-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WJc4wvbtyh9DjA2degVi0WfKXRMDFDHv+xufOwyp+6zEwLb7qYVklHAzHPTIq+g3 RFATfdV83Xo7iRZI09fgIA== 0000883041-96-000008.txt : 19960903 0000883041-96-000008.hdr.sgml : 19960903 ACCESSION NUMBER: 0000883041-96-000008 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960830 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERACTIVE TECHNOLOGIES CORP INC CENTRAL INDEX KEY: 0000883041 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ALLIED TO MOTION PICTURE PRODUCTION [7819] IRS NUMBER: 980120805 STATE OF INCORPORATION: WY FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-19796 FILM NUMBER: 96624528 BUSINESS ADDRESS: STREET 1: 104 SOUTH HARBOR CITY BLVD STREET 2: STE A CITY: MELBOURNE STATE: FL ZIP: 32901 BUSINESS PHONE: 4079534811 10KSB/A 1 FORM 10KSB/A ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-KSB/A AMENDMENT NO. 1 (to the Annual Report For Fiscal Year Ended May 31, 1996, Submitted August 29, 1996) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 FOR THE FISCAL YEAR ENDED May 31, 1996 COMMISSION FILE NUMBER: 0-19796 INTERACTIVE TECHNOLOGIES CORPORATION, INC. (Exact name of registrant as specified in charter) Wyoming 98-0120805 (State or other (IRS Employer jurisdiction of Identification No.) incorporation) 104 SOUTH HARBOR CITY BOULEVARD SUITE A MELBOURNE, FLORIDA 32901 (Address of Principal Executive Offices) Registrant's telephone number including area code: 407-953-4811 Securities Registered Under Section 12(b) of the Exchange Act: NONE Securities Registered Under Section 12(g) of the Exchange Act: COMMON STOCK, $0.01 PAR VALUE. Check whether the Registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes_X_ No___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. _X_ The Registrant's operating revenues for its most recent fiscal year were: $56,532. The aggregate market value of voting stock held by non-affiliates of the Registrant, based on the average of the closing bid and asked prices of the Registrant's Common Stock in the NASDAQ market as reportedby NASDAQ on May 31,1996, was approximately $30,095,220. Shares of voting stock held by each officer and director and by each person who owns 5% or more of the outstanding voting stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive. As of May 31, 1996, 11,742,044 shares of Common Stock, $0.01 par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE None. LOCATION OF EXHIBIT INDEX The index of exhibits is contained in PART IV, Item 13 herein on page no. _____ TABLE OF CONTENTS PART I: Item 1. Description of Business Item 2. Description of Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders PART II: Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Item 6. Management's Plan of Operation Item 7 Financial Statements Item 8 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure PART III: Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act Item 10. Executive Compensation Item 11. Security Ownership of Certain Beneficial Owners and Management Item 12. Certain Relationships and Related Transactions PART IV: Item 13. Exhibits, and Reports on Form 8-K SIGNATURES 1 PART I Item 1. Description of Business. a. Business Development. Interactive Technologies Corporation, Inc. (the Company) was incorporated in the state of Wyoming on August 8, 1991. At that time, the Company was engaged in the business of exploiting its rights under a license (the "License") granted by CST Entertainment Imaging, Inc. ("CST"), which gave the Company the exclusive right to use CST's coloring process to convert to color black-and-white film and videotape, including black-and-white theatrical films and television programs, produced for distribution in Europe. The Company also had exclusive right to use CST's technology to provide digital special visual effects for new film and video productions produced for distribution primarily in the European territory. The Company ceased this effort on October 18, 1995. On October 20, 1995, the Company entered into an agreement to acquire assets of Syneractive, Inc. (SI), a Florida Corporation. SI's assets included intellectual property consisting of a television production and a trademark known as Rebate TV(TM), a marketing and sales medium for a wide variety of products and services. They also included license rights from the Federal Communications Commission (FCC) to operate interactive and data service systems in the Charleston -North Charleston, SC, and Melbourne-Titusville- Palm Bay, FL metropolitan areas. The Company issued 5,700,000 shares of common stock to its current sole director and officer in exchange for these assets of SI. In May, 1996, the Company closed an agreement for the acquisition of television studios, post production facilities, satellite links and remote production equipment located in Princeton, N.J. The Company acquired a fully operational studio and post production facility and C and Ku Band Satellite Links from Studiolink Corporation in exchange for $1.1 million dollars. The acquisition was made under a lease purchase agreement in the amount of $1,100,000.00. This amount is payable monthly (with payments calculated as this principal with interest amortized over the lease period at a rate of 11% interest per annum) on a lease purchase basis over five years beginning May 1, 1996 to Studiolink Corporation, the seller of the equipment. The Company has the option to purchase the equipment at the end of the term for a nominal sum. Studiolink Corporation is unrelated to the Company. The Company provided additional collateral under the lease of 250,000 common shares. The equipment was used previously to make available television production, post production and satellite uplink services on a limited basis to consumers of such services and to process business of the private owner of the Studiolink Corporation. The Company expects to utilize these facilities in the production and distribution of its own television shows as well as to offer these services to users throughout the television and broadcast industry. The Company has agreed to take over the existing facility at 13 Rozel Road, Princeton, New Jersey and expand it to 9,934 square feet under lease. The Company expects to begin operating this as a new business without depending upon previous business. On April 9, 1996, the Company formed a wholly owned subsidiary, Satellite Network Television, (SNT), a Nevada corporation, to enhance the Company's television programming, production and broadcasting capabilities, and vertically integrate certain of the broadcast activities involved in the television programming segments of its business. The Company has acquired rights to a FCC license and owns the antenna and other equipments necessary to provide satellite uplink for television broadcasting. The Company's Principal Executive Offices are located at 104 South Harbor City Boulevard, Suite A, Melbourne, Florida 32901, and its telephone number is (407) 953-4811. 