<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 23, 2000
Net2Phone, Inc.
(Exact name of registrant as specified in its chapter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 000-26763 22-3559037
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
</TABLE>
520 Broad Street
Newark, New Jersey 07102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 412-4095
1
<PAGE>
This Amendment No. 2 currently represented on Form 8-K amends the current report
8-K filed by Net2Phone, Inc. on July 24, 2000 (the "Original 8-K"). The Closing
date mentioned in the Original 8-K has been amended and restated as July 7,
2000.
Item 2. Acquisition or Disposition of Assets.
The first paragraph of the Original 8-K is hereby amended and restated in its
entirety:
On July 7, 2000 Net2Phone, Inc., a Delaware corporation acquired though the
acquisition of Allia B.V., a company organized under the laws of
Netherlands, all of the issued and outstanding stock of Aplio S.A. Aplio
S.A., a societe anonyme organized under the laws of France is a developer
of software for internet telephony products based in Sarcelles, France with
marketing subsidiaries in Israel and California.
Net2Phone, as consideration for the stock paid in a combination of stock,
notes and cash. The total Purchase Price is $45,000,000.00 payable through
the assumption of $726,953.14 of indebtedness, issuance of 582,749 stocks
valued at $36.947 per share and issuance of promissory notes of initial
principal amount of $6,537,451.00. Along with the stock and the notes,
cash paid at the closing was $5,848,117.00 and $4,800,000 is subject to a
holdback and wasn't delivered at closing for certain net worth adjustments
and security for indemnification obligations of the sellers.
Under certain circumstances Net2Phone has the obligation to repurchase
certain stock of Net2Phone Inc.'s common stock issued in the acquisition on
the terms set forth in the Stock Purchase Agreement (Exhibit 7(c)(1)).
ITEM 7. Financial Statements
The financial statements are amended and restated in their entirety. The
closing date and the dates of anniversary payments mentioned in the first
amendment of the Net2Phone 8-K, dated September 21, 2000, have been amended to
be July 7, 2000, July 7, 2001 and July 7, 2002, respectively.
On July 23, 2000, Net2Phone, Inc. ("Net2Phone") filed a Current Report on Form
8-K to report its acquisition of Aplio, S.A. ("Aplio"). Pursuant to Item 7 of
Form 8-K, Net2Phone indicated that it would file certain financial information
no later than the date required under Item 7 of Form 8-K. This Amendment is
filed to provide the required financial information.
(a) Financial Statements of Business Acquired
The following audited financial statements of Aplio are included
herein:
Reports of Independent Auditor for December 31, 1997, December 31,
1998 and December 31, 1999
Consolidated Balance Sheets as of December 31, 1997 and 1996, for
December 31, 1998 and 1997 and of December 31, 1999 and 1998
Consolidated Statements of Income of December 31, 1997 and
1996, and for December 31, 1998 and 1997 and of December 31, 1999
and 1998
Consolidated Statement of Cash Flows for the Year Ended December 31,
1997 and December 31, 1998 and 1997 and for December 31, 1999 and
1998
Notes to Financial Statements, December 31, 1997, December 31, 1998
and December 31, 1999
Supplementary Information to the Consolidated Financial
Statements of June 30, 2000
Consolidated Balance Sheets as of June 30, 2000 and 1999
Consolidated Profit and Loss Account for the six months ended June
30, 2000 and December 31, 1999
Consolidated Statements of Cash Flow for the six months ended June
30, 2000 and December 31, 1999
Notes to Financial Statements, June 30, 2000 and 1999.
(b) The following unaudited pro forma financial information of Net2Phone
and Aplio is included herein:
Unaudited Pro Forma Condensed Combined Balance Sheets, as of April
30, 2000
Unaudited Condensed Combined Statement of Operations, for the nine
months ended April 30, 2000
Unaudited Condensed Combined Statement of Operations, for the year
ended July 31, 1999
Notes to the Pro Forma Financial Data
Exhibit 23.1 Consent of Independent Auditors
2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934,
THE REGISTRATION HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, HEREUNTO DULY AUTHORISED.
Date October 16, 2000 By: /s/ ILAN SLASKY
------------------
Ilan Slasky
Chief Financial Officer
<PAGE>
APLIO, S.A.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
Together with
Independant Auditors' Report
<PAGE>
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of APLIO, S.A.,
and subsidiaries as of December 31, 1997.
We remind you that APLIO, S.A. is not under the French legal obligation to
establish consolidated balance sheets.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 that the financial statements are free of material
misstatement. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of APLIO, S.A. and
subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
principles.
Paris, May 16, 2000
/s/Maurice SOUED
Maurice SOUED
Auditor
<PAGE>
APLIO, S.A.
-----------
Consolidated Balance Sheets
December 31, 1997 and 1996
(French Francs)
ASSETS
------
-------------------------------------------
Year ended December 31, 1997 Year ended
---------------------------------
Gross Depr.or December
amount allow. Net amount 31, 1996
-------------------------------------------
--------------------------------------------------------------------------------
Fixed assets 2,573,878 119,694 2,454,184 0
--------------------------------------------------------------------------------
Intangible fixed assets 2,265,866 80,947 2,184,919 0
--------------------------------------------------------------------------------
Tangible fixed assets 226,922 38,747 188,175 0
--------------------------------------------------------------------------------
Financial fixed assets 81,090 0 81,090 0
--------------------------------------------------------------------------------
Current assets 6,793,607 0 6,793,607 0
--------------------------------------------------------------------------------
Inventories 369,050 0 369,050 0
--------------------------------------------------------------------------------
Trade accounts receivable 0 0 0 0
--------------------------------------------------------------------------------
Other receivables 1,309,899 0 1,309,899 0
--------------------------------------------------------------------------------
Marketable securities 5,041,230 0 5,041,230 0
--------------------------------------------------------------------------------
Available funds 73,428 0 73,428 0
--------------------------------------------------------------------------------
Prepaid Expenses 45,829 45,829 0
--------------------------------------------------------------------------------
TOTAL ASSETS 9,413,314 119,694 9,293,620 0
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
-----------------------
Dec.31,1997 Dec.31,1996
-----------------------
--------------------------------------------------------------------------------
Stockholder's funds 7,573,321 0
--------------------------------------------------------------------------------
Called-up capital 960,000 0
--------------------------------------------------------------------------------
Additional paid-in capital 8,794,000 0
--------------------------------------------------------------------------------
Balance, beginning of year 0 0
--------------------------------------------------------------------------------
Net profit or loss -2,180,679 0
--------------------------------------------------------------------------------
Differences of exchange 0 0
--------------------------------------------------------------------------------
Commitments and contingencies 0 0
--------------------------------------------------------------------------------
Liabilities 1,720,299 0
--------------------------------------------------------------------------------
Financial liabilities 310,439 0
--------------------------------------------------------------------------------
Governmental loans 0 0
--------------------------------------------------------------------------------
Shareholders accounts 35,702 0
--------------------------------------------------------------------------------
Trade accounts payable 967,115 0
--------------------------------------------------------------------------------
Taxes & social debts 403,202 0
--------------------------------------------------------------------------------
Other debts 3,841 0
--------------------------------------------------------------------------------
Unearned income 0 0
--------------------------------------------------------------------------------
TOTAL LIABILITIES 9,293,620 0
--------------------------------------------------------------------------------
<PAGE>
APLIO, S.A.
