GTT Communications, Inc. | ||
(Exact Name of Registrant as Specified in its Charter) |
Delaware | 000-51211 | 20-2096338 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
8484 Westpark Drive Suite 720 McLean, Virginia 22102 | ||
(Address of principal executive offices) (Zip Code) |
N/A | ||
(Former Name or Former Address, if Changed Since Last Report) |
Item 2.01. | Completion of Acquisition or Disposition of Assets. |
Item 9.01 | Financial Statements and Exhibits |
• | Unaudited Pro Forma Condensed Combined Balance Sheets as of March 31, 2013. |
• | Unaudited Pro Forma Condensed Combined Statement of Operations for the Three Months Ended March 31, 2013. |
• | Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2012. |
• | Notes to Unaudited Pro Forma Condensed Combined Financial Statements. |
Exhibit No. | Description of Exhibit | |
99.1 | The audited consolidated financial statements of NT Network Services, LLC, SCS and Subsidiaries for the year ended December 31, 2012. | |
99.2 | The audited consolidated financial statements of Tinet S.P.A. and Subsidiaries for the year ended December 31, 2011. | |
99.3 | The reviewed consolidated financial statements of NT Network Services, LLC, SCS and Subsidiaries for the three-months ended March 31, 2013 and 2012. | |
99.4 | The unaudited pro forma condensed combined financial information for the year ended December 31, 2012 and for the three months ended March 31, 2013, giving effect to the Acquisition. |
Date: February 25, 2014 | GTT COMMUNICATIONS, INC. | ||
/s/ Michael Bauer | |||
Michael Bauer | |||
Chief Financial Officer | |||
Exhibit No. | Description of Exhibit | |
99.1 | The audited consolidated financial statements of NT Network Services, LLC, SCS and Subsidiaries for the year ended December 31, 2012. | |
99.2 | The audited consolidated financial statements of Tinet S.P.A. and Subsidiaries for the year ended December 31, 2011. | |
99.3 | The reviewed consolidated financial statements of NT Network Services, LLC, SCS and Subsidiaries for the three-months ended March 31, 2013 and 2012. | |
99.4 | The unaudited pro forma condensed combined financial information for the year ended December 31, 2012 and for the three months ended March 31, 2013, giving effect to the Acquisition. |
Page | |
Independent Auditors’ Report | 1 |
Consolidated Financial Statements | |
Consolidated Balance Sheet at December 31, 2012 | 2 |
Consolidated Statement of Operations for the Year Ended December 31, 2012 | 3 |
Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2012 | 4 |
Consolidated Statement of Changes in Stockholders’ Equity for the Year Ended December 31, 2012 | 5 |
Consolidated Statement of Cash Flows for the Year Ended December 31, 2012 | 6 |
Notes to Consolidated Financial Statements | 7-15 |
ASSETS | |||
CURRENT ASSETS: | |||
Cash | $ | 10,114,928 | |
Accounts receivable, net | 12,954,733 | ||
Investments | 6,607 | ||
Prepaid expenses and other current assets | 4,943,390 | ||
Total Current Assets | 28,019,658 | ||
PROPERTY AND EQUIPMENT, NET | 9,708,438 | ||
NONCURRENT ASSETS: | |||
Intangible assets, net | 13,598 | ||
Other assets | 1,063,846 | ||
Total Non-current Assets | 1,077,444 | ||
Total Assets | $ | 38,805,540 | |
LIABILITIES AND MEMBERS' EQUITY | |||
CURRENT LIABILITIES: | |||
Accounts payable | $ | 4,834,816 | |
Accrued expenses and other current liabilities | 8,898,939 | ||
Income taxes payable - current | 1,181,656 | ||
Accrued cost of revenue | 5,123,370 | ||
Deferred tax liabilities | 13,557 | ||
Deferred revenue | 1,316,621 | ||
Total Current Liabilities | 21,368,959 | ||
NONCURRENT LIABILITIES: | |||
Other non-current liabilities | 761,983 | ||
Total Liabilities | 22,130,942 | ||
COMMITMENTS AND CONTINGENCIES | |||
MEMBERS' EQUITY | 16,674,598 | ||
Total Liabilities and Members' Equity | $ | 38,805,540 |
REVENUE | $ | 72,093,800 | |
OPERATING ACTIVITIES: | |||
Cost of telecommunication services provided | 40,876,052 | ||
Selling, general and administrative expenses | 26,348,800 | ||
Depreciation and amortization | 8,805,081 | ||
Loss on disposal of fixed assets | 868,796 | ||
Impairment of investments | 303,893 | ||
Impairment of goodwill, fixed and intangible assets | 26,482,794 | ||
LOSS FROM OPERATIONS | (31,591,616 | ) | |
OTHER EXPENSE: | |||
Interest expense, net | (154,293 | ) | |
Other expense, net | (756,716 | ) | |
Total Other Expense | (911,009 | ) | |
LOSS BEFORE PROVISION FOR INCOME TAXES | (32,502,625 | ) | |
PROVISION FOR INCOME TAXES | 2,096,803 | ||
NET LOSS | $ | (34,599,428 | ) |
NET LOSS | $ | (34,599,428 | ) |
OTHER COMPREHENSIVE INCOME: | |||
Change in accumulated foreign currency translation adjustment | 2,835,076 | ||
