<PAGE> 1
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 29, 2000
SONUS COMMUNICATION HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-30124 54-1939577
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
254 West 31st Street
New York, NY 10001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 904-1020
<PAGE> 2
Item 2. Acquisition of Assets.
On March 29, 2000, the registrant acquired Empire One Telecommunications,
Inc., a New York corporation, by merging Empire One with and into the
registrant's wholly-owned subsidiary, EOT Acquisition Corporation, a Delaware
corporation. EOT Acquisition, which was the surviving corporation following the
merger, changed its name to Empire One Telecommunications, Inc., effective at
the time of merger.
Empire One provides retail Internet and voice telecommunications services
to residential and commercial customers in niche ethnic markets throughout
eleven Northeastern and Middle Atlantic states plus the District of Columbia and
California. It had operated as a switchless long distance reseller since
initiating service in 1996. At the beginning of 1999, however, Empire One
successfully migrated its long distance traffic onto its own leased facilities
network while adding local telephone services and a full suite of Internet
products, including limited e-commerce functionality. Empire One leases two
switches one for its long distance traffic and the other for its local traffic
and is in the process of provisioning this equipment in New York City. Empire
One primarily markets its services to niche ethnic groups and has subscribers in
11 states and the District of Columbia. Marketing is targeted on the Chinese
markets in the New York, Los Angeles and San Francisco metropolitan areas.
As part of the stock-for-stock merger, all 159,250 shares of Empire One's
outstanding common stock held prior to the merger by 49 individual and corporate
shareholders were converted into the right to receive an aggregate of 1,065,857
shares of the registrant's common stock. Based upon certificates and
representations received from Empire One's former shareholders, at least 15 of
Empire One's former shareholders were accredited investors at the time of the
merger.
Empire One's principal stockholders, consisting of John Friedman, Paul
Butler and Bradley Lewis, collectively owned over 72% of Empire One prior to the
merger. Following the merger, each of these former Empire One shareholders
became executive officers and employees of the registrant.
The amount of consideration paid by the registrant for Empire One was
determined through arms-length negotiations between the registrant's management
and that of Empire One, and centered on Empire One's equity value and the value
of the registrant's common stock. The equity value of Empire One was determined
for the purposes of the merger to be $3,197,571, and was based in part upon the
strategic value of the combined companies as operationally integrated after the
merger, and not the current fair market value of Empire One on a standalone
basis. The negotiated price of $3.00 per share of the registrant's common stock
issued in the merger did not necessarily bear any direct relationship to the
registrant's revenues or the value of the registrant's physical or other assets,
its book value or any other generally accepted criteria of valuation.
The primary assets used by Empire One in its business and acquired by the
registrant include capital leases on two network switches, switch interface
equipment, three network servers, thirty-eight personal computers, various
testing equipment, assorted data networking equipment and other office equipment
and furniture. The registrant intends to continue to use these assets in the
manner they have historically been used.
<PAGE> 3
Item 5. Other Events.
In June, 2000 the registrant moved its corporate headquarters from
Arlington, Virginia to New York City, and ceased doing business out of its
Arlington, Virginia office, except for the management of certain international
long distance routes. The registrant is in the process of evaluating its
strategic alternatives with respect to its international wholesale long distance
business, which alternatives may include a sale or restructuring of the
business.
The registrant has limited cash resources. A failure to obtain financing
immediately will begin to have a material adverse effect on the registrant, its
business, financial condition and results of operations, and will impair the
registrant's ability to continue as a going concern. There can be no assurances
that financing can be obtained, or as to the terms (if any) on which financing
may be obtained, or that the Company can continue in business if such financing
is not obtained.
<PAGE> 4
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements.
(i) Consolidated Financial Statements for Empire One Telecommunications,
Inc. for the Fiscal Years Ended December 31, 1999 and 1998.
INDEPENDENT AUDITORS' REPORT
To The Shareholders
Empire One Telecommunications, Inc.
New York, New York
We have audited the accompanying consolidated balance sheet of Empire One
Telecommunications, Inc. as of December 31, 1999, and the related consolidated
statements of operations, accumulated deficit, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The consolidated financial statements of Empire
One Telecommunications, Inc., as of December 31, 1998, were audited by other
auditors whose report dated May 24, 1999 expressed an unqualified opinion on
those statements.
We conducted our audit 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Empire One
Telecommunications, Inc. as of December 31, 1999, and the consolidated results
of its operations and its consolidated cash flows for the year then ended, in
conformity with generally accepted accounting principles.