2 b. Business of Registrant. (1) Principal Products or Services and Their Markets. Interactive Technologies Corporation, Inc. ("ITC") is a developer and producer of television, interactive television and interactive digital media programming. These programs are developed in various interactive formats for cable, broadcast and direct broadcast satellite television and for Internet distribution. Programming. ITC's principal interactive programming product is its Rebate TV(TM) program. Rebate TV(TM) is a marketing and sales network which airs one half-hour of programming a day on WIRB/Channel 56 in the central Florida market which serves a population of 2,176,100. Rebate TV(TM) first aired April 15, 1996, and has been on the air daily since that time. The Company expects later network growth to see distribution via communications satellite to cable television headends and other local distribution systems across the country. Rebate TV(TM) is a television program which incorporates interactive media and computer data management to allow the retail vendors to communicate their message to the consumer, to allow the consumer to verify his or her purchase, and to receive a cash rebate from the Company. The television program which airs one half hour a day, seven days a week is divided into 14 one minute retail information segments which are utilized by advertisers to provide information about their company and a brief description of the cash rebate offered to the consumer. The balance of the program consists of information segments, rebate reviews and instructional segments. Retailers represent a broad spectrum of business including grocery chains, furniture stores, tire service stores, retail banks, restaurants, car dealers and various specialty businesses. The consumer, after watching Rebate TV(TM), shops at one or more of the participating retailers and makes a purchase of items of product or in dollar amounts which carry the rebate offered by each particular retailer, (i.e. a $5 rebate on a purchase of $50 or more, or $10 rebate on the purchase of a brake package, etc.) The consumer then goes home and calls the toll free telephone number, 1-888-2REBATE, which connects him to the Company's computer data base, and he then registers the Rebate TV(TM) number on the bottom of the receipt. At the end of the month, the Company sends a check to the Rebate TV(TM) customer for a total of all rebates processed during that month. These rebates are in addition to coupons or other promotional offers by the vendor. Rebate TV(TM) had approximately 4,000 subscribers by the end of the fiscal year. The Company collects point-of-sale information from the vendors who participate in Rebate TV(TM), and processes that data along with Rebate TV(TM) customer call-in data, then credits rebates to customer accounts as they are verified. The Company manages escrow accounts for retail vendors so that rebates are transferred to a general customer escrow fund as they are credited, and issues checks at the end of each month to Rebate TV(TM) customers. The Company receives revenues of two types from Rebate TV(TM). First, retail vendors pay an initial production fee to the Company for the production of the information segment that becomes part of the television show. Secondly, the retail vendors pay the company a transaction fee based upon verified sales. The amount of the transaction fee varies with the type of retailer and the frequency of purchase of its products, i.e. the transaction fee for a automobile sale is much higher than a grocery store because of the size and frequency of purchase. Rebate TV(TM) is designed to utilize existing communication technologies for consumer responses - it now uses the telephone and the Internet as return links. However, it is also designed to easily accommodate the emerging interactive television systems as they come into use, such as Interactive Video and Data Services (IVDS) and Interactive Television (via fiber optic cable/ telephone cable etc.) 3 PROGRAM MARKET EXPANSION The Company's roll out plan provides for Rebate TV(TM) to open in the Atlanta market following the Orlando market. The Company has hired a General Manager for the Atlanta office who began with the Company on April 1, 1996. The Company's plan also includes the completion of an interface for Interactive Video and Data Services (IVDS) return links during the next 12 months. Overall, during the next 18-36 months, the Company's plan calls for the market expansion of Rebate TV(TM). The program is scheduled to expand into 25 of the top national markets within three years from the date of first broadcast. The Company expects to hire as many as 50 additional employees over the next 24 months to support the operation of this programming and to continue to develop and refine the programming as the Company adds markets for these services. PROGRAM DEVELOPMENT The Company's research and development efforts consumed the technical efforts of the Company from October 1995 through the airing of Rebate TV(TM) on April 15, 1996, and involved two basic areas: the television programming for the shows, and the data management and computer interface development efforts for the interaction with the retailers and the consumers. None of this expense will be borne directly by the retailers or the consumers, but will be recouped through profits as the Company expands its markets. Development of Rebate TV(TM) basic programming by ITC has been done during the fiscal year with Century III at Universal Studios, Florida. Established in 1976, Century III has serviced a widely diverse client base with high production values utilizing the latest and finest in production and post-production hardware. This includes local, regional, national and international projects for all four broadcast television networks, national cable networks such as Nickelodeon and HBO, major independent producers, advertising agencies and major corporate and governmental organizations such as Digital Equipment Corporation, Harris Corporation, General Electric, NCR, AT&T, Kodak, Polaroid, Walt Disney World, Harcourt Brace Jovanovich, FPL Group, Westinghouse, McDonnell Douglas, Martin Marietta, Reebok, International and NASA. The creative director for Rebate TV(TM) is Michael Hamilton who has designed, directed and produced such television series as "Magnum P.I., "Simon & Simon", "Wings" and "The Twilight Zone". His commercial experience includes such clients as Cadillac(TM), Texaco, Coca Cola(TM), Heineken, American Airlines, Donna Karan, Elizabeth Arden, QVC, Business Technology Management and the Family Channel. The computer development efforts related to Rebate TV(TM) were done at the Company's engineering offices in Melbourne, Florida, where the hardware and software designs and specifications were developed, tested and implemented during the current fiscal year, to: o manage the large amounts of data and transactions involved in collecting and verifying sales information from the Rebate TV(TM) retailers; o calculate the rebates, record the credits, and issue the checks to the consumer; o accommodate and record the telephone rebate requests, and provide automated participation information to the public. ITC looks to Rebate TV(TM) to attract its share of the Communications Industry end-user market estimated to be $189.3 billion by 1998. Interactive digital media is projected to remain the fastest growing category in the industry.1 Internet Access. ITC's Internet home pages for use with Rebate TV(TM) allow viewers to access the program's data base through the Internet. It allows them to view the status of their accounts, enter vendor rebate claims, and later will allow viewers to access a variety of products and services associated with Rebate TV(TM) which the Company expects to include. The Company's home page is located at http://www.INET-USA.com/RTV. Network Operations. ITC is in development and production of its own television channel and is scheduled to distribute its Rebate TV(TM) video programming in this format to customers. The Company's distribution plan currently provides for distribution of this programming started in the central Florida markets to expand from there. Overall, during the next 18-36 months, the Company's plan calls for the Rebate TV(TM) to expand into 25 of the top national markets within -------------------------- 1. The Veronicas,Shudder & Assoc. Communications Industry Forecast, July 1994 4 three years from the date of first broadcast. The Company expects to hire as many as 50 additional employees over the next 24 months to support the operation of this programming and to continue to develop and refine the programming as the Company adds markets for these services. The Company currently maintains a sales office in Atlanta, GA, and has announced a on-air date for that market of January 6, 1997. In addition, plans include the exploitation of the Company's wholly-owned subsidiary, SNT's, satellite uplink capabilities to expand it's programming to a potentially worldwide market. Satellite Network Television (SNT). The company formed Satellite Network Television, Inc. (SNT) a Nevada corporation, to operate its facilities in Princeton, New Jersey. These facilities consist of three basic segments: Studio Operations:Complete studio and control room facilities including studio cameras, XY lighting, preset lighting board and recording facilities. Post Production: Equipped Video and audio edit rooms for on and off line edits. 