SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
------ EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1993
------ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD _ __ TO _ _
Commission File Number 0-17366
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SHARED TECHNOLOGIES INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 87-0424558
- -------------------------------------------- ------------------------------
(State or other jurisdiction of Incorporation (I.R.S. Employer
or organization) Identification No.)
100 Great Meadow Road, Suite 104
Wethersfield, Connecticut 06109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 258-2400
---------------
Securities registered pursuant to Section 12(b) of the Act: None
-----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.004 par value
-------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes_ X _ No_ _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
nonaffiliates as of May 31, 1994 was approximately $9,820,536, based on the
average of the closing bid and asked prices as reported on such date in the
over-the-counter market.
Indicate the number of shares outstanding of each of the registrant's classes
of Common Stock, as of May 31, 1994
5,202,750 shares of Common Stock
$.004 par value
----------------------------
The following document is hereby incorporated by reference into Part III of
this Form 10-K: The registrant's Proxy Statement for its Annual Meeting of
Stockholders held on June 8, 1994 filed with the Securities and Exchange
Commission in definitive form on May 30, 1994.
<PAGE>
PART I
Item 1.
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Business
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(a) General Development of Business - Shared Technologies Inc., which was
incorporated on January 30, 1986, its subsidiaries and affiliated partnerships
(collectively, the "Company") are engaged in providing shared tenant services
("STS") to tenants of modern, multi-tenant office buildings. As an STS
provider, the Company generally obtains the exclusive right from a building
owner (the "Owner/Developer") to install an on-site communications system,
called a private branch exchange ("PBX"), or an off-site communications system,
called centrex, and to market telecommunications and office automation services
and equipment to tenants.
In May 1991, the Company acquired the stock of Boston Telecommunications
Company (BTC), a provider of STS in the Boston area. The Company paid
$1,097,000 consisting of acquisition cost less cash received of $197,000, stock
purchase warrants valued at $300,000 and a $600,000 promissory note payable.
In May 1989, the Company acquired interests in four entities providing STS in
the greater Chicago area from Shared Services, Inc. and I.S.E., Inc. for
$180,000. Additionally, in February 1989, the Company purchased the stock of
Multi-Tenant Services, Inc. (MTS) a former division of BellSouth Corporation
for $4,048,000 of which $391,000 was paid in cash and in payment of the balance
the Company assumed existing lease obligations. MTS was a provider of STS in
nine metropolitan areas. Such acquisitions were consummated in order to
increase the Company's revenues and spread its overhead expenditures over a
larger base.
The Company is a provider of telecommunications services and equipment,
including basic telephone equipment, local and long-distance network services
and on-site maintenance. The Company also offers its customers data services,
as well as data processing and office automation equipment, service and
support. Additionally, the Company sells and rents cellular telephones in
several locations both to its existing customers and the general marketplace.
In December and October 1993 the Company commenced management and
subsequently completed the acquisition of certain assets and liabilities of
Road and Show South, Ltd. and Road and Show Cellular East, Inc., respectively.
The purchase price for South was $1,261,611 which represents $46,111 cash and
an obligation to issue 221,000 shares of the Company's common stock. The
purchase price for East was $750,245 which represents $209,245 cash and an
obligation to issue 108,200 shares of the Company's common stock.
(b) Recent Developments - During 1992, the Company completed a
restructuring due to its working capital deficit and the maturity of its
principal financing arrangements which were due to the FDIC, as receiver for
the Company's principal lender. The restructuring included Shared Technologies
Inc. and all of its subsidiaries. The restructuring resulted in the Company
recording a gain of $5,162,000 before related expenses of $1,361,000 for
consulting fees related to the restructuring and income taxes of $45,000. As a
result of the restructuring, approximately $900,000 of vendor payables and
$1,500,000 of capital lease obligations were forgiven and $3,300,000 of vendor
payables were converted to three year non-interest bearing notes payable (see
Note 7 of Notes to Consolidated Financial Statements). Additionally, a
-1-<PAGE>
settlement agreement was entered into with the Federal Deposit Insurance
Corporation ("FDIC") as receiver for the Company's principal lender which
resulted in the Company paying off its term loan and revolving credit
arrangements and recognizing a gain of approximately $2,700,000 (see Note 7 of
Notes to Consolidated Financial Statements). As of December 31, 1992, the
Company was still negotiating the settlement of a $600,000 promissory note (see
Note 7 of Notes to Consolidated Financial Statements). Subsequent to such date
the Company entered into a settlement agreement which provides for the payment
of $750,000 plus interest at 10% which resulted in an extraordinary loss of
$150,000 in 1993.
In connection with the restructuring, the Company also raised equity
capital of approximately $5,780,000 from certain institutional investors, net
of expenses. Such offering was exempt from registration based upon Regulation
S. A firm, one of whose principals is a director and stockholder of the
Company served as underwriter for the offering. The Company paid this firm
underwriting commissions and expenses totalling $446,750 for the offering. No
other parties to the restructuring were affiliated with the Company. The
Company also entered into agreements with Series A and B Preferred Stockholders
to convert their holdings, including $327,920 of the accrued dividends related
thereto, into Series C Preferred Stock. As part of this conversion, $40,990 of
the accrued dividends was forgiven by the stockholders (see Note 8 of Notes to
Consolidated Financial Statements).
In September 1992 the Company effected a one-for-four reverse stock split
of Common Stock and increased the par value of Common Stock from $.001 to $.004
per share. All per share amounts contained herein have been retroactively
adjusted to reflect this split.
(c) Financial Information about Industry Segments - The Company is
engaged in one industry segment, the shared tenant services ("STS") industry,
providing telecommunications and office automation services and equipment to
tenants in modern, multi-tenant office buildings.
(d) Narrative Description of Business
(1) (i) Products and Services
---------------------
Shared Tenant Services (STS)
- -----------------------------
As an STS provider, the Company generally obtains the exclusive right from
a building owner (the "Owner/Developer") to install an on-site communications
system, called a private branch exchange ("PBX"), or an off-site communications
system, called centrex, and to market telecommunications and office automation
services and equipment to tenants. An STS project requires significant
expenditures for capital equipment and installation costs and a significant
start-up period before it can become profitable. The initial cost of capital
equipment to establish STS in a new building ranges from $50,000 to $300,000
with additional start-up working capital requirements ranging from $10,000 to
$100,000.
The STS provider often leases space within the building for on-site
support staff. STS provides an Owner/Developer with an important building
amenity and provides a tenant with the availability of one-stop shopping for a
wide range of telecommunications and office automation equipment and services
-2-<PAGE>
as well as on-site training, maintenance and support, without any capital
investment.
The Company's services are provided to its customers under the concept of
one-stop shopping for basic telecommunications, voice and data transmission,
and office automation services and equipment which include:
-Access to cost-effective centralized digital switching
-Broad selection of telephone equipment
-Discounted, quality long-distance service
-Local telephone service
-System maintenance, management and administration
-Customized call reporting and billing
-Office automation equipment including computer, facsimile
and peripherals
-On-site training and assistance
-Cable and wiring design and maintenance
-Equipment service and support
-Cellular sale and rental
To date, the Company has concentrated primarily on developing the
telephone portion of its business. The Company's telephone services consist of
selecting and installing telephone equipment on tenants' premises and providing
ongoing service to train tenants, to perform moves, adds and changes, and to
maintain the telephone equipment. Tenants are quoted a monthly charge for
leased equipment which includes a rental fee for the equipment, a charge for
access to the PBX owned by the Company and installed in the buildings or to the
centrex service, and a local access charge based on the cost of the trunk lines
which connect the building to the central office of the local telephone
company. In addition, tenants are charged for special services and usage,
including IN-WATS lines, dedicated circuits, directory listings, local message
units (where applicable), directory assistance, credit card calls, third-party
billing calls, and long-distance at a discount from the standard rates charged
by long distance providers.
As the telecommunications business is established in each building, the
Company increases its emphasis on the sale or lease of personal computers and
peripherals, and the marketing of computer time sharing, voice mail, message
centers, local area networks for computers, voice messaging, facsimile
transmission, copying equipment and data transmission. The Company also sells
computer equipment and peripherals, and sells or rents cellular phones, to
customers who are not tenants in buildings in which it provides STS.
The Company provides a monthly statement to each customer delineating all
STS charges. The Company bills for the prior month's usage, installation,
moves, adds and changes on the first of the following month. The statements
also include equipment, local and system access and other special service
charges in advance for the succeeding month. The local access charge reflects
the cost to the Company of the trunk lines connecting the building to the
central office of the local telephone company and is levied on the Company by
the local telephone company. In general, the Company passes this cost through
to tenants.