COMPREHENSIVE LOSS | $ | (31,764,352 | ) |
Accumulated | |||||||||||
Other Comprehensive | |||||||||||
Members' | Income - Translation | ||||||||||
Equity | Adjustment | Total | |||||||||
BALANCE AT DECEMBER 31, 2011 | $ | — | $ | — | $ | — | |||||
CONTRIBUTION OF TINET S.P.A. AND SUBSIDIARIES | |||||||||||
STOCKHOLDERS' EQUITY | 47,357,903 | 1,593,233 | 48,951,136 | ||||||||
NET LOSS FOR THE YEAR ENDED DECEMBER 31, 2012 | (34,599,428 | ) | — | (34,599,428 | ) | ||||||
CONTRIBUTIONS FROM RELATED PARTY | 2,144,075 | — | 2,144,075 | ||||||||
FOREIGN CURRENCY TRANSLATION ADJUSTMENT | (2,656,261 | ) | 2,835,076 | 178,815 | |||||||
BALANCE AT DECEMBER 31, 2012 | $ | 12,246,289 | $ | 4,428,309 | $ | 16,674,598 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net loss | $ | (34,599,428 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||
Depreciation and amortization | 8,805,081 | ||
Deferred income taxes | 1,268,045 | ||
Gain on sale of fixed assets | (27,556 | ) | |
Bad debt provision | 1,758,149 | ||
Impairment of investments | 303,893 | ||
Impairment of goodwill, fixed and intangible assets | 27,379,146 | ||
Changes in Assets (Increase) Decrease: | |||
Accounts receivable | 1,011,231 | ||
Prepaid expenses and other current assets | 19,026 | ||
Changes in Liabilities Increase (Decrease): | |||
Accounts payable and accrued expenses | 457,324 | ||
Income taxes payable | 741,978 | ||
Deferred revenue | 227,129 | ||
Other non-current liabilities | 170,332 | ||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 7,514,350 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Acquisition of property and equipment | (4,764,949 | ) | |
NET CASH USED IN INVESTING ACTIVITIES | (4,764,949 | ) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Cash acquired from contribution from Tinet S.p.A. | 5,115,204 | ||
Repayments on loans | (1,900,000 | ) | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 3,215,204 | ||
EFFECT OF FOREIGN EXCHANGE RATE CHANGES | 4,150,323 | ||
NET INCREASE IN CASH | 10,114,928 | ||
CASH, BEGINNING OF YEAR | — | ||
CASH, END OF YEAR | $ | 10,114,928 | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |||
Interest paid | $ | 8,142 | |
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES : | |||
Reclassification of due to related party, net to capital | $ | 2,144,075 | |
Contribution of Tinet S.p.A. and Subsidiaries, non-cash portion | $ | 43,835,932 |
Office equipment | 3 to 13 years |
Network equipment | 5 years |
Software | 5 years |
Patents | 5 years |
Trademarks | 5 years |
Indefeasible rights of use | 5 to 15 years |
Customer list | 5 years |
Office equipment | $ | 713,456 | |
Network equipment | 23,687,759 | ||
Leasehold improvements | 139,943 | ||
Software | 1,877,236 | ||
Assets under construction | 50,503 | ||
26,468,897 | |||
Less: Accumulated depreciation and amortization | 16,760,459 | ||
$ | 9,708,438 |
Useful Life | |||||
Patents | 5 years | $ | 2,001 | ||
net of accumulated amortization of $5,248 | |||||
Trademarks, | 5 years | 11,597 | |||
net of accumulated amortization of $24,048 | |||||
$ | 13,598 |
Revenue | $ | 5,267,747 | |
Cost of telecommunication services | $ | 11,799,155 | |
Interest expense | $ | 143,240 |
Current: | |||
IRES | $ | 507,750 | |
IRAP | 141,995 | ||
Foreign | 179,013 | ||
828,758 | |||
Deferred: | |||
IRES | (5,902,253 | ) | |
Change in valuation allowance | 7,170,298 | ||
1,268,045 | |||
Total provision for income taxes | $ | 2,096,803 |
Italian statutory income tax rate | 27.5 | % |
Permanent items | (10.89 | )% |
Foreign tax rate differential | 0.2 | % |
Change in valuation allowance | (22.06 | )% |
FIN 48 | (1.2 | )% |
Effective Tax Rate | (6.45 | )% |
Deferred Tax Assets: | ||||
Directors' compensation | $ | 822 | ||
Bad debt provision | 638,616 | |||
Tax depreciation on goodwill | 1,199,275 | |||
Maroc Telecom Provision | 71,012 | |||
Miscellaneous | 23,769 | |||
Risk provision | 452,673 | |||
Write-down of tangible assets | 1,642,263 | |||
Write-down of intangible assets | 3,355,542 | |||
Total deferred tax assets before valuation allowance | 7,383,972 | |||
Less: Valuation allowance | 7,370,415 | |||
Total deferred tax assets | 13,557 | |||
Deferred Tax Liabilities: | ||||
Foreign exchange gain/loss | (13,557 | ) | ||
Total deferred tax liabilities | (13,557 | ) | ||
Net deferred tax asset | $ | — |
Note 10 - | Leases |
Years Ending December 31: | |||
2013 | $ | 473,592 | |
2014 | 549,921 | ||
2015 | 549,921 | ||
2016 | 457,417 | ||
2017 | 338,484 | ||
Thereafter | 1,579,591 | ||
$ | 3,948,926 |
Note 11 - | Subsequent Events |
Page | |
Independent Auditors’ Report | 1 |
Consolidated Financial Statements | |