3-D Graphics and Paintbox edit rooms, voice over and audio facilities and control equipment. Satellite Links: Fully redundant C band and Ku band satellite uplinks and downlinks with support and playback equipment. These facilities were acquired to provide the Company the ability to completely produce and distribute its own programming in-house. However, the Company operates this facility as a full-service studio and broadcast facility available to the business community and realizes revenues from providing contract services from its facilities and from remote sports and general subject broadcasts. (These include such services as video conferencing, and television and video program production for educational, commercial and corporate videos.) The Company began major renovations to these facilities in May, 1996, and has been operating at a reduced level during renovations. The renovations are scheduled to be complete in September of 1996. Interactive Video and Data Services. As part of ITC's commitment to the evolution of interactive television, its Federal Communications Commission Interactive Video and Data Services (IVDS) radio station licenses in the Charleston-North Charleston, SC, and Melbourne-Titusville-Palm Bay, FL service areas represent an additional enhancement to the Company's programming distribution. These licenses have a duration of an initial five years, and are renewable if all conditions of the license are met. IVDS, a two way communications system, will allow viewers to take an active role in systems delivered through broadcast television, cable television, wireless cable, direct broadcast satellite or other future television delivery methods. IVDS is regulated as a personal radio service under the rules of the FCC which has allocated spectrum in the 218-219 MHz range for its use. IVDS systems are designed to operate with a hand-held remote control device that controls the interactive set top device on the subscriber's television set. A viewer would interact with the TV station through a radio signal using an IVDS frequency. The Company has purchased equipment for its Charleston-North Charleston, SC license, which is at the date of this report in transit to Melbourne, Florida, and will be stored until the Company is ready for installation in Charleston. The Company has under contract the sale of 90% of this ownership of this license and equipment and has reserved rights to provide programming to this license area when it is in operation. The Company is reviewing alternative uses and equipment proposals for its Melbourne-Titusville-Palm Bay, FL license and expects to proceed to install a system for this license within the next 24 - 36 months. Although ITC will run its Rebate TV(TM) and other programs on its own service area systems, the programs it develops are intended for use on various interactive delivery systems and are not specific to Interactive Video and Data Services systems. They are marketed to all of these various delivery systems. For broadcast of Rebate TV(TM) programming the Company currently uses and plans to use standard video media distribution methods such as cable, broadcast stations, wireless cable and direct broadcast satellite. Although the Company has designed its programs to utilize an IVDS return link (a "return link" is the method by which data is sent from the consumer or viewer back to the originator of the program), they are also designed to accommodate other return links such 5 as the telephone. The Company has purchased equipment and software to provide a telephone return link as an interim return link for its own license areas as well as other areas where it is providing programming, to be utilized where IVDS is not available; until the installation an operation of the IVDS equipment as a return link is completed as well as for use with non subscribers to IVDS. Intellectual Content. The Company has developed a plan for the accumulation and sale of intellectual content. This content takes several forms, including completed television and video programming, both developed and produced by the Company and by third parties; property rights to written scripts and publications for the purpose of producing or having produced television or motion picture products; and program ideas, concepts and designs. This plan commenced during the last month of the fiscal year. In addition to the Rebate TV(TM) programs, the company has filed and had accepted Trademark applications with the United States Patent and Trademark Office for "Rebate TV" and for "DEAL! DEALS! DEALS!" (a direct shopping program which the Company has produced). The Company has produced in conjunction with Nightwing Entertainment Group, Inc./Petsville USA a series of direct sale pet product shows which it expects to air during the 4th quarter of 1996 and beyond. Subsequent to the end of the fiscal year, the Company acquired movie and television rights for one year to Special Treatment a novel currently in print. The Company through its SNT subsidiary currently has in development and preproduction a series of Bowling Tournament shows produced in conjunction with the New Jersey Bowling Proprietors Association scheduled to air fourth quarter of 1996 and/or first quarter of 1997. The Company has in addition under this plan a number of projects under consideration and review. To date, revenue from these activities has been limited to the Rebate TV(TM) television program, and to a limited showing of its DEAL! DEALS! DEALS! program. There is associated with each of these shows and projects a lead time or advance period necessary for development and scheduling. In addition, the company may elect to sell outright or resell any of these properties. The Company does not expect to receive material revenues from these projects other than Rebate TV(TM) program until calendar year 1997. As of May 31, 1996, the Company has 12 ITC and 5 SNT employees, all of which are full-time. The Company's fiscal year runs from June 1 to May 31 of each year. Item 2. Description of Properties. The Company currently has executive and engineering offices at 104 South Harbor City Boulevard, Suite A, Melbourne, Florida; programming and media offices at Century III at Universal Studios, 2000 Universal Studios Plaza, Suite 100, Orlando, Florida; and marketing offices at 228 Park Avenue North, Suite J, Winter Park, Florida, and 111 Chickering Parkway Roswell, Georgia. In addition, the Satellite Network Television (SNT) facilities are located at 13 Rozel Road, Princeton, New Jersey. The Melbourne facility consists of 1,250 square feet of office and engineering space, and is leased from The Network Group, for a term of one year, with automatic renewal for an additional 12 months unless either Landlord or Tenant is notified in writing by the other party at least 60 days prior to termination date. Monthly lease payments are $1,250.00 plus applicable Florida