-----------
Consolidated Statements of Income
December 31, 1997 and 1996
(French Francs)
-----------------------
Dec.31,1997 Dec.31,1996
-----------------------
--------------------------------------------------------------------------------
Net sales 75,563 0
--------------------------------------------------------------------------------
Capitalized production costs 1,625,272 0
--------------------------------------------------------------------------------
Other revenues 895 0
--------------------------------------------------------------------------------
Total operating revenues 1,701,730 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cost of goods sold 57,538 0
--------------------------------------------------------------------------------
Personnel expenses 1,640,368 0
--------------------------------------------------------------------------------
Other operating expenses 2,948,793 0
--------------------------------------------------------------------------------
Taxes and licenses 7,433 0
--------------------------------------------------------------------------------
Depreciation of assets 119,695 0
--------------------------------------------------------------------------------
Allowance and contingences 0 0
--------------------------------------------------------------------------------
Total operating expenses 4,773,827 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Loss from continuing operations -3,072,097 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Loss from financial operations 44,012 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Result of ordinary operations -3,028,085 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net exceptional result 0 0
--------------------------------------------------------------------------------
Income tax 847,406 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET INCOME -2,180,679 0
--------------------------------------------------------------------------------
<PAGE>
APLIO, S.A.
-----------
Consolidated Statement of Cash Flows
Years Ended December 31, 1997
(French Francs)
-------------------------
1997 1996
-------------------------
Operating expenses
-------------------------------------------------------------------------
Net income -2,180,679 0
-------------------------------------------------------------------------
Depreciation expense 119,695 0
-------------------------------------------------------------------------
Changes in stocks -369,050 0
-------------------------------------------------------------------------
Increase in accounts receivable and
in accounts payable 18,430 0
-------------------------------------------------------------------------
Net cash provided by operating
activities -2,411,604 0
-------------------------------------------------------------------------
Investing activities
-------------------------------------------------------------------------
Purchase of equipment 2,573,878 0
-------------------------------------------------------------------------
Disposal of fixed assets 0 0
-------------------------------------------------------------------------
Net cash used by investing activities -2,573,878 0
-------------------------------------------------------------------------
Financing activities
-------------------------------------------------------------------------
Increase of capital 9,754,000 0
-------------------------------------------------------------------------
Differences of exchange 0 0
-------------------------------------------------------------------------
New loans 0 0
-------------------------------------------------------------------------
Governmental loans 0 0
-------------------------------------------------------------------------
Shareholders accounts 35,701 0
-------------------------------------------------------------------------
Net cash provided by financing
activities 9,789,701 0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net increase in cash 4,804,219 0
-------------------------------------------------------------------------
Cash at beginning period 0 0
-------------------------------------------------------------------------
Cash at end period 4,804,219 0
-------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
The consolidated financial statements of APLIO are established according to
the French law of January 3, 1985 and to its statutory order of February 17,
1986. We think that the use of U.S. GAAP would not have lead to any significant
difference about stockholders' equity and net loss, except for Research and
Development Costs that were capitalized for KF 1,625.
The following information is wholly part of them.
A. Principles and modes of consolidation
. Concerned companies
From the start, the following companies are consolidated according to the global
integration method, on the basis of their December 31, 1997 balance sheets.
--------------------------------------------------------------------------------
NAME ADDRESS % PARTICIP. CREATION ACCOUNTING PERIOD
--------------------------------------------------------------------------------
APLIO, S.A. Paris-France Consolidating 1996 12/31
Company
--------------------------------------------------------------------------------
APLIO INC. California- 100 1997 12/31
USA
--------------------------------------------------------------------------------
APLIO LTD Israel 100 1997 12/31
--------------------------------------------------------------------------------
. Conversion method
The financial statements have been converted with the method of closing cost.
That is, the average rate for the items included in the Statement of Income;
the historical rate for the Stockholders' Funds' items; and the closing rate
for the other items of the balance sheet. The amount of the difference between
the historical and the closing rates has been registered in the Stockholders'
funds in the item "foreign exchange differences".
. Minority participation
None.
. Deferred Tax Assets
None.
<PAGE>
B. General Accounting Principles and methods of valuation
1. Intangible fixed assets
-----------------------
Intangible fixed assets are evaluated on the basis of the acquisition or
production cost. Amortization is calculated according to the predictable useful
life.
The most currently used amortization rates are the following:
Software 50%
Research and Development Costs 33%
Research and Development costs are capitalized when they fulfil the required
conditions - strictly individualized projects, strong chances of technical and
commercial success, costs separately stated for each project.
Amortization of R&D costs begins at the end of development.
2. Tangible fixed assets
---------------------
Tangible fixed assets are evaluated on the basis of the acquisition cost.
Amortization is calculated according to the predictable useful life.
The most currently used amortization rates are the following:
Industrial machinery & tooling 20%
Other improvements 10%
Transport equipment 20%
Office & data processing equipment 33%
Furniture 20%
3. Inventories
-----------
Inventories are estimated according to the weight average cost. The costs of
finished goods include purchase costs, producing costs and additional costs
(customs, duties and freight). A reserve for inventory loss is registered when
the costs become superior to the estimated selling price.
<PAGE>
4. Debts and Receivables assessment
--------------------------------
They are estimated at their initial value. An allowance for bad debts is booked
in case of irrecoverable debts.
The item "Other Receivables" include a French R&D Tax Credit of MF 0.8 in 1997.
It will be reimbursed in 2001, or deduced from the future income tax if there is
one before this time.
5. Fixed assets and depreciation
-----------------------------
. Fixed assets
--------------------------------------------------------------------------------
Items Gross Amount Acquisitions Decrease Gross Amount
Beginning of year (KF) (KF) End of year
(KF) (KF)
--------------------------------------------------------------------------------
Software 0 641 0 641
--------------------------------------------------------------------------------
R&D costs 0 1,625 0 1,625
--------------------------------------------------------------------------------
Intangible fixed 0 2,266 0 2,266
assets
--------------------------------------------------------------------------------
Tangible fixed 0 227 0 227
assets
--------------------------------------------------------------------------------
Financial fixed 0 81 0 81
assets
--------------------------------------------------------------------------------
0 2,574 0 2,574
--------------------------------------------------------------------------------
. Depreciation
--------------------------------------------------------------------------------
Items Amount Increase Decrease Amount
Beginning of year (KF) (KF) End of year
(KF) (KF)
--------------------------------------------------------------------------------
Software 0 81 0 81
--------------------------------------------------------------------------------
R&D costs 0 0 0 0
--------------------------------------------------------------------------------
Intangible fixed 0 81 0 81
assets
--------------------------------------------------------------------------------
Tangible fixed 0 39 0 39
assets
--------------------------------------------------------------------------------
0 120 0 120
--------------------------------------------------------------------------------
<PAGE>
6. Receivables statement
---------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Items Gross Amount Less than 1 year More than 1 year
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits 82 82
---------------------------------------------------------------------------------------------------
Total fixed assets 82 82
---------------------------------------------------------------------------------------------------
Inventories 370 370
---------------------------------------------------------------------------------------------------
Accounts receivable 0 0
---------------------------------------------------------------------------------------------------
Other receivable 1,310 463 847
---------------------------------------------------------------------------------------------------
1,680 833 847
---------------------------------------------------------------------------------------------------
Prepaid expenses 46 46
---------------------------------------------------------------------------------------------------
46 46
---------------------------------------------------------------------------------------------------
Total 1,808 879 929
---------------------------------------------------------------------------------------------------
</TABLE>
7. Liabilities statement
---------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Items Gross Amount Less than 1 year More than 1 year More than 5 years
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Bank overdrafts 310 310
--------------------------------------------------------------------------------------------------------------
Financial liabilities 36 36
--------------------------------------------------------------------------------------------------------------
346 346
--------------------------------------------------------------------------------------------------------------
Trade Accounts payable 967 967
--------------------------------------------------------------------------------------------------------------
Taxes and social debts 402 402
--------------------------------------------------------------------------------------------------------------
Others debts 4 4
--------------------------------------------------------------------------------------------------------------
1,373 1,373
--------------------------------------------------------------------------------------------------------------
Total 1,719 1,719
--------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APLIO, S.A.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Together with
Independent Auditors' Report
<PAGE>
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of APLIO, S.A. and
subsidiaries as of December 31, 1998.
