<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
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 7, 2000
TELENETICS CORPORATION
(Exact name of registrant as specified in its charter)
California 33-0061894
(State or Other Jurisdiction of 0-16580 (IRS Employer
Incorporation) (Commission File Number) Identification No.)
25111 Arctic Ocean
Lake Forest, CA 92630
(Address of Principal Executive Offices)
(949) 455-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On January 7, 2000, Telenetics Corporation (the "Company") acquired all
of the outstanding stock of eflex Wireless, Inc. ("Eflex"). The stock
was acquired from Edward L. Didion and Teralyn Didion, John D. McLean
and Kathleen M. McLean, William C. Saunders and Paula Saunders and
Terry S. Parker (collectively, the "Selling Shareholders") pursuant to
the terms of a stock purchase agreement.
Eflex has developed proprietary technology for sending and receiving
data over the existing control channels of cellular networks and is
headquartered in Brandon, Florida.
The base purchase price for the acquisition consisted of the issuance
of 750,000 shares of the Company's common stock with a fair market
value of $2,070,000. In addition, the Company may be obligated to issue
up to an additional 6,000,558 shares of the Company's common stock if
certain milestones are attained during the earn-out period through
December 31, 2004.
The acquisition of Eflex will be accounted for using the purchase
method of accounting, with the assets acquired and the liabilities
assumed recorded at their fair values as of the date of acquisition.
The excess of the purchase price over the fair value of the assets
acquired and the liabilities assumed represents the value of the
technology acquired and will be recorded in intangible assets.
In determining the purchase price for Eflex, the Company took into
account the value of companies of similar industry and size to Eflex,
the proprietary technology of Eflex and its officers, comparable
transactions and the market for such companies generally.
2
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired
The following financial statements of Eflex are included in this
Current Report:
Page
----
Independent Auditors' Report 4
Financial Statements
Balance Sheet as of December 31, 1999 5
Statement of Operations for the period from inception (July 28,
1999) to December 31, 1999 6
Statement of Stockholders' Deficit for the period from
inception (July 28, 1999) to December 31, 1999 7
Statement of Cash Flows for the period from inception (July
28, 1999) to December 31, 1999 8
Notes to Financial Statements 9
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
eFlex Wireless, Inc.
We have audited the accompanying balance sheet of eFlex Wireless, Inc. (a
development stage corporation) as of December 31, 1999 and the related
statements of operations, stockholders' deficit and cash flows for the period
from inception (July 28, 1999) through December 31, 1999. 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.
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 financial position of eFlex Wireless, Inc. at
December 31, 1999, and the results of its operations and its cash flows for the
period from inception (July 28, 1999) through December 31, 1999 in conformity
with generally accepted accounting principles.
/S/ BDO Seidman, LLP
Orlando, Florida
February 23, 2000
4
<PAGE>
EFLEX WIRELESS, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1999
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 9,909
Prepaid expenses 1,176
- --------------------------------------------------------------------------------
Total current assets 11,085
Office equipment, net of accumulated depreciation of $965 15,591
- --------------------------------------------------------------------------------
$ 26,676
================================================================================
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 18,551
Accrued compensation 100,470
Accrued expenses 12,275
Note payable to related party (Note 3) 257,000
- --------------------------------------------------------------------------------
Total current liabilities 388,296
- --------------------------------------------------------------------------------
Stockholders' deficit:
Common stock, $.01 par value; 100,000 shares authorized; 10,000
shares issued and outstanding 100
Excess of purchase price over net assets acquired (Note 2) (50,560)
Deficit accumulated during the development stage (311,060)
Less: Stockholders' receivables (100)
- --------------------------------------------------------------------------------
Total stockholders' deficit (361,620)
- --------------------------------------------------------------------------------
$ 26,676
================================================================================
See accompanying notes to financial statements.