sales tax. The Company's Century III office at Universal Studios consists of approximately 250 square feet of office space and use of common areas. The cost of this space is included in invoicing for production work Century III is performing for the Company. The Winter Park facility consists of 1080 square feet of office space. It is leased from Williams-Builder Partnership for a term of two years with monthly base lease payments of $1,301.40, plus applicable Florida sales tax, and pro rata common area maintenance fees estimated to be approximately $200 per month. The Roswell office currently exists at the residence of the General Manager in the Atlanta area, for which the Company neither compensates nor 6 reimburses. The Company anticipates a requirement for a corporate sales and administrative office in Atlanta within six months. The SNT facility consists of 7,050 square feet of television studio, and 1,783 square feet of office and administrative space for which the Company pays a minimum monthly rent of $9,572.50, plus electric, for Year 1, and $10,948.75, plus electric, for Years 2 - 5 of a five year lease. The SNT facility is leased from LLB Realty, L.L.C./Keller, Dodds and Woodworth, Inc. Additional square footage in the facility is available, and the Company plans to expand to a total of 9,934 square feet for its use. Item 3. Legal Proceedings. None. Item 4. Submission of Matters to a Vote of Security Holders. The Company did not submit any matters to a vote of the security holders during its fiscal year June 1, 1995 through May 31, 1996. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. a. Market Information Interactive Technologies, Inc. common shares are traded on the National Association of Securities Dealers Automated Quotation Systems (NASDAQ) SmallCap Market under the symbol "ITNL". The Company's shares were traded on the NASDAQ exchange beginning April 30, 1996. High and low quotes for the last quarter of the Company's fiscal year when the shares began trading on NASDAQ were: High Low Fiscal Year 1996 4th Quarter 5 4 7/8 Prior to being traded on the NASDAQ exchange, the Company's common shares were traded in the "over-the-counter" or "Bulletin Board" market. The following quotes represent the quarterly high and low quotes available through the quarter ending 12/29/95. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions: Fiscal Year 1996 High Low Quarter Ending 3/29/96 4 3/4 3 7/8 Quarter Ending 12/29/95 4 2 1/2 Prior to the quarter ending 12/29/95 of the Company's FY 96, and during the previous FY 95, to the best of the Company's knowledge, no trading occurred in the Company's common stock. b. Holders As of August 5, 1996, there were approximately 941 record holders of the Company's Common Stock. c. Dividends The Company has never paid any cash dividends on its Common Stock and has no present intent to pay any cash dividends in the foreseeable future. The declaration of cash dividends will depend on future earnings, if any, the financial needs of the Company, and other pertinent factors. Further, the declaration of dividends will be at the discretion of the Company's Board of Directors. Item 6. Management's Plan of Operation. a. Plan of Operation The Company had no significant revenues from operations over the previous two fiscal years. It began generating revenue from operations at the end of the development period for Rebate TV(TM) during the last quarter of FY 95, and at the same time began realizing revenues from SNT operations. 7 The Company's primary show, "Rebate TV" began to air for one half hour twice daily, seven days a week April 15, 1996 at 6:30 and 9:00 p.m. on Paxson Broadcasting's WIRB/Channel 56 serving the central Florida market, and continues to air. The Company expects to receive revenues from these operations and from its SNT operations over the coming year. The Company acquired $1,040,800 in working capital during the past fiscal year, through loans and private stock sales. The Company believes that it can meet its cash requirements during the first quarter of the fiscal year but expects to require additional funds over the next 12 months for the expansion and addition of markets for its product and for operations. Although the Company currently has no written commitments for additional funds, it believes that it can raise additional cash required from private sources. The Company continually accumulates data in the operation of its Rebate TV(TM), and examines this data with regard to indicated changes in its programming. The Company expects to continue research and development of its products based upon the collection of this data. Item 7. Financial Statements: TURNER, STONE, & COMPANY Certified Public Accounting A Registered Limited Liability Partnership 12700 Park Central Dr., Suite 1610 Dallas, Texas 75251 Telephone (214) 239-1660 Facsimile (214) 239-1665 Independent Auditor's Report Board of Directors Interactive Technologies Corporation, Inc. Melbourne, Florida We have audited the accompanying consolidated balance sheet of Interactive Technologies Corporation, Inc. and subsidiary as of May 31, 1996 and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Interactive Technologies Corporation, Inc. as of May 31, 1995 and the year then ended were audited by other auditors whose report dated August 11, 1995, expressed an unqualified opinion on those statements and included an explanatory paragraph that described substantial doubt about the Company's ability to continue as a going concern. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1996 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Interactive Technologies Corporation, Inc. and subsidiary at May 31, 1996 and the results of its operations and its cash flows for the aforementioned period in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has no prior operating history in its new industry and the success of its new business operations are dependent upon adequate financing to fund its operations, all of which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are describes in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. TURNER, STONE & COMPANY, LLP Certified Public Accountants 8 Interactive Technologies Corporation, Incorporated And Subsidiary Consolidated Balance Sheets May 31, 1996 and 1995 Assets 1996 1995 --------- ----------- Current Assets: Cash $ 63,114 $ 11,745 Accounts receivable, trade 31,792 - Prepaid expenses and other assets 49,153 - ---------- ----------- Total current assets 144,059 11,745 ---------- ----------- Property and equipment, at cost, net of $35,255 of accumulated depreciation 1,256,344 - ---------- ----------- Other Assets: Organizational costs, net of $ 1,534 of accumulated amortization $ 2,466 - License rights, net of $ 246,084 of accumulated amortization 718,916 - Proprietary software and trademark, net of $97,519 of accumulated amort 5,363,524 - ---------- ----------- 6,084,906 $ - ---------- ----------- Total Assets $ 7,485,309 $ 11,745 ========== =========== Accompanying notes are an integral part of the financial statements. 9 Interactive Technologies Corporation, Incorporated And Subsidiary Consolidated Balance Sheets May 31, 1996 and 1995 Liabilities and Stockholders' Equity 1996 1995 ----------- ---------- Current Liabilities: Accounts payable, trade $ 362,802 $ - Accrued expenses 119,670 20,000 Contract of sale deposit 401,901 - Loan Payable, related party - 656,831 Current portion of long-term liabilities 348,295 - ---------- ---------- Total current liabilities 1,232,668 676,831 Long-term liabilities: License rights payable 731,573 - Capital lease obligation 873,070 - Convertible debentures payable 500,000 - ---------- ---------- 2,104,643 $ 0 Commitments and contingencies: - - Stockholders' equity: Common Stock $.01 par value; 12,500,000 shares authorized, 11,742,044 and 5,689,544, respectively, shares issued and outstanding 117,420 56,895 Paid-in capital in excess of par 8,392,240 3,192,082 Accumulated deficit (4,361,662) (3,914,063) ----------- ----------- 4,147,998 (665,086) ----------- ----------- $ 7,485,309 $ 11,745 ============ =========== Accompanying notes are an integral part of the financial statements. 