LAZAR LEVINE & FELIX LLP
New York, New York
April 4, 2000
<PAGE> 5
EMPIRE ONE TELECOMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
- ASSETS (NOTE 4b) -
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,355 $ 107,842
Accounts receivable - net of allowance for doubtful accounts of $29,893 and
$-0 -, for 1999 and 1998, respectively 624,025 746,537
Due from shareholders/officers (Note 6) 4,754 25,264
Prepaid expenses and other current assets 4,166 7,635
----------- -----------
TOTAL CURRENT ASSETS 640,300 887,278
----------- -----------
PROPERTY AND EQUIPMENT - NET (NOTES 2d, 3 AND 5) 487,800 67,785
----------- -----------
OTHER ASSETS:
Deferred tax assets (Notes 2e and 8) - 165,100
Security deposits and other assets 147,949 146,530
----------- -----------
147,949 311,630
----------- -----------
$ 1,276,049 $ 1,266,693
=========== ===========
- LIABILITIES AND SHAREHOLDERS' DEFICIT -
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,002,821 $ 832,106
Short-term loans payable (Notes 4a) 150,000 -
Current portion of long-term debt (Note 4b) 144,481 56,282
Capital lease obligations - current (Note 5) 103,610 -
Sales and excise taxes payable 45,371 53,552
Accrued payroll - officers (Note 6) 87,500 -
----------- -----------
TOTAL CURRENT LIABILITIES 1,533,783 941,940
----------- -----------
OTHER LIABILITIES:
Long-term debt (Note 4b) 229,085 167,273
Capital lease obligations (Note 5) 304,368 -
Accounts payable, long term - 195,751
----------- -----------
533,453 363,024
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 9)
SHAREHOLDERS' DEFICIT:
Common stock, par value $.0001 per share; 1,000,000 shares
authorized, 115,500 shares and 110,500 shares
issued and outstanding for 1999 and 1998, respectively (Note 7) 12 11
Additional paid-in capital 339,112 329,113
Accumulated deficit (1,130,311) (367,395)
----------- -----------
(791,187) (38,271)
----------- -----------
$ 1,276,049 $ 1,266,693
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 6
EMPIRE ONE TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
REVENUE:
Telecommunications services, net of unbillable calls
of $25,252 and $62,829, for 1999 and 1998, respectively (Note 2f) $ 4,680,760 $ 5,980,762
----------- -----------
EXPENSES (INCOME):
Cost of telecommunication services 3,136,572 4,347,151
Selling, general and administrative costs 2,137,671 1,882,303
Interest expense 58,243 56,537
Finance charges and other income (53,910) (73,644)
----------- -----------
TOTAL EXPENSES 5,278,576 6,212,347
----------- -----------
LOSS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES (597,816) (231,585)
Provision (benefit) for income taxes (Notes 2e and 8) 165,100 (49,000)
----------- -----------
NET LOSS $ (762,916) $ (182,585)
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 7
EMPIRE ONE TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ACCUMULATED DEFICIT, BEGINNING OF YEAR $ (367,395) $ (184,810)
Net loss (762,916) (182,585)
----------- -----------
ACCUMULATED DEFICIT, END OF YEAR $(1,130,311) $ (367,395)
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 8
EMPIRE ONE TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(762,916) $(182,585)
Adjustments to reconcile net (loss) to net cash (used) provided for
operating activities:
Bad debt provision 29,893 -
Depreciation and amortization 18,641 30,897
Issuance of common stock for services 10,000 4,000
Deferred income taxes 165,100 (49,000)
Changes in assets and liabilities:
Decrease in accounts receivable 92,619 266,282
Decrease (increase) in due from stockholders 20,510 (24,972)
Decrease in prepaid expenses 3,469 705
Increase in accounts payable 204,355 306,568
Increase in accrued payroll 87,500 -
(Decrease) in sales and excise taxes payable (8,181) (128,574)
--------- ---------
NET CASH (USED) PROVIDED FOR OPERATING ACTIVITIES (139,010) 223,321
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (21,923) (18,452)
Increase in security deposits (1,419) (120,240)
--------- ---------
NET CASH (USED) FOR INVESTING ACTIVITIES (23,342) (138,692)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 150,000 -
Repayment of long-term debt (79,380) (49,948)
Payment of capital lease obligations (8,755) -
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 61,865 (49,948)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (100,487) 34,681
Cash and cash equivalents, beginning of year 107,842 73,161
--------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,355 $ 107,842
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
(i) Cash paid during the year for:
Taxes paid $ - $ -
Interest 58,243 56,637
(ii) During 1999, the Company acquired equipment under a leasing
arrangement aggregating $416,733.
