SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
_________________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 1, 2000
eLOT, Inc. (f/k/a/ EXECUTONE INFORMATION SYSTEMS, INC.)
(Exact name of registrant as specified in its charter)
Virginia 0-11551 86-0449210
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
478 Wheelers Farms Road, Milford, Connecticut 06460
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 876-7600
<PAGE>
Item 2. Disposition of Assets.
On January 1, 2000, the eLOT, Inc., formerly known as Executone
Information Systems, Inc. ("Executone" or the "Company") sold its
Computer Telephony business ("CT Business") to Executone Inter-
Tel Business Information Systems, Inc., a wholly owned subsidiary
of Inter-Tel Incorporated ("Inter-Tel"). The purchase price was
$44.3 million in cash, subject to purchase price adjustments as
of the closing date.
<PAGE>
Item 7. Financial Statements and Exhibits.
Page
(b) Pro forma financial information 4
Pro forma consolidated balance sheet at September 30, 1999 5
Pro forma consolidated statement of operations for the
nine months ended September 30, 1999 6
Pro forma consolidated statement of operations for the
Year ended December 31, 1998 7
(c) Exhibits
(1) Asset Purchase Agreement by and among Executone Information
Systems, Inc., Executone Inter-Tel Business Information
Systems, Inc., and Inter-Tel Incorporated, dated as of October
17, 1999. Incorporated by reference to the definitive proxy
statement (Form 14A) of the Company filed on November 18, 1999
(File No. 0-11551).
<PAGE>
EXECUTONE INFORMATION SYSTEMS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Financial Information has
been prepared pursuant to the asset purchase agreement dated
October 17, 1999 among Executone, Inter-Tel and Executone Inter-
Tel Business Information Systems, Inc. The Pro Forma
Consolidated Balance Sheet as of September 30, 1999 has been
prepared as if the sale of the computer telephony business had
been consummated as of that date. The unaudited Pro Forma
Consolidated Statements of Operations for the nine-month period
ended September 30, 1999 and for the year ended December 31, 1998
have been prepared as if the sale of the computer telephony
business had been consummated at the beginning of each period
presented.
The pro forma information set forth below is unaudited and
not necessarily indicative of the results that would actually
have occurred if the sale of the computer telephony business had
occurred as of the time periods indicated or of results that may
be obtained in the future.
The pro forma adjustments, as described in the Notes to
Unaudited Pro Forma Financial Statements, are based upon
available information and upon certain assumptions that
management believes are reasonable. The Pro Forma Consolidated
Balance Sheet as of September 30, 1999 has been adjusted to
reflect the sale of the net assets of the computer telephony
business for $44.3 million. The estimated after tax gain on the
transaction is included in equity. An additional adjustment has
been made to reflect the use of the sale proceeds to repay
Executone's outstanding balance on its revolving credit facility.
The Pro Forma Consolidated Statements of Operations for the nine-
month period ended September 30, 1999 and for the year ended
December 31, 1998 have been adjusted to reflect the impact of the
debt repayment on interest expense.
The unaudited Pro Forma Financial Information should be read
in conjunction with the following:
- Executone's consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, filed with the Securities and Exchange
Commission on April 15, 1999, and
- Executone's unaudited financial statements included in the
Company's Quarterly Report on Form 10-Q for the nine-month period
ended September 30, 1999, filed with the Securities and Exchange
Commission on November 12, 1999.
<PAGE>
EXECUTONE INFORMATION SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The following unaudited pro forma consolidated balance sheet of
Executone as of September 30, 1999 gives effect to the sale of
the computer telephony business. The unaudited pro forma
consolidated statements of operations of Executone for the year
ended December 31, 1998 and the nine months ended September 30,
1999 present the results of Executone as if the computer
telephony business had been sold at the beginning of each period
presented.
The unaudited pro forma consolidated financial statements are
based on the historical financial statements of Executone and the
assumptions and adjustments set forth in the accompanying notes
to the unaudited pro forma consolidated financial statements.