Consolidated Balance Sheet at December 31, 2011 | 2 |
Consolidated Statement of Operations for the Year Ended December 31, 2011 | 3 |
Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2011 | 4 |
Consolidated Statement of Changes in Stockholders’ Equity for the Year Ended December 31, 2011 | 5 |
Consolidated Statement of Cash Flows for the Year Ended December 31, 2011 | 6 |
Notes to Consolidated Financial Statements | 7-14 |
ASSETS | ||||
CURRENT ASSETS: | ||||
Cash | $ | 5,115,204 | ||
Accounts receivable, net | 15,463,055 | |||
Investments | 6,474 | |||
Prepaid expenses and other current assets | 4,740,796 | |||
Deferred tax assets | 1,290,389 | |||
Total Current Assets | 26,615,918 | |||
PROPERTY AND EQUIPMENT, NET | 17,121,606 | |||
NONCURRENT ASSETS: | ||||
Intangible assets, net | 10,301,818 | |||
Goodwill | 13,591,515 | |||
Other assets | 1,164,407 | |||
Total Non-current Assets | 25,057,740 | |||
Total Assets | $ | 68,795,264 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
CURRENT LIABILITIES: | ||||
Accounts payable | $ | 9,455,594 | ||
Accrued expenses and other current liabilities | 5,241,731 | |||
Income taxes payable - current | 415,866 | |||
Accrued cost of revenue | 3,078,398 | |||
Deferred tax liabilities | 13,284 | |||
Deferred revenue | 1,062,960 | |||
Total Current Liabilities | 19,267,833 | |||
NON-CURRENT LIABILITIES: | ||||
Other non-current liabilities | 576,295 | |||
Total Liabilities | 19,844,128 | |||
COMMITMENTS AND CONTINGENCIES | ||||
STOCKHOLDERS' EQUITY: | ||||
Common stock, par value 1.29485; 120,000 shares authorized and issued | 155,382 | |||
Additional paid-in capital | 55,729,981 | |||
Accumulated deficit | (8,527,460 | ) | ||
Accumulated other comprehensive income | 1,593,233 | |||
Total Stockholders' Equity | 48,951,136 | |||
Total Liabilities and Stockholders' Equity | $ | 68,795,264 |
REVENUE | $ | 68,122,741 | |
OPERATING ACTIVITIES: | |||
Cost of telecommunication services provided | 41,386,002 | ||
Selling, general and administrative expenses | 19,515,198 | ||
Depreciation and amortization | 10,951,035 | ||
Gain on sale of fixed assets | (1,715,913 | ) | |
LOSS FROM OPERATIONS | (2,013,581 | ) | |
OTHER EXPENSE: | |||
Interest expense, net | (968,038 | ) | |
Other expense, net | (473,735 | ) | |
Total Other Expense | (1,441,773 | ) | |
LOSS BEFORE PROVISION FOR INCOME TAXES | (3,455,354 | ) | |
PROVISION FOR INCOME TAXES | 2,021,457 | ||
NET LOSS | $ | (5,476,811 | ) |
NET LOSS | $ | (5,476,811 | ) |
OTHER COMPREHENSIVE INCOME: | |||
Change in accumulated foreign currency translation adjustment | 1,606,446 | ||
COMPREHENSIVE LOSS | $ | (3,870,365 | ) |
Other Comprehensive | |||||||||||||||||||||
Common Stock | Additional Paid-In | Accumulated | Income - Translation | ||||||||||||||||||
Shares | Amount | Capital | Deficit | Adjustment | Total | ||||||||||||||||
BALANCE AT DECEMBER 31, 2010 | 120,000 | $ | 159,018 | $ | 26,476,497 | $ | (1,464,315 | ) | $ | (13,213 | ) | $ | 25,157,987 | ||||||||
NET LOSS FOR THE YEAR ENDED DECEMBER 31, 2011 | — | — | — | (5,476,811 | ) | — | (5,476,811 | ) | |||||||||||||
CONTRIBUTIONS FROM RELATED PARTY | — | — | 29,858,884 | — | — | 29,858,884 | |||||||||||||||
FOREIGN CURRENCY TRANSLATION ADJUSTMENT | — | (3,636 | ) | (605,400 | ) | (1,586,334 | ) | 1,606,446 | (588,924 | ) | |||||||||||
BALANCE AT DECEMBER 31, 2011 | 120,000 | $ | 155,382 | $ | 55,729,981 | $ | (8,527,460 | ) | $ | 1,593,233 | $ | 48,951,136 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net loss | $ | (5,476,811 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||
Depreciation and amortization | 10,951,035 | ||
Deferred income taxes | (756,061 | ) | |
Gain on sale of fixed assets | (1,715,913 | ) | |
Bad debt provision | 688,591 | ||
Changes in Assets (Increase) Decrease: | |||
Accounts receivable | (3,111,247 | ) | |
Prepaid expenses and other current assets | (3,973,956 | ) | |
Changes in Liabilities Increase (Decrease): | |||
Accounts payable and accrued expenses | 11,400,045 | ||
Income taxes payable | 236,311 | ||
Deferred revenue | 136,151 | ||
Other non-current liabilities | 231,313 | ||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 8,609,458 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Acquisition of property and equipment | (7,909,480 | ) | |
NET CASH USED IN INVESTING ACTIVITIES | (7,909,480 | ) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Proceeds from related party notes, net | 4,789,856 | ||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 4,789,856 | ||
EFFECT OF FOREIGN EXCHANGE RATE CHANGES | (3,460,235 | ) | |
NET INCREASE IN CASH | 2,029,599 | ||
CASH, BEGINNING OF YEAR | 3,085,605 | ||