We remind you that APLIO S.A. is not under the French legal obligation to
establish consolidated balance sheets.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 that the financial statements are free of material
misstatement. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of APLIO, S.A. and
subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
principles.
Paris, May 16, 2000
/s/ Maurice Soued
Maurice SOUED
Auditor
<PAGE>
APLIO, S.A.
----------
Consolidated Balance Sheets
December 31, 1998 and 1997
(French Francs)
<TABLE>
<CAPTION>
ASSETS
------
----------------------------------------------------
Year ended December 31, 1998 Year ended
--------------------------------------
Depr. or December
Gross amount allow. Net amount 31, 1997
----------------------------------------------------
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed assets 4,636,483 2,423,244 2,213,239 2,454,184
------------------------------------------------------------------------------------------------------
Intangible fixed assets 2,496,678 2,077,534 419,144 2,184,919
------------------------------------------------------------------------------------------------------
Tangible fixed assets 1,901,098 345,710 1,555,388 188,175 .
------------------------------------------------------------------------------------------------------
Financial fixed assets 238,707 0 238,707 81,090
------------------------------------------------------------------------------------------------------
Current assets 19,723,090 192,329 19,530,761 6,793,607
------------------------------------------------------------------------------------------------------
Inventories 3,192,399 85,551 3,106,848 369,050
------------------------------------------------------------------------------------------------------
Trade accounts receivable 6,769,577 106,778 6,662,799 0
------------------------------------------------------------------------------------------------------
Other receivables 6,596,380 0 6,596,380 1,309,899
------------------------------------------------------------------------------------------------------
Marketable securities 0 0 0 5,041,230
------------------------------------------------------------------------------------------------------
Available funds 3,164,734 0 3,164,734 73,428
------------------------------------------------------------------------------------------------------
Prepaid Expenses 660,998 660,998 45,829
------------------------------------------------------------------------------------------------------
TOTAL ASSETS 25,020,571 2,615,573 22,404,998 9,293,620
------------------------------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
---------------------------
Dec. 31, 1998 Dec. 31, 1997
---------------------------
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stockholder's funds 10,745,899 7,573,321
------------------------------------------------------------------------------------------------------
Called-up capital 1,194,667 960,000
------------------------------------------------------------------------------------------------------
Additional paid-in capital 34,497,514 8,794,000
------------------------------------------------------------------------------------------------------
Balance, beginning of year -2,180,679 0
------------------------------------------------------------------------------------------------------
Net profit or loss -23,480,355 -2,180,679
------------------------------------------------------------------------------------------------------
Differences of exchange 714,752 0
------------------------------------------------------------------------------------------------------
Commitments and contingencies 36,025 0
------------------------------------------------------------------------------------------------------
Liabilities 11,623,074 1,720,299
------------------------------------------------------------------------------------------------------
Financial liabilities 0 310,439
------------------------------------------------------------------------------------------------------
Governmental loans 0 0
------------------------------------------------------------------------------------------------------
Shareholders accounts 93,100 35,702
------------------------------------------------------------------------------------------------------
Trade accounts payable 9,148,622 967,115
------------------------------------------------------------------------------------------------------
Taxes & social debts 970,537 403,202
------------------------------------------------------------------------------------------------------
Other debts 1,410,815 3,841
------------------------------------------------------------------------------------------------------
Unearned income 0 0
------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 22,404,998 9,293,620
------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APLIO, S.A.
-----------
Consolidated Statements of Income
December 31, 1998 and 1997
(French Francs)
-----------------------------
Dec. 31, 1998 Dec. 31, 1997
-----------------------------
------------------------------------------------------------------------------
Net sales 28,334,053 75,563
------------------------------------------------------------------------------
Capitalized production costs 0 1 625,272
------------------------------------------------------------------------------
Other revenues 3 895
------------------------------------------------------------------------------
Total operating revenues 28,334,056 1,701,730
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Cost of goods sold 20,019,757 57,538
------------------------------------------------------------------------------
Personnel expenses 8,097,834 1,640,368
------------------------------------------------------------------------------
Other operating expenses 23,667,093 2,948,793
------------------------------------------------------------------------------
Taxes and licenses 126,300 7,433
------------------------------------------------------------------------------
Depreciation of assets 2,304,989 119,695
------------------------------------------------------------------------------
Allowance and contingences 233,672 0
------------------------------------------------------------------------------
Total operating expenses 54,449,645 4,773,827
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Loss from continuing operations -26,115,589 -3,072,097
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Loss from financial operations -787,770 44,012
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Result of ordinary operations -26,903,359 -3,028,085
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net exceptional result -6,011 0
------------------------------------------------------------------------------
Income tax 3,429,015 847,406
------------------------------------------------------------------------------
------------------------------------------------------------------------------
NET INCOME -23,480,355 -2,180,679
------------------------------------------------------------------------------
<PAGE>
APLIO, S.A.
-----------
Consolidated Statement of Cash Flows
Years Ended December 31, 1998 and 1997
(French Francs)
---------------------------
1998 1997
---------------------------
Operating expenses
-------------------------------------------------------------------------------
Net income -23,480,355 -2,180,679
-------------------------------------------------------------------------------
Depreciation expense 2,538,661 119,695
-------------------------------------------------------------------------------
Changes in stocks -2,823,349 -369,050
-------------------------------------------------------------------------------
Increase in accounts receivable and
in accounts payable -2,522,169 18,430
-------------------------------------------------------------------------------
Net cash provided by operating
activities -26,287,212 -2,411,604
-------------------------------------------------------------------------------
Investing activities
-------------------------------------------------------------------------------
Purchase of equipment 2,062,605 2,573,878
-------------------------------------------------------------------------------
Disposal of fixed assets 0 0
-------------------------------------------------------------------------------
Net cash used by investing
activities -2,062,605 -2,573,878
-------------------------------------------------------------------------------
Financing activities
-------------------------------------------------------------------------------
Increase of capital 25,938,181 9,754,000
-------------------------------------------------------------------------------
Difference of exchange 714,752 0
-------------------------------------------------------------------------------
New loans 0 0
-------------------------------------------------------------------------------
Governmental loans 0 0
-------------------------------------------------------------------------------
Shareholders accounts 57,398 35,701
-------------------------------------------------------------------------------
Net cash provided by financing
activities 26,710,331 9,789,701
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net increase in cash -1,639,485 4,804,219
-------------------------------------------------------------------------------
Cash at beginning period 4,804,219 0
-------------------------------------------------------------------------------
Cash at end period 3,164,734 4,804,219
-------------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
The consolidated financial statements of APLIO are established according to the
French law of January 3, 1985 and to its statutory order of February 17, 1986.
We think that the use of U.S. GAAP would not have lead to any significant
difference about stockholders' equity and net loss, except for Research and
Development costs that were capitalized and depreciated for an amount of KF
1,625.
The following information is wholly part of them.
A. Principles and modes of consolidation
. Concerned companies
From the start, the following companies are consolidated according to the global
integration method, on the basis of their December 31, 1998 balance sheets.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
NAME ADDRESS % PARTICIP. CREATION ACCOUNTING PERIOD
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
APLIO, S.A. Paris-France Consolidating 1996 12/31
Company
-------------------------------------------------------------------------------------------------------
APLIO INC. California- 100 1997 12/31
USA
-------------------------------------------------------------------------------------------------------
APLIO LTD Israel 100 1997 12/31
-------------------------------------------------------------------------------------------------------
</TABLE>
. Conversion method
The financial statements have been converted with the method of closing cost.
