<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a - 16 or 15d - 16
of the Securities Exchange Act of 1934
For the month of April 2000
TOWNPAGESNET.COM PLC
11 MARKET SQUARE, ALTON, HAMPSHIRE GU34 1HD, UNITED KINGDOM
(011) 44 1420 543 468
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or 40-F.
Form 20-F X Form 40-F __
---
Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g-3-2(b) under the Securities Exchange Act
of 1934.
Yes __ No X
---
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with rule 12g3-2(b):
N/A
This report on Form 6-K contains unaudited condensed pro forma
consolidated financial information reflecting the pro forma effect of certain
acquisitions made during fiscal 1999 by TownPagesNet.com plc and audited
historical financial statements and unaudited condensed financial statements of
the entities acquired.
1
<PAGE> 2
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
OF TOWNPAGESNET.COM PLC
On July 19, 1999, TownPagesNet.com plc acquired WWW.CO. UK Limited and the
following affiliated companies, collectively referred to as "WWW", which prior
to their acquisition were under common ownership and control:
(1) Summerfields Publishing Ltd,
(2) The Platinum Club Limited,
(3) Feature Boards Limited, and
(4) WWW.CO.UK Limited.
The total consideration paid for the acquisition of WWW was Pound Sterling 4.0
million which consisted of Pound Sterling 1.5 million in cash and 488,281
TownPages' ordinary shares. TownPages is also obligated to pay a maximum of
Pound Sterling 250,000 at the end of the each of the fiscal years ending
December 31, 1999 and December 31, 2000 in the event the aggregate sales
revenues of WWW equal or exceed Pound Sterling 2,139,000 and Pound
Sterling 2,861,000, respectively.
WWW provides advertising management and optimization services to advertisers
and agencies in both print media and through the internet from locations in the
United Kingdom. Under the trading name Cinemas Online, WWW is an Internet
provider of cinema information in England and Ireland.
On September 24, 1999, TownPages acquired Morbria Limited for a total
consideration of Pound Sterling 3,379,888 which consisted of 857,972 TownPages'
ordinary shares. TownPages is also obligated to pay a maximum of Pound
Sterling 930,000 if the net revenues of Morbria for the year ended March 31,
2000 exceed Pound Sterling 3,160,000. If the net revenues in the year ending
March 31, 2001 exceed Pound Sterling 3,160,000, TownPages is obligated to pay a
sum equal to the amount by which net revenues exceed Pound Sterling 3,160,000
multiplied by a factor of 1.77.
The Morbria group provides multi-media, reprographic and advertising services
in both print media and through the internet from locations in the United
Kingdom.
On October 1, 1999, TownPages acquired Buyersguide Limited. The total
consideration paid was Pound Sterling 2,500,000 which consisted of 486,381
TownPages ordinary shares. TownPages is also obligated to pay an amount of ten
times the profits of Buyersguide for the twelve month period to March 31, 2000
less Pound Sterling 250,000. In addition, there is a secondary earnout
payable of Pound Sterling 166,750 should sales invoices issued by Buyersguide
for the six months ended March 31, 2000 exceed Pound Sterling 900,000.
2
<PAGE> 3
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
OF TOWNPAGESNET.COM PLC -- (CONTINUED)
Buyersguide provides advertising services through the internet from locations
in the United Kingdom.
These acquisitions have been accounted for as purchases. The allocation of the
purchase price for each acquisition has not been finally determined and,
accordingly, the pro forma adjustments reflected below may be adjusted when
additional information is obtained during the one-year period subsequent to the
date of the acquisition. However, any reallocation of the purchase price based
on final valuations of the assets and liabilities acquired should not differ
significantly from the original estimates and should not have a material impact
on the consolidated pro forma information.
The following information, which is unaudited, gives pro forma effect to the
acquisition of WWW, Morbria and Buyersguide and has been prepared in accordance
with United States generally accepted accounting principles ("U.S.GAAP"). The
pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position of
TownPages as they may be in the future or as they might have been had the
acquisitions been consummated on the respective dates assumed.
The unaudited condensed pro forma consolidated financial information should be
read in conjunction with the historical financial statements of TownPages
included in its Registration Statement on Form F-1 (File No. 333-72075) filed
with the Securities and Exchange Commission and its Report on Form 6-K dated
November 24, 1999, furnished to the Securities and Exchange Commission, and the
historical combined financial statements of WWW, the consolidated financial
statements of Morbria and the financial statements of BuyersGuide included
elsewhere in this Report on Form 6-K.
3
<PAGE> 4
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED BALANCE SHEET
OF TOWNPAGESNET.COM PLC
SEPTEMBER 30, 1999
The following unaudited condensed pro forma consolidated balance sheet at
September 30, 1999 gives pro forma effect to the acquisition of BuyersGuide,
after giving effect to the adjustments described in the notes to the unaudited
condensed pro forma financial information, as if the acquisition had occurred
on September 30, 1999. The historical financial information for
TownPagesNet.com plc is derived from its historical unaudited condensed
consolidated balance sheet at September 30, 1999 included in its Report on Form
6-K dated November 24, 1999. The historical financial information for
BuyersGuide is derived from its unaudited balance sheet at September 30, 1999,
included elsewhere in this Report on Form 6-K.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ ---------------------------------
ADJUSTMENTS
TOWNPAGES BUYERSGUIDE (NOTE 1) CONSOLIDATED
-------------- --------------- ------------- -----------------
POUND POUND POUND POUND
STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash, cash equivalents and short-term
investments 3,618,238 - (47,561)(a) 3,570,677
Accounts receivable 10,469,455 - - 10,469,455
Receivable from related party 1,486,347 - - 1,486,347
Unbilled Receivables 471,673 - - 471,673
Other receivables 133,844 - - 133,844
Prepaid expenses and other current assets 115,833 - - 115,833
-------------- --------------- ------------- -----------------
Total Current Assets 16,295,390 - (47,561) 16,247,829
Computer equipment 493,355 - - 493,355
Furniture and fixtures 243,330 - - 243,330
Equipment 1,409,388 10,821 - 1,420,209
-------------- --------------- ------------- -----------------
2,146,073 10,821 - 2,156,894
Less: Accumulated depreciation 1,016,602 - 1,16,602
-------------- --------------- ------------- -----------------
1,129,471 10,821 - 1,140,292
Intangible assets 7,629,919 - 2,536,740 (b) 10,166,659
-------------- --------------- ------------- -----------------
25,054,780 10,821 2,489,179 27,554,780
-------------- --------------- ------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Bank loans of credit and other notes payable 303,084 - - 303,084
Accounts payable 653,043 - - 653,043
Accrued expenses and other liabilities 1,041,218 - - 1,041,218
Amounts payable under Web site design
agreements 4,285,568 - - 4,285,568
Current portion of capital lease obligations 165,850 - - 165,850
Income taxes and social security payable 562,877 - - 562,877
Deferred income 2,292,811 - - 2,292,811
---------------- --------------- ------------- -----------------
Total current liabilities: 9,304,451 - - 9,304,451
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C> <C> <C> <C>
Minority Interest 20,961 - - 20,961
COMMITMENTS
Stockholders Equity (Net Capital Deficiency)
9% Series A redeemable convertible
preferred stock Pound Sterling 1 par value,
5,000,000
shares authorized 850,000 - - 850,000
Ordinary shares:
Pound Sterling 0.01 par value; 20,000,000
shares authorized,
8,546,272 issued 85,463 100 4,764(c) 90,327
Additional Paid-In Capital 16,465,544 10,721 2,484,415(d) 18,960,680
Accumulated funds/(deficit) (1,671,639) - - (1,671,639)
---------------- --------------- ------------- -----------------
Total shareholders' equity: 15,729,368 10,821 2,489,179 18,229,368
---------------- --------------- ------------- -----------------
25,054,780 10,821 2,489,179 27,554,780
---------------- --------------- ------------- -----------------
</TABLE>
See Notes to Unaudited Condensed Pro Forma Consolidated Financial Information.
