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
September 2, 1999
(Date of report)
WORLD CALLNET, INC.
DELAWARE 1-12835 75-2468002
(State of Incorporation) (Commission File Number) (IRS Employer ID)
Brecon House, Meridian Gate, 207 Marsh Wall, London E14 9YT
(Address of Principle Executive Offices)
0171 335 8300
(Registrant's Telephone Number)
World CallNet, Inc. (the"Company") initially filed a Current Report on
Form 8-K with the Securities and Exchange Commission on September 17, 1999,
which is hereby amended by this Form 8-K/A to comply with Item 7 of Form 8-K and
the provisions of Rule 3-05 of Regulation S-X.
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
On September 2, 1999, World CallNet, Inc. (the "Company") entered into
stock purchase agreements with the shareholders of CallNet Plc. ("PLC"), a
company incorporated in the United Kingdom, pursuant to which the Company
acquired all of the issued and outstanding shares of capital stock (the "PLC
Stock") of CallNet Plc, and options to purchase CallNet Stock (the "PLC
Options"), from the holders of the shares of the PLC Stock and PLC Options, in
exchange for the issuance of an aggregate of 2,544,560 shares of common stock,
par value $0.001 per share, of the Company. Prior to the completion of the
exchange, the Company owned approximately 16% of the outstanding shares of the
capital stock of PLC which were acquired in February 1999 in exchange for
500,000 shares of the Company's $0.001 par value common stock.
CallNet PLC
PLC is engaged in the business of providing free Internet access to its
customers to facilitate telephone usage, which generates metered toll revenues
to the local telephone company. PLC has an agreement with Cable & Wireless
Communications, Inc. ("CWC"), whereby PLC earns 50% of the interconnect toll
revenues (after deducting certain access charges paid to telecommunications
providers such as British Telecom). CWC charges its customers for calls to PLC,
as an Internet service provider. The fundamental business strategy is to direct
telephone usage to the PLC telecommunications network from new and existing
Internet customers. The Company designs and markets products that are designed
to facilitate new Internet access.
Since February 1999, the Company has been receiving a monthly cash
distribution equal to 30% of the net revenues collected by PLC under the terms
of a licensing agreement with CWC. It is expected that PLC shall continue to
operate as a wholly owned subsidiary of the Company sharing common management
and facilities. The net assets of PLC that were acquired by the Company shall be
accounted for as a purchase in the Company's consolidated financial statements.
The Company and PLC both have a September 30 fiscal year end.
2
<PAGE>
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The Company acquired 100% of the outstanding shares of capital
stock of PLC on September 2, 1999. The audited financial
statements of PLC and the related Auditors Report as of June
30, 1999 and for the nine months ended June 30, 1999 and the
period from inception through September 30 1998 are filed
herein as Addendum I.
(b) Pro Forma Financial Information.
Pro Forma Combined Financial Information of the Company and
PLC as of June 30, 1999 and for the nine months ended June 30,
1999 and the period from inception through September 30 1998
is filed herein as Addendum II.
(c) Exhibits
Number Description
- ------ -----------
3.1 10.1 Stock Exchange Agreement, dated as of June 16, 1999 and
consummated on September 2, 1999, by and among World CallNet,
Inc., Paul Goodman-Simpson, Aaron Goodman-Simpson and Keith
Goodyer, which is incorporated by reference herein from Exhibit
3.1 to the Company's Form 8-K, dated September 2, 1999.
3.2 10.2 Stock Exchange Agreement, dated as of June 16, 1999 and
consummated on September 2, 1999, by and among World CallNet,
Inc. and the parties listed on Exhibit A attached thereto, which
is incorporated by reference herein from Exhibit 3.2 to the
Company's Form 8-K, dated September 2, 1999.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
WORLD CALLNET, INC.
