities 1,902,791 3,791,730
- --------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Installment obligations to FCC
(Note 15) -- --
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 13)
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Notes 10 and 15)
Common stock 73,236 55,342
Additional paid-in capital 687,486 699,690
Preferred stock
Series "A" 13,471,172 10,834,089
Series "B" 13,608,992 13,389,007
Series "C" 27,544,118 15,018,868
Series "D" 18,608,846 --
Stock subscriptions receivable (135,010) --
Shares issued for future obligations
(Note 13) (7,609,179) (4,529,639)
Shares issued to entities with a major
investment in the
Company's stock (Notes 3 and 4) (10,743,022) (10,892,992)
Deficit accumulated during develop-
ment stage (28,652,273) (14,822,319)
- --------------------------------------------------------------------------------
Total stockholders' equity 26,854,366 9,752,046
- --------------------------------------------------------------------------------
$ 28,757,157 $ 13,543,776
- --------------------------------------------------------------------------------
</TABLE>
F-28
<PAGE> 33
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Six Six From Inception
Months Ended Months Ended (June 9, 1993) to
June 30, June 30, June 30,
1996 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ 7,310 $ 1,000 $ 18,840
- --------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE
Compensation and related 832,131 272,303 2,595,069
Management fee -- -- 610,000
Consulting and contract labor 5,887,520 126,073 8,914,789
Financing commissions 1,313,348 103,363 3,464,287
General operating 1,633,833 239,731 3,105,903
Bad debt expense 1,009,837 -- 1,009,837
Lodging, meals and entertainment 757,515 316,437 1,796,612
Office occupancy 146,603 61,646 537,583
Real estate operations 74,497 5,106 495,067
Research and development -- 161,141 161,141
Reserve on real estate held for
investment (Note 14) -- -- 2,070,682
- --------------------------------------------------------------------------------
Total general and administrative 11,655,284 1,285,800 24,760,970
- --------------------------------------------------------------------------------
LOSS FROM OPERATIONS (11,647,974) (1,284,800) (24,742,130)
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income -- -- 143,227
Other deductions (2,157,471) (1,600) (4,699,551)
Interest expense (24,509) (13,009) (1,131,667)
- --------------------------------------------------------------------------------
Total other income (expense) (2,181,980) (14,609) (5,687,791)
- --------------------------------------------------------------------------------
NET LOSS $(13,829,954) $(1,299,409) $(30,429,921)
- --------------------------------------------------------------------------------
</TABLE>
F-29
<PAGE> 34
<TABLE>
<CAPTION>
Common Stock Paid-In Series "A"
Shares Amount Capital Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT, inception from (June 9, 1993)
to December 31, 1995 -- $ -- $ -- -- $ --
Issued common stock for expenses paid by
sole shareholder and related parties 4,620,000 4,620 605,380 -- --
Net loss from inception (June 9, 1993) to
December 31, 1993 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1993 4,620,000 4,620 605,380 -- --
Common stock issued in exchange for:
License 15,700,000 15,700 (15,700) -- --
Debt 50,000 50 139,810 -- --
Preferred stock issued in exchange for:
Debentures -- -- -- 25,675 428,000
Related party debt -- -- -- 149,970 2,500,000
Sold preferred stock -- -- -- 63,170 1,052,982
Net loss for year -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1994 20,370,000 20,370 729,490 238,815 3,980,982
Common stock issued in exchange for:
Services and security 5,222,000 5,222 -- -- --
LNN Communications 29,750,000 29,750 (29,750) -- --
Earl S. Kim 625,000 625 12,499,375 -- --
Common stock redeemed:
Earl S. Kim (625,000) (625) (12,499,375) -- --
Sold preferred stock -- -- (50) 182,692 2,927,788
Preferred stock issued in exchange for:
Investment in entities with a major
investment in the Company's stock -- -- -- 59,988 1,000,000
Acquisition of assets -- -- -- 39,593 660,015
Payment of expenses -- -- -- 24,746 412,516
Future obligations -- -- -- 111,145 1,852,788
Net loss for year -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1995 55,342,000 $ 55,342 $ 699,690 656,979 $10,834,089
- ---------------------------------------------------------------------------------------------------------
</TABLE>
F-30
<PAGE> 35
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FROM INCEPTION (JUNE 9, 1993) TO JUNE 30, 1996
<TABLE>
<CAPTION>
Preferred Stock
-----------------------------------------
Series "B" Series "C"
-------------------- ------------------- Other Accumulated
Shares Amount Shares Amount Items Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT, inception from (June 9, 1993)
to December 31, 1995 -- $ -- -- $ -- $ -- $ -- $ --
Issued common stock for expenses paid by
sole shareholder and related parties -- -- -- -- -- -- 610,000
Net loss from inception (June 9, 1993) to
December 31, 1993 -- -- -- -- -- (1,001,053) (1,001,053)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1993 -- -- -- -- -- (1,001,053) (391,053)
Common stock issued in exchange for:
License -- -- -- -- -- -- --
Debt -- -- -- -- -- -- 139,860
Preferred stock issued in exchange for:
Debentures -- -- -- -- -- -- 428,000
Related party debt -- -- -- -- -- -- 2,500,000
Sold preferred stock -- -- -- -- -- -- 1,052,982
Net loss for year -- -- -- -- -- (4,151,792) (4,151,792)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1994 -- -- -- -- -- (5,152,845) (422,003)
Common stock issued in exchange for:
Services and security -- -- -- -- -- -- 5,222
LNN Communications -- -- -- -- -- -- --
Earl S. Kim -- -- -- -- -- -- 12,500,000
Common stock redeemed:
Earl S. Kim -- -- -- -- -- -- (12,500,000)
Sold preferred stock -- -- 8,409 140,179 -- -- 3,067,918
Preferred stock issued in exchange for:
Investment in entities with a major
investment in the Company's stock 263,527 4,392,992 329,934 5,500,000 (10,892,992) -- --
Acquisition of assets 444,557 7,410,748 369,781 6,164,237 -- -- 14,235,000
Payment of expenses 11,110 185,205 116,254 1,937,947 -- -- 2,535,668
Future obligations 83,987 1,400,062 76,575 1,276,505 (4,529,639) -- --
Net loss for year -- -- -- -- -- (9,669,474) (9,669,474)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT, December 31, 1995 803,181 $13,389,007 900,953 $15,018,868 $(15,422,631) $(14,822,319) $ 9,752,046
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accountants' report on reviewed financial statements and notes to financial
statements.
