<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) NOVEMBER 25, 1997
------------------------------
OZEMAIL LIMITED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
AUSTRALIA 0-28476 NOT APPLICABLE
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
OZEMAIL CENTRE, 39 HERBERT STREET, ST. LEONARDS 2065, SYDNEY, AUSTRALIA NONE
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 011-61-2-391-0400
----------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
- ------ ------------------------------------
(a) On November 25, 1997, OzEmail Limited, an Australian corporation
("OzEmail"), purchased all of the outstanding ordinary shares of Access One Pty
Limited, an Australian Corporation ("Access One"), together with certain related
assets, from Solution 6 Holdings Limited, an Australian corporation ("Solution
6"), pursuant to an Agreement for Sale and Purchase of the Internet Business of
Solution 6, by and between OzEmail and Solution 6.
The consideration for the purchase consisted of a payment of five million
Australian dollars (A$5,000,000 or US$3,500,000) and the issue of ten million
(10,000,000) ordinary shares par value A$0.004 per share of OzEmail with a fair
value at the time of issuance of A$15,740,000. Of such shares, 7,200,000 were
issued on November 25, 1997, with the balance of 2,800,000 shares to be issued
on satisfaction of determining a working capital adjustment representing the
adjustment to the fair value of net assets acquired as determined in accordance
with the terms of the agreement for the sale and purchase of the assets of
Solution 6. The source of the cash consideration was working capital. The
amount of consideration was determined by arms-length negotiation among the
parties. A copy of such agreement is filed as Exhibit 7(c)(2.1) to this report
and is incorporated herein by reference. The description of the agreements set
forth herein does not purport to be complete and is qualified in its entirety
by reference to the provisions of the definitive agreement, incorporated by
reference as an exhibit hereto.
(b) Access One is in the business of providing Internet service in
Australia. OzEmail intends to continue these operations.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS:
- ------ ------------------------------------------------------------------
The following financial statements and pro forma financial information are filed
as a part of this report:
(a) Financial Statements of Business Acquired. Access One Pty Limited
(Exhibit 99.4).
------------------------------------------------------------------
The financial statements of Access One filed as part of this report
were prepared on the basis of historical accounting principles
consistent with the view of management incumbent at such time,
prior to the acquisition of Access One by OzEmail. With respect
to the treatment of revenue received in advance on long-term
contracts, OzEmail believes however, that certain amounts should be
treated as deferred revenue in accordance with OzEmail accounting
policies and generally accepted accounting principles. The U.S.
GAAP reconciliations within the Access One accounts fully reflect
the deferred revenue in accordance with U.S. generally accepted
accounting principles.
In connection with the acquisition of Access One by OzEmail, the
purchase and sale agreement provided for a working capital adjustment
to be determined within six months of the acquisition (i.e., May 25,
1997). Solution 6 Holdings Limited, the vendor of Access One, and
OzEmail have yet to reach an agreement as to the working capital
adjustment. The Company does not believe that this will have a
material adverse effect on the Company's business, results of
operations or financial position.
<PAGE> 3
(b) Pro Forma Financial Information. OzEmail Limited and Access One
Pty Limited (Exhibit 99.5)
----------------------------------------------------------------
(c) Exhibits. The following documents are filed as exhibits to this
--------
report:
1. Exhibit 7(c)(2.1) - Agreement for Sale and Purchase of the
Internet Business of Solution 6, dated November 8, 1997, by and
between OzEmail and Solution 6
(Incorporated by reference to
Exhibit 10.2 of OzEmail's Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission on November 14,
1998).
2. Exhibit 7(c)(99.1) - Press Release, dated November 10, 1997,
issued by OzEmail announcing the signing of the Agreement for
Sale and Purchase of the Internet Business of Solution 6
(Incorporated by reference to Exhibit 99.1 of OzEmail's Form 10-Q
filed with the Securities and Exchange Commission on November 14,
1998).
3. Exhibit 7(c)(99.2) - Press Release, dated November 10, 1997,
announcing third quarter 1997 results and the acquisition of
Access One (Incorporated by reference to Exhibit 99.2 of
OzEmail's Form 10-Q filed with the Securities and Exchange
Commission on November 14, 1998).
4. Exhibit 7(c)(99.3) - Press Release, dated November 25, 1997,
announcing the completion of OzEmail's acquisition of Access One
(Incorporated by reference to the exhibit attached to OzEmail's
Form 6-K filed with the Securities and Exchange Commission on
April 2, 1998).
5. Exhibit 99.4 - Financial Statements of Business Acquired.
Access One Pty Limited
6. Exhibit 99.5 - Pro Forma Financial Information. OzEmail Limited
and Access One Pty Limited
<PAGE> 4
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.
