-----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, BUejlK6T0luj83aDwi2MqzOWVbNMGNnV8GTsZfFP6IVtl51Uy0rUIWm7KUoqNwkg W2SrShylQzjKbiEvjgrGKw== 0000817632-96-000001.txt : 19960131 0000817632-96-000001.hdr.sgml : 19960131 ACCESSION NUMBER: 0000817632-96-000001 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960130 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960130 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARED TECHNOLOGIES INC CENTRAL INDEX KEY: 0000817632 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 870424558 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-17366 FILM NUMBER: 96508725 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD STREET 2: STE 104 CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 2032582400 MAIL ADDRESS: STREET 2: 100 GREAT MEADOW ROAD SUITE 104 CITY: WETHERSFIELD STATE: CT ZIP: 06109 8-K/A 1 1/30/96 AMENDED 8K/A SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of earliest event reported) : June 19, 1995 SHARED TECHNOLOGIES INC. DELAWARE 0-17366 87-0424558 --------- ------- ---------- (State or other (Commission (I.R.S. jurisdiction of File Number) Employer incorporation) Identification No.) 100 Great Meadow Road, Suite 104 Wethersfield, CT. 06109 --------------------------------- ---------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (203-258-2400) Total number of sequentially numbered paged in this filing, including exhibits hereto: 22 Item 2. Acquisition or Disposition of Assets. ------------------------------------- On June 19, 1995, Shared Technologies Cellular Inc., ("STC" or the "Company"),completed its acquisition of the outstanding capital stock of Cellular Hotline, Inc. (``Hotline'') for $617,000. The $617,000 was comprised of $367,000 in cash, paid at closing, and the issuance of 50,000 shares of the Companys' Common Stock, $.01 par value (``Shares''). Part of the cash that was paid at closing was used to repay debt that STC agreed to assume at closing. The Company used a portion of the proceeds from its April 21, 1995 Public Offering for the cash portion of this purchase. At the discretion of the former Hotline stockholders, STC is required to repurchase all of the Shares for $5.00 per share, at any time during the period commencing three months and ending six months after June 19, 1995. STC has the right to repurchase all or a part of the Shares for $6.00 per share during the same period. Additionally, at closing, STC issued Options to purchase 50,000 additional shares of the Companys' Common Stock, $.01 par value, excercisable at $7.50 per share for three years. The agreement provides for additional payments based upon attaining certain levels of activation revenues, as defined, over a one year period. The former stockholders of Hotline are as follows: 1. S. Robert Pye 2. James Green 3. Triad Capital Partners, Inc. 4. The North Fork Group Item 7. Financial Statements and Exhibits. Page ---------------------------------- (a) Financial statements of business acquired. (i) Audited balance sheets of Cellular Hotline,Inc.as of December 31, 1994 and 1993 and the related audited statements of operations and stockholders' deficit, and cash flows for the years ended December 31,1994 and 1993, including the notes thereto. 5 (ii)Unaudited balance sheets of Cellular Hotline, Inc as of April 30, 1995 and April 30, 1994 and the related unaudited statements of operations, and cash flows for the periods ended April 30,1995 and April 30, 1994, including the notes thereto. 16 (b) Pro Forma financial information. -------------------------------- (i)Pro forma consolidated statement of operations for the year ended December 31, 1994. 20 (ii)Pro forma consolidated statement of operations for the six months ended June 30, 1995. 