F-31
<PAGE> 36
<TABLE>
<CAPTION>
Common Stock Series "A"
------------------- Paid-In ------------------------
Shares Amount Capital Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT, December 31, 1995 55,342,000 $55,342 $ 699,690 656,979 $ 10,834,089
Sold stock 129,000 129 3,996 193,042 3,179,840
Preferred issued (cancelled) in exchange for:
Investment in entities with a major invest-
ment in the Company's stock -- -- -- -- --
Void purchase of investments with
stock -- -- -- (59,988) (1,000,000)
Acquisition of assets -- -- -- 1,500 25,005
Payment of expenses 100,000 100 -- 3,240 54,011
Future obligations 1,465,000 1,465 -- 22,689 378,227
Preferred "D" issued to shareholders as
incentive (Note 13) -- -- -- -- --
Issuance of Founder shares 16,200,000 16,200 (16,200) -- --
Net loss -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
BALANCE AT, June 30, 1996 73,236,000 $73,236 $ 687,486 817,462 $ 13,471,172
- --------------------------------------------------------------------------------------------------------
</TABLE>
F-32
<PAGE> 37
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FROM INCEPTION (JUNE 9, 1993) TO JUNE 30, 1996
<TABLE>
<CAPTION>
Preferred Stock
-----------------------------------------------------------------------
Series "B" Series "C" Series "D"
----------------------- -------------------- ---------------------
Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT, December 31, 1995 803,181 $ 13,389,007 900,953 $15,018,868 -- $ --
Sold stock -- -- -- -- -- --
Preferred issued (cancelled) in exchange for:
Investment in entities with a major invest-
ment in the Company's stock 578,884 9,649,997 -- -- -- --
Void purchase of investments with
stock (585,483) (9,760,009) -- -- -- --
Acquisition of assets 15,997 266,668 489,909 8,166,790 273,860 11,502,110
Payment of expenses 800 13,336 238,956 3,983,402 45,275 1,901,550
Future obligations 2,999 49,993 22,499 375,058 123,933 5,205,186
Preferred "D" issued to shareholders as
incentive (Note 13) -- -- -- -- 11,875 --
Issuance of Founder shares -- -- -- -- -- --
Net loss -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT, June 30, 1996 816,378 $ 13,608,992 1,652,317 $27,544,118 454,943 $18,608,856
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Other Accumulated
Items Deficit Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT, December 31, 1995 $(15,422,631) $(14,822,319) $ 9,752,046
Sold stock -- -- 3,183,965
Preferred issued (cancelled) in exchange for:
Investment in entities with a major invest-
ment in the Company's stock -- -- 9,649,997
Void purchase of investments with
stock -- -- (10,760,009)
Acquisition of assets -- -- 19,960,573
Payment of expenses -- -- 5,952,409
Future obligations (6,009,929) -- --
Preferred "D" issued to shareholders as
incentive (Note 13) -- -- --
Issuance of Founder shares -- (13,829,954) (13,829,954)
Net loss -- -- --
- -----------------------------------------------------------------------------------------
BALANCE AT, June 30, 1996 $(21,432,560) $(28,652,273) $ 23,909,027
- -----------------------------------------------------------------------------------------
</TABLE>
F-33
<PAGE> 38
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Six From Inception
Months Ended Months Ended (June 9, 1993) to
June 30, June 30, June 30,
1996 1995 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(13,829,954) $(440,849) $(28,652,273)
Items not affecting cash:
Bad debt 1,009,837 -- 1,009,837
Depreciation -- -- 53,166
Amortization of annuity discount -- -- (143,427)
Expenditures paid by sole shareholder
and related parties -- -- 610,000
Loss on exchange of preferred shares -- -- 2,500,000
Expenses paid with issuance of stock 8,662,579 -- 11,233,122
Reserve on real estate held for investment -- -- --
Decrease (increase) in assets:
Prepaid expenses 241,024 -- 134,365
Increase (decrease) in liabilities:
Accounts payable 187,029 116,957 1,267,473
Accrued expenses (496,426) -- 2,283,778
Payroll taxes payable 24,310 21,450 493,312
- -----------------------------------------------------------------------------------------------
Net cash used in operating activities (4,201,601) (302,442) (9,210,647)
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used for purchase of equipment (45,761) -- (60,761)
Acquisition of licenses and property rights (44,500) -- (44,500)
Investment in unconsolidated related company (25,559) -- (25,559)
- -----------------------------------------------------------------------------------------------
Net cash used in investing activities (115,820) -- (130,820)
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repay) bank overdraft 151,937 (57,677) 151,937
Sale of debentures payable -- -- 543,300
Proceeds from notes payable 665,720 63,870 1,227,949
Net loans from (to) affiliated companies (91,707) -- (105,557)
Net loans from (to) others (878,971) (36,400) (536,786)
Issuance of preferred stock 4,139,675 332,649 8,060,624
- -----------------------------------------------------------------------------------------------
Net cash from financing activities 3,986,654 302,442 9,341,467
- -----------------------------------------------------------------------------------------------
</TABLE>
F-34
<PAGE> 39
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Six From Inception
Months Ended Months Ended (June 9, 1993) to
June 30, June 30, June 30,
1996 1995 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH (330,767) -- --
CASH at beginning of period 330,767 -- --
- ----------------------------------------------------------------------------------------------------
CASH at end of period $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ -- $ -- $ 66,264
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING TRANSACTIONS:
Loans paid by issuing preferred stock $ 910,000 $ -- $ 1,110,000
- ----------------------------------------------------------------------------------------------------
Fixed assets acquired by issuing preferred stock
Cost of assets $ 2,502,327 $ -- $ 2,762,324
Expensed 85,892 -- 115,894
Cash paid (45,761) -- (60,761)
- ----------------------------------------------------------------------------------------------------
Preferred stock issued $ 2,542,458 $ -- $ 2,817,457
- ----------------------------------------------------------------------------------------------------
Common stock issued in exchange for:
Paid-in capital $ 16,200 $ -- $ 76,100
Loans payable -- -- 139,860
- ----------------------------------------------------------------------------------------------------
Total $ 16,200 $ -- $ 215,960
- ----------------------------------------------------------------------------------------------------
</TABLE>
F-35
<PAGE> 40
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Six From Inception
Months Ended Months Ended (June 9, 1993) to
June 30, June 30, June 30,
1996 1995 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING TRANSACTIONS: (Continued)
Preferred stock issued in exchange for:
Real estate held for investment 5,072,990 5,072,990
Entities with a major investment in
the Company (650,000) 1,365,000 10,892,992
Annuities (6,500,000) 5,785,000 6,500,000
Investment in unconsolidated related
company 7,500,000 -- 615,973
Accrued commissions 1,328,024 -- 1,328,024
Property and equipment 3,148,869 -- 2,817,457
Inventory 165,033 -- 603,687
Payment of contract obligations 13,683,000 -- 13,683,000
Prepaid expenses 765,150 150,000 550,030
Other licenses -- -- 232,496
Trust deed receivable -- -- 49,151
Loans receivable 656,562 -- 656,562
Debentures -- -- 428,000
- -----------------------------------------------------------------------------------------------
Total $ 25,169,628 $ 7,300,000 $ 43,430,362
- -----------------------------------------------------------------------------------------------
</TABLE>
See accountants' report on reviewed financial statements and notes to financial
statements.