5
<PAGE> 6
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS OF TOWNPAGESNET.COM
PLC
NINE MONTHS ENDED SEPTEMBER 30, 1999
The following unaudited condensed pro forma consolidated statement of
operations for the nine months ended September 30, 1999, gives pro forma effect
to the acquisition of WWW, Morbria and Buyersguide, after giving effect to the
adjustments described in the notes to the unaudited condensed pro forma
financial information, as if the acquisition had occurred on January 1, 1999.
The historical financial information for TownPages is derived from its
historical unaudited condensed statement of operations for the nine months
ended September 30, 1999 included in its Report on Form 6-K dated November 24,
1999. The historical financial information for WWW is derived from its
unaudited condensed combined statement of operations for the six months ended
June 30, 1999 included elsewhere in this Report on Form 6-K and its unaudited
condensed consolidated statement of operations for the three months ended
September 30, 1999 which is not included in this Report on Form 6-K. The
historical financial information for Morbria and BuyersGuide is derived from
their unaudited condensed statements of operations for the year ended March 31,
1999 and their unaudited condensed statements of operations for the six months
ended September 30, 1999 all of which are included elsewhere in this Report on
Form 6-K.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------------------- ---------------------------------
ADJUSTMENTS
TOWNPAGES WWW.CO.UK MORBRIA BUYERS-GUIDE NOTE 1 CONSOLIDATED
------------- ------------ ------------ ------------ ------------- ----------------
POUND POUND POUND POUND POUND POUND
STERLING STERLING STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Advertising revenues 300,231 742,552 532,385 760,687 - 2,335,855
Contract revenues and
other 4,731,608 - 454,649 - (150,350)(a) 5,035,907
Contract revenues
from related parties 556,142 - 517,211 - - 1,073,353
------------- ------------ ------------ ------------ ------------- ----------------
TOTAL REVENUES 5,587,981 742,552 1,504,245 760,687 (150,350) 8,445,115
COST OF REVENUES
Maintenance and
hosting costs 463,865 - - 1,150 - 465,015
Cost of contract
revenues and other 2,763,609 - 275,205 - (150,350)(a) 2,888,464
Advertising and
commission costs 177,980 469,633 437,025 351,336 - 1,435,974
------------- ------------ ------------ ------------ ------------- ----------------
3,405,454 469,633 712,230 352,486 (150,350) 4,789,453
GROSS PROFIT 2,182,527 272,919 792,015 408,201 - 3,655,662
OPERATING EXPENSES:
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing 762,750 - - - - 762,750
Research and
development 364,931 27,941 54,834 - - 447,706
General and
administrative 1,124,423 324,358 445,306 147,680 - 2,041,767
Depreciation 71,219 5,459 75,361 6,561 - 158,600
Amortisation 197,953 - - - 1,472,319 (b) 1,670,272
------------- ------------ ------------ ------------ ------------- ----------------
Total operating
expenses 2,521,276 357,758 575,501 154,241 1,472,319 5,081,095
OPERATING PROFIT / (LOSS) (338,749) (84,839) 216,514 253,960 (1,472,319) (1,425,433)
Interest expense (64,228) (5,248) (111,281) (690) - (181,447)
Interest income 146,718 2,296 - 1,382 (58,125)(c) 92,271
Other income 4,371 7,041 - - - 11,412
------------- ------------ ------------ ------------ ------------- ----------------
NET PROFIT/ (LOSS) (251,888) (80,750) 105,233 254,652 (1,530,444) (1,503,197)
============= ============ ============ ============ ============= ================
Basic and diluted net Pound Pound
loss per share Sterling Sterling
(0.04) (0.19)
------------- ----------------
Shares used in
computing basic and
diluted net loss per
share 6,345,244 1,671,282 (d) 8,016,526
------------- ------------- ----------------
</TABLE>
See Notes to Unaudited Condensed Pro Forma Consolidated Financial Information.
7
<PAGE> 8
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
OF TOWNPAGESNET.COM PLC
YEAR ENDED DECEMBER 31, 1998
The following unaudited condensed pro forma consolidated statement of
operations for the year ended December 31, 1998, gives pro forma effect to the
acquisition of WWW, Morbria and Buyersguide, after giving effect to the
adjustments described in the notes to the unaudited condensed consolidated pro
forma financial information, as if the acquisition had occurred on January 1,
1998. The historical financial information for TownPagesNet.com plc is derived
from its historical audited consolidated statement of operations for the year
ended December 31, 1998 included in its Registration Statement on Form F-1. The
historical financial information for WWW is derived from its audited combined
statement of operations for the year ended December 31, 1998, and that for
Morbria and Buyersguide is derived from their audited statements of operations
for the year ended March 31, 1999, each of which are included elsewhere in this
Report on Form 6-K
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------------------- --------------------------------
ADJUSTMENTS
TOWNPAGES WWW.CO.UK MORBRIA BUYERS-GUIDE NOTE 1 CONSOLIDATED
--------------------------------------- ------------ --------------- --------------
POUND POUND POUND POUND POUND POUND
STERLING STERLING STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Advertising revenues 40,839 1,294,314 736,886 695,033 - 2,767,072
Contract revenues and
other 919,522 - 775,056 - (60,000)(a) 1,634,578
Contract revenues from
related parties 159,742 - 654,770 - - 814,512
--------------------------------------- ------------ --------------- --------------
TOTAL REVENUES 1,120,103 1,294,314 2,166,712 695,033 (60,000) 5,216,162
COST OF REVENUES
Maintenance and
hosting costs 179,776 - - 1,194 - 180,970
Cost of contract
revenues and other 563,854 - 602,344 - (60,000)(a) 1,106,198
Advertising and
commission costs - 766,060 602,197 368,559 - 1,736,816
--------------------------------------- ------------ --------------- --------------
743,630 766,060 1,204,541 369,753 (60,000) 3,023,984
GROSS PROFIT 376,473 528,254 962,171 325,280 - 2,192,178
OPERATING EXPENSES:
Sales and marketing 351,633 - - - - 351,633
Research and
development 67,910 42,667 107,337 - - 217,914
General and
administrative 715,168 421,611 320,050 247,377 - 1,704,206
Depreciation 42,022 11,135 50,010 9,190 - 112,357
Amortisation - - - - 2,227,029 (b) 2,227,029
--------------------------------------- ------------ --------------- --------------
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total operating
expenses 1,176,733 475,413 477,397 256,567 2,227,029 4,613,139
OPERATING PROFIT / (LOSS) (800,260) 52,841 484,774 68,713 (2,227,029) (2,420,961)
Interest expense (91,385) (6,945) (135,123) (920) (77,500)(e) (311,873)
Interest income 1,500 - - 579 - 2,079
Other income 18,049 1,756 - - - 19,805
Minority Interest - - (9,542) - - (9,542)
--------------------------------------- ------------ --------------- --------------
(872,096) 47,652 340,109 68,372 (2,304,529) (2,720,492)
Income Taxes - - (25,771) - - (25,771)
--------------------------------------- ------------ --------------- --------------
NET PROFIT/ (LOSS) (872,096) 47,652 314,338 68,372 (2,304,529) (2,746,263)
======================================= ============ =============== ==============
Basic and diluted net Pound Pound
loss per share Sterling Sterling
(0.17) (0.40)
------------- --------------
Shares used in
computing basic and
diluted net loss per
share 5,000,000 1,832,634 (d) 6,832,634
------------- --------------- --------------
</TABLE>
See Notes to Unaudited Condensed Pro Forma Consolidated Financial Information.