Customers are billed for all telecommunications usage, including long-
distance calls. Currently, the Company offers a discount of 15% to 40% from
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the AT&T direct distance dial published rates, which discounts can be changed
by the Company on 30 days' notice. The Company currently purchases long-
distance services from AT&T, MCI and RCI (Rochester Telephone) and may change
to other long distance providers in the future. The Company estimates that by
efficiently managing its long-distance network, it can provide long-distance
services at a discount of up to 40% of the AT&T direct distance dial rates.
Cellular
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Shared Technologies Cellular, Inc. (STC), provides cellular phone service.
STC rents cellular telephones in over 20 locations around the
country. The rental portion of STC's business was greatly expanded at the end
of 1993 through the purchase of certain assets of the Road and Show Cellular
companies.
Equipment
- ----------
The Company offers its telecommunications services through either a PBX or
centrex-based system.
A PBX is a telecommunications switch that has the following
characteristics:
-is owned by a private user, not a telephone company
-automatically switches incoming and outgoing calls over trunk lines so
that dedicated telephone lines are not required
-functions like a telephone company central office, except that it is
under the direct control of its owner
-offers more features than are typically available through private
business lines, key systems or centrex services
-is typically capable of handling from 100 to 2,000 users
The Company owns or leases PBXs and other equipment manufactured by
InteCom Inc., Northern Telecom, AT&T, NEC and Mitel. This equipment can be
acquired from a variety of sources. The Company employs its own technicians to
maintain its PBXs, which have, on average, an estimated useful life of
approximately eight to twelve years. From time to time, the Company upgrades
its PBXs by adding additional software and hardware which can increase the
capabilities and extend the useful life of a PBX beyond the ordinary eight to
twelve year period.
An alternative to the PBX is digital centrex, a service offered by the
local regulated telephone company. Recently, a number of local telephone
companies have enhanced their digital centrex offerings to be more competitive
with PBXs in terms of both features and price. In addition, some telephone
companies have petitioned their local regulatory commission to permit them
to negotiate pricing with large users (defined as a company using over 100
lines), rather than charging tariffed rates. In response to these
developments, the Company has entered into an arrangement with Illinois Bell to
provide service in downtown Chicago via digital centrex, eliminating the need
for a PBX in each building, and has entered into an exclusive agreement with
the Owner/Developers of two buildings to provide STS/centrex. Additionally, in
1993 the Company began providing centrex services in Indianapolis.
-4-<PAGE>
The Company offers a full range of customer premise equipment, including
telephones, computers and peripherals, and facsimile and voice mail equipment
compatible with its PBX and centrex-based systems. The Company has no long-
term contracts establishing the price at which it acquires equipment, but can
negotiate pricing due to the availability of multiple sources of supply.
STS Buildings
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As of December 31, 1993, the Company was providing STS to tenants in 70
buildings located in 13 metropolitan areas. In those cities where the Company
provides STS to tenants in more than one building, the Company is able to
realize significant operating economies by sharing management, administrative,
sales and technical staff across a number of buildings. The following table
sets forth as of December 31, 1993, on a city-by-city basis, the Net Leasable
Square Feet and the Potential Lines of Service in each building where the
Company provides STS to tenants as estimated by management.
<TABLE>
<CAPTION>
Net Potential Number of
Leasable Lines of Lines in Number of
City Sq. Ft. Service Service Buildings
------ --------------- --------- --------- -----------
<S> <C> <C> <C> <C>
Atlanta, Georgia 3,733,000 12,443 3,015 8
Birmingham, Alabama 1,435,000 1,450 1,056 2
Boston, Massachusetts 4,846,000 15,144 2,542 11
Chicago, Illinois 3,567,000 11,890 2,980 9
Hartford, Connecticut 1,755,000 5,850 3,354 8
Los Angeles, California 895,000 2,983 218 2
Mahwah, New Jersey 625,000 1,067 1,050 1
Memphis, Tennessee 320,000 1,067 196 1
Nashville, Tennessee 972,000 3,240 613 2
New Orleans, Louisiana 2,913,000 9,009 3,138 4
Phoenix, Arizona 2,484,000 8,280 2,044 12
Indianapolis, Indiana 300,000 1,000 203 3
Seattle, Washington 4,092,000 13,640 2,867 7
---------- ------- --------- ---
TOTAL 27,937,000 87,063 23,276 70
</TABLE>
Of the potential 87,063 lines of service, the Company has under contract
23,276 lines (26.7%). Accordingly, management believes that the opportunity
exists for the Company to increase penetration and revenues in the buildings to
which it currently provides STS.
Owner/Developer Agreements
- --------------------------
In most buildings where it provides STS, the Company or its assignor has
entered into a contractual agreement ("Owner/Developer Agreement") with the
building Owner/Developer. Subject to specific provisions contained in certain
Owner/Developer Agreements, the Owner/Developer Agreements generally grant the
Company the exclusive right to provide STS in the building and the
Owner/Developer is precluded from entering into a "materially similar
arrangement" with a third party. In addition, the Company is granted a right
-5-<PAGE>
of first refusal in the building for the offering of additional STS, such as
telephone answering services, word and data processing, telex, copier services
and certain other STS. The term of the agreement is generally for ten years
and may contain one or two five-year renewal options.
The Owner/Developer Agreements generally provide for the payment of
royalties to the Owner/Developer which may be based on a percentage of gross
revenues or on a percentage of rental, sale and service income or net long-
distance revenues. Such royalty payments may commence at the initial service
date, at some later date, typically 18 to 24 months after the Company commences
to provide STS to the building, or at the time the Company achieves a certain
level of market penetration in the building.
The Company is responsible for the costs and expenses incurred in
operating and maintaining the STS equipment in the building and must obtain the
Owner/Developer's approval to make any modification in the STS equipment which
would affect the building structure. The agreement is assignable by the
Owner/Developer upon the sale of the building. Certain Owner/Developers also
have the right to purchase the Company's STS equipment in the building at a
nominal or fair market price if the agreement is terminated.
Each Owner/Developer Agreement either contains a lease, or references a
separately executed lease, for the space necessary for the Company's on-site
personnel and equipment. These leases generally provide for a deferral of
rental payments until a certain occupancy percentage has been obtained in the
building, or a certain period of time, typically 12 to 24 months, after the
Company commences operations.
Tenant Contracts
- -----------------
The Company is a party to a Master Shared Tenant Services Agreement
("Tenant Contract") with substantially all of its customers. The Tenant
Contract contains terms and conditions governing the provision of STS.
Subsequent to signing a Tenant Contract, tenants submit individual customer
orders for specific equipment rentals and STS. In addition to the typical
Tenant Contracts for STS, the Company has agreements with several tenants who
have their own PBX to maintain the system and manage the tenant's telephone
call billing system, and the Company receives a monthly fee for its services.
The Company generally signs contracts for a period of five years or a term
coterminous with the customers lease in the building. The Company has
contracts ranging from month to month to five years. The Company feels it has
staggered the contracts such that there is no time when a material amount of
contracts come due at the same time. Additionally, the Company does not have
any individual contracts which are material.
(ii) Government Regulation
----------------------
As a provider of telephone services, the Company's operations are
materially affected by regulatory developments on both a federal and state
level. The Fedeal Communications Commission ("FCC") regulates interstate
communications and the state public utility commission ("PUCs") regulate
intrastate communications. The FCC has determined that STS providers, sharing
a PBX and related equipment within the same premises, should be characterized
as end users, as opposed to interexchange carriers for access charge purposes,
-6-<PAGE>
thereby entitling them to a more favorable rate structure. Although there is
currently no major effort underway to modify the existing FCC regulatory scheme
with regard to STS providers, any change in the liability of such providers for
access charges or any substantial change with regard to other regulatory
constraints could have a material adverse effect on the Company's business.
PUCs may regulate STS providers through direct regulatory requirements as well
as through the terms, conditions of service and rates contained in the tariffs
of the underlying local exchange carrier covering service offerings to STS
providers. To date, the Company has, to some degree, elected to operate in
states which maintain a comparatively favorable regulatory environment for STS
providers sharing a PBX and related equipment. All of the states in which the
Company now operates do not currently require a certification of or otherwise
directly regulate STS providers with the exception of Alabama, which has
granted such certification to the Company. The Company also has obtained
certification to resell certain intrastate long-distance services in
California, which requires such certification. Although at present none of
these states have any proceeding or other effort underway to materially modify
their regulatory treatment of such STS providers, no assurance can be given
that such proceedings will not be initiated in the future. Further, regulatory
agencies in many states have not yet generally addressed the issue of sharing
centrex lines and the regulatory consequences of such operations are uncertain;
however, the Company to date has only engaged in sharing centrex lines in
states (Illinois and Indiana) where regulatory agencies have expressly
permitted such operations.
