<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------
JULY 31, 2000
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
ARS NETWORKS, INCORPORATED
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NEW HAMPSHIRE 000-25967 14-1805077
---------------------------- ---------------------- ---------------
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
100 WALNUT STREET, CHAMPLAIN
NEW YORK
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
12919
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(ZIP CODE)
(518) 298-2042
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
This filing amends the previously filed Form 8-K, dated August 11, 2000 and
filed on August 11, 2000 (the "8-K") of ARS Networks, Incorporated ("ARS"), and
relates to the acquisition by ARS of 100% of the common shares of T & T Diesel
Power Limited, a Canadian company in the business of assembling and selling
diesel powered generators. As stated in the 8-K, the required financial
statements and pro forma financial information would be filed by amendment at a
later date.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
T & T Diesel Power Limited
Financial Statements
Years Ended July 31, 1999 and 2000
2
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Contents
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Independent Auditors' Report 4
Financial Statements
Balance Sheets 5
Statements of Operations 6
Statements of Stockholders' Equity 7
Statements of Cash Flows 8
Notes to Financial Statements 9-12
3
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Independent Auditors' Report
T & T Diesel Power Limited
Georgetown, Ontario, Canada
We have audited the accompanying balance sheets of T & T Diesel Power Limited as
of July 31, 1999 and 2000, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of T & T Diesel Power Limited at
July 31, 1999 and 2000, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
/s/ Lougen, Valenti, Bookbinder & Weintraub, LLP
Amherst, New York
September 29, 2000
4
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T & T Diesel Power Limited
Balance Sheets
<TABLE>
<CAPTION>
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July 31, 1999 2000
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(Canadian Dollars)
Assets
<S> <C> <C>
Current
Cash $133,529 $ 56,843
Accounts receivable (Notes 3 and 7) 250,345 248,405
Inventories (Notes 2 and 3) 78,478 145,258
Prepaid and other 500 2,041
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Total Current Assets 462,852 452,547
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Equipment (Note 3)
Office furniture and fixtures 6,323 8,023
Vehicles 30,207 28,707
Shop equipment and tools 18,025 18,025
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54,555 54,755
Less accumulated depreciation 21,446 29,309
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Net Equipment 33,109 25,446
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$495,961 $477,993
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Liabilities
Current Liabilities
Accounts payable $159,428 $ 93,852
Sales taxes payable 15,964 16,591
Management wages payable 96,747 153,024
Customer deposit 52,000 -
Income taxes payable 12,698 29,306
Dividends payable - 100,000
Due to stockholders (Note 4) 21,210 -
Accrued compensation 17,663 20,941
Current maturities of long-term debt (Note 3) 7,535 7,748
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Total Current Liabilities 383,245 421,462
Long-Term Debt, Less current maturities (Note 3) 13,703 5,955
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Total Liabilities 396,948 427,417
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Commitments and Contingencies (Note 6)
Stockholders' Equity (Note 8)
Common stock, Class A, no par value - unlimited shares authorized;
issued and outstanding, 100 10 10
Common stock, Class B, no par value - unlimited shares authorized;
issued and outstanding, 100 10 10
Retained earnings 98,993 50,556
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Total Stockholders' Equity 99,013 50,576
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$495,961 $477,993
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</TABLE>
See accompanying notes to financial statements
5
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T & T Diesel Power Limited
Statements of Operations
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Years Ended July 31, 1999 2000
------------------------------------------------------------------------
(Canadian Dollars)
Revenue $1,115,001 $2,150,023
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Cost of Sales:
Beginning inventories 68,429 78,478
Purchases 732,450 1,454,596
Manufacturing labor and benefits 136,272 177,670
Shop expenses and freight 14,514 23,468
------------------------------------------------------------------------
951,665 1,734,212
Less ending inventories 78,478 145,258
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Total Cost of Sales 873,187 1,588,954
------------------------------------------------------------------------
Gross Profit 241,814 561,069
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Operating Expenses:
Management renumeration 82,608 270,025
Office wages and casual labor 21,465 12,168
Occupancy costs (Notes 4 and 6) 17,741 26,444
Vehicle, delivery and travel 16,316 21,975
Office and general 7,183 7,695
Depreciation 6,470 9,363
Advertising and promotion 6,469 4,303
Professional fees 5,943 5,275
Telephone and fax 4,102 3,277
Insurance 3,734 3,727
Repairs and maintenance 2,210 1,836
Bank charges 882 920
