-----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, ReQN3HKFFkmlwAHB/5/Qcj3jns/zXGxHIhcxfC8Ni+8/xmEKjK1ZY3PeMOBwsTaS d8VcZvsKeI+UFAeTcZoFeQ== /in/edgar/work/20000825/0000891554-00-002079/0000891554-00-002079.txt : 20000922 0000891554-00-002079.hdr.sgml : 20000922 ACCESSION NUMBER: 0000891554-00-002079 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000614 ITEM INFORMATION: FILED AS OF DATE: 20000825 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VDC COMMUNICATIONS INC CENTRAL INDEX KEY: 0000784961 STANDARD INDUSTRIAL CLASSIFICATION: [4813 ] IRS NUMBER: 061524454 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-14281 FILM NUMBER: 710406 BUSINESS ADDRESS: STREET 1: 75 HOLLY HILL LANE CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2038695100 MAIL ADDRESS: STREET 1: 75 HOLLY HILL LANE CITY: GREENWICH STATE: CT ZIP: 06830 FORMER COMPANY: FORMER CONFORMED NAME: VDC CORP LTD DATE OF NAME CHANGE: 19960117 8-K/A 1 0001.txt FORM 8-K/A 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 Exchange Act of 1934 Date of Report (date of earliest event reported): June 14, 2000 VDC COMMUNICATIONS, INC. ------------------------ (Exact name of registrant as specified in its charter) Delaware 001-14281 061524454 - ------------------ ----------------------- ---------------------- (State or other (Commission File No.) (IRS Employer jurisdiction of Identification No.) incorporation) 75 Holly Hill Lane Greenwich, Connecticut 06830 ---------------------------- (Address of principal executive office) (203) 869-5100 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name or former address, if changed since last report.) General Explanation The purpose of this Report is to amend the registrant's Current Report on Form 8-K dated June 14, 2000 relative to the acquisition of Rare Telephony, Inc. This Report amends the information provided under Item 7(a) and 7(b). Item 7. Financial Statements and Exhibits (a) Financial statements of business acquired. Rare Telephony, Inc. Report of Independent Certified Public Accountants Consolidated Balance Sheet as of June 30, 2000 Consolidated Statement of Operations for the year ended June 30, 2000 Consolidated Statement of Stockholders' Deficit for the year ended June 30, 2000 Consolidated Statement of Cash Flows for the year ended June 30, 2000 Notes to Consolidated Financial Statements (b) Pro forma financial information. (c) Exhibits (referenced to Item 601 of Regulation S-K).
Exhibit Number Title ------ ----- 2.1 Agreement and Plan of Merger dated May 25, 2000 by and among VDC Communications, Inc., Voice & Data Communications (Latin America), Inc., Rare Telephony, Inc., and the holders of all of the outstanding common stock of Rare Telephony, Inc. 2.2 Amendment to Agreement and Plan of Merger dated June 14, 2000 2.3 Certificate of Merger of Rare Telephony, Inc. into Voice & Data Communications (Latin America), Inc. 2.4 Articles of Merger of Rare Telephony, Inc. into Voice & Data Communications (Latin America), Inc. 10.37 Escrow Agreement, dated May 25, 2000, by and among VDC Communications, Inc., Voice & Data Communications (Latin America), Inc., the shareholders of Rare Telephony, Inc., and Buchanan Ingersoll Professional Corporation 10.38 Form of Registration Rights Agreement 10.39 Form of Executive Employment Agreement 10.40 Form of Employment Agreement 10.41 Independent Contractor Agreement, dated May 25, 2000, by and among Peter J. Salzano and Voice & Data Communications (Latin America), Inc. 10.42 License Agreement, dated June 14, 2000, by and between Peter J. Salzano and Free dot Calling.com, Inc. 10.43 Network Agreement, dated May 25, 2000, by and among Network Consulting Group, Inc. and VDC Communications, Inc. 10.44 Funding Agreement, dated June 14, 2000, by and between Voice & Data Communications (Latin America), Inc. and VDC Communications, Inc. 10.45 Promissory Note, dated June 23, 2000, made by Rare Telephony, Inc. in favor of Peter J. Salzano
SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 25, 2000 VDC COMMUNICATIONS, INC. By: /s/ Frederick A. Moran --------------------------- Frederick A. Moran Chairman of the Board and Chief Executive Officer Financial Statements Provided Under Item 7(a) Report of Independent Certified Public Accountants Board of Directors and Stockholders of Rare Telephony, Inc. and subsidiaries Newark, New Jersey We have audited the accompanying consolidated balance sheet of Rare Telephony, Inc. and subsidiaries as of June 30, 2000 and the related consolidated statements of operations, stockholders' deficit, and cash flows for the period from July 1, 1999 (inception) to June 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rare Telephony, Inc. at June 30, 2000, and the results of its operations and its cash flows for the period from July 1, 1999 (inception) to June 30, 2000 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered significant losses from operations and has a net capital deficiency. Furthermore, as discussed in Note 1, the Company was merged into a VDC Communications, Inc. ("VDC") subsidiary as of June 30, 2000. The acquisition by VDC does not eliminate this uncertainty. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ BDO Seidman, LLP BDO Seidman, LLP Valhalla, New York August 18, 2000 RARE TELEPHONY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