That is, the average rate for the items included in the Statement of Income;
the historical rate for the Stockholders' Funds' items; and the closing rate
for the other items of the balance sheet. The amount of the difference between
the historical and the closing rates has been registered in the Stockholders'
funds in the item "foreign exchange differences".
. Minority participation
None.
. Deferred Tax Assets
None.
<PAGE>
B. General Accounting Principles and methods of valuation
1. Intangible fixed assets
-----------------------
Intangible fixed assets are evaluated on the basis of the acquisition or
production cost. Amortization is calculated according to the predictable useful
life.
The most currently used amortization rates are the following:
Software 50%
Research and Development Costs 33%
Research and Development costs are capitalized when they fulfil the required
conditions - strictly individualized projects, strong chances of technical and
commercial success, costs separately stated for each project.
Amortization of R&D costs begins at the end of development.
2. Tangible fixed assets
---------------------
Tangible fixed assets are evaluated on the basis of the acquisition cost.
Amortization is calculated according to the predictable useful life.
The most currently used amortization rates are the following:
Industrial machinery & tooling 20%
Other improvements 10%
Transport equipment 20%
Office & data processing equipment 33%
Furniture 20%
3. Inventories
-----------
Inventories are estimated according to the weight average cost. The costs of
finished goods include purchase costs, producing costs and additional costs
(customs, duties and freight). A reserve for inventory loss is registered when
the costs become superior to the estimated selling price.
<PAGE>
4. Debts and Receivables assessment
--------------------------------
They are estimated at their initial value. An allowance for bad debts is booked
in case of irrecoverable debts.
The item "Other Receivables" include a French R&D Tax Credit of MF 3.4 in 1998
and MF 0.8 in 1997. It will be reimbursed respectively in 2002 and 2001, or
deduced from the future income tax if there is one before these dates.
5. Fixed assets and depreciation
-----------------------------
. Fixed assets
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Items Gross Amount Acquisitions Decrease Gross Amount
Beginning of year (KF) (KF) End of year
(KF) (KF)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Software 641 230 0 871
--------------------------------------------------------------------------------------------------------
R&D costs 1,625 0 0 1,625
--------------------------------------------------------------------------------------------------------
Intangible fixed 2,266 230 0 2,496
assets
--------------------------------------------------------------------------------------------------------
Tangible fixed 227 1,674 0 1,901
assets
--------------------------------------------------------------------------------------------------------
Financial fixed 81 158 0 239
assets
--------------------------------------------------------------------------------------------------------
2,574 2,062 0 4,636
--------------------------------------------------------------------------------------------------------
</TABLE>
. Depreciation
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Items Amount Increase Decrease Amount
Beginning of year (KF) (KF) End of year
(KF) (KF)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Software 81 371 0 452
--------------------------------------------------------------------------------------------------------
R&D costs 0 1,625 0 1,625
--------------------------------------------------------------------------------------------------------
Intangible fixed 81 1,996 0 2,077
assets
--------------------------------------------------------------------------------------------------------
Tangible fixed 39 307 0 346
assets
--------------------------------------------------------------------------------------------------------
120 2,303 0 2,423
--------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
6. Receivables statement
---------------------
--------------------------------------------------------------------------------
Items Gross Amount Less than 1 year More than 1 year
--------------------------------------------------------------------------------
Deposits 239 239
--------------------------------------------------------------------------------
Total fixed assets 239 239
--------------------------------------------------------------------------------
Inventories 3,107 3,107
--------------------------------------------------------------------------------
Accounts receivable 6,770 6,770
--------------------------------------------------------------------------------
Other receivable 6,543 2,267 4,276
--------------------------------------------------------------------------------
16,420 12,144 4,276
--------------------------------------------------------------------------------
Prepaid expenses 661 661
--------------------------------------------------------------------------------
661 661
--------------------------------------------------------------------------------
Total 17,320 12,805 4,515
--------------------------------------------------------------------------------
7. Liabilities statement
---------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Items Gross Amount Less than 1 year More than 1 year More than 5 Years
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank overdrafts 0 0
---------------------------------------------------------------------------------------------------------
Financial liabilities 93 93
---------------------------------------------------------------------------------------------------------
93 93 0
---------------------------------------------------------------------------------------------------------
Trade Accounts 9,149 9,149
Payable
---------------------------------------------------------------------------------------------------------
Taxes and social 970 970
debts
---------------------------------------------------------------------------------------------------------
Other debts 991 991
---------------------------------------------------------------------------------------------------------
11,110 11,110
---------------------------------------------------------------------------------------------------------
Total 11,203 11,203 0
---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APLIO, S.A.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Together with
Independant Auditors' Report
<PAGE>
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of APLIO, S.A. and
subsidiaries as of December 31, 1999.
We remind you that APLIO S.A. is not under the French legal obligation to
establish consolidated balance sheets.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 that the financial statements are free of material
misstatement. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of APLIO, S.A. and
subsidiaries as of December 31, 1999, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
principles.
Paris, May 16, 2000
/s/ Maurice SOUED
Maurice SOUED
Auditor
<PAGE>
APLIO, S.A.
-----------
Consolidated Balance Sheets
December 31, 1999 and 1998
(French Francs)
<TABLE>
<CAPTION>
ASSETS
------
---------------------------------------------------------
Year ended December 31, 1999 Year ended
----------------------------------------
Depr.or December
Gross amount allow. Net amount 31, 1998
---------------------------------------------------------
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed assets 15,372,211 2,456,984 12,915,227 2,213,239
------------------------------------------------------------------------------------------
Intangible fixed assets 12,744,163 1,581,712 11,162,451 419,144
------------------------------------------------------------------------------------------
Tangible fixed assets 2,336,230 875,272 1,460,958 1,555,388
------------------------------------------------------------------------------------------
Financial fixed assets 291,818 0 291,818 238,707
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Current assets 17,895,558 1,057,123 16,838,435 19,530,761
------------------------------------------------------------------------------------------
Inventories 4,057,503 298,212 3,759,291 3,106,848
------------------------------------------------------------------------------------------
Trade accounts receivable 2,523,143 758,911 1,764,232 6,662,799
------------------------------------------------------------------------------------------
Other receivables 9,184,673 0 9,184,673 6,596,380
------------------------------------------------------------------------------------------
Marketable securities 1,545,638 0 1,545,638 0
------------------------------------------------------------------------------------------
Available funds 584,601 0 584,601 3,164,734
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Prepaid Expenses 111,450 0 111,450 660,998
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
TOTAL ASSETS 33,379,219 3,514,107 29,865,112 22,404,998
------------------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
-----------------------------
Dec.31,1999 Dec.31,1998
-----------------------------
------------------------------------------------------------------------------------------
<S> <C> <C>
Stockholder's funds -3,106,192 10,745,899
------------------------------------------------------------------------------------------
Called-up capital 13,746,966 1,194,667
------------------------------------------------------------------------------------------
Additional paid-in capital 28,195,306 34,497,514
------------------------------------------------------------------------------------------
Balance, beginning of year -25,661,038 -2,180,679
------------------------------------------------------------------------------------------
Net profit or loss -20,011,021 -23,480,355
------------------------------------------------------------------------------------------
Differences of exchange 623,595 714,752
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Commitments and contingencies 892,725 36,025
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Liabilities 31,584,869 11,623,074
------------------------------------------------------------------------------------------
Financial liabilities 494,580 0
------------------------------------------------------------------------------------------
Governmental loans 5,000,000 0
------------------------------------------------------------------------------------------
Shareholders accounts 17,448,808 93,100
------------------------------------------------------------------------------------------
Trade accounts payable 7,743,170 9,148,622
------------------------------------------------------------------------------------------
Taxes & social debts 589,991 970,537
------------------------------------------------------------------------------------------
Other debts 308,320 1,410,815
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Unearned income 493,710 O
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
TOTAL LIABILITIES 29,865,112 22,404,998
------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APLIO, S.A.