9
<PAGE> 10
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
OF TOWNPAGESNET.COM PLC
NOTE 1 -- BUYERSGUIDE LIMITED BALANCE SHEET RECONCILIATION
The unaudited condensed pro forma balance sheet includes the assets of
Buyersguide Limited acquired by TownPages. The following is a reconciliation of
the historical balance sheet of Buyersguide Limited to the assets acquired by
TownPages:
<TABLE>
<CAPTION>
As at Amounts Adjusted pro
September not acquired forma
30,1999
------------------------------------------------------
<S> <C> <C> <C>
Pound Pound Pound
Sterling Sterling Sterling
Cash, cash equivalents and short term investments 153,944 (153,944) -
Accounts receivable 250,031 (250,031) -
------------------------------------------------------
403,975 (403,975) -
Furniture and fixtures 18,978 (18,978) -
Equipment 28,907 (18,086) 10,821
------------------------------------------------------
47,885 (37,064) 10,821
Less accumulated depreciation 20,515 (20,515) -
------------------------------------------------------
27,370 (16,549) 10,821
------------------------------------------------------
431,345 (420,524) 10,821
======================================================
Accounts payable 17,296 (17,296) -
Current portion of caiptal lease obligations 2,102 (2,102) -
Income taxes and social security payable 74,982 (74,982) -
Deferred income 565,144 (565,144) -
------------------------------------------------------
659,524 (659,524) -
Ordinary shares 100 - 100
Additional paid-in-capital 30,388 (19,667) 10,721
Accumulated deficit (258,667) 258,667 -
------------------------------------------------------
(228,179) 239,000 10,821
------------------------------------------------------
Pound Pound Pound
Sterling Sterling Sterling
431,345 (420,524) 10,821
======================================================
</TABLE>
10
<PAGE> 11
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
OF TOWNPAGESNET.COM PLC
NOTE 2 -- PRO FORMA ADJUSTMENTS
Balance sheet
The unaudited condensed pro forma consolidated balance sheet gives
effect to the acquisition as follows:
The acquisition of Buyersguide is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------
<S> <C>
POUND STERLING
Net assets of Buyersguide at October 1, 1999 10,821
------
Purchase consideration:
Shares 486,381 ordinary shares at $8.60 (Pound Sterling 5.14) per
share being the share price on October 1, 1999 2,500,000
Legal and other 47,561
---------
Total cost of investment 2,547,561
---------
Goodwill arising 2,536,740
=========
The pro forma balance sheet adjustments related to this acquisition
are summarized as follows:
<CAPTION>
SEPTEMBER 30, 1999
------------------
<S> <C>
POUND STERLING
(a) Cash - legal and other costs (47,561)
============
(b) Goodwill arising 2,536,740
=========
(c) Share capital
Elimination of Buyersguide ordinary shares (100)
Issue of TownPages Ordinary shares - 486,381 ordinary shares
at Pound Sterling 0.01 par value 4,864
---------
4,764
=========
(d) Additional paid-in capital -premium of Pound Sterling 5.13 per share 2,484,415
=========
</TABLE>
11
<PAGE> 12
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
OF TOWNPAGESNET.COM PLC -- (CONTINUED)
NOTE 2 -- PRO FORMA ADJUSTMENTS AND ACQUISITIONS -- (CONTINUED)
Statements of Operations
The unaudited condensed pro forma consolidated statements of
operations give effect to the following pro forma adjustments:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
POUND STERLING POUND STERLING
<S> <C> <C>
(a) Elimination of inter-company revenue in Morbria and costs
in Townpages 150,350 60,000
======= ======
(b) Amortization of goodwill
WWW goodwill of Pound Sterling 4,859,437 over 5 years,
less Pound Sterling 197,953 included in historical results of
operations for TownPages for nine months ended September 30,
1999 530,962 971,887
Morbria goodwill of Pound Sterling 3,738,970 over 5 years 560,846 747,794
Buyersguide goodwill of Pound Sterling 2,536,740 over 5 years 380,511 507,348
--------- ---------
Total 1,472,319 2,227,029
========= =========
(c) Reduction in interest income arising from use of cash
of Pound Sterling 1,550,000 as part of the acquisition
consideration of WWW at 5% per annum 58,125 -
====== ============
(d) Shares used in computing basic and diluted net loss per share
WWW issue of 488,281 ordinary shares less 142,564 included in
historical computation Morbria issue of 857,972 ordinary
shares less 18,788 included in historical computation
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C> <C>
Buyersguide issue of 486,381 ordinary shares
(e) Increase in interest expense arising from need for
cash of Pound Sterling 1,550,000 as part of the acquisition
consideration of WWW at 5% per annum - 77,500
=========== ======
</TABLE>
13
<PAGE> 14
INDEX TO
FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WWW
Report of Independent Auditors............................ 14
Combined Balance Sheets as of December 31 1997 and 1998 and June 30, 1999 (unaudited) 15
Combined Statement of Operations for the years ended December 31, 1997 and 1998 and the
six-month periods ended June 30, 1998 and 1999 (unaudited) 16
Statement of Net Investment Capital Deficiency for the years ended December 31, 1997 and
1998 and the six-month period ended June 30, 1999 (unaudited) 17
Statement of Cash Flows for the years ended December 31, 1997 and 1998 and the six-month
periods ended June 30, 1998 and 1999 (unaudited) 18
Notes to Financial Statements............................... 19
MORBRIA
Report of Independent Auditors............................ 24
Consolidated Balance Sheets as of March 31, 1998 and 1999 and
September 30, 1999 (unaudited) 25
Consolidated Statement of Operations for the years ended March 31, 1998 and 1999 and the six-
month periods ended September 30, 1998 and 1999 (unaudited) 26
Statement of Net Capital Deficiency for the years ended March 31, 1998 and 1999 and the six-
month period ended September 30, 1999 (unaudited) 27
Statement of Cash Flows for the years ended March 31, 1998 and 1999 and the six-month
periods ended September 30, 1998 and 1999 (unaudited) 28
Notes to Financial Statements 29
BUYERSGUIDE
Report of Independent Auditors 35
Balance Sheets as of March 31, 1998 and 1999 and September 30, 1999 (unaudited) 36
Statement of Operations for the years ended March 31, 1998 and 1999 and for the six-month
periods ended September 30, 1998 and 1999 (unaudited) 37
Statement of Stockholders Equity for the years ended March 31, 1998 and 1999 and the six-
month period ended September 30, 1999 (unaudited) 38
Statement of Cash Flows for the years ended March 31, 1998 and 1999 and the six-month
periods ended September 30, 1998 and 1999 (unaudited) 39
Notes to Financial Statements 40
</TABLE>
14
<PAGE> 15
WWW
REPORT OF INDEPENDENT AUDITORS
To: The Directors and Shareholders of
the companies comprising WWW
We have audited the accompanying combined balance sheets of WWW.CO.UK as of
December 31, 1997 and 1998 and the related statements of operations, capital
deficiency and cash flows for each of the two years in the period ended
December 31, 1998. These financial statements are the responsibility of WWW's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material mis-statement. 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 combined financial position of WWW at December 31,
1997 and 1998, and the combined results of its operations and its combined cash
flows for each of the two years in the period ended December 31, 1998, in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG
Reading, England
October 1, 1999
15
<PAGE> 16
WWW
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
---------------------------- ----------------------
1997 1998 1999
(UNAUDITED)
POUND POUND POUND
STERLING STERLING STERLING
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and short term Investments 11,819 2,594 466
Accounts receivable, net of allowance for bad
debts of Pound Sterling 373,264, Pound
Sterling 295,925, and Pound Sterling 349,599,
respectively 539,748 685,519 819,588
Receivable from related party (Note 7) 2,548 68,972 15,607
Prepaid expenses and other current assets 9,704 8,864 31,700
-------------------------------- -----------------
Total Current Assets 563,819 765,949 867,361
Furniture and equipment 36,496 85,203 87,407
Less: accumulated depreciation (11,471) (25,746) (27,472)
-------------------------------- -----------------
25,025 59,457 59,935
-------------------------------- -----------------
588,844 825,406 927,296
================================ =================