F-36
<PAGE> 41
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
WINCOM Corp. was incorporated in the State of Delaware on June 9, 1993 and
until August 7, 1996 was named World Integrated Network of Companies, Inc.
Prior to May 6, 1996, the Company was named World Interactive Network and
prior to August 4, 1994, the Company was named LMN Studios, Inc.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and the following wholly-owned subsidiaries:
<TABLE>
<S> <C>
Bayshore Interactive Partners P. Kouri Corp
Capital Hills Development Corporation P.A.W. Inc.
Capital Hills Holding Pacific Inter-Neighborhood Network, Inc.
Central Inter-Neighborhood, Inc. Shaker IVDS Partners, Inc.
Interactive Innovations Corp. South Central Inter-Neighborhood Network, Inc.
L.C.I. Investments, Inc. South Eastern Inter-Neighborhood Network, Inc.
LNN Intellectual Properties South Western Inter-Neighborhood Network, Inc.
Mager, Inc. Toma Kouri Corp.
Midwestern Inter-Neighborhood Network, Inc. V.W.Y. Thermal, Inc.
North Central Inter-Neighborhood Network, Inc. WCI Partners, Inc.
North Eastern Inter-Neighborhood Network, Inc. Westborn Development
</TABLE>
The consolidated subsidiaries hold ownership of real estate and broadcast
licenses pending the close of the proposed sale described in Note 15. They
are not actively engaged in business. All significant intercompany
transactions and balances have been eliminated in consolidation. The
interim amounts are not necessarily indicative of the results of
operations for a full fiscal year.
NATURE OF OPERATIONS
The Company is currently in the development stage of operations
concentrating its efforts on raising capital, product research and
development, marketing its services, seeking acquisitions, and acquiring
the necessary assets to begin business operations.
The Company has acquired most of its assets by issuing its preferred stock
in acquisitions which are contingent upon the close of an agreement
involving the merger of the Company, as described in Note 15.
F-37
<PAGE> 42
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
COMMUNICATIONS LINE OF BUSINESS
The Company is acquiring FCC Interactive Video and Data Services (IVDS)
licenses to offer services with utility based applications, cable
television applications and direct broadcast satellite applications.
MEDIA LINE OF BUSINESS
The Company intends to create, develop, finance and produce "new media"
entertainment, home shopping and interactive television programming to be
aired over a new network to bear the call letters "WINCO". "New media" is
the business of providing audio, video and graphical content for cable,
broadcast, CD-Rom and on-line services for entertainment, information,
merchandising, advertising and educational services. The Company is
acquiring FCC Low Power Television (LPTV) and Multiple Multi-Point
Distribution Services (MMDS) licenses related to future programming
distribution.
REAL ESTATE
The Company has invested in California real estate, as a capital reserve,
with the intent of either disposing of the properties or using the
properties as collateral for investment capital to fund future operations.
USE OF 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 reported amount of the revenues and expenses
during the period. Actual results could differ from those estimates.
INVENTORY
Inventory is valued using the first-in, first-out (FIFO), lower of cost or
market method.
F-38
<PAGE> 43
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LICENSES
FCC licenses are amortized using the straight-line method over the
original license term beginning when they are placed in service.
FURNITURE AND EQUIPMENT
Furniture and equipment is stated at cost, depreciation is computed using
straight-line methods of depreciation over the estimated useful lives of
the assets which range from three to seven years.
INVESTMENTS IN UNCONSOLIDATED COMPANIES
The Company recorded investment in a real estate limited liability company
at cost, adjusted for the Company's proportionate share of its
undistributed earnings or losses (equity method). The Company's investment
in Innovative Marketing Ventures, Inc. and Command Performance Network,
Inc. have been recorded, at cost, as an offset to stockholder's equity
because those companies' major assets are WINCOM Corp. preferred stock.
INTANGIBLES
All intangibles are amortized using the straight-line method and are
continually evaluated by management based upon the estimated discounted
cash flow expected from the intangible to determine if its carrying value
will be realized.
FINANCIAL INSTRUMENTS AND CREDIT RISK
The Company is currently dependent on its ability to raise and maintain
capital. It is entering a media and technology based development stage
market and will be subject to a competitive industry throughout the United
States.
In addition, the Company is a party to financial instruments, which
include investment in and loans to/from related companies and a trust
deed. Those instruments involve, to varying degrees, elements of credit
risk. The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument is represented by the
amount recognized on the financial statement. The Company does not have a
policy of requiring collateral to support financial instruments subject to
credit risk.
F-39
<PAGE> 44
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109. Deferred income taxes are provided
on timing differences between financial statement and income tax
reporting. The Company's temporary differences are due to capitalization
and amortization of start-up costs, net operating losses and depreciation
of fixed assets.