5
<PAGE>
EFLEX WIRELESS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JULY 28, 1999) TO DECEMBER 31, 1999
PERIOD FROM INCEPTION (JULY 28, 1999) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
General and administrative expenses $ (305,452)
Interest expense (5,608)
- --------------------------------------------------------------------------------
Net loss $ (311,060)
================================================================================
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
EFLEX WIRELESS, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION (JULY 28, 1999) TO DECEMBER 31, 1999
<CAPTION>
DEFICIT
EXCESS OF ACCUMULATED
COMMON STOCK PURCHASE PRICE DURING THE
-------------------------- OVER NET ASSETS DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT ACQUIRED STAGE RECEIVABLES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, July 28, 1999 - $ - $ - $ - $ -
July 28, 1999 - Issuance of common
stock to founders 10,000 100 - - (100)
August 27, 1999 - Business acquisition
(Note 2) - - (50,560) - -
Net loss - - - (311,060) -
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 10,000 $ 100 $ (50,560) $ (311,060) $ (100)
=============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
EFLEX WIRELESS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JULY 28, 1999) TO DECEMBER 31, 1999
PERIOD FROM INCEPTION (JULY 28, 1999) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (311,060)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation 965
Cash provided by (used for):
Prepaid expenses (1,176)
Accounts payable 18,551
Accrued payroll 100,470
Accrued expenses 12,275
- --------------------------------------------------------------------------------
Net cash used for operating activities (179,975)
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of office equipment (14,118)
Cash paid in business acquisition (7,998)
- --------------------------------------------------------------------------------
Net cash used for investing activities (22,116)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of note payable to related party 212,000
- --------------------------------------------------------------------------------
Net increase in cash 9,909
Cash, beginning of period -
- --------------------------------------------------------------------------------
Cash, end of period $ 9,909
================================================================================
See accompanying notes to financial statements.
8
<PAGE>
EFLEX WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Nature of Operations
Significant --------------------
Accounting
Policies eFlex Wireless, Inc. (the "Company") was incorporated
on July 28, 1999 for the purpose of developing and
marketing remote equipment monitoring and control
devices. The Company is in the "development stage" as
defined by Financial Accounting Standards Board
Statement No. 7, which established standards of
financial accounting and reporting applicable to
development stage enterprises.
Office Equipment
----------------
Office equipment is carried at cost and depreciated
under the straight-line method over a useful life of
five years.
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 at the date of the financial statements
and the reported amounts of revenues and expenses
during the reporting period. Actual results could
differ from those estimates.
Income Taxes
------------
The Company, with the consent of its stockholders,
elected to be taxed as an S corporation for federal
and certain state income tax purposes. Under this
election, the stockholders include their respective
share of taxable income of the Company in their
individual tax returns. Therefore no provision for
income taxes has been made.
Fair Value of Financial Instruments
-----------------------------------
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial
Instruments," requires disclosure of fair value
information about financial instruments. Fair value
estimates discussed herein are based upon certain
market assumptions and pertinent information
available to management as of December 31, 1999.
9
<PAGE>
EFLEX WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The respective carrying value of certain
on-balance-sheet financial instruments approximated
their fair values. These financial instruments
include cash, accounts receivable, accounts payable,
accrued expenses and note payable to related party.
Fair values were assumed to approximate carrying
values for these financial instruments since they are
short term in nature and their carrying amounts
approximate fair values or they are receivable or
payable on demand.
2. Business On August 27, 1999, the Company entered into sales
Acquisition and assignment agreements with two companies
affiliated through common control and their
stockholder whereby the Company was assigned all of
the assets and assumed all of the liabilities of
these companies. Since these companies are considered
entities under common control, the assets and
liabilities purchased were recorded at their
historical basis. The excess of the purchase price
over the net assets acquired has been included in the
stockholders' deficit section of the balance sheet.
The transaction was recorded as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
<S> <C>
Total consideration paid in cash $ 7,998
Less book value of assets acquired (2,438)
Liabilities assumed 45,000
------------------------------------------------------------------------------
Excess of purchase price over net assets acquired $ 50,560
==============================================================================
</TABLE>
3. Note Payable to Note payable to related party consists of the
Related Party following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------------------------------------
<S> <C>
Fixed 7% note payable to company owned by two
stockholders, maximum loan amount of $305,000,
principal and interest due on December 31, 2000,
collateralized by substantially all the Company's
assets and intellectual property $ 257,000
==============================================================================
</TABLE>
One-half of this note payable and related accrued
interest was paid by the seller and the remaining
one-half was assumed by the seller in connection with
the sale of the Company on January 7, 2000 (see Note
6).
10
<PAGE>
EFLEX WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Supplemental Cash Supplemental cash flow information is as follows:
Flow Information
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
------------------------------------------------------------------------------
<S> <C>
Cash paid for interest $ -
Noncash investing and financing activities:
Assumption of note payable from affiliated
company 45,000
Assignment of office equipment from affiliated
company 2,438
Common stock issued in exchange for
stockholders' receivables 100
==============================================================================
</TABLE>
5. Commitments The Company is party to various legal proceedings
and arising out of the normal conduct of business.
Contingencies Management believes that the final outcome of these
proceedings will not have a material adverse effect,
if any, upon the Company's financial position.