(iii) During 1999, the Company refinanced its long-term debt and
accounts payable with a vendor. As a result, accounts
payable of $229,391 and a note payable of $205,536 were
combined into a new note payable of $434,927.
</TABLE>
See accompanying notes.
<PAGE> 9
NOTE 1 - DESCRIPTION OF COMPANY AND BUSINESS:
Empire One Telecommunications, Inc. (the "Company") was formed on March
23, 1994, and commenced significant operations in 1996 as a provider of
long distance telephone service. In 1999, the Company expanded its
operations to provide local telephone and dial up internet services and
intends to also render wireless services in the near future. In
addition, the Company offers discounted calling plans for domestic and
international calls to customers located primarily in the Northeastern
and Pacific Coast states. During 1998, Empire One incorporated a wholly
owned subsidiary in Canada. This subsidiary has been inactive since
inception.
The Company is essentially an inter-exchange carrier that routes
customers' calls using a leased switch facility over a transmission
network consisting of dedicated long distance lines provided by
carriers. The carriers provide the call record information from which
the Company bills substantially all of its customer base.
The Company has sustained significant operating losses for the past two
years and at December 31, 1999 reflects an accumulated deficit of
$1,130,311 and negative working capital of $893,483. See Note 10
regarding subsequent event - sale of the Company to a publicly trade
entity.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with generally
accepted accounting principles. Outlined below are those policies which
are considered particularly significant.
(a) USE OF ESTIMATES:
In preparing financial statements in accordance with generally accepted
accounting principles, management makes certain estimates and
assumptions, where applicable, that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period.
While actual results could differ from those estimates, management does
not expect such variances, if any, to have a material effect on the
financial statements.
(b) STATEMENTS OF CASH FLOWS:
For purposes of the statements of cash flows the Company considers all
highly liquid investments purchased with a remaining maturity of three
months or less to be cash equivalents.
(c) CONCENTRATION OF CREDIT RISK:
From time-to-time, the Company maintains cash with a bank in excess of
federally insured limits and is exposed to the credit risk from this
concentration of cash.
<PAGE> 10
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(d) DEPRECIATION AND AMORTIZATION:
Property and equipment are stated at cost. Depreciation and
amortization are computed by straight-line and accelerated methods as
follows:
<TABLE>
<S> <C>
Computer equipment 5-7 years
Software 3 years
Furniture and office equipment 5 years
</TABLE>
(e) INCOME TAXES:
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year-end. Income tax
expense represents the current tax payable for the period and the
change during the period in deferred tax assets and liabilities.
(f) REVENUE RECOGNITION:
Operating revenue is recognized upon completion of a telephone call and
is recorded net of an estimate for unbillable calls. Related
promotional credits, bad debts and billing and collection expenses are
estimated and accrued in the period that revenue is recognized.
(g) STATEMENT OF COMPREHENSIVE INCOME:
The Company has adopted SFAS 130 "Reporting Comprehensive Income",
which is effective for years beginning after December 15, 1997.
Comprehensive income consists of net income or loss or other
comprehensive income (income, expenses, gains and losses that bypass
the income statement and are reported directly as a separate component
of equity). The Company presently has no items of other comprehensive
income.
(h) RECLASSIFICATION:
The 1998 financial statements have been reclassified, where
appropriate, to conform to the 1999 financial statement presentation.
<PAGE> 11
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Computer equipment $ 67,030 $ 42,993
Software 29,419 35,426
Furniture and equipment 18,868 14,975
Property held under capital leases 416,733 -
-------- --------
532,050 93,394
Accumulated depreciation and amortization 44,250 25,609
-------- --------
$487,800 $ 67,785
======== ========
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1999 and 1998, aggregated $18,641 and $19,010, respectively.
NOTE 4 - LOAN PAYABLE:
(a) SHORT-TERM LOANS:
In December 1999, the Company received an interest-bearing loan from
Sonus Communication Holdings, Inc. (Sonus) in the amount of $150,000.
See also Note 10 re: Subsequent Events.