(Registrant)
November 15, 1999 /s/ Paul Goodman-Simpson
------------------------
Paul Goodman-Simpson, Director,
President and Chief Executive
Officer
4
<PAGE>
Addendum I
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
CallNet Plc
London, England
We have audited the accompanying balance sheet of CallNet Plc (a development
stage company) as of June 30, 1999, and the related statements of operations,
stockholders' equity and cash flows for the nine months ended June 30, 1999 and
the periods from inception (January 12, 1998) to September 30, 1998 and from
inception to September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 CallNet Plc as of June 30,
1999, and the results of its operations and its cash flows for the nine months
ended June 30, 1999 and the periods from inception (January 12, 1998) to
September 30, 1998 and from inception to June 30, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in the development stage, has incurred
significant operating losses, and will require substantial capital to fully
implement its business plan, which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
HEIN + ASSOCIATES LLP
Dallas, Texas
October 29, 1999
5
<PAGE>
<TABLE>
<CAPTION>
CALLNET PLC
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. Dollars)
AS OF JUNE 30, 1999
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 7,610
Accounts receivable 98,568
Prepaid assets 84,073
Receivable from affiliated parties 133,210
-----------
Total current assets 323,461
-----------
OTHER ASSETS:
Property and equipment, net of $29,456 accumulated depreciation
105,854
Investment in affiliated company, at equity 445,373
Intangible asset, net of accumulated amortization of $47,668 201,019
Bonds and deposits 206,334
-----------
958,580
-----------
Total assets $ 1,282,041
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses 360,292
Accrued payroll taxes 153,224
Accrued compensation 287,595
Due to affiliate 477,743
-----------
Total current liabilities 1,278,854
STOCKHOLDERS' EQUITY:
Common stock, $1.58 par value; 1,000,000 shares authorized, 76,114 shares
issues and outstanding 119,880
Additional paid-in capital 2,140,852
Deficit accumulated during development stage (2,257,545)
-----------
Total stockholders' equity 3,187
-----------
Total liabilities and stockholders' equity $ 1,282,041
===========
</TABLE>
See accompanying notes to these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
CALLNET PLC
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
Cumulative
Nine Months Period From Period From
Ended Inception to Inception to
June 30, 1999 September 30, 1998 June 30, 1999
------------ ------------------ --------------
<S> <C> <C> <C>
REVENUES $ 219,905 $ 20,869 $ 240,774
COSTS AND EXPENSES:
Cost of revenues 237,746 6,765 244,511
General and administrative 1,473,120 648,937 2,122,057
Depreciation and amortization 62,035 15,089 77,124
----------- ----------- -----------
1,772,901 670,791 2,443,692
----------- ----------- -----------
OTHER EXPENSES -
Loss from equity investee 54,627 -- 54,627
----------- ----------- -----------
NET LOSS $(1,607,623) $ (649,922) $(2,257,545)
=========== =========== ===========
NET LOSS PER SHARE (basic and diluted) $ (25.52) $ (44.06) $ (57.26)
=========== =========== ===========
WEIGHTED AVERAGE SHARES 63,005 14,751 39,423
=========== =========== ===========
</TABLE>
See accompanying notes to these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
CALLNET PLC
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(Expressed in U.S. Dollars)
FOR THE PERIOD FROM INCEPTION (JANUARY 12, 1998) THROUGH JUNE 30, 1999
Accumulated
Additional Deficit In
Common Stock Paid-In Development
Shares Amount Capital Stage Total
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
In July 1998, shares issued at $1.58 to the founding
shareholders 33,554 $ 52,848 $ -- $ -- $ 52,848
In July 1998, shares issued at $37.80 per share
in exchange for 100% of TelEmail (Europe) Ltd. 6,579 10,362 238,324 -- 248,686
In July 1998, shares issued for cash at $70.71
($36.98 aftersettlement in February 1999) 9,867 15,540 682,140 -- 697,680
Loss for the period -- -- -- (649,922) (649,922)
---------- ----------- ----------- ----------- -----------
BALANCE, September 30, 1998 50,000 78,750 920,464 (649,922) 349,292
Expenses paid by stockholder -- -- 21,956 -- 21,956
In February 1999, shares issued at $40.00 per
share in exchange for 500,000 shares of
World CallNet, Inc. common stock 12,500 19,688 480,312 -- 500,000
In February 1999, shares issued in settlement of
prior transaction 9,000 14,175 (14,175) -- --