10 Interactive Technologies Corporation, Incorporated And Subsidiary Consolidated Statements of Operations Years Ended May 31, 1996 and 1995 1996 1995 ------------ ------------ Revenue $ 56,532 $ - ------------- ------------ Operating expenses: Depreciation 34,741 - Amortization 210,569 - General and administrative 916,652 20,810 Management fee-shareholder 16,666 50,000 Interest expense: Stockholder 27,368 65,491 Other - - ------------ ------------ 1,205,996 136,301 ------------ ------------ ------------ ------------ Loss from operations (1,149,464) (136,301) Gain on disposition of joint venture interest 701,865 - ----------- ------------ Loss before income taxes (447,599) (136,301) Provision for income taxes - - ----------- ------------ Net Loss $ (447,599) $(136,301) =========== ============ Net loss per share Primary $ 0.05 $ 0.02 Diluted $ 0.05 $ 0.02 Accompanying notes are an integral part of the financial statements. 11 Interactive Technologies Corporation, Inc. And Subsidiary Consolidated Statement of Stockholders' Equity Years Ended May 31, 1996 and 1995 Common Stock Add'l Paid Accumulated Shares Amount In Capital Deficit Total ------- ------- ---------- ---------- ------- Balance at May 31, 1994 5,689,544 $ 56,895 $3,192,082 $(3,777,762) $(528,785) Net Loss - - - (136,301) (136,301) --------- -------- ---------- ----------- --------- Balance at May 31, 1995 5,689,544 56,895 $3,192,082 (3,914,063) (665,086) Issuance of common stock in exchange for cash 102,500 1,025 408,975 410,000 Issuance of common stock in reverse acquisition transaction 5,700,000 57,000 4,793,683 4,850,683 Issuance of common stock as security for capital lease obligation 250,000 2,500 (2,500) Net loss - - - (447,599) (447,599) --------- ------ ---------- --------- ---------- 11,742,044 $117,420 $8,392,240 $(4,361,662) $4,147,998 ========== ======== ========= ============ ========== Accompaning notes are an integral part of the financial statements. 12 Interactive Technologies Corporation, Incorporated And Subsidiary Consolidated Statement of Cash Flows Years Ended May 31, 1996 and 1995 1996 1995 ---------- ---------- Cash flows from operating activities: Cash received from customers $ 26,390 $ - Cash paid to employees (171,974) - Cash paid to suppliers (278,114) (70,810) Interest paid: Stockholder (65,491) Others (48,847) - Taxes paid - - ---------- ---------- Net cash used in operating activities (472,545) (136,301) Cash flows from investing activities: Purchase of property and equipment (187,193) - Capitalized software development (461,043) - --------- ---------- Net cash used in investing activities (648,236) - --------- ---------- Cash flows from financing activities: Issuance of convertible debentures 630,800 - Issuance of common stock in reverse acquisition 20,861 - Proceeds from note payable stockholder corporation 1,000 140,481 Contract of sale deposits received 159,351 - Repayment of capital lease obligation (49,862) - Common stock issued for cash 410,000 - --------- ---------- Net cash provided by financing activities 1,172,150 140,481 --------- ---------- Net increase in cash 51,369 4,180 Cash at beginning of period 11,745 7,565 --------- ---------- Cash at end of period $ 63,114 $ 11,745 ========== ========== Accompaning notes are an integral part of the financial statements. 13 Interactive Technologies Corporation, Inc. And Subsidiary Consolidated Statement of Cash Flows Years Ended May 31, 1996 and 1995 Reconciliation of Net Income to Net Cash Used in Operating Activities 1996 1995 ----------- ----------- Net loss $ (447,599) $(136,301) ------------ ----------- Adjustments to reconcile net loss to net cash used in operating activities: Amortization 210,569 Depreciation 34,741 Increase in accounts receivable (30,142) Decrease in prepaid expenses 847 Increase accounts payable 362,802 Increase in accrued expenses 54,068 Increase in accrued management fees payable, stockholder 16,666 Increase in accrued interest payable, stockholder 27,368 Gain on disposition of joint venture interest (701,865) -------------- ------------ Total adjustments (24,946) - -------------- ------------ Net cash used in operating activities $ (472,545) $(136,301) ============== ============ Supplemental Schedule of Non-Cash Investing and Financing Activities Issuance of common stock for assets, net of various liabilities in reverse acquisition transaction $4,829,822 - Disposition of joint venture interest in exchange for note payable and accrued interest and management fees payable $ 701,865 - Capitalized program development costs incurred for accounts payable, trade $1,100,000 - Accompaning notes are an integral part of the financial statements. 14 INTERACTIVE TECHNOLOGIES CORPORATION, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Interactive Technologies Corporation, Inc. (the Company) was incorporated in the state of Wyoming on August 8, 1991. On October 20, 1995, the Company entered into a reverse acquisition transaction, described below, with Syneractive, Inc. (SI). SI was incorporated in the state of Florida on August 31, 1995. Prior to October 20, 1995, the Company was engaged primarily in the business of exploiting its rights under a license granted by CST Entertainment Imaging, Inc. The license gave the Company the exclusive right to colorize black-and-white film and videotape, including black-and-white theatrical films and television programs, which were originally produced for distribution primarily within European countries. However, the Company abandoned the business of exploiting the license (see Note 3) on October 18, 1995 as a result of being unable to realize any revenue from the license. SI, which was acquired in a reverse acquisition, obtained license rights from the Federal Communications Commission to operate interactive and data service systems in the Charleston - North Charleston, SC and Melbourne - Titusville, Florida metropolitan areas. Syneractive, Inc. also acquired proprietary software and a trademark known as Rebate TV, which is a marketing and sales medium for a wide variety of products and services. Advertisers on Rebate TV will offer substantial rebates to the network's viewers through a unique interactive rebate program. Touch-tone phones will initially interact the network to secured earned rebates, and later the network will be accessed via wireless digital communications networks currently under development. The Rebate TV operations commenced April 15, 1996 and serve customers in the eastern United States. Management expects exploitation of the FCC licenses to commence in 1997. They intend to hire the necessary management personnel, raise addition capital and generate profitable operations needed to continue its existence. Syneractive, Inc. was dissolved on October 30, 1995. Reverse acquisition On October 1, 1995, the Company issued 5,700,000 shares of common stock to its current sole director and officer in exchange for the net assets of SI. After the issuance of such stock, the current director and officer effectively controlled the Company, holding approximately 50.1% of the outstanding common stock. Prior to the reverse acquisition, the current sole director and officer of the Company owned all of the outstanding common stock of SI. Accordingly, the reverse acquisition has been accounted for at the historical cost of the assets acquired. Consolidated principles On April 9, 1996 the Company formed a wholly owned subsidiary, Satellite Network Television (SNT), by issuing 1,000,000 common stock share to ITC. SNT operates television studios, a post production facility and satellite links. It produces commercials, infomericals, business videos, commercial programming, and remote broadcasts for both the Company's Rebate TV operations and for outside customers. The accompanying consolidated financial statements include the general accounts of the Company and SNT. All material intercompany accounts and balances have been eliminated in the consolidation. Property and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is currently be provided by straight line and accelerated method for financial and tax reporting purposes, respectively, over estimated useful lives of five years. Amortization Organizational costs, which were acquired from Syneractive, Inc. are being amortized using the straight line method of five years. For the year ended May 31, 1996, amortization expense totaled $466. 