June 30, 2000 ---- Assets Current: Cash and cash equivalents $ 970 Accounts receivable 119,331 --------------------- Total current assets 120,301 Property and equipment, less accumulated depreciation 744,664 Product development costs, net 265,108 Other assets 130,381 --------------------- Total assets $ 1,260,454 ===================== Liabilities and Stockholders' Deficit Current: Accounts payable and accrued expenses $ 942,319 Unearned revenue 463,585 Related Party payable 29,514 Related party note payable-current 13,766 Current portion of long term debt 57,724 --------------------- Total current liabilities 1,506,908 Long-term debt 137,843 Related party note payable-long term 1,186,234 --------------------- Total liabilities 2,830,985 Commitment and Contingencies Stockholders' Deficit: Common stock, no par value, 25,000 shares authorized, issued and outstanding - Additional paid-in capital 1,884,398 Accumulated deficit (3,454,929) --------------------- Total stockholders' equity (1,570,531) --------------------- Total liabilities and stockholders' deficit $ 1,260,454 =====================
See accompanying notes to consolidated financial statements. RARE TELEPHONY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS
Period from July 1, 1999 (inception) to June 30, 2000 ---------------------------- Revenue $1,468,984 Operating expenses: Costs of services 2,642,639 Selling, general and administrative expenses 1,963,258 Non-cash compensation expense 296,416 ----------------------- Total operating expenses 4,902,313 ----------------------- Operating loss (3,433,329) Other income (expense) (21,600) ----------------------- Net loss $ (3,454,929) -----------------------
See accompanying notes to consolidated financial statements. RARE TELEPHONY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLERS' DEFICIT
Common Stock Paid in Capital Accumulated Deficit Total ------------------------------------------------------------------------------------ Balance - July 1, 1999 $ - $ - $ - $ - Capital contribution - 1,884,398 - $ 1,884,398 Net loss - - (3,454,929) (3,454,929) ------------------------------------------------------------------------------------ Balance - June 30, 2000 $ - $ 1,884,398 $ (3,454,929) $(1,570,531) ====================================================================================
See accompanying notes to consolidated financial statements. RARE TELEPHONY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Period from July 1, 1999 (Inception) to June 30, 2000 ---------------- Cash flows from operating activities: Net loss $(3,454,929) Adjustments to reconcile net loss to net cash provided by operating activities: Non-cash compensation expense 296,416 Depreciation and amortization 203,442 Changes in operating assets and liabilities: Accounts receivable (119,331) Other assets (200,171) Accounts payable and accrued expenses 942,318 Related party payable 29,514 Unearned revenue 463,585 ---------------- Net cash used by operating activities (1,839,156) Cash flows from investing activities: Fixed asset acquisitions (4,664) Product development costs (307,868) ---------------- Net cash flows used in investing activities (312,532) Cash flows from financing activities: Borrowings under long term debt 200,000 Repayments of long term debt (4,433) Borrowings from related party 1,200,000 Capital Contributions 757,091 ---------------- Net cash flows provided by financing activities 2,152,658 ---------------- Net increase in cash and cash equivalents 970 Cash and cash equivalents, beginning of period - ---------------- Cash and cash equivalents, end of period $ 970 ================ See accompanying notes to consolidated financial statements. Supplemental schedule of noncash investing and financing activities: Fixed assets contributed by stockholder $ 830,891 Services constituting contributed capital $ 296,416
