<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
-------------------------------------------------------------------------------
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 31, 2000
COMMISSION FILE NUMBER: 01-25957
BIZNESSONLINE.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-25957 06-1519132
-------- ------- ----------
(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation or organization) File Number) Identification No.)
1720 Route 34, PO Box 1347 WALL, NJ 07719
---------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 732-280-6408
Registrant's fax number, including area code: 732-280-6409
<PAGE>
EXPLANATORY NOTE
On April 14, 2000, the Registrant filed a Current Report on Form 8-K,
describing the acquisitions of Telecon Communications Corp., a competitive
local exchange carrier based in Johnstown, New York, and Telesupport, Inc.,
an Internet service provider and an affiliate of Telecon (the "Telecon
Acquisition"). This Current Report on Form 8-K/A amends the initial report by
including with this Form 8-K/A the financial statements for the companies
acquired on a combined basis and the pro forma financial information
prescribed by Item 7 to Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(a) Combined Financial Statements of Telecon Communications Corp.
and Telesupport, Inc.
- Independent Auditors' Report 1
- Balance Sheets as of December 31, 1999 and 1998 2
- Statements of Operations for the years ended December 31, 1999 and 3
1998
- Statements of Stockholders' Equity for the years ended December 31, 4
1999 and 1998
- Statements of Cash Flows for the years ended December 31, 1999 and 5
1998
- Notes to Combined Financial Statements 6
(b) Pro Forma Financial Information.
- Introduction to Unaudited Pro Forma Condensed Combined Financial 11
Information
- Unaudited Pro Forma Condensed Consolidated Statement of Operations 12
for the year ended December 31, 1999
- Unaudited Pro Forma Condensed Consolidated Statement of Operations 13
for the three months ended March 31, 2000
- Notes to Unaudited Pro Forma Condensed Consolidated Financial Information 14
- Unaudited Condensed Consolidated Balance Sheet as of March 31, 15
2000
(c) Exhibits
23.1 Consent of KPMG LLP
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Telecon Communications Corp.:
We have audited the accompanying combined balance sheets of Telecon
Communications Corp. and Telesupport, Inc. (collectively, "Telecon
Communications") as of December 31, 1999 and 1998, and the related combined
statements of operations, stockholders' equity and cash flows for the years then
ended. These combined financial statements are the responsibility of Telecon's
management. Our responsibility is to express an opinion on these combined
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 audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Telecon
Communications Corp. and Telesupport, Inc. as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Providence, Rhode Island
January 31, 2000 /s/ KPMG LLP
<PAGE>
TELECON COMMUNICATIONS
Combined Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
---------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 819,155 635,549
Accounts receivable, net of allowance for doubtful
accounts of approximately $1.2 million and
$1.0 million in 1999 and 1998,
respectively 2,247,209 1,812,331
Current portion of trade notes receivable 72,955 95,212
Prepaid expenses 116,853 42,262
Federal excise tax receivable 39,077 1,817
Notes receivable from stockholders (note 2) 178,000 --
Inventories 80,128 --
---------- ---------
Total current assets 3,553,377 2,587,171
---------- ---------
Property and equipment:
Land and improvements 26,958 26,958
Building 156,134 156,134
Furniture and fixtures 25,883 25,883
Computer and telecommunications equipment 531,542 414,754
---------- ---------
740,517 623,729
Less accumulated depreciation 259,436 159,983
---------- ---------
Net property and equipment 481,081 463,746
Trade notes receivable, net of current portion 68,449 76,613
Intangible assets, net of amortization of $12,000
and $9,000 in 1999 and 1998, respectively 18,052 21,053
---------- ---------
Total assets $ 4,120,959 3,148,583
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 718,257 574,500
Accrued expenses (note 4) 150,000 2,231,833
Notes payable to stockholders (note 2) -- 40,755
Deferred revenue 314,709 256,893
---------- ---------
Total current liabilities 1,182,966 3,103,981
Commitments (note 5)
Stockholders' equity:
Common stock, No par value; 400 shares authorized,
225.16 and 150 shares issued and outstanding in
1999 and 1998, respectively 1,899,570 11,000
Retained earnings 1,138,423 133,602
Treasury Stock, 45 common shares, at cost (100,000) (100,000)
---------- ---------
Total stockholders' equity 2,937,993 44,602
---------- ---------
Total liabilities and stockholders' equity $ 4,120,959 3,148,583
========== =========
</TABLE>
See accompanying notes to combined financial statements.