6. Subsequent As of January 7, 2000, the Company became a
Events wholly-owned subsidiary of Telenetics. On January 7,
2000, the stockholders of the Company entered into an
agreement to sell all of the Company's outstanding
stock to Telenetics Corporation ("Telenetics"), a
California corporation. Also as of this date, the
Company's officers and directors resigned from their
positions, and all employment and consulting
agreements were terminated. New employment and
consulting agreements were executed with Telenetics
and the Company's officers and employees.
11
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS, CONTINUED
(b) Pro forma financial information.
The following pro forma financial information of the Company is
included in this Current Report:
Page
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Description of Pro Forma Financial Information 13
Pro Forma Financial Statements
Pro Forma Condensed Balance Sheet as of September 30, 1999
(unaudited) 14
Pro Forma Condensed Statement of Operations for the nine
months ended September 30, 1999 (unaudited) 15
Notes to Pro Forma Condensed Financial Statements
September 30, 1999 (unaudited) 16
12
<PAGE>
DESCRIPTION OF PRO FORMA FINANCIAL INFORMATION
The acquisition of Eflex will be accounted for using the purchase method of
accounting with the assets acquired and liabilities assumed recorded at their
fair values as of the date of acquisition. The excess of the purchase price over
the fair value of the assets acquired and liabilities assumed represents the
value of the technology acquired and will be recorded in intangible assets.
The following unaudited pro forma condensed financial information is based upon
the historical financial statements and has been prepared to illustrate the
effect of the acquisition of Eflex.
The unaudited pro forma condensed balance sheet assumes the acquisition occurred
on September 30, 1999 and was prepared using the historical balance sheets of
the Company and Eflex as of that date. The unaudited pro forma condensed
statement of operations illustrates the effect of the acquisition of Eflex on
the Company's results of operations for the nine months ended September 30,
1999, assuming the acquisition took place on July 28, 1999 (the incorporation
date of Eflex).
The unaudited pro forma condensed balance sheet and statement of operations are
not intended to be indicative of the financial position or results of operations
which actually would have been realized had the acquisition occurred on the
dates assumed, nor of the future results of operations of the combined entities.
The accompanying unaudited pro forma condensed financial statements should be
read in connection with the historical financial statements and notes of the
Company and Eflex.
13
<PAGE>
<TABLE>
TELENETICS CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999 (UNAUDITED)
<CAPTION>
Pro Forma
Adjustments(1) Pro Forma
Telenetics Eflex Debit (Credit) Combined
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets:
Cash $ 4,873 $ 106 $ 4,979
Accounts receivable, net 1,932,362 - 1,932,362
Receivable from related parties 155,659 - 155,659
Inventories 1,640,536 - 1,640,536
Prepaid expenses and other current assets 171,116 766 171,882
------------------------------- --------------
Total current assets 3,904,546 872 3,905,418
Property, plant and equipment, net 739,920 10,474 750,394
Goodwill, net 408,680 - 408,680
Intangible assets, net 567,503 - 2,344,048 2,911,551
Other assets 72,769 - 72,769
------------------------------- --------------
Total assets $ 5,693,418 $ 11,346 $ 8,048,812
=============================== ==============
Current liabilities:
Bank overdraft $ 74,079 $ - $ 74,079
Revolving line of credit 940,501 - 940,501
Current portion of related party debt 25,762 - 25,762
Current portion of long-term debt 28,972 - 28,972
Subordinated unsecured promissory notes 696,513 - 696,513
Accounts payable 1,201,870 17,120 1,218,990
Accrued expenses 469,189 56,274 (80,000) 605,463
Advance payments from customers 12,333 - 12,333
Income tax payable 173,746 - 173,746
------------------------------- --------------
Total current liabilities 3,622,965 73,394 3,776,359
Related party debt, less current portion 250,000 132,000 382,000
Long-term debt, less current portion 42,652 - 42,652
------------------------------- --------------
Total liabilities 3,915,617 205,394 4,201,011
Shareholders' Equity:
Preferred stock 1,593,744 - 1,593,744
Common stock 11,809,643 100 (2,070,000) 13,879,643
100
Accumulated deficit (11,625,586) (143,488) (143,488) (11,625,586)
Excess of purchase price over net assets
acquired - (50,560) (50,560) -
Shareholders' receivable - (100) (100) -
------------------------------- --------------
Total shareholders' equity 1,777,801 (194,048) 3,847,801
------------------------------- --------------
Total liabilities and shareholders' equity $ 5,693,418 $ 11,346 $ 8,048,812
============================= ==============
</TABLE>
See accompanying notes to the pro forma condensed financial statements.
