-----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, OPPX3PqS3ZtSLfrZipR6jK2lTzTyhQ1TNq2cipewg6OFHzohy7mrC3xf4HB4o5CP qaheT0Yt3XgIvbeTjyNitQ== 0000950115-99-001047.txt : 19990811 0000950115-99-001047.hdr.sgml : 19990811 ACCESSION NUMBER: 0000950115-99-001047 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990518 ITEM INFORMATION: FILED AS OF DATE: 19990802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERACTIVE FLIGHT TECHNOLOGIES INC CENTRAL INDEX KEY: 0000932021 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 113197148 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-25668 FILM NUMBER: 99676362 BUSINESS ADDRESS: STREET 1: 4041 NORTH CENTRAL AVENUE STREET 2: SUITE B 200 CITY: PHOENIX STATE: AZ ZIP: 85012 BUSINESS PHONE: 6022008900 MAIL ADDRESS: STREET 1: 4041 N CENTRAL AVE STREET 2: STE B 200 CITY: PHOENIX STATE: AZ ZIP: 85012 8-K/A 1 FORM 8-K/A 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): May 18, 1999 ------------ Interactive Flight Technologies, Inc. ---------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware -------------------------------------------- (State or other jurisdiction of incorporation) 0-25668 11-3197148 ---------------------- ------------------------------- (Commission File Number) (IRS Employer Identification No.) 222 North 44th Street, Phoenix, AZ 85034 ---------------------------------------------------------- (Address of principal executive offices, including zip code) (602) 629-6200 ----------------------------- (Registrant's telephone number) 4041 N. Central Avenue, Suite B-200, Phoenix, AZ 85012 ------------------------------------------------------------ (Former name or former address, if changed since last report.) The undersigned registrant hereby amends its Current Report on Form 8-K dated May 17, 1999 which was filed on June 1, 1999, solely to add the pro forma financial information required by Item 7(b) of Form 8-K. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (b) Pro Forma Financial Information On May 18, 1999, Interactive Flight Technologies, Inc. (the "Company") received from The Network Connection, Inc. ("TNC") 1,055,745 shares of TNC's common stock and 2,495,400 shares of its Series D Convertible Preferred Stock in exchange for $4,250,000 in cash and substantially all the assets and certain liabilities of the Company's Interactive Entertainment Division ("IED"), as defined in the Asset Purchase and Sale Agreement dated April 30, 1999, as amended (the "Transaction"). The Transaction has been accounted for as a reverse merger whereby, for accounting purposes, the Company is considered the accounting acquiror and the TNC is treated as the successor to the historical operations of IED. TNC will continue to file as a Securities and Exchange Commission ("SEC") registrant and continue to report under the name The Network Connection, Inc. The Company will continue to report as a separate SEC registrant, owning the shares of TNC as described above. The historical financial statements of TNC up to the date of the transaction will no longer be included in future filings of TNC. The attached unaudited pro forma condensed combined balance sheet as of April 30, 1999 and the unaudited pro forma condensed combined statements of operations for the six months ended April 30, 1999(1) and the year ended October 31, 1998(2) give effect to the acquisition (as described above), as of April 30, 1999 for purposes of the balance sheet and as of the beginning of the periods presented for purposes of the statements of operations. As a result of the reverse merger, the assets and liabilities of IED are presented at their historical cost basis and the assets and liabilities of TNC have been recorded at their estimated fair market value at the date of the Transaction for purposes of the purchase price allocation. In addition, the pro forma condensed combined financial statements reflect the consolidation of TNC and IED into the operations of the Company based on the percentage ownership of TNC by the Company. The unaudited pro forma condensed combined statements of operations are not necessarily indicative of the future results of operations of the Company or the results of operations which would have resulted had TNC and the Company's IED been combined during the periods presented. In addition, the unaudited pro forma results of operations are not intended to be a projection of future period results. - -------- (1) TNC reports on a calendar year basis, and as such, the underlying balance sheet data and results of operations are as of and for the six months ended March 31, 1999. The balance sheet data as of March 31, 1999 was derived from TNC's March 31, 1999 Quarterly Report on Form 10-QSB filed with the SEC. The results of operations data for the six months ended March 31, 1999 were derived from the results of operations