OzEmail Limited
---------------
(Registrant)
Date: June 19, 1998 By:/s/ Trevor Kennedy
-----------------------------
Name: Trevor Kennedy
Title: Director
<PAGE> 1
ACCESS ONE PTY LTD A.C.N. 070 546 977
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 1997
<TABLE>
<CAPTION>
YEAR ENDED 11 MONTH PERIOD ENDED
30 JUNE 1996 30 JUNE 1996
$ $
<S> <C> <C> <C>
OPERATING REVENUE 2 21,257,387 7,416,356
========== ==========
OPERATING LOSS 2 (10,961,163) (3,899,233)
========== ==========
INCOME TAX ATTRIBUTABLE TO OPERATING LOSS 3 - -
========== ==========
OPERATING LOSS AFTER INCOME TAX (10,961,163) (3,899,233)
(ACCUMULATED LOSSES) AT BEGINNING OF THE FINANCIAL YEAR (3,899,233) -
========== =========
(ACCUMULATED LOSSES) AT THE END OF THE FINANCIAL YEAR (14,860,396)
(3,899,233)
</TABLE>
The accompanying notes form part of these financial statements
1
<PAGE> 2
ACCESS ONE PTY LTD A.C.N. 070 546 977
BALANCE SHEET
AS AT 30 JUNE 1997
<TABLE>
<CAPTION>
NOTE 30 JUNE 1997 30 JUNE 1996
$ $
<S> <C> <C> <C>
Cash 252,259 20,787
Receivables 4 2,538,334 2,656,295
Inventories 5 116,856 332,052
Other 6 141,658 143,014
----------- ----------
TOTAL CURRENT ASSETS
3,049,107 3,152,148
----------- ----------
NON-CURRENT ASSETS
Plant and equipment 7 2,079,599 1,804,826
Intangibles 8 2,166,899 2,422,199
Other 9 - 530,134
----------- ----------
TOTAL NON-CURRENT ASSETS
4,246,498 4,757,159
----------- ----------
TOTAL ASSETS 7,295,605 7,909,307
----------- ----------
CURRENT LIABILITIES
Accounts payable 10 5,694,263 3,139,817
Borrowings 11 16,041,615 8,220,323
Provisions 12 258,726 225,513
----------- ----------
TOTAL CURRENT LIABILITIES
21,994,604 11,585,653
----------- ----------
NON-CURRENT LIABILITIES
Borrowings 13 52,568
104,890
Provisions 14 108,827 117,995
----------- ----------
TOTAL NON-CURRENT LIABILITIES
161,395 222,885
TOTAL LIABILITIES
22,155,999
11,808,538
----------- ----------
NET ASSETS (14,860,394) (3,899,231)
=========== ==========
SHAREHOLDERS' EQUITY
Share capital 16 2
2
Accumulated losses (14,860,396) (3,899,233)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY
(14,860,394) (3,899,231)
=========== ==========
</TABLE>
The accompanying notes form part of these financial statements
2
<PAGE> 3
ACCESS ONE PTY LTD A.C.N. 070 546 977
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 1997
<TABLE>
<CAPTION>
NOTE 30 JUNE 1997 30 JUNE 1996
$ $
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
21,526,468 4,647,079
Interest received - other parties
- 1,638
Other receipts -
5,615
Interest and other costs of finance paid - related
entities
(1,520,649)
(440,923)
Interest and other costs of finance paid - other parties
(8,623) (42,348)
Management fees paid (1,373,245) (1,516,091)
Payments to suppliers and employees
(25,411,363) (6,702,430)
----------- ----------
NET CASH FLOW FROM OPERATING ACTIVITIES
15 (6,787,412)
(4,047,460)
=========== ==========
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of plant and equipment
(771,549) (1,164,534)
Proceeds from sale of plant and equipment
18,500 15,500
Cash paid for purchase of Access One business
- (2,551,769)
----------- ----------
NET CASH FLOW FROM INVESTING ACTIVITIES
(753,049)
(3,700,803)
=========== ==========
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from issue of shares - shares issued on
incorporation
- 2
Borrowings from related entities
6,165,979 7,975,590
Borrowings from ultimate controlling entity
1,661,166 198,433
Finance Lease Principal
(6,091) (22,460)
Hire Purchase Principal
(52,084) (374,352)
----------- ----------
NET CASH FLOW FROM FINANCING ACTIVITIES
7,768,970
7,777,213
=========== ==========
NET INCREASE/(DECREASE) IN CASH HELD
228,509 28,950
Add opening cash brought forward
28,950 -
----------- ----------
CLOSING CASH CARRIED FORWARD
15 257,459 28,950
=========== ==========
</TABLE>
The accompanying notes form part of these financial statements
3
<PAGE> 4
ACCESS ONE PTY LTD A.C.N. 070 546 977
NOTES TO AND FORMING PART OF THE ACCOUNTS AS AT 30 JUNE 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with the
historical cost convention. Cost in relation to assets represents the cash
amount paid or the fair value of the asset given in exchange. These
general purpose financial statements have been made out in accordance with
the requirements of the Corporations Law and applicable accounting
standards and in accordance with other mandatory professional reporting
requirements.
The accounting policies adopted were applied consistently throughout the
financial year.
CASH
For the purposes of the Statement of Cash Flows, cash includes cash on hand
and in banks, and money market, investments readily convertible to cash
within two working days net of outstanding bank overdrafts.
INCOME TAX
Tax effect accounting is applied using the liability method whereby income
tax is regarded as an expense, and is calculated on the accounting profit
after allowing for permanent differences. To the extent timing differences
occur between the time items are recognised in the accounts and when items
are taken into account in determining taxable income, the net related
taxation benefit or liability, calculated at current rates, is disclosed as
a future income tax benefit or a provision for deferred income tax. The
net future income tax benefit relating to tax losses and timing differences
is not carried forward as an asset unless the benefit is virtually certain
of being realised.
PLANT AND EQUIPMENT
Plant and equipment are carried at cost. Any gain or loss on the disposal
of assets is determined as the difference between the carrying value of the
asset at the time of disposal and the proceeds from disposal, and is
included in the results of the company in the year of disposal.
Depreciation is provided on a straight line basis on all plant and
equipment, at rates calculated to allocate the cost of valuation less
estimated residual value at the end of the useful lives of the assets
against revenue over those estimated useful lives.
Major depreciation periods are: Plant and equipment - 3 to 5 years.
RECOVERABLE AMOUNT
Non-current assets are not revalued at an amount above their recoverable
amount and, where carrying values exceed this recoverable amount, assets
are written down. In determining this recoverable amount, the expected net
cash flows have not been discounted to their present value using a market
determined risk adjusted discount rate.
RESEARCH AND DEVELOPMENT
Research and development costs are charged as incurred, except where future
benefits are expected, beyond any reasonable doubt, to exceed those costs.
Where research and development costs are deferred, they are amortised over
future periods on a basis related to expected future benefits.
4
<PAGE> 5
ACCESS ONE PTY LTD A.C.N. 070 546 977
NOTES TO AND FORMING PART OF THE ACCOUNTS AS AT 30 JUNE 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
INVENTORIES
Inventories are valued at the lower of cost and net realisable value.
Costs
incurred in bringing each product to its present location and condition are
accounted for as follows:
Acquisition costs are calculated on a first-in first-out basis.
LEASES
Finance leases, which effectively transfer to the economic entity
substantially all of the risks and benefits incidental to ownership of the
leased item, are capitalised at the present value of the minimum lease
payments, disclosed as leased plant and equipment, and amortised over the
period the economic entity is expected to benefit from the use of the
leased assets.