CASH
Cash consists of demand deposit accounts only.
INTERIM FINANCIAL INFORMATION
The interim financial statements for six-month periods ended June 30,m
1996, and June 30, 1995, are unaudited. In the opinion of management, such
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair representation of the results of the
interim periods. The results of operations for the six-month period ended
June 30, 1996 are not necessarily indicative of the results for the entire
year.
2. PROPERTY RIGHTS
On March 5, 1996, the Company agreed to purchase from Maestro Holding
Corporation all the rights, title and interest in all the recordings,
discs, tapes and catalogues belonging to Maestro. The purchase price,
equaling $12,000,030, was originally by agreement to be paid in Struthers
common stock. As of May 31, 1996, Maestro agreed to take WINCOM Series "D"
cumulative preferred stock (see Note 10).
F-40
<PAGE> 45
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
3. NOTE RECEIVABLE
On May 31, 1996, the Company sold to its majority stockholder, Winco
Corporation, a Delaware corporation, real estate, two subsidiary
corporations, automobiles, equipment, inventory and rights to certain
other assets. As consideration, the Company received a note in the amount
of $7,959,595. The note bears interest at ten percent (10%) per annum with
the principal and all accrued interest due and payable on or before June
1, 1999. Winco Corporation has pledged 397,980 shares of their Struthers
common stock as security on the note and WinCom has a secured interest in
the assets transferred.
Additionally, Winco Corporation assumed responsibility for the following
leases:
A. Residential property at 621 Stone Canyon, Los Angeles, California
B. Office space at 1825 Century Park East, Suite 930, Los Angeles,
California
C. All automobile leases.
4. SHARES ISSUED TO ENTITIES WITH A MAJOR INVESTMENT IN THE COMPANY'S STOCK
The Company has acquired stock of two companies by exchanging shares. As a
result of these transactions, those companies have a significant
investment in the Company's stock as one of their major assets, the cost
has been reflected as an offset to the equity section. The transactions
are as follows:
INNOVATIVE MARKETING VENTURES
The Company acquired 28% of the outstanding stock of Innovative Marketing
Ventures on May 28, 1995 by issuing 200,000 shares of the Company's Series
"B" 7.5% Cumulative Convertible Preferred Stock valued at $3,334,000. The
transaction was accounted for on the cost basis.
Innovative Marketing Ventures manufactures and distributes water boards,
snow boards, skateboards and related apparel products. Their total assets
as of June 30, 1995 total approximately $4,700,000 and their stockholder's
equity is approximately $4,100,000. Included in their assets and equity is
$3,334,000 World Network of Companies, Inc. stock, $360,000 is
intangibles.
F-41
<PAGE> 46
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
4. SHARES ISSUED TO ENTITIES WITH A MAJOR INVESTMENT IN THE COMPANY'S STOCK
(Continued)
COMMAND PERFORMANCE NETWORK (CPN)
The Company issued 59,988 shares of its Series "A" Cumulative Convertible
Preferred Stock and 329,934 shares of its Series "C" Cumulative
Convertible Preferred Stock for a total consideration of $6,500,000 in
connection with a memorandum of understanding dated June 7, 1995.
On November 17, 1995, the Company agreed to accept CPN Series "A"
preferred shares that are convertible into two common shares for each
preferred share when either (i) CPN is able to liquidate all of the
preferred stock it has received from the Company or (ii) the Company
redeems for cash its preferred stock for $6.00 per share. In consideration
for this change, the Company was relieved of its obligation to provide any
additional financing.
CPN is also a development stage company and is preparing to produce a
sports information channel for cable television, satellite broadcast and
the internet.
As of July 31, 1995, the assets and stockholders' equity of Command
Performance Network, Inc. were comprised primarily of the World
Interactive Network, Inc. stock and Command Performance Network, Inc.
subscriptions receivable.
5. INVESTMENT IN UNCONSOLIDATED COMPANIES
The Company acquired 50 percent ownership in a limited liability company
which holds real estate. The other 50 percent owner is the manager of the
company. The original cost of the investment was recorded at the
liquidation value of the shares issued to acquire the Company's interest.
During June of 1996, the Company acquired a 50 percent ownership interest
in RTT, Inc. The Company issued 449,910 shares of Series "B" Cumulative
Convertible Preferred Stock for consideration of $7,500,000. The original
cost of the investment was recorded at the liquidation value of the shares
issued to acquire the Company's interest.
F-42
<PAGE> 47
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
6. PROPERTY AND EQUIPMENT
The property and equipment is comprised as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
Amount Amount
- ----------------------------------------------------------------------------------
<S> <C> <C>
Vehicles $ -- $259,997
Broadcast equipment 2,533,412 --
Software 5,500 --
- ----------------------------------------------------------------------------------
2,538,912 259,997
Less accumulated depreciation 2,326 53,166
- ----------------------------------------------------------------------------------
$2,536,586 $206,831
==================================================================================
</TABLE>
F-43
<PAGE> 48
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
7. INTELLECTUAL PROPERTY RIGHTS
On April 5, 1994, the Company was granted a non-exclusive right to utilize
certain technology referred to as the "Vault" in connection with its
specialized interactive television programming. The license is for the
full duration of the existence of the licensed technology. The Company
issued 5,990,000 shares of common stock to its then sole shareholder to
acquire the license.
On June 30, 1995, the Company acquired the underlying intellectual
property rights for the "Vault" technology by issuing 29,750,000 shares of
common stock to its majority stockholder to acquire LNN Intellectual
Properties, Inc.
Generally accepted accounting principles require that the license and the
underlying intellectual property rights, referred to above, be valued at
the lower of predecessor cost (not including research and development
costs) or recoverable value. The shareholder has represented that its cost
in the technology was substantially research and development; therefore,
generally accepted accounting principles require these assets be recorded
at zero.
