-----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, Gx258+0zaCOCkOz0njl+gR/6GoVeFc3dPTY3KxZXnyzkf0d9hT4jp7k3dyKbtJKZ PFXDfkS10cqeTie/57vUTw== 0000950116-02-000252.txt : 20020414 0000950116-02-000252.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950116-02-000252 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011204 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEOWARE SYSTEMS INC CENTRAL INDEX KEY: 0000894743 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 232705700 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21240 FILM NUMBER: 02553244 BUSINESS ADDRESS: STREET 1: 400 FEHELEY DR CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6102778300 MAIL ADDRESS: STREET 1: 400 FEHELEY DR CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 FORMER COMPANY: FORMER CONFORMED NAME: HDS NETWORK SYSTEMS INC DATE OF NAME CHANGE: 19950313 FORMER COMPANY: FORMER CONFORMED NAME: INFORMATION SYSTEMS ACQUISITION CORP DATE OF NAME CHANGE: 19930108 8-K/A 1 eightka.txt EIGHTKA.TXT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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): December 4, 2001 ---------------- NEOWARE SYSTEMS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter)
Delaware 000-21240 23-2705700 - ------------------------------------------------------------------------------------------------------------------- (State or other jurisdiction of (Commission File No.) (IRS Employer Identification No.) incorporation or organization)
400 Feheley Drive King of Prussia, Pennsylvania 19406 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Registrant's telephone number including area code) (610) 277-8300 ------------- Item 2. Acquisition or Disposition of Assets. On January 29, 2002, Neoware Systems, Inc., a Delaware corporation ("Neoware"), filed a Current Report on Form 8-K to report Neoware's acquisition of substantially all the assets and certain of the liabilities of Telcom Assistance Center Corporation, a/k/a Activ-e Solutions, a Delaware corporation ("TACC"), in accordance with the Asset Purchase Agreement dated November 27, 2001, which closed on December 4, 2001, between Neoware and TACC (the "Purchase Agreement"). Neoware stated, pursuant to Item 7 of the Report, that it would file the financial statements of the business acquired, as required by Item 7(a), and the pro forma financial information, as required by Item 7(b), by amendment.. This amendment is being filed to provide the required financial information. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial statements of Business Acquired. The following financial statements of TACC required pursuant to Article 3 of Regulation S-X are filed as Exhibit 99.1 to this Form 8-K/A. (i) Independent Auditors' Report; Audited Balance Sheets as of December 31, 2000 and 1999; Audited Statements of Operations for the years ended December 31, 2000 and 1999; Audited Statements of Shareholders' Equity Deficiency for the years ended December 31, 2000 and 1999; Audited Statements of Cash Flows for the years ended December 31, 2000 and 1999; and Notes to Audited Financial Statements. (ii) Unaudited Balance Sheet as of September 30, 2001; Unaudited Statements of Operations for the nine months ended September 30, 2001 and 2000; Unaudited Statements of Shareholders' Equity Deficiency for the nine months ended September 30, 2001; Unaudited Statements of Cash Flows for the nine months ended September 30, 2001 and 2000; and Notes to Unaudited Financial Statements. (b) Pro Forma Financial Information. The following unaudited pro forma financial information required pursuant to Article 11 of Regulation S-X is filed as Exhibit 99.2 to this Form 8-K. (i) Unaudited Pro Forma Combined Statements of Operations for the year ended June 30, 2001 and for the six-month period ended December 31, 2001. (c) Exhibits. 23.1 Consent of Goldenberg Rosenthal, LLP 99.1 Audited Financial Statements of Telcom Assistance Center Corporation for the years ended December 31, 1999 and 2000, and unaudited financial statements of Telcom Assistance Center Corporation for the nine months ended September 30, 2001 and 2000. 99.2 Unaudited Pro Forma Combined Statements of Operations for the year ended June 30, 2001 and for the six-month period ended December 31, 2001. 2 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 duly authorized. NEOWARE SYSTEMS, INC. Dated: February 19, 2002 By: /S/ MICHAEL G. KANTROWITZ -------------------------- 3 EXHIBITS Exhibit No. Description 23.1 Consent of Goldenberg Rosenthal, LLP. 99.1 Audited Financial Statements of Telcom Assistance Center Corporation for the years ended December 31, 2000 and 1999, and unaudited financial statements of Telcom Assistance Center Corporation for the nine months ended September 30, 2001 and 2000. 99.2 Unaudited Pro Forma Combined Statements of Operations for the year ended June 30, 2001 and for the six-month period ended December 31, 2001. EX-23 3 ex23-1.txt EX23-1.TXT Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We hereby consent to the incorporation of our report dated March 23, 2001 relating to the financial statements of Telcom Assistance Center Corporation in the Company's previously filed Registration Statement File No. 33-93942, No. 333-20185 and No. 333-56292. /s/ Goldenberg Rosenthal, LLP Jenkintown, Pa., February 14, 2002 EX-99 4 ex99-1.txt EX99-1.TXT Exhibit 99-1 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS --------------------------------------- Financial Statements Years Ended December 31, 2000 and 1999 F-1 Independent Auditor's Report March 23, 2001 Shareholders Telcom Assistance Center Corporation Plymouth Meeting, Pennsylvania We have audited the accompanying balance sheets of TELCOM ASSISTANCE CENTER CORPORATION T/a ACTIV-E SOLUTIONS as of December 31, 2000 and 1999 and the related statements of operations, of shareholders' equity deficiency and of 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 auditing standards generally accepted in the United States of America. 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. As described in Note 2 to the financial statements, TELCOM ASSISTANCE CENTER CORPORATION T/a ACTIV-E SOLUTIONS changed its method of accounting for organization costs in 1999. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TELCOM ASSISTANCE CENTER CORPORATION T/a ACTIV-E SOLUTIONS as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Goldenberg Rosenthal, LLP ------------------------------ Goldenberg Rosenthal, LLP F-2
TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS BALANCE SHEETS - ------------------------------------------------------------------------------------------------------------------------------------ December 31 ------------------------------------------- ASSETS 2000 1999 ------------------ ------------------ Current assets Cash $ 15,159 $ 904 Accounts receivable and unbilled revenue, net of allowance for doubtful accounts of $969 and $450 in 2000 and 1999 735,487 378,934 Inventories 5,532 48,963 Prepaid expenses 39,852 40,573 ------------------ ------------------ Total current assets 796,030 469,374 ------------------ ------------------ Property and equipment Office equipment 1,075,794 928,534 Furniture and fixtures 163,112 263,112 Leasehold improvements 192,979 192,979 Software 156,591 108,007 ------------------ ------------------ 1,588,476 1,492,632 Less accumulated depreciation 1,199,962 1,135,438 ------------------ ------------------ Net property and equipment 388,514 357,194 ------------------ ------------------ Other assets Security deposits 18,523 19,021 ------------------ ------------------ Total other assets 18,523 19,021 ------------------ ------------------ Total Assets $ 1,203,067 $ 845,589 ================== ==================
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December 31 --------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY 2000 1999 ------------------- ------------------- Current liabilities Accounts payable and accrued expenses $ 829,268 $ 721,756 Dividends payable 13,925 - Note payable, related party 22,581 - Note payable, bank 695,000 670,925 Current maturities of long-term debt 16,667 71,035 Current portion of capital lease obligations 11,604 27,049 Payroll and sales tax payable 110,159 92,385 Customer deposits 43,205 85,108 Deferred revenue 115,113 42,099 ------------------- ------------------- Total current liabilities 1,857,522 1,710,357 ------------------- ------------------- Long-term liabilities Long-term debt, net of current maturities 29,167 45,833 Capital lease obligations, net of current portion - 11,096 ------------------- ------------------- Total long-term liabilities 29,167 56,929 ------------------- ------------------- Redeemable Preferred Stock (redemption value $595,800) 595,800 - ------------------- ------------------- Commitments Shareholders' equity deficiency Common stock, $.01 par value Authorized, 1,000,000 shares Issued 116,196 shares in 2000 and 129,203 shares in 1999 1,162 1,292 Additional paid in capital 656,726 697,442 Deficit (1,937,310) (1,536,431) ------------------- ------------------- (1,279,422) (837,697) Treasury stock, at cost Common stock, 27,824 shares in 1999 - 84,000 ------------------- ------------------- Total shareholders' equity deficiency (1,279,422) (921,697) ------------------- ------------------- Total Liabilities and Shareholders' Equity Deficiency $ 1,203,067 $ 845,589 =================== =================== See notes to financial statements
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TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF OPERATIONS - ----------------------------------------------------------------------------------------------------------------------- Year Ended December 31 ------------------------------------------- 2000 1999 ------------------ ------------------ Revenue $ 7,215,625 $ 4,564,083 Direct costs 5,828,627 3,560,734 ------------------ ------------------ Gross profit 1,386,998 1,003,349 Operating expenses 1,514,882 1,596,504 ------------------ ------------------ Loss from operations before depreciation and amortization (127,884) (593,155) Depreciation and amortization 142,473 206,767 ------------------ ------------------ Loss from operations (270,357) (799,922) ------------------ ------------------ Other income (expense) Interest expense (106,037) (76,957) Interest income 526 428 Other income 19,744 8,834 ------------------ ------------------ Total other income (expense) (85,767) (67,695) ------------------ ------------------ Loss before cumulative effect of a change in accounting principle (356,124) (867,617) Cumulative effect of a change in accounting principle - (6,071) ------------------ ------------------ Net loss $ (356,124) $ (873,688) ================== ================== See notes to financial statements
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TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIENCY YEARS ENDED ENDED DECEMBER 31, 2000 AND 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Telcom Assistance Center Corporation ------------------------------------------------------------------ Common Stock -------------------------------- Number Additional of Paid-in Shares Amount Capital ------------- ------------- --------------- Balance, January 1, 1999 81,000 $ 810 $ 452,090 Redemption of 27,824 shares of common stock upon buyout of shareholder (27,824) - - Issuance of 39,216 shares of common stock from rights offering 39,216 392 199,608 Issuance of 8,987 shares of common stock in lieu of officer's salary 8,987 90 45,744 Net loss - - - ------------- ------------- --------------- Balance, December 31, 1999 101,379 1,292 697,442 Treasury stock retired - (278) (83,722) Sale of 23,176 shares of common stock of shareholder (23,176) (232) - Purchase of 23,176 shares of common stock 23,176 232 - Issuance of 14,000 shares of common stock in lieu of bonuses 14,000 140 34,860 Issuance of 817 shares of common stock in lieu of officer's salary 817 8 4,159 Purchase of 120,000 warrants - - 3,987 Accretion of Redeemable Preferred Stock - - - Dividends Declared - - - Net loss - - - ------------- ------------- --------------- Balance, December 31, 2000 116,196 $ 1,162 $ 656,726 ============= =========== =============
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[RESTUBBED TABLE] TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIENCY YEARS ENDED ENDED DECEMBER 31, 2000 AND 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Telcom Assistance Center Corporation ------------------------------------------------------------------ Treasury Stock Deficit Total ------------------ ------------------- ------------------ Balance, January 1, 1999 $ - $ (662,743) $ (209,843) Redemption of 27,824 shares of common stock upon buyout of shareholder (84,000) - (84,000) Issuance of 39,216 shares of common stock from rights offering - - 200,000 Issuance of 8,987 shares of common stock in lieu of officer's salary - - 45,834 Net loss - (873,688) (873,688) ------------------ ------------------- ------------------ Balance, December 31, 1999 (84,000) (1,536,431) (921,697) Treasury stock retired 84,000 - - Sale of 23,176 shares of common stock of shareholder - - - Purchase of 23,176 shares of common stock - - - Issuance of 14,000 shares of common stock in lieu of bonuses - - 35,000 Issuance of 817 shares of common stock in lieu of officer's salary - - 4,167 Purchase of 120,000 warrants - - 3,987 Accretion of Redeemable Preferred Stock - (30,830) (30,830) Dividends Declared - (13,925) (13,925) Net loss - (356,124) (356,124) ------------------ ------------------- ----------------- Balance, December 31, 2000 $ - $ (1,937,310) $ (1,279,422) ================ ================ ================= See notes to financial statements