2
<PAGE>
TELECON COMMUNICATIONS
Combined Statements of Operations
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revenues (note 7) $ 10,028,358 8,199,449
Operating expenses:
Connectivity and operations 6,845,893 5,764,378
General and administrative 1,426,743 1,382,634
Stock compensation (note 6) -- 1,888,570
Sales and marketing 75,923 71,685
Depreciation and amortization 102,453 72,717
---------- ----------
Total operating expenses 8,451,012 9,179,984
---------- ----------
Operating income (loss) 1,577,346 (980,535)
Other income (expense):
Interest income, net 9,697 5,251
Other income -- 15,183
---------- ----------
Total other income 9,697 20,434
---------- ----------
Net income (loss) $ 1,587,043 (960,101)
========== ==========
Net income (loss) per share - basic and diluted $ 7,048.51 (6,400.67)
========== ==========
Weighted average shares outstanding - basic and diluted 225.16 150
========== ==========
</TABLE>
See accompanying notes to combined financial statements.
3
<PAGE>
TELECON COMMUNICATIONS
Combined Statements of Stockholders' Equity
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED TREASURY STOCKHOLDERS'
STOCK EARNINGS STOCK EQUITY
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 11,000 1,600,657 (100,000) 1,511,657
Distributions to stockholders -- (506,954) -- (506,954)
Net loss -- (960,101) -- (960,101)
---------- ---------- --------- -----------
Balance at December 31, 1998 11,000 133,602 (100,000) 44,602
Issuance of common stock (note 6) 1,888,570 -- -- 1,888,570
Distributions to stockholders -- (582,222) -- (582,222)
Net income -- 1,587,043 -- 1,587,043
---------- ---------- --------- -----------
Balance at December 31, 1999 $ 1,899,570 1,138,423 (100,000) 2,937,993
========== ========== ========= ===========
</TABLE>
See accompanying notes to combined financial statements.
4
<PAGE>
TELECON COMMUNICATIONS
Combined Statements of Cash Flows
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,587,043 (960,101)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 102,453 72,717
Provision for bad debts 146,547 140,180
Non-cash stock compensation -- 1,888,570
Changes in net assets and liabilities:
Increase in accounts receivable (581,425) (585,942)
(Increase) decrease in trade notes receivable 30,421 (37,769)
Increase in prepaid expenses (74,591) (29,525)
Increase in Federal excise tax receivable (37,260) (1,817)
Increase in inventories (80,128) --
Increase in accounts payable 143,757 174,273
Increase (decrease) in accrued expenses (193,262) 59,992
Change in stockholder notes, net (218,755) 4,015
Increase in deferred revenue 57,816 111,003
----------- -----------
Net cash provided by operating activities 882,616 835,596
----------- -----------
Cash flows from investing activities:
Capital expenditures for property and equipment (116,788) (178,695)
----------- -----------
Net cash used in investing activities (116,788) (178,695)
----------- -----------
Cash flows from financing activities:
Distributions to stockholders (582,222) (459,654)
----------- -----------
Net cash used in financing activities (582,222) (459,654)
----------- -----------
Net increase in cash and cash equivalents 183,606 197,247
Cash and cash equivalents at beginning of year 635,549 438,302
----------- -----------
Cash and cash equivalents at end of year $ 819,155 635,549
=========== ===========
Supplemental cash flow information:
Interest paid was $0 and $1,394 in 1999 and 1998.
Other non-cash activities:
Effective January 1, 1999, the Company issued shares of common
stock to certain employees in exchange for services performed
in 1998. The total fair value of the shares was approximately
$1.9 million.
</TABLE>
See accompanying notes to combined financial statements.
5
<PAGE>
TELECON COMMUNICATIONS
Notes to Combined Financial Statements
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPAL OF COMBINATION
The combined financial statements of Telecon Communications
("Telecon Communications" or "the Company") include the financial
statements of Telecon Communications Corp. and Telesupport, Inc.,
which are owned by three common stockholders. All significant
intercompany balances and transactions have been eliminated in
combination.