(b) NOTE PAYABLE - CITIZENS:
On July 1, 1997, the Company borrowed $300,000 from Citizens
Telecommunications Company (Citizens). The loan, which originally
matured on June 1, 2002, was secured by accounts receivable, contract
rights, property and equipment and all other assets of Empire. The loan
was also secured by personal guarantees of the three officers of
Empire, and by a security interest in the issued and outstanding shares
of Empire held by these officers. The interest rate on the loan was 12%
per annum.
On May 24, 1999 the Company refinanced its long-term debt and its
accounts payable with Citizens. Account payable of $229,391 and long
term debt of $205,536 were combined into a note payable of $434,927.
The new note bears interest of 10.5% per annum and is payable in 37
monthly installments of principal and interest of $13,811. The loan
continues to be secured by accounts receivable, contract rights,
property and equipment and all other assets of Empire, by personal
guarantees of the officers of Empire and by a security interest in the
issued and outstanding shares of Empire held by these officers.
Principal payments on the note are due as follows:
<TABLE>
<S> <C>
2000 $144,481
2001 148,699
2002 80,386
--------
$373,566
========
</TABLE>
<PAGE> 12
NOTE 5 - CAPITALIZED LEASES:
The Company has entered into a lease for equipment which expires in
2004. The assets and liability under this capital lease have been
recorded at the fair market value of the assets. The assets will be
depreciated over their estimated productive lives. No depreciation was
charged in 1999 since these assets were not yet placed in service.
Minimum future lease payments under capital leases as of December 31,
1999 and for each of the next five fiscal years and in the aggregate
are:
<TABLE>
<S> <C>
2000 $186,100
2001 142,750
2002 110,340
2003 110,340
2004 91,950
--------
Total minimum lease payments 641,480
Less: amount representing interest 233,502
--------
$407,978
</TABLE>
NOTE 6 - RELATED PARTY TRANSACTIONS:
As of December 31, 1999 and 1998, $4,754 and $25,264 respectively, was
due from shareholders for non-interest bearing advances made which are
due on demand. As of December 31, 1999, $87,500 was due to shareholders
for deferred salaries. In March 2000, subsequent to the year end, the
shareholders received an aggregate of 43,750 shares of common stock in
lieu of payment for accrued salaries.
NOTE 7 - STOCKHOLDERS' EQUITY:
During December 31, 1999 and 1998, Empire issued 5,000 shares and 2,000
shares, respectively, of its common stock for consulting services
performed. Each share of common stock was valued at $2.
NOTE 8 - INCOME TAXES:
Deferred income taxes (benefits) are provided for certain income and
expenses which are recognized in different periods for tax and
financial reporting purposes as well as net operating loss
carryforwards.
<TABLE>
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
Deferred taxes are as follows:
Deferred tax asset:
Federal $ - $ 131,000
State and local
- 34,100
--------- ---------
$ - $ 165,100
========= =========
Benefit (provision) for income taxes:
Federal $ 131,000 $ 39,000
State and local 34,100 10,000
--------- ---------
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C>
$(165,100) $ 49,000
========= =========
</TABLE>
NOTE 8 - INCOME TAXES (CONTINUED):
The Company has available operating loss carryforwards for federal tax
purposes of approximately $1,000,000. These losses expire in various
years beginning in 2011 and may result in deferred tax assets. The
Company had previously recorded a deferred tax asset based on the
assumed recoverability of the net operating loss carryforward. Since
the Company realized a significant net operating loss for the current
year, this deferred tax asset has been reversed. The Company has
provided a 100% valuation allowance against its deferred tax asset
since it is not more likely than not that such asset will be realized
in the near future. This allowance will be evaluated at the end of each
year, considering both positive and negative evidence concerning the
realizability of the assets, and will be increased or reduced
accordingly.
NOTE 9 - COMMITMENTS:
(a) During December 1998, Empire entered into a two year agreement with
Frontier Communication of the West Inc. (Frontier) whereby Frontier
will provide Empire with interstate, international and when permitted
intrastate transmission switching facilities and other services. Empire
is billed on a per call basis, with a minimum monthly payment of
$50,000 for the first 3 months of the contract and $100,000 thereafter.
(b) EMPLOYMENT AGREEMENTS:
On January 1, 1998, Empire entered into employment agreements with its
three officers. The agreements expire on December 31, 2000 but will
automatically renew for one year periods unless timely notice is given
by an officer or Empire. Compensation beyond the year 2000 shall not be
less than $150,000 and each officer is also entitled to a performance
bonus of 3.33% of pre-tax net income. Former officers may not enter
another business for one year if it competes with Empire.