CASH, END OF YEAR | $ | 5,115,204 | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |||
Interest paid | $ | 265,826 | |
Income taxes paid | $ | 160,840 | |
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES : | |||
Contribution from related party | $ | 20,377,000 | |
Contribution of intracompany loan | $ | 10,455,000 | |
Reclassification of due to related party, net to capital | $ | 9,481,884 |
Office equipment | 3 to 13 years |
Network equipment | 5 years |
Software | 5 years |
Patents | 5 years |
Trademarks | 5 years |
Indefeasible rights of use | 5 to 15 years |
Customer list | 5 years |
Intangibles in Progress | 5 years |
Office equipment | $ | 650,551 | |
Network equipment | 24,720,121 | ||
Leasehold improvements | 149,396 | ||
Software | 2,642,674 | ||
Assets under construction | 78,680 | ||
28,241,422 | |||
Less: Accumulated depreciation and amortization | 11,119,816 | ||
$ | 17,121,606 |
Useful Life | |||||
Patents | 5 years | $ | 3,491 | ||
net of accumulated amortization of $3,774 | |||||
Trademarks, | 5 years | 18,661 | |||
net of accumulated amortization of $24,887 | |||||
Indefeasible rights of use, | 5 to 15 years | 3,474,559 | |||
net of accumulated amortization of $1,161,386 | |||||
Customer list, | 5 years | 6,687,527 | |||
net of accumulated amortization of $7,223,874 | |||||
Intangible in progress | — | 117,580 | |||
$ | 10,301,818 |
Years Ending December 31: | |||
2012 | $ | 3,422,237 | |
2013 | 3,422,237 | ||
2014 | 1,827,048 | ||
2015 | 686,014 | ||
2016 | 553,705 | ||
Thereafter | 390,577 | ||
$ | 10,301,818 |
Goodwill | Indefinite life | $ | 13,591,515 |
Revenue | $ | 871,862 | |
Cost of telecommunication services | $ | 4,480,770 | |
Interest expense | $ | 873,216 |
Current: | |||
IRES | $ | 2,715,152 | |
Foreign | 62,366 | ||
2,777,518 | |||
Deferred: | |||
IRES | (756,061 | ) | |
Total provision for income taxes | $ | 2,021,457 |
Italian statutory income tax rate | 27.5 | % |
Permanent items | (7.77 | )% |
Foreign tax rate differential | 0.92 | % |
FIN 48 | (63.61 | )% |
Effective Tax Rate | (42.96 | )% |
Deferred Tax Assets: | ||||
Directors' compensation | $ | 28,589 | ||
Bad debt provision | 177,766 | |||
Tax depreciation on goodwill | 770,028 | |||
Maroc Telecom Provision | 69,581 | |||
Miscellaneous | 6,376 | |||
DTA establishment | 238,049 | |||
Total deferred tax assets before valuation allowance | 1,290,389 | |||
Less: Valuation allowance | — | |||
Total deferred tax assets | 1,290,389 | |||
Deferred Tax Liabilities: | ||||
Foreign exchange gain/loss | (13,284 | ) | ||
Total deferred tax liabilities | (13,284 | ) | ||
Net deferred tax asset | $ | 1,277,105 |
Note 10 - | Leases |
Years Ending December 31: | |||
2012 | $ | 603,840 | |
2013 | 464,048 | ||
2014 | 538,839 | ||
2015 | 538,839 | ||
2016 | 448,199 | ||
Thereafter | 1,879,423 | ||
$ | 4,473,188 |
Note 11 - | Subsequent Events |
Page | |
Independent Auditors’ Report | 1 |
Consolidated Financial Statements | |
Consolidated Balance Sheet at March 31, 2013 | 2 |
Consolidated Statement of Operations for the Three Months Ended March 31, 2013 | 3 |
Consolidated Statement of Comprehensive Loss for the Three Months Ended March 31, 2013 | 4 |
Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2013 | 5 |
Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2013 | 6 |
Notes to Consolidated Financial Statements | 7-12 |
ASSETS | |||
CURRENT ASSETS: | |||
Cash | $ | 5,801,247 | |
Accounts receivable, net | 11,795,427 | ||
Investments | 8,971 | ||
Prepaid expenses and other current assets | 5,541,645 | ||
Total Current Assets | 23,147,290 | ||
PROPERTY AND EQUIPMENT, NET | 10,128,718 | ||
NONCURRENT ASSETS: | |||
Intangible assets, net | 11,313 | ||
Other assets | 1,037,901 | ||
Total Non-current Assets | 1,049,214 | ||
Total Assets | $ | 34,325,222 | |
LIABILITIES AND MEMEBERS' EQUITY | |||
CURRENT LIABILITIES: | |||
Accounts payable | $ | 2,989,079 | |
Accrued expenses and other current liabilities | 9,079,501 | ||
Income taxes payable - current | 939,467 | ||
Accrued cost of revenue | 6,122,526 | ||
Deferred tax liabilities | 13,148 | ||
Deferred revenue | 1,118,513 | ||
Total Current Liabilities | 20,262,234 | ||
NONCURRENT LIABILITIES: | |||
Other non-current liabilities | 769,829 | ||
Total Liabilities | 21,032,063 | ||
COMMITMENTS AND CONTINGENCIES | |||
MEMBERS' EQUITY | 13,293,159 | ||
Total Liabilities and Members' Equity | $ | 34,325,222 |
REVENUE | $ | 21,775,356 | |
OPERATING ACTIVITIES: | |||
Cost of telecommunication services provided | 14,118,130 | ||
Selling, general and administrative expenses | 5,999,749 | ||
Depreciation and amortization | 932,343 | ||
INCOME FROM OPERATIONS | 725,134 | ||
