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 event reported: August 31, 2000
Date of Report: November 14, 2000
NXGEN NETWORKS, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 000-28427 870621120
--------------- ------------------- -----------------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification Number)
1700 Lincoln Street - Suite 1920 Denver Co 80203
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: 303-839-9150
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GLOBAL TECH CENTER, DON JUAN ROAD, P.O. BOX 218, HERTFORD, NORTH CAROLINA 27944
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(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable
ITEM 5. OTHER EVENTS
Not Applicable
ITEM 6. RESIGNATION OF DIRECTORS
Not Applicable
ITEM 7. FINANCIAL STATEMENTS AND EXHBITS
(1) Financial Statements
(a) International Long Distance Corporation - Consolidated Financial
Statements:
Six Months Ended June 30, 2000 (compiled) and Year Ended December 31,
1999 (audited)
Years Ended December 31, 1999 and 1998
(b) Pro forma financial information
(3) Exhibits
The following exhibits are filed as a part of this report.
Exhibit Description
------- ---------------------------------------------
2 Share Exchange Agreement/Information Statement
23 Consent of Independent Accountants
ITEM 8. CHANGE IN FISCAL YEAR
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
NXGEN NETWORKS, INC.
(Registrant)
/s/ Ralph Proceviat
--------------------------
Ralph Proceviat, CFO
Dated: November 14, 2000
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<PAGE>
FINANCIAL STATEMENTS
--------------------
International Long Distance Corporation
(a development stage company)
Consolidated Financial Statements
Six Months Ended June 30, 2000 (compiled)
and
Year Ended December 31, 1999 (audited)
<PAGE>
International Long Distance Corporation
(a development stage company)
Contents
Page
----
Accountants' Report 1
Consolidated Balance Sheets 2-3
Consolidated Statements of Operations 4
Consolidated Statements of Changes in Stockholders' Deficit 5
Consolidated Statements of Cash Flows 6-8
Notes to Consolidated Financial Statements 9-18
<PAGE>
1
Accountants' Report
Board of Directors
International Long Distance Corporation
Hertford, North Carolina
We have compiled the accompanying consolidated balance sheet of International
Long Distance Corporation (a North Carolina corporation) as of June 30, 2000,
and the related consolidated statements of operations, changes in stockholders'
deficit, and cash flows for the six months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying consolidated financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
The financial statements for the year ended December 31, 1999, were audited by
us and we expressed an unqualified opinion on them in our report dated June 2,
2000, but we have not performed any auditing procedures since that date.
/s/
Atlanta, Georgia
August 24, 2000
<PAGE>
2
International Long Distance Corporation
(a development stage company)
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
Assets
2000 1999
(Complied) (Audited)
---------- ----------
Current assets
Cash $ 149,912 $ --
Accounts receivable - trade 60,543 101,181
Accounts receivable - officer 85,060 84,060
---------- ----------
Total current assets 295,515 185,241
---------- ----------
Investments
Investment in Airtime Technologies 135,000 --
Property and equipment
Land 39,374 39,374
Leasehold improvements 511,800 105,132
Computers and software 341,851 248,652
Furniture and fixtures 71,359 4,660
Telephone switching equipment 6,406,086 3,100,135
---------- ----------
Total property and equipment 7,370,470 3,497,953
Less: accumulated depreciation 1,283,618 718,697
---------- ----------
Property and equipment, net 6,086,852 2,779,256
---------- ----------
Other assets
Deposits 44,559 44,559
Deferred finance charges, net of
amortization of $165,339 and $121,018 277,866 322,187
---------- ----------
Total other assets 322,425 366,746
---------- ----------
Total assets $6,839,792 $3,331,243
========== ==========
See notes to consolidated financial statements and accountants' report.
<PAGE>
3
<TABLE>
<CAPTION>
International Long Distance Corporation
(a development stage company)
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
Liabilities and Stockholders' Deficit
2000 1999
(Compiled) (Audited)
------------ ------------
<S> <C> <C>
Current liabilities
Cash overdraft $ -- $ 3,118
Accounts payable 3,997,930 2,528,020
Accrued expenses 476,149 145,027
Accrued interest 132,460 3,300
Current portion of capital lease obligations 129,124 123,715
Short-term notes payable 5,942,785 1,837,188
Unearned revenue 89,975 55,000
------------ ------------
Total current liabilities 10,768,423 4,695,368
------------ ------------
Capital lease obligations 200,014 255,490
------------ ------------
Stockholders' deficit
Common stock, $.00033 par value;
11,000,000 shares authorized;
5,500,000 shares issued and outstanding 1,812 500
Subscription agreements -- 6,065,584
Additional paid-in capital 7,692,301 --
Deficit accumulated during the
development stage (11,822,758) (7,685,699)
------------ ------------
Total stockholders' deficit (4,128,645) (1,619,615)
------------ ------------
Total liabilities and stockholders' deficit $ 6,839,792 $ 3,331,243
============ ============
</TABLE>
See notes to consolidated financial statements and accountants' report.
<PAGE>
<TABLE>
<CAPTION>
4
International Long Distance Corporation
(a development stage company)
Consolidated Statements of Operations
March 20, 1998 March 20, 1998
Six Months Ended (Inception) to (Inception) to
June 30, 2000 December 31, 1999 to June 30, 2000
(Compiled) (Audited) (Compiled)
-------------- ------------------ -------------------
<S> <C> <C> <C>
Revenue
Service revenue $ 652,888 $ 173,464 $ 826,352
Other income 10,417 1,030 11,447
-------------- --------------- ----------------
663,305 174,494 837,799
------------- ------------- ---------------
Costs and expenses
Costs of telephone services 1,043,285 961,674 2,004,959
Research and development 128,533 140,911 269,444
General and administrative 579,588 368,103 947,691
Other operating expenses 1,197,665 511,684 1,709,349
Maintenance and utilities 32,159 47,720 79,879
Travel, meals and
entertainment 215,873 142,793 358,666
------------- ------------ ---------------
3,197,103 2,172,885 5,369,988
------------ ------------ --------------
Operating loss (2,533,798) (1,998,391) (4,532,189)
------------ ------------ -------------
Other expenses
Amortization and finance costs 419,082 1,114,122 1,533,204
Bad debts 143,354 1,300 144,654
Charitable contributions 143,132 137,664 280,796
Depreciation 564,921 718,697 1,283,618
Interest 187,588 249,810 437,398
Loss on impairment of asset - 279,071 279,071
Loss on uncollectible
advances to affiliate - 1,085,448 1,085,448
Loss on failed venture - 2,011,396 2,011,396
Rents and leases 145,184 89,800 234,984
------------ ------------- ---------------
Total other expenses 1,603,261 5,687,308 7,290,569
----------- ----------- --------------
Net loss $(4,137,059) $(7,685,699) $(11,822,758)
=========== ============ ============
</TABLE>
See notes to consolidated financial statements and accountants' report.
<PAGE>
<TABLE>
<CAPTION>
5
International Long Distance Corporation
(a development stage company)
Consolidated Statement of Changes in Stockholder's Deficit
Six Months Ended June 30, 2000
and the Period March 20, 1998 (date of inception) to December 31, 1999
Additional Retained Total
Common Subscription Paid-In Earnings Stockholder's
Stock Agreements Capital (Deficit) Deficit
------------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $ -- $ -- $ -- $ -- $ --
Issuance of 500 shares
of common stock 500 -- -- -- 500
Funds / services received
for stock subscriptions -- 6,065,584 -- -- 6,065,584
Net loss (7,685,699) (7,685,699)
----------- ------------ ------------ ------------ ------------
Balance, December 31, 1999 (Audited) 500 6,065,584 -- (7,685,699) (1,619,615)
Funds/services received
for stock subscriptions -- 1,678,029 -- -- 1,678,029
Issuance of 5,499,500 shares
of common stock 1,315 (7,743,613) 7,743,089 -- 791
Net loss -- (4,137,059) (4,137,059)
----------- ------------ ------------ ------------ ------------
1,815 -- 7,743,089 (11,822,758) (4,077,854)
Stock subscription receivable (3) -- (50,788) -- (50,791)
----------- ------------ ------------ ------------ ------------
Balance, June 30, 2000 (Compiled) $ 1 812 $ -- $ 7,692,301 $ (11,822,758) $(4,128,645)
=========== ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements and accountants' report.
