UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest reported): August 23, 2004
CORRIDOR COMMUNICATIONS CORP.
(Exact name of registrant as specified in charter)
Amnis Systems Inc.
(Former name of registrant)
Delaware 000-29645 94-3402831
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1860 Hawthorne Ave. NE, Suite 320, Salem, Oregon 97303
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 961-5707
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Acquisition
On August 25, 2004, Corridor Communications Corp., a Delaware corporation (the
"Company"), closed an Asset Purchase Agreement (the "Agreement") with Eagle West
Communications, Inc. ("Eagle West"), a Nevada company, whereby the Company
acquired all of the assets of Eagle West for a purchase price of $1,700,000.
Eagle West acquired the assets from Eagle West, LLC, a Kansas limited liability
company ("Eagle LLC"), which had filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Arizona on February 18, 2003. On May 12, 2004, the
Bankruptcy Court granted Eagle LLC the authority to proceed with the sale of its
assets to Eagle West. The transaction was funded by utilizing cash generated
from the sale of the Company's preferred stock in connection with a private
placement recently finalized by the Company and a promissory note entered by the
Company in the amount of $300,000 on August 20, 2004. The Company did not assume
any liabilities of Eagle West. Eagle West, Eagle LLC and their respective
affiliates are unrelated parties to the Company and its affiliates, and the
purchase price was determined by arms-length negotiations.
Business Summary
Overview
The assets purchased from Eagle West consist of cable television systems serving
communities in Arizona, Nevada and New Mexico (the "Eagle West System"). The
Eagle West System is a service that delivers multiple channels of television
programming to subscribers who pay a monthly fee for the services they receive.
The Eagle West System consists of a network of coaxial optic cable in which
channels are delivered to the subscribers' television sets. With this
acquisition, we intend to overlay our wireless Internet service onto the Eagle
West System.
The Eagle West System has constructed and operated pursuant to non-exclusive
franchises awarded by local and state governmental authorities for specified
periods of time. The Eagle West System offers varying levels of service which
may include, among other programming, local broadcast network affiliates and
independent television stations, certain other news, information and
entertainment channels such as CNN, CNBC, ESPN, and MTV, and certain premium
services such as HBO, Showtime, The Movie Channel, Starz and Cinemax.
The Eagle West System's revenues are derived principally from monthly fees paid
by subscribers. In addition to recurring subscriber revenues, the Eagle West
System derives revenues from the sales of pay-per-view movies and events, from
the sale of advertising time on advertiser supported programming and from
installation charges. Certain services and equipment provided by substantially
all of our cable television systems are subject to regulation.
As of June 30, 2004, the Eagle West System served approximately 7,200
subscribers, throughout Arizona, Nevada and New Mexico.
Future Development
The Company intends to develop the Eagle West System in order to provide cable
television up to 550 Hz (90 channels with a future 400 channels of digital
compressed video) but also fiber optic capacity to expand into high-speed data,
telephone and Internet access. The fiber optic network will support Video,
Audio, Voice, High-speed data and Internets services. To install the
communications network we will use existing utility poles and install cable
underground where available, to reach all of the required service areas. To
provide Voice service the system will require 90-volt power supplies to provide
ringer voltage to customers. "Standby" power supplies will automatically provide
generated and battery power to the system for several hours in the event of
commercial power interruptions.
We intend to provide our Wireless Internet Service to the Eagle West System
customers as well. The speed of our Wireless Internet Service (actual bandwidth
to and from the computer) is comparable to most DSL and cable services
(approximately 384k to 768k). We will provide a variety of different services
for home or business users as well as access for users that are "just passing
through". In addition to providing Internet access, we will also provide use of
email accounts and a web site which varies in size from 5MB to 15MB. The cost of
Internet access will range from $29.95 per month to $79.95 per month. We will
also provides daily and weekly rates. We will also sell WiFi adapters, which
allow any standard computers to access its WiFi network.
Subscriber Rates and Services; Marketing and Sales
The Eagle West System offers a package of services, generally marketed as
"Family Cable", which includes, among other programming, certain other news,
information and entertainment channels such as CNN, CNBC, ESPN and MTV. For
additional charges, our cable television systems provide certain premium
services such as HBO, Showtime, The Movie Channel, Starz and Cinemax, which may
be purchased either individually or in combinations or in tiers.
In addition, the Eagle West System offers a basic package which includes
broadcast network local affiliates and public, educational or governmental
channels and certain leased access channels.