15 License rights are being amortized over the initial five year term of the licenses. Although they are renewable at no additional consideration, there is no guarantee the company will renew these licenses. For the year ended May 31, 1996, amortization expense totaled $112,584. Software and trademark costs will be amortized at an annual amount equal to the greater of the amount computed using (a) the ration that current gross revenues bear to the total of current and anticipated future gross revenues or (b) the straight-line method over a seven year estimated economic life beginning April 18, 1996. For the year ended May 31, 1996, amortization expense totaled $97,519. Advertising The Company's advertising costs, which consist of radio airtime for the Rebate TV operations, are charged to expense when incurred. For the years ended May 31, 1996 and 1995, advertising costs totaled $197,229 and $0, respectively. Management estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash flow For purposes of the statement of cash flows, cash includes demand deposits and time deposits with maturities of less than three months. None of the Company's cash is restricted. Earnings per share Primary and fully diluted earnings per share amounts are based upon 9,558,539 and 5,689,544, respectively, weighted average shares of common stock and common stock equivalents outstanding. No effect has been given to the assumed exercise of stock options and warrants and convertible debentures as the effect would be antidilutive. 2. COMMITMENTS AND CONTINGENCIES Operating leases Through October 31, 1995, the Company used office space provided free of charge by its stockholder, the value of which was not material. The Company presently leases its facilities in Florida and New Jersey under non-cancelable operating lease agreements expiring through April 2001. For the years ended May 31, 1996 and 1995, rent expense under these leases totaled $24,603 and $0, respectively. Minimum future rental payments required under the above operating leases are as follows: Year Ending Amount May 31 1997 $138,113 1998 144,399 1999 131,385 2000 131,385 2001 120,436 $665,718 Capital lease obligations On March 27, 1996, the Company acquired various studio equipment under a capital lease obligation payable monthly through March 2001 with imputed interest at 11.0%, secured by the equipment and 250,000 common stock shares of the Company. As part of the transaction, the stockholder of the lessor/corporation purchased 50,000 common stock shares of the Company for $200,000 cash and received warrants to purchase 50,000 common stock shares at $2.00 per share. At May 31, 1996, the cost of equipment acquired under this lease and related accumulated depreciation totaled $1,100,000 and $26,190, respectively. 16 Minimum future payments required under the above capital lease obligation is as follows: Year Ending Total Principal Imputed May 31 Interest 1997 $287,646 $177,068 $110,578 1998 287,646 198,328 89,318 1999 287,646 222,140 65,506 2000 287,646 248,810 38,836 2001 239,705 203,792 35,913 $1,390,289 $1,050,138 $340,151 License fees payable The Company, through SI, has acquired licenses from the Federal Communications Commission to operate interactive video and data service systems in various metropolitan statistical areas (Note 1). The license rights are payableinterest only, at 7.7 percent for two years with principal and interest payable monthly over the remaining three years of the licenses. Interest has been accrued from the dates the licenses were formally issued. Future principal payments under the above license right obligations are as follows: Year Ending May 31 Amount 1997 $40,427 1998 246,983 1999 260,446 2000 224,144 2001 - $772,000 Employment agreement The Company has entered into an employment agreement, with a director and principal member of management, which provides for annual compensation equal to 5% of the gross profit from the Rebate TV operations, with a minimum salary for the first year of $125,000. In addition, the Company provides a monthly automobile allowance. The agreement expires in October 2005, and provides for full payment if the employee should be terminated without cause, become disabled, or die before such date. The Company's current compensation benefits do not provide any other post-retirement or post-employment benefits. 3. CONVERTIBLE DEBENTURES During the year ended May 31, 1996, the Company issued $630,800 of 8% convertible debentures maturing through April 2001. The bonds are convertible into shares of the company's common stock at conversion prices of $1.00 to $3.75. In the event that the Company becomes a private company, the lenders have the right to immediately require redemption at a rate of 10% of par in the first year the Company becomes private plus an additional 1% for each year to redemption. Sinking fund requirements required under the terms of the convertible debenture are as follows: Year Ending May 31 Amount 1997 $130,800 1998 15,000 1999 50,000 2000 60,000 2001 375,000 $630,800 17 4. RELATED PARTY TRANSACTIONS Stockholder The Company had a 50% interest in a joint venture with another corporation to exploit its license (Note 1) and accounted for this investment using the equity method. At May 31, 1995, the joint venture had no assets and the carrying value of its investment was $0. Also, at May 31, 1995 the Company had available a $700,000 financing arrangement through a stockholder corporation with an interest rate of 12.5%. The amount outstanding at May 31, 1995 totaled $656,831. The stockholder corporation also charged a monthly management fee of $4,167 through September 30, 1995. In October 1995 the Company sold its joint venture interest in exchange for its release from the amount owed under the financing arrangement plus accrued interest and management fees through September of 1995, resulting in a gain of $701,865, the excess of these amounts over the carrying value of its investment in the joint venture. During the years ended May 31, 1996 and 1995 interest expense totaling $27,368 and $65,491, respectively, and management fees totaling $16,666 and $50,000 accrued to the stockholder corporation. 