LIABILITIES AND CAPITAL DEFICIENCY
CURRENT LIABILITIES:
Notes payable - - 48,488
Loans payable to related parties 51,189 98,805 90,263
Accounts payable 83,625 91,111 177,678
Accrued expenses and other liabilities 21,105 115,925 54,261
Accrued interest 4,547 9,899 13,680
Deferred income 1,062,388 993,329 1,105,192
Taxes and social security payable 110,815 213,510 210,856
-------------------------------- -----------------
1,333,669 1,522,579 1,700,418
CAPITAL DEFICIENCY:
Capital Deficiency (744,825) (697,173) (773,122)
-------------------------------- -----------------
588,844 825,406 927,296
================================ =================
</TABLE>
See Notes to Financial Statements
16
<PAGE> 17
WWW
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------- -----------------------------------
1997 1998 1998 1999
(UNAUDITED)
POUND POUND POUND POUND
STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C>
Revenues 1,155,185 1,294,314 602,884 666,339
Cost of revenues (786,884) (766,060) (367,806) (423,310)
--------------------------------- -----------------------------------
Gross profit 368,301 528,254 235,078 243,029
OPERATING EXPENSES:
Research and development - 42,667 - 23,813
General and administrative 449,483 421,611 190,366 291,679
Depreciation 4,416 11,135 4,530 4,866
--------------------------------- -----------------------------------
Total operating expenses 453,899 475,413 194,896 320,358
--------------------------------- -----------------------------------
Operating income/(loss) (85,598) 52,841 40,182 (77,329)
Interest expense (6,918) (6,945) (3,206) (5,018)
Interest income 110 - - -
Other operating income - 1,756 - 6,398
--------------------------------- -----------------------------------
Net income (92,406) 47,652 36,976 (75,949)
================================= ===================================
</TABLE>
See Notes to Financial Statements
17
<PAGE> 18
WWW
COMBINED STATEMENT OF CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
POUND STERLING
<S> <C>
Balance at January 1, 1997 (652,435)
Increase in invested capital 16
Net loss for year (92,406)
-----------------
Balance at December 31, 1997 (744,825)
Net income for year 47,652
-----------------
Balance at December 31, 1998 (697,173)
Net loss for period (unaudited) (75,949)
-----------------
Balance at June 30, 1999 (unaudited) (773,122)
=================
</TABLE>
See Notes to Financial Statements
18
<PAGE> 19
WWW
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
(UNAUDITED)
1997 1998 1998 1999
POUND POUND POUND POUND
STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income / (loss) (92,406) 47,652 36,976 (75,949)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 4,416 11,135 4,530 4,866
Loss on sale of fixed assets - 2,897 - -
Changes in operating assets and
liabilities
Accounts receivable 117,161 (145,771) 46,634 (121,519)
Prepaid and other current assets 41,301 (65,584) (93,896) 17,979
Accounts payable 20,086 7,486 58,256 86,567
Accrued expenses and other (17,668) 94,820 10,519 (61,664)
Accrued interest 4,547 5,352 2,038 3,781
Deferred income 28,967 (69,059) (44,294) 111,863
Taxes and social security payable (59,923) 102,695 309 (2,654)
-------------------------------- -------------------------------
Net cash provided by / (used in) operating
activities 46,481 (8,377) 21,072 (36,730)
-------------------------------- -------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (4,754) (59,953) (14,316) (5,344)
Proceeds from sale of fixed assets - 11,489 - -
-------------------------------- -------------------------------
Net cash used in investing activities (4,754) (48,464) (14,316) (5,344)
-------------------------------- -------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 27,396 65,166 16,751 48,488
Repayment of borrowings (57,595) (17,550) (17,250) (8,542)
Increase in invested capital 16 - - -
-------------------------------- -------------------------------
Net cash provided by / (used in) financing
activities (30,183) 47,616 (499) 39,946
-------------------------------- -------------------------------
Net change in cash and cash equivalents 11,544 (9,225) 6,257 (2,128)
Cash and cash equivalents at the beginning
of the period 275 11,819 11,819 2,594
-------------------------------- -------------------------------
Cash and cash equivalents at the end of the
period 11,819 2,594 18,076 466
================================ ===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid 2,371 1,593 1,168 1,237
================================ ===============================
</TABLE>
See Notes to Financial Statements
19
<PAGE> 20
WWW
NOTES TO THE FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANISATION AND BUSINESS
These financial statements represent a combination of the financial statements
of Summerfields Publishing Limited, The Platinum Club Limited, Feature Boards
Limited and WWW.CO.UK Limited (together "WWW" or the "Group"), which were
companies under common control and ownership. The Group operates in one
business segment, the providing of advertising management and optimisation
services to advertisers and agencies in both print media and through the
internet. All of the Group's operations are located in the United Kingdom.
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with United States
generally accepted accounting principles. These financial statements have been
prepared pounds sterling.
USE OF ESTIMATES
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Group considers investments in highly liquid instruments purchased with an
original maturity of 90 days or less to be cash equivalents. Such amounts are
stated at cost which approximates market value. As of December 31, 1997 and
1998, the Group maintained its cash and cash equivalents in checking accounts
with several financial institutions.
20
<PAGE> 21
WWW
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Group to concentration of
credit risk consist primarily of accounts receivable at December 31, 1997 and
1998. The Group performs periodic credit evaluations of its customers and
maintains an allowance for potential credit losses based on historical
experience and other information available to management. The Group does not
require collateral on accounts receivable. Actual credit losses may differ
significantly from estimated amounts included in the allowance for doubtful
accounts and such differences could be material to the financial statements.
FIXTURES AND EQUIPMENT
Fixtures and equipment are stated at cost. Depreciation is provided at rates
calculated to write off the cost less estimated residual value of each asset
over its expected useful life, as follows:
Fixtures and equipment 5 years straight line
REVENUE RECOGNITION
The Group sells advertising on one- and two-year contracts with income being
recognized in the profit and loss account on a daily basis over the term of
each individual contract. Advertising income derived from Internet services is
recognized rateably over the term of each individual contract.
21
<PAGE> 22
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
DEFERRED INCOME
Income in respect of advertising contracts signed prior to the balance sheet
date which will be credited to the Statement of Operations in accounting
periods subsequent to the balance sheet date is treated as deferred income.
22
<PAGE> 23
WWW
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the U.S. Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivatives and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The adoption of SFAS No. 133 is not
expected to have an impact on the Group's results of operations, financial
position, or cash flows.
In March 1998, the American Institute of Certified Public Accountants issued
SOP 98-1: Statement of Position 98-1 ("SOP 98-1"), "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use", which provides
guidance on accounting for such software costs and is effective for years
beginning after December 15, 1998. SOP 98-1 identifies the characteristics of
internal use software and provides examples to assist in determining when
software is developed or obtained for internal use. The impact of SOP 98-1 has
not had a material impact on the Group's results of operations.
2. LINE OF CREDIT
As of December 31, 1998, the Group met its day to day working capital
requirements through an overdraft facility which is repayable on demand. The
Group expects to operate within the facility currently agreed in the
foreseeable future. The overdraft is secured by a fixed and floating charge on
the Group's assets.