----------
Consolidated Statements of Income
December 31, 1999 and 1998
(French Francs)
----------------------------
Dec.31, 1999 Dec.31, 1998
----------------------------
------------------------------------------------------------------------------
Net sales 24,697,403 28,334,053
------------------------------------------------------------------------------
Capitalized production costs 11,516,125 0
------------------------------------------------------------------------------
Other revenues 88,482 3
------------------------------------------------------------------------------
Total operating revenues 36,302,010 28,334,056
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Cost of goods sold 18,664,539 20,019,757
------------------------------------------------------------------------------
Personnel expenses 13,152,749 8,097,834
------------------------------------------------------------------------------
Other operating expenses 24,793,314 23,667,093
------------------------------------------------------------------------------
Taxes and licenses 180,499 126,300
------------------------------------------------------------------------------
Depreciation of assets 1,655,941 2,304,989
------------------------------------------------------------------------------
Allowance and contingences 1,612,817 233,672
------------------------------------------------------------------------------
Total operating expenses 60,059,859 54,449,645
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Loss from continuing operations -23,757,849 -26,115,589
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Loss from financial operations -386,792 -787,770
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Result of ordinary operations -24,144,641 -26,903,359
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net exceptional result 20,575 -6,011
------------------------------------------------------------------------------
Income tax 4,113,045 3,429,015
------------------------------------------------------------------------------
------------------------------------------------------------------------------
NET INCOME -20,011,021 -23,480,355
------------------------------------------------------------------------------
<PAGE>
APLIO, S.A.
-----------
Consolidated Statement of Cash Flows
Years Ended December 31, 1999 and 1998
(French Francs)
------------------------------------
1999 1998 1997
------------------------------------
Operating expenses
------------------------------------------------------------------------------
Net income -20,011,021 -23,480,355 -2,180,679
------------------------------------------------------------------------------
Depreciation expense 1,755,234 2,538,661 119,695
------------------------------------------------------------------------------
Changes in stocks -865,104 -2,823,349 -369,050
------------------------------------------------------------------------------
Increase in accounts receivable and
in accounts payable -187,099 -2,522,169 18,430
------------------------------------------------------------------------------
Net cash provided by operating
activities -19,307,990 -26,287,212 -2,411,604
------------------------------------------------------------------------------
Investing activities
------------------------------------------------------------------------------
Purchase of equipment 10,735,728 2,062,605 2,573,878
------------------------------------------------------------------------------
Disposal of fixed assets 0 0 0
------------------------------------------------------------------------------
Net cash used by investing
activities -10,735,728 -2,062,605 -2,573,878
------------------------------------------------------------------------------
Financing activities
------------------------------------------------------------------------------
Increase of capital 6,250,091 25,938,181 9,754,000
------------------------------------------------------------------------------
Differences of exchange -91,157 714,752 0
------------------------------------------------------------------------------
New loans 61 304 0 0
------------------------------------------------------------------------------
Governmental loans 5,000,000 0 0
------------------------------------------------------------------------------
Shareholders accounts 17,355,708 57,398 35,701
------------------------------------------------------------------------------
Net cash provided by financing
activities 28,575,946 26,710,331 9,789,701
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net increase in cash -1,467,771 -1,639,485 4,804,219
------------------------------------------------------------------------------
Cash at beginning period 3,164,734 4,804,219 0
------------------------------------------------------------------------------
Cash at end period 1,696,962 3,164,734 4,804,219
------------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
APLIO, S.A. and subsidiaries have closed their third accounting period on
December 31, 1999.
In order to ensure its development, the Company realized an increase of capital
that added up to MF 6.2, share premium included, and also obtained current
account contribution for an amount of MF 17.4. These financial contributions
allowed the Company to :
- complete the APLIO TRIO development
- confirm its position as a technological company.
Because of the strategic changes decided by management, sales decreased a lot
during the second six-month period of the year. The total turnover amounts to MF
24.7 against MF 28.3 last year; the loss amounts to MF 27.1 against MF 20.2
last year.
Moreover, these results include a French Research and Development Tax Credit of
MF 4.1.
In order to face new investments in 2000, another increase of capital was
realized on February 21, 2000, for an amount of MF 7.5. The ability of the
Company to continue is dependent on other financial contributions that will have
to take place in 2000.
SUPLEMENTARY INFORMATION TO THE CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 1999
The consolidated financial statements of APLIO are established according to the
French law of January 3, 1985 and to its statutory order of February 17, 1986.
We think that the use of U.S. GAAP would not have lead to any significant
difference about stockholders' equity and net loss, except for Research and
Development costs that were capitalized for KF 11,5 15 and depreciated for an
amount of KF 729.
The following information is wholly part of them.
<PAGE>
A. Principles and modes of consolidation
. Concerned companies
From the start, the following companies are consolidated according to the global
integration method, on the basis of their December 31, 1999 balance sheets.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
NAME ADDRESS % PARTICIP. CREATION ACCOUNTING PERIOD
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
APLIO, S.A. Paris-France Consolidating 1996 12/31
Company
---------------------------------------------------------------------------------------------------
APLIO INC. California- 100 1997 12/31
USA
---------------------------------------------------------------------------------------------------
APLIO LTD Israel 100 1997 12/31
---------------------------------------------------------------------------------------------------
</TABLE>
. Conversion method
The financial statements have been converted with the method of closing cost.
That is, the average rate for the items included in the Statement of Income ;
the historical rate for the Stockholders' Funds' items ; and the closing rate
for the other items of the balance sheet. The amount of the difference between
the historical and the closing rates has been registered in the Stockholders'
funds in the item a "foreign exchange differences".
. Minority participation
None.
. Deferred Tax Assets
None.
B. General Accounting Principles and methods of valuation
1. Intangible fixed assets
-----------------------
Intangible fixed assets are evaluated on the basis of the acquisition or
production cost. Amortization is calculated according to the predictable useful
life.
The most currently used amortization rates are the following :
Software 50%
Research and Development Costs 33%
<PAGE>
Research and Development costs are capitalized when they fulfil the required
conditions -strictly individualized projects, strong chances of technical and
commercial success, costs separately stated for each project.
Amortization of R&D costs begins at the end of development.
2. Tangible fixed assets
---------------------
Tangible fixed assets are evaluated on the basis of the acquisition cost.
Amortization is calculated according to the predictable useful life.
The most currently used amortization rates are the following :
Industrial machinery & tooling 20%
Other improvements 10%
Transport equipment 20%
Office & data processing equipment 33%
Furniture 20%
3. Inventories
-----------
Inventories are estimated according to the weight average cost. The costs of
finished goods include purchase costs, producing costs and additional costs
(customs, duties and freight). A reserve for inventory loss is registered when
the costs become superior to the estimated selling price.
4. Debts and Receivables assessment
--------------------------------
They are estimated at their initial value. An allowance for bad debts is booked
in case of irrecoverable debts.
The item "Other Receivables" include a French R&D Tax Credit of MF 4.1 in 1999,
MF 3.4 in 1998 and MF 0.8 in 1997. It will be reimbursed respectively in 2003,
2002 and 2001, or deduced from the future income tax if there is one before
these dates.