21 (iii)Notes to Pro forma consolidated statements of operations. 22 (c) Exhibits. ---------- Exhibit No. Description ----------- ------------- 10.1 Stock Purchase Agreement dated June 19, 1995. Incorporated by reference from Exhibit 10.1 of the Company's Form 8-K for June 19, 1995 filed on June 30, 1995. 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. Shared Technologies Inc. By: /s/ Vincent DiVincenzo ------------------------- Vincent DiVincenzo Senior Vice President-Finance and Administration, Treasurer, Chief Financial Officer Date: January 30, 1996 CELLULAR HOTLINE, INC. FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT DECEMBER 31, 1994 AND 1993 CONTENTS Independent Auditors' Report Financial Statements Balance Sheets Statements of Operations Statements of Stockholders' Deficit Statements of Cash Flows Notes to Financial Statements INDEPENDENT AUDITORS' REPORT Board of Directors Cellular Hotline, Inc. We have audited the accompanying balance sheets of Cellular Hotline, Inc. as of December 31, 1994 and 1993, and the related statements of operations and stockholders' deficit, and cash flows for the years then ended. 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 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 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 Cellular Hotline, Inc. as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Rothstein, Kass & Company, P.C. Roseland, New Jersey August 8, 1995
BALANCE SHEETS December 31, 1994 1993 ------------- ------ ------- ASSETS Current assets Cash $ 10,525 $ 3,089 Accounts receivable 138,785 118,029 Carrier commissions receivable, less allowance for unearned income of $60,368 in 1994 and $126,201 in 1993 610,378 1,276,037 License fees receivable 28,950 300,000 Other current assets 23,720 9,079 -------- -------- Total current assets 812,358 1,706,234 Furniture, software and equipment, less accumulated depreciation and amortization of $249,046 in 1994 and $216,229 in 1993 50,461 64,602 Other assets 8,344 8,344 ------ ------- $871,163 $1,779,180 ========= ========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable $ 133,360 $ 58,378 Accrued expenses and other current 72,776 46,626 liabilities Carrier commissions payable 656,354 1,453,300 Notes payable 253,757 253,757 --------- -------- Total current liabilities 1,116,247 1,812,061 ---------- ---------- Commitments Stockholders' deficit Common stock, $1 par value, authorized 30,000 shares, issued and outstanding 1,940 shares 1,940 1,940 Capital in excess of par value 186,900 186,900 Accumulated deficit (433,924) (221,721) --------- --------- Total stockholders' deficit (245,084) (32,881) ---------- --------- $871,163 $1,779,180 ========== ========== See accompanying notes to financial statements
STATEMENTS OF OPERATIONS Years Ended December 31, 1994 1993 -------- ----- Revenues $ 3,294,957 $ 2,473,518 Cost of revenues 2,525,712 1,483,438 Gross profit 769,245 990,080 Expenses Payroll 495,012 468,962 Selling 46,620 37,590 General and administrative 418,648 318,426 Total expenses 960,280 824,978 Income (loss) from operations (191,035) 165,102 Interest expense 21,168 26,827 Net income (loss) $ (212,203) $ 138,275 See accompanying notes to financial statements.
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended December 31, 1994 and 1993 Capital in Common Stock Excess of Accumulated Shares Amount Par Value Deficit Balances, January 1, 1993 1,940 $ 1,940 $186,900 $(359,996) Net income 138,275 ------- ------- ---------- ------- Balances, December 31, 1993 1,940 1,940 186,900 (221,721) Net loss (212,203) ------- ------- ---------- ---------- Balances, December 31, 1994 1,940 $ 1,940 $186,900 $(433,924) ====== ======= ========= ========== See accompanying notes to financial statements.