In March 1999, the Group entered into a Pound Sterling 50,000 seven-year
revolving line of credit agreement with a financial institution. The line of
credit bears interest at a base lending rate plus 3% (8.5% as of June 30,
1999). The balance of the facility outstanding at June 30, 1999 was Pound
Sterling 48,488.
3. LOANS PAYABLE
The loans payable balance comprises loans payable to the Group's director and
another related party. The loans have been established as an 8% line of credit
facility which is due upon demand. There is no specific limit on the line of
credit, but it is at the discretion of the counter parties to the individual
loan.
23
<PAGE> 24
WWW
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
4. COMMITMENTS
The Group occupied office space under an operating lease with Harley C.
Cartwright, a related party to the Group. The Group sub-leases a portion of the
office space to a third party under a month-to-month lease agreement. Required
future rental payments under the operating lease as of December 31, 1998 are as
follows:
<TABLE>
<S> <C> <C>
1999.............................................................Pound Sterling 25,000
2000.............................................................Pound Sterling 25,000
2001.............................................................Pound Sterling 25,000
2002.............................................................Pound Sterling 25,000
2003.............................................................Pound Sterling 25,000
Thereafter.......................................................Pound Sterling 41,667
-----------------------
Pound Sterling 166,667
</TABLE>
Rent expense for the years ended December 31, 1997 and 1998 was Pound
Sterling 6,481 and Pound Sterling 10,733, respectively. Rent expense for the
six-month periods ended June 30, 1998 and 1999 were Pound Sterling 2,916 and
Pound Sterling 8,790, respectively.
5. INCOME TAXES
Due to operating losses and the inability to recognize a corporation tax
benefit therefrom, there is no provision for income taxes for 1997 or 1998.
Deferred income taxes reflect the net tax effects of temporary difference
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for corporation tax purposes. Significant
components of the Group's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1998
---- ----
<S> <C> <C>
Pound Sterling Pound Sterling
Net operating loss carryforwards 76,209 59,918
Depreciation (318) (2,157)
Other timing differences 53,132 58,103
--------------------- ------------------
Total deferred tax assets 129,023 115,864
Valuation allowance (129,023) (115,864)
--------------------- ------------------
Pound Sterling Pound Sterling
Net deferred tax asset - -
===================== ==================
</TABLE>
Because of the Group's lack of earnings history, the deferred tax assets have
been fully offset
24
<PAGE> 25
by a valuation allowance. The valuation allowance increased by Pound Sterling
13,159 during the year ended December 31, 1998.
25
<PAGE> 26
WWW
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
6. RELATED PARTY TRANSACTIONS
From time to time, a director of the Group borrows funds from the Group. As of
December 31, 1997 and 1998 and June 30, 1999, the balance of this receivable
from the director was Pound Sterling 2,548, Pound Sterling 68,972, and Pound
Sterling 15,607, respectively. This balance has been included in receivable
from related party for all periods presented.
7. SUBSEQUENT EVENTS
On July 19, 1999, TownPagesNet.com plc (TownPages) acquired WWW.
26
<PAGE> 27
MORBRIA LIMITED
REPORT OF INDEPENDENT AUDITORS
To: The Directors and Shareholders
Morbria Limited:
We have audited the accompanying consolidated balance sheets of Morbria Limited
as of March 31, 1998 and 1999 and the related consolidated statements of
operations, net capital deficiency and cash flows for each of the two years in
the period ended March 31, 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 United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material mis-statement. 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 consolidated financial position of Morbria Limited
at March 31, 1998 and 1999, and the consolidated results of its operations and
its consolidated cash flows for each of the two years in the period ended March
31, 1999, in conformity with United States generally accepted accounting
principles.
ERNST & YOUNG
Reading, England
November 26, 1999
27
<PAGE> 28
MORBRIA LIMITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS AT
AS AT MARCH 31, SEPTEMBER 30,
------------------------------- --------------------
(UNAUDITED)
1998 1999 1999
POUND POUND POUND
STERLING STERLING STERLING
<S> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash, cash equivalents and short term investments 2,603 394 324
Accounts receivable 565,069 568,659 387,939
Receivable from related parties 292,155 616,229 774,879
Inventories 97,799 117,027 471,673
Prepaid expenses and other current assets 85,261 33,081 52,067
---------------------------------- -----------------
Total Current Assets 1,042,887 1,335,390 1,686,882
Computer equipment 84,487 99,083 99,083
Furniture and fixtures 154,193 171,007 200,366
Equipment 800,245 1,041,739 1,165,775
---------------------------------- -----------------
1,038,925 1,311,829 1,465,224
Less: Accumulated depreciation (568,193) (586,142) (639,114)
---------------------------------- -----------------
470,732 725,687 826,110
---------------------------------- -----------------
1,513,619 2,061,077 2,512,992
---------------------------------- -----------------
CURRENT LIABILITIES:
Bank loans of credit and other notes payable 1,352,829 1,622,048 252,481
Accounts payable 201,816 230,453 338,107
Accrued expenses and other liabilities 255,436 130,183 185,287
Current portion of capital lease obligations 79,751 92,673 75,065
Income taxes and social security payable 98,437 112,956 75,606
----------------------------------- ----------------
1,988,269 2,188,313 926,546
Capital lease obligations less
current portion 60,620 126,536 90,785
Loans from related parties - - 1,700,000
Minority Interest 17,670 27,212 20,961
SHAREHOLDERS' EQUITY:
Common stock 1,000 1,000 1,000
Accumulated funds (553,940) (281,984) (226,300)
----------------------------------- ----------------
Total shareholders' equity: (552,940) (280,984) (225,300)
----------------------------------- -----------------
1,513,619 2,061,077 2,512,992
----------------------------------- ----------------
</TABLE>
See Notes to Financial Statements
28
<PAGE> 29
MORBRIA LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
-------------------------------- -------------------------------
(UNAUDITED)
1998 1999 1998 1999
POUND POUND POUND POUND
STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C>
Revenues
Advertising revenues 1,071,657 736,886 336,562 348,163
Contract revenues and other 591,063 775,056 357,525 303,377
Revenues from related parties 415,092 654,770 330,889 378,182
-------------------------------- -------------------------------
Total revenues 2,077,812 2,166,712 1,024,976 1,029,722
Cost of revenues
Cost of contract revenues and other 594,969 602,344 291,777 171,014
Advertising and commission costs 831,007 602,197 286,680 284,875
-------------------------------- -------------------------------
1,425,976 1,204,541 578,457 455,889
Gross Profit 651,836 962,171 446,519 573,833
OPERATING EXPENSES:
Research and development 62,000 107,337 53,000 28,000
General and administrative 507,224 320,050 259,555 305,978
Depreciation 143,273 50,010 31,527 67,418
-------------------------------- -------------------------------
Total operating expenses 712,497 477,397 344,082 401,396
Operating income / (loss) (60,661 ) 484,774 102,437 172,437
Interest expense (111,914 ) (135,123 ) (63,923 ) (82,907 )
Minority interest (8,983 ) (9,542 ) (22,127 ) 6,251
-------------------------------- -------------------------------
(181,558 ) 340,109 16,387 95,781
Income taxes 8,417 (25,177 ) (12,589 ) (21,069 )
-------------------------------- -------------------------------
Net income/ (loss) for the period (173,141 ) 314,932 3,798 74,712
================================ ===============================
</TABLE>
See Notes to Financial Statements
29
<PAGE> 30
MORBRIA LIMITED
CONSOLIDATED STATEMENT OF NET CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------
ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
----------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Pound Pound Pound Pound
Sterling Sterling Sterling Sterling
Balance at April 1, 1997 1,000 1,000 (361,530) (360,530)
Net loss for year (173,141) (173,141)
Dividends paid (19,269) (19,269)
----------------------------- -------------------------------
Balance at March 31, 1998 1,000 1,000 (553,940) (552,940)
Net income for year 314,932 314,932
Dividends paid (42,976) (42,976)
----------------------------- -------------------------------
Balance at March 31, 1999 1,000 1,000 (281,984) (280,984)
Net income for period (Unaudited) 74,712 74,712
Dividends paid (Unaudited) (19,028) (19,028)
----------------------------- -------------------------------
Balance at September 30, 1999
(Unaudited) Pound Pound Pound Pound
Sterling Sterling Sterling Sterling
1,000 1,000 (226,300) (225,300)
============================= ===============================
</TABLE>
See Notes to Financial Statements
30
<PAGE> 31
MORBRIA LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