<PAGE>
5. Fixed assets and depreciation
-----------------------------
. Fixed assets
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Items Gross Amount Gross Amount
Beginning of year Acquisitions Decrease End of year
(KF) (KF) (KF) (KF)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Software 871 357 0 1.228
--------------------------------------------------------------------------------------------------------------------------
R&D costs 1,625 11,515 1,625 11,515
--------------------------------------------------------------------------------------------------------------------------
Intangible fixed 2,496 11,872 1,625 12,743
assets
--------------------------------------------------------------------------------------------------------------------------
Tangible fixed 1,901 447 12 2,336
assets
--------------------------------------------------------------------------------------------------------------------------
Financial fixed 239 53 0 292
assets
--------------------------------------------------------------------------------------------------------------------------
4,636 12,373 1,637 15,372
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
. Depreciation
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Items Amount Increase Decrease Amount
Beginning of year (KF) (KF) End of year
(KF) (KF)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Software 452 400 0 852
--------------------------------------------------------------------------------------------------------------------------
R&D costs 1,625 729 1,625 729
--------------------------------------------------------------------------------------------------------------------------
Intangible fixed 2,077 1,129 1,625 1,581
assets
--------------------------------------------------------------------------------------------------------------------------
Tangible fixed 346 535 5 875
assets
--------------------------------------------------------------------------------------------------------------------------
2,423 1,664 1,630 2,456
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
6. Receivables statement
---------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Items Gross Amount Less than 1 year More than 1 year
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits 292 292
--------------------------------------------------------------------------------------------------------------------------
Total fixed assets 292 292
--------------------------------------------------------------------------------------------------------------------------
Inventories 3,759 3,759
--------------------------------------------------------------------------------------------------------------------------
Accounts receivable 1,764 1,764
--------------------------------------------------------------------------------------------------------------------------
Other receivable 9,184 790 8,394
--------------------------------------------------------------------------------------------------------------------------
14,707 6,313 8,394
--------------------------------------------------------------------------------------------------------------------------
Prepaid expenses 111 111
--------------------------------------------------------------------------------------------------------------------------
111 111
--------------------------------------------------------------------------------------------------------------------------
Total 15,110 6,424 8,686
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
7. Liabilities statement
---------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Items Gross Amount Less than 1 year More than 1 year More than 5
years
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank overdrafts 495 495
----------------------------------------------------------------------------------------------------
Governmental loans 5,000 5,000
----------------------------------------------------------------------------------------------------
Financial liabilities 17,449 17,449
----------------------------------------------------------------------------------------------------
22,944 17,944 5,000
----------------------------------------------------------------------------------------------------
Trade Accounts 7,543 7,543
payable
----------------------------------------------------------------------------------------------------
Taxes and social 590 590
debts
----------------------------------------------------------------------------------------------------
Other debts 308 308
----------------------------------------------------------------------------------------------------
8,441 8,441
----------------------------------------------------------------------------------------------------
Total 31,385 26,385 5,000
----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APLIO, S.A.
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(UNAUDITED)
<PAGE>
APLIO, S.A.
Consolidated Balance Sheets
June 30, 2000 and 1999
<TABLE>
<CAPTION>
30 Jun'00 31 Dec '99
Assets FF'OOO FF'000
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents 2,164 1,697
Trade accounts receivable, less allowances for doubtful
accounts of FF 527,212 ) 1,268 741 1,764
(527)
Inventories:
Finished goods 2,714 3,095
Raw materials 655 664
Supplies --------- ---------
Total inventories 3,369 3,759
Other current assets 9,310 9,185
Prepaid Expenses 56 111
Total Current Assets 15,640 16,516
Fixed Assets
Intangible fixed Assets 12,860 9,635 11,162
Less accumulated depreciation (3,225)
Tangible fixed Assets 2,529 1,401 1,461
Less accumulated depreciation (1,128)
Financial Fixed Assets 205 205 292
--------- ---------
11,241 12,915
--------- ---------
Total Fixed Assets 11,241 12,915
--------- ---------
26,881 29,431
========= =========
</TABLE>
Page 1
<PAGE>
APLIO, S.A.
Consolidated Balance Sheets
June 30, 2000 and 1999
<TABLE>
<CAPTION>
30 Jun'00 31 Dec '99
Liabilities and Stockholders' Equity FF'OOO FF'000
--------- ----------
<S> <C> <C>
Current liabilities:
Loans & Overdrafts 55 61
Trade accounts payable 6,687 7,743
Taxes & social security 1,107 590
Sundry payables 602 308
Unearned income 494
Provisions for risks 1,215 893
--------- ----------
Total current liabilities 9,666 10,089
Long-term debt, excluding current installments
Governmental loans 6,439 5,000
Shareholders accounts 19,664 17,448
--------- ----------
26,103 22,448
Total liabilities 35,769 32,537
========= ==========
Stockholders' equity:
Share Capita1 21,697 13,747
Additional paid-in capital 28,195 28,195
Retained earnings (45,672) (25,661)
Result for period (13,073) (20,011)
Foreign exchange movements (35) 624
--------- ----------
Total stockholders equity -8,888 -3,106
26,881 29,431
========= ==========
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
APLIO, S.A.
Consolidated Profit and Loss Account
June 30, 2000 and 1999
30 Jun'00 31 Dec '99
FF'00 FF'000
-------------- ---------------
<S> <C> <C>
TURNOVER 4,228 24,697
CAPITALIZED PRODUCT COSTS 11,516
OTHER REVENUES 88 88
COST OF SALES (2,517) (18,665)
-------------- ---------------
GROSS MARGIN 1,799 17,637
SELLING AND ADMINISTRATIVE EXPENSES (14,764) (41,395)
-------------- ---------------
OPERATING RESULT (12,965) (23,758)
EXCEPTIONAL COST 547 21
INTEREST RECIEVABLE 236 441
INTEREST PAYABLE (891) (828)
-------------- ---------------
(655) (387)
-------------- ---------------
RESULT BEFORE TAXATION (13,073) (24,124)
TAXATION
DEFERRED TAX 0 4,113
-------------- ---------------
RESULT AFTER TAX (13,073) (20,011)
-------------- ---------------
RESULT FOR THE PERIOD (13,073) (20,011)
============== ===============
</TABLE>
<PAGE>
APLIO, S.A.
CASH FLOW
June 30, 2000 and 1999
<TABLE>
<CAPTION>
30 Jun '00
FF '000
-----------------
<S> <C>
OPERATING ACTIVITIES
OPERATING PROFIT (12,965)
DEPRECIATION CHARGES 1,843
PROFIT/(LOSS) ON SALE OF ASSETS (44)
(INCREASE) /DECREASE IN STOCKS 390
(INCREASE) /DECREASE IN DEBTORS 898
INCREASE/(DECREASE) IN CREDITORS 3,233
OTHER (58)
-----------------
Net cash flow from operating activities (6,703)
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
INTEREST RECEIVED 236
INTEREST PAID (891)
DIVIDENDS PAID/RECEIVED
OTHER
-----------------
Net cash flow from returns on investments and serving of finance (655)
TAXATION
CORPORATION TAX 0
OTHER
Tax paid 0
INVESTING ACTIVITIES
PURCHASE OF FIXED ASSETS (125)
SALE OF FIXED ASSETS 0
OTHER
-----------------
Net cash flow from investing activities (125)
-----------------
NET CASH FLOW BEFORE FINANCING (7,483)
FINANCING
ISSUE OF SHARE CAPITAL 7,950
OTHER
Net cash flow from financing 7,950
-----------------
INCREASE IN CASH AND CASH EQUIVALENTS 467
OPENING CASH AND CASH EQUIVALENTS 1,697
-----------------
CLOSING CASH AND CASH EQUIVALENTS 2,164
=================
</TABLE>
Page 4
<PAGE>
APLIO, S.A.