STATEMENTS OF CASH FLOWS Years Ended December 31 1994 1993 ------- ------- Cash flows from operating activities $ (212,203) $ 138,275 ----------- ---------- Net income (loss) Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation 32,817 47,293 Changes in operating assets and liabilities: Increase in accounts receivable (20,756) (3,460) Decrease (increase) in carrier commissions receivable 665,659 (8,927) Decrease (increase) in license fee 271,050 (62,480) receivable Increase in other current assets (14,641) (897) Increase in other assets (5,675) Increase (decrease) in accounts payable 74,982 (52,994) Increase (decrease) in accrued expenses and other current liabilities 26,150 (57,488) Decrease in carrier commissions payable (796,946) (54,395) ---------- --------- Total adjustments 238,315 (199,023) ---------- --------- Net cash provided by (used in) operating 26,112 (60,748) activities --------- ---------- Cash flows from investing activities, payments for furniture, software and equipment (18,676) (11,020) ---------- --------- Net increase (decrease) in cash 7,436 (71,768) Cash, beginning of year 3,089 74,857 -------- -------- Cash, end of year $10,525 $3,089 ========== ========== See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS 1 Business Summary Cellular Hotline, Inc. (the Company) provides nationwide cellular phone activation services and designs software for the retail cellular phone industry for sale, or license to third parties. 2 Summary of significant accounting policies Revenue Recognition Revenues are recognized as services are performed. Revenues relating to license fees are recognized once all material services or conditions relating to the sale of a license have been substantially performed. Capitalized Software Development Costs Costs of producing product masters, including significant product enhancements incurred subsequent to establishing technological feasibility in the process of software production are capitalized according to the principles set forth in Statement No. 86 of the Financial Accounting Standards Board. Costs incurred prior to the establishment of technological feasibility are charged to research, product development, and support expenses. All costs incurred have been charged to operations, since any costs incurred subsequent to reaching technological feasibility were insignificant. Carrier Commissions Receivable Carrier commissions receivable represents amounts due from cellular carriers for commissions on new cellular phone line activations. The cellular commission is earned only after the cellular telephone user has remained on the cellular telephone network for a specified period of time. The Company records a provision for unearned income equal to 9% of the gross the carrier commissions receivable relating to the cancellations of cellular service by the user prior to the end of the aforementioned vesting period. Concurrently, the Company records a commission expense to the retailer. Furniture, Software and Equipment Furniture, software and equipment is stated at cost. The Company records depreciation and amortization on the straight-line method over the estimated useful lives of the assets ranging from 5 to 7 years. Income Taxes The Company adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes", effective as of January 1, 1993. SFAS 109 requires an asset and liability approach to financial reporting for income taxes. The adoption of SFAS 109 had no cumulative effect on the financial statements for the year ended December 31, 1993. Deferred income tax assets and liabilities are computed annually for differences between financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to effect taxable income. Valuation allowances are established, when necessary, to reduce the deferred tax assets to the amount expected to be realized. 3 Notes payable The following is a summary of notes payable: Interest Rate 1994 1993 Note payable to a stockholder requiring quarterly payments equal to a certain percentage of net cash flows, as defined. Payments are applied first to reduce interest due, then to Prime Plus reduce principal. 1% $75,000 $75,000 Note payable to a stockholder requiring quarterly payments equal to a certain percentage of net cash flows, as defined. Payments are applied first to reduce interest due, then to Prime Plus reduce principal. 1% 37,500 37,500 Convertible note payable in quarterly payments through March 1994 equal to a certain percentage of net cash flows, as defined. Payments are applied first to reduce interest due, then to reduce principal. The note is convertible, at the noteholder's option, to common stock at a price of Prime Plus $647 per share. 1% 141,257 141,257 $253,757 $253,757 ========= ========== 4 Commitments The Company leases its Office under a lease expiring in September 1996, providing for, among other items, minimum annual rent plus other operating expenses. Future minimum aggregate annual rental payments as of December 31, 1994 are as follows: Year ending December 31, 1995 $43,000 1996 32,000 Rent expense for the years ended 1994 and 1993 amounted to $46,287 and $45,005, respectively. 5 Related party transactions The Company has received loans from stockholders including accrued interest for the years ended 1994 and 1993 amounting to approximately $138,500 and $129,000, respectively. Interest expense on these notes for the years ended 1994 and 1993 was approximately $9,000 and $8,000, respectively. The Company incurred expenses for the years ended December 31, 1994 and 1993 of approximately $78,000 and $63,000, respectively from an affiliate to a stockholder of the Company. 6 Income taxes The Company has recorded a deferred income tax asset aggregating approximately $200,000 and $110,000 for the years ended December 31, 1994 and 1993, respectively, arising from the net operating loss carryforwards and a valuation allowance in the same amount, since it was more likely than not that the Company would not realize all of the tax benefits. At December 31, 1994, the Company has net operating loss carryforwards of approximately $540,000 for federal and state income tax purposes expiring through 2009. 7 Subsequent event In June 1995, the Company's stockholders sold all of their common stock of the Company to Shared Technologies Cellular, Inc. In connection with the sale, the convertible note payable was repaid and the remaining notes payable were contributed to capital in excess of par value.