<PAGE>
6
<PAGE>
<TABLE>
<CAPTION>
International Long Distance Corporation
(a development stage company)
Consolidated Statements of Cash Flows
March 20, 1998 March 20, 1998
Six Months Ended (Inception) to (Inception) to
June 30, 2000 December 31, 1999 June 30, 2000
(Compiled) (Audited) (Compiled)
---------------- ------------------- ----------------------
<S> <C> <C> <C>
Cash flows from operating activities
Cash received from revenue $ 460,564 $ 128,313 $ 588,877
Cash paid to suppliers, employees and affiliate (1,688,505) (894,992) (2,583,497)
Cash paid for interest (58,428) (246,510) (304,938)
Cash advanced to failed joint venture - (1,829,396) (1,829,396)
-------------- ------------------ ----------------
Net cash used in operating activities (1,286,369) (2,842,585) (4,128,954)
-------------- ------------------ ----------------
Cash flows from investing activities:
Purchases of property and equipment (3,724,017) (3,307,229) (7,031,246)
Payment of deposits - (44,559) (44,559)
-------------- ------------------ ----------------
Net cash used in investing activities (3,724,017) (3,351,788) (7,075,805)
-------------- ------------------ ----------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 4,287,079 2,525,838 6,812,917
Proceeds from stock subscription agreements 1,104,768 4,447,275 5,552,043
Proceeds from issuance of common stock - 500 500
Repayment of notes payable and capital leases (231,549) (779,240) (1,010,789)
------------- ------------------ ----------------
Net cash provided by financing activities 5,160,298 6,194,373 11,354,671
------------- ------------------ ----------------
Net increase in cash and cash equivalents -
Cash and cash equivalents, beginning of period - - -
------------- ------------------ ----------------
Cash and cash equivalents, end of period $ 149,912 $ - $ 149,912
-------------- ------------------ ----------------
</TABLE>
See notes to consolidated financial statements and accountants' report.
<PAGE>
7
<TABLE>
<CAPTION>
International Long Distance Corporation
(a development stage company)
Consolidated Statements of Cash Flows
Six Months March 20, 1998 March 20, 1998
Ended (Inception) to (Inception) to
June 30, 2000 December 31, 1999 June 30, 2000
(Compiled) (Audited) (Compiled)
------------- ------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(4,137,059) $(7,685,699) $(11,822,758)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 564,921 718,697 1,283,618
Amortization and finance costs 617,582 1,114,122 1,731,704
Loss on impairment of asset -- 279,071 279,071
Non-cash subscription activity (198,500) -- (198,500)
Non-cash portion of loss on failed venture -- 182,000 182,000
Conversion of accounts receivable
to investment (135,000) (135,000)
Changes in assets and liabilities:
(Increase) decrease in assets
Accounts receivable - trade 40,638 (101,181) (60,543)
Accounts receivable - officer (1,000) (84,060) (85,060)
Increase (decrease) in liabilities
Cash overdraft (3,118) 3,118 --
Accounts payable 1,469,910 2,528,020 3,997,930
Accrued expenses 331,122 145,027 476,149
Accrued interest 129,160 3,300 132,460
Unearned revenue 34,975 55,000 89,975
----------- ----------- -----------
Net cash used in
operating activities $(1,286,369) $(2,842,585) (4,128,954)
=========== =========== ===========
See notes to consolidated financial statements and accountants' report.
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
International Long Distance Corporation
(a development stage company)
Consolidated Statements of Cash Flows
Six Months March 20, 1998 March 20, 1998
Ended (Inception) to (Inception) to
June 30, 2000 December 31, 1999 June 30, 2000
(Compiled) (Audited) (Compiled)
----------------- --------------- ---------------
<S> <C> <C> <C>
Schedule of non-cash operating, investing,
and financing transactions:
Acquisition of certain property and equipment:
Capital leases
Equipment acquired $ - $ 469,795 $ 469,795
Capital leases assumed - (379,206) (379,206)
------------------ -------------- --------------
Cash paid $ - $ 90,589 $ 90,589
================= ============== =============
Conversion of investor services to equity:
Subscription agreements
Settlement of claims $ - $ 182,000 $ 182,000
Services received 374,761 993,104 1,367,865
Exchange for property and equipment 148,500 - 148,500
Acquisition of equipment leases - 443,205 443,205
Subscription receivable 50,000 - 50,000
Subscription agreements issued (573,261) (1,618,309) (2,191,570)
----------------- -------------- -------------
Cash paid $ - $ - $ -
================= ============== =============
Investment in common stock:
Accounts receivable converted $ (278,354) $ - (278,354)
Fair market value of investments
acquired at conversion of stock 135,000 - 135,000
Bad debt on receivable conversion 143,354 - 143,354
----------------- -------------- ------------
Cash paid $ - $ - $ -
================= ============== =============
</TABLE>
See notes to consolidated financial statements and accountants' report.
<PAGE>
9
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
Note 1 - Summary of significant accounting policies
Nature of business and basis of present+ation
International Long Distance Corporation ("ILDC" or the "Company") was formed on
March 20, 1998, in the State of North Carolina as a long distance service
provider dedicated to utilizing state of the art technology to provide premier
long distance telephone service both domestically and internationally. The
Company's operations center is located in Hertford, North Carolina.
Custom Telecom Solutions ("CTS") was formed as a joint venture corporation in
November 1999, by an agreement between the Company and StarTouch International.
The joint venture agreement was never executed. CTS remains a wholly-owned
subsidiary of the Company but currently has no operations. All significant
intercompany transactions have been eliminated in consolidation.
Cash and equivalents
Cash and equivalents includes all highly liquid investments with an original
maturity of three months or less.
Property, equipment and depreciation
Property and equipment acquired through a purchase transaction are stated at
cost. Certain property and equipment was acquired through an issuance of the
Company's common stock. These assets are stated at the fair market value of the
assets at the time of the issuance. Maintenance and repairs are charged to
operations and major improvements are capitalized. Upon retirement, sale or
other disposition, the cost and accumulated depreciation are eliminated from the
accounts and any gain or loss is included in operations. Depreciation is
computed using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes. Estimated useful lives of the
assets range from three to fifteen years.
Property and equipment includes assets acquired under capital leases totaling
$469,795. Equipment acquired through these leases are included as a component of
telephone switching equipment.
Revenue recognition
Originally, the Company provided services involving the sale of prepaid long
distance telephone cards. The corresponding revenue is included in the
accompanying financial statements. Proceeds from the sale of prepaid phone cards
are initially recorded as unearned revenue and, as the cards are used, the
income earned by ILDC is reported in the statement of operations as service
revenue. ILDC's primary source of revenue in the future is anticipated to be
generated through the
<PAGE>
10
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
establishment of revenue producing long distance telephone networks.
Income taxes
ILDC is subject to federal and state corporation income taxes on any net taxable
income. Deferred income tax assets and liabilities are computed to reflect the
difference between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets and liabilities to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the period reported. Actual results could differ
from those estimates.
Start-Up expenses
In accordance with Statement of Position 98-5, Reporting on the Costs of
Start-up Activities, the Company expensed all organization and start-up expenses
as incurred.
Allowance for doubtful accounts
Accounts receivable have been reviewed by management and no allowance for
doubtful accounts is considered necessary as of June 30, 2000.
Deferred finance charges
In the early stages of development, certain investors assisted the Company in
obtaining some of the telephone switching equipment necessary to further the
Company's operations. The investors leased the equipment and assigned the leases
to the Company. These equipment leases are recorded on the books as capital
leases (Note 9). The total cost of equipment leased by investors and assigned to
ILDC is $469,795. ILDC has either directly made all payments required under the
leases or given credit to the investors for any lease payments made by the
investors.
<PAGE>
11
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
In consideration for the assistance provided by the investors in obtaining the
equipment leases, ILDC credited these investors with joint venture or
profit-sharing agreements (Note 2) totaling $443,205. These costs have been
recorded as deferred finance charges and are being amortized over the term of
the leases. Amortization of deferred finance charges was $44,321 and $121,018
for the periods ended June 30, 2000 and December 31, 1999, respectively.
Additionally, ILDC credited investors with joint venture or profit sharing
agreements (Note 2) totaling $374,761 and $993,104 at June 30, 2000, and
December 31, 1999, respectively, for providing short-term loans and lines of
credit to ILDC or obtaining additional investors. These amounts are included as
a component of amortization and finance costs in the consolidated statements of
operations.
Common stock
On January 15, 2000, ILDC issued 791 shares of common stock to friends, family,
and employees. Additionally, subsequent to the stock split described below,
10,000 shares of common stock at a value of $5.00 per share were issued to
various other investors. None of these shares were paid for as of June 30, 2000,
and are shown as common stock subscription receivable in the consolidated
financial statements.
In April 2000, ILDC shareholders approved an amendment to the Articles of
Incorporation to increase the number of authorized shares of common stock from
100,000 to 11,000,000.
On April 15, 2000, ILDC's board of directors declared a 3,032 for 1 split on the
shares of ILDC's common stock. Each stockholder of record on April 15, 2000,
received 3,032 additional shares of common stock for each share of common stock
then held. The stock was issued subsequent to the declaration date. All
references in the financial statements to the number of shares outstanding of
ILDC's common stock reflect the effect of the stock split for all periods
presented. Par value after the split was $.00033 per share.
As of June 30, 2000, ILDC had 11,000,000 shares of $.00033 par value common
stock authorized with 5,500,000 issued and outstanding.