OTHER INCOME (EXPENSE): | |||
Other income, net | 101,185 | ||
Interest expense, net | (11,468 | ) | |
Total Other Income | 89,717 | ||
INCOME BEFORE PROVISION FOR INCOME TAXES | 814,851 | ||
PROVISION FOR INCOME TAXES | 303,027 | ||
NET INCOME | $ | 511,824 |
NET INCOME | $ | 511,824 | |
OTHER COMPREHENSIVE LOSS: | |||
Change in accumulated foreign currency translation adjustment | (2,214,483 | ) | |
COMPREHENSIVE LOSS | $ | (1,702,659 | ) |
Accumulated | ||||||||||||
Other Comprehensive | ||||||||||||
Members' | Income - Translation | |||||||||||
Equity | Adjustment | Total | ||||||||||
BALANCE AT JANUARY 1, 2013 | $ | 12,246,289 | $ | 4,428,309 | $ | 16,674,598 | ||||||
NET INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2013 | 511,824 | — | 511,824 | |||||||||
FOREIGN CURRENCY TRANSLATION ADJUSTMENT | (1,678,780 | ) | (2,214,483 | ) | (3,893,263 | ) | ||||||
BALANCE AT MARCH 31, 2013 | $ | 11,079,333 | $ | 2,213,826 | $ | 13,293,159 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income | $ | 511,824 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 932,343 | ||
Bad debt provision | 616,394 | ||
Changes in Assets (Increase) Decrease: | |||
Accounts receivable | 176,155 | ||
Prepaid expenses and other current assets | (776,890 | ) | |
Changes in Liabilities Increase (Decrease): | |||
Accounts payable and accrued expenses | (100,399 | ) | |
Income taxes payable | (212,979 | ) | |
Deferred revenue | (163,330 | ) | |
Other non-current liabilities | 31,782 | ||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 1,014,900 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Acquisition of property and equipment | (1,665,624 | ) | |
NET CASH USED IN INVESTING ACTIVITIES | (1,665,624 | ) | |
EFFECT OF FOREIGN EXCHANGE RATE CHANGES | (3,662,957 | ) | |
NET DECREASE IN CASH | (4,313,681 | ) | |
CASH, BEGINNING OF PERIOD | 10,114,928 | ||
CASH, END OF PERIOD | $ | 5,801,247 |
Office equipment | 3 to 13 years |
Network equipment | 5 years |
Software | 5 years |
Patents | 5 years |
Trademarks | 5 years |
Office equipment | $ | 686,524 | |
Network equipment | 9,502,194 | ||
Leasehold improvements | 113,124 | ||
Software | 844,135 | ||
Assets under construction | 66,531 | ||
11,212,508 | |||
Less: Accumulated depreciation and amortization | 1,083,790 | ||
$ | 10,128,718 |
Useful Life | ||||||
Patents | 5 years | $ | 1,629 | |||
net of accumulated amortization of $5,401 | ||||||
Trademarks, | 5 years | 9,684 | ||||
net of accumulated amortization of $24,887 | ||||||
$ | 11,313 |
Revenue | $ | 462,389 | |
Cost of telecommunication services | $ | 2,974,541 | |
Interest expense | $ | 12,263 |
Twelve Months Ending March 31: | |||
2014 | $ | 493,120 | |
2015 | 533,338 | ||
2016 | 510,909 | ||
2017 | 414,787 | ||
2018 | 328,277 | ||
Thereafter | 1,449,889 | ||
$ | 3,730,320 |
Note 11 - | Subsequent Events |
Page | |
Independent Auditors’ Report | 1 |
Consolidated Financial Statements | |
Consolidated Balance Sheet at March 31, 2012 | 2 |
Consolidated Statement of Operations for the Three Months Ended March 31, 2012 | 3 |
Consolidated Statement of Comprehensive Loss for the Three Months Ended March 31, 2012 | 4 |
Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2012 | 5 |
Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2012 | 6 |
Notes to Consolidated Financial Statements | 7-13 |
ASSETS | ||||
CURRENT ASSETS: | ||||
Cash | $ | 7,268,258 | ||
Accounts receivable, net | 15,425,967 | |||
Investments | 6,669 | |||
Prepaid expenses and other current assets | 5,047,080 | |||
Deferred tax assets | 1,329,185 | |||
Total Current Assets | 29,077,159 | |||
PROPERTY AND EQUIPMENT, NET | 18,175,940 | |||
NONCURRENT ASSETS: | ||||
Intangible assets, net | 9,714,827 | |||
Goodwill | 14,137,588 | |||
Other assets | 1,008,503 | |||
Total Non-current Assets | 24,860,918 | |||
Total Assets | $ | 72,114,017 | ||
LIABILITIES AND MEMBERS' EQUITY | ||||
CURRENT LIABILITIES: | ||||
Accounts payable | $ | 7,370,572 | ||
Accrued expenses and other current liabilities | 5,047,780 | |||
Income taxes payable - current | 749,738 | |||
Accrued cost of revenue | 4,478,083 | |||
Deferred tax liabilities | 13,683 | |||
Deferred revenue | 982,480 | |||
Total Current Liabilities | 18,642,336 | |||
NONCURRENT LIABILITIES: | ||||
Other non-current liabilities | 624,627 | |||
Total Liabilities | 19,266,963 | |||
COMMITMENTS AND CONTINGENCIES | ||||
MEMBERS' EQUITY | 52,847,054 | |||
Total Liabilities and Members' Equity | $ | 72,114,017 |
REVENUE | $ | 20,746,472 | |
OPERATING ACTIVITIES: | |||
Cost of telecommunication services provided | 10,389,814 | ||
Selling, general and administrative expenses | 6,546,877 | ||