Operating lease payments, where the lessor effectively retains
substantially all of the risks and benefits of ownership of the leased
items, are included in the determination of the operating profit in equal
instalments over the lease term.
The cost of improvements to or on leasehold property is capitalised and
disclosed as leasehold improvements.
EMPLOYEE ENTITLEMENTS
Provision is made for employee entitlement benefits accumulated as a result
of employees rendering services up to the reporting date. These benefits
include wages and salaries, annual leave and a long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any
other entitlements expected to be settled within twelve months of the
reporting date are measured at their nominal amounts. All other employee
entitlement liabilities are measured at the present value of the estimated
future cash outflows to be made in respect of services provided by
employees up to the reporting date. In determining the present value of
future cash outflows, the interest rates attaching to government guaranteed
securities which have terms to maturity approximating the terms of the
related liability are used.
Employee entitlement expenses and revenues arising in respect of the
following categories:
- wages and salaries, non-monetary benefits, annual leave, long
service leave, sick leave and other leave entitlements; and
- other types of employee entitlements
are charged against profits on a net basis in their respective categories.
The contributions made to superannuation funds are charged against profits when
due.
GOODWILL
Goodwill represents the purchase consideration over the fair value of
identifiable net assets acquired at the time of acquisition of a business
or shares in a controlled entity. Goodwill is amortised by the straight
line method over the period during which the benefits are expected to be
received. This is taken as being 10 years.
5
<PAGE> 6
ACCESS ONE PTY LTD A.C.N. 070 546 977
NOTES TO AND FORMING PART OF THE ACCOUNTS AS AT 30 JUNE 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
GOING CONCERN
The accounts have been prepared on a going concern basis which contemplates
the continuity of the economic entity's business activities and the
realisation of assets and the payment of liabilities in the normal course
of business.
Access One Pty Ltd has experienced significant losses and negative cash
flows in the current year and as at 30 June 1997, the current liabilities
exceed current assets by $18,945,497.
The financial statements have been prepared on a going concern basis as the
ultimate holding company, Solution 6 Holdings Limited, has indicated that
it will provide support to the company to ensure it can pay its debts as
and when they fall due.
The ability of Solution 6 Holdings Limited to provide continuing financial
support to Access One Pty Ltd will be determined by those matters which
have been disclosed in the financial statements of Solution 6 Holdings
Limited at 30 June 1997 which are as follows:
The directors of Solution 6 Holdings Limited believe that the Solution 6
group will not incur operating losses for the 1998 financial year and will
be able to meet its commitments as and when they fall due, and it is
therefore appropriate to prepare the financial statements on a going
concern basis.
o A $7 million financing facility was obtained on 1 July 1997 from
Integral Business Finance Pty Limited. This facility is secured by
trade receivables and the value of real property owned by the group.
the term of this facility is nine months. The proceeds of this
facility have been used to repay the bank borrowings that existed at
30 June 1997.
o A financing facility for at least $1 million has been offered by M.J.
Capital Corporation on appropriate commercial terms.
o Opportunities to raise further debt and/or equity capital are being
actively pursued by the Board.
o The sale of certain real property assets is currently being
negotiated. These sales are expected to be finalised in the first half of
the 1998 financial year and to realise at least the recorded amount.
o The sale of operations considered to be non-core is being contemplated
by the Board.
o A review of all operating costs and infrastructure has been commenced
with a view to reducing overall levels of expenditure.
o The operations of Access One Pty Ltd have been restructured and the
directors anticipate that this will lead to a turnaround in that
entity's operations and improved cash outflows during the coming
financial year.
o The business of CABS has recently been acquired and the directors
anticipate that this will generate significant profitable revenue
during the 1998 financial year.
6
<PAGE> 7
ACCESS ONE PTY LTD A.C.N. 070 546 977
NOTES TO AND FORMING PART OF THE ACCOUNTS AS AT 30 JUNE 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
As noted in these amounts, the appropriateness of the going concern basis
for the preparation of the accounts depends upon the successful outcome of
some or all of the above initiatives which, as they relate to future
events, must be viewed conservatively.
<TABLE>
<CAPTION>
1997
1996
$
$
<S> <C> <C>
2. OPERATING LOSS
Depreciation of plant and equipment 482,008
145,272
Amortisation of goodwill 255,300
130,770
Bad and doubtful debts - trade debtors 424,135
39,755
Interest - related entities
1,520,649
440,923
Interest - other corporations 8,623
42,348
Loss on sale of non-current assets -
27,247
Rentals - operating leases 471,100
103,492
Provisions for employee entitlements - current 33,213
107,274
Provisions for employee entitlements - non-current (9,168)
39,755
Provision for diminution in inventory 250,000
-
Research and development costs 2,063,555
266,786
Foreign exchange (gain) -
165
Management fees - related entities 1,373,245
1,516,091
Profit on sale of non-current assets
(3,732)
(17,704)
Interest - other corporations -
(1,638)
Included in the operating loss are the following
items of operating revenue:
Sales revenue 21,238,887
7,393,603
Interest - other corporations -
1,638
Proceeds from sale of non-current assets 18,500
15,500
Other -
5,615
---------- ----------
OPERATING REVENUE 21,257,387
7,416,356
========== ==========
</TABLE>
7
<PAGE> 8
ACCESS ONE PTY LTD A.C.N. 070 546 977
<TABLE>
<CAPTION>
1997
1996
$
$
<S> <C> <C>
3. INCOME TAX
The prima facie income tax using applicable tax rates
differs from the income tax provided in the accounts
as follows:
Prima facie tax on operating loss
(3,946,019) (1,403,724)
Amortisation of goodwill
91,908 47,077
Other non-deductible items 29,067 -
Tax effect of timing differences not tax effected:
- - Employee entitlements (non-current) (3,300) 42,478
- - Employee entitlements (current) 11,957 81,185
- - Provision for doubtful debts 28,830 36,000
- - Unearned maintenance 137,820 98,546
- - Deferred research and development written off/
(capitalised)
190,848 (190,848)
- - Provision for diminution in inventory 28,687 -
- - Prepayments 488 -
- - Other Employment provisions 88,920 -
Tax effect of tax losses not recognised
3,221,398 975,811
Tax effect of tax losses utilised by related entities
119,396 313,475
---------- ----------
Income Tax Attributable
- -
========== ==========
Income tax provided comprises:
Provision attributable to current year
(3,340,794) (1,289,286)
Tax effect of tax losses utilised by related entities
119,396 313,475
Tax effect of tax losses not recognised
3,221,398 975,811
---------- ----------
- -
========== ==========
Future income tax benefit available to the company
arising from tax losses not brought to account at
balance date as realisation of the benefit is not
regarded as virtually certain.