Eagle West Systems sales efforts are primarily directed toward increasing
penetration and revenues in its franchise areas. It markets its cable television
services through in-person selling, as well as telemarketing, direct mail
advertising, promotional campaigns and local media and newspaper advertising.
System Capacity
The system includes 27 city and county franchises with 850 miles of active cable
plant in Arizona and 160 miles in Nevada. The combined cable plant has over
45,000 active passings with 7,200 current subscribers. The City of Mesa has 80
additional miles of conduit not yet activated in new subdivisions.
Programming
Adequate programming is available to the cable television systems from a variety
of sources. Program suppliers' compensation is typically a fixed, per subscriber
monthly fee based, in most cases, either on the total number of subscribers of
the cable television systems and certain of its affiliates, or on the number of
subscribers subscribing to the particular service. The programming contracts are
generally for a fixed period of time and are subject to negotiated renewal.
Cable programming costs have increased in recent years and are expected to
continue to increase due to additional programming being provided to most
subscribers, increased costs to produce or purchase cable programming and other
factors.
Competition
The Eagle West System competes with a variety of other television programming
delivery systems, including broadcast television signals available to homes
within our market by over-the-air reception. We compete with DirecTv, Dish Net
work and in Mesa, New Mexico, Casa Grande, Arizona and Boulder, Nevada with Cox
Cable.
Franchises
The cable television systems are operated primarily in Arizona, New Mexico and
Nevada under non-exclusive franchise agreements with state or municipal
franchising authorities. Franchise authorities generally charge a franchise fee
equal to our percentage of our revenues that are derived from the operation of
the system within such locality. As permitted by law, these fees are generally
collected from subscribers and remitted to the local franchising authority.
Franchise agreements are usually for a term of ten to fifteen years from the
date of grant, although some renewals have been for shorter terms, generally
between five and ten years in length. Some of the franchises grant us an option
to renew upon expiration of the initial term.
In situations where franchises have expired or not been renewed, we operate
under temporary authority granted by the state cable television regulatory
agencies, while negotiating renewal terms with franchising authorities. The
Cable Communications Policy Act of 1984 and the Cable Television Consumer
Protection and Competition Act of 1992 provide significant procedural
protections for cable operators seeking renewal of their franchises. In
connection with a renewal, a franchise authority may impose different and more
stringent terms.
Franchises usually require the consent of franchising authorities prior to the
sale, assignment, transfer or change in ownership or control. Federal law
generally provides localities with 120 days to consider such requests.
Government Regulation
The Eagle West System is regulated under congressionally imposed uniform
national guidelines, first set in the Cable Communications Policy Act of 1984
and amended by the Cable Television Consumer Protection and Competition Act of
1992 and the Telecommunications Act of 1996.
This federal legislation authorizes states or localities to franchise cable
television systems but sets limits on their franchising powers. It sets a
ceiling on cities and other communities imposing franchise fees of not more than
5% of gross revenues from the provision of cable services. It prohibits
localities from requiring cable operators to carry specific programming
services, and protects cable operators in seeking franchise renewals by limiting
the factors a locality may consider and requiring a due process hearing before
denial of renewal. Franchising authorities are prohibited from granting an
exclusive cable franchise and cannot unreasonably refuse to award an additional
franchise to compete with an existing franchisor.
Localities may require free access to public, educational or governmental
channels on our systems. We must make a limited number of commercial leased
access channels available for potentially competitive video services. Federal
law prohibits obscene programming and requires us to sell or lease devices to
block programming considered offensive by a customer.
Federal law requires us to establish a "basic service" package consisting, at a
minimum, of all local broadcast signals that we choose to carry, as well as all
public, educational and governmental access programming carried by our systems.
The rates for our basic service package are subject to regulation by local
franchising authorities. Local municipalities or state cable television
regulators may also regulate the rates we charge for the installation and lease
of the equipment used by subscribers to receive the basic service package,
including equipment that may also be used to receive other packages of
programming, and the installation and monthly use of connections for additional
television sets.
Employees
As of June 30, 2004, Eagle West had approximately 20 employees. We believe that
our relationships with our employees are good. Our employees are not represented
by a labor union and we consider our relations with our employees to be good.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses acquired.
Audited Financial Statements of Eagle West Communications, Inc., a
Nevada corporation, for the year ended December 31, 2003 and for the
period ended July 30, 2004.
(b) Proforma Financial Information
Proforma Financial Information.
(c) Exhibits.