Rare Telephony Inc., and Subsidiaries Notes to consolidated financial statements Summary of Significant Accounting Policies (a) Description of Business and Organization Rare Telephony, Inc. (the "Company") was a privately held corporation through June 2000. The Company merged with and into a wholly-owned subsidiary of VDC Communications, Inc. ("VDC") on June 30, 2000. The Company commenced operations in July 1999. The Company operates through its wholly owned subsidiaries, Cash Back Rebates LD.com., a Delaware corporation and Free dot Calling.com, Inc, a Nevada corporation, which is not yet operational. The Company is a pre-paid long distance provider that obtains customers through telemarketing sales. In the future, through Free dot Calling.com, Inc., the Company anticipates offering its services over the Internet through a proprietary E-commerce platform. (b) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. (c) Revenue Recognition Revenues from retail long distance are recognized when services are provided. Customer prepayments are recorded as unearned revenue until earned. (d) Cost of Services Cost of services include network costs that consist of access, transport, and termination costs. These costs also include telemarketing salaries, depreciation and overhead attributable to operations. Such costs are recognized when incurred in connection with the provision of telecommunications services. (e) Accounts Receivable After confirming customer orders in writing, the Company waits seven days to deposit new customer prepayments. As such, the Company records the last seven days sales in a reporting period as accounts receivable. (f) Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all liquid investments with an original maturity of three months or less to be cash equivalents. The carrying amount reported in the accompanying balance sheet approximates fair market value. (g) Property and Equipment Property and equipment are carried at cost. Replacements and betterments are capitalized. Repairs and maintenance are charged to operations. Depreciation and amortization of property and equipment are computed using the straight-line method over the following estimated useful lives: operating equipment 5 years leasehold improvements life of lease furniture and equipment 3-5 years For income tax purposes, depreciation is computed using statutory recovery methods. (h) Product Development Costs The Company capitalizes product development costs incurred for the production of computer software used in the billing process and other related product development costs. Capitalized costs consist of the direct labor involved from the point of technological feasibility until the product was generally available. The Company amortizes capitalized costs on a straight line basis over the estimated useful life of the asset, which is estimated to be three years. Capitalized product development costs were $307,868 less amortization of $42,760 at June 30, 2000. (i) Intangible Assets Intangible assets consist of costs of obtaining telecommunications tariffs in various states throughout the United States. These assets are amortized on a straight-line basis over a period of 2 years. Intangible assets of $159,818 less accumulated amortization of $73,250 are included in other assets at June 30, 2000. (j) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (k) Financial Instruments The carrying amount of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximated fair value at June 30, 2000 because of the relatively short maturity of these financial instruments. Management estimates that the fair values of long term debt and related party long term debt approximate fair value at June 30, 2000 based on their terms and interest rates. (l) Impairment of Long-Lived Assets The Company periodically reviews the values assigned to long-lived assets, including property and equipment and intangibles, to determine if any impairments are other than temporary. Management believes that the long-lived assets in the accompanying balance sheet are appropriately valued. (m) Concentration of Suppliers of Telecommunications Services The Company purchased virtually all its long distance services from Qwest Communications, Inc. 2. Going Concern The Company's auditors have raised the issue that the Company may not be able to continue as a going concern as a result of the Company's lack of profits. The Company has used substantial amounts of working capital in its operations and has sustained significant operating losses. As of June 30, 2000, current liabilities exceeded current assets by approximately $1.4 million. Management's plan is for VDC to continue to fund the Company's operations as it has in the past. There can be no assurances that VDC will provide the working capital necessary to sustain operations. In view of these matters, continued operations of the Company is dependent upon VDC and/or the success of future operations to meet the Company's financing requirements. 