8. OTHER LICENSE
On July 26, 1995, the Company purchased a license from Durand
Communications, Inc. to be the sole and exclusive provider of TV generated
content pertaining to direct response products and sources, including but
not limited to television direct response formats and/or promotions which
are to be reformatted for Internet Dial-Up (On Line) service, via the
"MindWire" Network which license grants WIN-TV the exclusive right to list
itself, through a dedicated "WIN" button, on the MindWire Network
Navigator. The MindWire Network Navigator is a utility application used to
assist end users in navigating MindWire Servers which have volunteered to
become part of the MindWire Network. The MindWire Network is a linking of
MindWire servers throughout the world via a feature called WIPLINK and the
Internet.
As consideration for the license, the Company agreed to issue 14,997
shares of its Series "C" Cumulative Convertible Preferred Stock valued at
$232,497. In addition, the Company will pay a royalty on all promotions
advertised on the WIN-TV MindWire. The royalty is approximately 5% of the
net sales price.
F-44
<PAGE> 49
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
9. DEBENTURES AND DEMAND LOANS PAYABLE
DEBENTURES PAYABLE
During 1994 and 1993 the Company issued 12% participating debentures due
one year from the issue date. During 1994 all except $115,300 of these
debentures were exchanged for Preferred Series "A" shares. The remaining
debentures are due on demand with interest payable monthly.
DEMAND LOANS PAYABLE
Demand loans payable at June 30, 1996 consist of $144,095 that the Company
has borrowed from various individuals with no stated interest or payment
terms, due on demand, and $1,598,852 of debt outstanding which bears
interest at varying rates between 10% to 12% is due within the next twelve
months an is secured by Pudwill Real estate.
10. STOCKHOLDERS' EQUITY
The Company has authorized common and four series of preferred shares as
follows:
COMMON STOCK
During 1995 the Company increased the number of authorized shares of
common stock from 25,000,000 shares to 75,000,000 shares for the purposes
of carrying out its business plan and to award certain key Officers,
Directors and Consultants equity interests in the Company as partial
compensation for services rendered. Of these shares, 5,222,000 were
awarded as compensation totaling $5,222. The par value is .001.
As of December 31, 1995, the issued and outstanding shares totaled
55,342,000 shares. At June 30, 1996 the total outstanding was 73,236,000.
PREFERRED "A" STOCK
On April 4, 1994, the Company authorized 900,000 shares of its $16.67
Series "A" Cumulative Convertible Preferred Stock. There were 656,979
shares issued and outstanding at December 31, 1995 and 817,462 outstanding
at June 30, 1996. Each Series "A" share is convertible into two common
shares. The shares accrue dividends at 10% per year. The Board of
Directors has not authorized payment of accrued dividends.
F-45
<PAGE> 50
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
10. STOCKHOLDERS' EQUITY (CONTINUED)
PREFERRED "B" STOCK
On March 23, 1995, the Company authorized 1,200,000 shares of its "B"
series of preferred stock with an annual dividend of 7.5% and liquidation
preference of $16.67. Each share is convertible into one and one-half
common shares. As of December 31, 1995 and June 30, 1996, 1,199,103 and
1,196,303 shares respectively, of the Series "B" Preferred Stock were
issued and outstanding.
PREFERRED "C" STOCK
On June 25, 1995, the Company authorized a "C" series of Cumulative
Convertible Preferred Stock bearing an annual dividend yield of 7% and a
liquidation preference of $16,67. Each share is convertible into two
shares of common stock. As of December 31, 1995, the Company had 6,000,000
shares of its Series "C" authorized, and 5,636,924 shares issued, and
outstanding. At June 30, 1996 there were 5,964,984 shares outstanding.
CONVERSION FEATURE
The Series "A", "B", "C" and "D" Cumulative Convertible Preferred Stock
shall be convertible at the option of the holder upon the occurrence of an
initial public offering of common stock underwritten pursuant to a
registration statement filed under the Securities Act of 1933.
PREFERRED "D" STOCK
On June 11, 1996, the Company authorized 2,380,952 shares of its $42
Series "D" Cumulative Convertible Preferred Stock. There were 1,357,076
shares issued and outstanding at June 30, 1996. Each Series "D" share is
convertible into one and one half common shares, with the restriction that
the stock may not be converted for two years following the date of
issuance, or until the Company's common stock has been trading at a price
of $50 per share or more for nine consecutive days, which ever occurs
first. The shares accrue dividends at 5% per year. The board of directors
has not authorized payment of accrued dividends. At June 30, 1996, the
Company issued 11,875 shares of Preferred "D" Stock to various investors
as an inducement to purchase Preferred "A" stock. The shares of Preferred
"D" Stock issued were recorded at a zero value.
F-46
<PAGE> 51
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
ACCUMULATED PREFERRED DIVIDENDS
Total accumulated but undeclared dividends are approximately as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
Series "A" $ 929,773 $ 890,939
Series "B" 677,587 1,040,836
Series "C" 5,787,055 2,606,512
- ---------------------------------------------------------------------------------
$7,394,415 $4,538,287
=================================================================================
</TABLE>
F-47
<PAGE> 52
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
11. INCOME TAXES
As of December 31, 1995 and June 30, 1996, the net deferred income tax
asset arising because of timing difference from the capitalization and
amortization of start-up costs for tax accounting and due to the net
operating loss carryforward was approximately $12,250,000. Because it is
more likely than not that the deferred tax asset will not be realized, a
valuation allowance of an equal amount has been used to offset the
recognition in the financial statements.
The Tax Reform Act of 1986 contains provisions which limit the federal net
operating loss carryforwards available that can be used in any given year
in the event of certain occurrences, which include significant ownership
changes. The plans discussed in Note 15 could significantly limit the use
of the net operating loss carryforward.
12. AGREEMENT TO SELL - GOING CONCERN
On May 25, 1995 (as amended in May 1996 and September 1996), the Company
agreed to a merger with Struthers Industries, Inc. (Struthers) in exchange
for approximately ninety-two percent of Struthers' issued and outstanding
common stock on a fully diluted basis. See subsequent event note 15 for
details of the sale.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. At June 30, 1996 the Company has
negative working capital of approximately $4,000,000 and accumulated
losses of approximately $36,359,000 these conditions raise substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
Management has alternative plans to raise the capital needed to continue
its development stage activities, however, there is no assurance that
these plans will be successful. In addition, the Company has received
$6,000,000 which is being held in escrow pending when certain conditions
are met. When these conditions are met, the $6,000,000 will be available
to fund the operations of the Company.