Exhibit No. Description
10.1 Asset Purchase Agreement dated August 16, 2004 entered between the
Company and Eagle West Communications, Inc. (filed as Exhibit 10.1
to Form 8-K Current Report filed with the Securities and Exchange
Commission on August 27, 2004)
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 hereunto duly authorized.
CORRIDOR COMMUNICATIONS CORP.
Date: September 8, 2004 /s/ J. Michael Heil
-----------------------
J. Michael Heil,
Chief Executive Officer
EAGLE WEST COMMUNICATIONS, INC.
FINANCIAL STATEMENTS
JULY 30, 2004 AND DECEMBER 31, 2003
C O N T E N T S
Report of Independent Registered Public Accounting Firm..................... 3
Balance Sheets.............................................................. 4
Statements of Operations.................................................... 5
Statements of Stockholders' Equity.......................................... 6
Statements of Cash Flows.................................................... 7
Notes to the Financial Statements........................................... 8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Eagle West Communications, Inc.
Phoenix, Arizona
We have audited the accompanying balance sheet of Eagle West Communications,
Inc. as of July 31, 2004 and December 31, 2003 and the related statements of
operations, stockholders' equity and cash flows for the seven months ending July
31, 2004 and from inception on November 14, 2003 to December 31, 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with standards of the Public Company
Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eagle West Communications, Inc.
as of July 31, 2004 and December 31, 2003 and the results of its operations and
its cash flows for the seven months ending July 31, 2004 and from inception on
November 14, 2003 to December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
HJ & Associates, LLC
Salt Lake City, Utah
August 25, 2004
EAGLE WEST COMMUNICATIONS, INC.
Balance Sheets
ASSETS
------
July 31, December 31,
2004 2003
------------ -------------
CURRENT ASSETS
Cash $ 415 $ --
------------ -------------
Total Current Assets 415 --
------------ -------------
PROPERTY AND EQUIPMENT, NET (Note 2) 468,600 --
------------ -------------
OTHER ASSETS
Intangible - customer base (Net) (Note 1) 1,231,400 --
------------ -------------
Total Other Assets 1,231,400 --
------------ -------------
TOTAL ASSETS $ 1,700,415 $ --
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ -- $ --
Obligation payable (Note 3) 1,700,000 --
------------ -------------
Total Current Liabilities 1,700,000 --
------------ -------------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 35,000,000
shares authorized, 1,075,000 shares issued
and outstanding 1,075 1,075
Subscription receivable -- (500)
Additional paid-in capital -- --
Accumulated deficit (660) (575)
------------ -------------
Total Stockholders' Equity 415 --
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,700,415 $ --
============ =============
The accompanying notes are an integral part of these financial statements.
4
EAGLE WEST COMMUNICATIONS, INC.
Statements of Operations
From Inception on
For the Seven November 14, 2003
Months Ended through
July 31, December 31,
2004 2003
------------ -------------
NET SALES $ -- $ --
------------ -------------
EXPENSES
General and administrative 85 575
------------ -------------
Total Operating Expenses 85 575
------------ -------------
LOSS FROM OPERATIONS (85) (575)
------------ -------------
PROVISION FOR INCOME TAXES -- --
------------ -------------
NET LOSS $ (85) $ (575)
============ =============
BASIC LOSS PER SHARE
Basic loss per share $ (0.00) $ (0.00)
============ =============
BASIC WEIGHTED AVERAGE SHARES 1,075,000 1,075,000
============ =============
The accompanying notes are an integral part of these financial statements.
5
EAGLE WEST COMMUNICATIONS, INC.
Statements of Stockholders' Equity
Common Stock Additional Stock
-------------------- Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
--------- --------- ------------- --------- ---------
Balance, November 14, 2003 -- $ -- $ -- $ -- $ --
Common stock issued to
founders 1,075,000 1,075 -- (500) --
Net loss for the period
ended December 31, 2003 -- -- -- -- (575)
--------- --------- ------------- --------- ---------
Balance, December 31, 2003 1,075,000 1,075 -- (500) (575)
Collection of stock receivable -- -- -- 500 --
Net loss for the seven months
ended July 31, 2004 -- -- -- -- (85)
--------- --------- ------------- --------- ---------
Balance, July 31, 2004 1,075,000 $ 1,075 $ -- $ -- $ (660)
========= ========= ============= ========= =========
The accompanying notes are an integral part of these financial statements.
6
EAGLE WEST COMMUNICATIONS, INC.
