8-K/A 1 bestnet8ka011807.txt PERIOD ENDED 01-08-07 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: January 18, 2007 (Date of earliest event reported: January 8, 2007) BESTNET COMMUNICATIONS CORP. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 001-15482 86-1006416 --------------------------- ---------- ------------------ (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2850 Thornhills Ave., S.E., Suite 104 Grand Rapids, Michigan 49546 -------------------------------------- -------- (Address of principal executive offices) (Zip Code) (616) 977-9933 ----------------------------- (Registrant's telephone number) Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Unless otherwise indicated or the context otherwise requires, all references below in this report on Form 8-K/A to "we," "us" and the "Company" are to BestNet Communications Corp., a Nevada corporation. Cautionary Note Regarding Forward-looking Statements and Risk Factors The Registrant's Form 10-KSB, any Form 10-QSB or any Form 8-K of the Registrant or any other written or oral statements made by or on behalf of the Registrant may contain forward-looking statements which reflect the Registrant's current views with respect to future events and financial performance. The words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," and similar expressions identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; any statements regarding the validity of our intellectual property and patent protection; and any statements of assumptions underlying any of the foregoing. Such "forward-looking statements" are subject to risks and uncertainties set forth from time to time in the Registrant's SEC reports and include, among others, the Risk Factors described below. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Registrant's views as of the date the statement was made. The Registrant undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Explanatory Note As previously reported, on January 8, 2007, BestNet Communications Corp., a Nevada corporation (the "Seller") entered into an Asset Purchase Agreement with Interactive Media Technologies, Inc., a Florida corporation (the "Buyer"), to sell most of the assets, including the goodwill, of our Telephone Business. The purchase price for purchased assets and assumed liabilities is $60,000 payable as follows: (i) $30,000 payable upon the execution of the Asset Purchase Agreement; and (ii) $30,000 payable upon the Closing Date of February 15, 2007. On the closing date, the Buyer also agrees to reimburse the Seller for all expenses paid by the Seller after January 31, 2007 (the "Switchover Date") through the Closing Date which relate to liabilities associated with the business that were incurred by the Seller after the Switchover Date. On January 12, 2006, we filed a Current Report on Form 8-K (the "8-K Report") to report this transaction. This Current Report on Form 8-K/A is being filed to amend Item 9.01 of the 8-K Report in order to provide the pro forma financial information required by Item 9.01(b). Item 9.01 Financial Statements and Exhibits (b) Pro forma financial information BESTNET COMMUNICATIONS CORP. INDEX TO UNAUDITED PRO FORMA INFORMATION Page ---- Pro Forma Condensed Consolidated Financial Statements - Basis of Presentation (Unaudited) F-2 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of August 31, 2006 F-3 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended August 31, 2006 F-4 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended August 31, 2005 F-5 Notes and Management's Assumptions to the Pro Forma Condensed Consolidated Financial Information (Unaudited) F-6 BESTNET COMMUNICATIONS CORP. PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION (Unaudited) The unaudited pro forma condensed consolidated balance sheet as of August 31, 2006, and the unaudited pro forma condensed consolidated statements of operations for the two years ended August 31, 2006, are based on the historical financial statements of the Registrant. The unaudited pro forma condensed consolidated balance sheet as of August 31, 2006, is presented as if the disposition of the Company's Telephone Segment and receipt of the proceeds by the Registrant as described in the Explanatory Note to this Form 8-K/A occurred in its entirety on August 31, 2006. The unaudited pro forma condensed consolidated statements of operations for the two years ended August 31, 2006, are presented as if the disposition of the Telephone Segment and receipt of the proceeds by the Registrant as described in the Explanatory Note to this Form 8-K/A occurred on September 1, 2004. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical financial statements and notes thereto appearing in the Registrant's Annual Report on Form 10-KSB for the fiscal years ended August 31, 2006 and August 31, 2005. Preparation of the pro forma information is based on assumptions considered appropriate by the Registrant's management. The pro forma financial information is unaudited and is not necessarily indicative of the results which would have occurred if the transactions described above had been consummated on September 1, 2004 for the pro forma condensed consolidated statements of operations and on August 31, 2006 for the pro forma condensed consolidated balance sheet, nor does it purport to represent the future financial position and the results of operations for future periods. In management's opinion, all adjustments necessary to reflect the effects of the transactions listed above have been made. F-2
BESTNET COMMUNICATIONS CORP. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2006 Pro Forma Historical Adjustments Pro Forma ------------ ------------ ------------ Assets Cash and cash equivalents .............................. $ 365,494 $ 117,750 (A) $ 483,244 Accounts receivable, net ............................... 55,381 (55,381)(A) -- Notes receivable - related parties ..................... 16,564 -- 16,564 Prepaid expenses and other current assets .............. 24,576 (14,164)(B) 10,412 ------------ ------------ ------------ Total current assets ................................... 462,015 48,205 510,220 ------------ ------------ ------------ Property and equipment, net ............................ 114,614 (97,898)(B) 16,716 Deposits and other assets .............................. 82,326 (77,713)(A) 4,613 Investment in joint venture ............................ 10,000 -- 10,000 ------------ ------------ ------------ Total Assets ........................................... $ 668,955 $ (127,406) $ 541,549 ============ ============ ============ Liabilities and Stockholders' Deficit Current Liabilities: Convertible notes payable, net ......................... $ 521,639 $ -- $ 521,639 Convertible notes payable - related party .............. 