4,344,978 1,123,579
========== ==========
</TABLE>
8
<PAGE> 9
ACCESS ONE PTY LTD A.C.N. 070 546 977
This future income tax benefit will only be obtained if:
(a) future assessable income is derived of a nature and
of an amount sufficient to enable the benefit to be
realised;
(b) the conditions of deductibility imposed by tax
legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the
economic entity in realising the benefit.
4. RECEIVABLES (CURRENT)
<TABLE>
<CAPTION>
1997
1996
$
$
<S> <C> <C>
Trade Debtors 2,458,943
2,746,524
Provision for doubtful debts
(180,085) (100,000)
---------- ----------
2,278,858 2,646,524
Money on deposit 5,200 8,163
Other debtors 254,276 1,608
---------- ----------
TOTAL RECEIVABLES (CURRENT)
2,538,334 2,656,295
========== ==========
Movement in provision for doubtful debts:
Balance at beginning of year
100,000 -
Provision balance recognised on acquisition of
internet business
- 100,000
Bad debts written off (47,915)
-
Bad and doubtful debts provided for during the year
128,000 -
---------- ----------
BALANCE AT END OF YEAR
180,085 100,000
========== ==========
5. INVENTORIES (CURRENT)
Finished goods at cost 336,528 472,039
Provision for diminution in value
(219,672) (139,987)
Total inventories at lower of cost and net realisable ---------- ----------
value
116,856 332,052
========== ==========
6. OTHER CURRENT ASSETS
Prepayments 141,658 143,014
---------- ----------
141,658 143,014
========== ==========
</TABLE>
9
<PAGE> 10
ACCESS ONE PTY LTD A.C.N. 070 546 977
<TABLE>
<CAPTION>
1997
1996
$
$
<S> <C> <C>
7. PLANT AND EQUIPMENT
Fixtures and fittings - at cost
175,558 40,235
Accumulated depreciation
(28,841) -
---------- ----------
146,717 40,235
========== ==========
Plant and equipment at cost
2,527,357 1,903,050
Accumulated depreciation
(616,670) (168,713)
---------- ----------
1,910,687 1,734,337
========== ==========
Plant and equipment under lease:
At cost 38,312 38,312
Accumulated amortisation
(16,117) (8,058)
---------- ----------
22,195 30,254
========== ==========
Total plant and equipment:
At cost 2,741,227 1,981,597
Accumulated depreciation and amortisation
(661,628) (176,771)
---------- ----------
2,079,599 1,804,826
========== ==========
8. INTANGIBLES
Goodwill 2,552,969 2,552,969
Provision for amortisation (386,070) (130,770)
---------- ----------
2,166,899 2,422,199
========== ==========
9. OTHER NON-CURRENT ASSETS
Deferred research and development
- 530,134
---------- ----------
- 530,134
========== ==========
Movements in deferred research and development:
Balance at beginning of year
530,134 -
Deferral 1,533,421 769,920
Amortisation (2,063,555) (266,786)
---------- ----------
BALANCE AT END OF YEAR
- 530,134
========== ==========
</TABLE>
10
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ACCESS ONE PTY LTD A.C.N. 070 546 977
<TABLE>
<CAPTION>
1997
1996
$
$
<S> <C> <C>
10. ACCOUNTS PAYABLE (CURRENT)
Trade creditors 4,399,908 2,171,201
Other creditors and accruals 911,523 694,878
Unearned maintenance income 382,832 273,738
---------- ----------
5,694,263 3,139,817
========== ==========
11. BORROWINGS (CURRENT)
Related parties 14,141,569 7,975,590
Ultimate controlling entity 1,859,599 198,433
Hire purchase liability (note 18) 35,986 38,923
Lease liability (note 17) 4,461 7,377
---------- ----------
16,041,615 8,220,323
========== ==========
12. PROVISIONS (CURRENT)
Employee entitlements 258,726 225,513
---------- ----------
258,726 225,513
========== ==========
13. BORROWINGS (NON-CURRENT)
Hire purchase liability (note 18) 48,196 97,343
Lease Liability (note 17) 4,372 7,547
---------- ----------
52,568 104,890
========== ==========
14. PROVISIONS (NON-CURRENT)
Employee entitlements 108,827 117,995
---------- ----------
108,827 117,995
========== ==========
</TABLE>
11
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ACCESS ONE PTY LTD A.C.N. 070 546 977
<TABLE>
<CAPTION>
1997
1996
$
$
<S> <C> <C>
15. STATEMENT OF CASH FLOWS
(a) Reconciliation of cash -
Cash at bank and on hand 252,259 20,787
Cash on deposit 5,200 8,163
---------- ----------
CLOSING CASH BALANCE 257,459 28,950
========== ==========
(b) Reconciliation of the operating (loss) after tax to
the net cash flow from operations -
Operating (loss) after tax (10,961,163) (3,899,233)
Depreciation : Plant and equipment 482,008 145,272
Amortisation : Goodwill 255,300 130,770
Writedown of deferred research and development 530,134 -
Proceeds from the sale of non-current assets (18,500) (15,500)
Book value of non-current assets sold 14,768 25,043
Changes in assets and liabilities:
Provision for doubtful debts 128,000 100,000
Provision for employee entitlements - current 33,213 107,274
Provision for employee entitlements - non-current (9,168) 39,755
Provision for diminution in value of inventories 250,000 -
Trade debtors 239,666 (2,528,362)
Other debtors (252,668) 1,621
Inventories (34,804) (4,172)