5. INCOME TAXES The Company used the accrual method of accounting for tax and financial reporting purposes. At May 31, 1996, the Company had net operating loss carryforwards for financial and tax reporting purposes of approximately $4,300,000. These carryforwards expire through the year 2010, and are further subject to the provisions of Internal Revenue Code Section 382. Pursuant to Statement of Financial Accounting Standards No. 109, the Company has recognized a deferred tax asset attributable to the net operating loss carryover, net of a deferred tax liability related to amortization timing differences, in the amount of $1,469,703 which has been fully offset by a valuation allowance in the same amount, as follows: 1996 1995 Beginning balance $ 1,330,781 $1,284,513 Increase during period 138,922 46,268 Ending balance $1,469,703 $1,330,781 6. FINANCIAL INSTRUMENTS The Company's financial instruments consist of its cash, accounts receivable trade and its convertible payable. Cash The Company maintains its cash in bank deposit and other accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts, and does not believes it is subject to any credit risks involving its cash. Accounts receivable, trade The Company accounts receivable are unsecured and represent sales not collected at the end of the year. Management believes these accounts receivable are fairly stated at estimated not realizable amounts. Convertible debentures payable Management believes the carrying value of their debentures payable represents the fair value of these financial instruments because their terms are similar to those in the lending market for comparable loans with comparable risks. 7. STOCK OPTIONS AND WARRANTS During the years ended May 31, 1996, and 1995, the Company issued various stock options and warrants to employees and others. The options and warrants expire between January 1999 and May 2001 and are exercisable a prices from $2.00 to $4.50 per warrant 18 The following is a schedule of the activity relating to the Company's stock options and warrants: 1996 1995 Options and warrants outstanding at beginning of year 25,000 25,000 Options and warrants issued during year Officers and directors - - Employees 65,704 - Others 103,750 - Options and warrants exercised during year: Officers and directors - - Employees - - Others - - Options and warrants expired during year (25,000) Options and warrants outstanding at end of year 169,454 25,000 Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure By unanimous consent of the Board of Directors of the Company on November 10, 1995, the Registrant engaged the accounting firm of Turner, Stone & Company of Dallas, Texas as independent accountants for the Registrant for the fiscal year beginning June 1, 1995, and voted to excuse the accounting firm of Lumsden & McCormick from further service to the Company after the completion of its work on the audit for the Registrant for the fiscal year ending May 31, 1995. During the previous two fiscal years ending May 31, 1995, there were no disagreements with Lumsden & Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure or any reportable events. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act. a. Directors and Executive Officers. The following table sets forth the names, ages and positions of the directors and executive officers of the Company as of May 31, 1996. A summary of the background and experience of each of these individuals is set forth after the table. The directors and executive officers are: NAME AGE POSITION Perry Douglas West 49 Chairman, Chief Executive Officer Robert J. Poe 42 Chief Operating Officer The Board of Directors currently consists of two Directors, each holding office for a term of one year. Perry Douglas West joined the Company in October 1995, and is Chairman and Chief Executive Officer of the Company. Mr. West co-founded American Financial Network in July of l985. Headquartered in Dallas, Texas, American Financial Network operated a national computerized mortgage loan origination network. Mr. West served as Executive Vice President/Director and General Counsel of this public company from 1985 to 1991. Mr. West has practiced law in Florida since 1974, representing various business institutions in the financial, computer, natural resources and general business industries and international transactions. He was graduated with a Bachelor of Arts degree from The Florida State University in l968 and with a Juris Doctorate degree from The Florida State University, College of Law in l974. Robert J. Poe joined the Company as Director of Program Development and Director in November 1995 and is a veteran of the broadcast industry. Mr. Poe founded a marketing, media and management consulting firm in 1993, and has been involved in the genesis of numerous successful broadcasting and entertainment undertakings, including the WMMO Radio Station in Orlando, Florida, and the Orlando Magic Professional Basketball Team. He serves on the East Central Florida Regional Planning Council as a gubernatorial appointee and he is on the 19 Board of Directors of the Florida Association of Broadcasters. Mr. Poe has served as president of the National Association of State Radio Networks and president of the Orlando Radio Broadcasters Association. b. Significant Employees. Board of Directors of the Florida Association of Broadcasters. Mr. Poe has served as president of the National Association of State Radio Networks and president of the Orlando Radio Broadcasters Association. b. Significant Employees. George C. Clark, Ph.D, joined the Company in November 1995 as Director of Systems Development. He was previously a Senior Scientist in the Advanced Technology Department in the Electronics Systems Sector of Harris Corporation, headquartered in Melbourne, Florida from 1964 through 1994. During his tenure at Harris, Dr. Clark conducted advanced research and development in antennas, electronic communications systems, statistical communication theory, error correction coding, computer-aided design of electronic circuits and systems, object oriented programming methodologies, and modeling of transportation systems. He also served as Director of the Advanced Technology Department at Harris, co-authored a graduate level text book on error correction coding, spent two years as a Visiting Scientist at the MIT Laboratory for Computer Science, and taught many undergraduate courses in Electronic Engineering, Artificial Intelligence and in Signal and Systems Theory. Dr. Clark holds a Bachelor of Science degree in Electrical Engineering from the Massachusetts Institute of Technology in 1959, a Masters Degree in Physics from the University of Miami in 1961 and a Ph.D. degree in Electrical Engineering from Purdue University in 1965. Dr. Clark managed the development of the computer software and hardware systems that form the infrastructure to the operations of Rebate TV(TM), and his absence from the Company would have an initial adverse effect on operations. Michael Hamilton joined the Company in April 1996 as Executive Vice President, Production, in charge of all creative operations and new program development for the Company. Mr. Hamilton is an entertainment industry veteran, whose recent credits include developing a Movie of the Week for the ABC network, a feature in conjunction with Jason Alexander's Daeson Productions, and transactional programming for QVC. He also designed and directed such television series as Wings, Murder She Wrote, The Twilight Zone and Magnum P.I., with experience extending to commercial clients such as Donna Karan, Cadillac(TM) and Coca-Cola(TM). His absence from the Company would have an initial adverse effect on programming operations. c. Family Relationships. None. Item 10. Executive Compensation. Perry Douglas West, Chairman and Chief Executive Officer of the Company has no employment agreement in force as of May 31, 1996, and receives no current compensation. Mr. West has agreed to defer compensation and compensation issues until a future date. Robert J. Poe, Chief Operating Officer has an employment agreement with the Company effective November 1, 1995, with an initial term of ten years. Mr. Poe's agreement calls for him to receive a base salary of $12,500 per month for the first twelve calendar months of his contract. In addition he is to receive 5% of the gross profits from the operation of the Company's Rebate TV(TM) television programming, as well as other programming brought into the Company by Mr. Poe. Item 11. Security Ownership of Certain Beneficial Owners and Management. a. Security Ownership of Certain Beneficial Owners. The Company knows of no persons or groups being the beneficial owner of more than 5% of the Company's Common Shares. 