Statements of Cash Flow
From Inception on
For the Seven November 14, 2003
onths Ended through
July 31, December 31,
2004 2003
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (85) $ (575)
------------ -------------
Adjustments to reconcile net loss to net
cash used by operating activities:
Net Cash Used by Operating Activities (85) (575)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 500 575
------------ -------------
Net Cash Provided by Financing
Activities 500 575
------------ -------------
NET INCREASE IN CASH 415 --
CASH AT BEGINNING OF YEAR -- --
------------ -------------
CASH AT END OF YEAR $ 415 $ --
============ =============
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ -- $ --
Income taxes $ -- $ --
NON-CASH FINANCING ACTIVITIES
The accompanying notes are an integral part of these financial statements.
7
EAGLE WEST COMMUNICATIONS, INC.
Notes to the Financial Statements
July 31, 2004 and December 31, 2003
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Eagle West Communications, Inc. a Nevada corporation, was incorporated on
November 14, 2003. The Company is in the business of providing cable
television systems serving communities in Arizona, Nevada, and New Mexico.
The Company is not considered to be in the development stage because of
the operating assets acquired.
b. Accounting Method
The Company's financial statements are prepared using the accrual method
of accounting. The Company has elected a December 31 year-end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
d. Basic Loss Per Share
The computations of basic loss per share of common stock are based on the
weighted average number of shares outstanding during each period
presented.
From Inception on
For the Seven November 14, 2003
Months Ended through
July 31, December 31,
2004 2003
------------ ------------
Net loss $ (85) $ (575)
------------ ------------
Net loss per share attributable to
common shareholders $ (0.00) $ (0.00)
============ ============
Basic weighted average shares 1,075,000 1,075,000
============ ============
e. Property and Equipment
Property and equipment are stated at cost. Expenditures for small tools,
ordinary maintenance and repairs are charged to operations as incurred.
Major additions and improvements are capitalized. Depreciation is computed
using the straight-line and accelerated methods as follows:
Machinery and equipment 5-7 years
Vehicles 5 years
Depreciation expense for the seven months ended July 31, 2004 and for the
year ended December 31, 2003 was $- and $-, respectively.
8
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
g. Provision for Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating
loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are
the differences between the reported amounts of assets and liabilities and
their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely that not that some
portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of July 31,
2004 and December 31, 2003:
July 31, December 31
2004 2003
------------ ------------
Deferred tax assets
NOL Carryover $ 257 $ 224
Deferred tax liabilities: -- --
Valuation allowance (257) (224)
------------ ------------
Net deferred tax asset $ -- $ --
============ ============
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate of 39% to pretax income from
continuing operations for the years ended December 31, 2003 and 2002 due to the
following:
July 31, December 31
2004 2003
------------ ------------
Book loss $ 33 $ 224
Valuation allowance (33) (224)
------------ ------------
$ -- $ --
============ ============
9
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
g. Provision for Income Taxes (Continued)
At December 31, 2003, the Company had net operating loss carryforwards of
approximately $575 that may be offset against future taxable income from
the year 2003 through 2023. No tax benefit has been reported in the
December 31, 2003 financial statements since the potential tax benefit is
offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986,
net operating loss carryforwards for Federal income tax reporting purposes
are subject to annual limitations. Should a change in ownership occur, net
operating loss carryforwards may be limited as to use in the future.
h. Intangible Assets
The Company acquired a customer base of over 6,000 current users. These
users will continue to receive cable services provided by the Company. The
right to this customer base has been recorded as an intangible asset in
the amount of $1,231,400. The Company has established a three life on this
base. Amortization of the intangible will begin on commencement of the
billable services by the Company. Billable services commenced on August
25, 2004.
i. Newly Issued Accounting Pronouncements
During the year ended December 31, 2003, the Company adopted the following
accounting pronouncements:
SFAS NO. 143 -- In August 2001, the FASB issued SFAS No. 143, Accounting
for Asset Retirement Obligations, which established a uniform methodology
for accounting for estimated reclamation and abandonment costs. The
statement was effective for fiscal years beginning after June 15, 2002.
The adoption of SFAS No. 143 did not have a material effect on the
financial statements of the Company.
SFAS NO. 145 -- On April 30, 2002, the FASB issued FASB Statement No. 145
(SFAS 145), "Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." SFAS 145 rescinds both
FASB
10
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
i. Newly Issued Accounting Pronouncements (Continued)
Statement No. 4 (SFAS 4), "Reporting Gains and Losses from Extinguishment
of Debt," and the amendment to SFAS 4, FASB Statement No. 64 (SFAS 64),
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements."