Note 2 - Stock subscription agreements
In order to obtain capital for the purposes of the construction, installation
and maintenance of a telephone switching and call routing system and to fulfill
liabilities and obligations associated with start-up expenses, the Company
entered into joint venture and profit sharing agreements with various investors.
In addition, the Company credited certain investors with joint venture or
profit-sharing agreements in exchange for services provided to ILDC (Note 1) and
in settlement of claims against
<PAGE>
12
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
ILDC (Note 6). ILDC issued joint venture and profit-sharing agreements totaling
$7,743,613 in exchange for the following consideration:
Inception through Inception through
Consideration June 30, 2000 December 31, 2999
-------------------------------- ------------------ -----------------
Cash received $5,552,043 $4,447,275
Acquisition of equipment leases 443,205 443,205
Providing short- term loans and
raising capital 1,566,365 993,104
Settlement of claims 182,000 182,000
----------- -----------
$7,743,613 $6,065,884
========== ==========
No payments were made under these agreements since ILDC had not reached
profitability.
On April 18, 2000, the investors agreed to cancel their joint venture and profit
sharing agreements in exchange for common stock of ILDC. In order to facilitate
the exchange, the Company increased the number of authorized shares from 100,000
to 11,000,000 (Note 1). Generally, each investor received one share of common
stock for every $5.00 invested through joint venture or profit sharing
agreements whether the investment was in cash or for services provided. ILDC
issued 1,584,956 shares of stock in connection with the subscription agreements
totaling $7,743,613.
Note 3 - Merger, reorganization, and share exchange
The Company had finalized plans for a merger and reorganization with a publicly
traded entity (Note 12). Closing on the merger was anticipated to be in June
2000. Complications arose and ILDC has since finalized a share exchange with Old
Night, Inc. (Old Night), another publically traded entity. An agreement between
ILDC and Old Night was reached on June 30, 2000. The agreement provides for an
exchange of 4,529,054 shares of Old Night common stock for 4,529,054 shares
(82.35%) of ILDC common stock. The exchange offer is contingent on ILDC
shareholders holding a minimum of 80% (4,400,000) of the issued and outstanding
shares of ILDC tendering their share certificates in the exchange. The share
exchange offer expires August 31, 2000.
Note 4 - Income taxes
ILDC had net operating losses of $4,137,059 and $7,685,699 as of June 30, 2000,
and December 31, 1999, respectively, which will be carried forward to offset
future taxable income. The cumulative tax benefit and deferred tax asset,
totaling $4,610,000, generated by this net operating loss, has been completely
offset by a valuation allowance due to the uncertainty of attaining profitable
operations.
<PAGE>
13
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
Note 5 - Related party transactions
ILDC was affiliated with National Marketing Corporation (NMC), a marketing
organization, which is owned by the president of ILDC. ILDC advanced $1,085,448
to National Marketing Corporation during the calendar years 1998 and 1999, which
will not be repaid since operations of NMC have been discontinued. A substantial
portion of the funds advanced to NMC were forwarded to Prepaid Cellular
Services, LLC (Note 6) in the form of loans, advances, and direct payment of
Prepaid Cellular's liabilities. Prepaid Cellular ceased operations during 1999.
As a result, these advances to National Marketing Corporation have been
reflected as uncollectible advances to affiliate in the accompanying
consolidated financial statements.
ILDC has advanced the president $85,060 as of June 30, 2000. No interest is
charged on the advance.
Note 6 - Prepaid Cellular Services LLC
ILDC entered into various transactions with Prepaid Cellular Services, LLC (PCS)
regarding the use of the ILDC telephone switching and network services. As the
relationship with PCS progressed, the Company also made cash advances to PCS,
purchased equipment for PCS and paid operating expenses of PCS. In addition,
Anthony Overman, the president of ILDC, served for a brief period as CEO of PCS.
ILDC also attempted to acquire the stock of PCS and merge PCS into ILDC. The
acquisition of the stock was rejected and irreconcilable differences between the
companies arose. Due to the significant amount invested into PCS, ILDC continued
to fund the operations of PCS in an attempt to reach a point where revenue could
be generated or some of the investment recovered. PCS ultimately failed.
Numerous claims were made against PCS by various creditors and third parties.
Due to the close relationship of ILDC with PCS and the fact that the ILDC
president served as CEO of PCS, claims have been made against ILDC for some of
the PCS debts and obligations (Note 11).
ILDC funded PCS amounts totaling $2,518,149. These amounts include advances by
ILDC to PCS, payment of PCS expenses and obligations, and a settlement of
approximately $468,000 to Garwell Limited Partnership for advances to PCS. The
Garwell claim was settled by issuance of ILDC common stock. Subsequent to
December 31, 1999, ILDC agreed to issue 200,000 shares of common stock to
Garwell or its affiliates in exchange for cancelling the $468,000 claim and in
exchange for $350,000 which had previously been invested in ILDC (Notes 2 and
3). When PCS ceased operations, ILDC took possession of equipment totaling
$506,753. The remaining costs related to PCS, totaling $2,011,396, have been
charged to expense as loss on failed venture.
ILDC has assumed responsibility for the portion of the debts incurred by PCS in
cases where management has determined that ILDC has financially benefitted or is
ultimately liable for payment.
<PAGE>
14
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
These liabilities have been recorded in the accompanying consolidated financial
statements.
Note 7 - Investment in Airtime Technologies
During April 2000, ILDC converted $278,534 in accounts receivable to 150,000
shares (or 5% ownership) of Airtime Technologies (Airtime). The Airtime stock
was. valued at $135,000 based on a recent transaction between Airtime and an
unrelated party. The difference between the original accounts receivable balance
and the value of the stock was written off as bad debt.
Note 8 - Short-term notes payable
At June 30, 2000 and December 31, 1999, short-term notes payable consisted of
the following:
2000 1999
---- ----
Note payable to Comdial due in monthly installments of
$25,550 plus interest at 10.75% with remaining principal and
interst due at maturity on September 30, 2000. $ 76,477 $228,800
Note payable to BDR Consulting, Inc. (Note 12) due in one
payment, without interest, on September 30, 2000, unless
otherwise converted into equity without the issuance of
shares in ILDC. BDR Consulting, Inc. was granted the option
to purchase 150,000 shares of the newly merged company at
$5.00 per share upon this conversion. Interest will accrue
at a rate of 10% on any unpaid principal at maturity. 150,000 -
Note payable to Crafton Matthews originally due January 15,
2000, and extended to April 19, 2000. The note was paid on
the extended due date. - 29,000
Notes payable to Old Night, Inc. originally due in one
payment, plus interest at 10% on August 15, 2000. The terms
of the notes were renegotiated on August 15, 2000. The
extended maturity date of the notes is October 31, 2000.
Interest will accrue at a rate of 8% after maturity. The
notes arose from advances to purchase additional equipment
and to meet current obligations of ILDC as they became due. 2,299,000
<PAGE>
15
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
Note payable to StarTouch International originally due in
one payment including interest at 10% on June 5, 2000. The
note arose from advances relating to a proposed joint
venture agreement between ILDC and StarTouch (Note 1). When
the joint venture was abandoned, all amounts due were
converted to a note payable dated February 5, 2000. Interest
accrues from the date of the note. ILDC and StarTouch are
negotiating the payment terms and maturity of this note and
expect to reach a resolution by August 28, 2000. The most
recent counteroffer from ILDC to StarTouch consists of ILDC
making an initial payment of $650,000 by September 30, 2000,
with the remaining balances due in six monthly installments
of approximately $230,000, plus monthly interest at 10%.
StarTouch may convert any of the unpaid balance to common
stock at a conversion price of $8.00 per share. 2,067,300 1,579,329
--------- ---------
$5,942,785$1,837,188
========== =========
Note 9 - Capital lease obligations
Included in long-term debt are lease obligations that have been capitalized for
financial statement purposes. Minimum future lease payments under capital leases
as of June 30, 2000, are as follows:
June 30, Amount
-------- ---------
2001 $ 172,845
2002 135,835
2003 91,952
2004 7,608
-----------
Total minimum lease payments 408,240
Less: amounts representing interest (79,102)
----------
Present value of net minimum
lease payments $329,138
---------
Note 10 - Impairment of assets used in operations
In 1999, during the course of ILDC's review of its operations, the Company
assessed the recoverability of the carrying value of the Compaq Tandem SCP
platform, which resulted in an impairment loss of $279,071. This loss reflects
the amount by which the carrying value exceeds the estimated fair value of the
asset. The impairment loss is reported in the consolidated statement of
operations.
<PAGE>
16
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
Note 11 - Legal matters
ILDC is currently being sued by Compaq Computer Corporation for $820,439, which
includes interest and court costs, for equipment purchased and currently in the
possession of ILDC (Note 10). The full amount of this potential liability is
included in accounts payable in the accompanying consolidated financial
statements. ILDC and the plaintiff are currently engaged in negotiations in an
attempt to settle this liability. On August 14, 2000, ILDC offered to pay the
sum of $156,845 and to return the equipment to settle the claim. The offer has
not been accepted as of August 24, 2000.