Inventory provision - (100,000)
Prepayments 1,356 (106,881)
Research and development - (503,844)
Goodwill - 52,080
Trade creditors 2,228,707 1,623,303
Other creditors and accruals 216,645 612,379
Unearned maintenance 109,094 273,035
---------- ----------
NET CASH FROM OPERATING ACTIVITIES
(6,787,412) (4,047,460)
========== ==========
16. SHARE CAPITAL
Authorised
1,000,000 ordinary shares of $1.00 each
1,000,000 1,000,000
========== ==========
Issued and paid up
2 ordinary shares of $1.00 each fully paid
2 2
========== ==========
</TABLE>
12
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ACCESS ONE PTY LTD A.C.N. 070 546 977
<TABLE>
<CAPTION>
1997
1996
$
$
<S> <C> <C>
17. LEASING EXPENDITURE COMMITMENTS
(a) FINANCE LEASE COMMITMENTS
PAYABLE -
Not later than 1 year 5,260 8,716
Later than 1 year but not later than 2 years 4,574 3,959
Later than 2 years and not later than 5 years - 4,575
========== ==========
Minimum lease payments 9,834 17,250
Less future finance charges (1,001) (2,326)
========== ==========
TOTAL LEASE LIABILITY 8,833 14,924
========== ==========
Current Liability (Note 11) 4,461 7,377
Non-current liability (Note 13) 4,372 7,547
========== ==========
8,833 14,924
========== ==========
(b) OPERATING LEASE COMMITMENTS
PAYABLE -
Not later than 1 year 148,963 113,320
Later than 1 year but not later than 2 years 76,259 118,320
Later than 2 years and not later than 5 years 21,887 51,520
---------- ----------
247,109 283,160
========== ==========
18. HIRE PURCHASE EXPENDITURE COMMITMENTS
Payable:
Not later than 1 year 42,818 52,447
Later than 1 year but not later than 2 years
38,442 52,447
Later than 2 years and not later than 5 years
12,882 68,305
========== ==========
Minimum hire purchase payments
94,142 173,199
Less future finance charges
(9,960) (36,933)
========== ==========
TOTAL HIRE PURCHASE LIABILITY
84,182 136,266
========== ==========
Current Liability (Note 10)
36,986 38,923
Non-Current Liability (Note 13)
48,196 97,343
---------- ----------
84,182 136,266
========== ==========
</TABLE>
13
<PAGE> 14
ACCESS ONE PTY LTD A.C.N. 070 546 977
<TABLE>
<CAPTION>
1997
1996
$
$
<S> <C> <C>
19. FRANKING ACCOUNT
The amount of unappropriated profits and reserves that
could be distributed out of existing franking credits or
out of franking credits arising from the payment of
income tax in the forthcoming period NIL NIL
========== ==========
20. REMUNERATION OF DIRECTORS
Directors' remuneration:
Income paid, payable or otherwise made available by the
company and any related bodies corporate or entities
controlled by the ultimate controlling entity. 1,201,035 388,108
========== ==========
</TABLE>
The number of directors of the company whose
remuneration falls within the
following bands:
$ $ 1997 1996
0 - 999 - 2
60,000 - 69,999 - 1
110,000 - 119,999 1 -
120,000 - 129,999 - 1
180,000 - 189,999 1 -
200,000 - 209,999 - 1
260,000 - 269,999 1 -
630,000 - 639,999 1 -
21. SEGMENT INFORMATION
The company operates in the internet service industry and in the geographic
segment of Australia.
22. RELATED PARTY DISCLOSURES
(a) The Directors of Access One Pty Ltd during the financial year were:
B.M. Redden (appointed 24. 3.97)
T.J. Ashman (resigned 4. 4.97)
D.D. Stewart (resigned 21. 3.97)
C.S. Tyler (appointed 24. 3.97)
14
<PAGE> 15
ACCESS ONE PTY LTD A.C.N. 070 546 977
22. RELATED PARTY DISCLOSURES (CONTD.)
(b) The following related party transactions occurred during the financial
year:
(i) Borrowings from Solution 6 Holdings Limited (ultimate controlling
entity) during the year of $1,661,166 (1996 - $198,433).
Borrowings from Solution 6 Pty Ltd (related entity) during the
year of $6,146,900 (1996 - $7,951,609).
Borrowings from ISIS International Limited (related entity) of
$19,079 (1996 - $23,981).
At 30 June 1997 the balance of outstanding loans were:
1997 1996
$ $
Solution 6 Holdings Limited 1,859,599 198,433
Solution 6 Pty Ltd 14,098,509 7,951,609
ISIS International Limited 43,060 23,981
The terms of these borrowings were:
Solution 6 Holdings Limited - interest free loan payable at call;
Solution 6 Pty Ltd - interest loan payable at call;
ISIS International Limited - interest free trading account payable
at call.
(ii) During the year, management fees of $1,373,245 (1996 - $1,516,091)
and interest of $1,520,649 (1996 - $440,923) were charged by
Solution 6 Pty Ltd.
(iii) Tax losses of $331,657 (1996 - $870,763) were transferred to the
following related companies at Nil consideration:
<TABLE>
<CAPTION>
1997 1997 1996 1996
Tax Losses Tax Benefit Tax Losses Tax Benefit
$ $ $ $
<S> <C> <C> <C> <C>
Solution 6 Pty Ltd 131,109 47,199 -
Solution 6 Holdings Limited - - 758,759 273,153
Direct Connect Teleservice Pty Ltd 200,548 72,197 112,184 40,387
------- ------- ------- -------
331,657 119,396 870,943 313,540
======= ======= ======= =======
</TABLE>
(c) Solution 6 Holdings Limited is the ultimate controlling entity.