Statement of Stockholders Equity
June 30, 2000 and 1999
<TABLE>
<CAPTION>
Share Share Other Minority Exchange P&L Totals
Capital Premium Reserve Movments
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
At commencement of peri 13,747 28,195 624 (45,672) (3,106)
Result for period (13,073) (13,073)
Foreign exchange movements (659) (659)
Other items 7,950 7,950
-----------------------------------------------------------------------------------------
At end of period 21,697 28,195 0 0 (35) (58,745) (8,888)
=========================================================================================
</TABLE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS,
June 30, 2000 and 1999
SUPLEMENTARY INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
The consolidated financial statements of APLIO are established according to the
French law of January 3, 1985 and to its statutory order of February 17, 1986.
The following information is wholly part of them.
A. Principles and modes of consolidation
. Concerned companies
From the start, the following companies are consolidated according to the global
integration method, on the basis of their June 30, 2000 balance sheets.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
NAME ADDRESS % PARTICIP. CREATION ACCOUNTING PERIOD
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
APLIO, S.A. Paris-France Consolidating 1996 06/30
Company
-----------------------------------------------------------------------------------------------------------
APLIO INC. California- 100 1997 06/30
USA
-----------------------------------------------------------------------------------------------------------
APLIO LTD Israel 100 1997 06/30
-----------------------------------------------------------------------------------------------------------
</TABLE>
. Conversion method
The financial statements have been converted with the method of closing cost.
That is, the average rate for the items included in the Statement of Income; the
historical rate for the Stockholders' Funds' items; and the closing rate for the
other items of the balance sheet. The amount of the difference between the
historical and the closing rates has been registered in the Stockholders' funds
in the item "foreign exchange differences".
. Minority participation
None.
. Deferred Tax Assets
None.
<PAGE>
B. General Accounting Principles and methods of valuation
1. Change in General Accounting Principles concerning R & D costs
------------------------------------------------------------------
From the beginning of 2000, the new management decided not to capitalize
Research and Development Costs any more, which constitutes a change in the
accounting principles used the previous years.
2. Intangible fixed assets
--------------------------
Intangible fixed assets are evaluated on the basis of the acquisition or
production cost. Amortization is calculated according to the predictable useful
life.
The most currently used amortization rates are the following:
Software 50%
Research and Development Costs 33%
Research and Development costs were capitalized (before 2000) when they
fulfilled the required conditions - strictly individualized projects, strong
chances of technical and commercial success, costs separately stated for each
project.
Amortization of R&D costs began at the end of development.
3. Tangible fixed assets
------------------------
Tangible fixed assets are evaluated on the basis of the acquisition cost.
Amortization is calculated according to the predictable useful life.
The most currently used amortization rates are the following:
Industrial machinery & tooling 20%
Other improvements 10%
Transport equipment 20%
Office & data processing equipment 33%
Furniture 20%
4. Inventories
--------------
Inventories are estimated according to the weight average cost. The costs of
finished goods include purchase costs, producing costs and additional costs
(customs, duties and freight). A reserve for inventory loss is registered when
the costs become superior to the estimated selling price.
5. Debts and Receivables assessment
-----------------------------------
They are estimated at their initial value. An allowance for bad debts is booked
in case of irrecoverable debts.
The item "Other Receivables" includes a French R&D Tax Credit of MF 4.1 in
1999, MF 3.4 in 1998 and MF 0.8 in 1997. It will be reimbursed respectively in
2003, 2002 and 2001, or deduced from the future income tax if there is one
before these dates.
6.
Tangible Fixed Assets
<TABLE>
<CAPTION>
FREEHOLD PLANT & FIXTURES & MOTOR TOTAL
LAND & EQUIPMENT FITIINGS VEHICLES
BUILDINGS
0 0 0 0 0
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COST
At commencement of period 435 1,816 85 2,336
Additions 125 125
Disposals 0
Transfers 0
Exchange diffs 62 6 68
-------------------------------------------------------------------------------------------
At end of period 0 435 2,003 91 2,529
===========================================================================================
DEPRECIATION
At commencement of period 123 739 13 875
Charge for the year 44 177 8 229
Eliminated on disposals 0
Transfers 0
Exchange diffs 24 24
-------------------------------------------------------------------------------------------
At end of period 0 167 940 21 1,128
===========================================================================================
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
NET BOOK VALUE
At commencement of 0 312 1,077 72 1,461
===========================================================================================
At end of period 0 268 1,063 70 1,401
===========================================================================================
</TABLE>
7.
Stocks
June 30, 2000 and 1999
30 Jun '00 31 Dec '99
FF '000 FF '000
---------- ----------
RAW MATERIALS 655 664
FINISHED GOODS 2,714 3,095
---------- ----------
3,369 3,759
========== ==========
<PAGE>
Net2Phone, Inc.
Unaudited Pro Forma Financial Data
On July 7, 2000, Net2Phone acquired all of the issued and outstanding common
stock of Aplio, S.A. in exchange for cash, common stock and promissory notes. In
addition, Net2Phone is required to make payments of $2,778,230, $2,778,230 and
$2,499,999 (the "Anniversary Payments") on July 7, 2001, July 7, 2002 and July
6, 2003, respectively to three of the shareholders of Aplio. The Anniversary
Payments have not been included in the purchase price of the acquisition, as the
payments are contingent upon continuous employment by the three shareholders. In
addition the shares of Net2Phone stock issued to the shareholders are puttable
at an exercise price equal to or greater of $36.947 or the current market value
of Net2Phone common stock as of the date of the put, therefore the common stock
has been classified as redeemable common stock.
The unaudited pro forma financial data of Net2Phone presented below gives effect
to the acquisition of Aplio S.A. Certain amounts in the Aplio financial
statements have been reclassified to conform to Net2Phone's presentation.
The statements of operations data reflect the translation of all French franc
denominated amounts at the average rate for the nine months ended June 30, 2000
of $0.14645 = FF 1.00 and the average rate for the year ended September 30, 1999
of $0.1580 = FF1.00. The balance sheet data reflects the translation of all
French franc denominated amounts at the June 30, 2000 rate of $0.1461 = FF1.00.
The acquisition has been accounted for using the purchase method of accounting.
Accordingly, assets acquired and liabilities assumed have been recorded at their
estimated fair value, which are subject to further adjustment based upon
appraisals and other analysis. We are unaware of events other than those
disclosed in the notes to the unaudited pro forma financial data that would
require a material change to the preliminary purchase price allocation. However,
a final determination of necessary purchase accounting adjustments will be made
upon the completion of a study to be undertaken to determine the fair value of
certain assets and liabilities, including intangible assets.
The unaudited pro forma condensed combined statements of operations for the nine
months ended April 30, 2000 and the year ended July 31, 1999 give effect to the
acquisition if it had been consummated on August 1, 1998. The unaudited pro
forma combined balance sheets at April 30, 2000 give the effect to the merger as
if it had been consummated on April 30, 2000.
The unaudited pro forma condensed combined financial statements do not purport
to present the financial position or results of operations of Net2Phone had the
acquisition occurred on the dates specified, nor are they necessarily indicative
of the financial position or results of operations that may be achieved in the
future. The unaudited pro forma condensed combined statements of operations do
not reflect any adjustments for synergies that management expects to realize
commencing upon consummation of the proposed acquisitions. No assurances can be
made as to the amount of cost savings or revenue enhancements, if any, that may
be realized.
The unaudited pro forma financial statements should be read in conjunction with
the financial statements and notes thereto of Net2Phone incorporated by
reference and the financial statements and notes thereto of Aplio appearing
elsewhere in this Form 8-K.
<PAGE>
Net2Phone, Inc.