14
<PAGE>
<TABLE>
TELENETICS CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<CAPTION>
Pro Forma
Adjustments Pro Forma
Telenetics Eflex (2) Debit (Credit) Combined
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 10,316,338 $ - $ 10,316,338
Cost of sales 7,147,024 - 7,147,024
-------------------------------------- ---------------
Gross profit 3,169,314 - 3,169,314
Operating expenses 2,860,865 141,677 56,000 (3) 3,183,542
125,000 (4)
-------------------------------------- ---------------
Income (loss) from operations 308,449 (141,677) (14,228)
Interest expense (254,938) (1,811) (256,749)
Debt termination costs (86,190) - (86,190)
Other income 36,573 - 36,573
-------------------------------------- ---------------
Income (loss) before income taxes 3,894 (143,488) (320,594)
Income taxes 829 - 829
-------------------------------------- ---------------
Net income (loss) $ 3,065 $ (143,488) $ (321,423)
====================================== ===============
Net income (loss) per share, basic
and diluted (5) $ -0- $ (.03)
================= ===============
Weighted average shares of common
stock, basic and diluted 9,644,125 9,810,792
================== ===============
</TABLE>
See accompanying notes to the pro forma condensed financial statements.
15
<PAGE>
TELENETICS CORPORATION
NOTES TO THE PRO FORMA CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
(1) The acquisition of Eflex by the Company is accounted for using the
purchase method of accounting. The pro forma adjustments to record
the acquisition in the accompanying unaudited pro forma condensed
balance sheet are as follows:
Components of purchase price:
Issuance of 750,000 shares of the Company's
common stock $ 2,070,000
Acquisition costs 80,000
--------------
Total purchase price 2,150,000
Net liabilities assumed 194,048
--------------
Value of technology acquired $ 2,344,048
==============
(2) The historical financial statements for Eflex have been accounted
for on a December 31 fiscal year end basis. The historical financial
statements of Eflex included in the pro forma condensed statement of
operations reflect its results of operations from July 28, 1999
(date of incorporation) through
September 30, 1999.
(3) Technology acquired and included in intangible assets is estimated
to have a useful life of seven years and is amortized using the
straight-line method.
(4) Additional compensation expense incurred as a result of new
employment, consulting and stock option agreements with certain
former employees and consultants of Eflex, which agreements are
directly attributable to the transaction.
(5) Pro forma loss per share is based on the weighted average number of
shares of common stock outstanding during the period. Options and
warrants to purchase common stock were excluded in the calculation
of the pro forma loss per share, as their effect would be
antidilutive.
16
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS, CONTINUED
(c) Exhibits
2.1 Stock Purchase Agreement dated as of January 7, 2000
between the Company and the Selling Shareholders*
2.2 Promissory Note dated as of January 7, 2000 from the
Company in favor of Saunders & Parker, Inc. for
$136,444.90*
2.3 Non-Qualified Stock Option dated January 7, 2000 issued
by the Company to Edward L. Didion*
2.4 Non-Qualified Stock Option dated January 7, 2000 issued
by the Company to John D. McLean*
2.5 Non-Qualified Stock Option dated January 7, 2000 issued
by the Company to Saunders & Parker, Inc.*
2.6 Non-Qualified Stock Option dated January 7, 2000 issued
by the Company to T. Keith Odom*
2.7 Registration Rights Agreement dated January 7, 2000
between the Company and Edward L. Didion*
2.8 Registration Rights Agreement dated January 7, 2000
between the Company and John D. McLean*
17
<PAGE>
2.9 Registration Rights Agreement dated January 7, 2000
between the Company and Saunders & Parker, Inc.*
2.10 Registration Rights Agreement dated January 7, 2000
between the Company and T. Keith Odom*
2.11 Registration Rights Agreement between the Company and
Terry S. Parker*
2.12 Registration Rights Agreement dated January 7, 2000
between the Company and William C. Saunders*
2.13 Consulting Agreement dated January 7, 2000 between the
Company and Edward L. Didion*
2.14 Employment Agreement dated January 7, 2000 between the
Company and John D. McLean*
2.15 Employment Agreement dated January 7, 2000 between the
Company and T. Keith Odom*
2.16 Consulting Agreement dated January 7, 2000 between the
Company and Saunders & Parker, Inc.*
2.17 Promissory Note dated as of January 7, 2000 from the
Company in favor of John D. McLean for $107,500*
2.18 Shareholder Agreement dated as of January 7, 2000*
* Filed with the Securities and Exchange Commission on January 21, 2000 as an
exhibit to Registrant's Form 8-K dated January 7, 2000 and incorporated
herein by reference.
18
<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 hereunto duly authorized.
Date: March 21, 2000
TELENETICS CORPORATION
By: /S/ David L. Stone
---------------------
David L. Stone
Chief Financial Officer