F-48
<PAGE> 53
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES
SHARES ISSUED FOR FUTURE OBLIGATIONS
The Company has issued Series "A", "B", "C" and "D" Cumulative Convertible
Preferred Shares to secure payments of amounts due, as a retainer for
future services or as a guarantee. Those shares are reflected as
outstanding with a corresponding charge to equity until the consideration
for the shares is realized. The shares issued are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------------------------------------------------------------------------------------
<S> <C> <C>
Guarantee Bond - Shares of the Company's Cumulative
Convertible Preferred Stock had been issued as
collateral for a one million dollar 5-year guarantee
bond for Innovative Marketing Ventures $ -- $1,000,000
Legal Fees - The Company issued shares of
the Company's Series "A" and shares of
Series "B" Cumulative Convertible Preferred Stock
as security for legal fees due and payable 500,125 500,000
Retainers - The Company issued shares of Series
"A", Series "B" and Series "C" preferred stock
and shares of common stock to various individuals
as retainers to guarantee the availability of
their services. As of June 30, 1996, no
services have been utilized 7,109,054 3,029,639
----------------------------------------------------------------------------------------
$7,609,179 $4,529,639
========================================================================================
</TABLE>
F-49
<PAGE> 54
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
AGREEMENT TO DELIVER PUBLICLY TRADED SECURITIES
The Company entered into agreements to acquire approximately $60,292,000
in assets. These assets were acquired through the issuance of preferred
stock or by agreements to issue future publicly traded securities. During
June 1996, substantially all agreements to issue future publicly traded
securities were rescinded and were replaced with the issuance of Series
"D" Cumulative Preferred Stock.
REDEMPTION OF PREFERRED SHARES
The Company has agreements with certain preferred stockholders holding
3,834,288 shares of Series "C" Cumulative Convertible Preferred Stock to
exchange each share for two common shares of publicly traded stock after
the closing of the transaction described in Note 15. If the shares are
trading at less than $8.3125 per share, the Company has agreed to issue
additional shares to result in a value of $16.625 per preferred share
exchanged. The redemption would result in a decrease in stockholders'
equity and an increase in the minority interest in consolidated assets.
14. REAL ESTATE HELD FOR INVESTMENT
The Company has entered into agreements to acquire real estate assets in
non-cash transactions. A summary of the real estate is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
Name Date Location Type Liens Cost Cost
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Erhart/Walker 05/26/95 Adelanto Lots $ 30,000 $ 175,002 $ 175,002
Tulare-Willow
Springs 08/11/95 Orosi 91 Lots 147,750 864,506 864,506
Tulare Krause 08/04/95 Springville Lots 33,850 204,208 204,208
Fresno-Katzman/
Krause 06/17/95 Kerman High school (ab) 221,000 2,000,000 2,000,000
Fresno BIG 06/27/95 Fresno Elementary (ab) -- 699,981 699,980
Adelanto-Brooks 06/06/95 Adelanto Lots -- 379,992 379,992
Penner 07/18/95 San Bernardino Lots -- 250,009 250,009
3HB International 05/31/96 Cleveland Commercial 88,000 5,000,016 5,000,016
----------------------------------------------------------------------------------------------------------------
$ 520,600 $ 9,573,714 $ 9,573,713
Reserved Real Estate held for investment -- (1,223,935) (1,223,935)
----------------------------------------------------------------------------------------------------------------
$ 520,600 $ 8,349,779 $ 8,349,778
</TABLE>
F-50
<PAGE> 55
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
In recognition of the potential for continued uncertainty in the
California real estate market the Company has provided for a general
reserve of $8,000,000 against real estate held for investment.
15. SUBSEQUENT EVENTS
STRUTHERS MERGER
On September 6, 1996, Struthers acquired 100 percent of the issued and
outstanding common stock of the Company, from its sole stockholder WINCO
Corp., in return for 92% of Struthers outstanding common stock. The
completion of this sale satisfies the terms of the contingent asset
purchases described in Note 13 (see below).
PROPERTY RIGHTS
On July 23, 1996 the Company sold $6,000,000 worth of its rights, title
and interest in the recordings, discs, tapes and catalogs, purchased from
Maestro Holding Corporation. As consideration, the buyer, New Visual
Entertainment, Inc. a Utah Corporation, issued to the Company $6,000,000
worth of its preferred stock, having a liquidation value of $30 per share.
The issuance shall be under a two-year certificate with a 3-to-1
conversion rate. Additionally, the Company will receive a 2.5% royalty,
from the gross profits of New Visual Entertainments business activity
related to this transaction.
F-51
<PAGE> 56
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
15. SUBSEQUENT EVENTS (Continued)
On September 6, 1996 the Company consumated the transaction as discussed
in Note 12. The assets and liabilities resulting from these transactions
are listed as follows:
REAL ESTATE HELD FOR INVESTMENT
The Company has entered into agreements to acquire real estate assets in
non-cash transactions. A summary of the real estate is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
Name Date Location Type Liens Cost Cost
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Hills
Holding 08/31/95 Kern Lots 125,000 6,860,705 6,860,705
Capital Hills Dev. 08/31/95 Kern Lots 125,000 6,860,705 6,860,705
P. Kouri Corp. 08/31/95 San Bernardino Lots 70,000 1,059,995 1,059,995
L.C.I. Investments 08/31/95 Fresno Lots 130,000 2,316,196 2,316,196
Pudwill Commercial 10/12/95 Santa Monica 4 Office Bldgs. 1,450,000 3,683,333 2,333,333
Pudwill Lot 10/12/95 Santa Maria Lot 250,000 1,649,997 1,399,997
Karadetian
(Deposit) 11/06/95 Belair Lots -- 100,020 100,020
Westborn
Development 11/10/95 Santa Marcos Lots -- 2,600,004 2,600,004
Petty Trust 12/27/95 Riverside Lots -- 1,100,004 1,100,004
Toma/Kouri Corp. 01/04/96 Loma Linda Land 0 1,183,000 1,183,000
--------------------------------------------------------------------------------------------------------------
$2,150,000 $27,413,959 $35,387,672
Reserved Real Estate held for investment -- (6,776,065) (6,776,065)
--------------------------------------------------------------------------------------------------------------
$2,150,000 $20,637,894 $27,387,672
==============================================================================================================
</TABLE>
F-52
<PAGE> 57
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
15. SUBSEQUENT EVENTS (Continued)
REAL ESTATE HELD FOR INVESTMENT (Continued)
The liens on the real estate acquired remain the obligation of the seller;
therefore, they are not reflected as a liability of the Company.