Depreciation and amortization | 2,376,678 | ||
Loss on sale of fixed assets | 150,279 | ||
INCOME FROM OPERATIONS | 1,282,824 | ||
OTHER EXPENSE: | |||
Interest expense, net | (41,105 | ) | |
Other expense, net | (30,643 | ) | |
Total Other Expense | (71,748 | ) | |
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,211,076 | ||
PROVISION FOR INCOME TAXES | 677,889 | ||
NET INCOME | $ | 533,187 |
NET INCOME | $ | 533,187 | |
OTHER COMPREHENSIVE LOSS | |||
Change in accumulated foreign currency translation adjustment | $ | (743,082 | ) |
COMPREHENSIVE LOSS | $ | (209,895 | ) |
Accumulated | |||||||||||
Other Comprehensive | |||||||||||
Members' | Income - Translation | ||||||||||
Equity | Adjustment | Total | |||||||||
BALANCE AT DECEMBER 31, 2011 | $ | — | $ | — | $ | — | |||||
CONTRIBUTIONS OF TINET S.P.A. AND SUBSIDIARIES | 47,357,903 | 1,593,233 | 48,951,136 | ||||||||
STOCKHOLDERS' EQUITY | |||||||||||
NET INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2012 | 533,187 | — | 533,187 | ||||||||
CONTRIBUTIONS FROM RELATED PARTY | 1,924,555 | — | 1,924,555 | ||||||||
FOREIGN CURRENCY TRANSLATION ADJUSTMENT | 2,181,258 | (743,082 | ) | 1,438,176 | |||||||
BALANCE AT MARCH 31, 2012 | $ | 51,996,903 | $ | 850,151 | $ | 52,847,054 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income | $ | 533,187 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 2,376,678 | ||
Loss on sale of fixed assets | 150,279 | ||
Bad debt provision | 62,183 | ||
Changes in Assets (Increase) Decrease: | |||
Accounts receivable | 425,154 | ||
Prepaid and refundable income taxes | 26,368 | ||
Changes in Liabilities Increase (Decrease): | |||
Accounts payable and accrued expenses | 552,099 | ||
Income taxes payable | 311,990 | ||
Deferred revenue | (109,157 | ) | |
Other non-current liabilities | 30,100 | ||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 4,358,881 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Acquisition of property and equipment | (2,313,662 | ) | |
NET CASH USED IN INVESTING ACTIVITIES | (2,313,662 | ) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Cash acquired from contribution from Tinet S.p.A. | 5,115,204 | ||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 5,115,204 | ||
EFFECT OF FOREIGN EXCHANGE RATE CHANGES | 107,835 | ||
NET INCREASE IN CASH | 7,268,258 | ||
CASH, BEGINNING OF PERIOD | — | ||
CASH, END OF PERIOD | $ | 7,268,258 | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |||
Interest paid | $ | 29,833 | |
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES : | |||
Reclassification of due to related party, net to capital | $ | 1,924,555 | |
Contribution of Tinet S.p.A. and Subsidiaries, non-cash portion | $ | 43,835,932 |
Office equipment | 3 to 13 years |
Network equipment | 5 years |
Software | 5 years |
Patents | 5 years |
Trademarks | 5 years |
Indefeasible rights of use | 5 to 15 years |
Customer list | 5 years |
Intangibles in Progress | 5 years |
Office equipment | $ | 685,714 | |
Network equipment | 27,452,515 | ||
Leasehold improvements | 153,888 | ||
Software | 2,779,504 | ||
Assets under construction | 31,944 | ||
31,103,565 | |||
Less: Accumulated depreciation and amortization | 12,927,625 | ||
$ | 18,175,940 |
Useful Life | |||||
Patents | 5 years | $ | 3,221 | ||
net of accumulated amortization of $5,401 | |||||
Trademarks, | 5 years | 17,562 | |||
net of accumulated amortization of $24,887 | |||||
Indefeasible rights of use, | 5 to 15 years | 3,402,784 | |||
net of accumulated amortization of $1,372,542 | |||||
Customer list, | 5 years | 6,171,565 | |||
net of accumulated amortization of $8,160,139 | |||||
Intangibles in progress | 119,695 | ||||
$ | 9,714,827 |
Twelve Months Ending March 31, | |||
2013 | $ | 2,628,411 | |
2014 | 3,525,127 | ||
2015 | 1,881,978 | ||
2016 | 706,639 | ||
2017 | 570,352 | ||
Thereafter | 402,320 | ||
$ | 9,714,827 |
Goodwill | Indefinite life | $ | 14,137,588 |
Revenue | $ | 1,793,689 | |
Cost of telecommunication services | $ | 1,373,060 | |
Interest expense | $ | 37,153 |
Note 9 - | Non-retirement Post-employment Benefits |
Note 10 - | Leases |
Twelve Months Ending March 31, | |||
2013 | $ | 577,994 | |
2014 | 513,185 | ||
2015 | 555,039 | ||
2016 | 531,698 | ||
2017 | 431,665 | ||
Thereafter | 1,850,520 | ||
$ | 4,460,101 |
Note 11 - | Subsequent Events |
(Amounts in thousands, except for share and per share data) | GTT | Tinet | Pro forma Adjustments | Pro forma Combined | ||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | 4,607 | 5,801 | 46,565 | (c) (h) | 2,014 | |||||||||||
(49,158 | ) | (d) | ||||||||||||||
(5,801 | ) | (e) | ||||||||||||||
Accounts receivable, net | 9,807 | 11,795 | 21,602 | |||||||||||||