3. Related Party Transactions On June 14, 2000, the Company entered into a loan agreement to pay $100,000 to Network Consulting Group ("Network") with interest at 8% per annum (the "Note"). The Note will be paid in monthly installments of $3,134 commencing on December 1, 2000 and continue thereafter on the first day of each successive month until November 1, 2003 when the entire outstanding principal balance and any unpaid interest is due. During April through June 2000, VDC loaned the Company a total of $1,100,000 at 8% interest per annum. The loans are due on June 14, 2004. Aggregate principal maturities on related party notes payable are as follows:
Year ending June 30, 2001 $ 13,766 2002 31,908 2003 31,957 2004 1,122,369 ----------------- Total $1,200,000
Network paid the Company $200,000 for consulting services during the year ended June 30, 2000. The consulting services are recorded as revenue in the statement of operations. The president of Network was, prior to the merger, a significant shareholder of the Company. Shareholder Obligations Included in property and equipment and additional paid in capital are assets contributed (at predecessor's cost) by a Company shareholder, prior to the merger, totaling approximately $681,000. The assets were financed via capital leases that are the obligations of the shareholder. The equipment serves as collateral for the capital lease obligations. The accumulated depreciation attributable to this equipment was $65,892 at June 30, 2000. 4. Debt In February 2000, an independent third party loaned the Company $200,000 at 15% per annum. The loan is due in monthly installments of $6,933.07 per month commencing in June 2000 with the final payment due May 2003. Aggregate principal maturities on long term debt are as follows:
Year ending June 30, 2001 $ 57,724 2002 67,003 2003 70,840 ----------------- Total $ 195,567
5. Property and Equipment
Major classes of property and equipment consist of the following: Operating equipment $ 282,112 Office equipment 412,786 Furniture & fixtures 140,659 ------------ 835,557 Accumulated depreciation-cost of services 29,829 Accumulated depreciation-SG&A 61,064 ------------- Property and equipment, net of accumulated depreciation $ 744,664
During the year ended June 30, 2000, the Company wrote off $17,436 attributable to the abandonment of leasehold improvements at its former location. 6. Income Taxes The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," under which deferred assets and liabilities are provided on differences between financial reporting and taxable income using enacted tax rates. Deferred income tax expenses or credits are based on the changes in deferred income tax assets or liabilities from period to period. Under SFAS No. 109, deferred tax assets may be recognized for temporary differences that will result in deductible amounts in future periods. A valuation allowance is recognized if, on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company had deferred tax assets of approximately $1,358,000 at June 30, 2000. The deferred tax assets are primarily attributable to net operating losses ("NOLS") and are subject to annual limitations of approximately $190,000 due to the merger with the VDC subsidiary. A valuation allowance has been established for the entire amount of the deferred tax assets. Deferred income taxes result primarily from the net operating loss carryforwards which expire through 2019. Reconciliation of the Company's actual tax rate to the U.S. Federal Statutory rate for the year ended June 30, 2000 is as follows:
Income tax rates - -Statutory U.S. Federal rate (34%) - -State rate (9%) - -Valuation allowance 43% --- Total -%
7. Non-cash compensation Various employees of the Company contributed services at below market rates to the Company during the year ended June 30, 2000. In exchange for those services, the employees received an ownership interest in the Company of approximately 16%. This ownership interest has been recorded as additional paid in capital with a corresponding charge to non-cash compensation expense. The value of these services was estimated based on the relative ownership interests of shareholders who contributed cash or equipment to those providing services. 8. Commitments and Contingencies Operating Leases
The Company leases equipment and office space under noncancellable operating leases. Future minimum lease payments are as follows: Year ending June 30, 2001 $ 132,000 2002 110,000 ------- $ 242,000