20 b. Security Ownership of Management. The following table sets forth information with respect to the share ownership of Common Stock, par value $0.01, of the Company by its officers and directors, both individually and as a group, who are the beneficial owner of more than 5% of the Company's Common Shares. (1) (2) (3) (4) Title of Class Name Amount and Percent of Address of Nature of Class 3 Beneficial Beneficial Owner1 Ownership2 - ------------------------------------------------------------------------------ Common Perry Douglas West 5,700,000 48.54 1270 Orange Avenue Suite A Winter Park, FL 32789 All Directors and 5,728,600 48.78 Officers as a group NOTES 1 Each person has sole voting and investment power with respect to the shares indicated as owned beneficially by each person. 2 Except as other wise noted, all shares listed are owned both of record and beneficially. 3 Based upon 11,742,044 shares of Common Stock outstanding as of May 31, 1996. c. Changes in Control. Pursuant to an Asset Purchase Agreement ("Asset Purchase Agreement") signed on October 20, 1995, among Interactive Technologies Corporation, Inc., a Wyoming corporation ("Registrant"), Syneractive, Inc., a Florida corporation, and Perry Douglas West, the Registrant purchased certain assets in exchange for 5,214,464 shares of the Registrant's common stock and agreed to purchase additional assets for an additional 485,536 shares of the Registrant's common stock. Control of the registrant after this transaction was in the hands of Perry Douglas West who previously owned approximately 47.82% of the outstanding common stock and owned 50.04% of the outstanding common stock after the completion of the acquisition of additional assets pursuant to the Asset Purchase Agreement. Prior to the transaction, no single shareholder held more than 10% of the common stock. The directors and officers of the Registrant as a whole owned l8.69% of the outstanding common stock of the Registrant prior to the transaction. Resolutions were delivered at closing electing Perry Douglas West as Chairman of the Board of Directors and Chief Executive Officer of the Registrant. At that time Morton J. Glickman resigned as Chairman and Director of the Board of Directors. Item 12. Certain Relationships and Related Transactions. On October l8, l995 the Registrant entered into a Purchase Agreement ("Purchase Agreement") with Jayhead Investments, Ltd. for the sale of a certain joint venture interest with CST Entertainment Imaging, Inc. in which the Registrant had contributed its license to colorize black and white film and videotape and other related features in certain European countries, the terms of which are set forth in that certain license agreement, as amended, granted by CST Entertainment Imaging, Inc. to Exergon, S.A., and subsequently assigned to the Registrant and all proceeds due therefrom. This asset has been written off of the Registrant's books and carries no value in the Registrant's financial statements. This Purchase Agreement provided for the exchange of this asset for the satisfaction of $701,865 in debt owed by the Registrant to Jayhead Investment, Ltd., a company which is controlled by a former Director and Officer of the Company. This interest has been assigned subject to necessary third party approval and the indebtedness forgiven. On October 20, 1995, the Registrant executed the purchase of certain asset pursuant to a Asset Purchase Agreement ("Asset Purchase Agreement") signed on October 20, 1995 among Interactive Technologies Corporation, Inc., a Wyoming 21 corporation ("Registrant"), Syneractive, Inc., a Florida corporation and Perry Douglas West, the Registrant purchased certain assets in exchange for 5,214,464 shares of the Registrant's common stock and has agreed to purchase additional assets for an additional 485,536 shares of the Registrant's common stock. The assets purchased consist primarily of all right title and interest in and to a video program concept and design created for interactive television known as "Rebate TV(TM)", certain engineering reports and data, contract receivables and cash in the approximate amount of $50,000 plus equipment deposits in the amount of $43,875. The additional assets which the Registrant agreed to purchase upon the approval of the transfer by the Federal Communications Commission include Federal Communications Commission Radio Station Licenses for Interactive Video and Data Services radio service in service areas 137 and 90. These licenses are subject to amounts due over the period of the licenses (five years) to the Federal Communications Commission of $540,000 for service area 137 and $232,000 for service area 90. In addition, the license for service area 90 is subject to a contract agreement which gives a third party the right to purchase, subject to the retention of an interest in the nature of a 10% royalty, up to 90% of this license for $500,000. These assets also include the rights to a contract for the purchase of certain radio station equipment for the license area 90. These are assets and do not include any current operations. The Registrant has placed the net value of the total of these assets at $5,700,000. Perry Douglas West is now Chief Executive Officer, and Director of the Company. PART IV Item 13. Exhibits and Reports on Form 8-K. The information provided in Item 1(a) above, Business Development, regarding the acquisition of television studios, post production facilities, satellite links and remote production equipment located in Princeton, N.J., was filed on Form 8K dated May 21, 1996, which is herein incorporated by reference. The information provided in Item 11 (c) above, Change in Control, and Item 12, Certain Relationships and Related Transactions, was filed on Form 8K dated November 3, 1995, and amended on Form 8K/A dated December 12, 1995, which is herein incorporated by reference. The information provided in Item 8 above, Changes In and Disagreements With Accountants on Accounting and Financial Disclosure, was filed on Form 8K dated November 13, 1995, and amended on Form 8K/A dated November 28, 1995, which is herein incorporated by reference. 22 EXHIBIT INDEX Exhibit Page 3.0 Charter and By-Laws * 10.0 Material Contracts: 10.1 ITC lease with The Network Group, Inc. for Melbourne, Florida office and engineering space, dated October 25, 1996 (P) 10.2 ITC lease with Williams-Builder Partnership for Winter Park, Florida office space, dated March 21, 1996 (P) 10.3 ITC Equipment Lease Agreement with Studiolink Corporation, dated March 27, 1996 (P) 10.4 ITC Employment Agreement with Chief Operating Officer/Director Bob Poe, dated November 1, 1995 (P) 10.5 Satellite Network Television lease with LLB Realty, L.L.C./Keller, Dodds & Wentworth for Princeton, New Jersey television studio and production facility, dated March 1996(P) 21.0 Subsidiaries of the Registrant(P) 21.1 Satellite Network Television Corporate Charter/By-Laws, filed April 9, 1996 (P) * This exhibit was previously filed as an exhibit to the Registrant's Form 10 filed January 14, 1992 and is herein incorporated by reference. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Interactive Technologies Corporation, Inc. by: _________________________________________ Perry Douglas West, Chief Executive Officer by: _________________________________________ Joseph N. Dambro, Director of Finance Dated: August ____, 1996 -----END PRIVACY-ENHANCED MESSAGE-----