Deferred contract costs | 1,279 | — | — | 1,279 | ||||||||||||
Investments | — | 9 | 9 | |||||||||||||
Prepaid expenses and other current assets | 3,875 | 5,542 | — | 9,417 | ||||||||||||
Total current assets | 19,568 | 23,147 | (8,394 | ) | 34,321 | |||||||||||
Property and equipment, net | 6,462 | 10,129 | 5,000 | (f) | 21,591 | |||||||||||
Intangible assets, net | 23,851 | 11 | 25,789 | (g) | 49,651 | |||||||||||
Other assets | 2,633 | 1,038 | 2,360 | (h) | 6,031 | |||||||||||
Goodwill | 50,557 | — | 20,462 | (i) | 71,019 | |||||||||||
Total assets | $ | 103,071 | $ | 34,325 | $ | 45,217 | $ | 182,613 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | 12,844 | 2,989 | — | 15,833 | ||||||||||||
Accrued expenses and other current liabilities | 12,682 | 16,155 | 28,837 | |||||||||||||
Short-term debt | 5,329 | — | 1,235 | (c) | 6,564 | |||||||||||
Deferred revenue | 6,308 | 1,119 | 2,000 | (j) | 9,427 | |||||||||||
Total current liabilities | 37,163 | 20,262 | 3,235 | 60,660 | ||||||||||||
Long-term debt | 37,334 | — | 43,715 | (c) | 81,049 | |||||||||||
Deferred revenue and other long-term liabilities | 6,470 | 770 | 1,505 | (k) | 16,330 | |||||||||||
7,585 | (m) | |||||||||||||||
Total liabilities | 80,967 | 21,032 | 56,040 | 158,039 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders' equity: | ||||||||||||||||
Common stock, par value $.0001 per share, 80,000,000 shares authorized, 18,921,798 shares issued and outstanding as of March 31, 2012 | 2 | 1 | (1 | ) | (l) | 2 | ||||||||||
Additional paid-in capital | 70,817 | — | 2,470 | (c) | 73,287 | |||||||||||
Retained earnings (accumulated deficit) | (47,958 | ) | 11,078 | (11,078 | ) | (l) | (47,958 | ) | ||||||||
Accumulated other comprehensive income (loss) | (757 | ) | 2,214 | (2,214 | ) | (l) | (757 | ) | ||||||||
Total stockholders' equity | 22,104 | 13,293 | (10,823 | ) | 24,574 | |||||||||||
Total liabilities and stockholders' equity | $ | 103,071 | $ | 34,325 | $ | 45,217 | $ | 182,613 |
(Amounts in thousands, except for share and per share data) | GTT | Tinet | Pro forma Adjustments | Pro forma Combined | |||||||||||||
Revenue: | |||||||||||||||||
Telecommunications services sold | $ | 26,433 | $ | 21,775 | — | $ | 48,208 | ||||||||||
Operating expenses: | |||||||||||||||||
Cost of telecommunications services provided | 17,657 | 14,118 | — | 31,775 | |||||||||||||
Selling, general and administrative expense | 5,364 | 6,000 | — | 11,364 | |||||||||||||
Restructuring costs, employee termination and other items | 242 | — | — | — | |||||||||||||
Depreciation and amortization | 2,395 | 932 | 1,290 | (a) | 4,617 | ||||||||||||
Total operating expenses | 25,658 | 21,050 | 1,290 | 47,998 | |||||||||||||
Operating income (loss) | 775 | 725 | (1,290 | ) | 210 | ||||||||||||
Other income (expense): | |||||||||||||||||
Interest expense, net | (1,306 | ) | (11 | ) | (894 | ) | (b) | (2,212 | ) | ||||||||
Other income (expense), net | (1,799 | ) | 101 | (513 | ) | (k) | (2,211 | ) | |||||||||
Total other income (expense) | (3,105 | ) | 90 | (1,408 | ) | (4,423 | ) | ||||||||||
Income (loss) before taxes | (2,330 | ) | 815 | (2,698 | ) | (4,213 | ) | ||||||||||
Provision for income taxes | 191 | 303 | — | 494 | |||||||||||||
Net income (loss) | $ | (2,521 | ) | $ | 512 | $ | (2,698 | ) | $ | (4,707 | ) | ||||||
Loss per share | |||||||||||||||||
Basic | $ | (0.13 | ) | $ | (0.24 | ) | |||||||||||
Diluted | $ | (0.13 | ) | $ | (0.24 | ) | |||||||||||
Weighted average shares: | |||||||||||||||||
Basic | 19,264,481 | 19,264,481 | |||||||||||||||
Diluted | 19,264,481 | 19,264,481 |
(Amounts in thousands, except for share and per share data) | GTT | Tinet | Pro forma Adjustments | Pro forma Combined | |||||||||||||
Revenue: | |||||||||||||||||
Telecommunications services sold | $ | 107,877 | $ | 72,094 | — | $ | 179,971 | ||||||||||
Operating expenses: | |||||||||||||||||
Cost of telecommunications services provided | 76,000 | 40,876 | — | 116,876 | |||||||||||||
Selling, general and administrative expense | 18,957 | 26,349 | — | 45,306 | |||||||||||||
Loss on disposal of fixed assets | — | 869 | — | 869 | |||||||||||||
Impairment of investments | — | 304 | — | 304 | |||||||||||||
Impairment of goodwill, fixed and intangible assets | — | 26,483 | — | 26,483 | |||||||||||||
Restructuring costs, employee termination and other items | 701 | — | — | 701 | |||||||||||||
Depreciation and amortization | 7,296 | 8,805 | 5,160 | (a) | 21,261 | ||||||||||||
Total operating expenses | 102,954 | 103,685 | 5,160 | 211,799 | |||||||||||||
Operating income (loss) | 4,923 | (31,592 | ) | (5,160 | ) | (31,829 | ) | ||||||||||