There is a possibility that the Company could be included in some of the
numerous claims asserted against Prepaid Cellular Services, LLC (Note 6) due to
the relationship between the two entities. The potential liability from these
claims can not be estimated in the opinion of management and its counsel.
Note 12- BDR Consulting, Inc.
On February 16, 2000, BDR Consulting, Inc. ("BDR") entered into an agreement
with ILDC where BDR would assist ILDC in raising at least $1,500,000 for its
operations and in negotiating a merger between ILDC and a publicly traded
company. For its services and the financing, BDR would receive shares of ILDC
equal to the then outstanding shares of the Company which would make BDR a 50%
shareholder.
On February 28, 2000, BDR cancelled this agreement and converted the $1,500,000
advanced into a short-term note (Note 8). BDR, commencing in May 2000, began
advancing funds to Old Night, Inc., in exchange for shares of its common stock.
Old Night is the target of a share exchange agreement with ILDC (Note 3). Old
Night has also advanced the funds to ILDC in exchange for short-term notes
described in Note 8.
Note 13 - Commitments
ILDC currently leases an office building in Hertford, North Carolina, for $5,000
per month under a 24-month lease agreement due to expire October 31, 2001. The
lease was originally in the name of a company owned by ILDC's President and had
been assigned to ILDC at December 31, 1999. During the period ended June 30,
2000, the assignment was returned to the original lessor in connection with
other negotiations regarding the President of ILDC. The absolute purchase option
requiring ILDC to purchase the building upon expiration of the lease for
$750,000 is no longer an obligation to ILDC since the original lessor is
obligated to exercise this option.
ILDC also leases office space in Atlanta, Georgia for $2,797 per month under a
26-month lease assumed from the prior lessee, Prepaid Cellular Services LLC,
(Note 6). The lease was due to expire
<PAGE>
17
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
April 30, 2001. The lease was renegotiated in June 2000. Additional space was
added to the original lease. The current lease is for $13,870 per month for a
term of five years, to expire in May 2005, with one renewal option of five
years.
Future minimum lease payments under non-cancellable leases with original terms
in excess of one year are as follows:
June 30, Amount
-------- ---------
2001 $ 226,440
2002 186,440
2003 166,440
2004 166,440
2005 152,750
---------
$ 898,510
On July 27, 2000, ILDC entered into a one year agreement with Winton Capital
Holdings, Inc. (Winton) to lease four Salix switching devices for $51,250 per
quarter due to expire July 31, 2000. Three of the Salix switches had already
been purchased by ILDC at June 30, 2000, for a total of $1,480,415. This amount
is reflected in accounts payable at June 30, 2000, but will be paid from the
above financing.
Note 14 - Financial instruments
The Financial Accounting Standards Board requires disclosure of information
about financial instruments and related off-balance sheet risk and
concentrations of credit risk. The Company places its cash with insured
financial institutions. However, at times during the year, the cash balances
exceeded the federally insured limits of the Federal Deposit Insurance
Corporation.
Note 15- Continuation as a going concern
The Company incurred operating losses of $11,822,758 for the period from
inception through June 30, 2000. These consolidated financial statements are
presented on the basis which assumes the continued existence of International
Long Distance Corporation as a going concern. Continuation as a going concern
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business over a reasonable length of time. The financial
statements do not include any adjustments that might be necessary if ILDC is
unable to continue as a going concern. Continuation of ILDC as a going concern
is contingent upon completion of the share exchange (Note 3), continued
financial support from investors and creditors, obtaining sufficient long-term
financing for acquisition and implementation of its telephone network, and upon
achieving and maintaining profitable operations.
<PAGE>
18
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
June 30, 2000
Current plans for financing future operations include the Winton Capital
Holdings, Inc. lease described in Note 13 above which paid accounts payable
totaling $1,480,415 at June 30, 2000. In addition, ILDC has received a
commitment letter for up to $10,000,000 in lease financing for telephone network
build out subject to the Company meeting certain financing restrictions.
Additional shares of the new company, upon merger, will also be available for
issue to assist with operating costs and network build out.
<PAGE>
International Long Distance Corporation
(a development stage company)
Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
<PAGE>
International Long Distance Corporation
(a development stage company)
Contents
Page
Independent Auditors' Report 1
Consolidated Balance Sheet 2-3
Consolidated Statements of Operations 4
Consolidated Statements of Changes in Stockholders' Deficit 5
Consolidated Statements of Cash Flows 6-8
Notes to Consolidated Financial Statements 9-17
<PAGE>
Independent Auditors' Report
Board of Directors
International Long Distance Corporation
Hertford, North Carolina
We have audited the accompanying consolidated balance sheets of International
Long Distance Corporation (a development stage company), as of December 31, 1999
and 1998, and the related consolidated statements of operations, changes in
stockholder's deficit and cash flows for the years then ended and for the period
March 20, 1998 (date of inception), to December 31, 1999. 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 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 audit provides 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 International Long
Distance Corporation, as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended and from March 20, 1998
(date of inception), to December 31, 1999, in conformity with generally accepted
accounting principles.
/s/
Atlanta, Georgia
June 2, 2000 (Except Note 15 which is dated August 24, 2000)
<PAGE>
2
International Long Distance Corporation
(a development stage company)
Consolidated Balance Sheets
December 31, 1999 and 1998
Assets
1999 1998
---------- ----------
Current assets
Cash $ -- $ --
Accounts receivable - trade 101,181 --
Accounts receivable - officer 84,060 21,445
Accounts receivable - Prepaid Cellular Services -- 1,356,284
Accounts receivable - affiliate -- 917,560
---------- ----------
Total current assets 185,241 2,295,289
---------- ----------
Property and equipment
Land 39,374 --
Leasehold improvements 105,132 --
Computers and software 248,652 --
Furniture and fixtures 4,660 --
Telephone switching equipment 3,100,135 1,016,066
---------- ----------
Total property and equipment 3,497,953 1,016,066
Less: accumulated depreciation 718,697 62,761
---------- ----------
Property and equipment, net 2,779,256 953,305
---------- ----------
Other assets
Deposits 44,559 14,559
Deferred finance charges, net of
amortization of $121,018 and $20,710 322,187 272,495
---------- ----------
Total other assets 366,746 287,054
---------- ----------
Total assets $3,331,243 $3,535,648
========== ==========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
3
International Long Distance Corporation
(a development stage company)
Consolidated Balance Sheets
December 31, 1999 and 1998
Liabilities and Stockholders' Deficit
1999 1998
--------------- ----------------
<S> <C> <C>
Current liabilities
Cash overdraft $ 3,118 $ -
Accounts payable 2,528,020 977,810
Accrued expenses 145,027 -
Accrued interest 3,300 -
Current portion of capital lease obligations 123,715 43,873
Short-term notes payable 1,837,188 -
Unearned revenue 55,000 -
--------------- -----------------
Total current liabilities 4,695,368 1,021,683
------------- -----------
Capital lease obligations 255,490 249,112
-------------- ------------
Stockholders' deficit
Common stock, $1.00 par value;
100,000 shares authorized;
500 shares issued and outstanding 500 500
Subscription agreements 6,065,584 2,548,325
Deficit accumulated during the
development stage (7,685,699) (283,972)
------------ -------------
Total stockholders' deficit (1,619,615) 2,264,853
------------ ------------
Total liabilities and stockholders' deficit $ 3,331,243 $ 3,535,648
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
4
<TABLE>
<CAPTION>
International Long Distance Corporation
(a development stage company)
Consolidated Statements of Operations
Years Ended December 31, 1999 and 1998,
and
the Period March 20, 1998 (Inception) to December 31, 1999
March 20, 1998
Year Ended December 31, (Inception) to
-------------------------------------
1999 1998 December 31, 1999
------------------- -------------------- -----------------
<S> <C> <C> <C>
Revenue
Service revenue $ 173,464 $ - $ 173,464
Other income 1,030 - 1,030
---------------- ----------------- ---------------
174,494 - 174,494
-------------- ----------------- -------------
Costs and expenses
Costs of telephone services 895,022 66,652 961,674
Research and development 140,911 - 140,911
General and administrative 330,545 37,558 368,103
Other operating expenses 495,916 15,768 511,684
Maintenance and utilities 47,095 625 47,720
Travel, meals and
entertainment 104,819 37,974 142,793
------------- ------------ ------------
2,014,308 158,577 2,172,885
------------ ----------- ------------
Operating loss (1,839,814) (158,577) (1,998,391)
------------ ---------- ------------
Other expenses
Amortization and finance costs 1,093,411 20,711 1,114,122
Bad debts 1,300 - 1,300
Charitable contributions 127,664 10,000 137,664
Depreciation 655,936 62,761 718,697
Interest 217,887 31,923 249,810
Loss on impairment of asset 279,071 - 279,071
Loss on uncollectible
advances to affiliate 1,085,448 - 1,085,448
Loss on failed venture 2,011,396 - 2,011,396
Rents and leases 89,800 - 89,800
------------- ----------------- --------------
Total other expenses 5,561,913 125,395 5,687,308
----------- ----------- ------------