(iii) Marketing
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The Company's marketing efforts initially focus on city selection and then
individual building selection within a city. City selection is based upon
considerations such as the building construction rate, vacancy rate, location
relative to current STS projects, Owner/Developer relationships and local
regulatory environment. Once the Company has made a decision to enter the STS
market in a given city, it then concentrates on selecting the "hub" building
for its marketing efforts, taking into account considerations such as location
of the building within the city, likelihood the building will reach full
occupancy and probable tenant mix.
The Company also employs a marketing concept involving the establishment
of a hub STS building in close proximity with other satellite STS buildings
which can be managed by one regional director and which share sales and
administrative and technical personnel.
After an appropriate building has been identified, the Company begins
marketing its services to the Owner/Developer to obtain the exclusive right to
provide STS in the building. On occasion, an Owner/Developer will issue a
formal request for proposal and seek competitive bids. Once agreement with the
Owner/Developer has been reached, marketing efforts with tenants are commenced.
Tenant marketing occurs during the leasing process of a building, which is
during the planning stage of the tenant's move. The Company also has the
opportunity to increase penetration in highly leased and popular buildings by:
- When there is a new tenant replacing a moving out tenant, the Company
is invited by the leasing manager to present the "building's
communication amenity package" provided by the Company.
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- When a current tenant who is up for lease renewal, the leasing
manager will again recommend that the tenant consider using the
"building's communication amenity package" provided by the Company.
In most cases the building management company or the building owners point
out to the perspective lessee or renewal tenant the cost savings by taking
advantage of the "building's communication amenity package" which can save the
perspective company between $1.25 and $1.75 per square foot.
Typically, the Company's marketing initially concentrates on working in
conjunction with the building's leasing agent to provide STS to prospective
tenants. Once the tenant has committed to a lease, marketing efforts are
focused on tenant subscription to the STS offerings within the building.
The Company's customers consist primarily of small to medium-size tenants,
such as brokerage, accounting and law firms. While the majority of the
Company's customers are tenants in STS buildings, the Company also provides
services and sells and leases equipment to end-users who are not located in STS
buildings.
(iv) Patents, Trademarks, Licenses, Franchises, Concessions
See Item 1(d) (i) - "Owner/Developer Agreements" herein. Additionally,
Shared Technologies Inc. is a registered trademark.
(v) Seasonality
-------------
While the Company's STS business is not generally seasonal, the Company
has experienced, over the last several years, a reduction in local and long
distance revenues in the month of December which is believed to be associated
with the holiday season.
(vi) Working Capital
----------------
To date, the Company has funded its working capital shortfall through
borrowings and sales of its securities. See Item 1(a) - "General Development
of Business"; "Management's Discussion and Analysis of Results of Operations
and Financial Condition"; and Note 1 of Notes to Consolidated Financial
Statements herein. The Company requires working capital due to the nature of
its business which requires an upfront capital investment that is recovered
over a period of time.
(vii) Dependence on a Single Customer
---------------------------------
No single customer or building accounts for 10% or more of the Company's
revenues. The Company's business is not dependent upon a single or a few
customers. Effective January 1992, the Company is no longer providing service
to the Javits Convention Center in New York. While no single customer at
Javits accounted for 10% of revenue, total Javits operations accounted for 10%
of the Company's revenue in 1991.
(viii) Backlog
--------
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At any given period the Company maintains new contracts signed but not yet
installed due to the term of the contract which further adds to this backlog.
The number of additional lines not yet installed related to new contracts
cannot be determined due to changes that occur through the installation date.
Therefore, backlog information cannot be quantified.
(ix) Competition
------------
While the Company competes with other STS providers to obtain exclusive
STS rights from the Owner/Developer of an STS office building, this competition
is not severe due to the number of office buildings available, their location
and the location of an appropriate STS provider.
The Company believes its competitive advantage is city based. The Company
has operations in some cities where it is the only STS provider. In this case
the competitive advantage is with the Company. The Company has offices across
the country with many developers and is not dependent on any developer for any
material amount of business.
The sale of telecommunication services is a competitive business. The
major discriminating factors for telecommunication buyers are price and
service. The Company provides on site technical service to most of its
buildings. Due to this the Company feels it can offer a superior level of
service to its customers. Also, since the Company provides all aspects of
telecommunication services, takes responsibility for the complete satisfaction
of its customer which differs from multi-vendor environments where
responsibility is fragmented.
The Company prices its products in a competitive environment. Due to this
the Company has to remain flexible with its pricing. The Company's main
competitive advantages are the Company's ability to negotiate a lower per
minute rate with long-distance vendors due to volume discounts and the
elimination of up-front capital expenditures for customers due to equipment
rentals from the Company.
When the Company obtains the exclusive STS rights for a building, it then
must compete with local telephone companies, long distance telephone service
suppliers and equipment/system suppliers in the solicitation of tenants in the
building to subscribe to its services. Local telephone companies are regulated
and, in the case of the Bell operating companies and the general telephone
operating companies, cannot sell long-distance telephone service. Local
telephone companies can sell lines or trunks from their local central office
and centrex service directly to the tenant. Local telephone company services
are subject to tariff regulation and such entities do not typically offer
office automation products. Long-distance telephone service suppliers (such as
AT&T, MCI and Sprint) typically offer volume discount plans and market to
tenants directly, but do not generally provide local telephone service. In
addition, these suppliers typically do not sell telecommunications or office
automation equipment directly to tenants.
The Company must also compete with equipment/system suppliers and
distributors who sell PBXs and other office automation equipment and who
provide or arrange for installation, maintenance and service of such equipment.
Major companies such as AT&T, Northern Telecom, NEC and Siemens compete in
this area.
-9-<PAGE>
(x) Employees
-----------
As of March 15, 1994, the Company employed 187 persons; 16 in management,
50 in administration, 110 in sales and service and 11 in technical positions.
The Company's employees are not represented by a union. The Company regards
its relations with its employees to be good.
Item 2.
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Property
- --------
The Company does not own any real estate and has no present plans to
purchase any real estate. The Company's principal executive offices are leased
and are located at 100 Great Meadow Road, Suite 104, Wethersfield, Connecticut
06109.
The Company leases space for its on-site staff and its PBX equipment in
many of the buildings in which it operates an STS project. (See Note 12 of
Notes to Consolidated Financial Statements herein for information concerning
the Company's leases at December 31, 1993.) These leases are for offices
located in the following buildings:
-10-<PAGE>
Atlanta Mahwah, NJ
Atlanta Financial Center Crossroads Corporate Center
Atlanta Plaza
Buckhead Plaza Memphis
Crown Pointe Morgan Keegan Tower
The Terraces
Nashville
Birmingham Third National Financial Center
Riverchase Galleria Dominion Tower
Highland Ridge
Boston New Orleans
One International Place Lakeway Center
World Trade Center Boston Metairie Galleria
Rowes Wharf Place St. Charles
Marketplace Center
75 State Street
Chicago
Chemical Plaza Phoenix
North Pier Biltmore Financial Center
Oakbrook Terraces Camelback Esplanade
One Financial Place 24th & Highland
Sherman Place 2600 N. Central Avenue
LaSalle Atrium Paradise Village Office Park
Gateway Chicago
Hartford Seattle
CityPlace Columbia Seafirst Center
100 Pearl Street Koll Center Bellevue
Putnam Park Koll Market Place Tower
Two Union Square
Los Angeles 1000 Second Avenue
Citicorp Center Skyline Tower
Stamford
Metro Center
Item 3.
- -------
Legal Proceedings
- ------------------
In 1993, the Company settled a lawsuit with The New York State Convention
Center Operating Corp. ("CCOC"), which arose in connection with the Company's
operations at the Jacob K. Javits Convention Center in New York City, which
operations were terminated in December, 1991. However, as part of the
termination of such operations, the Company's departure from the Convention
Center resulted in the termination of its agreement with Tel-A-Booth
Communications, Ltd. ("Tel-A-Booth"), the payphone service provider for the
building.
Tel-A-Booth is currently in a Chapter 7 bankruptcy proceeding, pursuant to
which the Company is listed as a creditor of Tel-A-Booth in the amount of
-11-<PAGE>
$300,000.
The Company is named as a co-defendant in a lawsuit brought by Tel-A-Booth
arising out of the termination of its agreement with the Company. The lawsuit,
which was commenced in New York State Supreme Court, County of New York, on
January 10, 1992 is now proceeding toward trial. Tel-A-Booth has claimed
damages of $10,000,000, primarily for lost profits. The Company has asserted
various counterclaims against the plaintiff. Although the discovery phase of
this case is incomplete, the Company views that it has substantial defenses to
the plaintiff's claims.