Cellular Hotline, Inc. Balance Sheets April 30, 1995 and 1994 (unaudited) April 30, April 30, 1995 1994 ------------ ----------- ASSETS Current assets: Cash $19,462 $61,966 Accounts receivable 40,472 236,582 Carrier Commissions receivable, less allowance for unearned income of $46,000 and $170,000 at April 30, 1995 and April 30, 1994, respectively 414,567 1,549,668 Other current assets 21,614 6,800 Total current assets 496,115 1,855,016 Furniture, software and equipment, less 49,274 64,261 accumulated depreciation and amortization of $255,986 and $230,871 at April 30, 1995 and April 30, 1994, respectively Other assets 8,344 8,344 Total assets $553,733 $1,927,621 LIABILITIES and STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $85,948 $36,144 Accrued expenses 79,841 64,067 Carrier commissions payable 527,602 1,753,131 Total current liabilities 693,391 1,853,342 Notes payable 253,757 253,757 Stockholders' deficit Common Stock; $1 par value, authorized 1,940 1,940 30,000 shares issued and outstanding 1,940 shares Additional paid-in capital 186,900 186,900 Accumulated deficit (582,255) (368,318) Total stockholders' deficit (393,415) (179,478) Total liabilities and stockholders' deficit $553,733 $1,927,621
Cellular Hotline, Inc. Statements of Operations For the Four Months Ended April 30, 1995 and 1994 (unaudited) April 30, April 30, 1995 1994 Revenues $925,922 $1,217,831 Cost of revenues 767,490 1,011,931 Gross profit 158,432 205,900 Selling, general & administrative expenses: 298,212 343,238 Operating loss (139,780) (137,338) Interest expense, net (8,551) (9,259) Net loss ($148,331) ($146,597)
Cellular Hotline, Inc. Statements of Cash Flows For the Four Months Ended April 30, 1995 and 1994 (unaudited) April 30, April 30, 1995 1994 Cash Flows Provided by Operating Activities: Net Loss ($148,331) ($146,597) Adjustments: Depreciation and amortization 6,940 13,668 Change in Assets and Liabilities: Decrease in accounts receivable 127,263 181,447 Decrease (increase) in carrier commissions 195,811 (273,631) receivable Decrease in other current assets 2,106 2,279 Decrease in accounts payable (47,412) (22,234) Increase in accrued expenses 7,065 17,441 Decrease (increase) in carrier commissions (128,752) 299,831 payable Net cash provided by operating activities 14,690 72,204 Cash Flows Used in Investing Activities: Increase in other assets 0 0 Capital expenditures (5,753) (13,327) Net cash used in investing activities (5,753) (13,327) Net increase in cash 8,937 58,877 Cash, Beginning of Period 10,525 3,089 Cash, End of Period $19,462 $61,966
Cellular Hotline, Inc. Notes to Financial Statements April 30, 1995 and 1994 (unaudited) 1. Significant Accounting Policies ------------------------------- Organization and Basis of Presentation -------------------------------------- Cellular Hotline, Inc. (``Hotline'') was formed August 13, 1984, as a Missouri Corporation. Hotline provides nationwide cellular phone activation services and designs software for the retail cellular phone industry for sale or license to third parties. Revenue Recognition -------------------- Revenues are recognized as services are performed. Revenues related to license fees are recognized once all material services or conditions relating to the sale of a license have been substantially performed. Carrier Commissions Receivable ------------------------------ Carrier commissions receivable represents amounts due from cellular carriers for commissions on new cellular phone line activations. The cellular commission is earned only after the cellular telephone user has remained on the cellular telephone network for a specified period of time (vesting period). The Company records a provision for unearned income equal to 9% of the gross carrier commissions receivable relating to the cancellations of cellular service by the user prior to the end of the aforementioned vesting period. Concurrently, the Company records a commission expense to the retailer. Furniture, Software and Equipment --------------------------------- Furniture, software and equipment is stated at cost. The Company records depreciation and amortization on the straight-line method over the estimated useful lives of the assets ranging from 5 to 7 years. Income Taxes ------------- The Company adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), ``Accounting for Income Taxes'' effective as of January 1, 1993. SFAS 109 requires an asset and liability approach to financial reporting for income taxes. 2. Notes Payable --------------- Notes payable consist of two notes to stockholders and one note from a major vendor of Hotline. These notes bear interest at prime plus 1% and require quarterly payments equal to 80% of net cash flows, as defined. 3. Related Party Transactions ---------------------------- Hotline has received loans from shareholders and a major vendor. In addition, Hotline incurred fulfillment fees to an affiliated company of a major shareholder. Fulfillment fees are expenses for storing, handling and shipping of cellular phones held on behalf of customers. 4.Commitments -------------- Hotline leases its office under a lease expiring September 1996, providing for, among other items, minimum annual rent plus other operating expenses.
