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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 11, 1997
GROUP LONG DISTANCE, INC.
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(Exact Name of Registrant as Specified in Charter)
Florida 0-21913 65-0213198
- ---------------------------- --------------------- -------------------
(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
1451 West Cypress Creek Road, Suite 200,
Fort Lauderdale, FL 33309
- ---------------------------------------- ------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (954) 771-9696
N/A
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
The following financial statements of Eastern Telecommunications
Incorporated, a New York corporation ("EIT"), are filed as part of this
Form 8-K/A on the pages indicated:
Page
O Report of Independent Certified Public Accountants.....................F-1
O Historical Statements of Income and Direct Operating Expense
Exclusive of Items Not Comparable to the Proposed Future
Operations of the Customer Base........................................F-2
(b) Pro Forma Financial Information
The following financial statements of the Registrant giving effect to the
acquisition of ETI are filed as part of this Form 8-K/A on the pages
indicated:
O Pro Forma Financial Statements (Unaudited).............................F-3
O Pro Forma Statement of Operations
for the year ended April 30, 1997 (Unaudited)..........................F-4
O Pro Forma Adjustment (Unaudited) as at July 31, 1997...................F-5
O Pro Forma Balance Sheet as at April 30, 1997 (Unaudited)...............F-6
O Pro Forma Statement of Operations for the Three Months
Ended July 31, 1997 (Unaudited)........................................F-7
O Pro Forma Adjustments as at July 31, 1997..............................F-8
(c) Exhibits
10.30 Stock Purchase Agreement, dated as of August 11, 1997, by and among
the selling shareholders of Eastern Telecommunications Incorporated
and the Company, together with all exhibits thereto (incorporated
herein by reference to Exhibit 10.30 to the Company's Form 10-KSB
for the year ended April 30, 1997).
2
<PAGE>
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.
GROUP LONG DISTANCE, INC.
Date: October 27, 1997 By: /s/ Gerald M. Dunne, Jr.
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Gerald M. Dunne, Jr.
Chief Executive Officer and President
4
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Group Long Distance, Inc.
We have audited the accompanying Historical Statements of Income and Direct
Operating Expenses exclusive of items not comparable to the proposed future
operations of the customer base of Eastern Telecommunications Incorporated for
each of the two years in the period ended June 30, 1997. These statements are
the responsibility of the management of Group Long Distance, Inc. Our
responsibility is to express an opinion on these 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 statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statements. We believe that
our audits provide a reasonable basis for our opinion.
The accompanying statements were prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission as described in
Note A and are not intended to be a complete presentation of Eastern
Telecommunications Incorporated's revenues and expenses.
In our opinion, the statements referred to above present fairly, in all material
respects, the operating income and direct operating expenses described in Note A
of Eastern Telecommunications Incorporated's Historical Statements of Income and
Direct Operating Expenses for each of the two years in the period ended June 30,
1997 in conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
Fort Lauderdale, Florida
October 17, 1997
F-1
<PAGE>
Eastern Telecommunications Incorporated
HISTORICAL STATEMENTS OF INCOME AND DIRECT OPERATING
EXPENSES EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE
PROPOSED FUTURE OPERATIONS OF THE CUSTOMER BASE
For the Year Ended June 30,
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Revenues $ 4,682,089 $ 7,866,575
Direct operating expenses
Telephone expense 2,607,413 4,664,356
------------- -------------
Operating income exclusive of items
not comparable to the proposed future
operations of the property $ 2,074,676 $ 3,202,219
============= =============
</TABLE>
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
On August 11, 1997, Group Long Distance, Inc. acquired all the issued and
outstanding stock of Eastern Telecommunications Incorporated ("ETI"), a New
York-based long-distance reseller. The purchase price aggregated $8,313,000 and
consisted of two $3,500,000 notes, assumption of $1,200,000 of certain
liabilities and the payment of closing costs of $113,000. ETI's assets consist
of two warrants to purchase 1,347,000 shares of the common stock of Tel-Save, a
customer base of 7,000 customers, and certain receivables. The purchase price
was allocated $7,713,000 to the warrants and $600,000 to the customer base
acquired of 7,000 customers. No value was assigned to the receivables purchased
due to the uncertainty surrounding their collectibility. ETI's operations are
not comparable to the proposed future operations of this customer base.
Accordingly, it is impracticable to prepare the full financial statements
required by Regulation S-X. The audited statements include only the direct
income and direct operating expense of servicing this customer base. Amounts of
selling general, and administrative expenses expected after the acquisition are
reflected in the pro forma statements of operations.
F-2
<PAGE>
Group Long Distance, Inc.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
On August 11, 1997, Group Long Distance, Inc. ("GLD") acquired Eastern
Telecommunications Incorporated ("ETI") whose assets consisted of a customer
base of approximately 7,000 customers, related accounts receivable, and certain
common stock purchase warrants.
The following unaudited pro forma statement of operations for the year ended
April 30, 1997, and the three months ended July 31, 1997 are presented as if
Group Long Distance, Inc. had acquired ETI on May 1, 1996. Selling, general, and
administrative expenses have been adjusted to reflect the incremental costs to
operate this customer base within GLD's organizational structure. The pro forma
balance sheet gives effect to this acquisition as if it had occurred on July 31,
1997.
Pro forma information is not necessarily indicative of what the Company's
results of operations actually would have been if these transactions had in fact
occurred on the dates indicated.
F-3
<PAGE>
Group Long Distance, Inc.
PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Eastern
Group Long Telecommu-
Distance, nications Pro Forma Total
Inc. Incorporated Adjustments Pro Forma
<S> <C> <C> <C> <C>
Revenues $ 23,430,846 $ 5,806,930 $ - $ 29,237,776
Cost of sales 17,219,730 3,255,174 - 20,474,904
-------------- -------------- ------------- --------------
Gross profit 6,211,116 2,551,756 - 8,762,872
-------------- -------------- ------------- --------------
Selling, general and administrative
expenses 10,480,351 - 234,104 (1) 11,326,455
162,000 (2)
450,000 (3)
Interest expense (net) 365,487 - 700,000 (4) 1,065,487
-------------- -------------- ------------- --------------
Earnings (loss) before
income taxes (4,634,722) 2,551,756 (1,546,104) (3,629,070)
Income tax expense (benefit) (502,000) - 625,797 (5) 123,797
-------------- -------------- ------------- --------------
Net earnings (loss) $ (4,132,722) $ 2,551,756 $ (2,171,901) $ (3,752,867)
============== ============== ============= ==============
Earnings per common and common
equivalent share $ (1.78) $ (1.61)
============== ==============
</TABLE>
F-4
<PAGE>
Group Long Distance, Inc.
PRO FORMA ADJUSTMENTS (UNAUDITED)
April 30, 1997
1) To record provision for bad debt on additional revenues. This provision is
based on the Company's historical experience of 5% of revenues.
2) To record regulatory and filing fees and miscellaneous monthly recurring
costs.
3) To record amortization expense of customer base acquisition cost.
4) To record interest expense based on $7 million of notes payable at an annual
interest rate of 10%.
5) To record taxes on additional pre-tax income.
F-5
<PAGE>
Group Long Distance, Inc.
PRO FORMA BALANCE SHEET
July 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Eastern
Group Long Telecommu-
Distance, nications Pro Forma Total
Inc. Incorporated Adjustments Pro Forma
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash $ 751,829 $ - $ - $ 751,829
Accounts receivable, net 7,380,947 - - 7,380,947
Note receivable - related party 26,608 - - 26,608
Investments - Tel-Save warrants - - 7,713,000 (1) 7,713,000
Deferred tax assets 233,300 - - 233,300
Prepaid expenses and other current assets 7,309,948 - - 7,309,948
-------------- ------------- ------------- --------------
15,702,632 - 7,713,000 23,415,632
-------------- ------------- ------------- --------------
Prepaid expenses, net of current portion 5,070,000 - - 5,070,000
Property and equipment, net 322,120 - - 322,120
Customer and acquisition costs, net 1,710,935 - 600,000 (1) 2,310,935
Deferred tax assets 513,384 - - 513,384
Other assets 33,543 - - 33,543
-------------- ------------- ------------- --------------
Total assets $ 23,352,614 $ - $ 8,313,000 $ 31,665,614
============== ============= ============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ - $ - $ 7,000,000 (1) $ 7,000,000
Accounts payable 19,668,593 - 1,313,000 (1) 20,981,593
Accrued expenses and other liabilities 533,197 - - 533,197
Current portion of long-term debt 1,881,373 - - 1,881,373
-------------- ------------- ------------- --------------
22,083,163 - 8,313,000 30,396,163
Long-term debt, net of current portion 1,074,330 - - 1,074,330
-------------- ------------- ------------- --------------
Total liabilities 23,157,493 - 8,313,000 31,470,493
-------------- ------------- ------------- --------------
Stockholders' equity
Preferred stock - - - -
Common stock - - - -
Additional paid-in capital 5,751,319 - - 5,751,319
Accumulated deficit (5,556,198) - - (5,556,198)
-------------- ------------- ------------- --------------
Total stockholders' equity 195,121 - - 195,121
-------------- ------------- ------------- --------------
Total liabilities and
stockholders' equity $ 23,352,614 $ - $ 8,313,000 $ 31,665,614
============== ============= ============= ==============
</TABLE>
F-6
<PAGE>
Group Long Distance, Inc.
PRO FORMA STATEMENT OF OPERATIONS
For the Three Months Ended July 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Historical Eastern
Statement Telecommu-
of nications Pro Forma Total
Operations Incorporated Adjustments Pro Forma
<S> <C> <C> <C> <C>
Revenues $ 9,064,998 $ 676,547 $ - $ 9,741,545
Cost of sales 6,961,188 378,968 - 7,340,156
-------------- ------------- ------------- --------------
Gross profit 2,103,810 297,579 - 2,401,389
-------------- ------------- ------------- --------------
Selling, general and administrative
expenses 3,511,851 - 33,827 (2) 3,608,678
40,500 (3)
22,500 (4)
Interest expense, net 32,496 - 175,000 (5) 207,496
-------------- ------------- ------------- --------------
Earnings (loss) before
income taxes (1,440,537) 297,579 (271,827) (1,414,785)
Income tax expense (benefit) (96,784) - 29,434 (6) (67,350)
-------------- ------------- ------------- --------------
Net earnings (loss) $ (1,343,753) $ 297,579 $ (301,261) $ (1,347,435)
============== ============= ============= ==============
Earnings (loss) per common and common
equivalent share $ (0.39) $ (0.39)
============== ==============
</TABLE>
F-7
<PAGE>
Group Long Distance, Inc.
PRO FORMA ADJUSTMENTS (UNAUDITED)
July 31, 1997
1) To record the purchase of Eastern Telecommunications Incorporated. The
purchase price aggregated $8,313,000 and consisted of two $3.5 million
notes, assumption of $1.2 million of certain liabilities and the payment of
closing costs in the amount of $113,000.
2) To record provision for bad debt on additional revenues. This provision is
based on the Company's historical experience of 5% of revenues.
3) To record regulatory and filing fees and miscellaneous monthly recurring
costs.
4) To record amortization expense of customer base acquisition cost.
5) To record interest expense based on $7 million of notes payable at an annual
interest rate of 10% for three months.
6) To record taxes on additional pre-tax income.
F-8