The Company is also party to other litigation and unasserted claims.
However, management does not believe the outcome of these matters will have a
material impact on the Company's results of operations or financial position.
Item 4.
- --------
Submission of Matters to a Vote of Security Holders
- ----------------------------------------------------
None.
-12-<PAGE>
PART II
Item 5.
- --------
Market for Registrant's Common Stock and Related Stockholder Matters
- ---------------------------------------------------------------------
The Company's shares of Common Stock (trading symbol: STCH) have been
quoted and traded in the over-the-counter market since December 13, 1988.
However, on February 7, 1992, the Company's stock was delisted from the Nasdaq
trading system due to the Company's failure to meet certain Nasdaq capital and
surplus requirements. The stock was relisted for trading in the Nasdaq Small-
Cap market on October 6, 1992, following the Company's restructuring. During
the period in which the Company's Common Stock was not listed on the Nasdaq
trading system, it was quoted on the NASD's OTC Bulletin Board Service, during
which period trading activity was negligible. In September, 1992 the Company
effected a one-for-four reverse stock split of its Common Stock and increased
the par value of the Common Stock from $.001 to $.004 per share. All per share
amounts contained herein have been retroactively adjusted to reflect this
split. Over-the-counter market quotations reflect interdealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
Bid Ask
-------------------- ---------------
1993 High Low High Low
- ---------------- --------- ------- ------- --------
<S> <C> <C> <C> <C>
First Quarter $7 $4 $7 1/4 $4 5/8
Second Quarter 4 7/8 3 1/2 5 1/4 4
Third Quarter 5 3/4 2 1/2 6 3
Fourth Quarter 5 5/8 3 1/8 6 3 1/2
</TABLE>
<TABLE>
<CAPTION>
Bid Ask
------------------- ---------------
1992 High Low High Low
- ------------------- --------- ------- -------- -------
<S> <C> <C> <C> <C>
First Quarter $4 1/4 $ 1 $4 1/2 $4
Second Quarter 2 2 4 4
Third Quarter 2 2 4 4
Fourth Quarter 6 7/8 4 7 1/4 4 3/4
</TABLE>
Number of beneficial holders of the Company's Common Stock as of December 31,
1993 is 1,260.
-13-<PAGE>
Item 6.
- ----------
Selected Financial Data
- -------------------------
The following table sets forth the selected financial data of the Company for
each of the last five years. Financial statements for 1990 and 1989 are not
presented in this filing. Such selected financial data were derived from
audited consolidated financial statements not included herein. The selected
financial data of the Company should be read in conjunction with the
Consolidated Financial Statements and related notes appearing elsewhere in this
Form 10-K. In September 1992 the Company effected a one-for-four reverse stock
split of common stock and increased the par value of common stock from $.001 to
$.004 per share. Weighted average common shares outstanding and per share
information have been retroactively adjusted to reflect this split. All
amounts, except per share amounts, are in thousands.
<TABLE>
<CAPTION>
Statement of Operations Data: 1993 1992 1991 1990 1989
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $25,426 $24,077 $23,172 $21,804 $16,990
Gross margin 10,912 9,254 6,358 5,786 4,150
Selling, general and
administrative expenses 10,102 9,959 10,717 10,246 8,656
Operating income (loss) 810 (705) (4,359) (4,460) (4,506)
Interest expense, net (438) (290) (1,268) (950) (884)
Minority interest in net(inc)
losses of subsidiaries (82) (37) 4 29 20
Loss on settlement agreement - - - (489) -
Extraordinary Item -
(Loss) gain on restructuring (150) 3,756 - - -
Net income (loss) 140 2,724 (5,623) (5,869) (5,370)
Net income (loss) per
common share (.04) .59 (1.59) (1.63) (1.83)
Weighted average common
shares outstanding 5,132 4,063 3,730 3,601 2,935
Cash dividends declared
per preferred share .32 .30 .30 - -
Cash dividends paid
per preferred share .32 .38 .18 - -
Cash dividends declared or
paid per common share - - - - -
Balance Sheet Data:
Working capital deficit ($ 3,874) ($ 4,506) ($15,615) ($ 5,751) ($10,340)
Total assets 20,601 18,752 18,436 14,531 16,429
Notes payable, convertible
promissory notes payable,
other long-term debt (incl.
current portion) and
redeemable preferred stock 3,719 4,745 10,030 6,927 9,950
Stockholders' equity (deficit) 9,302 6,034 (3,148) (999) (2,398)
</TABLE>
-14-<PAGE>
Item 7.
- --------
Management's Discussion and Analysis of Results of Operations and Financial
- -----------------------------------------------------------------------------
Condition
- -----------
The Company's revenue of $25,426,000 for the year ended December 31, 1993
represented an increase of $1,349,000 or 5.6%, over the year ended December 31,
1992. Of this increase $851,000 was due to an increase in shared tenant
service (STS) revenue. The remaining increase of $498,000 is attributable to
the fourth quarter acquisitions of Road and Show East and Road and Show South
(see Note 5 of Notes to Consolidated Financial Statements), nationwide rental
phone businesses.
Revenue of $24,077,000 for the year ended December 31, 1992 represented an
increase of $905,000, or 3.9%, over the year ended December 31, 1991. This
increase occurred despite the fact that the Company ceased operations at the
Javits Convention Center in New York in 1991, therefore generating no revenue
from such operations in the year ended December 31, 1992, compared to
$2,413,000 of revenue from the Javits Convention Center in the year ended
December 31, 1991. Partially offsetting this decrease was the effect of the
Boston Telecommunications Company ("BTC") acquisition in May 1991, which
accounted for $3,081,000 of revenue in the year ended December 31, 1992,
compared to $1,795,000 of revenue in the year ended December 31, 1991. The
remaining net revenue increase was due to increased utilization of the
Company's services of $2,032,000 and a small increase in enhanced office
services revenue.
While the Company's revenue increased, cost of revenue decreased $308,000
for the year ended December 31, 1993 compared to the year ended December 31,
1992. Cost of revenue as a percentage of revenue decreased from 61.6% in the
year ended December 31, 1992 to 57.1% for the year ended December 31, 1993.
This improvement was due almost entirely to the improved margin on long
distance and local access services as a result of increased volume which has
enabled the Company to negotiate better rates with its vendors.
Cost of revenue decreased $1,992,000 for the year ended December 31, 1992
compared to the year ended December 31, 1991. Cost of revenue as a percentage
of revenue decreased from 72.6% to 61.6% during this period. The benefit of
having no Javits Convention Center cost of revenue in the year ended December
31, 1992 was partially offset by the effect of a full year of BTC cost of
revenue in the year ended December 31, 1991 and accounted for a net decrease in
cost of revenue of $1,261,000. The remaining net decrease of $731,000 was
attributable to the effect of the Company's change in 1992 in the depreciable
life on telecommunications equipment from five years to eight years ($933,000;
see Note 3 of Notes to Consolidated Financial Statements) and improved margins
on its hardware and long-distance services due to new agreements with suppliers
partially offset by the cost of revenue associated with the increased
utilization of the Company's services.
Selling, general and administrative expenses increased $143,000 for the
year ended December 31, 1993 compared to the year ended December 31, 1992.
This increased primarily resulted from the addition of 10 new STS buildings and
the acquisition of Road and Show South and Road and Show East (see Note 5 of
Notes to Consolidated Financial Statements) which added approximately $200,000
-15-<PAGE>
of selling general and administrative expenses. In addition, during 1993, the
Company incurred business development expenses of approximately $305,000
relating to these acquisitions. The increase was offset by a $258,000 decrease
in consulting expenses associated with the settlement of certain obligations of
the Company (see Note 4 of Notes to Consolidated Financial Statements),
reductions of approximately $525,000 in certain accrual accounts including
settlement of the Javits litigation for less than previously provided (see Note
12 of Notes to Consolidated Financial Statements) and the capitalization of
startup costs of approximately $176,000 associated with certain new operations.
The Company believes it will achieve overhead savings in the rental business
as it becomes more efficient in its operation of this rapidly expanding
business.
Selling, general and administrative expenses decreased $758,000, or 7.1%,
for the year ended December 31, 1992 as compared to the year ended December 31,
1991. Additionally, selling, general and administrative expenses as a
percentage of revenue decreased from 46.3% to 41.4% from 1991 to 1992. These
reductions were achieved as a direct result of the Company's restructuring
efforts and its focus on controlling its overhead expenses and due to the
Company no longer providing services at the Javits Convention Center.