----------------------------- ---------------------------------
(UNAUDITED)
1998 1999 1998 1999
POUND POUND POUND POUND
STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income / (loss) (173,141) 314,932 3,798 74,712
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 143,273 50,010 31,527 67,418
Profit/loss on sale of fixed assets 31,475 5,433 13,089 2,669
Change in operating assets and liabilities:
Accounts receivable 131,016 (3,590) (278,412 ) 180,720
Receivable from related parties (218,547) (324,074) 145,010 (158,650 )
Inventories 12,968 (19,228) 50,406 (354,646 )
Prepaid expenses and other current assets 1,833 52,180 (170,827 ) (18,986 )
Accounts payable (91,860) 28,637 33,925 107,654
Accrued expenses and other liabilities 158,037 (125,253) 93,507 55,104
Income taxes and social security payable (16,913) 14,519 (36,095 ) (37,350 )
----------------------------- ---------------------------------
Net cash used in operating activities (21,859) (6,434) (114,072 ) (81,355 )
----------------------------- ---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (131,788) (331,142) (183,227 ) (170,510 )
Proceeds from sale of fixed assets - 20,744 - -
----------------------------- ---------------------------------
Net cash used in investing activities (131,788) (310,398) (183,227 ) (170,510 )
----------------------------- ---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds/ (repayment) on finance leases net (62,074) 78,838 94,931 (53,359 )
Minority Interest 8,983 9,542 22,127 (6,251 )
Repayment of loans from related parties (150,021) - - -
Proceeds/(repayments) of overdraft, net 376,211 269,219 180,675 (1,369,567 )
Payment of dividends (19,269) (42,976) - (19,028 )
Loan from related party - - - 1,700,000
----------------------------- ---------------------------------
Net cash provided by financing activities 153,830 314,623 297,733 251,795
----------------------------- ---------------------------------
Net change in cash and cash equivalents 183 (2,209) 434 (70 )
Cash and cash equivalents at beginning of period 2,420 2,603 2,603 394
----------------------------- ---------------------------------
Cash and cash equivalents at end of the period 2,603 394 3,037 324
============================= =================================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid 111,914 135,123 63,923 82,907
============================= =================================
</TABLE>
See Notes to Financial Statements
31
<PAGE> 32
MORBRIA LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANISATION AND BUSINESS
Morbria Limited provides multi-media, reprographic and advertising management
and optimization services to advertisers and agencies in both print media and
through the internet. All of the Group's operations are located in the United
Kingdom.
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with United States
generally accepted accounting principles. The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated upon
consolidation. These financial statements have been prepared in pounds
sterling.
USE OF ESTIMATES
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers investments in highly liquid instruments purchased with
an original maturity of 90 days or less to be cash equivalents. Such amounts
are stated at cost which approximates market value. As of March 31, 1998 and
1999, the Company maintained its cash and cash equivalents in checking accounts
with several financial institutions.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of accounts receivable at March 31, 1998 and
1999. The Company performs periodic credit evaluations of its customers and
maintains an allowance for potential credit losses based on historical
experience and other information available to management. The Company does not
require collateral on accounts receivable. Actual credit losses may differ
significantly from estimated amounts included in the allowance for doubtful
accounts
32
<PAGE> 33
and such differences could be material to the financial statements.
MORBRIA LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
FIXTURES AND EQUIPMENT
Fixtures and equipment are stated at cost. Depreciation is provided at rates
calculated to write off the cost less estimated residual value of each asset
over its expected useful life, as follows:
Fixtures and fittings 4 years straight line
Plant and machinery 8 years straight line
REVENUE RECOGNITION
The Company sells advertising and multi-media services under contracts with
variable lengths. Revenues from such contracts are recognised on a completed
contract basis. The Company also sells reprographic services on a purchase
order basis. Revenues from such services are recognized upon completion of such
services when collection is deemed probable.
ADVERTISING
Costs related to advertising are expensed as incurred. Advertising expense was
immaterial for all periods presented.
INVENTORIES
Inventories represent both raw materials and work in process under advertising
service and web-development contracts. Raw materials are stated at the lower of
cost or net realizable value on a first-in, first-out basis. Inventories were
comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1998 1999 1999
------------------ ------------------- ----------------------
<S> <C> <C> <C>
Pound Sterling Pound Sterling Pound Sterling
Raw materials 17,164 10,609 9,890
Work in process 80,635 106,418 461,783
------------------ ------------------- ----------------------
</TABLE>
33
<PAGE> 34
<TABLE>
<S> <C> <C> <C>
------------------ ------------------- ----------------------
Pound Sterling Pound Sterling Pound Sterling
97,799 117,027 471,673
================== =================== ======================
</TABLE>
MORBRIA LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, "Accounting for Derivatives and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. SFAS No.
133 is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. The adoption of SFAS No. 133 is not expected to have an impact on the
Group's results of operations, financial position, or cash flows.
In March 1998, the American Institute of Certified Public Accountants issued
SOP 98-1: Statement of Position 98-1 ("SOP 98-1"), "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use", which provides
guidance on accounting for such software costs and is effective for years
beginning after December 15, 1998. SOP 98-1 identifies the characteristics of
internal use software and provides examples to assist in determining when
software is developed or obtained for internal use. The impact of SOP 98-1 has
not had a material impact on the Group's results of operations.
2. LINE OF CREDIT
As of March 31, 1999, the Company met its day to day working capital
requirements through an overdraft facility which is repayable on demand. The
Company expects to operate within
34
<PAGE> 35
the facility currently agreed in the foreseeable future. The overdraft is
secured by a fixed and floating charge on the Company's assets.
3. LOANS PAYABLE
In September 1999, as part of the acquisition agreement between TownPages and
Morbria, TownPages loaned Morbria Pound Sterling 1,700,000. The loan is
repayable on demand.
MORBRIA LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
4. INCOME TAXES
Income tax expense (benefit) consist of:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1998 1999 1998 1999
------------ ------------ -------------- -------------
<S> <C> <C> <C> <C>
Pound Pound Pound Pound
Sterling Sterling Sterling Sterling
Current taxes - - - 14,237
Deferred taxes (8,417) 25,177 12,589 6,832
------------ ------------ -------------- -------------
Pound Pound Pound Pound
Sterling Sterling Sterling Sterling
Income tax expense (benefit) (8,417) 25,177 12,589 21,069
------------ ------------ -------------- -------------
</TABLE>
Deferred income taxes reflect the net tax effects of tax carryovers and
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1998 1999 1999
----------------- --------------- ---------------
<S> <C> <C> <C>
Deferred tax assets:
Pound Sterling Pound Sterling Pound Sterling
Net operating loss carryforwards 139,637 134,373 127,706
Accelerated capital allowances 23,770 5,818 5,645
Other temporary differences - 207 207
----------------- --------------- ---------------
Total deferred tax assets 163,407 140,398 133,558
</TABLE>
35
<PAGE> 36
<TABLE>
<S> <C> <C> <C>
Less: Valuation allowance (146,382) (134,914) (131,149)
----------------- --------------- ---------------
17,025 5,484 2,409
Deferred tax liabilities:
Accelerated capital allowances - 13,636 17,393
----------------- --------------- ---------------
Total deferred tax liabilities - 13,636 17,393
----------------- --------------- ---------------
Pound Sterling Pound Sterling Pound Sterling
Net deferred tax assets (liabilities) 17,025 (8,512) (14,984)
----------------- --------------- ---------------
</TABLE>
36
<PAGE> 37
MORBRIA LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
4. INCOME TAXES (CONT.)
Realization of our net deferred tax assets is dependent on future taxable
income. We believe that it is more likely than not that such assets will be
realised. However, ultimate realization could be negatively impacted by market
conditions and other variables not known or anticipated at this time. The
valuation allowance decreased by Pound Sterling 11,468 from March 31, 1998 to
March 31, 1999 and by Pound Sterling 3,765 from March 1999 to September 30,
1999.