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TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF CASH FLOWS - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 31 -------------------------------------------- 2000 1999 -------------------- ----------------- Cash flows from operating activities Net loss $ (356,124) $ (873,688) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 142,473 212,838 Allowance for doubtful accounts 519 - Common stock issued in lieu of payment for services 4,167 45,834 Loss on sale of property and equipment 9,300 - Loss on abandoned and stolen equipment - 6,562 (Increase) decrease in assets Accounts receivable (307,072) 939,757 Inventory 43,431 (13,306) Prepaid expenses 721 20,422 Security deposits 498 522 Increase (decrease) in liabilities Accounts payable and accrued expenses 242,512 (641,909) Payroll and sales tax payable 17,774 (36,858) Customer deposits (41,903) 50,197 Deferred revenue 73,014 1,489 -------------------- ----------------- Net cash used in operating activities (170,690) (288,140) -------------------- ----------------- Cash flows from investing activities Acquisition of property and equipment (195,842) (18,119) -------------------- ----------------- Cash flows from financing activities Proceeds from (repayments of) notes payable, bank 24,075 (271,000) Proceeds from related party note payable 22,581 - Net proceeds from issuance of redeemable preferred stock 414,970 - Net proceeds from the issuance of warrants 3,987 - Principal payments on long-term debt (71,035) (35,131) Principal payments on capital lease obligations (26,541) (25,557) Proceeds from issuance of common stock - 200,000 Redemption of common stock - (7,000) Proceeds from sale of property and equipment 12,750 - Insurance proceeds for stolen equipment - 2,766 -------------------- ----------------- Net cash provided by (used in) financing activities 380,787 (135,922) -------------------- ----------------- Net increase (decrease) in cash 14,255 (442,181) Cash, beginning of year 904 443,085 -------------------- ----------------- Cash, end of year $ 15,159 $ 904 ==================== ================= See notes to financial statements
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TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF CASH FLOWS - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 31 -------------------------------------------- 2000 1999 -------------------- ----------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 99,405 $ 75,731 ==================== ================= SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES Issuance of preferred stock in lieu of repayment of related party note payable $ 75,000 $ - ==================== ================= Proceeds not received at year end for issuance of preferred stock $ 50,000 $ - ==================== ================= Issuance of preferred stock in lieu of accrued compensation $ 25,000 $ - ==================== ================= Note payable issued to buy out shareholder $ - $ 77,000 ==================== ================= Issuance of common stock in lieu of accrued bonuses $ 35,000 $ - ==================== ================= Treasury stock retired $ 84,000 $ - ==================== ================= Dividend declared $ 13,925 $ - ==================== ================= See notes to financial statements
F-9 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 Description of Business ----------------------- Summary of Significant Telcom Assistance Center Corporation ("TAC") is a Delaware Accounting corporation originally formed in 1996. Telcom Assistance Policies Center Corporation receives the majority of its revenue from selling, implementing and supporting computer technology. It also operates a support organization which specializes in the deployment, support and ordering of telecommunication services. The Company's computer technology revenue is primarily received from businesses located in the northeastern portion of the United States and its telecommunication related revenue is received from businesses located throughout the United States. As of January, 2000, the Company is doing business as Activ-e Solutions. Inventories ----------- Inventories which consist of merchandise held for resale, are stated at the lower of cost or market, with cost determined by the first-in, first-out method. Property and Equipment and Depreciation --------------------------------------- Property and equipment are stated at cost. Expenditures for maintenance, repairs and renewals of a minor nature are charged against earnings as incurred. Major renewals and betterments are capitalized. Depreciation is provided by using the straight-line method over the estimated useful lives of the related assets. Deferred Revenue ---------------- Deferred revenue represents monies received on unexpired service agreements. Concentration of Credit Risk ---------------------------- The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of trade accounts receivable and cash balances. The Company grants credit terms in the normal course of business to its customers. The Company's customers operate in various industries. Concentration of credit risk with respect to these trade receivables are considered minimal due to the stability of the companies involved. As part of its ongoing control procedures, the Company monitors the credit worthiness of its customers. The Company does not normally require collateral or other security to support revenues from services rendered or credit sales. F-10 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 The Company maintains its cash balances in a financial Summary of institution located in the Philadelphia, Pennsylvania suburbs. Significant The balances are insured by the Federal Deposit Insurance Accounting Corporation up to $100,000. At times the Company's balances Policies may exceed federally insured limits. The Company has not (continued) experienced any losses in these accounts and believes it is not exposed to significant credit risk on such deposits. Capital Leases -------------- Assets under capital leases and lease obligations are recorded at the lower of the net present value of the minimum lease obligations or fair value of the assets at the lease inception date. Assets under capital leases are depreciated on the straight-line method over the estimated useful life of the related assets. Use of Estimates ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising Costs ----------------- The Company expenses advertising costs as they are incurred. Advertising costs for the years ended December 31, 2000 and 1999 were $36,598 and $91,613, respectively. Revenue Recognition ------------------- The Company recognizes service fee revenue on hours worked by the technical staff at the relevant hourly billing rates. The Company recognizes hardware and software revenue on delivery and telecommunication support revenue upon the completion of the associated service. 