------------------------------------------------------------------------
Total Operating Expenses 175,123 367,008
------------------------------------------------------------------------
Operating Income 66,691 194,061
Interest expense 157 498
------------------------------------------------------------------------
Income Before Taxes on Income 66,534 193,563
Taxes on income (Note 5) 14,869 42,000
------------------------------------------------------------------------
Net Income $ 51,665 $ 151,563
------------------------------------------------------------------------
See accompanying notes to financial statements
6
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T & T Diesel Power Limited
Statements of Stockholders' Equity (Note 8)
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Years Ended July 31, 1999 and 2000
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(Canadian Dollars)
Common Stock
-----------------------------
Number of Retained
Shares Amount Earnings
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Balance, August 1, 1998 200 $20 $ 47,328
Net income for the year - - 51,665
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Balance, July 31, 1999 200 20 98,993
Net income for the year - - 151,563
Dividends - Class A common stock (80,000)
Dividends - Class B common stock - - (120,000)
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Balance, July 31, 2000 200 $20 $ 50,556
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See accompanying notes to financial statements
7
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T & T Diesel Power Limited
Statements of Cash Flows (Note 9)
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Years Ended July 31, 1999 2000
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(Canadian Dollars)
Cash Flows From Operating Activities:
Net income $ 51,665 $ 151,563
----------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,470 9,363
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (75,630) 1,940
(Increase) in inventories (10,049) (66,780)
Decrease (increase) in prepaid and other 1,141 (1,541)
(Decrease) in accounts payable (10,213) (65,576)
Increase in sales tax payable 4,307 627
Increase in management wages payable 30,280 56,277
Increase (decrease) in customer deposit 52,000 (52,000)
Increase in income taxes payable 7,298 16,608
Increase in accrued compensation 11,023 3,278
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Total Adjustments 16,627 (97,804)
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Net Cash Provided By Operating Activities 68,292 53,759
Cash Flows From Investing Activities:
Equipment acquisitions (4,153) (1,700)
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Net Cash (Used In) Investing Activities (4,153) (1,700)
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Cash Flows From Financing Activities:
Dividends paid (13,233) (100,000)
Payments of amounts due to stockholders - (21,210)
Payments of long-term debt (1,851) (7,535)
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Net Cash (Used In) Financing Activities (15,084) (128,745)
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Net Increase (Decrease) In Cash 49,055 (76,686)
Cash, beginning of year 84,474 133,529
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Cash, end of year $133,529 $ 56,843
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See accompanying notes to financial statements
8
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T & T Diesel Power Limited
Notes to Financial Statements
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1. Summary of Organization and Business Operations
Significant
Accounting The Company is a Canadian corporation which designs
standby and prime
Policies and assembles power diesel generators and sound
attenuated generator sets.
Basis of Presentation
The accompanying financial statements have been
prepared in accordance with U.S. generally accepted
accounting principles and are presented in Canadian
dollars.
Business and Credit Concentrations
Financial instruments which potentially subject the
company to concentrations of credit risk consist
principally of cash and accounts receivable. The
company grants credit primarily to large
telecommunications, wholesale, industrial commercial,
and rental equipment companies. The majority of its
customers are located in Eastern Canada.
Cash Equivalents
The company considers all highly liquid investments
with a maturity of three months or less when purchased
to be "cash equivalents" which are included as cash in
the accompanying financial statements.
Inventories
Inventories consisting primarily of assembled
generators ready for shipment, generator components and
raw material assembly parts and supplies are valued at
the lower of cost or market, with cost being determined
using the first- in, first-out ("FIFO") method.
Equipment and Depreciation
Equipment is stated at cost. Depreciation is computed
on accelerated methods for both financial statement
purposes and income tax purposes over the estimated
useful lives of the equipment.
Evaluating Recoverability of Long-Lived Assets
The company reviews the carrying values of its long-
lived assets for possible impairment whenever events or
changes in circumstances indicate that the carrying
amount of the assets may not be recoverable. The
company assesses recoverability of those assets by
estimating future non-discounted cash flows. Any long-
lived assets held for disposal are reported at the
lower of their carrying amounts of fair value less cost
to sell. No impairments have been recorded through July
31, 2000.