Through this rescission, SFAS 145 eliminates the requirement (in both SFAS
4 and SFAS 64) that gains and losses from the extinguishment of debt be
aggregated and, if material, classified as an extraordinary item, net of
the related income tax effect. However, an entity is not prohibited from
classifying such gains and losses as extraordinary items, so long as it
meets the criteria in paragraph 20 of Accounting Principles Board Opinion
No. 30, Reporting the Results of Operations Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. Further, SFAS 145 amends
paragraph 14(a) of FASB Statement No. 13, "Accounting for Leases", to
eliminate an inconsistency between the accounting for sale-leaseback
transactions and certain lease modifications that have economic effects
that are similar to sale-leaseback transactions. The amendment requires
that a lease modification (1) results in recognition of the gain or loss
in the 9 financial statements, (2) is subject to FASB Statement No. 66,
"Accounting for Sales of Real Estate," if the leased asset is real estate
(including integral equipment), and (3) is subject (in its entirety) to
the sale-leaseback rules of FASB Statement No. 98, "Accounting for Leases:
Sale-Leaseback Transactions Involving Real Estate, Sales-Type Leases of
Real Estate, Definition of the Lease Term, and Initial Direct Costs of
Direct Financing Leases." Generally, FAS 145 is effective for transactions
occurring after May 15, 2002. The adoption of SFAS 145 did not have a
material effect on the financial statements of the Company.
SFAS NO. 146 -- In June 2002, the FASB issued SFAS No. 146, "Accounting
for Exit or Disposal Activities" (SFAS 146). SFAS 146 addresses
significant issues regarding the recognition, measurement, and reporting
of costs that are associated with exit and disposal activities, including
restructuring activities that are currently accounted for under EITF No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The scope of SFAS 146 also includes costs related to
terminating a contract that is not a capital lease and termination
benefits that employees who are involuntarily terminated receive under the
terms of a one-time benefit arrangement that is not an ongoing benefit
arrangement or an individual deferred-compensation contract. SFAS 146 will
be effective for exit or disposal activities that are initiated after
December 31, 2002 and early application is encouraged. The provisions of
EITF No. 94-3 shall continue to apply for an exit activity initiated under
an exit plan that met the criteria of EITF No. 94-3 prior to the adoption
of SFAS 146. The effect on adoption of SFAS 146 will change on a
prospective basis the timing of when the restructuring charges are
recorded from a commitment date approach to when the liability is
incurred. The adoption of SFAS 146 did not have a material effect on the
financial statements of the Company.
SFAS NO. 147 -- In October 2002, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 147,
"Acquisitions of Certain Financial Institutions" which is effective for
acquisitions on or after October 1, 2002. This statement provides
interpretive guidance on the application of the purchase
11
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
i. Newly Issued Accounting Pronouncements (Continued)
method to acquisitions of financial institutions. Except for transactions
between two or more mutual enterprises, this Statement removes
acquisitions of financial institutions from the scope of both SFAS 72 and
Interpretation 9 and requires that those transactions be accounted for in
accordance with SFAS No. 141, "Business Combinations" and No. 142,
"Goodwill and Other Intangible Assets". The adoption of SFAS No. 147 did
not have a material effect on the financial statements of the Company.
SFAS NO. 148 -- In December 2002, the FASB issued SFAS No. 148,
"Accounting for Stock Based Compensation-Transition and Disclosure-an
amendment of FASB Statement No. 123" which is effective for financial
statements issued for fiscal years ending after December 15, 2002. This
Statement amends SFAS 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure
requirements of SFAS 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for
stock-based compensation and the effect of the method used on reported
results. The adoption of SFAS No. 148 did not have a material effect on
the financial statements of the Company.
SFAS NO. 149 -- In April 2003, the FASB issued SFAS No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities" which is
effective for contracts entered into or modified after June 30, 2003 and
for hedging relationships designated after June 30, 2003. This statement
amends and clarifies financial accounting for derivative instruments
embedded in other contracts (collectively referred to as derivatives) and
hedging activities under SFAS 133. The adoption of SFAS No. 149 did not
have a material effect on the financial statements of the Company.
SFAS NO. 150 -- In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity" which is effective for financial instruments entered into or
modified after May 31, 2003, and is otherwise effective at the beginning
of the first interim period beginning after June 15, 2003. This Statement
establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability
(or an asset in some circumstances) because that financial instrument
embodies an obligation of the issuer. The adoption of SFAS No. 150 did not
have a material effect on the financial statements of the Company.