The following is a reconciliation between income taxes at the statutory United
Kingdom corporation tax rate and the total income tax expense (benefit):
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1998 1998 1998 1999
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Statutory United Kingdom income
Pound Pound Pound Pound
Sterling Sterling Sterling Sterling
Tax expense (benefit) (53,498) 108,92 11,939 26,859
US GAAP adjustments not tax effected 279,980 (76,233) 1,337 (9,152)
Permanent differences (254,387) 4,915 2,458 7,098
Other 19,488 (11,897) (3,145) (3,736)
------------- ------------ ------------ ------------
Pound Pound Pound Pound
Sterling Sterling Sterling Sterling
(8,417) 25,177 12,589 21,069
------------- ------------ ------------ ------------
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company has traded extensively with other companies controlled by Kevin
Leech, the majority shareholder of the Company. The amounts receivable from
related parties in which Kevin Leech is the controlling party were Pound
Sterling 292,155, Pound Sterling 616,229 and Pound Sterling 774,879 as at
March 31, 1998 and 1999 and September 30, 1999, respectively. Revenues from
such related parties were Pound Sterling 415,092, Pound Sterling 654,770, Pound
Sterling 330,889 and Pound Sterling 378,812 for the years ended March 31, 1998
and 1999 and the six months ended September 30, 1998 and 1999, respectively.
37
<PAGE> 38
MORBRIA LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
6. COMMITMENTS
The Company's operating lease commitments are in respect of equipment and
office buildings. In most cases, it is expected that the operating leases will
be renewed or replaced by other leases in the normal course of business. The
charge in the Company's financial statements in respect of these leases for the
years ended March 31, 1999 and 1998 were Pound Sterling 57,214 and Pound
Sterling 46,865, respectively and for the six months ended September 30, 1999
and 1998 such expenses were Pound Sterling 22,535 and Pound Sterling 22,535,
respectively.
Future minimum annual payments under lease agreements at March 31, 1999 were as
follows:
<TABLE>
<CAPTION>
OPERATING
---------
LEASES CAPITAL LEASES
------ -------------
Pound Pound
Sterling Sterling
<S> <C> <C>
Year ending March 31,
45,071 65,239
2000..............................................................
37,367 122,853
2001..............................................................
37,367 63,310
2002..............................................................
36,750 -
2003..............................................................
36,750 -
2004..............................................................
Thereafter........................................................ - -
------------- -----------------
Total minimum lease payments 193,305 251,402
=============
Amount representing interest (32,193)
-----------------
Present value of minimum lease payments under
capital lease obligations 219,209
Less current portion (92,673)
-----------------
Non-current portion 126,536
=================
</TABLE>
38
<PAGE> 39
As of March 31, 1999, the cost of assets held under capital lease was Pound
Sterling 302,003 with related accumulated amortization of Pound Sterling
104,294.
7. SUBSEQUENT EVENTS
On 24 September, 1999, TownPagesNet.com plc acquired Morbria Limited
39
<PAGE> 40
BUYERSGUIDE LIMITED
REPORT OF INDEPENDENT AUDITORS
To: The Directors and Shareholders
Buyersguide Limited
We have audited the accompanying balance sheets of Buyersguide Limited as of
March 31, 1998 and 1999 and the related statements of operations, stockholders
equity and cash flows for each of the two years in the period ended March 31,
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 United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material mis-statement. 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 Buyersguide Limited at March
31, 1998 and 1999, and the results of its operations and its combined cash
flows for each of the two years in the period ended March 31, 1999, in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG
Reading, England
March 17, 2000
40
<PAGE> 41
BUYERSGUIDE LIMITED
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
---------------------------- -----------------
1998 1999 1999
Pound Pound Pound
Sterling Sterling Sterling
<S> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash, cash equivalents and short term investments 48,335 57,479 153,944
Accounts receivable 109,674 178,099 250,031
---------------------------- -----------------
Total Current Assets 158,009 235,578 403,975
Motor Vehicles 28,907 28,907 28,907
Furniture and fixtures 12,564 14,278 18,978
---------------------------- -----------------
41,471 43,185 47,885
Less: Accumulated depreciation (7,062) (16,252) (20,515)
---------------------------- -----------------
34,409 26,933 27,370
---------------------------- -----------------
192,418 262,511 431,345
---------------------------- -----------------
LIABILITIES AND SHAREHOLDERS EQUITY:
CURRENT LIABILITIES:
Bank loans of credit 2,083 - -
Accounts payable 16,887 22,257 17,296
Current portion of capital lease obligations 4,576 4,578 2,102
Income taxes and social security payable 22,991 42,698 74,982
Deferred Income 234,117 480,272 565,144
---------------------------- -----------------
Total current liabilities: 280,654 549,805 659,524
Capital lease obligations less current portion 4,952 - -
SHAREHOLDERS' EQUITY:
Invested capital 30,488 30,488 30,488
Accumulated deficit (123,676) (317,782) (258,667)
---------------------------- -----------------
Total shareholders' equity: (93,188) (287,294) (228,179)
---------------------------- -----------------
192,418 262,511 431,345
---------------------------- -----------------
</TABLE>
See Notes to Financial Statements
41
<PAGE> 42
BUYERSGUIDE LIMITED
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, SIX MONTHS ENDED SEPTEMBER 30,
----------------------------- --------------------------------
1998 1999 1998 1999
POUND POUND POUND POUND
STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C>
REVENUES
Advertising revenues 285,868 695,033 283,364 536,348
Contract revenues and other - - - -
Revenues from related parties - - - -
----------------------------- --------------------------------
TOTAL REVENUES 285,868 695,033 283,364 536,348
COST OF REVENUES
Maintenance and hosting costs 1,988 1,194 597 852
Cost of contract revenues and other - - - -
Advertising and commission costs 132,335 368,559 146,488 259,196
----------------------------- --------------------------------
134,323 369,753 147,085 260,048
GROSS PROFIT 151,545 325,280 136,279 276,300
OPERATING EXPENSES:
General and administrative 155,364 247,377 118,548 90,977
Depreciation 5,830 9,190 4,595 4,263
----------------------------- --------------------------------
Total operating expenses 161,194 256,567 123,143 95,240
OPERATING PROFIT / (LOSS) (9,649) 68,713 13,136 181,060
Interest expense (78) (920) (460) (460)
Interest income 161 579 290 1,237
----------------------------- --------------------------------
NET PROFIT/(LOSS) FOR THE PERIOD (9,566) 68,372 12,966 181,837
============================= ================================
</TABLE>
See Notes to Financial Statements
42
<PAGE> 43
BUYERSGUIDE LIMITED
COMBINED STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
INVESTED ACCUMULATED
CAPITAL DEFICIT TOTAL
------------------------------------------------------
<S> <C> <C> <C>
Pound Pound Pound
Sterling Sterling Sterling
Balance at March 31, 1997 20,847 (36,433) (15,586)
Net loss for year (9,566) (9,566)
Income taxes - -
Partner drawings (77,677) (77,677)
Partner contributions 9,641 - 9,641
------------------------------------------------------
Balance at March 31, 1998 30,488 (123,676) (93,188)
Net profit for year 68,372 68,372
Income taxes - -
Partner drawings (262,478) (262,478)
Movement in stock - -
------------------------------------------------------
Balance at March 31, 1999 30,488 (317,782) (287,294)
Net profit for period 181,837 181,837
Income taxes - -
Partner drawings (122,722) (122,722)
Movement in stock - -
------------------------------------------------------
Pound Pound Pound
Sterling Sterling Sterling
Balance at September 30, 1999 30,488 (258,667) (228,179)
======================================================
</TABLE>
See Notes to Financial Statements
43
<PAGE> 44
BUYERSGUIDE LIMITED
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
--------------------------- --------------------------