Interest expense, net of interest income, increased $148,000 in the year
ended December 31, 1993 compared to the year ended December 31, 1992 due to
approximately $292,000 accrued related to estimated interest and penalty
payments to taxing authorities that may arise from late payments.
Interest expense, net of interest income, decreased $978,000 in the year
ended December 31, 1992 compared to the year ended December 31, 1991, due to
the settlement of the Company's term and revolving credit obligations and
reductions in other interest bearing obligations associated with the Company's
restructuring (see Notes 4 and 7 of Notes to Consolidated Financial
Statements).
Income (loss) before extraordinary item improved from a loss of $1,032,000
in 1992 to income of $290,000 in 1993. This significant turnaround was due to
all the factors mentioned previously but principally to the improved margins on
the Company's services and its expanding user base.
Due to the factors discussed above, the loss prior to the extraordinary
item (see below) decreased $4,591,000 in the year ended December 31, 1992
compared to the year ended December 31, 1991. This significant improvement was
principally due to an increased utilization of the Company's services, improved
margins on the Company's services and the change in the depreciable life for
telecommunications equipment.
In 1992 the Company settled certain obligations to its lenders and other
creditors (see Note 4 of Notes to Consolidated Financial Statements). This
resulted in an extraordinary gain for the year ended December 31, 1992 of
$5,162,000 before restructuring expenses of $1,361,000 and income taxes of
$45,000 and an adjustment to the restructuring gain which resulted in an
extraordinary loss for the year ended December 31, 1993 of $150,000.
Liquidity and Capital Resources
- --------------------------------
The Company's working capital deficit at December 31, 1993 was $3,874,000
-16-<PAGE>
compared to $4,506,000 at December 31, 1992. Stockholders' equity at December
31, 1993 was $9,302,000, compared to $6,034,000 at December 31, 1992.
Net cash provided by (used in) operating activities during the three years
ended December 31, 1993 has continued to improve. Cash provided by operations
in 1993 was $2,207,000 and $571,000 in 1992 compared to cash used of $457,000
in 1991. This improvement is principally due to the improved operating
performance of the Company. Income before the restructuring item was $290,000
for 1993 compared to net losses of $1,032,000 and $5,623,000 in 1992 and 1991,
respectively. The changes in the assets and liabilities of the Company are
reflective of its cash situation in each period.
Net cash used in investing activities decreased from $2,400,000 in 1991 to
$2,300,000 in 1993 due to the Company's ongoing efforts to reduce capital
expenditures offset by the timing of certain other investing activities.
Net cash provided by (used in) financing activities reflects the Company's
bank borrowings in 1991 of $750,000. Additionally, during 1993, 1992 and 1991
the Company collected approximately $1.8 million, $5.7 million and $3.9
million, respectively from sales of common and preferred stock some of which
was used to repay its obligations.
During 1993, the Company produced income before extraordinary items for
the first time in its history. The Company expects to continue to operate
profitability in 1994. However, the Company has a working capital deficit
which will be difficult to fund solely by the Company's 1994 results.
Accordingly, the Company is continuing its efforts to complete the sale of
Series D Preferred Stock (see Note 8 of Notes to Consolidated Financial
Statements) and has obtained a commitment, subject to certain conditions, for a
$5 million facility from a bank (see Note 14 of Notes to Consolidated Financial
Statements). While there are no assurances that these transactions will be
completed, the Company believes that they will be consummated.
The Company believes further that its recent Road and Show acquisitions
(see Note 5 to Notes to Consolidated Financial Statements), will operate on a
cash flow positive basis in 1994.
Subsequent to year-end the Company signed an agreement to acquire Dallas-
based Access Telecommunication Group, L.P. The $5,000,000 cash required at
closing for this acquisition is anticipated to be provided from the bank
facility previously mentioned and a $4,000,000 equity infusion for which the
Company has received a commitment. Completion of this acquisition would
provide additional shared tenant service and long-distance revenue which would
add to the Company's profitable base of business.
At December 31, 1993 the Company did not have any material commitments for
capital expenditures. The Company does not offer any post-employment benefits.
Accordingly, the adoption of Statement of Financial Accounting Standard No.
112 will not impact the Company.
-17-<PAGE>
Item 8.
- ----------
Financial Statements and Supplementary Data
Attached.
Item 9.
- ---------
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
On January 25, 1995 the Company filed a Form 8-K announcing a change in
independent public accountants to Rothstein, Kass & Company, P.C. from Arthur
Andersen LLP for the year end December 31, 1994.
-18-<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
- - - - - - - - - - - - - - - - - - - - - - -
Page
INDEPENDENT AUDITORS' REPORT: Rothstein, Kass & Company, P.C. F-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS: Arthur Andersen LLP F-3
FINANCIAL STATEMENTS -
Consolidated Balance Sheets as of December 31, 1993 and 1992 F-4
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991 F-5
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1993, 1992 and 1991 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 F-7
Notes to Consolidated Financial Statements F-8
FINANCIAL STATEMENT SCHEDULES -
Schedule II Amounts Receivable from Related Parties,
Underwriters, Promoters and Employees Other
than Related Parties as of December 31, 1993,
1992 and 1991 F-23
Schedule V Property, Plant and Equipment as of December 31,
1993, 1992 and 1991 F-24
Schedule VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and
Equipment as of December 31, 1993, 1992 and 1991 F-25
Schedule VIII Valuation and Qualifying Accounts for the years
ended December 31, 1993, 1992 and 1991 F-26
Schedule X Supplementary Income Statement Information
for the years ended December 31, 1993, 1992
and 1991 F-27
Notes:
(a) All other schedules are not submitted because they are not applicable, not
required or because the required information is included in the consolidated
financial statements or notes thereto.
(b) Individual financial statements of the Company have been omitted since (1)
consolidated statements of the Company and its subsidiaries are filed, and
(2) the Company is primarily an operating company and all subsidiaries
included in the consolidated financial statements filed are majority-owned
and do not have a material amount of debt to outside persons.
F-1<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Shared Technologies Inc.