FASB INTERPRETATION NO. 45 -- "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others - an Interpretation of FASB Statements No. 5, 57 and 107". The
initial recognition and initial measurement provisions of this
Interpretation are to be applied prospectively to guarantees issued or
modified after December 31, 2002. The disclosure requirements in the
Interpretation were effective for financial statements of interim or
annual periods ending after December 15, 2002. The adoption of FASB
Interpretation No. 45 did not have a material effect on the financial
statements of the Company.
12
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
i. Newly Issued Accounting Pronouncements (Continued)
FASB INTERPRETATION NO. 46 -- In January 2003, the FASB issued FASB
Interpretation No. 46 "Consolidation of Variable Interest Entities." FIN
46 provides guidance on the identification of entities for which control
is achieved through means other than through voting rights, variable
interest entities, and how to determine when and which business
enterprises should consolidate variable interest entities. This
interpretation applies immediately to variable interest entities created
after January 31, 2003. It applies in the first fiscal year or interim
period beginning after June 15, 2003, to variable interest entities in
which an enterprise holds a variable interest that it acquired before
February 1, 2003. The adoption of FIN 46 did not have a material impact on
the Company's financial statements.
During the year ended December 31, 2003, the Company adopted the following
Emerging Issues Task Force Consensuses: EITF Issue No. 00-21 "Revenue
Arrangements with Multiple Deliverables", EITF Issue No. 01 -8 "
Determining Whether an Arrangement Contains a Lease", EITF Issue No. 02-3
"Issues Related to Accounting for Contracts Involved in Energy Trading and
Risk Management Activities", EITF Issue No. 02-9 "Accounting by a Reseller
for Certain Consideration Received from a Vendor", EITF Issue No. 02-17,
"Recognition of Customer Relationship Intangible Assets Acquired in a
Business Combination", EITF Issue No. 02-18 "Accounting for Subsequent
Investments in an Investee after Suspension of Equity Method Loss
Recognition", EITF Issue No. 03-1, "The Meaning of Other Than Temporary
and its Application to Certain Instruments", EITF Issue No. 03-5,
"Applicability of AICPA Statement of Position 9702, `Software Revenue
Recognition' to Non-Software Deliverables in an Arrangement Containing
More Than Incidental Software", EITF Issue No. 03-7, "Accounting for the
Settlement of the Equity Settled Portion of a Convertible Debt Instrument
That Permits or Requires the Conversion Spread to be Settled in Stock",
EITF Issue No. 03-10, "Application of EITF Issue No. 02-16 by Resellers to
Sales Incentives Offered to Consumers by Manufacturers.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at July 31, 2004 and
December 31, 2003:
July 31, December 31
2004 2003
------------ ------------
Cable and equipment $ 396,200 $ --
Vehicles 72,400 --
------------- -------------
468,600 --
Less accumulated depreciation -- --
------------- -------------
$ 468,600 $ --
============ ============
13
NOTE 3 - OBLIGATION PAYABLE
Obligations payable at July 31, 2004 and December 31, 2003 consist of the
following:
The Company entered into an agreement to purchase
assets from Eagle West LLC through a bankruptcy
proceedings. Amount is due August 2004. (See Note 5) $ 1,700,000
Less: current portion (1,700,000)
-------------
Long-term portions $ --
=============
Maturities of debt are as follows:
Year ending December 31:
2004 $ 1,700,000
2005 --
2006 --
2007 --
2008 --
Thereafter --
--------------
Total $ 1,700,000
=============
NOTE 4 - ACQUISTION OF ASSETS
In April 2004 the Company entered into a Asset Purchase Agreement to
acquire certain cable television systems in the southwestern United States
from Eagle West LLC (unrelated party) which had filed a chapter 11
bankruptcy. The agreement called for the Company to pay $1,700,000 in cash
to acquire the assets. The systems operate approximately 750 miles of
cable plant with approximately 6,000 subscribers.
In June 2004, the US Bankruptcy Judge approved the sale of the purchased
assets for $1,700,000 free and clear of all claims and liens. The assets
consisted of vehicles used to service and maintain the cable system, all
of the fixed assets associated with these systems (e.g. strung cable,
satellite dishes and the current subscriber users.) Upon completion of the
escrow agreement the Company will take over the operations of the cable
systems including the usage, subscriber billings and revenue collection.