280,450 -- 280,450 Obligation to TEDCO .................................... 30,373 -- 30,373 Note payable ........................................... 100,000 -- 100,000 Accounts payable and other accrued expenses ............ 283,371 (65,813)(A) 217,558 Accrued interest payable ............................... 45,419 -- 45,419 Deferred revenue ....................................... 9,531 (9,531)(A) -- ------------ ------------ ------------ Total current liabilities ........................... 1,270,783 (75,344) 1,195,439 ------------ ------------ ------------ Stockholders' deficit: Preferred stock, par value $.001 per share; 10,000,000 shares authorized; 443,162 shares issued and outstanding ................................... 443 -- 443 Common stock, par value $.001 per share; 100,000,000 shares authorized; 90,102,953 shares issued; 60,259,793 shares outstanding ..................... 60,260 -- 60,260 Additional paid-in capital ............................. 41,599,814 -- 41,599,814 Accumulated deficit .................................... (42,262,345) (52,062)(C) (42,314,407) ------------ ------------ ------------ Total stockholders' deficit ............................ (601,828) (52,062) (653,890) ------------ ------------ ------------ Total liabilities and stockholders' deficit ............ $ 668,955 $ (127,406) $ 541,549 ============ ============ ============ See accompanying notes to unaudited pro forma condensed consolidated financial information. F-3
BESTNET COMMUNICATIONS CORP. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2006 Pro Forma Historical Adjustments Pro Forma ------------ ------------ ------------ Revenue .............................................. $ 1,174,073 $ (1,174,073)(D) $ -- Cost of revenue ...................................... 720,403 (720,403)(D) -- ------------ ------------ ------------ Gross Margin ......................................... 453,670 (453,670) -- General and administrative expense ................... 1,055,082 (557,777)(D) 497,305 Research and development expense ..................... 5,305,146 -- 5,305,146 Depreciation and amortization ........................ 134,298 (134,055)(D) 243 ------------ ------------ ------------ Total operating expenses ............................. 6,494,526 (691,832) 5,802,694 ------------ ------------ ------------ Loss from operations ................................. (6,040,856) 238,162 (5,802,694) ------------ ------------ ------------ Other income (expense): Interest income ...................................... 13,700 -- 13,700 Interest and finance charges ......................... (53,271) 30 (D) (53,241) Other expense ........................................ (5,638) -- (5,638) ------------ ------------ ------------ Total other expense .................................. (45,209) 30 (45,179) ------------ ------------ ------------ Net loss ............................................. $ (6,086,065) $ 238,192 $ (5,847,873) ============ ============ ============ Loss per common share, basic and diluted.............. $ (0.13) $ (0.12) ============ ============ Weighted average number of common shares outstanding, basic and diluted .................... 47,690,475 -- 47,690,475 ============ ============ ============ See accompanying notes to unaudited pro forma condensed consolidated financial information. F-4
BESTNET COMMUNICATIONS CORP. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2005 Pro Forma Historical Adjustments Pro Forma ------------ ------------ ------------ Revenue .............................................. $ 1,546,302 $ (1,546,302)(D) $ -- Cost of revenue. ..................................... 975,805 (975,805)(D) -- ------------ ------------ ------------ Gross Margin ......................................... 570,497 (570,497) -- General and administrative expense ................... 1,146,626 (626,194)(D) 520,432 Research and development expense ..................... -- -- -- Depreciation and amortization ........................ 176,940 (176,940)(D) -- ------------ ------------ ------------ Total operating expenses ............................. 1,323,566 (803,134) 520,432 ------------ ------------ ------------ Loss from operations ................................. (753,069) 232,637 (520,432) ------------ ------------ ------------ Other income (expense): Interest income ...................................... 970 -- 970 Interest and finance charges ......................... (34,909) 545 (D) (34,364) Gain on relief of debt ............................... 20,362 -- 20,362 Loss on disposal of property and equipment............ (1,663) -- (1,663) Other expense ........................................ (5,803) -- (5,803) ------------ ------------ ------------ Total other expense .................................. (21,043) 545 (20,498) ------------ ------------ ------------ Net loss ............................................. $ (774,112) $ 233,182 $ (540,930) ============ ============ ============ Loss per common share, basic and diluted.............. $ (0.02) $ (0.01) ============ ============ Weighted average number of common shares outstanding, basic and diluted .................. 42,645,471 -- 42,645,471 ============ ============ ============ See accompanying notes to unaudited pro forma condensed consolidated financial information. F-5
BESTNET COMMUNICATIONS CORP. NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (Unaudited) The following is a description of the pro forma adjustments to the historical condensed consolidated financial statements: (A) The increase in cash and cash equivalents represents (i) the proceeds from the sale of the Telephone Segment of $60,000 and (ii) the settlement of working capital including accounts receivable, vendor deposits, accounts payable and deferred revenue. (B) Reflects the removal of assets and liabilities of the Telephone Segment as if the sale was consummated on August 31, 2006. (C) Retained earnings has been adjusted for an estimated decrease of approximately $52,000 from the sale of the Telephone Segment as if the sale occurred on August 31, 2006. (D) Reflects the removal of the results of operations of the Telephone Segment as if the sale was consummated on September 1, 2004. F-6 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. BestNet Communications Corporation By: /s/ Stanley L. Schloz -------------------------------- Stanley L. Schloz President By: /s/ Michael A. Kramarz -------------------------------- Michael A. Kramarz Chief Financial Officer Date: January 18, 2007