for the fourth quarter of 1998 (three months ended December 31, 1998) included in TNC's December 31, 1998 Annual Report on Form 10-KSB filed with the SEC and the results of operations for the three months ended March 31, 1999 included in TNC's March 31, 1999 Quarterly Report on Form 10-QSB filed with the SEC. As such, the results of operations for the fourth quarter of 1998 for TNC are included in both the Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended April 30, 1999 and the year ended October 31, 1998. (2) TNC reports on a calendar year basis, and as such, the underlying results of operations are for the period ended December 31, 1998, as filed on Form 10-KSB. 2 Interactive Flight Technologies, Inc. Unaudited Pro Forma Condensed Combined Statement of Operations For The Six Months Ended April 30, 1999 ($ In Thousands)
Pro Forma Pro Forma Company TNC Adjustments Notes Combined ------- --- ----------- ----- -------- Revenues $ 627 $ (16) $ -- $ 611 Cost of revenues 374 257 -- 631 ------- ------- ------- ------- Gross profit (loss) 253 (273) -- (20) ------- ------- ------- ------- Selling, general and administrative 3,645 1,952 (207) (E) 5,390 Research and development -- 290 -- 290 Provision for doubtful accounts and inventory reserves -- 3,622 -- 3,622 Reversal of warranty, maintenance and commission accruals (1,987) -- -- (1,987) Expenses associated with investments 300 -- -- 300 Special charges -- 595 -- 595 Amortization of goodwill -- -- 236 (E) 236 ------- ------- ------- ------- 1,958 6,459 29 8,446 ------- ------- ------- ------- Operating loss (1,705) (6,732) (29) 8,446 Interest income 845 -- -- 845 Interest expense (3) (525) -- (528) Other income (expense) 49 -- -- 49 Minority interest share of loss (I) -- -- 1,550 1,550 ------- ------- ------- ------- Net loss (814) (7,257) 1,521 (6,550) Preferred stock dividends -- 303 -- 303 ------- ------- ------- ------- Net loss to common stockholders $ (814) $(7,560) $ 1,521 $(6,853) ======= ======= ======= ======= Earnings per share $ (0.15) $ (1.26) Weighted average shares 5,428 5,428
3 See accompanying notes to unaudited pro forma condensed combined financial statements. Interactive Flight Technologies, Inc. Unaudited Pro Forma Condensed Combined Statement of Operations For the year ended October 31, 1998 ($ in Thousands)
Pro Forma Pro Forma Company TNC Adjustments Notes Combined ------- --- ----------- ----- -------- Revenues $ 19,143 $ 5,003 $ -- $ 24,146 Cost of revenues 15,762 3,005 -- 18,767 -------- -------- -------- -------- Gross profit 3,381 1,998 -- 5,379 -------- -------- -------- -------- Selling, general and administrative 11,388 3,966 (590)(E) 14,764 Research and development 1,092 397 -- 1,489 Provision for doubtful accounts and inventory reserves 10 6,464 -- 6,474 Special charges 400 595 -- 995 Amortization of goodwill -- -- 473(E) 473 -------- -------- -------- -------- 12,890 11,422 (117) 24,195 -------- -------- -------- -------- Operating loss (9,509) (9,424) 117 816 Interest income 2,251 -- -- 2,251 Interest expense (12) (209) -- (221) Other income (expense) 10 -- -- 10 Minority interest share of loss (I) -- -- 2,093 2,093 -------- -------- -------- -------- Net loss (7,260) (9,633) 2,210 (14,683) Preferred stock dividends 575 -- 575 -------- -------- -------- -------- Net loss to common stockholders $ (7,260) $(10,208) $ 2,210 $(15,258) ======== ======== ======== ======== Earnings per share $ (1.22) $ (2.57) Weighted average shares 5,933 5,933
See accompanying notes to unaudited pro forma condensed combined financial statements. 4 Interactive Flight Technologies, Inc. Unaudited Pro Forma Condensed Combined Balance Sheet April 30, 1999 ($ in Thousands)
Company TNC TNC Consolidated Company Company-IED March 31, Pro Forma Pro Forma Excluding IED Pro Forma Pro Forma April 30, 1999 1999 Adjustments Notes Combined April 30, 1999 Adjustments Notes Combined ---------- ---- ------------ ----- -------- -------------- ----------- ----- -------- Current assets: Cash & cash equivalents $ 4,369 $ 107 $ - $ 4,476 $ 15,363 $ 19,839 Restricted cash 447 - - 447 135 582 Short-term Investments - - - - 7,990 7,990 Notes receivable - 229 - 229 - 229 Accounts receivable 1,251 1,478 - 2,729 30 2759 Inventories, net 1,513 2,681 (1,281)(C) 2,913 - 2,913 Prepaid expenses 7 26 - 33 432 465 Assets held for use - - - - 523 523 Other current assets 109 - - 109 934 1043 -------- ------- --------- --------- -------- --------- --------- Total current assets 7,696 4,521 (1,281) 10,936 25,407 36,343 Investment securities - - - - 1,674 1,674 Notes receivable - - - - 1,050 (750)(H) 300 Property and equipment, 594 2,414 (806 (B) 2,202 42 2,244 net Goodwill - - 4,728 (A) 4,728 - 4,728 Other assets 555 84 - 639 542 1,181 ======== ======= ========= ========= ======== ========= ========= Total assets $ 8,845 $ 7,019 $ 2,641 $ 18,505 $ 28,715 $ (750) $ 46,470 ======== ======= ========= ========= ======== ========= ========= Current liabilities: Accounts payable $ 654 $ 2,497 - $ 3,151 $ 397 $ 3,548 Payable to stockholder - 75 - 75 - 75 Notes payable - 2,293 - 2,293 - (750)(H) 1,543 Accrued liabilities 2.028 - - 2,028 271 2,299 Deferred revenue 2,158 521 - 2,679 - 2,679 Accrued product warranties 3,836 - - 3,836 1 3,837 Current portion long-term debt and leases - 37 - 37 - 37 -------- ------- --------- --------- -------- --------- -------- Total current liabilities 8,676 5,423 - 14,099 669 (750) 14,768 Long term debt - 693 - 693 - - 693 -------- ------- --------- --------- -------- --------- -------- Total liabilities 8,676 6,116 - 14,792 669 (750) 15,461 Series A preferred stock of Company $0.01 par value and $1,000 - - - - - 3,050 (G) 3,050 stated value Minority interest in TNC - - - - - 494 (F) 494 Series B 8% preferred (1,500 shares $.01 par value) - 1,549 (1,549)(D) - - - Stockholders' equity: Series B 8% preferred (1,500 shares $.01 par value and $1,000 stated value) - - 15 (D) 15 - (15)(G) - Series C 8% preferred (800 shares $.01 par value and $1,000 stated value - - 8 (D) 8 - (8)(G) - Series D preferred (2,495,400 shares $.01 par value and - - 25 (D) 25 - (25)(G) - $1,000 stated value) Common stock TNC - 5 1 (D) 6 - (6)(G) - Class A common stock of Company $0.1 par value - - - - 54 54 Class B common stock of - Company $0.1 par value - - - - - Treasury stock - - - - (194) (194) Additional paid in capital - 16,704 (13,214)(D) 3,490 110,079 (3,490)(G) 110,079 Unrealized gains - - - - 2,374 2,374 Retained earnings (deficit) 169 (17,355) 17,355 (D) 169 (84,267) (84,098) -------- ------- --------- --------- -------- --------- -------- Total shareholders' equity 169 (646) 4,190 3,713 28,046 (3,544) 28,215 -------- ------- --------- --------- -------- --------- --------- Total liabilities and equity $ 8,845 $ 7,019 $ 2,641 $ 18,505 $ 28,715 $ (750) $ 46,470 ======== ======== ========= ========= ======== ========= ========
See accompanying notes to unaudited pro forma condensed combined financial statements. 5 i) Basis of Accounting On May 18, 1999, The Network Connection, Inc. ("TNC") completed the issuance of 1,055,745 shares of its common stock and 2,495,400 shares of its Series D Convertible Preferred Stock in exchange for $4,250,000 in cash and all the assets and certain liabilities of Interactive Flight Technologies, Inc.'s (the "Company") Interactive Entertainment Division ("IED"), as defined in the Asset Purchase and Sale Agreement, dated April 30, 1999, as amended (the "Transaction"). The transaction has been accounted for as a reverse merger whereby, for accounting purposes, the Company is considered the accounting acquiror and TNC is treated as the successor to the historical operations of the Company. TNC will continue to file as a SEC registrant and continue to report under the name The Network Connection, Inc. The Company will also continue to report as a separate SEC registrant, owning the shares of TNC as described above. The unaudited pro forma condensed combined balance sheet as of April 30, 1999, gives effect to the Transaction as if the Transaction had taken place on April 30, 1999 and combines the Company's unaudited April 30, 1999 assets and liabilities, as derived from the Company's unaudited April 30, 1999 financial statements, with TNC's unaudited balance sheet as of March 31, 1999. The unaudited pro forma condensed combined statement of operations for the six months ended April 30, 1999 is presented using TNC's unaudited statement of operations for the six months ended March 31, 1999 (see footnote 1 on page 1) combined with the Company's unaudited statement of operations for the six months ended April 30, 1999 as if the Transaction had taken place on November 1, 1998. The unaudited pro forma condensed combined statement of operations for the year ended October 31, 1998 is presented using TNC's audited statement of operations for the year ended December 31, 1998 combined with the Company's audited statement of operations for the year ended October 31, 1998, as if the Transaction had taken place on November 1, 1997. As a result, TNC's results of operations for the three months ended December 31, 1998 are included in the unaudited pro forma condensed combined statements of operations for both the six months ended April 30, 1999 and the year ended December 31, 1998. The unaudited pro forma condensed combined financial statements should be read in conjunction with TNC's unaudited financial statements as of and for the three months ended March 31, 1999 as filed on Form 10-QSB and the audited financial statements as of and for the year ended December 31, 1998, as filed on Form 10-KSB, and with the Company's unaudited consolidated financial statements as of and for the six months ended April 30, 1999 as