(c) OPERATING LEASES:
The Company leases computer equipment, office equipment and office
telephone systems under operating leases. Lease payments for equipment
are due as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
2000 $6,224
2001 3,456
-------
$9,680
=======
</TABLE>
Equipment lease expense for the years ended December 31, 1999 and 1998
was $13,942 and $22,853, respectively. The Company also has a data
processing agreement for telephone billings to April 30, 2001 at a
fixed fee of $500 per month plus additional charges by the hour and by
the number of items processed.
<PAGE> 14
NOTE 9 - COMMITMENTS (CONTINUED):
Empire also occupies office space under a lease that expires on August
30, 2008. Rent expense for the years ended December 31, 1999 and 1998
was $83,698 and $39,814, respectively.
(c) OPERATING LEASES (CONTINUED):
Future rental payments are as follows:
<TABLE>
<S> <C>
2000 $ 88,077
2001 91,159
2002 94,351
2003 97,653
2004 101,070
Thereafter 411,164
----------
$ 883,474
==========
</TABLE>
NOTE 10 - SUBSEQUENT EVENT:
At the end of March 2000, the Company was acquired by Sonus
Communication Holdings, Inc. ("Sonus") through an exchange of shares.
Sonus issued an aggregate of 1,065,857 shares of Sonus common stock,
valued at $3.00 per share, in exchange for all of the Company's issued
and outstanding shares. As a result of this transaction, effective
March 31, 2000, the Company became a wholly-owned subsidiary of Sonus
Communications Holdings, Inc., a publicly traded entity.
<PAGE> 15
(b) Pro Forma Financial Information.
(i) Year Ended 1999 Pro Forma Financial Information.
PROFORMA STATEMENTS OF OPERATIONS
The following unaudited proforma consolidated statements of operations for the
registrant have been prepared from the historical results of operations of Sonus
giving effect to the acquisition of EOT assuming the merger was consummated
January 1, 1999. Such unaudited proforma information should be read in
conjunction with the historical financial statements of Sonus Communication
Holdings, Inc. and Empire One Telecommunications, Inc. including the notes
thereto and the notes to these unaudited proforma consolidated statements of
operations. These statements do not purport to represent what the actual results
of operations would have been for the registrant had the merger been consummated
at the beginning of the period, is not indicative of actual results and does not
purport to represent what the results of operations of the combined entity may
be in the future.
Since the acquisition has already been reflected in the registrant's
consolidated balance sheet included in its Form 10-QSB for the period ended
March 31, 2000, no proforma balance sheet is required to be presented.
<PAGE> 16
UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Historical
-----------------------------
Sonus Empire One
Communication Telecomm.,
Holdings, Inc. Inc. Adjustments Consolidated
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Telecommunications services $ 1,635,042 $ 4,674,905 $ $ 6,309,947
Installment sales 69,014 69,014
----------- ----------- ----------- -----------
TOTAL REVENUES 1,704,056 4,674,905 6,378,961
COSTS AND EXPENSES:
Direct expenses 1,951,519 3,040,667 4,992,186
General and administrative 1,237,092 2,316,236 3,553,328
Amortization of cost over net assets acquired (1) 286,197 286,197
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 3,188,611 5,356,903 286,197 8,831,711
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (1,484,555) (681,998) (286,197) (2,452,750)
OTHER EXPENSES:
Interest expense (5,100) (80,918) (86,018)
Merger related costs (261,611) - (261,611)
----------- ----------- ----------- -----------
TOTAL OTHER EXPENSES (266,711) (80,918) 000 (347,629)
----------- ----------- ----------- -----------
NET LOSS $(1,751,266) $ (762,916) $ (286,197) $(2,800,379)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,965,071 1,065,857 5,030,928 5,030,928
=========== =========== =========== ===========
BASIC LOSS PER SHARE $ (0.44) $ (0.72) $ (0.06) $ (0.56)
=========== =========== =========== ===========
</TABLE>
-------------------------------------------------------------------------------
1/ Adjustment to amortize the excess of purchase price over net assets acquired
if EOT had been acquired as of the beginning of the period. The calculation is
based on a 15 year life.
<PAGE> 17
(ii) First Quarter, 2000 Pro Forma Financial Information.