Net loss $(7,401,727) $(283,972) $(7,685,699)
=========== ========= ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
5
International Long Distance Corporation
(a development stage company)
Consolidated Statement of Changes in Stockholder's Deficit
Period from March 20, 1998 (Inception) to December 31, 1999
Retained Total
Common Subscription Earnings Stockholder's
Stock Agreements (Deficit) Deficit
------------- ------------- ------------ -------------------
<S> <C> <C> <C> <C>
Balance, March 20, 1998 $ - $ - $ - $ -
Issuance of 500 shares of common stock 500 - - 500
Funds / services received for
stock subscriptions - 2,548,325 - 2,548,325
Net loss (283,972) (283,972)
---------------------------------------------- --------------
Balance, December 31, 1998 500 2,548,325 (283,972) 2,264,853
Funds / services received for
stock subscriptions - 3,517,259 - 3,517,259
Net loss - - (7,401,727) (7,401,727)
------------------------------ ------------ -------------
Balance, December 31, 1999 $ 500 $6,065,584 $(7,685,699) $(1,619,615)
========== ========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
6
<PAGE>
<TABLE>
<CAPTION>
International Long Distance Corporation
(a development stage company)
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998,
and
the Period March 20, 1998 (Inception) to December 31, 1999
March 20, 1998
Year Ended December 31, (Inception) to
----------------------------------
1999 1998 December 31, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities
Cash received from revenue $ 128,313 $ - $ 128,313
Cash paid to suppliers, employees
and affiliate (785,552) (109,440) (894,992)
Cash paid for interest (214,587) (31,923) (246,510)
Cash advanced to failed joint venture (473,112) (1,356,284) (1,829,396)
------------ ------------ ------------
Net cash used in operating activities (1,344,938) (1,497,647) (2,842,585)
----------- ------------ -----------
Cash flows from investing activities:
Purchases of property and equipment (2,601,958) (705,271) (3,307,229)
Payment of deposits (30,000) (14,559) (44,559)
------------ ------------- -------------
Net cash used in investing activities (2,631,958) (719,830) (3,351,788)
----------- ------------ -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 2,525,838 - 2,525,838
Proceeds from stock subscription agreements 2,212,488 2,234,787 4,447,275
Proceeds from issuance of common stock - 500 500
Repayment of notes payable and capital leases (761,430) (17,810) (779,240)
----------- ------------ -----------
Net cash provided by financing activities 3,976,896 2,217,477 6,194,373
---------- ----------- ----------
Net increase in cash and cash equivalents - - -
Cash and cash equivalents, beginning of period - - -
---------------- ----------------- ----------------
Cash and cash equivalents, end of period $ - $ - $ -
================ ================= ===============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
International Long Distance Corporation
(a development stage company)
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998,
and
the Period March 20, 1998 (Inception) to December 31, 1999
March 20, 1998
Year Ended December 31, (Inception) to
----------------------------
1999 1998 December 31, 1999
----------------- -------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(7,401,727) $ (283,972) (7,685,699)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 655,936 62,761 718,697
Amortization and finance costs 1,073,079 41,043 1,114,122
Loss on impairment of asset 279,071 - 279,071
Non-cash portion of loss on
failed venture 182,000 - 182,000
Conversion of accounts receivable
to investment
Changes in assets and liabilities:
(Increase) decrease in assets
Accounts receivable-
joint venture 1,356,284 (1,356,284) -
Accounts receivable-affiliate 917,560 (917,560) -
Accounts receivable-trade (101,181) - (101,181)
Accounts receivable-officer (62,615) (21,445) (84,060)
Increase (decrease) in liabilities
Cash overdraft 3,118 - 3,118
Accounts payable 1,550,210 977,810 2,528,020
Accrued expenses 145,027 - 145,027
Accrued interest 3,300 - 3,300
Unearned revenue 55,000 - 55,000
-------------- ------------------ --------------
Net cash used in
operating activities $(1,344,938) $(1,497,647) (2,842,585)
=========== =========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
International Long Distance Corporation
(a development stage company)
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998,
and
the Period March 20, 1998 (Inception) to December 31, 1999
March 20, 1998
Year Ended December 31, (Inception) to
-----------------------------------------
1999 1998 December 31, 1999
--------------------- --------------------- -----------------
Schedule of non-cash operating, investing, and financing transactions:
<S> <C> <C> <C>
Acquisition of certain property and equipment:
Capital leases
Equipment acquired $ 159,000 $ 310,795 $ 469,795
Capital leases assumed (86,221) (292,985) (379,206)
-------------- ----------- -------------
Cash paid $ 72,779 $ 17,810 $ 90,589
============= ========== =============
Conversion of investor services to equity:
Subscription agreements
Settlement of claims $ 182,000 $ - $ 182,000
Services received 972,771 20,333 993,104
Acquisition of equipment leases 150,000 293,205 443,205
Subscription agreements issued (1,304,771) (313,538) (1,618,309)
----------- ---------- -----------
Cash paid $ - $ - $ -
================= ============== =================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
9
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
Note 1 - Summary of significant accounting policies
Nature of business and basis of presentation
International Long Distance Corporation ("ILDC" or the "Company") was formed on
March 20, 1998, in the State of North Carolina as a long distance service
provider dedicated to utilizing state of the art technology to provide premier
long distance telephone service both domestically and internationally. The
Company is headquartered in Hertford, North Carolina and is currently in the
process of raising capital to expand its operations.
Custom Telecom Solutions ("CTS") was formed as a joint venture corporation in
November 1999, by an agreement between the Company and StarTouch International.
The joint venture agreement was never executed. CTS remains a wholly-owned
subsidiary of the Company but currently has no operations. All significant
intercompany transactions have been eliminated in consolidation.
Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
Property, equipment and depreciation
Property and equipment are stated at cost. Maintenance and repairs are charged
to operations and major improvements are capitalized. Upon retirement, sale or
other disposition, the cost and accumulated depreciation are eliminated from the
accounts and any gain or loss is included in operations. Depreciation is
computed using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes. Estimated useful lives of the
assets range from three to fifteen years.
Property and equipment includes assets acquired under capital leases totaling
$469,795. Equipment acquired through these leases are included as a component of
telephone switching equipment.
Revenue recognition
Originally the Company provided services involving the sale of prepaid long
distance telephone cards. The corresponding revenue is included in the
accompanying financial statements. Proceeds from the sale of prepaid phone cards
are recorded as unearned revenue and, as the cards are used, the income earned
by ILDC is reported in the statement of operations as service revenue. ILDC's
primary source of revenue in the future is anticipated to be generated through
the establishment of revenue producing long distance telephone networks.
<PAGE>
10
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
Income taxes
ILDC is subject to federal and state corporation income taxes on any net taxable
income. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets and liabilities to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the period reported. Actual results could differ
from those estimates.
Start-Up expenses
In accordance with Statement of Position 98-5, Reporting on the Costs of
Start-up Activities, the Company expensed all organization and start-up expenses
as incurred.
Allowance for doubtful accounts
Accounts receivable have been reviewed by management and no allowance for
doubtful accounts is considered necessary as of December 31, 1999 and 1998.
Deferred finance charges
In the early stages of development, certain investors assisted the Company in
obtaining some of the telephone switching equipment necessary to further the
Company's operations. The investors leased the equipment and assigned the leases
to the Company. These equipment leases are recorded on the books as capital
leases (Note 8). The total cost of equipment leased by investors and assigned to
ILDC is $469,795. ILDC has either directly made all payments required under the
leases or given credit to the investors for any lease payments made by the
investors.
In consideration for the assistance provided by the investors in obtaining the
equipment leases, ILDC has credited these investors with joint venture or
profit-sharing agreements (Note 2) totaling
<PAGE>
11
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
$443,205. These costs have been recorded as deferred finance charges and are
being amortized over the term of the leases. Amortization of deferred finance
charges was $121,018 and $20,710 at December 31, 1999 and 1998, respectively.
Additionally, ILDC credited investors $993,104 for providing short-term loans
and lines of credit to ILDC or obtaining additional investors. This amount is
included as a component of amortization and finance costs in the consolidated
statement operations.
Common stock
At December 31, 1999, ILDC had 100,000 shares of $1.00 par value common stock
authorized with 500 shares issued and outstanding. All of the shares outstanding
at December 31, 1999, were owned by the Anthony C. Overman Revocable Trust. The
trustee is Anthony C. Overman, president of ILDC.
Subsequent to December 31, 1999, as part of the merger and reorganization (Note
3), the stock was split and the number of authorized shares was increased to
11,000,000.