Shared Technologies Inc. Pro-Forma Consolidated Statement of Operations For the Year Ended December 31, 1994 Shared Cellular Technologies Hotline Pro-forma Pro-forma Inc. Inc. Adjustments Consolidated Revenues $45,366,511 $3,294,957 $48,661,468 Cost of revenues 26,171,865 2,525,712 28,697,577 Gross profit 19,194,646 769,245 0 19,963,891 Selling,general & 16,971,416 960,280 (8,311) 17,923,385 administrative expenses Operating income 2,223,230 (191,035) 8,311 2,040,506 (loss) Interest expense, (487,245) (21,168) 27,969 (480,444) net Income (loss) 1,735,985 (212,203) 36,280 1,560,062 before income tax credit Income tax credit 550,000 - - 550,000 Net Income (loss) 2,285,985 (212,203) 36,280 2,110,062 Preferred stock (478,159) - - (478,159) dividends Net income (loss) $1,807,826 ($212,203) $36,280 $1,631,903 applicable to common stock Income (loss) per $0.27 $0.24 common share Weighted average 6,792,277 6,792,277 shares outstanding
Shared Technologies Inc. Pro-Forma Consolidated Statement of Operations For the Year Ended June 30, 1995 Shared Cellular Technologies Hotline Pro-forma Pro-forma Inc. Inc. Adjustments Consolidated Revenues $27,709,769 $925,922 $28,635,691 Cost of revenues 16,908,745 767,490 17,676,235 Gross profit 10,801,024 158,432 0 10,959,456 Selling,general & 10,124,083 298,212 9,397 10,431,692 administrative expenses Operating income 676,941 (139,780) (9,397) 527,764 (loss) Gain on sale of 1,374,544 - - 1,374,544 subsidiary stock Interest expense, (169,320) (8,551) 8,700 (169,171) net Net Income (loss) 1,882,165 (148,331) (697) 1,733,137 Preferred stock (198,895) - - (198,895) dividends Net income (loss) $1,683,270 ($148,331) ($697) $1,534,242 applicable to common stock Income (loss) per $0.19 $0.17 common share Weighted average 8,772,147 8,772,147 shares outstanding
Shared Technologies Inc Notes to Pro Forma Consolidated Statements of Operations for the Year Ended December 31, 1994 and Six Months Ended June 30, 1995 (unaudited) The pro forma consolidated statements of operations represents the operating results for Shared Technologies Cellular, Inc. and Cellular Hotline, Inc. referred to herein as Hotline, for the year ended December 31, 1994 and the six months ended June 30, 1995. The pro forma consolidated statements of operations assume that the acquisition occurred at the beginning of the respective periods. The pro forma adjustments are for amortization expense related to goodwill associated with this acquisition and to decrease depreciation and amortization expenses related to the adjustment in the carrying value of furniture, software and equipment acquired. The amount of the goodwill is approximately $780,000 and is being amortized over a 20 year period taking 1/2 year in the first year. The carrying value of the furniture, software and equipment is approximately $50,000 and is being depreciated and amortized over a 5 year period taking / year in the first year. In addition, the pro forma consolidated statements of operations include an adjustment to reduce interest expense for amounts owed to the former stockholders that was forgiven upon the acquisition of Hotline and the repayment of the remaining notes payable at closing. The amount of the interest expense was $28,000 for the year ended December 31, 1994 and $9,000 for the six months ended June 30, 1995. The weighted average shares outstanding for the year ended December 31, 1994 and the six months ended June 30, 1995 reflects the 50,000 shares of common stock issued as part of the purchase price. -----END PRIVACY-ENHANCED MESSAGE-----