No depreciation has been recorded on the assets until operations begin
under the Company. The Company will also be responsible for any future
payments of any existing lease commitments associated with the above
assets. In addition, the systems operate under several franchise
agreements throughout parts of Arizona and Nevada. The Company is
currently filing with the franchisees to transfer title to the Company and
extend the terms.
14
NOTE 5 - SUBSEQUENT EVENTS
On August 16, 2004, the Company entered into an agreement with Corridor
Communication Corp. to sale the company for $1,700,000. The Company would
then use these funds to fulfill its obligation on purchases of the assets
of Eagle West LLC. (See Note 5). Subsequently, the funds were received by
the Company and funds were transferred to Eagle West, LLC.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The systems acquired by the Company operate under franchise agreements
with several municipalities. Many of the franchises will begin to expire
in 2005. The Company has filed request with these municipalities to
transfer the agreement in the Company's name and extend the terms of the
franchise. The Company feels confident that their requests will be
granted.
15
CORRIDOR COMMUNICATIONS CORP.
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
CONTENTS
Page
----
FINANCIAL STATEMENTS:
Pro Forma Combined Balance Sheet as of June 30, 2004 (unaudited) F-2
Pro Forma Combined Statements of Operations for the six months
ended June 30, 2004 (unaudited) F-3
Pro Forma Combined Statements of Operations for the year
ended December 31, 2003 (unaudited) F-4
Notes to Pro Forma Combined Financial Statements (unaudited) F-5
F-1
CORRIDOR COMMUNICATIONS CORP.
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 2004
(UNAUDITED)
EAGLE
REGISTRANT WEST ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,072 $ 415 a,b $ 41,000 $ 47,487
Note receivable -- --
Account receivable 18,814 18,814
Inventory 57,689 57,689
Prepaid expenses and other current assets 42,761 42,761
Debt issuance costs 14,235 14,235
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS 139,571 415 41,000 180,986
PROPERTY AND EQUIPMENT 198,298 468,600 666,898
FRANCHISE 49,000 49,000
CUSTOMER LIST 180,729 1,231,400 b (415) 1,411,714
DEBT ISSUANCE COSTS 46,395 46,395
GOODWILL 11,542 11,542
------------ ------------ ------------ ------------
TOTAL ASSETS $ 625,535 $ 1,700,415 $ 40,585 $ 2,366,535
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Secured promissory note $ 500,000 $ a $ (500,000) $ --
Stockholders' notes payable 155,000 155,000
Note payable, current portion 7,335 7,335
Accounts payable 2,039,160 2,039,160
Obligation payable -- 1,700,000 b (1,700,000) --
Accrued salaries 1,608,747 1,608,747
Accrued vacation 229,687 229,687
Accrued interest payable 581,863 581,863
Customer deposits 20,350 20,350
Convertible notes payable 2,015,327 2,015,327
Deferred revenue 60,496 60,496
Other accrued expenses 1,118,450 1,118,450
------------ ------------ ------------ ------------
TOTAL CURRENT LIABILITIES 8,336,415 1,700,000 (2,200,000) 7,836,415
------------ ------------ ------------ ------------
DEFEREED REVENUE 79,008 79,008
NOTE PAYABLE 58,237 58,237
CONVERTIBLE NOTES PAYABLE 515,990 515,990
------------ ------------ ------------ ------------
TOTAL LIABILITIES 8,989,650 1,700,000 (2,200,000) 8,489,650
------------ ------------ ------------ ------------
STOCKHOLDERS' DEFICIT
Preferred stock -- a 2,241,000 2,241,000
Common stock 58,044 1,075 b (1,075) 58,044
Additional paid-in capital 32,462,226 32,462,226
Accumulated deficit (40,884,385) (660) b 660 (40,884,385)
------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (8,364,115) 415 2,240,585 (6,123,115)
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 625,535 $ 1,700,415 $ 40,585 $ 2,366,535
============ ============ ============ ============
See accompanying notes to pro forma combined financial statements
F-2
CORRIDOR COMMUNICATIONS CORP.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED)
EAGLE
REGISTRANT WEST ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
SALES $ -- $ -- $ $ --
COST OF GOODS SOLD -- -- --
------------ ------------ ------------ ------------
GROSS PROFIT -- -- -- --
------------ ------------ ------------ ------------
OPERATING EXPENSES
General and administrative 606,286 85 606,371
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 606,286 85 -- 606,371
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (606,286) (85) -- (606,371)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense, net (320,336) (320,336)
Amortization of discount on convertible notes
payable (680,839) (680,839)