15
<PAGE> 16
ACCESS ONE PTY LTD A.C.N. 070 546 977
23. AUDITORS' REMUNERATION
Fees in relation to this company are borne by the chief entity as follows:
<TABLE>
<CAPTION>
1997 1996
$ $
<S> <C> <C>
Auditing accounts 36,000 36,038
Other services - -
-
------ ------
36,000 36,038
====== ======
</TABLE>
24. SUBSEQUENT EVENTS
On 1 July 1997, Solution 6 Holdings Limited, the ultimate controlling entity,
executed a loan agreement with Integral Business Finance Pty Ltd to provide a
facility to borrow $7 million. That facility is supported by a specific and
floating charge over the assets of Access One Pty Ltd and other Solution 6
Holdings Limited group entities.
On 6 November 1997, the company concluded a settlement of its dispute with the
vendor of the internet business over the royalty calculation method and the
claims of related parties of the vendor for wrongful dismissal. An amount of
$1,300,000 has been agreed to be paid in full and final settlement of any past
or current disputes via 18 equal instalments over the next 18 months from
6 November 1997. Solution 6 Holdings Limited has issued promissory notes which
fall due on the dates the instalments re to be paid to Labtam Pty Ltd in
settlement of the amount owed.
On 9 November 1997. Solution 6 Holdings Limited, the ultimate holding company,
entered into a conditional agreement for the sale of its internet business and
its shares in Access One Pty Ltd.
25. RECONCILIATION TO US GAAP
Australian GAAP varies in certain respects from generally accepted accounting
principles in the United States (US GAAP). Application of US GAAP would have
affected shareholders' equity as at 30 June 1997 and 1996 and net income (loss)
for each of the year ended 30 June 1997 and the 11 months ended 30 June 1996 to
the extent quantified below. A description of the material differences between
Australian GAAP, as followed by Access One Pty Ltd (the Company), and US GAAP
are as follows:
(a) REVENUE RECOGNITION / DEFERRED REVENUE
The Company's revenues are derived primarily from quarterly and annual usage
fees and hourly connect and monthly user charges for access to the Internet.
Prior to 25 November 1997, the Company recognised revenue upon invoicing for
annual contracts. Prior to 30 June 1996 the Company recognised revenue upon
invoicing for quarterly contracts.
16
<PAGE> 17
ACCESS ONE PTY LTD A.C.N. 070 546 977
25. RECONCILIATION TO US GAAP (CONTD.)
US GAAP requires that revenue for internet usage be recognised over the term
of the usage period. Revenue recognition in accordance with US GAAP would
result in an increase in deferred revenue for the year ended 30 June 1997 and
eleven months ended 30 June 1996 of $137,626 and $728,794, respectively.
(b) PRODUCT DEVELOPMENT COSTS
The Company capitalised product development costs with an expected recoverable
value equal to or greater than costs during the year ended 30 June 1996. The
recoverability of the deferred costs was reassessed during the year ended
30 June 1997. The recoverable value of the costs at 30 June 1997 was assessed
to be zero.
US GAAP requires that all research and development costs be expensed when
incurred except in very limited circumstances. The deferred research and
development costs in Note 9 consist principally of salaries and certain
other expenses directly related to development and modification of software
product capitalised in accordance with the provisions of US Statement of
Financial Accounting Standards (SFAS) No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed". Capitalisation
begins when technological feasibility has been established and ends when the
product is available for license to customers. Capitalised costs are amortised
on a straight line basis over the estimated product life, or on the ratio of
current revenues to total project revenues, whichever is greater.
The product development costs capitalised for Australian generally accepted
accounting principles did not meet the requirements of SFAS 86. This
difference from US GAAP is include in the reconciliation of net income
(loss) and shareholder's equity below.
(c) CASH
The definition of cash included in Note 1 Summary of Significant Accounting
Policy, describes cash as "cash on hand and in banks, and money market
investments readily convertible to cash within 2 working days net of
outstanding bank overdrafts" for the purposes of the Statement of Cash
Flows. The inclusion of overdrafts in the definition of cash is not
consistent with US GAAP, however as the company did not have an overdraft,
no adjustment is required in the reconciliation to US GAAP.
17
<PAGE> 18
ACCESS ONE PTY LTD A.C.N. 070 546 977
RECONCILIATION OF NET INCOME (LOSS) AND SHAREHOLDERS' EQUITY TO US GAAP
The following is a reconciliation of the significant adjustments necessary
to reconcile net income (loss) and shareholders' equity in accordance with
US GAAP to the amounts determined under Australian GAAP for the year ended
30 June 1997 and the 11 months ended 30 June 1996.
<TABLE>
<CAPTION>
Year ended 30 June
------------------------------
1997 1996
------------ -----------
<S> <C> <C>
Net loss as reported in the profit and loss
statements according to Australian GAAP $(10,961,163) $(3,899,233)
Adjustments to accord with US GAAP:
Deferred Revenue (a) (137,626) (728,794)
Product Development Costs (b) 530,134 (530,134)
----------- ----------
Net loss according to US GAAP $(10,568,655) $(5,158,161)
----------- ----------
At 30 June
------------------------------
1997 1996
------------ -----------
Shareholder's equity as reported in the profit
and loss statements according to Australian
GAAP ($14,860,396) ($3,899,233)
Cumulative adjustments required to accord with
US GAAP
Deferred Revenue (a) (866,420) (728,794)
Product Development Costs (b) 0 (530,134)
------------ -----------
Shareholder's equity according to US GAAP $(15,726,816) $(5,158,161)
----------- ----------
</TABLE>
26. RESTATEMENT OF 1996 FINANCIAL STATEMENTS
The financial statements of Access One Pty Ltd dated 11 February 1997 were
qualified for the 11 months ended 30 June 1996.
The qualification was in respect of the company not amortising goodwill on
the acquisition of the Access One business. Based on a cost of $2,522,969
and an estimated useful life of 10 years, the amortisation charged for the
11 months ended 30 June 1996 should have been $130,770.
The amount of $130,770 was subsequently expensed as amortisation of
goodwill in the financial statements for the year ended 30 June 1997, dated
14 November 1997.
The results of Access One Pty Ltd have been restated in this report to
recognise the amortisation of goodwill of $130,770 for the 11 months ended
30 June 1996.
18
<PAGE> 19
ACCESS ONE PTY LTD A.C.N. 070 546 977
26. RESTATEMENT OF 1996 FINANCIAL STATEMENTS (CONTD.)
The impact of this restatement is as follows:
a) increase the loss for the 11 months ended 30 June 1996 by $130,770 to
$3,899,233;
b) decrease the loss for the year ended 30 June 1997 by $130,770 to
$10,961,163;
c) decrease the amount recorded for goodwill in Note 8 by $130,770 to
$2,422,199 as at 30 June 1996.