We have audited the accompanying consolidated balance sheet of Shared
Technologies Inc. and Subsidiaries as of December 31, 1993 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements and the schedules
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedules 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Shared Technologies
Inc. and Subsidiaries as of December 31, 1993, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principals.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index on page F-1 are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states, in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Roseland, New Jersey
April 10, 1995
F-2<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - - - - - - - - - - - - - - - - - - - -
To Shared Technologies Inc.:
We have audited the accompanying consolidated balance sheet of Shared
Technologies Inc. (a Delaware corporation) and subsidiaries as of December 31,
1992, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 1992 and 1991. These
financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these 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 audits provide 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 Shared Technologies Inc. and
subsidiaries as of December 31, 1992, and the results of their operations and
their cash flows for the years ended December 31, 1992 and 1991 in conformity
with generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, the Company
and others have been named in a lawsuit seeking damages of approximately $10
million including $1.4 million for equipment purchased for which no provision
has been made in the accompanying consolidated financial statements. The
Company has filed answers to this complaint denying the material allegations of
the claim. Although the claim is being contested by the Company, the outcome
of this matter is uncertain at this time.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index on
page F-1 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
The information in the schedules for the years ended December 31, 1992 and
1991 has been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
Arthur Andersen LLP
Hartford, Connecticut
March 23, 1993 (except with respect to the matter
discussed in the second paragraph of Note 12 as to
which the date is April 14, 1994)
F-3<PAGE>
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
<S> <C> <C>
ASSETS 1993 1992
CURRENT ASSETS:
Cash $ 408,533 $ 1,295,980
Accounts receivable, less
allowance
for doubtful accounts and
discounts
of $310,000 and $297,000 at
December 31, 1993 and 1992,
respectively 4,614,188 3,854,799
Inventory and supplies - 300,801
Other 545,071 375,934
----------- -----------
Total current assets 5,567,792 5,827,514
----------- -----------
EQUIPMENT, at cost:
Telecommunications equipment 21,298,405 20,347,498
Office and data processing
equipment 4,358,275 3,386,082
----------- -----------
25,656,680 23,733,580
Less - Accumulated depreciation
and amortization 13,545,303 11,785,101
----------- -----------
12,111,377 11,948,479
----------- -----------
OTHER ASSETS:
Intangible assets 2,347,958 328,887
Other 573,535 647,198
----------- -----------
2,921,493 976,085
----------- -----------
$20,600,662 $18,752,078
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4<PAGE>
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,941,876 $ 2,462,915
and capital lease obligations
Accounts payable 4,482,239 3,518,289
Accrued expenses 2,068,771 3,494,742
Advance billings 948,938 857,407
------------ ------------
Total current liabilities 9,441,824 10,333,353
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion 1,777,431 2,281,751
----------- ------------
MINORITY INTERESTS IN NET ASSETS OF
SUBSIDIARIES 78,971 102,621
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes
1, 5, 11, 12 and 14)
STOCKHOLDERS' EQUITY:
Preferred stock; Series C, $.01
par value, 1,500,000 and 5,000,000
shares authorized in 1993 and
1992; 987,930 and 1,106,730 shares
outstanding in 1993 and 1992 9,879 11,067
Preferred stock; Series D, $.01
par value, 1,000,000 and no shares
authorized in 1993 and 1992;
453,158
and no shares, outstanding in 1993
and 1992 4,532 -
Common stock, $.004 par value,
10,000,000 shares authorized;
5,190,335 and 5,092,197 shares
outstanding in 1993 and 1992 20,761 20,369
Additional paid-in capital 31,759,048 30,046,725
Accumulated deficit (24,248,284) (24,043,808)
Obligations to issue common stock 1,756,500 -
------------ ------------
Total stockholders' equity 9,302,436 6,034,353
------------ ------------
$20,600,662 $18,752,078
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-4A<PAGE>
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
<S> <C> <C> <C>
Revenue:
Telecommunication services 22,788,212 21,430,224 20,744,815
Enhanced office services 2,474,353 2,552,885 2,348,750
Other 163,241 93,855 78,293
----------- ----------- -----------
Total Revenue 25,425,806 24,076,964 23,171,858
----------- ----------- -----------
Cost of Revenue:
Telecommunication services 13,152,386 13,002,376 15,078,259
Enhanced office services 1,329,090 1,717,256 1,675,651
Other 32,567 102,588 60,028
----------- ----------- -----------
Total Cost of Revenue 14,514,043 14,822,220 16,813,938
----------- ----------- -----------
Gross Margin 10,911,763 9,254,744 6,357,920
Selling, General and Administrative
Expenses 10,101,985 9,959,366 10,717,143
----------- ----------- -----------
Operating Income (Loss) 809,778 (704,622) (4,359,223)
Interest Expense (529,565) (410,830) (1,427,154)
Interest Income 91,889 120,815 159,589
Minority Interests in Net (Income)
Losses of Subsidiaries (81,928) (37,391) 4,130
----------- ----------- -----------
Income (Loss) Before
Extraordinary Item 290,174 (1,032,028) (5,622,658)
Extraordinary Item:
(Loss) gain on restructuring (in
1992
net of restructuring expenses of
$1,361,000 and income taxes of
$45,000 and after the
extraordinary benefit of utilizing
net operating loss carryforwards
of $3,000,000) (Note 4) (150,000) 3,756,327 -
----------- ----------- -----------
Net Income (Loss) 140,174 2,724,299 (5,622,658)
Preferred Stock Dividends (344,650) (334,478) (300,825)
----------- ----------- -----------
Net Income (Loss) Applicable to
Common Stock (204,476) 2,389,821 (5,923,483)
=========== =========== ===========
Income (Loss) Per Common Share:
Income (Loss) Before Extra-
ordinary Item
(0.01) (0.33) (1.59)
Extraordinary Item (0.03) 0.92 -
----------- ----------- -----------
Net Income (Loss) (0.04) 0.59 (1.59)
=========== =========== ============
Weighted Average Common Shares
Outstanding 5,132,296 4,062,710 3,730,334
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5<PAGE>
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Series B Series C Series D
Preferred Preferred Preferred
Stock Stock Stock
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, - $ - - $ - - $ -
1991
Dividends on - - - - - -
preferred stock
Proceeds from sales
of preferred
stock 914,750 9,147 - - - -
Exercise of common - - - - - -
stock options
Issuance of common - - - - - -
stock warrants
Net loss - - - - - -
-------- ------ --------- ------- ------- ------
Balance, December 914,750 9,147 - - - -
31, 1991
Dividends on - - - - - -
preferred stock
Conversion of
Series A Preferred
Stock to Series C - - 110,000 1,100 - -
Preferred Stock
Conversion of
Series B Preferred
Stock to Series C (914,750) (9,147) 914,750 9,147 - -
Preferred Stock
Conversion of
preferred stock
dividends
payable to Series - - 81,980 820 - -
C Preferred Stock
Proceeds from sale
of common stock,
including
subscriptions of
$162,980
collected
subsequent to
December 31,
1992 and net of - - - - - -
expenses of
$470,000
Common stock issued
in lieu of
compensation and - - - - - -
other
Exercise of common - - - - - -
stock options
Exercise of common - - - - - -
stock warrants
Net income - - - - - -
-------- ------ --------- ------- ------- ------
Balance, December - - 1,106,730 11,067 - -
31, 1992
Dividends on - - - - - -
preferred stock
Proceeds from sale
of Series D
Preferred Stock, - - - - 453,158 4,532
net of expenses of
$411,549
Redemption of - - (118,800) (1,188) - -
Series C Preferred
Stock
Common stock to be
issued for
acquisitions - - - - - -
Common stock issued
in lieu of
compensation - - - - - -
Common stock issued
in lieu of
deferred - - - - - -
financing fees
Exercise of common - - - - - -
stock options
Net income - - - - - -
-------- ------ --------- ------- ------- ------
Balance, December - $ - 987,930 $ 9,879 453,158 $4,532
31, 1993
======== ====== ========= ======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-6<PAGE>
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Common Stock Additional Paid Accumulated
Shares Amount In Capital Deficit
<S> <C> <C> <C> <C>
Balance, January 3,704,107 $14,816 $19,496,224 $(20,510,146)
1, 1991
Dividends on - - - (300,825)
preferred stock
Proceeds from
sales of
preferred
stock - - 3,365,853 -
Exercise of common 36,625 147 99,108 -
stock options
Issuance of common - - 300,000 -
stock warrants
Net loss - - - (5,622,658)
--------- ------- ----------- ------------
Balance, December 3,740,732 14,963 23,261,185 (26,433,629)
31, 1991
Dividends on - - - (334,478)
preferred stock
Conversion of
Series A
Preferred
Stock to Series - - 438,900 -
C Preferred
Stock
Conversion of
Series B
Preferred
Stock to Series - - - -
C Preferred
Stock
Conversion of
preferred stock
dividends
payable to - - 327,100 -
Series C
Preferred Stock
Proceeds from sale
of common stock,
including
subscriptions of
$162,980
collected
subsequent to
December 31,
1992 and net of 1,250,000 5,000 5,775,000 -
expenses of
$470,000
Common stock
issued in lieu
of
compensation and 31,985 128 127,558 -
other
Exercise of common 53,938 216 110,827 -
stock options
Exercise of common 15,542 62 6,155 -
stock warrants
Net income - - - 2,724,299
--------- ------- ----------- ------------
Balance, December 5,092,197 20,369 30,046,725 (24,043,808)
31, 1992
Dividends on - - - (344,650)
preferred stock
Proceeds from sale
of Series D
Preferred Stock,
net of expenses
of
$411,549 - - 1,736,601 -
Redemption of - - (384,912) -
Series C
Preferred Stock
Common stock to be
issued for
acquisitions - - - -
Common stock
issued in lieu
of
compensation 49,345 197 228,229 -
Common stock
issued in lieu
of
deferred 13,793 55 49,945 -
financing fees
Exercise of common 35,000 140 82,460 -
stock options