Note 2 - Stock subscription agreements
In order to obtain capital for the purposes of the construction, installation
and maintenance of a telephone switching and call routing system and to fulfill
liabilities and obligations associated with start-up expenses, the Company
entered into joint venture and profit sharing agreements with various investors.
In addition, the Company credited certain investors with joint venture or
profit-sharing agreements in exchange for services provided to ILDC (Note 1) and
in settlement of claims against ILDC (Note 6). Through December 31, 1999, ILDC
issued joint venture and profit-sharing agreements totaling $6,065,584 in
exchange for the following consideration:
Consideration 1999 1998
---------------------------------------- ------------- --------------
Cash received $4,447,275 $2,234,787
Acquisition of equipment leases 443,205 293,205
Providing short- term loans and
raising capital 993,104 20,333
Settlement of claims 182,000 -
----------- --------------
$6,065,584 $2,548,325
========== ==========
No payments were made under these agreements since ILDC had not reached
profitability.
Subsequent to December 31, 1999, the investors agreed to cancel their joint
venture and profit sharing agreements in exchange for common stock of ILDC. In
order to facilitate the exchange, the
<PAGE>
12
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
Company increased the number of authorized shares from 100,000 to 11,000,000
(Note 1). Generally, each investor will receive one share of common stock for
every $5.00 invested through joint venture or profit sharing agreements whether
the investment was in cash or for services provided. The shares will be issued
in conjunction with the merger and reorganization (Note 3).
The amount reported in stockholder's deficit as subscription agreements of
$6,065,584 represents the amounts invested through joint venture and profit
sharing agreements. The Company expects to issue 1,249,350 shares of stock for
the subscription agreements. Subsequent to December 31, 1999, ILDC received
additional capital of approximately $800,000 through the issuance of joint
venture agreements. The additional joint venture agreements will also be
cancelled in exchange for common stock of ILDC at the merger.
Note 3 - Merger and reorganization
The Company as of May 18, 2000, has finalized plans for a merger and
reorganization with a publicly traded entity. Closing on the merger is
anticipated to be June 30, 2000. Upon completion of the merger, all of the ILDC
stock issued and outstanding at June 30, 2000, will be converted into the right
to receive newly issued shares of the publicly traded common stock, par value
$.001. The merger is expected to be a tax free reorganization within the meaning
of Section 368 of the Internal Revenue Code.
Note 4 - Income taxes
ILDC has a net operating loss of $7,685,699 as of December 31, 1999, which will
be carried forward to offset future taxable income. The tax benefit and deferred
tax asset, totaling $2,984,000, generated by this net operating loss, has been
offset by a valuation allowance due to the uncertainty of profitable operations.
Note 5 - Related party transactions
ILDC was affiliated with National Marketing Corporation (NMC), a marketing
organization, which is owned by the president of ILDC. ILDC advanced $1,085,448
to National Marketing Corporation during the calendar years 1998 and 1999, which
will not be repaid since operations of NMC have been discontinued. A substantial
portion of the funds advanced to NMC were forwarded to Prepaid Cellular
Services, LLC (Note 6) in the form of loans, advances, and direct payment of
Prepaid Cellular's liabilities. Prepaid Cellular ceased operations during 1999.
At December 31, 1998, advances totaling $917,560 were classified as advances
from affiliate. Due to the operations of NMC and Prepaid Cellular Services being
discontinued during 1999, all advances to NMC have been reflected as
uncollectible advances to affiliate in the accompanying consolidated financial
statements.
<PAGE>
13
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
ILDC has advanced the president $84,060 as of December 31, 1999. No interest is
charged on the advance.
ILDC received advances from a relative of the president totaling $41,985. This
amount is included in accounts payable at December 31, 1999.
Note 6 - Prepaid Cellular Services LLC
ILDC entered into various transactions with Prepaid Cellular Services, LLC (PCS)
regarding the use of the ILDC telephone switching and network services. As the
relationship with PCS progressed, the Company also made cash advances to PCS,
purchased equipment for PCS and paid operating expenses of PCS. In addition,
Anthony Overman, the president of ILDC, served for a brief period as CEO of PCS.
ILDC also attempted to acquire the stock of PCS and merge PCS into ILDC. The
acquisition of the stock was rejected and irreconcilable differences between the
companies arose. Due to the significant amount invested into PCS, ILDC continued
to fund the operations of PCS in an attempt to reach a point where revenue could
be generated or some of the investment recovered. PCS ultimately failed.
Numerous claims were made against PCS by various creditors and third parties.
Due to the close relationship of ILDC with PCS and the fact that the ILDC
president served as CEO of PCS, claims have been made against ILDC for some of
the PCS debts and obligations (Note 10).
ILDC funded PCS amounts totaling $2,518,149. These amounts include advances by
ILDC to PCS, payment of PCS expenses and obligations, and a settlement of
approximately $468,000 to Garwell Limited Partnership for advances to PCS. The
Garwell claim was settled by issuance of ILDC common stock. Subsequent to
December 31, 1999, ILDC agreed to issue 200,000 shares of common stock to
Garwell or its affiliates in exchange for cancelling the $468,000 claim and in
exchange for $350,000 which had previously been invested in ILDC (Notes 2 and
3). When PCS ceased operations, ILDC took possession of equipment totaling
$506,753. The remaining costs related to PCS, totaling $2,011,396, have been
charged to expense as loss on failed venture. At December 31, 1998, all advances
to PCS, totaling $1,356,284, were recorded as an advance to PCS.
ILDC has assumed responsibility for the portion of the debts incurred by PCS in
cases where management has determined that ILDC has financially benefitted or is
ultimately liable for payment. These liabilities have been recorded in the
accompanying consolidated financial statements.
<PAGE>
14
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
Note 7 - Short-term notes payable
<TABLE>
<CAPTION>
Short-term notes payable consisted of the following: 1999 1998
------------ ------------
<S> <C> <C>
Note payable to Comdial due in monthly installments of
$25,550 plus interest at prime plus 2.5% (10.75% at December
31, 1999) with remaining principal and interest due at
maturity on September 30, 2000. $228,859 $ -
Note payable to Crafton Matthews originally due January 15,
2000, and extended to April 19, 2000. The note was paid in
full at the extended due date. 29,000 -
Note payable to StarTouch International due in one payment
including interest at 10% on June 5, 2000. Additional
amounts totaling $488,000 were borrowed during calendar year
2000 and are also due on June 5, 2000. The note arose from
advances relating to a proposed joint venture agreement
between ILDC and Star Touch (Note 1). When the joint venture
was abandoned, all amounts due were converted to a note
payable dated February 5, 2000. Interest accrues from the
date of the note.
1,579,329 -
----------- ---------
$1,837,188 $ -
========== =========
</TABLE>
Note 8 - Capital lease obligations
Included in long-term debt are lease obligations that have been capitalized for
financial statement purposes. Minimum future lease payments under capital leases
as of December 31, 1999 and 1998, are as follows:
Year ending December 31, 1999 1998
------------------------ ------------ ------------
1999 $ 91,952 $ 91,952
2000 175,533 91,952
2001 150,464 91,952
2002 106,581 91,952
2003 53,583 53,884
----------- -----------
Total minimum lease payments 486,161 421,692
Less: amounts representing interest (106,956) (128,707)
---------- ----------
Present value of net minimum
lease payments $ 379,205 $ 292,985
========= =========
<PAGE>
15
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
Note 9 - Impairment of assets used in operations
During the course of ILDC's review of its operations, the Company assessed the
recoverability of the carrying value of the Compaq Tandem SCP platform, which
resulted in an impairment loss of $279,071. This loss reflects the amount by
which the carrying value exceeds the estimated fair value of the asset. The
impairment loss is reported in the consolidated statement of operation in 1999.
Note 10 - Legal matters
ILDC is currently being sued by Compaq Computer Corporation for $820,439, which
includes interest and court costs, for equipment purchased and currently in the
possession of ILDC. The full amount of this potential liability is included in
accounts payable in the accompanying consolidated financial statements. The
Company and the plaintiff are currently engaged in negotiations in an attempt to
settle this liability.
There is a possibility that the Company could be included in some of the
numerous claims asserted against Prepaid Cellular Services, LLC (Note 6) due to
the relationship between the two entities. The potential liability from these
claims can not be estimated in the opinion of management and its counsel.
Note 11- BDR Consulting, Inc.
On February 16, 2000, BDR Consulting, Inc. ("BDR") entered into an agreement
with ILDC where BDR would assist ILDC in raising at least $1,500,000 for its
operations and in negotiating a merger between ILDC and a publicly traded
company. For its services and the financing, BDR will receive shares of ILDC
equal to the then outstanding shares of the Company which would make BDR a 50%
shareholder. As of May 31, 2000, BDR has raised approximately $3,600,000 in
financing for ILDC. Shares of ILDC will be issued in a simultaneous transaction
with the merger. Until that time all funds received from BDR are being treated
as advances.