The Company acquired the real estate by issuing shares of WINCOM's Series
"B", "C" and "D". Cumulative Convertible Preferred Stock and recorded the
acquisition at the liquidation value of the preferred stock issued.
Management has estimated that the properties can be sold for at least
their recorded value.
However, it is reasonably possible estimates of the recorded value may
change in the near term.
F-53
<PAGE> 58
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
15. SUBSEQUENT EVENTS (Continued)
Broadcast Licenses
The Company has entered into agreements to acquire broadcast licenses in
non-cash transactions primarily in exchange for the World Integrated
Network of Companies, Inc.'s Series "C" & "D" Cumulative Convertible
Preferred Stock and assumption of installment obligations to the FCC. A
summary of the licenses acquired along with their cost is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
Acquisition Shares Debt ------------ ------------
Name Date Type No. Issued Assumed Cost Cost
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eagle 08/31/95 IVDS 15 599,880 $ 2,957,000 $ 12,957,000 $ 12,957,000
Earl S. Kim 12/29/95 MMDS 3 297,619 -- 12,500,000 12,500,000
Elleron 07/21/95 IVDS 12 450,240 2,223,000 9,728,501 9,728,501
Shaker Partners 08/31/95 IVDS 9 286,865 2,538,000 7,320,039 7,320,039
Rose Regency 06/09/95 IVDS 9 334,738 1,246,000 6,826,082 6,826,082
Micro-Lite 08/31/95 MMDS 12 359,964 -- 4,150,830 6,000,600
WCI 08/31/95 IVDS 3 214,414 1,545,000 5,119,281 5,119,281
21st Century Inter-
active 08/17/95 IVDS 7 189,516 1,476,000 4,635,232 4,635,232
Interactive Innova-
tions 08/31/95 IVDS 5 160,551 1,100,000 3,776,385 3,776,385
Interactive Control 08/31/95 IVDS 2 160,268 570,000 3,241,667 3,241,667
IVIDCO 08/17/95 IVDS 4 90,343 565,000 2,071,018 2,071,018
I.V.D.S. Co. 02/01/96 IVDS 1 713,737 -- 11,898,000 --
WCA 08/31/95 IVDS 8 103,703 296,250 2,024,979 2,024,979
P.A.W. 08/31/95 IVDS 5 76,036 582,000 1,849,521 1,849,521
Mager Corp., Inc. 08/31/95 IVDS 1 59,785 456,000 1,452,616 1,452,616
21st Century Group 08/31/95 IVDS 5 66,143 268,000 1,370,604 1,370,604
Bay Shore 08/31/95 IVDS 3 45,884 262,000 1,026,886 1,026,886
Georgia Felger 08/31/95 IVDS 4 48,135 133,400 935,810 935,810
Emerging Tech. 08/31/95 IVDS 1 34,340 240,000 812,448 812,448
20th Century 05/31/96 IVDS 1 7,346 54,000 362,532 --
Low Power T.V. 02/16/96 TV 30 44,991 -- 750,000 --
- -----------------------------------------------------------------------------------------------------------------
$16,511,400 $ 94,809,431 $ 83,648,669
Less portion of purchase price allocated to complete the
minimum FCC required broadcast equipment build out -- 4,600,080 4,600,080
- -----------------------------------------------------------------------------------------------------------------
$ 16,511,400 $ 90,209,351 $ 79,048,589
=================================================================================================================
</TABLE>
F-54
<PAGE> 59
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
15. SUBSEQUENT EVENTS (Continued)
Broadcast Licenses (Continued)
The licenses are subject to certain benchmark requirements established by
the FCC relating to commencing service. Should the required FCC benchmarks
not be met, the license involved could be forfeited. In addition, the
original licenses were granted at a discounted price to qualified buyers.
When the licenses are transferred to the Company the FCC may disallow this
discount. If the discount is not approved by the FCC the Company will owe
an additional $3,915,750. Also, the transfer of ownership of the licenses
is subject to FCC approval.
The Company has recorded the acquisition of the licenses at the
liquidation value of the stock plus the debt assumed. Managements has
estimated that the recoverable value of the licenses exceeds their
recorded value. However, it is reasonably possible that the estimated
value or the useful life of the licenses may change in the near term.
Transfer of one of the licenses is dependent upon the completion of the
build out of the equipment required by the FCC, unless a waiver is
obtained from the FCC. The $4,600,080 of the purchase price allocated to
broadcast equipment is the estimated cost to build out high power
equipment. The cost of that equipment could increase by 400 percent should
the geographical area require low power equipment rather than high power.
Subsequent to year-end the Company and Micro-Lite Television revised the
existing agreement to exchange certain television station licenses and
therefore adjusted the purchase price to $4,150,830.
LONG-TERM DEBT - INSTALLMENT OBLIGATIONS TO FCC
In connection with the acquisition of broadcast licenses, the Company has
agreed to assume related installment obligations to the FCC. The
obligations are payable in quarterly installments of interest only through
December 31, 1996 and in equal payments of principal and interest through
December 31, 1999. Interest on the obligations varies per license from
7.125 to 7.71 percent.
F-55
<PAGE> 60
WINCOM CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
LONG-TERM DEBT - INSTALLMENT OBLIGATIONS TO FCC (CONTINUED)
The following is a summary of the principal maturity of long-term debt
during the next five years.
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
- --------------------------------------------------------------------------------
<S> <C>
1997 $ 4,309,070
1998 5,686,019
1999 6,516,561
- --------------------------------------------------------------------------------
$16,511,650
================================================================================
</TABLE>
Upon transfer of the licenses, the FCC may accelerate the required
payments on this debt.
