EX-2 5 streamnotes.htm STREAM Q2 NOTES TO STATEMENTS The company was incorporated on March 28, 1979  by registration of its Memorandum and Articles under the Company Act of Britis

1.

NATURE OF OPERATIONS & SIGNIFICANT ACCOUNTING POLICIES

The company was incorporated on March 28, 1979  by registration of its Memorandum and Articles under the Company Act of British Columbia, Canada. The company's stock was consolidated on a one new for 3.9 old shares basis on August 16, 1985 and again consolidated on a one new for three old shares basis on May 29, 1992. On October 19, 2001 the Company changed its name from Trooper Technologies Inc. to Stream Communications Network, Inc.


These interim consolidated financial statements should be read in conjunction with the audited December 31, 2002 annual financial statements.


These interim financial statements follow the same accounting policies and methods of their application as in the December 31, 2002 annual financial statements. These interim consolidated financial statements do not conform in all respects to the requirements of Canadian generally accepted accounting principles for annual financial statements in that they do not include all note disclosures.


These consolidated financial statements include the accounts of the Company and the following subsidiaries. All intercompany transactions and balances have been eliminated.


    

Country of Incorporation

Percentage ownership June 30, 2003

Percentage ownership December 31, 2002

EES Waste solutions Limited

Cyprus

100.0%

100.0%

International Eco-Waste Systems S.A. ("Eco-Waste")

Poland

0.0%

0.0%

Stream Communications Sp. z o.o. ("Stream")

Poland

100.0%

100.0%

Gimsat Sp. z o.o. ("Gimsat") - (note 3)

  

Poland

100.0%

100.0%

Polvoice.com Sp. z o.o. ("PolVoice")

Poland

0.0%

0.0%

Bielsat.com Sp. z o.o. ("Bielsat")

Poland

51.0%

51.0%


The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and expenses for the periods reported. Actual results could differ from those estimates.


2.

DISCONTINUED OPERATIONS


During 2001, the company commenced planned operations in providing cable TV and related cable services. The previous business of meat waste rendering was interrupted when  the European Commission imposed a ban on meat and bone meal products due to the risk of Bovine Spongiform Encephalopathy ("BSE") spread by these products. The Company changed direction in regards to the meat rendering business to avoid liability and uncertainty from the fallout from BSE and applied to change its hazardous waste licence to an incinerator licence. The Company was intending to utilize this licence to start operations in the hazardous waste business, but the company decided to sell this business, as it did not fit with its cable service business.


On September 30, 2002 Eco-Waste was sold to a arm’s length buyer. The terms of the agreement included a nominal down payment and payments due of $500,000 USD of which $250,000 is due on each of December 31, 2003 and December 31, 2004. Because of uncertainty in this sector of the market, these payments due in 2003 and 2004 are valued at nil.


In view of the Company’s main business and objectives directed towards cable TV, it was decided to discontinue the operations of PolVoice. In this manner, the Company is focused on one business objective. The operations of PolVoice were discontinued and the company is being liquidated.

The statements of operations for the discontinued business operations are:

For the six months ended June 30, 2003

PolVoice

Eco-Waste

Total

Sales

   

 $              -   

 $              -   

 $              -   

Expenses

   

                 -   

                 -   

                 -   

Amortization

   

                 -   

                 -   

                 -   

Write-down of net assets to net realizable value

 

                 -   

                 -   

                 -   

Foreign exchange loss

   

                 -   

                 -   

                 -   

Loss from discontinued operations

 

 

 $              -   

 $              -   

 $              -   

        

For the six months ended June 30, 2002

PolVoice

Eco-Waste

Total

Sales

   

 $        18,971

 $              -   

 $        18,971

Expenses

   

 $       (81,573)

 $     (116,517)

        (198,090)

Amortization

   

         (38,968)

                 -   

         (38,968)

Write-down of net assets to net realizable value

 

         (22,386)

     (2,109,267)

     (2,131,653)

Foreign exchange gain

   

                  5

                 -   

                  5

Loss from discontinued operations

 

 

 $     (123,951)

 $  (2,225,784)

 $  (2,349,735)

        

The balance sheets for the discontinued business operations are:

June 30, 2003

 

 

 

PolVoice

Eco-Waste

Total

Total assets

   

 $              -   

 $              -   

 $              -   

Total liabilities

      

Net assets of discontinued operations before net realizable value provision

                 -   

                 -   

                 -   

Net realizable value provision

  

                 -   

                 -   

                 -   

Net assets of discontinued operations

 

 

 $              -   

 $              -   

 $              -   

        

3.