9
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T & T Diesel Power Limited
Notes to Financial Statements
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Revenue Recognition
Revenue is recognized at the time when goods are shipped.
Comprehensive Income
The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 130. "Reporting Comprehensive Income",
which establishes standard for reporting and display of
comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized
under current accounting standard as components of
comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial
statements
Total comprehensive income for the years ended July 31, 1999
and 2000 is the same as the reported net income
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Effect of Recent Accounting Pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities' establishes accounting and reporting
requirements for derivative instruments. The Company has not
in the past nor does it anticipate that it will engage in
transactions involving derivative instruments, and therefore,
does not expect this pronouncement to have any effect on the
financial statements. SFAS No. 133, as amended by SFAS No.
137, is effective for fiscal years beginning after June 15,
2000.
2. Inventories Inventories consist of the following at July 31:
1999 2000
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Components and parts $78,478 $ 75,481
Assembled generators ready for shipment - 69,777
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$78,478 $145,258
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10
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T & T Diesel Power Limited
Notes to Financial Statements
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3. Long-Term Long-term debt consists of the following
Debt and at July 31:
Line of Credit
1999 2000
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Loan payable - finance company, maturing
in monthly installments of $699,
including interest at 2.8%,
collateralized by a specific vehicle $21,238 $13,703
Less current maturities 7,535 7,748
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Long-term debt, less current maturities $13,703 $ 5,955
Maturities of long-term debt are
approximately as follows:
2000 $ 7,535 $ -
2001 7,748 7,748
2002 5,955 5,955
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Total $21,238 $13,703
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At July 31, 2000, the Company had a line of credit
for $140,000 with interest payable at prime plus
1.5%, under which there were no borrowings. The
line was secured by accounts receivable,
inventories, equipment and the personal guarantees
of two officers of the company up to $100,000. The
line of credit agreement was terminated on
August 14, 2000.
4. Related Party Amounts due to stockholders are non-interest bearing
March 2, 2000. and were repaid
Transactions
During the year ended July 31, 2000, rent of $6,500
was paid to a stockholder for warehouse space used
in the assembly of generator sets. The expense is
included in occupancy costs in the statement of
operations.
5. Taxes on Provisions for federal and provincial income taxes in the
Income statements of operations are made up of the following
components:
1999 2000
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Current
Federal $ 9,097 $26,000
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Total taxes on income $14,869 $42,000
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11
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T & T Diesel Power Limited
Notes to Financial Statements
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A reconciliation of the combined
statutory federal and provincial income
tax rate and effective tax rate as a
percentage of pre-tax income is as
follows:
1999 2000
---- ----
Amount % Amount %
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Tax at statutory rate $14,637 22.0 $41,000 21.1
Nondeductible
entertainment and
promotions 232 0.3 1,000 0.6
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$14,869 22.3 $42,000 21.7
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6. Commitments and The Company is obligated under an operating lease for
Contingencies its premises. Rent is payable at $1,081 monthly plus GST
through December 31, 2000. Rent expense under the operating
lease was approximately $12,700 and $15,100 for the years
ended July 31, 1999 and 2000, respectively.
7. Major Customers The Company had one customer during the year ended July 31,
1999 and 2000 to which sales approximated 23% and 13%
respectively of sales. Accounts receivable outstanding from
this major customer represented approximately 2% and 0% of
total accounts receivable at July 31, 1999 and 2000,
respectively.
The Company had two other customers during the year ended
July 31, 1999 to which sales were approximately 31% and 11%
of total sales. Accounts receivable outstanding from these
major customers represented approximately 94% of total
accounts receivable at July 31, 1999. Sales to two different
customers during the year ended July 31, 2000 were
approximately 28% and 10% of total sales. Accounts
receivable from these major customers represented
approximately 26% of total accounts receivable at July 31,
2000.
8. Change in On July 31, 2000, ARS Networks,issued and outstanding Class
Ownership and Incorporated, a U.S. corporation, purchased all of the
A and Class B common shares of the Company.
9. Supplemental The Company made interest payments of approximately $200
Cash Flow and $500 during the years ended July 31, 1999 and 2000,
Information respectively.