Financing costs (67,483) (67,483)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (1,068,658) -- -- (1,068,658)
------------ ------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES AND
DISCONTINUED OPERATIONS (1,674,944) (85) -- (1,675,029)
PROVISION FOR INCOME TAXES -- -- --
------------ ------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS (1,674,944) (85) -- (1,675,029)
DISCONTINUED OPERATIONS-
Loss from operations of discontinued operations (1,160,623) -- (1,160,623)
------------ ------------ ------------ ------------
NET LOSS $ (2,835,567) $ (85) $ -- $ (2,835,652)
============ ============ ============ ============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.01) $ (0.01)
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 349,584,927 349,584,927
============ ============
See accompanying notes to pro forma combined financial statements
F-3
CORRIDOR COMMUNICATIONS CORP.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(UNAUDITED)
EAGLE
REGISTRANT WEST ADJUSTMENTS PRO FORMA
------------- ------------- ------------- -------------
SALES $ -- $ -- $ $ --
COST OF GOODS SOLD -- -- --
------------- ------------- ------------- -------------
GROSS PROFIT -- -- -- --
------------- ------------- ------------- -------------
OPERATING EXPENSES
General and administrative 1,236,674 575 1,237,249
------------- ------------- ------------- -------------
TOTAL OPERATING EXPENSES 1,236,674 575 -- 1,237,249
------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (1,236,674) (575) -- (1,237,249)
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest expense, net (492,594) (492,594)
Amortization of discount on convertible notes payable (1,937,982) (1,937,982)
Financing costs (1,238,540) (1,238,540)
Change in fair value of detachable warrants (299,831) (299,831)
Loss on restructuring of business (892,524) (892,524)
Other, net (1,036) (1,036)
------------- ------------- ------------- -------------
TOTAL OTHER INCOME (EXPENSE) (4,862,507) -- -- (4,862,507)
------------- ------------- ------------- -------------
LOSS BEFORE PROVISION FOR INCOME TAXES AND
DISCONTINUED OPERATIONS (6,099,181) (575) -- (6,099,756)
PROVISION FOR INCOME TAXES -- -- --
------------- ------------- ------------- -------------
NET LOSS FROM CONTINUING OPERATIONS (6,099,181) (575) -- (6,099,756)
DISCONTINUED OPERATIONS-
Loss from operations of discontinued operations (3,338,808) -- (3,338,808)
------------- ------------- ------------- -------------
NET LOSS $ (9,437,989) $ (575) $ -- $ (9,438,564)
============= ============= ============= =============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.08) $ (0.08)
============= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 118,340,630 118,340,630
============= =============
See accompanying notes to pro forma combined financial statements
F-4
CORRIDOR COMMUNICATIONS CORP.
NOTES TO PRO FORM COMBINED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
On August 25, 2004, Corridor Communications Corp., a Delaware corporation (the
"Company"), closed an Asset Purchase Agreement (the "Agreement") with Eagle West
Communications, Inc. ("Eagle West"), a Nevada company, whereby the Company
acquired all of the assets of Eagle West for a purchase price of $1,700,000.
Eagle West acquired the assets from Eagle West, LLC, a Kansas limited liability
company ("Eagle LLC"), which had filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Arizona on February 18, 2003. On May 12, 2004, the
Bankruptcy Court granted Eagle LLC the authority to proceed with the sale of its
assets to Eagle West. The Company did not assume any liabilities of Eagle West.
Eagle West, Eagle LLC and their respective affiliates are unrelated parties to
the Company and its affiliates, and the purchase price was determined by
arms-length negotiations. The accompanying pro forma combined balance sheet
presents the accounts of Corridor and Eagle West as if the acquisition of the
assets of Eagle West by Corridor occurred on June 30, 2004. The accompanying pro
forma combined statements of operations present the accounts of Corridor and
Eagle West for the six months ended June 30, 2004 and the year ended December
31, 2003 as if the acquisition occurred on January 1, 2003.
The following adjustments would be required if the acquisition occurred as
indicated above:
a. To record the sale of 1,457 shares of the Company's Convertible Preferred
Stock. The net proceeds to the Company were $1,741,000 after paying
$309,000 in offering costs and commissions and repaying $500,000 in short
term promissory notes.
b. To record the purchase price of $1,700,000 to acquire the assets of Eagle
West.
F-5