PROPERTY, PLANT AND EQUIPMENT


  

June 30, 2003

 

 

 

Cost

Accumulated amortization

Net book value

         
  

 Automobiles

   

 $      279,513

 $        92,145

 $      187,368

  

 Buildings, offices

   

      2,120,529

         625,424

      1,495,105

  

 Cable television network equipment

  

      7,449,102

      1,969,891

      5,479,211

  

 Furniture and fixtures

   

         363,089

         260,436

         102,653

  

 Computer software

   

          72,487

          53,094

          19,393

  

 Plant construction-in-progress

  

         191,380

                 -   

         191,380

  

 

 

 

 

 $ 10,476,100

 $   3,000,990

 $   7,475,110

         
  

December 31, 2002

 

 

 

Cost

Accumulated amortization

Net book value

         
  

 Automobiles

   

 $      331,814

 $      110,468

 $      221,346

  

 Buildings, offices

   

      2,520,229

         513,737

      2,006,492

  

 Cable television network equipment

  

      8,770,650

      2,056,039

      6,714,611

  

 Furniture and fixtures

   

         375,344

         265,698

         109,646

  

 Computer software

   

          85,828

          60,778

          25,050

  

 Plant construction-in-progress

  

         124,430

                 -   

         124,430

  

 

 

 

 

 $ 12,208,295

 $   3,006,720

 $   9,201,575


4.

INTANGIBLE ASSETS


  

June 30, 2003

 

 

 

Cost

Accumulated amortization

Net book value

  

Cable TV licences

   

 $        95,905

 $        41,446

 $        54,459

  

Subscriber base

   

      4,686,963

         345,065

      4,341,898

  

Goodwill

   

                 -   

                 -   

                 -   

  

 

 

 

 

 $   4,782,868

 $      386,511

 $   4,396,357

         
  

December 31, 2002

 

 

 

Cost

Accumulated amortization

Net book value

  

Cable TV licences

   

 $      116,217

 $        23,335

 $        92,882

  

Subscriber base

   

      5,565,072

         330,465

      5,234,607

  

Goodwill

   

         147,671

            5,806

         141,865

  

 

 

 

 

 $   5,828,960

 $      359,606

 $   5,469,354


5.

DEFERRED CHARGES

    

June 30, 2003

December 31, 2001

  

Direct and incremental costs of prospectus (note 6)

  

 $   2,193,089

 $   1,841,855

  

Due diligence costs of acquisition targets

  

         177,406

         177,406

  

 

 

 

 

 

 $   2,370,495

 $   2,019,261


6.

LONG-TERM DEBT

      
       

June 30, 2003

December 31, 2001

  

Loan balances, current portion

   

 $        75,007

 $      104,653

  

Loan balances, long term portion

   

          20,305

         146,195

  

Total

 

 

 

 

 $        95,312

 $      250,848

 

Bank loans are secured by the fixed assets of the Company repayable monthly at a rate of $10,890 per month, until August 2003 when the payments reduce to $5,376 per month. Interest in charged at the prime rate in Poland plus ½% .


7.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

    
 

Included in accounts payable and accrued liabilities is approximately $1,522,401  (December 31, 2002 - $1,637,715) owed on the acquisition of GimSat, and $1,137,611 (2002 - $616,812) owed for fees related to the prospectus (Note 10).


8.

CAPITAL STOCK

      
 

(a) Authorized

      
  

 150,000,000 common shares of no par value

    
 

(b) Issued

 

 

 

 

Number of Shares

 Price

 Share Capital

  

Balance - December 31, 2002

  

    27,666,379

 

 $ 26,110,367

  

Subscriptions received

  

                 -   

 

      1,136,728

  

Warrants exercised

   

         200,000

 $           2.85

         570,000

  

Warrants exercised

   

         100,000

 $           2.00

         200,000

  

Warrants exercised

   

      1,036,770

 $           1.80

      1,866,186

  

Fair value of warrants exercised

  

                 -   

 

      1,346,404

  

Balance - December 31, 2002

 

 

    29,003,149

 

 $ 31,229,685

  

Warrants exercised

         495,247

 $           1.80

         891,445

  

Fair value of warrants exercised

 

 

 

  

         343,244

  

Balance - June 30, 2003

 

 

    29,498,396

 

 $ 32,464,374


        (c) Options

In  the  Annual General Meeting held on June 30, 2003,  the shareholders approved the creation of the "Stock Option Plan" pursuant to which the directors  were  authorized  to  issue  stock  options from time to time to employees,  officers, consultants and directors of the Company up to 5,800,630 common shares of the Company at the time of such issue,  at a minimum price allowed under the applicable securities laws.