The acquisition of EOT was accounted for under the purchase accounting rules and
as a result, the balance sheet of EOT has been consolidated with Sonus as of
March 31, 2000. The registrant recognized the difference between the purchase
price and the net assets of EOT as Excess Purchase Price Over Net Assets
Acquired on the balance sheet. The operations of EOT will be consolidated with
those of the registrant beginning April 1, 2000. The proforma results of
operations for each of the quarters ended March 31, 2000 and 1999, respectively,
are shown below. These statements do not purport to represent what the actual
results of operations would have been for Sonus Communication Holdings, Inc. had
the merger been consummated at the beginning of the period, is not indicative of
actual results and does not purport to represent what the results of operations
of the combined entity may be in the future.
QUARTER ENDED MARCH 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Historical
------------------------------
Sonus EOT Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 167,817 $ 1,219,705 $ - $ 1,387,522
----------- ----------- ----------- -----------
Operating expenses:
Direct expenses 372,394 946,389 1,318,783
General & administrative 589,542 770,364 1,359,906
Amortization of cost over
assets acquired - - 71,550 71,550
----------- ----------- ----------- -----------
961,936 1,716,753 71,550 2,750,239
----------- ----------- ----------- -----------
Loss from operations (794,119) (497,048) (71,550) (1,362,717)
Other income (expenses) 10,450 (27,475) - (17,025)
----------- ----------- ----------- -----------
Net loss $ (783,669) $ (524,523) $ (71,550) $(1,379,742)
=========== =========== =========== ===========
</TABLE>
<PAGE> 18
QUARTER ENDED MARCH 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Historical
------------------------------
Sonus EOT Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues 242,438 $ 1,195,832 $ - $ 1,438,270
----------- ----------- ----------- -----------
Operating expenses:
Direct expenses 383,766 645,155 1,028,921
General & administrative 113,133 519,260 632,393
Amortization of cost over
assets acquired - - 71,550 71,550
----------- ----------- ----------- -----------
496,899 1,164,415 71,550 1,732,864
----------- ----------- ----------- -----------
Income (loss) from operations (254,461) 31,417 (71,550) (294,594)
Other income (expenses) (172,030) (10,573) - (182,603)
----------- ----------- ----------- -----------
Net income (loss) $ (426,491) $ 20,844 $ (71,550) $ (477,197)
=========== =========== =========== ===========
</TABLE>
<PAGE> 19
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Decription
----------- ----------
<S> <C>
2.1 Merger Agreement dated as of November 15, 1999 by and among Sonus
Communication Holdings, Inc., EOT Acquisition Corporation, Empire
One Telecommunications, Inc. and certain stockholders of EOT
Acquisition Corporation, attached as Exhibit 2.3 to the registration
statement on Form SB-2 filed by the registrant on December 7, 1999
and incorporated herein by reference.
2.2 Certificate of Merger filed with the Secretary of State of Delaware
on March 29, 2000, attached as Exhibit 2.2 to the Current Report
filed by the registrant on April 6, 2000 and incorporated herein by
reference.
2.3 Certificate of Merger filed with the Secretary of State of New York
on March 29, 2000, attached as Exhibit 2.3 to the Current Report
filed by the registrant on April 6, 2000 and incorporated herein by
reference.
99 Press Release, attached as Exhibit 99 to the Current Report filed by
the registrant on April 6, 2000 and incorporated herein by
reference.
</TABLE>
<PAGE> 20
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 thereunto duly authorized.
SONUS COMMUNICATION HOLDINGS, INC.
(Registrant)
By: /s/ John K. Friedman
------------------------------------
Name: John K. Friedman
Title: President
Dated: June 14, 2000
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Merger Agreement dated as of November 15, 1999 by and among Sonus
Communication Holdings, Inc., EOT Acquisition Corporation, Empire
One Telecommunications, Inc. and certain stockholders of EOT
Acquisition Corporation, attached as Exhibit 2.3 to the registration
statement on Form SB-2 filed by the registrant on December 7, 1999
and incorporated herein by reference.
2.2 Certificate of Merger filed with the Secretary of State of Delaware
on March 29, 2000, attached as Exhibit 2.2 to the Current Report
filed by the registrant on April 6, 2000 and incorporated herein by
reference.
2.3 Certificate of Merger filed with the Secretary of State of New York
on March 29, 2000, attached as Exhibit 2.3 to the Current Report
filed by the registrant on April 6, 2000 and incorporated herein by
reference.
99 Press Release, attached as Exhibit 99 to the Current Report filed by
the registrant on April 6, 2000 and incorporated herein by
reference.
</TABLE>