(B) NATURE OF OPERATIONS
Telecon Communications was incorporated in 1986 and is a provider
of Internet access, long distance and local telephone service,
paging, cellular telephone service, computer and telephone systems
consulting and resale, and energy services resale in upstate New
York. The corporate office is in Johnstown, N.Y. with an
additional retail and sales office in Glens Falls, NY.
(C) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions, including estimates of the
allowance for doubtful accounts and provisions for sales credits,
that affect the amounts reported in the financial statements.
Actual results may differ from those estimates.
(D) REVENUE RECOGNITION
The Company recognizes revenue when services are provided.
Services are generally billed in advance. Advance billings are
recorded as deferred revenue and recognized as revenue when earned
over the period of service.
(E) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
an original maturity of three months or less to be cash
equivalents.
(F) TRADE NOTES RECEIVABLES
Trade notes receivables represent receivables for computer and
telephone systems purchased and installed for customers for which
customers make monthly principal and interest payments over
periods generally in excess of one year.
6 (Continued)
<PAGE>
TELECON COMMUNICATIONS
Notes to Combined Financial Statements
December 31, 1999 and 1998
(G) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is
provided using an accelerated method over the estimated useful
lives of the assets for property and equipment. The estimated
useful lives are as follows:
<TABLE>
<S> <C>
Land Improvements 10 years
Building 39 years
Furniture and Fixtures 5-10 years
Computer and telecommunications equipment 5 years
</TABLE>
(H) INTANGIBLES
Intangible assets consist primarily of a covenant not to compete,
which is amortized over the covenant period of 10 years.
(I) INCOME TAXES
As a subchapter S corporation, Telecon Communications' income is
taxed at the stockholder level, therefore except for certain local
business income taxes, no income tax provision has been included
in the Combined Financial Statements.
(J) ADVERTISING COSTS
The Company incurs advertising costs associated with the marketing
of its services. These costs of advertising are expensed as
incurred. Advertising expense was approximately $26,000 for each
of the years ended December 31, 1999 and 1998.
(K) IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an
asset to future undiscounted net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair
value of the assets.
7 (Continued)
<PAGE>
TELECON COMMUNICATIONS
Notes to Combined Financial Statements
December 31, 1999 and 1998
(L) EARNINGS PER SHARE
The Company applies the provisions of SFAS No. 128, "Earnings per
Share" for its presentation of earnings per share. This statement
requires the presentation of basic and diluted earnings per share
for all periods presented. There were no common stock equivalents
outstanding for any of the periods presented; accordingly, basic
and fully diluted earnings per share are the same and are based
upon the combined number of shares outstanding for both Telecon
and Telesupport.
(2) SHAREHOLDER NOTES
(A) NOTES RECEIVABLE FROM STOCKHOLDERS
Two notes totaling $178,000 were executed in December 1999 and are
due to the Company from two officers and bear no interest. The
notes receivable will become due and are expected to be paid in
full during 2000.
(B) NOTES PAYABLE TO STOCKHOLDERS
The notes payable at December 31, 1998 are due to the stockholders
of Telecon Communications and bear no interest. The notes payable
were paid in 1999.
(3) LEASES
The Company has operating leases for certain office equipment, with
expiration dates through 2002. Rental expense for operating leases during
1999 and 1998 was approximately $18,000 and $16,000.
Approximate future minimum lease payments under operating leases as of
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED OPERATING
DECEMBER 31: LEASES
<S> <C>
2000 $ 14,500
2001 10,400
2002 4,000
---------
Total minimum lease payments $ 28,900
=========
</TABLE>
8 (Continued)
<PAGE>
TELECON COMMUNICATIONS
Notes to Combined Financial Statements
December 31, 1999 and 1998
(4) ACCRUED EXPENSES
Accrued expenses as December 31, 1999 and December 31, 1998 consist of
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Accrued stock compensation $ -- 1,888,570
Accrued payroll 85,841 95,160
Sales tax payable 29,000 81,224
Dividends payable -- 47,300
Other accruals 35,159 119,579
------------ -------------
Total $ 150,000 2,231,833
============ =============
</TABLE>
(5) COMMITMENTS
The Company has entered into several contracts with vendors that provide
certain telephone related line access services and energy related
services with various expiration dates. Following are the approximate
commitments for each of the three years subsequent to December 31, 1999:
<TABLE>
<S> <C>
2000 $ 2,255,000
2001 1,319,000
2002 60,000
------------
Total $ 3,634,000
============
</TABLE>
(6) STOCK COMPENSATION
On January 15, 1999, the Board of Directors and stockholders of the
Company approved the issuance of 75.16 shares of common stock of the
combined entities to two key employees for services provided in 1998. The
estimated fair value of the shares on the date the grant was approved was
approximately $1.9 million. This amount was recorded as a compensation
charge in the 1998 statement of operations. The actual issuance of the
shares was completed in 1999.