F-56
<PAGE> 61
STRUTHERS INDUSTRIES, INC.
PROFORMA FINANCIAL INFORMATION
June 30, 1996
<TABLE>
<CAPTION>
Sale of Proforma Proforma
BALANCE SHEET Struthers Wincom Rose Intl. Adjustments Combined
--------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash 582,981 295,415 287,566
Equity securities 104,183 104,183
Receivables, net 1,555,029 1,074,908 4,000,000 (2) 4,480,121
Inventories 1,810,403 1,695,417 114,986
Loans receivable 164,371 164,371
Other assets 149,880 1,173,589 36,544 1,286,925
-----------------------------------------------------------------------
Total Current Assets 4,202,476 1,337,960 3,102,284 4,000,000 6,438,152
Property and equipment, net 7,050,315 2,536,586 6,316,632 3,270,269
Broadcast licenses 90,209,351 (4) 90,209,351
Deposits on broadcast equipment buildout 4,600,080 (4) 4,600,080
Real estate held for investment 8,349,779 20,637,894 (4) 28,987,673
Property rights 12,000,030 (4) 12,000,030
Investment in unconsolidated related company 8,141,532 8,141,532
Goodwill 2,357,825 2,357,825 0
Loans receivable from related parties 8,065,152 8,065,152
Other 834,796 326,148 309,796 851,148
-----------------------------------------------------------------------
Total Assets 14,445,412 28,757,157 12,086,537 131,447,355 162,563,387
=======================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable and accrued liabilities 1,301,468 1,492,607 726,616 2,067,459
Accrued settlement 3,250,000 3,250,000
Debentures payable 115,300 115,300
Demand loans payable 142,947 1,600,000 (4) 1,742,947
Bank overdraft 151,937 151,937
Current portion of long-term debt 199,729 100,567 99,162
-----------------------------------------------------------------------
Total Current Liabilities 4,751,197 1,902,791 827,183 1,600,000 7,426,805
Long term obligations 710,276 168,302 16,511,650 (4) 17,053,624
Minority interest 241,669 241,669
Commitment and contingencies
Stockholders Equity
Common stock and
Additional paid in capital 37,143,604 760,722 (29,284,984)(1) 8,619,342
Preferred stock 73,233,128 116,111,770 (4) 189,344,898
Stock subscription receivable (210,000) (135,010) (345,010)
Shares issued for future obligations (7,609,179) (7,609,179)
Shares issued to entities with a major
IN investment in the Company's stock (10,743,022) (10,743,022)
Foreign currency translation adjustment (36,502) (36,502) 0
Accumulated deficit (28,154,832) (28,652,273) (45,913) 28,108,919 (1) (28,652,273)
------------------------------------------------------------------------
Total Stockholders Equity 8,742,270 26,854,366 (82,415) 114,935,705 150,614,756
Total Liabilities and Stockholders Equity 14,445,412 28,757,157 1,154,739 133,047,355 175,095,185
=========================================================================
</TABLE>
F-57
<PAGE> 62
<TABLE>
<CAPTION>
Six months ended June 30, 1996
Sale of Proforma Proforma
STATEMENT OF OPERATIONS Struthers Wincom Rose Intl. Adjustments Combined
--------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues 4,139,790 7,310 3,445,951 701,149
Cost of Sales 3,295,265 2,554,466 740,799
------------------------------------------------------------------------------
Gross profit 844,525 7,310 891,485 1,743,320
Selling, General and Administrative 1,226,426 11,655,284 594,398 12,287,312
Interest 132,559 27,051 105,508
Settlement expense 0
Write-down on certain assets
Loss on sale of assets 73,700 (6,931,798)(2) (6,858,098)
Equity in joint venture losses 71,847 71,847 0
Loss (gain) on equity securities (174,428) (167,172) (7,256)
Other income (153,479) 2,181,980 (5,011) (150,000)(3) 1,883,512
------------------------------------------------------------------------------
1,176,625 13,837,264 521,113 (7,081,798) 7,410,978
Loss from continuing operations before
income tax expense and minority interest (332,100) (13,829,954) 370,372 7,081,798 (5,667,658)
Income tax expense (benefit) (811,000) (811,000) 0
------------------------------------------------------------------------------
478,900 (13,829,954) 1,181,372 7,081,798 (5,667,658)
Minority interest (39,669) (39,669) 0
------------------------------------------------------------------------------
Income (Loss) from continuing operations 439,231 (13,829,954) 1,141,703 7,081,798 (12,249,020)
==============================================================================
<CAPTION>
Year ended December 31, 1995
STATEMENT OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Revenues 1,623,694 11,530 1,635,224
Cost of Sales 1,563,933 1,563,933
------------------------------------------------------------------------------
Gross profit 59,761 11,530 71,291
Selling, General and Administrative 1,527,432 8,416,085 9,943,517
Interest 61,117 61,117
Settlement expense 3,750,000 3,750,000
Write-down on certain assets 1,019,634 1,223,935 2,243,569
Loss on sale of assets (6,931,798)(2) (6,931,798)
Equity in joint venture losses 0
Loss (gain) on equity securities 28,391 28,391
Other (income)/expense (166,130) 40,984 (300,000)(3) (425,146)
------------------------------------------------------------------------------
6,220,444 9,681,004 (7,231,798) 8,669,650
Loss from continuing operations before
income tax expense and minority interest (6,160,683) (9,669,474) 7,231,798 (8,598,359)
Income tax expense (benefit) 1,208,000 1,208,000
------------------------------------------------------------------------------
(7,368,683) (9,669,474) 7,231,798 (9,806,359)
Minority interest 0 0
------------------------------------------------------------------------------
Loss from continuing operations (7,368,683) (9,669,474) 0 7,231,798 (9,806,359)
==============================================================================
</TABLE>
Notes:
1. Adjustment to reflect the acquisition of WINCOM with WINCOM as the
acquirer (reverse acquisition).
2. Assumes the sale of Rose International Ltd at the June 30 balance sheet
date for a note receivable of $4,000,000.
3. Assumes that the note receivable of $4,000,000 bears interest at 7.5% per
annum.
4. Assumes the closing of the Struthers transaction.
F-58