Common share purchase options are issued to directors, officers, employees and non-employees of the company with exercise prices which approximate market values at the time the option is granted. Options granted previously vested immediately and have a term of five years. Options granted in this period vest one-quarter every year with the first quarter vesting immediately and the remaining options vesting if the Company's shares are trading on an exchange and the trading price for the previous 30 days has exceeded 15% of the exercise price compounding each year to 45% in the third year. Options are normally granted for a period of five years.


Summary of directors' and employees' stock  options, warrants and convertible securities outstanding:

 

 

 

 

Shares

Weighted average         exercise  price $

Balance of options at December 31, 2002

 

      4,370,000

              1.88

 

Granted

   

                 -   

                 -   

 

Forfeited

   

                 -   

                 -   

 

Balance of options at June 30, 2003

 

 

 

      4,370,000

 $           1.88

 


The following table summarizes information about fixed stock options outstanding at June 30, 2003

 
   

Options Outstanding

 

Options Exercisable

 

Range of exercise prices

Number outstanding at June 30, 2003

Weighted average remaining contractual life (years)

Weighted average    exercise        price $

Number exercisable at June 30,      2003

Weighted average    exercise        price $

 

$1.41

 

        114,062

                0.8

 $           1.41

         114,062

 $           1.41

 

1.60

 

     3,049,938

                3.3

              1.60

         943,985

              1.60

 

2.62

 

        715,000

                1.6

              2.62

         715,000

              2.62

 

2.65

 

        491,000

                2.0

              2.65

         491,000

              2.65

 

 

 

     4,370,000

                2.8

 $           1.88

      2,264,047

 $           2.14


(d) Warrants

The changes in warrants were as follows:

Number of common shares permitted to be purchased

   

 

 

Number of warrants

Price per share

Expiry date

Fair value of Warrants

Outstanding December 31, 2002

        701,286

         350,643

$2.00

28-Dec-03

 $      228,318

  

        300,000

         150,000

1.80

28-Dec-03

         103,962

  

     3,404,105

      3,404,105

1.80

28-Dec-03

      2,359,309

  

        125,000

         125,000

2.25 USD

28-Dec-03

          49,080

Total balance December 31, 2002

     4,530,391

      4,029,748

 

 

 $   2,740,669

Outstanding June 30, 2003

        701,286

         350,643

$2.00

28-Dec-03

 $      228,318

  

        300,000

         150,000

1.80

28-Dec-03

         103,962

  

     2,908,858

      2,908,858

1.80

28-Dec-03

      2,016,065

  

        125,000

         125,000

2.25 USD

28-Dec-03

          49,080

Total Balance June 30, 2003

     4,035,144

      3,534,501

 

 

 $   2,397,425


9.

SEGMENTED INFORMATION

The Company operates primarily in one segment, being cable TV services and in two geographic locations, being Canada and Poland.


Geographic information

   
 

Revenues are attributed to countries based on location of customer

Revenues

 

 

 

 

For the six months ended June 30, 2003

For the six months ended June 30, 2002

  

Canada

  

 $              -   

 $              -   

  

Poland

  

      1,966,135

      1,856,158

 

 

 

 

 

 $   1,966,135

 $   1,856,158

       

Property, plant, equipment and intangibles

 

 

 June 30, 2003

December 31, 2002

  

Canada

  

 $        16,450

 $        24,923

  

Poland

  

    11,855,017

    14,646,006

 

 

 

 

 

 $ 11,871,467

 $ 14,670,929


10.

SUBSEQUENT EVENTS


The Company is currently preparing a prospectus in conjunction with an application to list on the Warsaw Stock Exchange.  The Company plans to use proceeds from the offering to further develop its cable television services. The listing on the Warsaw Stock Exchange and the prospectus is subject to regulatory approval.


11.

OFFICERS AND DIRECTORS


Stan Lis - President, CEO and director

  

Adam Wojcik, Chief Operating Officer and director

 

Iwona Kozak, Vice President Corporate Affairs and directors

Casey Forward, Chief Financial Officer

  

Jan Rynkiewicz, director

  

Boyce Butler, director