401(k) Plan ----------- The Company's employees are covered by a 401(k) plan maintained by the Company. The plan has been qualified by the Internal Revenue Service under Section 401(a). The Company's contribution to the plan for the years ended December 31, 2000 and 1999 was $6,637 and $1,119, respectively. F-11 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 Income Taxes Summary of ------------ Significant The Company has adopted the Statement of Financial Accounting Accounting Standards No. 109, ("SFAS No. 109") "Accounting for Income Policies Taxes", which requires the use of the liability method of (continued) accounting for deferred income taxes. NOTE 2 Effective January 1, 1999, the Company adopted Statement of Change in Position No. 98-5 Reporting on the Costs of Start-Up Accounting Activities. Under Statement of Position No. 98-5, costs of Principle start-up activities and organization costs are to be expensed as incurred. The adoption of Statement of Position No. 98-5 decreased income for the year ended December 31, 1999 and decreased retained earnings as of that date by $4,202. NOTE 3 In 2000, the Company maintained a working capital Note Payable, line-of-credit which expires in June, 2001, and bears interest Bank at the prime rate plus 2.00% (prime was 9.50% as of December 31, 2000), collateralized by all corporate assets. The collateral for this loan is cross-defaulted and cross-collateralized with all other loans the Company has with this bank. The Company can borrow up to the lesser of (a) $800,000 or (b) an amount up to 80% of the eligible accounts receivable. As of December 31, 2000, the Company had borrowed $695,000 and $105,000 remained available for use. The line-of-credit requires that certain covenants be met by the Company or the bank may demand payment in full. On September 5, 2000, the Company received a waiver of these covenants from the bank effective June 30, 1999 through September 30, 2000. As of December 31, 2000, the Company was not in compliance with the bank covenants. In 1999, the Company maintained a working capital line-of-credit which expired in June, 2000, and bear interest at the prime rate plus 1.25% (prime was 8.50% as of December 31, 1999), collateralized by all corporate assets. The bank required a stock pledge as additional collateral. The collateral for this loan was cross-defaulted and cross-collateralized with all other loans the Company had with this bank. In addition, the Company was required to maintain its primary account with this bank. The Company could borrow up to the lesser of (a) $700,000 or (b) an amount up to 80% of the eligible accounts receivable. As of December 31, 1999, the Company had borrowed $670,925 and $29,075 remained available for use. Total interest expense on the note payable, bank, was $82,759 and $62,389 for the years ended December 31, 2000 and 1999, respectively. F-12 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 4 The Company is obligated under the following notes payable as Notes Payable of December 31, 2000 and 1999 as follows:
2000 1999 ------- -------- Note payable, bank, due in monthly payments of $1,389 plus interest at 11.00%, until August 1, 2003, collateralized by all corporate assets $45,834 $ 62,500 Note payable, former shareholder, repaid during the current year - 54,368 ------- -------- 45,834 116,868 Less current portion 16,667 71,035 ------- -------- $29,167 $ 45,833 ======= ======== Scheduled maturities of notes payable as of December 31, 2000 are as follows: Year Ending December 31 ----------------------- 2001 $16,667 2002 18,503 2003 10,664 ------- $45,834 ======= Total interest expense on the notes payable was $5,731 and $8,280 for the years ended December 31, 2000 and 1999, respectively.
NOTE 5 The Company is obligated under capital leases for Capital Lease office equipment and furniture with terms ranging from Obligations two to five years. The capitalized equipment costs were $304,699 with associated accumulated depreciation of $235,115 and $201,173 as of December 31, 2000 and 1999 respectively. F-13 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 Scheduled minimum future obligations on leases in Capital Lease effect as of December 31, 2000 are as follows: Obligations (continued) Year Ending December 31 ----------------------- 2001 $13,020 Less amount representing interest 1,416 ------- Present value of net minimum obligations 11,604 Less current portion 11,604 ------- Long-term obligation $ - ======= The present values of future minimum obligations are calculated based on interest rates ranging from 8.5% to 13% determined to be applicable at the inception of the lease. Total interest expense on the outstanding obligations under capital leases was $2,552 and $5,562 for the years ended December 31, 2000 and 1999, respectively. NOTE 6 The Company is obligated under a lease for its office Commitments which expires in 2006 with the option to renew. The future minimum annual rents due under this lease are: Year Ending December 31 ----------------------- 2001 $144,950 2002 132,514 2003 135,916 2004 139,420 2005 142,914 Thereafter 23,916 -------- $719,630 ======== F-14 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 6 Rent expense for the years ended December 31, 2000 Commitments and 1999 was $188,636 and $167,743, respectively. (continued) The Company has also entered into an agreement with a financial consultant. The future commitment due under this agreement is $22,500 for the year ending December 31, 2001. NOTE 7 As discussed in Note 1, the Company has adopted SFAS Income Taxes No. 109. Under the provisions of SFAS 109, an entity recognizes deferred tax assets and liabilities for future tax consequences of events that have been previously recognized in the Company's financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on provisions of the enacted tax law. The effects of future changes in tax laws or rates are not anticipated. The Company's total deferred tax asset and deferred tax valuation allowance was as follows as of December 31, 2000 and 1999: 2000 1999 -------- -------- Deferred tax asset $800,000 $733,000 Less valuation allowance 800,000 733,000 -------- -------- Net deferred tax asset $ - $ - ======== ======== The Company has net operating loss carryforwards of approximately $1,818,000 which will expire in the year 2015. The valuation allowance increased $67,000 in 2000 as a result of the current year net operating loss. F-15 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 8 In 2000, stock warrants to purchase shares of the Stock Warrants Company's $.01 par value common stock at $5.10 per and Options share totaling 10,500 shares have been granted to members of the Board. 