In February 1999, shares issued at $41.18 per share for cash 4,614 7,267 291,983 -- 299,250
Stock option compensation granted to certain officers and
directors -- -- 440,312 -- 440,312
Net loss for the period -- -- -- (1,607,623) (1,607,623)
---------- ----------- ----------- ----------- -----------
Balance at June 30, 1999 76,114 $ 119,880 $ 2,140,852 $(2,257,545) $ 3,187
========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
CALLNET PLC
(A Development Stage Company)
CONSOLIDATED STATMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
Period From Period From
Inception Inception
Nine Months (January 12, 1998) (January 12, 1998)
Ended to to
June 30, 1999 September 30, 1998 June 30, 1999
------------- ------------------ ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,607,623) $ (649,922) (2,257,545)
Adjustments to reconcile cash used in operating
activities:
Depreciation and amortization expense 62,035 15,089 77,124
Compensation expense from stock options issued 440,312 -- 440,312
Expenses paid by stockholder 21,956 -- 21,956
Loss from equity investee 54,627 -- 54,627
Increase in accounts receivable (22,920) (75,648) (98,568)
Increase in prepaid assets (67,535) (16,538) (84,073)
Increase in accounts payable and accrued
liabilities 237,064 276,452 513,516
Increase in accrued compensation 179,156 108,439 287,595
----------- ----------- -----------
Net cash used by operating activities (702,928) (342,128) (1,045,056)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of office equipment and furniture (6,750) (128,561) (135,311)
Increase in deposits and other assets (172,944) (33,390) (206,334)
----------- ----------- -----------
(179,694) (161,951) (341,645)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received in common stock issuances 299,250 750,528 1,049,778
Change in amount due to/from affiliates 509,028 (164,495) 344,533
----------- ----------- -----------
808,278 586,033 1,394,311
NET INCREASE (DECREASE) IN CASH (74,344) 81,954 7,610
CASH, beginning of period 81,954 -- --
----------- ----------- -----------
CASH, end of period $ 7,610 $ 81,954 $ 7,610
=========== =========== ===========
NON-CASH TRANSACTIONS:
Acquire World CallNet shares for common stock $ 500,000 $ -- $ 500,000
=========== =========== ===========
Acquire TelEmail Europe for common stock $ -- $ 248,686 $ 248,686
=========== =========== ===========
</TABLE>
See accompanying notes to these financial statements.
9
<PAGE>
CALLNET PLC
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U. S. Dollars)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------
Organization
CallNet Plc (the "Company") was incorporated in the United Kingdom on
January 12, 1998. The Company's business plan is to operate as an Internet
service provider and to sell certain consumer internet software. At June
30, 1999, the Company is considered to be in the development stage. The
accompanying financial statements include the accounts of the Company and
its wholly owned subsidiary TelEmail (Europe) Ltd.
Intercompany accounts and transactions are eliminated.
Investments in Affiliated Company
At June 30, 1999, the Company has an investment in 500,000 shares of World
CallNet, Inc., an affiliated company described in Note 4. The investment is
accounted for on the equity method.
Foreign Currency Translation
The Company conducts its operations and maintains its accounts in its
functional currency of British pounds. The accompanying financial
statements are converted into U.S. dollars for the convenience of the users
at the prevailing exchange rate of one British pound to $1.575 at June 30,
1999.
Loss Per Share
Basic loss per share is computed based on the weighted average number of
shares outstanding during the period. Diluted loss per share takes common
stock equivalent shares (such as options, warrants and convertible
securities) into consideration. However, common stock equivalent shares are
not considered when their effect would be antidilutive. As of June 30,
1999, the Company had outstanding options for 11,000 shares of common stock
exercisable at $1.58 per share which are not included in the dilutive
calculation of earnings per share as the effect would be antidilutive.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management
to make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ
from those estimates.
Income Taxes
The Company accounts for income taxes under the liability method, which
requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. The Company has a tax loss carryforward at June 30, 1999 of
approximately $2,200,000. The Company has a deferred tax asset at June 30,
1999 of $700,000, which is fully reserved.