Net income - - - 140,174
--------- ------- ----------- ------------
Balance, December 5,190,335 $20,761 $31,759,048 $(24,248,284)
31, 1993
========= ======= =========== ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-6a<PAGE>
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Obligations to Total Shareholder's
Issue
Common Stock Equity
<S> <C> <C>
Balance, January 1,
1991
Dividends on $ - $ (999,106)
preferred stock
Proceeds from sales
of preferred stock
Exercise of common - (300,825)
stock options
Issuance of common - 3,375,000
stock warrants
Net loss - 99,255
- 300,000
Balance, December 31, - (5,622,658)
1991
---------- -----------
Dividends on - (3,148,334)
preferred stock
Conversion of Series
A Preferred
Stock to Series C - (334,478)
Preferred Stock
Conversion of Series
B Preferred
Stock to Series C - 440,000
Preferred Stock
Conversion of
preferred stock
dividends
payable to Series C - -
Preferred Stock
Proceeds from sale of
common stock,
including - 327,920
subscriptions of
$162,980
collected
subsequent to
December 31,
1992 and net of
expenses of
$470,000
Common stock issued - 5,780,000
in lieu of
compensation and
other
Exercise of common - 127,686
stock options
Exercise of common - 111,043
stock warrants
Net income - 6,217
- 2,724,299
Balance, December 31, ---------- -----------
1992
- 6,034,353
Dividends on
preferred stock
Proceeds from sale of - (344,650)
Series D
Preferred Stock,
net of expenses of
$411,549
Redemption of Series - 1,741,133
C Preferred Stock
Common stock to be - (386,100)
issued for
acquisitions
Common stock issued 1,756,500 1,756,500
in lieu of
compensation
Common stock issued - 228,426
in lieu of
deferred financing
fees
Exercise of common - 50,000
stock options
Net income - 82,600
- 140,174
Balance, December 31, ---------- -----------
1993
$1,756,500 $ 9,302,436
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-6b<PAGE>
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) 140,174 2,724,299 (5,622,658)
Adjustments to reconcile net
income
(loss) to net
cash provided by (used in)
operating activities:
Loss (gain) on restructuring 150,000 (5,162,576) -
Depreciation and amortization 2,562,024 2,447,925 3,423,438
Stock options and common stock
shares issued in lieu of
compensation and other 278,426 127,686 -
Provision for doubtful accounts 253,000
Minority interests 81,928 37,391 (4,130)
Change in assets and liabilities:
Accounts receivable (990,468) (468,931) (308,834)
Inventory and supplies - (52,093) 58,469
Other current assets 131,664 175,108 365,688
Other Assets (243,689)
Accounts payable 963,950 1,504,715 (19,934)
Accrued expenses (1,211,878) (783,854) 1,828,144
Advance billings 91,531 21,826 (177,517)
----------- ----------- -----------
Net cash provided by (used in)
operating activities 2,206,662 571,496 (457,334)
----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of equipment, net (2,034,760) (2,014,182) (2,430,387)
Advances to Company's president - - (103,988)
Repayments from Company's president - - 489,531
Acquisition of Road and Show
South and East (255,356) - -
Acquisition of Boston
Telecommunications Group, Inc. - - (197,290)
Long-term deposits (1,557) (296,994) -
Purchase of restricted investments - - (602,667)
Proceeds from restricted invstmnts - 852,698 492,540
Other investments - (95,548) (32,374)
----------- ----------- -----------
Net cash used in investing
activities (2,291,673) (1,554,026) (2,384,635)
----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under notes payable and
long-term debt - - 750,000
Repayments of notes payable,
long-term debt and capital
lease obligations (1,895,419) (3,962,571) (1,355,300)
Proceeds from sales of common and
preferred stock 1,823,733 5,734,280 3,914,255
Redemption of preferred stock (386,100) - -
Collections of stock subscriptions
receivable - - 13,358
Preferred stock dividends (344,650) (88,538) (177,855)
----------- ----------- -----------
Net cash (used in) provided by
financing activities (802,436) 1,683,171 3,144,458
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH (887,447) 700,641 302,489
CASH, BEGINNING OF YEAR 1,295,980 595,339 292,850
----------- ----------- -----------
CASH, END OF YEAR 408,533 1,295,980 595,339
=========== =========== ===========
Supplemental Disclosures:
Cash paid during the year for -
Interest 386,134 401,208 1,057,903
Income taxes - - -
Non-cash transactions -
Conversion of accrued expenses
to note payable in connection
with litigation settlement 460,478 - -
Obligations to issue common
stock in connection
with acquisitions 1,756,500 - -
Conversion of accounts payable
to long-term debt - 3,288,236 -
</TABLE>
F-7<PAGE>
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 1993, 1992 AND 1991
<S> <C> <C> <C>
1993 1992 1991
Conversion of preferred stock dividends
payable to Series C Preferred Stock - 327,920 -
Issuance of common stock purchase warrants
and promissory note payable in
connection with
BTC acquisition - - 900,000
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-7a<PAGE>
SHARED TECHNOLOGIES INC. AND SUBSIDIARIES
- - - - - - - - - - - - - - - - - - - - -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - - - - - - - - - - - - - - - - - - - - -
DECEMBER 31, 1993, 1992 AND 1991
- - - - - - - - - - - - - - - - -
1. Financial Condition and Operating Environment:
Shared Technologies Inc. and subsidiaries (the Company) had a
working capital deficit of approximately $3.9 million as of
December 31, 1993. In May 1994, the Company entered into a credit
agreement with a bank for financing (see Note 14) and completed a
sale for approximately $5 million of common stock to provide the
funding necessary to complete the acquisition described in Note 14.
2. Business and Organization:
The Company is in the shared tenant services (STS) industry,
providing telecommunications and office automation services and
equipment to tenants of office buildings.
The accompanying consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries and
partnership investments: Multi-Tenant Services, Inc. (100%), Event
Cellular, Inc. (100%), Shared Technologies Cellular, Inc. (and its
65% owned subsidiary, SafeCall, Inc.) (100%), Financial Place
Communications Company (99%), LaSalle Communications Company (50%)
and North Pier Communications Company (50%). Effective December
31, 1993, the Company purchased the remaining 50% interest in
LaSalle Communications Company for $26,100. The Company
consolidates its 50% interest in North Pier Communications Company
since it controls the management of the Company. All significant
intercompany accounts and transactions have been eliminated in the
accompanying consolidated financial statements.
3. Summary of Significant Accounting Policies:
Revenue recognition -
Revenues are recognized as services are performed. The Company
bills customers monthly in advance for equipment rentals and local
telephone service but defers recognition of these revenues until
the service is provided. Enhanced office services revenue, which
consists primarily of product and equipment sales, is recognized at
the time of shipment.
F-8<PAGE>
Cash -
As of December 31, 1993, the use of $50,000 of cash is restricted.
Inventory and supplies -
Inventory and supplies consists primarily of computer and
telecommunications parts expected to be used by the Company or sold
to customers.
Equipment -
Major renewals and betterments are capitalized. The costs of
maintenance and repairs which do not materially prolong the useful
life of the assets are charged to expense as incurred.
Depreciation and amortization is provided using the straight-line
method over the following estimated useful lives:
Telecommunications equipment 8 years
Office and data processing equipment 3-5 years
Leasehold improvements 8 years
Effective January 1, 1991, the Company changed the depreciable life
for new telecommunications equipment from five to eight years.
Additionally, effective January 1, 1992, the Company prospectively
changed the depreciable life of telecommunications equipment
purchased prior to January 1, 1991 from five to eight years. The
1992 change in estimate resulted in approximately $933,000, or $.23
per common share, less depreciation expense being recorded for the
year ended December 31, 1992 than would have been recorded using
the previous estimated depreciable life of five years. Excluding
the impact of the change, the loss before extraordinary item per
common share for 1992 would be $.56.
Telecommunications and data processing equipment includes assets
acquired under capital leases with a net book value of
approximately $514,000 and $579,000 as of December 31, 1993 and
1992, respectively.
Intangible assets -
Goodwill
Goodwill represents the excess of the purchase prices over the fair
values of net assets acquired in connection with business
acquisitions. The Company monitors the profitability of the
acquired operations to assess whether any impairment of recorded
goodwill has occurred. Goodwill for acquisitions prior to 1993 is
amortized over a 5 year period commencing with the related
acquisition date. Goodwill for the 1993 acquisitions is amortized
over a 20 year period commencing with the related acquisition date.
Goodwill, net of accumulated amortization, of approximately
$2,056,000 and $274,000 is included in other assets as of December
31, 1993 and 1992, respectively.
Startup costs
As of December 31, 1993 and 1992, $176,000 and $0, respectively, of
costs related to the startup of operations in certain new locations
have been deferred (see Note 15). Such costs will be amortized
over one to two year periods starting with the commencement of the
related operations.
F-9<PAGE>
Software development costs
As of December 31, 1993 and 1992, $68,000 and $0, respectively, of
software development costs have been capitalized. Software
development costs are amortized over a 5 year period starting with
the implementation of the related software.
Other deferred costs
As of December 31, 1993, financing fees of $50,000 related to the
Company's proposed credit agreement with a bank (see Note 14) have
been deferred. Such amounts will be amortized over the term of the
loan or expensed if the transaction is not consummated. As of
December 31, 1993 and 1992, approximately $42,000 and $54,000,
respectively, of organization costs, net of accumulated
amortization, have been deferred. Such costs are being amortized
over a 5 year period.