Note 12 - Commitments
ILDC currently leases an office building for $5,000 per month under a 24 month
lease agreement due to expire October 31, 2001. The lease contains an absolute
purchase option requiring the Company to purchase the building upon expiration
of the lease for $750,000. The lease was originally in the name of a company
owned by ILDC's sole shareholder. The lease was assigned to ILDC during the
development period.
<PAGE>
16
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
ILDC also leases office space in Atlanta, Georgia for $2,797 per month under a
26-month lease assumed from the prior lessee, Prepaid Cellular Services LLC,
(Note 6). The lease was due to expire April 30, 2001. The lease was renegotiated
in June 2000. Additional space was added to the original lease. The current
lease is for $13,870 per month for a term of five years, to expire in May 2005,
with one renewal option of five years.
As of December 31, 1999, ILDC had outstanding purchase orders totaling
approximately $5,500,000 for the purchase of additional telephone switching
equipment.
Note 13 - Financial instruments
The Financial Accounting Standards Board requires disclosure of information
about financial instruments and related off-balance sheet risk and
concentrations of credit risk. The Company places its cash with insured
financial institutions. However, at times during the year, the cash balances
exceeded the federally insured limits of the Federal Deposit Insurance
Corporation.
Note 14 - Continuation as a going concern
The Company incurred operating losses of $7,685,699 for the period from
inception through December 31, 1999. These consolidated financial statements are
presented on the basis which assumes the continued existence of International
Long Distance Corporation as a going concern. Continuation as a going concern
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business over a reasonable length of time. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. Continuation of the Company as a going
concern is contingent upon completion of the merger (Note 3), continued
financial support from investors and creditors and upon achieving and
maintaining profitable operations.
Note 15 - Subsequent events
The following is a series of subsequent events occurring between June 2, 2000
and August 24, 2000.
Common stock
On January 15, 2000, ILDC issued 791 shares of common stock to friends, family,
and employees. Additionally, subsequent to the stock split described below,
10,000 shares of common stock at a value of $5.00 per share were issued to
various other investors.
In April 2000, ILDC shareholders approved an amendment to the Articles of
Incorporation to increase the number of authorized shares of common stock from
100,000 to 11,000,000.
<PAGE>
17
International Long Distance Corporation
(a development stage company)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
On April 15, 2000, ILDC's board of directors declared a 3,032 for 1 split on the
shares of ILDC's common stock. Each stockholder of record on April 15, 2000,
received 3,032 additional shares of common stock for each share of common stock
then held. The stock was issued subsequent to the declaration date.
Merger, reorganization, and share exchange
The Company had finalized plans for a merger and reorganization with a publicly
traded entity (Note 3). Closing on the merger was anticipated to be in June
2000. Complications arose and ILDC has since finalized a share exchange with Old
Night, Inc. (Old Night), another publically traded entity. An agreement between
ILDC and Old Night was reached on June 30, 2000. The agreement provides for an
exchange of 4,529,054 shares of Old Night common stock for 4,529,054 shares
(82.35%) of ILDC common stock. The exchange offer is contingent on ILDC
shareholders holding a minimum of 80% (4,400,000) of the issued and outstanding
shares of ILDC tendering their share certificates in the exchange. The share
exchange offer expires August 31, 2000.
Investment in Airtime Technologies
During April 2000, ILDC converted $278,534 in accounts receivable to 150,000
shares (or 5% ownership) of Airtime Technologies (Airtime). The Airtime stock
was valued at $135,000 based on a recent transaction between Airtime and an
unrelated party. The difference between the original accounts receivable balance
and the value of the stock was written off as bad debt.
Legal matters
On August 14, 2000, ILDC offered to pay the sum of $156,845 to Compaq Computer
Corporation (Note 10) and to return the equipment to settle the claim. The offer
has not been accepted as of August 24, 2000.
Commitments
On July 27, 2000, ILDC entered into a one year agreement with Winton Capital
Holdings, Inc. (Winton) to lease four Salix switching devices for $51,250 per
quarter.
<PAGE>
NxGen Networks, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Information
Overview
On August 31, 2000, NxGen Networks, Inc., a Nevada corporation formerly named
Old Night, Inc. (the "Company") issued 4,529,054 shares of the Common Stock of
the Company to acquire approximately 82.35% of the issued and outstanding shares
of common stock of International Long Distance Corporation, a North Carolina
corporation ("ILDC"). The Company entered into a share exchange agreement dated
as of June 30, 2000 ("Agreement") with ILDC and certain stockholders of ILDC
("ILDC Stockholders") who are signatories to the Agreement incorporated by
reference herein to the Company's Definitive Information Statement on Form 14C
dated July 28, 2000 (the "Information Statement"), which provided for, among
other things, the issuance by the Company of 4,529,054 shares of its Common
Stock in exchange for 4,529,054 or 82.35% of the issued and outstanding shares
of common stock of ILDC (the "Share Exchange"). As a result of the Share
Exchange the ILDC Stockholders now hold approximately 43% of the Company's total
issued and outstanding share capital.
The acquisition was accounted for using the purchase method of accounting and
accordingly, the purchase price was allocated to the tangible and intangible net
assets acquired on the basis of their respective fair values on the acquisition
date. Goodwill represents intellectual property acquired - process patents
pending for its VOIP technology, Billing Software and Application Programming
Interface Software; core/alternative use technology for its Integrated Voice and
Data Network (IVDN) and technical expertise and know-how. Intangible assets and
goodwill are being amortized over their estimated useful lives of eight years.
The accompanying unaudited pro forma condensed consolidated balance sheets gives
effect to this consummated acquisition as if it had occurred on January 1, 1999
by consolidating the balance sheets of International Long Distance Corporation
and the Company at December 31, 1999 and June 30, 2000.
The accompanying unaudited pro forma condensed consolidated statements of
operations give effect to this consummated acquisition as if it had occurred on
December 31, 1999 by consolidating the results of operations of the Company and
International Long Distance Corporation for the year ended December 31, 1999 and
the six months ended June 30, 2000.
The unaudited pro forma condensed consolidated statements of operations are not
necessarily indicative of the operating results that would have been achieved
had the transaction been in effect as of the beginning of the periods presented
and should not be construed as being representative of future operating results.
<PAGE>
<TABLE>
<CAPTION>
NxGEN Networks, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
ILDC Old Night Pro forma Pro forma
---- --------- --------- ---------
6/30/2000 6/30/2000 Adjustments Combined
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 149,912 $ 191,773 $ 341,685
Accounts receivable-officer -
Note receivable-related party (8) 2,324,914 2,324,914
Accounts receivable-net 60,543 - - 60,543
------------ ------------ ------------ ------------
Total current assets 210,455 2,516,687 - 2,727,142
Property and equipment, net (3) 6,086,852 (400,000) 5,715,423
(5) 28,571
Deferred finance charges, net 277,866 277,866
Investment 135,000 135,000
Goodwill (3) 25,115,840 23,546,100
(7) (1,569,740)
Deposits and other assets 44,559 - - 44,559
------------ ------------ ------------ ------------
Total assets $ 6,754,732 $ 2,516,687 $ 23,174,671 $ 32,446,090
------------ ------------ ------------ ------------
Liabilities and shareholders' equity
Current liabilities
Accounts payable 3,997,930 3,997,930
Accrued liabilities 582,695 582,695
Note payable-related party 2,324,914 2,324,914
Short-term notes payable (6) 3,643,785 (1,500,000) 2,143,785
Obligations under capital leases 329,138 329,138
Deferred revenue and other 89,975 - - 89,975
------------ ------------ ------------ ------------
Total current liabilities 10,968,437 - (1,500,000) 9,468,437
------------ ------------ ------------ ------------
Noncontrolling interest in subsidiary - - (643,135) (643,135)
------------ ------------ ------------ ------------
Shareholders (deficit)
Common stock (1) 1,812 5,963 4,529 10,492
(3)
Common stock subscribed (3) (1,812) -
Additional paid-in capital (1) 7,692,301 2,548,601 22,640,741 25,753,342
(6) 1,500,000
(3) (9,192,301)
(4) 564,000
Deficit accumulated during the (7) (1,569,740)
development stage (3) (11,907,818) (37,877) 11,907,818 (2,143,046)
(5) ------------ ------------ ------------ ------------
(4) 28,571
(564,000)
Total shareholder's (deficit) (4,213,705) 2,516,687 25,317,806 23,620,788
------------ ------------ ------------ ------------
Total liabilities and shareholders' (deficit) $ 6,754,732 $ 2,516,687 $ 23,174,671 $ 32,446,090
------------ ------------ ------------ ------------
NxGEN Networks, Inc.
Notes to Unaudited pro forma condensed consolidated balance sheet
<FN>
(1) To record issuance of 4,529,054 shares of common stock of International Long Distance Corp. ("ILDC")
(2) To record the allocation of purchase price, assuming the allocation ocurred as of December 31, 1999 Due to the
operating results through the closing date of August 31, 2000, the actual amount of Goodwill recorded is
different than the amount reflected above.