Rent expense for the year ended June 30, 2000 was approximately $64,000. Pro Forma Financial Information Provided Under Item 7 (b) Unaudited Pro Forma Consolidated Financial Statements The following unaudited pro forma consolidated balance sheet reflects the effect of the acquisition of Rare Telephony, Inc. ("Rare") as of June 30, 2000. The unaudited pro forma consolidated statement of operations for the year ended June 30, 2000 combines historical statements of operations for VDC Communications, Inc. (the "Company") and the acquired company, Rare, as if the acquisition had occurred on July 1, 1999. The detailed assumptions used to prepare the unaudited pro forma consolidated financial information are contained herein. The unaudited pro forma consolidated financial information reflects the use of the purchase method of accounting for the acquisition. The unaudited pro forma financial information assumes the acquisition was consummated through the issuance of 1,551,020 shares of common stock of which 531,222 shares of common stock are subject to release based on certain Rare employees rendering post combination services and/or satisfying certain contractual criteria. The release of 531,222 shares of common stock, if and when it occurs, will be charged to compensation expense at the fair market value of the common stock on the date of release. Subject to certain additional terms and conditions set forth in the applicable escrow agreement, if certain Rare employees and a consultant are not terminated for cause, do not resign from employment or service and do not breach a material term of his employment or consulting contract, 180,616, 138,118, and 212,488 shares of common stock will be released on June 14, 2001, 2002, and 2003, respectively. 1,019,798 shares of common stock, valued at the June 14, 2000 closing market price of $1.5625 per share, were used to determine the purchase price. The purchase price also includes an investment banking fee of 81,633 shares of common stock at $1.5625 per share. The pro forma weighted average number of common shares outstanding assumes the shares issued in connection with the Rare acquisition were outstanding for the entire period. The unaudited pro forma data are not necessarily indicative of the results of operations which would have actually been reported had the transaction been consummated at the date mentioned above or which may be reported in the future. The unaudited pro forma data should be read in conjunction with the notes to the unaudited pro forma consolidated historical financial information. VDC Communications, Inc. and Subsidiaries Pro Forma Consolidated Balance Sheet
June 30, 2000 (Unaudited) Assets (a) Current: Pro-forma --------- Cash and cash equivalents $ 772,109 Marketable securities 51,212 Accounts receivable, net of allowance for doubtful accounts 935,217 ----------- Total current assets 1,758,538 Property and equipment, less accumulated depreciation 4,286,706 Product development costs 265,108 Goodwill 3,291,517 Advances 70,000 Investment in MCC 140,000 Other assets 513,726 ----------- Total assets $ 10,325,595 Liabilities and Stockholders' Equity Accounts payable and accrued expenses $ 3,739,120 Unearned Revenue 463,585 Related party note payable-current 13,766 Current portion of long term debt 57,724 Current portion of capitalized lease obligations 178,341 ----------- Total current liabilities 4,452,536 Long-term portion of long term debt 137,843 Related party note payable-long-term 86,234 Long-term portion of capitalized lease obligations 521,482 ----------- Total liabilities 5,198,095 Common stock 2,520 Additional paid-in capital 71,556,304 Accumulated deficit (65,904,574) Treasury stock (164,175) Accumulated comprehensive income (loss) (362,575) ----------- Total stockholders' equity 5,127,500 ----------- Total liabilities and stockholders' equity $ 10,325,595 -----------
See notes to pro forma financial statements (unaudited) (a) The pro forma consolidated balance sheet reflected above includes VDC Communications, Inc. and Rare Telephony, Inc. Rare Telephony merged with and into a wholly-owned VDC Communications, Inc. subsidiary on June 30, 2000. An audit is currently being performed on VDC Communications, Inc.'s financial statements and is expected to be completed shortly. VDC Communications, Inc. and Subsidiaries Pro Forma Consolidated Statement of Operations (Unaudited)