Proforma Condensed Combined Balance Sheets
(Unaudited)
April 30, 2000
<TABLE>
<CAPTION>
Net2Phone Aplio (1)
(Historical) (Historical) Adjustments Proforma
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 65,265,829 $ 316,236 $ (5,848,308) A $ 59,733,757
Marketable securities - current 59,097,223 - - 59,097,223
Trade accounts receivable 5,403,433 108,286 - 5,511,719
Prepaid contract deposits and other current assets 33,827,904 1,861,029 - 35,688,933
Investments in Yahoo! Inc. Common stock 105,040,301 - - 105,040,301
---------------------------------------------------------------------
Total current assets 268,634,690 2,285,551 (5,848,308) 265,071,933
Property and equipment, net 43,208,027 234,693 164,840 A 43,607,560
Intangibles, net 4,481,884 - 40,415,366 A 44,897,250
Investments 20,663,546 - - 20,663,546
Marketable securities - long term 52,960,381 - - 52,960,381
Other assets 1,097,918 - - 1,097,918
---------------------------------------------------------------------
Total assets $ 391,046,446 $ 2,520,244 $ 34,731,898 $ 428,298,588
=====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 6,133,417 $ 977,204 $ - $ 7,110,621
Accrued expenses 4,187,674 435,336 500,000 5,123,010
Deferred revenue 2,686,353 - - 2,686,353
Promissory notes - current portion - - 1,961,235 A 1,961,235
Due to IDT Corporation 4,725,820 - - 4,725,820
---------------------------------------------------------------------
Total current liabilities 17,733,264 1,412,540 2,461,235 21,607,039
Long term liabilities - 3,814,562 8,876,215 13,190,777
---------------------------------------------------------------------
Total liabilities 17,733,264 5,227,102 11,337,450 34,297,816
Commitments and contingencies
Redeemable common stock issued in conjunction with
the purchase of Aplio - - 20,687,590 A 20,687,590
Stockholders' equity (deficit) 373,313,182 (2,706,858) 2,706,858 373,313,182
---------------------------------------------------------------------
Total liabilities and stockholders' equity (deficit $ 391,046,446 $ 2,520,244 $ 34,731,898 $ 428,298,588
=====================================================================
</TABLE>
(1) As of June 30, 2000.
<PAGE>
Net2Phone, Inc.
Condensed Combined Statement of Operations
(Unaudited)
For the Nine Months Ended April 30, 2000
<TABLE>
<CAPTION>
Net2Phone Aplio
(Historical) (Historical)(1) Adjustments Proforma
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue: $ 47,478,530 $ 1,043,621 $ - $ 48,522,151
Direct cost of revenue 26,169,278 291,015 - 26,460,293
Selling and marketing 26,628,894 264,165 - 26,893,059
General and Administrative 23,497,976 3,262,792 - 26,760,768
Depreciation and Amortization 3,536,361 (77,414) 10,128,567 B 13,587,514
Compensation charge from the issuance of stk options 11,710,318 - - 11,710,318
-----------------------------------------------------------------
Total costs and expenses 91,542,827 3,740,558 10,128,567 105,411,952
Loss from operations (44,064,297) (2,696,937) (10,128,567) (56,889,801)
Other income (expense) 6,970,539 (39,126) (320,172) C 6,611,241
-----------------------------------------------------------------
Net income (loss) before taxes (37,093,758) (2,736,063) (10,448,739) (50,278,560)
Income tax expense - - - -
-----------------------------------------------------------------
Net income (loss) $ (37,093,758) $ (2,736,063) $ (10,448,739) (50,278,560)
=================================================================
Basic and diluted net loss per common share $ (0.73) $ (0.98)
=============== =============
Weighted average number of common shares used in the
calculation of basic and diluted net loss per common share 50,488,539 582,749 A 51,071,288
=============== =============================
</TABLE>
(1) For the nine months ended June 30, 2000.
<PAGE>
Net2Phone, Inc.
Condensed Combined Statement of Operations
(Unaudited)
For the Year Ended July 31, 1999
<TABLE>
<CAPTION>
Net2Phone Aplio
(Historical) (Historical) (1) Adjustments Proforma
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue: $ 33,256,457 $ 5,460,478 $ - $ 38,716,935
Direct cost of revenue 17,818,010 2,740,305 - 20,558,315
Selling and marketing 8,828,167 1,216,675 - 10,044,842
General and Administrative 10,836,072 6,276,739 - 17,112,811
Depreciation and Amortization 2,316,545 (247,157) 13,504,757 B 15,574,145
Compensation charge from the issuance of stk options 17,919,541 - - 17,919,541
----------------------------------------------------------------------
Total costs and expenses 57,718,335 9,986,562 13,504,757 81,209,654
----------------------------------------------------------------------
Loss from operations (24,461,878) (4,526,084) (13,504,757) (42,492,719)
Other income (expense) (243,314) (43,940) (426,895) C (714,149)
----------------------------------------------------------------------
Net income (loss) before taxes (24,705,192) (4,570,024) (13,931,652) (43,206,868)
Income tax expense - 633,051 - 633,051
----------------------------------------------------------------------
Net income (loss) (24,705,192) (3,936,973) (13,931,652) (42,573,817)
Redeemable preferred stock dividends (29,219,362) - - (29,219,362)
----------------------------------------------------------------------
Net loss available to common stockholders' $ (53,924,554) $ (3,936,973) $(13,931,652) $ (71,793,179)
======================================================================
Net loss per common share- basic and diluted $ (1.73) $ (2.26)
============== =============
Weighted average number of common shares
used in calculation of basic and diluted
net loss per common share 31,236,415 582,749 A 31,819,164
============== ==========================
</TABLE>
(1) For the twelve months ended September 30, 1999.
<PAGE>
Net2Phone, Inc.
Notes to the Unaudited Pro Forma Financial Data
A Purchase Price and Allocation of Purchase Price
Shares of Net2Phone, Inc. issued 582,749
Net2Phone, Inc. common stock price (1) $ 35.50
--------------
20,687,590
Promissory notes issued 6,537,450
Cash consideration (2) 10,648,308
--------------
Purchase price 37,873,348
Net liabilities at June 30, 2000 (2,706,858)
--------------
Excess of purchase price over net assets acquire $ 40,580,206
==============
Preliminary allocation to:
Fixed assets $ 164,840
Intangible assets 40,415,366
--------------
$ 40,580,206
==============
---------------------------------------------------------------------------
(1) To determine the value associated with the stock portion of the
consideration paid to Aplio shareholders, we have used the average of the
high, low and closing prices of Net2Phone, Inc.'s common stock for the
three days before and after the close and announcement of the transaction,
in accordance with Emerging Issues Task Force 95-19 "DETERMINATION OF THE
MEASUREMENT DATE FOR THE MARKET PRICE OF ACQUIRER SECURITIES ISSUED IN A
PURCHASE BUSINESS COMBINATION". The average of these closing prices was
$35.50.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(2) Represents cash paid at the closing of $5,848,308 and $4,800,000 to be paid
(i) after the expiration of certain time periods and (ii) to the extent
(a) the selling shareholders do not have any indemnification payment
obligations and (b) Aplio has met certain minimum net worth tests.
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended April 30, Year Ended
2000 July 31, 1999
--------------------------------
<S> <C> <C>
B Depreciation and Amortization
Depreciation of fixed assets step-up (over 5 years) $ 24,726 $ 32,968
Amortization of intangibles (over 3 years) 10,103,841 13,471,789
---------------------------------
$ 10,128,567 $ 13,504,757
=================================
Nine Months
Ended April 30, Year Ended
2000 July 31, 1999
--------------------------------
C Interest Expense
Interest on promissory notes at 6.53% $ 320,172 $ 426,895
================================
</TABLE>