(3) To eliminate ILDC's historical equity and relect 17.65% noncontrolling interest in subsidiary
(4) To record compensation expense of $564,000 related to the issuance of 150,000 options to purchase NxGEN common
stock to a consultant.
(5) To reflect change in depreciation expense as the result of the allocation of the purchase price.
(6) To record the effect of the automatic conversion of $1,500,000 short-term debt upon consumation of the merger
between ILDC and NxGEN.
(7) To reflect the amortization of goodwill and intangibles resulting from the purchase of ILDC.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NxGEN Networks, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
ILDC Old Night Pro forma Pro forma
---- --------- --------- ---------
12/31/1999 12/31/1999 Adjustments Combined
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ - $ - $ -
Accounts receivable-officer 84,060 - 84,060
Note receivable-related party
Accounts receivable-net 101,181 - - 101,181
----------- ----------- ------------ ------------
Total current assets 185,241 - - 185,241
Property and equipment, net (3) 2,779,256 - (400,000) 2,436,399
(5) 57,143
Deferred finance charges, net 322,187 - 322,187
Investment -
Goodwill (3) 24,021,750 21,019,031
(6) (3,002,719)
Deposits and other assets 44,559 - - 44,559
----------- ----------- ------------ ------------
Total assets $3,331,243 $ - $ 20,676,174 $ 24,007,417
----------- ----------- ------------ ------------
Liabilities and shareholders' equity
Current liabilities
Accounts payable 2,531,138 1,600 2,532,738
Accrued liabilities 148,327 - 148,327
Short-term notes payable 1,837,188 - 1,837,188
Obligations under capital leases 379,205 - 379,205
Deferred revenue and other 55,000 - - 55,000
----------- ----------- ------------ ------------
Total current liabilities 4,950,858 1,600 - 4,952,458
----------- ----------- ------------ ------------
Noncontrolling interest in subsidiary - - (643,135) (643,135)
----------- ----------- ------------ ------------
Shareholders (deficit)
Common stock (1) 500 496 4,529 5,025
(3) (500)
Common stock subscribed (3) 6,065,584 (6,065,584) -
Additional paid-in capital (1) - 37,504 22,640,741 23,242,245
(4) 564,000
Deficit accumulated during the
development stage (3) (7,685,699) (39,600) 7,685,699 (3,549,176)
----------- ----------- ------------ ------------
(6) (3,002,719)
(5) 57,143
(4) (564,000)
Total shareholder's (deficit) (1,619,615) (1,600) 21,319,309 19,698,094
----------- ----------- ------------ ------------
Total liabilities and shareholders' (deficit) $ 3,331,243 $ - $ 20,676,174 $ 24,007,417
----------- ----------- ------------ ------------
NxGEN Networks, Inc.
Notes to Unaudited pro forma condensed consolidated balance sheet
<FN>
(1) To record issuance of 4,529,054 shares of common stock of International Long Distance Corp. ("ILDC")
(2) To record the allocation of purchase price, assuming the allocation ocurred as of December 31, 1999 Due to the
operating results through the closing date of August 31, 2000, the actual amount of Goodwill recorded is
different than the amount reflected above.
(3) To eliminate ILDC's historical equity and reflect 17.65% noncontrolling interest in subsidiary
(4) To record compensation expense of $564,000 related to the issuance of 150,000 options to purchase NxGEN common
stock to a consultant.
(5) To reflect change in depreciation expense as the result of the allocation of the purchase price.
(6) To reflect the amortization of goodwill and intangibles resulting from the purchase of ILDC.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NxGEN Networks, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 1999
ILDC Old Night Pro forma Pro forma
---- --------- --------- ---------
Actual Actual Combined Adjustments Combined
------ ------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue
Service revenue $ 174,494 $ - $ 174,494 $ - $ 174,494
------------ ----------- ------------ ------------ ------------
Cost of revenue 895,022 - 895,022 - 895,022
------------ ----------- ------------ ------------ ------------
Gross profit (720,528) - (720,528) - (720,528)
Sales and marketing 104,819 104,819 104,819
Research and development 140,911 140,911 140,911
General and administrative 1,092,320 1,600 1,093,920 1,093,920
Amortization of goodwill (1) - 3,002,719 3,002,719
Compensation expense (2) - 564,000 564,000
Depreciation and amortization (3) 1,749,347 - 1,749,347 (57,143) 1,692,204
------------ ----------- ------------ ------------ ------------
3,087,397 1,600 3,088,997 3,509,576 6,598,573
------------ ----------- ------------ ------------ ------------
Loss from operations (3,807,925) (1,600) (3,809,525) (3,509,576) (7,319,101)
------------ ----------- ------------ ------------ ------------
Other expenses:
Loss on failed ventures 3,096,844 3,096,844 3,096,844
Impairment of assets 279,071 279,071 279,071
Interest 217,887 - 217,887 217,887
Other (income)expense - - - - -
------------ ----------- ------------ ------------ ------------
3,593,802 - 3,593,802 - 3,593,802
------------ ----------- ------------ ------------ ------------
Net loss $ (7,401,727) $ (1,600) $ (7,403,327) $ (3,509,576) $(10,912,903)
------------ ----------- ------------ ------------ ------------
Pro forma net loss per share-basic and diluted $ (14.91) $ (2.17)
------------ ------------
Pro forma weighted average shares-basic and diluted 496,400 (4) 5,025,454 (4)
------------ ------------
NxGEN Networks, Inc.
Notes to Unaudited pro forma condensed consolidated statement of operations
<FN>
(1) To reflect the amortization of goodwill and intangibles resulting from the purchase of ILDC.
(2) To record compensation expense of $564,000 related to the issuance of 150,000 options to purchase NxGEN common stock to
a consultant.
(3) To reflect change in depreciation expense as the result of the allocation of the purchase price.
(4) Pro forma basic and diluted net loss per share of Nxgen, Inc. for the year ended December 31, 1999 has been computed
using the weighted average number of common shares outstanding. All potentially dilutive securities have been excluded
from the calculation of pro forma diluted net loss per share because their effect is anti-dilutive. The adjustment to
the pro forma NxGEN, Inc. weighted average shares outstanding results from the inclusion of actual shares issued in
conjunction with the acquisition of ILDC as if such shares were outstanding from January 1, 1999.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NxGEN Networks, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six months ended June 30, 2000
ILDC Old Night Pro forma Pro forma
------------ ----------- ------------ -------------
Actual Actual Combined Adjustments Combined
------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenue
Service revenue $ 663,305 $ - $ 663,305 $ - $ 663,305
------------ ----------- ------------ ------------ -------------
Cost of revenue 1,043,285 - 1,043,285 - 1,043,285
------------ ----------- ------------ ------------ -------------
Gross profit (379,980) - (379,980) - (379,980)
Sales and marketing 215,873 215,873 215,873
Research and development 128,533 128,533 128,533
General and administrative 2,326,142 24,191 2,350,333 2,350,333
Amortization of goodwill (1) 1,569,740 1,569,740
Compensation expense (2) 564,000 564,000
Depreciation and amortization (3) 984,003 - 984,003 (28,571) 955,432
------------ ----------- ------------ ------------ -------------
3,654,551 24,191 3,678,742 2,105,169 5,783,911
------------ ----------- ------------ ------------ -------------
Loss from operations (4,034,531) (24,191) (4,058,722) (2,105,169) (6,163,891)
------------ ----------- ------------ ------------ -------------
Other expenses:
Interest 187,588 187,588 (25,914) 161,674
Other (income)expense - (25,914) (25,914) 25,914 -
------------ ----------- ------------ ------------ -------------
187,588 (25,914) 161,674 - 161,674
------------ ----------- ------------ ------------ -------------
Net Income (loss) $ (4,222,119) $ 1,723 $ (4,220,396) $ (2,105,169) $ (6,325,565)
------------ ----------- ------------ ------------ -------------
Pro forma netincome(loss) per share-basic and diluted $ 0.00 $ (0.20)
Pro forma weighted average shares-basic and diluted 5,963,400(4) 10,492,454
NxGEN Networks, Inc.
Notes to Unaudited pro forma condensed consolidated statement of operations
<FN>
(1) To reflect the amortization of goodwill and intangibles resulting from the purchase of ILDC.
(2) To record compensation expense of $564,000 related to the issuance of 150,000 options to purchase NxGEN common stock to
a consultant.
(3) To reflect change in depreciation expense as the result of the allocation of the purchase price.
(4) Pro forma basic and diluted net loss per share of Nxgen, Inc. for the year ended December 31, 1999 has been computed
using the weighted average number of common shares outstanding. All potentially dilutive securities have been excluded
from the calculation of pro forma diluted net loss per share because their effect is anti-dilutive. The adjustment to
the pro forma NxGEN, Inc. weighted average shares outstanding results from the inclusion of actual shares issued in
conjunction with the acquisition of ILDC as if such shares were outstanding from January 1, 2000.
</FN>
</TABLE>