filed on Form 10-QSB and the audited consolidated financial statements as of and for the year ended October 31, 1998 as filed on Form 10-KSB. The unaudited pro forma condensed combined statements of operations are not necessarily indicative of the future results of operations of the Company or the results of operations which would have resulted had TNC and the Company's IED been combined during the periods presented. In addition, the unaudited pro forma results are not intended to be a projection of future period results. The purchase price was allocated to assets and liabilities based on management's current estimate of their value. The final allocation of the purchase price may vary from the estimated allocation herein. The pro forma condensed combined financial statements reflect the consolidation of TNC and IED into the operations of the Company based on the percentage ownership of TNC by the Company. ii) Unaudited Pro Forma Condensed Combined Balance Sheet and Unaudited Pro Forma Condensed Combined Statements of Operations The accompanying pro forma adjustments reflect adjustments for the following items: A. To reflect the excess of acquisition cost over the estimated fair value of net liabilities assumed (goodwill). The purchase price and purchase-price allocation are summarized as follows (all dollars in thousands): 6 Purchase price paid as: Cash $ 4,250 Net fair value of assets of the Company contributed per the Agreement (excluding cash contribution but including other cash equivalents) 4,595 Net fair value of liabilities of the Company contributed per the Agreement (8,676) ------- Total purchase consideration $ 169 Allocated to: Historical book value of TNC's net liabilities (971) Adjustments to write-down assets to fair value: Inventories, net (1,281) Property and equipment (806) Total fair value of net liabilities assumed (3,058) Excess of fair value of TNC Series B and Series C preferred stock over its recorded or stated value (1,501) ------- Excess of purchase price over fair value of net liabilities assumed (goodwill) $ 4,728 =======
B. To reflect the write-down in property and equipment to fair value based on new management's estimate of fair market value based on a review of such assets and independent third party data where available. C. To reflect adjustments to arrive at the fair market value of such assets based on management's estimate of fair market value based on a review of such assets and other available data. Adjustments to inventory reflect certain changes in business strategy and potential customer orders since March 31, 1999, with respect to market opportunities for TNC's future service offerings. D. To reflect the elimination of certain stockholders' equity and mezzanine preferred stock accounts of TNC, to reflect the issuance of TNC common stock and Series D preferred stock in connection with the Transaction and to reflect the separate purchase (prior to the acquisition date) of TNC's Series B and C preferred stock by the Company. E. To reflect the decrease in depreciation and amortization expense due to (1) the amortization of goodwill on a straight-line basis over ten years, and (2) decrease in depreciation resulting from the write-down of property and equipment, depreciated on a straight-line basis over periods of approximately five years. F. To reflect the minority ownership interest in TNC. G. To reflect the elimination of certain stockholders' equity accounts of TNC and to reflect the issuance of the Company's Series A 8% Convertible Preferred Stock in connection with the Company's purchase of TNC's Series B 8% Preferred Stock and Series C 8% Preferred Stock prior to the Transaction. H. To reflect the elimination of the Company's Secured promissory note issued to TNC, prior to May 18, 1999. I. Minority interest share of loss was derived by applying the approximately 20.5% of TNC shares not owned by the Company, to the net loss to common stock holders. The Company's ownership percentage, for purposes of these pro forma financial statements, includes the 1,055,745 shares of common stock of TNC issued to the Company by TNC in connection with the Transaction, 15,090,569 common shares issuable to the Company upon conversion of the Series D Convertible Preferred Stock which was issued by TNC to the Company in connection with the Transaction, and 1,176,471 common shares issuable to the Company upon conversion of TNC's Series B 8% preferred and Series C 8% preferred provided by the Company in connection with the Transaction. 7 (c) Exhibits None. 8 SIGNATURE 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 hereto duly authorized. INTERACTIVE FLIGHT TECHNOLOGIES, INC. Registrant By: MORRIS C. AARON ------------------------------------ Morris C. Aaron, Vice President Chief Financial Officer Date: August 2, 1999 9 -----END PRIVACY-ENHANCED MESSAGE-----