8,500 of these warrants expire in December, 2010 and 2,000 of these warrants expire on December 31, 2004. In 2000, 1,500 warrants issued to a former shareholder were canceled as part of a stock purchase agreement. In 2000, stock warrants to purchase shares of the Company's $.01 par value common stock at $5.10 per share totaling 120,000 shares have been purchased by investors as part of the Redeemable Preferred Stock transaction (Note 12). These warrants expire on December 31, 2010. In 2000, stock warrants to purchase shares of the Company's $.01 par value common stock at $5.10 per share totaling 2,500 shares were granted to a consultant. These warrants expire on December 31, 2010. In 1999, stock warrants to purchase shares of the Company's $.01 par value common stock at $5.10 per share totaling 10,500 shares, have been granted to members of the board. These warrants expire in December, 2004. In 1999, stock warrants to purchase shares of the Company's $.01 par value common stock at $7.47 per share totaling 5,447 shares, have been granted to a lender. These warrants expire in September, 2008. The Company has a nonqualified stock option plan which provides for the granting of options to key employees of the Company. The option price, number of shares and grant date are determined at the discretion of the Company's board of directors. Grantees vest in the options over 1 to 4 years. In 1998, the Company has elected to account for the stock option plan under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. The compensation expense recorded for each of the years ended December 31, 2000 and 1999 was $-0-. Had compensation expense for the stock option plan been determined based on the fair value of the options at the grant date consistent with the methodology prescribed under Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," the Company's net income would have been decreased by approximately $19,974 and $7,900 using the nonpublic entity method for the years ended December 31, 2000 and 1999, respectively. F-16 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 8 The Black-Scholes option valuation model was developed Stock Warrants for use in estimating the fair value of traded options and Options which have no vesting restrictions and are fully (continued) transferable. In addition, option valuation models require the input of highly subjective assumptions. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. Pro forma information regarding net income (loss) is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 5%, dividend yield of 0%, and a weighted-average expected life of the option of five years. SFAS No. 123 permits nonpublic companies to use a valuation method that excludes volatility, resulting in an amount termed minimum value. A summary of option transactions during the year ended December 31, 2000 is shown below: Weighted Number Average of Exercise Shares Price -------- -------- Outstanding as of January 1, 1999 - $ - Granted during 1999 7,100 $5.10 -------- Outstanding as of January 1, 1999 7,100 $5.10 Granted during 2000 17,900 $5.10 -------- Outstanding as of December 31, 2000 25,000 $5.10 ======== ======== NOTE 9 In August, 1999, the Company redeemed 27,824 shares of Stock stock from its former president for $84,000. The Redemption Company made an initial payment of $7,000 and issued a 7% interest bearing note for the balance (see Note 4). In 2000, the Company retired these shares. F-17 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 10 In lieu of salary, the Company's Chief Executive Stock Officer receives the following: Compensation o An initial 100% vested grant of 1,000 options valued at $5.10 per option. o Compensation of 817 shares of stock per month valued at $5.10 per share. o Additional options equal to 3% of all shares outstanding to be calculated when the Company is sold. Options are to be vested equally over a three-year period with an acceleration if the Company is sold earlier. This compensation agreement expired January, 2000. As of December 31, 2000 and 1999, the officer owned 24,804 and 8,987 shares, respectively of common stock. NOTE 11 In September, 2000, the Company entered into an Agreements employment agreement with its Chief Executive Officer which expires on December 31, 2003. The agreement commits to an annual base salary and to expenses and discretionary bonuses as determined by the Board of Directors. NOTE 12 In 2000, the Company authorized an aggregate of 20 Redeemable units, consisting of 4,965 shares of Redeemable Preferred Preferred Stock per unit, and a warrant to purchase Stock 10,000 shares of common stock which expire on December 31, 2010 (see Note 8) for $50,000 per unit. The holders of the preferred stock shall be entitled to receive cumulative dividends, at the per share rate of 10% of the share value payable quarterly. In addition, certain events may trigger the redemption of the preferred stock before maturity date. If any shares of preferred stock have not been redeemed prior to December 31, 2003 (maturity date), the Company will redeem all of the outstanding shares. The preferred stock is redeemable as follows:
If redemption occurs Then the redemption price will be: ---------------------------------------- ------------------------------------------- Prior to December 31, 2001 120% of liquidation preference Prior to December 31, 2002 140% of liquidation preference Thereafter 160% of liquidation preference
F-18 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 12 As of December 31, 2000, $600,000 of Redeemable Redeemable Preferred Stock was issued to investors. Included in Preferred accounts receivable as of December 31, 2000, $50,000 Stock was due from investors for the Redeemable Preferred (continued) Stock which was subsequently paid in January, 2001. Legal costs of $31,043 that were incurred as part of the agreement are treated as a reduction of Redeemable Preferred Stock. NOTE 13 Net sales from one customer amounted to approximately Significant $2,025,000 or 28% of the total net sales for the year Risks, ended December 31, 2000. Accounts receivable due from Significant this customer was $-0- as of December 31, 2000. Customers Net sales from one customer amounted to approximately $736,000 or 16.1% of the total net sales for the year ended December 31, 1999. Accounts receivable due from this customer amounted to approximately $59,000 or 15.5% of total accounts receivable as of December 31, 1999. F-19 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS --------------------------------------- Unaudited Financial Statements As of September 30, 2001 and for the Nine Months Ended September 30, 2001 and 2000 F-20
TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS BALANCE SHEET September 30, 2001 (Unaudited) - ----------------------------------------------------------------------------------------------------- (Unaudited) Current assets Cash $ 2,483 Accounts receivable and unbilled revenue, net of allowance for doubtful accounts of $969 877,449 Inventories 3,428 Prepaid expenses 48,138 -------------------- Total current assets 931,498 -------------------- Property and equipment Office equipment 752,759 Furniture and fixtures 149,015 Leasehold improvements 41,181 Computer hardware and software 497,221 -------------------- 1,440,176 Less accumulated depreciation 858,184 -------------------- Net property and equipment 581,992 -------------------- Other assets Security deposits 29,574 -------------------- Total other assets 29,574 -------------------- Total Assets $ 1,543,064 ======================
F-21
TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS BALANCE SHEET September 30, 2001 (Unaudited) - --------------------------------------------------------------------------------------------------------------- (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY Current liabilities Accounts payable and accrued expenses $ 1,222,473 Dividends payable 18,904 Notes payable, financial institutions 617,724 Current maturities of long-term debt 18,503 Current portion of capital lease obligations 88,092 Payroll and sales tax payable 44,027 Customer deposits 86,282 Deferred revenue 145,924 ----------------- Total current liabilities 2,241,929 ----------------- Long-term liabilities Long-term debt, net of current maturities 13,441 Capital lease obligations, net of current portion 288,509 ----------------- Total long-term liabilities 301,950 ----------------- Redeemable Preferred Stock (redemption value $718,957) 718,957 ----------------- Commitments Shareholders' equity deficiency Common stock, $.01 par value Authorized, 1,000,000 shares Issued 228,196 and outstanding 2,282 Additional paid in capital 791,620 Deficit (2,513,674) ----------------- Total shareholders' equity deficiency (1,719,772) ----------------- Total Liabilities and Shareholders' Equity Deficiency $ 1,543,064 ================= See notes to financial statements
F-22
TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF OPERATIONS (Unaudited) - ---------------------------------------------------------------------------------------------------------- Nine Months Ended September 30, ------------------------------------------- 2001 2000 ------------------ ------------------ (Unaudited) (Unaudited) Revenue $ 4,837,433 $ 5,705,640 Direct costs 3,649,809 4,690,693 ------------------ ------------------ Gross profit 1,187,624 1,014,947 Operating expenses 1,484,933 1,168,700 ------------------ ------------------ Loss from operations before depreciation and amortization (297,309) (153,753) Depreciation and amortization 166,261 104,860 ------------------ ------------------ Loss from operations (463,570) (258,613) ------------------ ------------------ Interest expense (61,309) (76,248) ---------------- ---------------- Net loss $ (524,879) $ (334,861) ================== ================== See notes to financial statements
F-23
TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIENCY NINE MONTHS ENDED ENDED SEPTEMBER 30, 2001 (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Telcom Assistance Center Corporation ----------------------------------------------------------------------------------------- Common Stock -------------------- Number Additional of Paid-in Shares Amount Capital Deficit Total ------- ------ -------- ----------- ----------- Balance, December 31, 2000 116,196 $1,162 $656,726 $(1,937,310) $(1,279,422) Issuance of 112,000 shares of common stock 112,000 1,120 134,894 - 136,014 Dividends Declared - - - (51,485) (51,485) Net loss - - - (524,879) (524,879) ------- ------ -------- ----------- ----------- Balance, September 30, 2001 228,196 2,282 791,620 (2,513,674) (1,719,772) ======= ====== ======== =========== =========== See notes to financial statements
F-24
TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF CASH FLOWS (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Nine Months Ended September 30, ------------------------------------------ 2001 2000 -------------------- --------------- Cash flows from operating activities (Unaudited) (Unaudited) Net loss $ (524,879) $ (334,861) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 179,860 104,860 (Increase) decrease in assets Accounts receivable (141,962) (840,896) Inventory 2,104 (9,817) Prepaid expenses (8,286) 9,842 Security deposits (29,574) (2) Increase (decrease) in liabilities Accounts payable and accrued expenses 393,205 610,367 Payroll and sales tax payable (66,132) (53,262) Customer deposits 43,077 32,955 Deferred revenue 30,811 108,297 Organization costs 18,523 - -------------------- ------------- Net cash used in operating activities (103,253) (372,517) -------------------- ------------- Cash flows from investing activities Disposals (acquisitions) of property and equipment 12,156 (130,703) -------------------- ------------- Cash flows from financing activities Proceeds from (repayments of) notes payable, financial institutions (91,166) 60,730 Increase in dividends payable 4,979 - Payments of related party note payable (22,581) - Net proceeds from issuance of redeemable preferred stock 123,157 550,000 Payments of capital lease obligations (20,497) (22,520) Proceeds from issuance of common stock 136,014 43,981 Increase in shareholders' distributions (51,485) - ------------------ ------------- Net cash provided by (used in) financing activities 78,421 632,191 -------------------- ------------- Net increase (decrease) in cash (12,676) 128,971 Cash, beginning of period 15,159 (3,909) -------------------- ------------- Cash, end of period $ 2,483 $ 125,062 ==================== ============= See notes to financial statements
F-25
TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS STATEMENTS OF CASH FLOWS (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Nine Months Ended September 30, ------------------------------------------ (Unaudited) (Unaudited) 2001 2000 -------------------- --------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 61,679 $ 75,742 ==================== =============== SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES Issuance of preferred stock in lieu of repayment of related party note payable $ - $ 75,000 ==================== =============== Issuance of preferred stock in lieu of accrued compensation $ - $ 25,000 ==================== =============== Issuance of common stock in lieu of accrued bonuses $ - $ 35,000 ==================== =============== Treasury stock retired $ - $ 84,000 ==================== =============== Dividend declared $ 51,485 $ - ==================== =============== Proceeds from capital leases $ 385,494 $ - ==================== =============== See notes to financial statements