The Company made income tax payments of approximately $7,600
and $25,300 during the years ended July 31, 1999 and 2000,
respectively.
Noncash investing and financing activities consist of:
1999 2000
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Vehicle acquisition financed by
long-term debt $23,089 $ -
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12
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
1. Unaudited Pro Forma Consolidated Financial Statements of ARS
Networks, Incorporated and T & T Diesel Power Limited.
ARS NETWORKS, INCORPORATED
AND
T & T DIESEL POWER LIMITED
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
--------------------------------------------------------------------------------
BASIS OF PREPARATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
BASIS OF PREPARATION
The unaudited pro forma consolidated statement of operations for the year
ended July 31, 2000 includes the accounts of ARS Networks, Incorporated ("ARS")
and T & T Diesel Power Limited ("T & T"). The unaudited pro forma financial
statements have been prepared to illustrate the estimated effects of the
acquisition of T & T (the "Acquisition"). The Acquisition is accounted for
under the purchase method of accounting. The pro forma financial statements
were derived by adjusting the historical financial statements of ARS and
T & T for certain transactions pursuant to the Acquisition described in the
notes to the unaudited pro forma financial statements.
The historical financial statements of T & T were provided by the management
of T & T for the years ended July 31, 2000 and 1999. T & T's statement of
operations for the year ended July 31, 2000 was translated from Canadian
dollars to U.S. dollars using the average of the exchange rates on the first
and last day of the year ($1.4695 per Canadian dollar).
An unaudited pro forma consolidated balance sheet has not been presented since
the Acquisition occurred on July 31, 2000 and the consolidated balance sheet of
ARS and T & T was included in the Form 10QSB filed for the period ended July 31,
2000. The unaudited pro forma consolidated statement of operations for the year
ended July 31, 2000 was prepared as if the Acquisition had occurred on August 1,
1999. The pro forma financial data does not purport to be indicative of the
results which actually could have been obtained had such transactions been
completed as of the assumed dates or which may be obtained in the future.
The pro forma financial data should be read in conjunction with the
financial statements of ARS and T & T.
13
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ARS NETWORKS, INCORPORATED AND
T & T DIESEL POWER LIMITED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Pro forma
adjustments
------------------------
Pro Forma
Year ended July 31, 2000 ARS T & T Debit Credit Consolidated
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<S> <C> <C> <C> <C> <C>
NET SALES $ - $1,463,091 $ - $ - $ 1,463,091
COST OF SALES - 1,081,158 - - 1,081,158
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GROSS PROFIT - 381,933 - - 381,933
OPERATING EXPENSES 1,042,480 249,749 52,180 (1) 122,507 (3) 1,221,902
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INCOME (LOSS) FROM OPERATIONS (1,042,480) 132,184 52,180 122,507 (839,969)
INTEREST EXPENSES - 339 9,242 (2) - 9,581
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INCOME (LOSS) BEFORE TAXES (1.042.480) 131,845 61,422 122,507 (849,550)
TAXES ON INCOME - 28,581 27,000 (4) - 55,581
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (1,042,480) 103,264 88,422 122,507 (905,131)
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NET LOSS PER SHARE (BASIC AND DILUTED) (.10) (.09)
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic and Diluted 10,412,866 10,412,866
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</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
1. To reflect the net increase in depreciation and amortization expense due to
(1) the amortization of goodwill on a straight-line basis over 7 years of
$56,108, and (2) decrease in depreciation of $3,928 resulting from fair
value adjustment to equipment, depreciated on a straight-line basis over 7
years.
2. To reflect the increase in interest expense of $9,242 resulting from the
issuance of debt to finance a portion of the purchase price. The interest
rate on new debt of $115,516 is 8 percent.
3. To reflect the decrease in management compensation of $122,507 due to the
execution of employment agreements with the officers of the company.
4. To reflect increased income taxes of $27,000 at an effective tax rate of 23%
for the income tax effect of pro forma adjustments 1, 2 and 3 above, less
amortization of goodwill which is nondeductible for tax purposes.
5. Basic and diluted net loss per share are the same since the assumed exercise
of options would be anti-dilutive.
14
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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.
ARS NETWORKS, INCORPORATED
By: /s/ Sydney Harland
-----------------------
Name: Sydney Harland
Title: President
Date: October 13, 2000
15