Other income (expense): | |||||||||||||||||
Interest expense, net | (4,686 | ) | (154 | ) | (3,577 | ) | (b) | (8,417 | ) | ||||||||
Other income (expense), net | (1,054 | ) | (757 | ) | (713 | ) | (k) | (2,524 | ) | ||||||||
Total other income (expense) | (5,740 | ) | (911 | ) | (4,290 | ) | (10,941 | ) | |||||||||
Loss before taxes | (817 | ) | (32,503 | ) | (9,450 | ) | (42,769 | ) | |||||||||
Provision for income taxes | 746 | 2,097 | — | 2,843 | |||||||||||||
Net loss | $ | (1,563 | ) | $ | (34,599 | ) | $ | (9,450 | ) | $ | (45,612 | ) | |||||
Loss per share | |||||||||||||||||
Basic | $ | (0.08 | ) | $ | (2.41 | ) | |||||||||||
Diluted | $ | (0.08 | ) | $ | (2.41 | ) | |||||||||||
Weighted average shares: | |||||||||||||||||
Basic | 18,960,347 | 18,960,347 | |||||||||||||||
Diluted | 18,960,347 | 18,960,347 |
Amounts in thousands | ||||
Purchase Price | ||||
Total cash consideration | $ | 49,158 | ||
Fair value of liabilities assumed | 34,814 | |||
Total consideration | $ | 83,972 | ||
Purchase Price Allocation: | ||||
Acquired Assets | ||||
Current assets | $ | 17,839 | ||
Property and equipment | 15,004 | |||
Other assets | 1,282 | |||
Intangible assets | 25,800 | |||
Total fair value of assets acquired | 59,925 | |||
Goodwill | 24,047 | |||
Total consideration | $ | 83,972 |
a. | Reflect additional amortization expense related to acquired intangibles as of the beginning of the period. | |
b. | GTT borrowed $65.0 million under a senior term loan from Webster Bank and $8.5 million under a second lien credit facility to finance the transaction and cover additional cash needs involved in the transaction. GTT repaid Silicon Valley Bank $27.0 million with the proceeds of the new loan. |
(Dollars in thousands) | Year Ended December 31, 2012 | Three Months Ended March 31, 2013 | ||||
Additional GTT debt under senior term loan | $ | 65,000 | $ | 65,000 | ||
Effective annual interest rate | 6.5 | % | 6.5 | % | ||
Estimated GTT interest on senior term loan | $ | 4,225 | $ | 1,056 | ||
Additional GTT debt under second lien credit facility | 8,500 | 8,500 | ||||
Effective annual interest rate | 13.5 | % | 13.5 | % | ||
Estimated GTT interest on second lien facility | $ | 1,148 | $ | 287 | ||
SVB debt under senior term loan | 24,045 | 24,045 | ||||
Effective annual interest rate | 6.75 | % | 6.75 | % | ||
Less: Estimated interest on SVB senior term loan | $ | (1,623 | ) | $ | (406 | ) |
SVB debt under line of credit facility | 3,000 | 3,000 | ||||
Effective annual interest rate | 5.75 | % | 5.75 | % | ||
Less: Estimated interest on SVB line of credit facility | $ | (173 | ) | $ | (43 | ) |
Interest Expense Adjustment | $ | 3,577 | $ | 894 |
c. | GTT borrowed $65.0 million under a senior term loan from Webster Bank and $8.5 million under a second lien credit facility to finance the transaction and cover additional cash needs involved in the transaction. The $8.5 million credit facility was discounted $1.5 million to account for the warrants which are included as a separate liability in other long term liabilities. GTT repaid Silicon Valley Bank $27.0 million with the proceeds of the new loan. GTT raised $2.5 million from the sale of common stock on April 30, 2013 to fund the acquisition. |
d. | Cash consideration paid to the seller in the transaction (See Note 1). |
e. | The Tinet acquisition agreement included an adjustment based on cash and cash equivalents in Tinet immediately prior to the acquisition. |
f. | GTT acquired $5.0 million of telecommunications equipment from Inteliquent at the close of the acquisition. |
g. | Intangible assets generated by the transaction represent the customer relationships of $25.0 million and trade name of $0.8 million. |
h. | Deferred financing costs of $2.4 million incurred in financing the transaction paid at closing. |
i. | The goodwill adjustment of $20.5 million includes goodwill created from the acquisition (See Note 1) and working capital differences. |
j. | GTT agreed to provide Inteliquent with certain data services at no charge over a three-year period. The Company values these services at $2.0 million. |
k. | Warrants issued in conjunction with second lien credit facility were recognized and measured at fair value of $1.5 million as of March 31, 2013. Other expense of $0.7 million and $0.5 million were recognized in the year ended December 31, 2012 and three months ended March 31, 2013, respectively, due to the mark to market of the warrants issued. |
l. | Eliminate the historical stockholders’ equity accounts of Tinet at March 31, 2013. |
m. | Deferred tax liability resulting from the tax impact of the intangibles assets acquired in the acquisition. |