F-26 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS Unaudited - -------------------------------------------------------------------------------- NOTE 1 Description of Business Summary of ------------------------- Significant Telcom Assistance Center Corporation (the Company) is Accounting a Delaware corporation originally formed in 1996. Policies The Company receives the majority of its revenue from selling, implementing and supporting computer technology. It also operates a support organization which specializes in the deployment, support and ordering of telecommunication services. The Company's computer technology revenue is primarily received from businesses located in the northeastern portion of the United States and its telecommunication related revenue is received from businesses located throughout the United States. The Company conducts business as Activ-e Solutions. Inventories ----------- Inventories, which consist of merchandise held for resale, are stated at the lower of cost or market, with cost determined by the first-in, first-out method. Property and Equipment and Depreciation --------------------------------------- Property and equipment are stated at cost. Expenditures for maintenance, repairs and renewals of a minor nature are charged against earnings as incurred. Major renewals and betterments are capitalized. Depreciation is provided by using the straight-line method over the estimated useful lives of the related assets. Deferred Revenue ---------------- Deferred revenue represents monies received on unexpired service agreements. Concentration of Credit Risk ---------------------------- The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of trade accounts receivable and cash balances. The Company grants credit terms in the normal course of business to its customers. The Company's customers operate in various industries. Concentration of credit risk with respect to these trade receivables are considered minimal due to the stability of the companies involved. As part of its ongoing control procedures, the Company monitors the credit worthiness of its customers. The Company does not normally require collateral or other security to support revenues from services rendered or credit sales. F-27 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS Unaudited - -------------------------------------------------------------------------------- NOTE 1 The Company maintains its cash balances in a Summary of financial institution located in the Philadelphia, Significant Pennsylvania suburbs. The balances are insured by the Accounting Federal Deposit Insurance Corporation up to $100,000. Policies At times the Company's balances may exceed federally (continued) insured limits. The Company has not experienced any losses in these accounts and believes it is not exposed to significant credit risk on such deposits. Capital Leases -------------- Assets under capital leases and lease obligations are recorded at the lower of the net present value of the minimum lease obligations or fair value of the assets at the lease inception date. Assets under capital leases are depreciated on the straight-line method over the estimated useful life of the related assets. Use of Estimates ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition ------------------- The Company recognizes service fee revenue on hours worked by the technical staff at the relevant hourly billing rates. The Company recognizes hardware and software revenue on delivery and telecommunication support revenue upon the completion of the associated service. Income Taxes ------------ The Company has adopted the Statement of Financial Accounting Standards No. 109, ("SFAS No. 109") "Accounting for Income Taxes", which requires the use of the liability method of accounting for deferred income taxes. NOTE 2 The Company maintained a working capital line-of- Note Payable, credit with a bank which bears interest at the prime Bank rate plus 2.00% (prime was 8.00% as of September 30, 2001), collateralized by all corporate assets. The collateral for this loan is cross-defaulted and cross-collateralized with all other loans the Company has with this bank. The Company can borrow up to the lesser of (a) $700,000 or (b) an amount up to 80% of the eligible accounts receivable. As of September 30, 2001, the Company had an outstanding balance of $310,449. F-28 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS Unaudited - -------------------------------------------------------------------------------- NOTE 2 Notes Payable The line-of-credit requires that certain covenants be (continued) met by the Company or the bank may demand payment in full. On September 5, 2000, the Company received a waiver of these covenants from the bank effective June 30, 1999 through September 30, 2000. As of September 30, 2001, the Company was not in compliance with the bank covenants. Total interest expense on the note payable, bank, was $42,135 and $58,322 for the nine months ended September 30, 2001 and 2000, respectively. During September, 2001, the Company entered into an factoring agreement with a financial institution which provided for borrowings against eligible accounts receivable for a fee of 6.75% of such receivables. The outstanding borrowing as of September 30, 2001 amounted to $307,275. The Company was obligated under the following notes payable as of September 30, 2001 as follows: Note payable, bank, due in monthly payments of $1,389 plus interest at 11.00%, until August 1, 2003, collateralized by all corporate assets $31,944 Note payable, former shareholder, repaid during the year 2000 - -------- 31,944 Less current portion 18,503 ------- $13,441 ======= Scheduled maturities of notes payable as of September 30, 2001 are as follows: 2002 18,503 2003 13,441 ------- $31,944 ======= Total interest expense on the notes payable was $9,175 and $6,881 for the nine months ended September 30, 2001 and 2000, respectively. F-29 TELCOM ASSISTANCE CENTER CORPORATION T/A ACTIV-E SOLUTIONS NOTES TO FINANCIAL STATEMENTS Unaudited - -------------------------------------------------------------------------------- NOTE 3 As discussed in Note 1, the Company has adopted SFAS Income Taxes No. 109. Under the provisions of SFAS 109, an entity recognizes deferred tax assets and liabilities for future tax consequences of events that have been previously recognized in the Company's financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on provisions of the enacted tax law. The effects of future changes in tax laws or rates are not anticipated. The Company's total deferred tax asset and deferred tax valuation allowance was as follows as of September 30, 2001: 2001 -------- Deferred tax asset $911,000 Less valuation allowance 911,000 -------- Net deferred tax asset $ - ======== As of September 30, 2001, the Company had net operating loss carryforwards of approximately $2,375,000, which will expire in the year 2015. The valuation allowance increased $111,000 in 2001 as a result of the current period net operating loss. NOTE 4 In 2001, the company sold 248,196 shares of common Stock Issuance stock to officers of the company at a price of $1.25 per share. NOTE 5 In September, 2000, the Company entered into an Agreements employment agreement with its Chief Executive Officer which expires on December 31, 2003. The agreement commits to an annual base salary and to expenses and discretionary bonuses as determined by the Board of Directors. NOTE 6 In 2000, the Company authorized an aggregate of 20 Redeemable units, consisting of 4,965 shares of Redeemable Preferred Stock Preferred Stock per unit, and a warrant to purchase 10,000 shares of common stock which expire on December 31, 2010 for $50,000 per unit. The holders of the preferred stock shall be entitled to receive cumulative dividends, at the per share rate of 10% of the share value payable quarterly. In addition, certain events may trigger the redemption of the preferred stock before maturity date. If any shares of preferred stock have not been redeemed prior to December 31, 2003 (maturity date), the Company will redeem all of the outstanding shares. The preferred stock is redeemable as follows:
If redemption occurs Then the redemption price will be: ---------------------------------------- ------------------------------------------- Prior to December 31, 2001 120% of liquidation preference Prior to December 31, 2002 140% of liquidation preference Thereafter 160% of liquidation preference
As of September 30, 2001, $720,000 of Redeemable Preferred Stock was issued to investors. Legal costs of $31,043 that were incurred as part of the agreement are treated as a reduction of Redeemable Preferred Stock. F-30 EX-99 5 ex99-2.txt EX99-2.TXT Exhibit 99.2 Unaudited Pro Forma Combined Statements of Operations for the year ended June 30, 2001 and for the six-month period ended December 31, 2001. On December 4, 2001, Neoware completed its acquisition of substantially all the assets and certain of the liabilities of Telcom Assistance Center Corporation, a/k/a Activ-e Solutions, a Delaware corporation ("TACC"), in accordance with the Asset Purchase Agreement, dated November 27, 2001, between Neoware and TACC (the "Purchase Agreement"). The assets acquired consisted principally of contract rights, accounts receivable and personal property used in the business of providing managed and professional services, training and products to create server-based computing solutions. Neoware intends to continue to use the assets for similar purposes. Neoware also assumed liabilities which consisted principally of bank debt, trade payables and accrued expenses. Pursuant to the Asset Purchase Agreement, Neoware paid $75,000 in cash, funded with cash on hand, plus 619,101 shares of Neoware's common stock, of which 100,000 shares are being held in an escrow account for 120 days from the date of the closing to satisfy indemnification claims and certain liabilities. Up to an additional 100,000 shares were to be issued upon the satisfaction of certain conditions. The amount and type of consideration was determined on the basis of arm's length negotiations between Neoware and TACC. The following presents certain unaudited pro forma combined financial statements of Neoware which were prepared as if the acquisition took place on July 1, 2000. The financial statements give pro forma effect to the shares issued and cash paid in connection with the acquisition. No pro forma balance sheet is included since a balance sheet reflecting the impact of the acquisition was filed by Neoware in its Form 10-Q for the quarter ended December 31, 2001. The unaudited pro forma financial statements are provided for illustrative purposes only, and are not necessarily indicative of the operating results that would have occurred if these transactions had been consummated at the beginning of the periods indicated, nor are they necessarily indicative of any future operating results or financial position. The unaudited pro forma financial statements do not include any adjustments related to any profit improvements or potential costs savings which may result from the transaction. The unaudited pro forma combined financial statements reflect preliminary estimates of the allocation of the purchase price that may be adjusted. Management does not expect such adjustments to be material. NEOWARE SYSTEMS, INC. UNAUDITED PROFORMA COMBINED STATEMENTS OF OPERATIONS Six Months Ended December 31, 2001
(a) Neoware ACTIV-e Proforma Systems, Inc Solutions Adjustments Combined ------------ --------- ----------- -------- Net Revenues $11,859,862 $ 2,222,490 $ $14,082,352 Cost of revenues 6,800,843 1,613,079 8,413,922 ----------- ----------- ----------- ----------- Gross profit 5,059,019 609,411 -- 5,668,430 OPERATING EXPENSES: Sales & marketing 2,525,354 325,538 2,850,892 Research and development 674,851 -- 674,851 General and administrative 1,184,274 405,084 1,589,358 ----------- ----------- ----------- ----------- Operating expenses 4,384,479 730,622 -- 5,115,101 Operating income (loss) 674,540 (121,211) -- 553,329 Interest income (expense), net 195,701 (49,681) 146,020 ----------- ----------- ----------- ----------- Net Income (loss) $ 870,241 $ (170,892) $ -- $ 699,349 =========== =========== =========== =========== Basic EPS $ 0.08 $ 0.06 =========== =========== Diluted EPS $ 0.08 $ 0.06 =========== =========== Weighted average number of shares in basic earnings per share computation 10,279,762 619,101(c) 10,898,863 =========== =========== =========== Weighted average number of shares in diluted earnings per share computation 10,742,097 619,101(c) 11,361,198 =========== =========== ===========
(a) For the period July 1, 2001 through the acquisition date of December 4, 2001. (b) The excess purchase price over the net assets acquired has been allocated on a preliminary basis to goodwill. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets", goodwill is no longer amortized. As such, the Company has not recorded a proforma adjustment for amortization of intangible asets. (c) Represents the effect of the issuance of shares in connection with the acquisition. NEOWARE SYSTEMS, INC. UNAUDITED PROFORMA COMBINED STATEMENTS OF OPERATIONS Year Ended June 30, 2001
(a) Neoware ACTIV-e Proforma Systems, Inc Solutions Adjustments Combined ------------ --------- ----------- ----------- Net Revenues $ 17,654,825 $6,449,094 $ $ 24,103,919 Cost of revenues 11,692,775 4,969,527 16,662,302 ------------ ---------- ----------- ------------- Gross profit 5,962,050 1,479,567 - 7,441,617 OPERATING EXPENSES: Sales & marketing 3,058,008 916,869 3,974,877 Research and development 955,386 - 955,386 General and administrative 2,171,280 1,091,790 3,263,070 Acquisition Costs 245,839 - 245,839 ------------ ---------- ----------- -------------- Operating expenses 6,430,513 2,008,659 - 8,439,172 Operating income (loss) (468,463) (529,092) - (997,555) Loss on investment (812,000) - (812,000) Interest income (expense), net 771,695 (123,189) 648,506 ------------ ------------ ----------- -------------- Net Income (loss) $ (508,768) $ (652,281) $ - $ (1,161,049) ============ ========== =========== ============== Basic EPS ($0.05) ($0.11) ============ ============== Diluted EPS ($0.05) ($0.11) ============ ============== Weighted average number of shares in basic earnings per share computation 10,275,745 619,101(c) 10,894,846 ============ =========== ============== Weighted average number of shares in diluted earnings per share computation 10,275,745 619,101(c) 10,894,846 =========== =========== ==============
(a) For the period July 1, 2000 through June 30, 2001. (b) The excess purchase price over the net assets acquired has been allocated on a preliminary basis to goodwill. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets", goodwill is no longer amortized. As such, the Company has not recorded a proforma adjustment for amortization of intangible asets. (c) Represents the effect of the issuance of shares in connection with the acquisition. -----END PRIVACY-ENHANCED MESSAGE-----