10
<PAGE>
CALLNET PLC
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U. S. Dollars)
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation has been provided using the straight-line method over the
estimated useful lives of the assets of four years.
Long-Lived Assets
The Company's policy is to periodically review the net realizable value of
its long-lived assets, including goodwill, through an assessment of the
estimated future cash flows related to such assets. In the event that
assets are found to be carried at amounts in excess of estimated
undiscounted future cash flows, then the assets will be adjusted for
impairment to a level commensurate with the discounted cash flow of the
underlying assets. Based upon its most recent analysis, the Company
believes no impairment of long-lived assets exists at June 30, 1999.
Intangible Asset
Intangible asset consists of intellectual property, which is being
amortized by the straight-line method over five years.
Statement of Cash Flows
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Stock-Based Compensation
In January 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation", which
requires recognition of the value of stock options and warrants granted
based on an option pricing model. However, as permitted by SFAS 123, the
Company continues to account for stock options and warrants granted to
directors and employees pursuant to Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees", and related
interpretations. See Note 5.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments, including cash
equivalents, accounts receivable, short-term borrowings and accounts
payable, approximate fair value due to their short maturities.
2. CONTINUED OPERATIONS
--------------------
The Company is in the development stage and has incurred losses of
$2,257,545 from its inception through June 30, 1999. In addition, the
Company will require substantial capital to fully implement its business
plan. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Since its inception, the Company has met its
continuing obligations through advances from its parent company and from
the sale of its equity securities. Management intends to attempt to raise
additional capital in the near term. Management believes these actions will
permit the Company to achieve its objectives and attain profitable
operations to allow the Company to continue as a going concern.
11
<PAGE>
CALLNET PLC
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U. S. Dollars)
3. PROPERTY AND EQUIPMENT
----------------------
Property and equipment consists of the following at June 30, 1999:
Computer equipment $ 96,653
Office equipment and furniture 34,848
Vehicles 3,809
----------
135,310
Less accumulated depreciation (29,456)
----------
$ 105,854
==========
Depreciation expense for property and equipment of $24,731 and $4,725 was
recognized for the nine months ended June 30, 1999 and the period from
inception to September 30, 1998, respectively.
4. INVESTMENTS
-----------
In February 1999, the Company acquired 500,000 shares of World CallNet,
Inc., a publicly traded company which has common management and directors
with the Company, by issuing 12,500 shares of its common stock. The World
CallNet shares were valued at $500,000. The transaction was valued based on
such factors as the price of recent sales of common stock by the Company
and factors regarding World CallNet's common stock such as market price,
historical volatility of stock prices, the number of shares held by public
shareholders that have no trading restrictions and the relatively large
number of shares issued.
Under the terms of licensing agreements between the Company and World
CallNet, the Company is obligated to pay World CallNet 30% of the net
revenues it earns from revenue sharing agreements with telecommunication
companies. See note 6.
The following is a summary of financial position and results of operations
of World CallNet, Inc. as of June 30, 1999 and the nine months then ended:
Current assets $ 709,000
Property and equipment 73,000
Other assets, net 275,000
-----------
Total assets $ 1,057,000
===========
Current liabilities $ 2,122,000
Stockholders' deficit (1,065,000)
-----------
Total liabilities and deficit $ 1,057,000
===========
Sales $ 39,000
===========
Net loss $ (889,000)
===========
12
<PAGE>
CALLNET PLC
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U. S. Dollars)
5. STOCK-BASED COMPENSATION
------------------------
1999 Discretionary Share Option Scheme
In February 1999, the 1999 Discretionary Share Option Scheme (the"plan")
was adopted by the Company's Board of Directors. Generally, options granted
under the plan carry an exercise price equal to fair market value at the
date of the grant and are exercisable after the third anniversary of the
grant until the tenth anniversary. The plan provides for special exercise
provisions, if an employee or director granted options chooses to leave the
Company.
In May 1999, the Company granted options to its key directors to purchase
11,000 shares of common stock pursuant to the plan. The options granted are
exercisable at $1.58 per share from May 2002 to May 2009. Compensation
expense of $440,312 was recognized during the nine months ended June 30,
1999 based on the excess of the estimated market value of the stock over
the option exercise price.