1998 1999 1998 1999
POUND POUND POUND POUND
STERLING STERLING STERLING STERLING
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income / (loss) (9,566) 68,372 12,966 181,837
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 5,830 9,190 4,595 4,263
Change in operating assets and
liabilities:
Accounts receivable (83,878) (68,425) (5,814) (71,932)
Accounts payable 14,687 5,370 - (4,961)
Deferred income 191,327 246,155 103,572 84,872
Income taxes and social security payable 14,404 19,707 (739) 32,284
--------------------------- --------------------------
Net cash provided by operating activities 132,804 280,369 114,580 226,363
--------------------------- --------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of tangible fixed assets (20,914) (1,714) - (4,700)
--------------------------- --------------------------
Net cash used in investing activities (20,914) (1,714) - (4,700)
--------------------------- --------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on finance lease commitments (5,685) (4,950) (2,475) (2,476)
Proceeds from finance leases 10,000 - - -
Capital contributions 9,641 - - -
Proceeds from/repayment of loans 83 (2,083) (1,200) -
Partner drawings (77,677) (262,478) (131,239) (122,722)
--------------------------- --------------------------
Net cash used in by financing activities (63,638) (269,511) (134,914) (125,198)
--------------------------- --------------------------
Net change in cash and cash equivalents 48,252 9,144 (20,334) 96,465
Cash and cash equivalents at beginning of period 83 48,335 48,335 57,479
Cash and cash equivalents at end of the period
--------------------------- --------------------------
48,335 57,479 28,001 153,944
--------------------------- --------------------------
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid 78 920 460 460
--------------------------- --------------------------
</TABLE>
See Notes to Financial Statements
44
<PAGE> 45
BUYERSGUIDE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. BUSINESS
ORGANISATION AND BUSINESS
These financial statements represent the financial statements of Buyersguide
Limited. The company provides advertising services through the internet. All of
the Company's operations are located in the United Kingdom.
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with United States
generally accepted accounting principles. These financial statements have been
prepared in pounds sterling.
Through September 30, 1999 the business traded as a partnership. On that date,
the partnership ceased trading and the fixed assets of the business were
transferred to Buyersguide Limited, a company incorporated under the laws of
England and Wales. The remaining assets and liabilities of the partnership were
retained by the partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FIXTURES AND EQUIPMENT
Fixtures and equipment are stated at cost. Depreciation is provided at rates
calculated to write off the cost less estimated residual value of each asset
over its expected useful life, as follows:
Fixtures and fittings 5 years straight line
Plant and machinery 25% reducing balance
REVENUE RECOGNITION
45
<PAGE> 46
The group sells advertising on a twelve month contract. Income is recognised in
the profit and loss account on a pro rata basis over the twelve month period.
The corresponding costs are expensed when incurred.
BUYERSGUIDE LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCE LEASES AND HIRE PURCHASE
Assets held under finance leases are capitalized in the balance sheet and are
depreciated over the shorter of the lease term or their useful economic life.
Amortization of these assets is included in the income statement with
depreciation and amortization of purchased assets.
USE OF ESTIMATES
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the company to concentration of
credit risk consist primarily of accounts receivable at March 31, 1998 and
1999. The Group performs periodic credit evaluations of its customers and
maintains an allowance for potential credit losses based on historical
experience and other information available to management. The Group does not
require collateral on accounts receivable. Actual credit losses may differ
significantly from estimated amounts included in the allowance for doubtful
accounts and such differences could be material to the financial statements.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, "Accounting for Derivatives and Hedging Activities," which
establishes accounting
46
<PAGE> 47
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The adoption of
SFAS No. 133 is not expected to have an impact on the company's results of
operations, financial position, or cash flows.
In March 1998, the American Institute of Certified Public Accountants issued
SOP 98-1: Statement of Position 98-1 ("SOP 98-1"), "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use", which provides
guidance on accounting for such software costs and is effective for years
beginning after December 15, 1998. SOP 98-1 identifies the characteristics of
internal use software and provides examples to assist in determining when
software is developed or obtained for internal use. The impact of SOP 98-1 has
not had a material impact on the Group's results of operations.
BUYERSGUIDE LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
3. INCOME TAXES / CORPORATION TAXES
Due to the business operating as a partnership until September 30, 1999 profits
of the business were taxed under personal income tax rules rather than company
corporation tax rules. No estimates have been made to include a corporation tax
charge or liability in the accounts.
4. COMMITMENTS
The Company's operating leases are solely for office buildings and are month to
month leases. In most cases, it is expected that the operating leases will be
renewed or replaced by other leases in the normal course of business. Rental
expense incurred for the years ended March 31, 1999 and 1998 were Pound
Sterling 12,397 and Pound Sterling 5,400, respectively and for the six months
ended September 30, 1999 and 1998 were Pound Sterling 17,234 and Pound Sterling
5,557, respectively.
Future minimum annual payments under capital lease agreements at March 31, 1999
were as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES
POUND
STERLING
<S> <C>
Year ending March 31,
2000.............................................................. 5,428
2001.............................................................. -
2002.............................................................. -
2003.............................................................. -
</TABLE>
47
<PAGE> 48
<TABLE>
<S> <C>
2004.............................................................. -
Thereafter........................................................ -
------------------
Total minimum lease payments 5,428
Amount representing interest (850)
Present value of minimum lease payments under
------------------
capital lease obligations 4,578
Less current portion (4,578)
------------------
Non-current portion -
==================
</TABLE>
As of March 31, 1999, the cost of assets held under capital lease was Pound
Sterling 10,425 with related accumulated amortization of Pound Sterling 4,863.
BUYERSGUIDE LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
5. RELATED PARTY TRANSACTIONS
Mr J Bowden and Miss L Bowden are the co-owners of the property from which the
Company's Newcastle-upon-Tyne operations are carried on. The company believes
that this related-party transaction is on terms no less favourable than would
be obtained from unrelated third parties. Any future transactions between the
company and its officers, directors and affiliates will be on terms no less
favourable to the Company than can be obtained from unaffiliated third parties.
Rental expense in respect of such transactions for the year ended March 31,
1999 was Pound Sterling 9,120 and for the six months ended September 30, 1999
and 1998 were Pound Sterling 12,216 and Pound Sterling 2,280, respectively. No
rental expense was incurred under such agreement for the year ended March 31,
1998.
6. SUBSEQUENT EVENTS
On October 1, 1999, TownPages acquired Buyersguide Limited.
48
<PAGE> 49
TOWNPAGESNET.COM PLC
FORM 6-K
WWW.CO.UK, MORBRIA & BUYERSGUIDE
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 thereunto duly authorised.
TownPagesNet.com plc
Date: April 14, 2000 By: /s/ Richard Walker
--------------------- ---------------------------------
Richard Walker
Chief Financial Officer
49