9 (Continued)
<PAGE>
TELECON COMMUNICATIONS
Notes to Combined Financial Statements
December 31, 1999 and 1998
(7) SEGMENT REPORTING
During 1998, the Company adopted Financial Accounting Standards Board of
Statement No. 131 ("SFAS 131"), "Disclosures About Segments of an
Enterprise and Related Information." The Company does not prepare
statements of operations by segments but it does classify and manage its
revenue based upon eight reportable segments. All of the Company's
operations and long-lived assets reside in the United States.
Revenues by reportable segment are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cellular $ 1,871,628 1,679,938
Long Distance 3,380,051 3,745,686
Paging 440,181 356,530
Internet 1,561,988 852,478
Energy 421,529 57,601
Local Dial tone 871,987 451,385
Network 221,038 142,182
Service 1,259,956 913,649
------------ -------------
Total $ 10,028,358 8,199,449
============ =============
</TABLE>
Cellular, long distance and local dial tone, paging and energy resale
segment revenues consist of revenues earned through the resale of
services purchased through third party wholesalers to the Company's
customers. Internet and network segment revenues consist of revenues
earned through internet service provider services and network services to
the Company's customers. Service segment revenues consist of revenues
earned through various computer and telephone services consulting.
(8) SUBSEQUENT EVENT (UNAUDITED)
On December 5, 1999, Telecon Communications Corp. and its shareholders
entered into an asset purchase agreement with BiznessOnline.com, Inc.
pursuant to which BiznessOnline.com, Inc. will acquire (i) substantially
all of the assets of Telecon Communications Corp., except for a
receivable from two customers of approximately $528,000 at December 31,
1999, and (ii) certain liabilities of Telecon, for approximately
$14.8 million in cash. Also on December 5, 1999, the shareholders of
Telesupport, Inc. entered into a merger agreement with
BiznessOnline.com, Inc. whereby they will receive, in exchange for all
the stock of Telesupport, Inc., approximately 358,000 shares of Bizness
Online.com common stock. Contemporaneously with the acquisition,
Telesupport will be merged into a subsidiary of BiznessOnline.com. The
transactions are subject to customary closing conditions and, with
respect to Telecon, approval of the New York Public Service Commission.
10
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED
COMBINED CONSOLIDATED FINANCIAL DATA
On March 31, 2000, the Company acquired all the assets and assumed substantially
all the liabilities of Telecon Communications Corp., a competitive local
exchange carrier based in Johnstown, New York, for the payment of $14,815,000 in
cash. Also, on March 31, 2000, the Company acquired all the shares of
Telesupport, Inc., an Internet service provider located in Johnstown, New York
for 358,335 shares of common stock. The Telecon Acquisition was accounted for
using the purchase method of accounting.
On March 16, 2000, the Company closed a $15 million senior secured credit
facility. The Company used the proceeds of this facility to fund the cash
purchase price of Telecon Communications Corp. The credit facility is secured by
all the assets of the Company and its operating subsidiaries. In connection with
the financing, the Lender received certain cash fees and a warrant to purchase
838,779 shares of our common stock at prices of $7.00 per share for 559,185
shares and $12.00 per share for 279,593 shares, subject to certain anti-dilution
and other adjustments. The Lender also received 71,429 shares of common stock.
The warrants and shares of common stock issued to the Lender have been estimated
by us to have a value of $5.4 million using the Black-Scholes method of
valuation for the warrants, and the value of the shares of common stock issued
on the date of issuance. We are in the process of obtaining an independent
valuation of these warrants. The calculation of the value of the warrants may be
adjusted, if appropriate, upon completion of the valuation process. The fair
value of the warrants and shares issued have been recorded as a discount to the
related debt.