<TABLE>
<CAPTION>
September 30, 1999
CT Pro Forma
(in thousands of dollars) Consolidated Adjustments Pro Forma
<C> <C> <C> <C>
<S>
ASSETS
Current Assets
Cash and cash equivalents $1,219 $ - $28,961(a,b) $30,180
Accounts receivable 30,320 (19,438) - 10,882
Inventories 21,905 (13,240) - 8,665
Prepaid expenses and
other current assets 4,339 (1,900) (1,627)(a) 812
Total Current Assets 57,783 (34,578) 27,334 50,539
Property & Equipment, net 12,114 (4,206) - 7,908
Intangible Assets, net 3,698 - - 3,698
Deferred Taxes 22,811 - (10,750)(a,b) 12,061
Other Assets 6,809 (663) (190)(a) 5,956
TOTAL ASSETS $103,215 $(39,447) $16,394 $80,162
LIABILITIES AND EQUITY
Current Liabilities
Current portion of
long-term debt $1,107 $(343) $ - $764
Accounts payable 19,195 (13,972) - 5,223
Accrued payroll and
related costs 4,259 (2,431) 350 (a) 2,178
Accrued liabilities 11,944 (5,428) 1,200 (a) 7,716
Deferred revenue and
customer deposits 2,198 (1,316) - 882
Total Current Liabilities 38,703 (23,490) 1,550 16,763
Long-Term Debt 30,146 (454) (15,339)(b) 14,353
Other Long-Term Liabilities 1,445 (1,445) - -
Total Liabilities 70,294 (25,389) (13,789) 31,116
Stockholders' Equity
Common stock 630 - - 630
Preferred stock - - - -
Additional paid-in capital 78,413 (14,058) 14,058 (a) 78,413
Retained earnings(deficit)(46,122) - 16,125 (a,b)(29,997)
Total Stockholders'
Equity 32,921 (14,058) 30,183 49,046
TOTAL LIABILITIES
AND EQUITY $103,215 $(39,447) 16,394 80,162
</TABLE>
<PAGE>
EXECUTONE INFORMATION SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Nine Months Ended September 30, 1999
CT Pro Forma
Consolidated Operations Adjustments Pro Forma
<C> <C> <C> <C>
Net Sales $96,822 $(75,191) $4,261(d) $25,892
Cost of Sales 66,959 (52,476) 4,261(d) 18,744
Gross Profit 29,863 (22,715) - 7,148
Operating Expenses
Engineering &
Development 6,721 (4,807) - 1,914
Selling, General &
Administrative 32,534 (16,952) - 15,582
Total Operating Expenses 39,255 (21,759) - 17,496
Operating Income (Loss) (9,392) (956) - (10,348)
Interest Expense (2,321) - 952 (c) (1,369)
Other Income 1,252 - - 1,252
Pretax Income (Loss) (10,461) (956) 952 (10,465)
Income Taxes - (382) 382 (c,d) -
Income (Loss) from
Continuing Operations $(10,461) $(574) $570 $(10,465)
Basic and Diluted
Earnings (Loss) Per Share $(0.18) $(0.18)
Average Common Shares
Outstanding 57,334 57,334
</TABLE>
<PAGE>
EXECUTONE INFORMATION SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31, 1998
CT Pro Forma
Consolidated Operations Adjustments Pro Forma
<C> <C> <C> <C>
<S>
Net Sales $133,498 $(104,552) $5,916 (d) $34,862
Cost of Sales 91,777 (74,174) 5,916 (d) 23,519
Gross Profit 41,721 (30,378) - 11,343
Operating Expenses
Engineering & Development 10,052 (7,293) - 2,759
Selling, General &
Administrative 41,435 (24,851) - 16,584
eLottery goodwill impairment
and other shutdown costs 25,486 - - 25,486
Special charges 9,028 (3,735) - 5,293
Total Operating Expenses 86,001 (35,879) - 50,122
Operating Income (Loss) (44,280) 5,501 - (38,779)
Interest Expense (2,393) - 682 (c) (1,711)
Net Gain on Sale of Businesses 5,269 - - 5,269
Other Income (Expense) 313 - - 313
Pretax Income (Loss) (41,091) 5,501 682 (34,908)
Income Taxes (Benefit) (4,232) 2,200 273 (c,d) (1,759)
Income (Loss) from
Continuing Operations $(36,859) $3,301 $409 $(33,149)
Basic and Diluted Earnings
(Loss) Per Share $(0.74) $(0.67)
Average Common Shares
Outstanding 49,755 49,755
</TABLE>
<PAGE>
EXECUTONE Information Systems, Inc.
Notes To Unaudited Pro Forma Consolidated Financial Statements
The unaudited Pro Forma Financial Statements are based on the
assumptions set forth in the notes to such data and should be
read in conjunction with the Executone Consolidated Financial
Statements and the related Notes thereto and other financial
information included elsewhere in the Executone proxy statement
for the Annual Meeting of Shareholders held December 14, 1999
(incorporated in this report by reference). The Pro Forma
Statements are based upon Executone's consolidated totals,
adjusted to reflect the proposed sale of the computer telephony
business and other pro forma adjustments as noted below.
Balance Sheet Adjustments
(a) Adjustment to reflect the after tax gain on the sale of the
computer telephony business based upon cash proceeds of $44.3
million, less the net assets sold of $14.1 million, $3.3 million
in expenses incurred to separate the businesses and other charges
and the estimated federal and state effective tax rate of 40%.
(b) To reflect the use of the proceeds to repay Executone's
entire outstanding balance as of September 30, 1999 on the
revolving credit facility of $15.3 million.
Income Statement Adjustments
(c) Adjustment for each of the periods presented to reflect
the reduction in interest expense that would result from the
assumed repayment of debt (see (b) above) at the beginning of
the period. Amounts are tax effected at the estimated federal
and state effective rate of 40% for all periods except the
nine-month period ended September 30, 1999, for which
Executone has not taken tax benefit for its losses during the
year.
(d) In accordance with the manufacturing agreement, the CT
Business will manufacture for and sell products to Executone's
healthcare communications business post-closing at
manufactured cost. To reflect these sales in the historical
CT Business statements, sales to the healthcare communications
business which were intercompany sales on the consolidated
books and records have been added back to the CT Business
income statement as if it were a standalone company. This
adjustment eliminates these sales to determine the
consolidated pro forma statement of operations.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
EXECUTONE INFORMATION SYSTEMS, INC.
By: __________________________________
Edward W. Stone
Senior Vice President and Chief Financial Officer
Date: January 13, 2000