The following is a summary of activity for the stock options granted during
the period ended June 30, 1999:
Weighted
Average
Number Exercise
of Shares Price
--------- --------
Outstanding, September 30, 1998
Cancelled or expired - -
Granted 11,000 $ 1.58
Exercised - -
------- --------
Outstanding, June 30, 1999 11,000 $ 1.58
======= ========
If not previously exercised, options outstanding at June 30, 1999 will
expire as follows:
Weighted
Average
Number Exercise
of Shares Price
--------- --------
May 2009 11,000 $ 1.58
====== ========
Presented below is a comparison of the weighted average exercise prices and
fair values on the measurement date for the stock options granted during
the period ended June 30, 1999:
Number of Exercise Fair
Shares Price Value
---------- ------------- -------
11,000 $ 1.58 $ 39.15
======= ========= =======
13
<PAGE>
CALLNET PLC
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U. S. Dollars)
Pro Forma Stock-Based Compensation Disclosures
As discussed in Note 1, the Company applies APB Opinion No. 25 and related
interpretations in accounting for its stock options. Accordingly,
compensation cost of $440,312 has been recognized for grants of options to
directors during the period ended June 30, 1999. Had compensation been
determined based on the fair value at the measurement dates for the options
granted consistent with methods required by SFAS No. 123, compensation
expense would have been only nominally affected.
6. RELATED PARTY TRANSACTIONS
--------------------------
Certain directors and stockholders of the Company are directors and/or
stockholders in World CallNet (see Note 4) with which the Company had the
transactions set forth below:
o Certain intellectual property rights related to e-mail functionality
are held by the Company and by Overleaf Systems, a wholly owned
subsidiary of World CallNet.
o The Company entered into an agreement with World CallNet in which the
Company was granted a license covering World CallNet's system for the
business of Internet service provider, which entitles the Company to
sub-license such system to other parties. Under the terms of the
agreement, the Company paid $24,433 in licensing fees to World CallNet
during the nine months ended June 30, 1999.
o The Company has non-interest bearing operating advances receivable
from certain directors of $133,210 at June 30, 1999.
o The Company has received non-interest bearing operating advances from
World CallNet of $477,743 at June 30, 1999.
7. COMMITMENTS
-----------
The Company has employment agreements with three officers who are also
directors. Each of these employment agreements requires an annual salary
through September 2001 of approximately $110,000, and provides that if such
agreement is terminated by either party during the term of the agreement,
the full salary and benefits are required to be paid to the executive
officer until the end of the term of the agreement. Each of the these
officers have identical employment agreements with World CallNet.
The Company leases equipment and office facilities under the terms of
various non-cancelable rental agreements. Rental expenses from operating
leases for the nine months ended June 30, 1999 and the period from
inception through September 30, 1998 was $143,990 and $16,283,
respectively.
14
<PAGE>
CALLNET PLC
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U. S. Dollars)
Minimum future lease payments for non-cancelable operating leases for the
next five years and thereafter are as follows:
Years ending June 30,
---------------------
2000 $ 309,258
2001 309,258
2002 94,888
2003 46,305
2004 11,576
----------
$ 771,285
8. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
------------------------------------------------
Approximately 89% of the Company's accounts receivable at June 30, 1999 is
due from one large telecommunications entity. This concentration may impact
the Company's overall credit risk either positively or negatively, in that
this entity may be similarly affected by changes in economic or other
conditions. The Company believes that the risk is mitigated by the size,
reputation and nature of its customer. The Company generally does not
require collateral or other security to support customer receivables.
During the nine months ended June 30, 1999 and for the period from
inception to September 30, 1998, the Company derived 62% and 0%,
respectively, of its revenues from one customer.
9. SUBSEQUENT EVENT
----------------
On September 2, 1999, World CallNet acquired all of the outstanding shares
of the Company from its shareholders and the Company became a wholly owned
subsidiary of World CallNet.