19
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS OF ACCESS ONE PTY LIMITED
We have audited the accompanying balance sheet of Access One Pty Limited as of
June 30, 1996 and June 30, 1997, and the related statements of profit and loss
and cash flows for the year ended June 30, 1997 and the 11 months ended 30 June
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Access One Pty Limited at
June 30, 1996 and 1997 and the results of their operations and their cash flows
for the 11 months ended June 30, 1996 and the year ended 1997 in conformity with
Australian Accounting Standards.
Accounting principles generally accepted in Australia vary in certain
significant respects from accounting principles generally accepted in the United
States. The application of the generally accepted accounting principles in the
United States would have affected the determination of consolidated operating
loss for the 11 months ended June 30, 1996 and the year ended 1997 and the
determination of the shareholders' equity at June 30, 1996 and 1997 to the
extent summarised in Note 25 to the financial statements.
The accompanying financial statements have been prepared assuming that Access
One Pty Limited will continue as a going concern. As more fully described in
Note 1, Access One has incurred recurring operating losses and has a working
capital deficiency. These conditions raise substantial doubt about the
company's ability to continue as a going concern. The financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result form the outcome of this uncertainty
ERNST & YOUNG
Chartered Accountants
Sydney, Australia
November 21, 1997, except for Notes 25 and 26 for which the date is June 5,
1998.
20
<PAGE> 1
PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information gives effect to
the acquisition by OzEmail Limited (the Company) of Access One Pty Ltd
(Access One) in a transaction to be accounted for using the purchase
method of accounting in accordance with APB Opinion No. 16 (the
Acquisition). The unaudited pro forma information presents, on a U.S.
GAAP basis, condensed pro forma financial information of the Company
for the periods ended as of the dates indicated. The unaudited pro forma
condensed statement of operations data is based on the historical
financial statements of the Company and Access One and give effect to
the transaction as if they had occurred on January 1, 1996 for the year
ended December 31, 1996 and for the nine months ended September 30,
1997. The unaudited pro forma condensed balance sheet information is
based on the individual balances sheets of the Company and Access One
and gives effect to the transaction as if it occurred on September 30,
1997.
The pro forma condensed financial information set forth below reflects
pro forma adjustments that are based on upon available information and
certain assumptions that the Company believes are reasonable. Under the
purchase method of accounting, the purchase price is allocated to the
assets acquired and liabilities assumed based on their estimated fair
values at the time of the transaction. Any changes to adjustments
included in the unaudited pro forma condensed financial information ,
arising as a result of additional information becoming available are
expected to be immaterial. The Company's consideration is subject to a
working capital adjustment representing the adjustment to the fair value
of net assets acquired as further detailed in Note (b) to the pro forma
financial information. The goodwill as calculated as if the transaction
occurred on September 30, 1997 does not include the operating losses
which occurred for the period from September 30, 1997 through to the
acquisition date of November 25, 1997 of approximately A$3,531,000. The
Company does not expect, other than the matter discussed herein,
significant adjustments to the purchase price. Accordingly, actual
amounts will differ from those in the unaudited pro forma condensed
financial information. The Company expects to finalize the working
capital adjustment prior to December 31, 1998.
The unaudited pro forma condensed financial information is not
necessarily an indication of the results that would have been achieved
had such transaction been consummated as of the dates indicated or that
may be achieved in the future. The unaudited pro forma financial
information should be read in conjunction with the historical financial
statements and notes thereto of the Company and Access One.
1
<PAGE> 2
PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
OZEMAIL ACCESS ONE ADJUSTMENTS
COMBINED
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents 55,343 1,170 (5,000)(a)
51,513
Accounts Receivable 6,203 2,121 8,324
Other 1,498 595 3,235(b) 5,328
------------------------------------------------
TOTAL CURRENT ASSETS 63,044 3,886 (1,765) 65,165
Property and equipment, net 21,918 1,906 - 23,824
Goodwill 88 2,103 15,396(c) 17,587
Other 3,105 262 - 3,367
------------------------------------------------
TOTAL ASSETS 88,155 8,157 13,631 109,943
================================================
LIABILITIES
Accounts payable and accrued expenses
12,583
4,912
(1,500)(b)
15,995
Other current liabilities 25,853 1,065 5,978(a)(b)
32,896
------------------------------------------------
TOTAL CURRENT LIABILITIES 38,436 5,977 4,478
48,891
Long term debt 4,120 17,560 (17,560)(b) 4,120
Related party debt
------------------------------------------------
TOTAL LIABILITIES 42,556 23,537 (13,082) 53,011
------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock 415 2 27(a)(c) 444
Additional paid in capital 53,331 - 11,304(a)(c)
64,635
Retained earnings/(accumulated deficit)
(8,151)
(15,382)
15,382(c)
(8,151)
Reserves 4 - - 4
------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 45,599 (15,380) 26,713
56,932
------------------------------------------------
TOTAL LIABILITY AND SE 88,155 8,157 13,631 109,943
================================================
</TABLE>
See accompanying notes to unaudited pro forma condensed financial
information
2
<PAGE> 3
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
OZEMAIL ACCESS ONE ADJUSTMENTS
COMBINED
<S> <C> <C> <C> <C>
NET REVENUES 27,784 14,843 - 42,627
Cost of revenues 15,725 13,047 - 28,772
Sales and marketing 7,617 5,348 - 12,965
Product development 2,284 530 - 2,814
General and administrative 4,157 2,621 - 6,778
Amortization of Goodwill - 227 3,273(d) 3,500
------------------------------------------------
Income (loss) from operations (1,999) (6,930) (3,273)
(12,202)
Interest income(expense) net 2,090 (830) - 1,260
Other income 882 - - 882
------------------------------------------------
Income (loss) before income taxes 973 (7,760) (3,273)
(10,060)