Year ended June 30, 2000 (a) VDC Rare Adjustments Pro-forma --- ---- ----------- --------- (unaudited) Revenue $ 8,528,693 $ 1,468,984 - $ 9,997,677 Operating Expenses: Cost of services 8,721,649 2,642,639 - 11,364,288 Selling, general & administrative 2,482,457 1,963,258 1,097,172 5,542,887 Non-cash compensation expense - 296,416 282,213 578,629 ------- ------- ------- Total operating expenses 11,204,106 4,902,313 - 17,485,804 Operating income (loss) (2,675,413) (3,433,329) (7,488,127) Loss on impairment (2,260,000) - - (2,260,000) Other income (expenses) (311,018) (21,600) (332,618) ----------------------------------- ----------------- Total other income (expense) (2,571,018) (21,600) (2,592,618) ----------------------------------- ----------------- Net income (loss) $ (5,246,431) $ (3,454,929) $(10,080,745) ----------------------------------- ----------------- Net loss per common share-basic and diluted $ (0.26) $ (0.47) ----------------------------------- ----------------- Weighted Average number of shares outstanding 20,527,971 21,629,402 ----------------------------------- -----------------
See notes to pro forma financial statements (unaudited) (a) An audit is currently being performed on VDC Communications, Inc.'s financial statements and is expected to be completed shortly. VDC Communications, Inc. and Subsidiaries Notes to Pro-Forma Consolidated Financial Statements (Unaudited) Note A - The pro-forma adjustments to the consolidated balance sheet are as follows: To reflect the acquisition of Rare. The components of the purchase price and its allocation of the purchase price on the basis of the fair values of the assets acquired and to the assets and liabilities of Rare are as follows:
(1) Components of purchase price: Purchase price 1,720,986 Fair value of net liabilities acquired (1,570,531) ----------- Costs in excess of assets acquired $3,291,517
(2) Elimination of intercompany accounts: Rare: Related party note payable $(1,100,000) Related party payable (29,514) Accounts payable and accruals (8,900) VDC: Related party - note receivable 1,100,000 Related party receivable 29,514 Other assets 8,900 ------------- $ ------
(3) Consolidating Balance Sheets of VDC and Rare at June 30, 2000
Assets VDC Rare Adjustments Pro-forma --- ---- ----------- --------- Cash and cash equivalents 771,139 970 772,109 Marketable securities 51,212 51,212 Accounts receivable, net of allowance for doubtful accounts 815,886 119,331 935,217 -------------------------------- ---------------- Total current assets 1,638,237 120,301 1,758,538 Property and equipment, less accumulated depreciation 3,542,042 744,664 4,286,706 Investment in affiliate 1,720,986 (1,720,986) - Goodwill 3,291,517 3,291,517 Investment in MCC 140,000 140,000 Other assets 465,245 395,489 (8,900) 851,834 Related Party receivable 29,514 (29,514) - Related Party - note receivable 1,100,000 (1,100,000) - -------------------------------- ---------------- Total assets 8,636,024 1,260,454 10,328,595 Liabilities and Stockholders' Equity Accounts payable and accrued expenses 2,805,701 942,319 (8,900) 3,739,120 Unearned Revenue 463,585 463,585 Related party payable 29,514 (29,514) - Related party note payable-current 13,766 13,766 Current portion of long term debt 57,724 57,724 Current portion of capitalized lease obligations 178,341 178,341 -------------------------------- ---------------- Total current liabilities 2,984,042 1,506,908 4,452,536 Long-term portion of long term debt 137,843 137,843 Related party note payable-long-term 1,186,234 (1,100,000) 86,234 Long-term portion of capitalized lease obligations 521,482 521,482 -------------------------------- ---------------- Total liabilities 3,505,524 2,830,985 5,198,095 Common stock 2,520 2,520 Additional paid-in capital 71,556,304 1,884,398 (1,884,398) 71,556,304 Accumulated deficit (65,904,574) (3,454,929) 3,454,929 (65,904,574) Treasury stock (164,175) (164,175) Accumulated comprehensive income (loss) (362,575) (362,575) -------------------------------- ---------------- Total stockholders' equity 5,127,500 (1,570,531) 5,127,500 -------------------------------- ---------------- Total liabilities and stockholders' equity 8,633,024 1,260,454 10,325,595
Note B - The pro-forma adjustments to the consolidated statement of operations are as follows:
(1) Goodwill which is estimated to be amortized over three years Amortization expense $1,097,172 ----------
(2) Non-cash compensation expense attributable to the release of 180,616 shares of common stock valued at $1.5625 per share released after one year of post combination services. Non-cash compensation expense $282,213 --------
(3) Elimination of intercompany interest: Rare: Interest expense $ (8,900) VDC: Interest income 8,900 ------------ $ ----
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