15
<PAGE>
Addendum II
The following pro forma financial statements have been prepared as if the
acquisition of CallNet Plc ("PLC ") by World CallNet, Inc. (the "Company") had
occurred on the first day of the periods presented in the pro forma income
statements and as of June 30, 1999 in the pro forma balance sheet. The pro forma
financial information is based on the historical financial statements of the
Company and PLC and gives effect to the combination under the purchase method of
accounting. The pro forma financial statements should be read in conjunction
with the historical financial statements of PLC presented herein and of the
Company and should not be considered to be a representation of actual results
that would have occurred if the transaction had occurred on the dates indicated.
16
<PAGE>
<TABLE>
<CAPTION>
WORLD CALLNET, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1999
World CallNet Pro Forma Pro Forma
CallNet Plc Adjustments Balance
ASSETS: ----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Cash $ 11,623 7,610 19,233
Receivables from affiliates 634,087 133,210 (477,743)(2) 289,554
Other current assets 63,252 182,641 245,893
----------- ----------- --------- -----------
Total current assets 708,962 323,461 (477,743) 554,680
Property and equipment 72,998 105,854 178,852
Investments 500,000 445,373 (945,373)(1) --
Intangible asset 16,575 201,019 4,452,980 (1) 4,670,574
Other asset -- 206,334 -- 206,334
----------- ----------- ----------- -----------
Total assets $ 1,298,535 $ 1,282,041 $3,029,864 $ 5,610,440
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable $ 1,584,149 $ -- $ 1,584,149
Other current liabilities 537,897 801,111 1,339,008
----------- ----------- -----------
Total current liabilities 2,122,046 801,111 2,923,157
----------- ----------- -----------
Payable to affiliate -- 477,743 (477,743)(2) --
Stockholders' equity (823,511) 3,187 3,507,607 (1) 2,687,283
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 1,298,535 $ 1,282,041 $ 3,029,864 $ 5,610,440
=========== =========== =========== ===========
</TABLE>
1) Adjustment to reflect acquisition of remaining 85% of CallNet Plc by World
CallNet in exchange for issuance of stock of World Call Net. The World
CallNet stock is recorded at estimated market value. CallNet Plc's stock in
World CallNet is retired as part of the transaction.
2) Adjustment to eliminate CallNet Plc payable to World CallNet.
17
<PAGE>
<TABLE>
<CAPTION>
WORLD CALLNET, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1999
World CallNet Pro Forma
CallNet Plc Adjustments Balance
--------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 157,363 $ 219,905 $ 377,268
Operating expenses 1,487,542 1,710,866 3,198,408
Depreciation and amortization 9,561 62,035 638,990(1) 710,586
Interest expense 194,762 -- -- 194,762
----------- ----------- ---------- ----------
Total expenses 1,691,865 1,772,901 638,990 4,103,756
----------- ----------- ---------- -----------
Loss from equity investment -- 54,627 (54,627)(2) --
----------- ----------- ---------- -----------
Net Loss $(1,534,502) $(1,607,623) $ (584,363) $(3,726,488)
=========== =========== ========== ===========
Net Loss Per Share $ (.20) $ (.17) $ (.37)
=========== ========== ============
Weighted Average Shares 7,493,000 2,544,000 10,037,000
=========== ========== ============
</TABLE>
(1) Adjustment to record additional amortization of intangible asset as if
CallNet Plc had been acquired at the beginning of the period.
(2) Adjustment to eliminate effect of CallNet Plc's investment in World
CallNet.
18
<PAGE>
<TABLE>
<CAPTION>
WORLD CALLNET, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
World CallNet Pro Forma
CallNet Plc Adjustments Balance
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ -- $ 20,869 $ 20,869
Operating expenses 378,285 655,702 1,033,987
Depreciation and amortization -- 15,089 690,497(1) 705,586
----------- ----------- ----------- -----------
Total expenses 378,285 670,791 690,497 1,739,573
----------- ----------- ----------- -----------
Net Loss $ (378,285) $ (649,922) $ (690,497) $(1,718,704)
=========== =========== =========== ===========
</TABLE>
(1) Adjustment to record additional amortization of intangible asset as if
CallNet Plc had been acquired at the beginning of the period.
19