(Provision) benefit for income taxes (556) - -
(556)
Minority equity interest 17 - - 17
------------------------------------------------
Net income (loss) 434 (7,760) (3,273) (10,599)
================================================
Basic net income (loss) per share 0.01 N/A N/A (0.11)
Diluted net income (loss) per share 0.01 N/A N/A (0.11)
================================================
Basic weighted average shares outstanding (thousands)
89,286
N/A
10,000(e)
99,286
Diluted weighted average shares outstanding (thousands)
94,986
N/A
4,300(e)
99,286
================================================
</TABLE>
See accompanying notes to unaudited pro forma
condensed financial information
3
<PAGE> 4
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED 30 SEPTEMBER, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
OZEMAIL ACCESS ONE ADJUSTMENTS
COMBINED
<S> <C> <C> <C> <C>
NET REVENUES 38,557 18,610 - 57,167
Cost of revenues 23,466 16,054 - 39,520
Sales and marketing 9,617 3,457 - 13,074
Product development 6,945 - - 6,945
General and administrative 6,373 3,078 - 9,451
Amortization of Goodwill - 193 2,432(d) 2,625
------------------------------------------------
Income (loss) from operations (7,844) (4,172) (2,432)
(14.448)
Interest income(expense) net 2,747 (992) - 1,755
Other income (expense) (112) 4 - (108)
Income (loss) before income taxes (5,209) (5,160) (2,432)
(12,801)
(Provision) benefit for income taxes (3,794) - -
(3,794)
Net income (loss) (9,003) (5,160) (2,432) (16,595)
Basic net income (loss) per share (0.09) N/A N/A (0.15)
Diluted net income (loss) per share (0.09) N/A N/A
(0.15)
Basic weighted average shares outstanding (thousands)
103,555
N/A
10,000 (e)
113,555
Diluted weighted average shares outstanding (thousands)
103,555
N/A
10,000 (e)
113,555
</TABLE>
See accompanying notes to unaudited pro forma
condensed financial information
4
<PAGE> 5
NOTES TO PROFORMA CONDENSED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
(a) To reflect consideration issued in connection with the Acquisition.
Such consideration consisted of (i) A$5,000 of cash paid by the
Company from existing cash balances and (ii) the issuance of 10,000
ordinary shares valued at A$15,740. Under the terms of the Agreement,
7,200 ordinary shares (valued at A$11,333) were issued at closing and
2,880 ordinary shares (valued at A$4,407) will be issued upon
determination of a working capital adjustment calculated in accordance
with the Agreement. The value of the unissued 2,800 shares has been
included as a liability in the pro forma financial information.
Management expects the unissued shares to be issued and the working
capital adjustment to be resolved prior to December 31, 1998. There
are no contingencies noted in connection with the unissued shares.
(b) To record adjustments required to reflect the tangible assets
acquired and liabilities assumed in connection with the acquisition.
For purposes of this pro forma financial information, the carrying
values of tangible assets acquired and liabilities assumed are assumed
to approximate fair value on the date of the acquisition. In
addition, the Company has recorded the following adjustments to
reflect the fair value of tangible assets acquired and liabilities
assumed:
1. In connection with the acquisition the Company received
options to acquire 4,160 unlisted ordinary shares of Solution
6 (the parent of Access One) at an exercise price of A$0.75.
The options have been valued at the fair market value of
A$1,023 as determined on November, 25 1997, using the Black
Scholes option pricing model, and have been included within
other current assets in the accompany pro forma financial
information. The options expire November 25, 2000.
2. The Company estimates that resolution of the working
capital adjustment, calculated in accordance with the
Agreement, will result in the Company receiving $2,212 from
Solution 6. Such amount has been recorded as an other current
assets in the accompany pro forma financial information. The
Company expects the working capital adjustment to be resolved
prior to December 31, 1998
3. The Company has developed plans to integrate and
rationalize the operations of Access One subsequent to the
Acquisition. The Company has recorded liabilities of A$1,000
to reflect costs expected to be incurred in the near term in
connection with the integration and rationalization.
4. In connection with the Acquisition, the Company has
agreed to assume capital lease obligations totaling A$571
previously recorded by Solution 6.
5
<PAGE> 6
5. In connection with the Acquisition, Solution 6 has agreed
(i) repay accounts payable and accrued expenses of Access One
totaling approximately A$1,500, and (ii) transfer the
intercompany borrowings by Access One from Solution 6 of
A$17,560 to the Company. The intercompany borrowing is
recognized in the Company, where provision for recoverability
is made before the amount is eliminated on consolidation of
the Access One financials in the accompanying pro forma
financial information.
(c) To eliminate historical pre acquisition losses and share capital of
Access One and the historical net intangible asset balances of Access
One of A$2,103 and to record the excess value of the acquisition price
over the fair value of assets and liabilities as goodwill. Goodwill
will be amortized on a straight-line basis over its estimated life of
five years. No amount has been allocated to other intangible assets
as (i) such balances are considered to be immaterial, and (ii) the
useful lives of other intangible assets are assumed to be similar to
the life assigned to Goodwill.
(d) To record the amortization of Goodwill acquired in the transaction
and reverse goodwill amortization in the Access One historical
financial statements.
(e) To adjust weighted average shares for (i) shares issued as part of
the consideration give to Solution 6 in acquiring Access One and (ii)
to adjust for the dilutive shares taken into consideration under
reported profits when the combined results reflect a loss.
(f) The Access One AGAAP historical financial statements have been
adjusted for the items noted in note 25 o f Access One financial
statements, to be properly stated in accordance with US GAAP:
12 months ended 9 months ended
December 31, 1996 September 30, 1997
------------------------------------------
Inc (dec) Inc (dec)
Revenue (A$357) A$94
Product Development Costs A$531 (A$531)
An adjustment to reduce revenues of A$489 would also be required to
be made to the Access One AGAAP financial statements for the
period prior to January 1, 1996 to adjust for the deferral of revenues.
The AGAAP liability for deferred revenue has been increased by $752
at September 30, 1997 to comply with US GAAP.
6