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The selected unaudited pro forma condensed combined financial information
presented below has been derived from the audited and unaudited historical
financial statements of BiznessOnline.com, Inc. and Telecon Communications Corp.
and Telesupport, Inc., and reflects management's present estimate of pro forma
adjustments, including a preliminary estimate of the purchase price allocations,
which ultimately may be different. This pro forma presentation does not purport
to represent what our financial position or results of operations would actually
have been if such transactions and events had in fact occurred on those dates or
to project our results of operations for any future period. For presentation
purposes, the results of Telecon Communications Corp. and Telesupport, Inc. have
been combined as they are related companies under common control.
RESULTS OF OPERATIONS - PRO FORMA
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1999 includes the actual results of
BiznessOnline.com, Inc. for the year ended December 31, 1999 combined with
the pro forma effect of the results of operations of the Internet service
provider acquired in January 1999, the additional four Internet service
providers acquired in 1999, the Internet service provider acquired in July
1999, the three Internet service providers acquired in December 1999, and the
results of the web host and application providers acquired in August 1999 and
September 1999 ("the 1999 Acquisitions"), as if these 1999 acquisitions had
occurred on January 1, 1999. This information, which was reported in the
Company's 1999 Annual Report on Form 10-K, is presented under the heading
"1999 Acquired Companies". The pro forma information included under the
heading "Pro forma Consolidated" in the unaudited pro forma condensed
consolidated statement of operations for the year ended December 31, 1999 and
the quarter ended March 31, 2000 includes the results of Telecon and
Telesupport as if these acquisitions and the issuance of debt to MCG Finance
Corporation had occurred on January 1, 1999. This unaudited pro forma
consolidated financial information includes the effects of (a) the 1999
Acquisitions, (b) the Telecon Acquisition, (c) interest expense on the debt,
and (d) the amortization of goodwill and other intangibles resulting from the
acquisitions.
11
<PAGE>
BiznessOnline.com, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1999
Acquired Pro forma Pro forma
Companies Telecon Adjustments Consolidated
------------ -------- ----------- ------------
<S> <C> <C> <C> <C>
Internet revenues $ 14,874 $ 1,562 $16,436
Telecommunication revenues - 8,466 8,466
------- ------- ------ -------
Total revenue 14,874 10,028 24,902
------- ------- ------ -------
Costs and expenses:
Connectivity and operations 8,599 6,846 15,445
Sales and marketing 2,537 1,427 3,964
General and administrative 3,303 76 3,379
Stock compensation 322 - 322
Depreciation 878 102 980
Amortization 7,038 - 2,904 (1) 9,942
------- ------- ------ -------
Total costs and expenses 22,677 8,451 2,904 34,032
------- ------- ------ -------
Income (loss) from operations ( 7,803) 1,577 (2,904) ( 9,130)
Other expense (7) - (7)
Interest income, (expense) net 367 10 (3,607)(2) ( 3,230)
------- ------- ------ -------
Loss before income taxes (7,443) 1,587 (6,511) (12,367)
Income taxes 98 - 127 (3) 225
------- ------- ------ -------
Net income (loss) $( 7,541) $ 1,587 $(6,638) $(12,592)
------- ------- ------ -------
------- ------- ------ -------
Net loss per share, basic and diluted (4) $ (0.88) $ ( 1.39)
Weighted average shares outstanding, 8,609,574 9,039,338
basic and diluted
12
</TABLE>
<PAGE>
BiznessOnline.com, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Three Months Ended March 31, 2000
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro forma Pro forma
Actual Telecon Adjustments Consolidated
----------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Internet revenues $ 4,077 $ 486 $ 4,563
Telecommunication revenues - 2,395 2,395
----------- --------- ------------- -------------
Total revenue 4,077 2,881 6,958
Costs and expenses:
Connectivity and operations 3,359 2,431 5,790
Sales and marketing 1,087 22 1,109
General and administrative 779 41 820
Depreciation 405 31 436
Amortization 1,739 - 726 (1) 2,465
----------- --------- ------------- -------------
Total costs and expenses 7,369 2,525 726 10,620
----------- --------- ------------- -------------
Income (loss) from operations (3,292) 356 (726) (3,662)
Interest income (expense), net 4 10 (785) (2) (771)
----------- --------- ------------- -------------
Loss before income taxes (3,288) 366 (1,511) (4,433)
Income taxes 94 - 30 (3) 124
----------- --------- ------------- -------------
Net income (loss) $(3,382) $ 366 $(1,541) $( 4,557)
----------- --------- ------------- -------------
----------- --------- ------------- -------------
Net loss per share, basic and diluted (4) $ (0.39) $ (0.50)
Weighted average shares outstanding, 8,614,297 9,039,338
basic and diluted
</TABLE>
13
<PAGE>
Notes to the Unaudited Pro Forma Condensed Consolidated Financial
Information
PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been made to the unaudited condensed
consolidated statements of operations for the year ended December 31, 1999,
which includes the pro forma effects of all of the Company's 1999 acquisitions,
and the three months ended March 31, 2000.
(1) To record amortization expense for the increase in goodwill from the
acquisitions using a useful life of five years, as if such acquisitions had
been completed as of January 1, 1999.
(2) To adjust interest expense for the issuance of MCG debt as if such debt had
been issued as of January 1, 1999. Interest expense includes $1,373 during
1999 and $317 during the three months ended March 31, 2000 of accretion of
discount related to the warrant granted to MCG in connection with the debt
financing.
(3) To record income tax expense for the year ended December 31, 1999 and
quarter ended March 31, 2000 at an estimated effective rate of 8%. Tax
expense consists solely of state income taxes on income earned in New York
State. For federal income tax purposes, the Company files on a consolidated
basis and is in a net operating loss position. Therefore, no provision has
been made for federal income tax expense.
(4) Basic and diluted loss per share and the weighted average shares
outstanding for the unaudited pro forma condensed consolidated statements
of operations give effect to the results as if the 1999 Acquisitions and
the acquisition of Telecon Communications Corp. and Telesupport, Inc. had
been completed as of January 1, 1999.
The total purchase price for the Telecon Acquisition was allocated on a
preliminary basis, on the date of acquisition and will be reviewed upon
completion of valuations as appropriate or resolution of any contingent
purchase price adjustments. Pursuant to the purchase method of accounting,
the excess of purchase price over fair value of net assets acquired is
recorded as goodwill and is being amortized over 5 years. A final allocation
of purchase price will be determined during 2000 with respect to the Telecon
Acquisition, and changes, if any, will result in a change to the amount of
goodwill recorded in connection with the Telecon Acquisition. The Asset
Purchase Agreement between the Company and Telecon Communications Corp. has
provisions for adjustments to the Telecon purchase price based on
profitability levels and net equity levels based upon the December 31, 1999
and March 31, 2000 consolidated financial statements of Telecon
Communications Corp. and Telesupport, Inc. Any adjustments will result in an
adjustment to the amount recorded as goodwill.
The excess of the total purchase price for the Telecon Acquisition over the
allocations of fair value to the net assets acquired will be recorded as
goodwill, which is calculated as follows for purposes of the pro forma
presentations herein:
Purchase consideration $17,201
Direct acquisition costs 291
----------
Total purchase price $17,492
Less: tangible assets and liabilities acquired
Working capital $ 2,374
Property and equipment 525
Other assets 74
-----------
Goodwill $14,519
14
<PAGE>
BiznessOnline.com, Inc.
Unaudited Condensed Consolidated Balance Sheet
(In thousands)
CONSOLIDATED BALANCE SHEET
Included below is the Company's March 31, 2000 historical consolidated
balance sheet as filed in its March 31, 2000 Form 10-Q which includes the
impact of the Acquisitions completed on March 31, 2000 and the issuance of
debt to MCG Finance Corporation.
<TABLE>
<CAPTION>
March 31,
2000
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<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,476
Accounts receivable, net 4,031
Prepaid expenses and other current assets 858
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Total current assets 10,365
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Property and equipment, net 6,849
Goodwill and intangibles, n 45,107
Other assets 146
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Total assets $ 62,467
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt $ -
Current portion of obligations under capital leases 168
Accounts payable 2,499
Income tax payable 61
Accrued expenses 2,442
Deferred revenue 2,180
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Total current liabilities 7,350
Long term debt, net of current portion 9,646
Capital leases, net of current portion 81
Total liabilities 17,077
Stockholders' equity:
Preferred stock -
Common stock 90
Additional paid in capital 52,863
Accumulated deficit (7,563)
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Total stockholders' equity 45,390
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Total liabilities and stockholders' equity $ 62,467
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</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BiznessOnline.com, Inc.
Dated: June 14, 2000 By: /s/ Mark E. Munro
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Mark E. Munro
Chief Executive Officer and
President