Income taxes -
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," which had no effect. This statement requires a
company to recognize deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in a Company's financial statements or income tax
returns. Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial
statement carrying amounts and the tax bases of assets and
liabilities and net operating loss carryforwards available for tax
reporting purposes, using the applicable tax rates for the years in
which the differences are expected to reverse. A valuation
allowance is recorded on deferred tax assets unless realization is
more likely than not. Prior to adopting SFAS No. 109, the Company
accounted for income taxes using the deferral method as required by
Accounting Principles Board Opinion No. 11.
Income (loss) per common share -
Income (loss) per common share information was computed using the
weighted average number of shares outstanding and the effect of
options, warrants and obligations to issue common stock, if
dilutive, during each year. Applicable per share information for
1991 has been restated for the effect of the one-for-four reverse
stock split in 1992 (see Note 8).
Fully diluted income (loss) per common share is computed by
dividing net income available for common stock by the weighted
average number of common and common equivalent shares and the
effect of preferred stock conversions, if dilutive. Fully diluted
income (loss) per common share is substantially the same as income
(loss) per common share for the years ended December 31, 1993, 1992
and 1991.
F-10<PAGE>
4. Restructuring:
During 1992, the Company completed a restructuring which resulted
in the Company recording a gain of $5,162,000 before related
expenses of $1,361,000 and income taxes of $45,000 (see Note 11).
As a result of the restructuring, approximately $900,000 of vendor
payables and $1,500,000 of capital lease obligations were forgiven
and $3,300,000 of vendor payables were converted to three year non-
interest bearing notes payable (see Note 7). Additionally, a
settlement agreement was entered into with the Federal Deposit
Insurance Corporation (FDIC), as receiver for the Company's
principal lender, which resulted in the Company settling its term
loan and revolving credit arrangements and recognizing a gain of
approximately $2,700,000 (see Note 7). As of December 31, 1993,
the Company was still negotiating the settlement of a $600,000
promissory note (see Note 7). Subsequent to such date the Company
entered into a settlement agreement which provides for the payment
of $750,000 plus interest at 10%. Accordingly, for the year ended
December 31, 1993, the Company recorded, as an extraordinary item,
an expense of $150,000 in connection with the completion of the
restructuring.
In connection with the restructuring, the Company also sold common
stock, resulting in net proceeds to the Company of approximately
$5,780,000 which included $163,000 of subscriptions receivable as
of December 31, 1992, and entered into agreements with Series A and
B Preferred stockholders to convert their holdings, including
$327,920 of accrued dividends related thereto, into Series C
Preferred Stock.
5. Acquisitions:
In December and October 1993, the Company commenced management and
subsequently completed the acquisition of certain assets and
liabilities of Road and Show South, Ltd. (South) and Road and Show
Cellular East, Inc. (East), respectively. The purchase price for
South was $1,261,611 which represents $46,111 of cash and an
obligation to issue 221,000 shares of the Company's common stock
valued at $1,215,500 to be issued by the Company. The purchase
price for East was $750,245 which represents $209,245 of cash and
an obligation to issue 108,200 shares of the Company's common stock
valued at $541,000. The number of shares of common stock related
to the South acquisition is subject to adjustment on December 1,
1994 based on the price of the Company's common stock at that time.
As of December 31, 1993, no common stock had been issued related
to these acquisitions.
The transactions were accounted for as purchases, and the purchase
prices were allocated on the basis of the relative fair market
values of the net assets acquired as follows:
<TABLE>
<CAPTION>
South East
----------- ----------
<S> <C> <C>
Accounts receivable $ 21,921 $ -
Equipment 311,362 290,000
Note receivable 90,298 -
Goodwill 939,921 849,041
Accrued expenses (101,891) (229,457)
Note payable - (90,298)
Obligation under capital - (69,041)
lease
--------- ----------
$ 750,245 $1,261,611
========== =========
</TABLE>
F-11<PAGE>
The following unaudited pro forma statement of operations for 1993
gives effect to the acquisition as if it occurred on January 1 of
the year of acquisition
1993
Revenue
$28,819,214
Cost of Revenue 16,390,357
- - - - - - -
Gross Margin 12,428,857
Selling, general and
administrative expenses 12,417,674
- - - - - - -
Operating income 11,183
Other expenses, net (530,771)
- - - - - - -
Loss before extraordinary (519,588)
item
Extraordinary item (150,000)
- - - - - - -
Net loss
(669,588)
Preferred stock dividends (344,650)
- - - - - - -
Net loss applicable to
common stock $(1,014,238)
= = = = = = =
Net loss per common share:
Loss before extraordinary (.15)
item
Extraordinary item (.03)
- - - - - - -
Net loss
$(.18)
- - - - - - -
Weighted average number of
common shares outstanding 5,526,492
= = = = = = =
In May 1991, the Company commenced management and subsequently
completed the acquisition of 100% of the outstanding common stock
of Boston Telecommunications Group, Inc. d/b/a Boston
Telecommunications Company (BTC). The acquisition was accounted
for as a purchase. The purchase price consisted of a $600,000
promissory note payable with interest at 10% per annum, payable in
ten semi-annual installments commencing November 30, 1991 (see Note
7), and the issuance of warrants for the purchase of 25,000 shares
of common stock of the Company for $.40 per share. The warrants
are exercisable through May 1996. As of December 31, 1993,
warrants for 15,542 shares had been exercised. The Company valued
the warrants issued in connection with the acquisition at $300,000,
which represented the difference between the market price of the
Company's common stock on the date issued and the exercise price.
The unaudited pro forma consolidated condensed statements of
operations for the year ended December 31, 1991 as though the
acquisition of BTC had been made at the beginning of the year are
as follows (in thousands, except per share data):
1991
Revenue $24,169
Net loss applicable to
common stock (6,282)
Net loss per common
share (1.68)
6. Accrued Expenses:
Accrued expenses consisted of the following:
F-12<PAGE>
December 31,
- - - - - - - - - - - -
1993 1992
State sales and excise $1,194,746 $1,747,683
taxes
Professional fees -- 117,974
Deferred lease 153,805 201,521
obligations
Compensation 76,787 260,845
Property taxes 72,443 117,145
Concession fees 64,754 878,687
Other 506,236 170,887
---------- ----------
Total $2,068,771 $ 3,494,742
========== ==========
7. Long-Term Debt and Capital Lease Obligations:
Long-term debt and capital lease obligations consisted of the
following:
December 31,
---------------
1993 1992
Notes payable to vendors,
due in aggregate
quarterly
installment of
approximately $265,000
commencing September 30,
1992, non-bearing, due
September 1995 $1,615,490 $2,694,256
Promissory note, $600,000
original face amount,
payable in ten semi-
annual installments
commencing November 30,
1991, due May 31, 1996,
bearing interest at 10%
(see below) $ 750,000 $ 600,000
Promissory note, $550,000
original face amount
discounted at 7.75%, non-
interest bearing, payable
in quarterly installments
of $25,000 commencing
December 31, 1993, due
March 31, 1999,
collateralized by 137,500
shares of Seried C
Preferred Stock $ 428,003 $ -
Promissory note, $450,000
original face amount,
non-interest bearing,
payable in
quarterly installments of
$16,000 commencing
September 30, 1992, due
June 30, 1999 $ 353,353 $ 417,858
F-13<PAGE>
December 31,
- - - - - - - - - - - -
1993 1992
Capital lease obligations,
due in aggregate monthly
installments of approximately
$11,000 and $19,000 as of
December 31, 1993 and 1992,
respectively, with a weighted
average interest rate of 12.3%
and 12.2%, respectively,
collateralized by related
telecommunications and data
processing equipment $ 572,461 $ 444,552
Other - 588,000
-------------- ----------
3,719,307 4,744,666
Less: Current Portion 1,941,876 2,462,915
----------------- -------------
$ 1,777,431 $2,281,751
=================== =============
In connection with the Company's 1992 restructuring (see Note 4),
approximately $3,300,000 of vendor payables were converted to non-
interest bearing notes payable. As part of the restructuring, the
Company also renegotiated the terms of the $450,000 promissory
note. Prior to the restructuring, the note provided for interest
at prime plus 1% and was due in 1990. As of December 31, 1992, the
Company was still negotiating the settlement of the $600,000
promissory note. Subsequent to such date, the Company entered into
a settlement agreement which provides for the payment of $750,000
plus interest at 10%. In connection with the restructuring,
approximately $1,500,000 of capital lease obligations was forgiven.
As of December 31, 1992, one settlement requiring a cash payment
of $588,000 had not been completed. A payment of $588,000 plus
penalties and interest of $50,000 was made in 1993.
During 1992, a settlement agreement was entered into with the FDIC,
as receiver for the Company's principal lender. In connection with
this agreement, the Company paid $2,450,000 to the FDIC in full
settlement of its obligations to the bank under the Company's term
loan and revolving credit arrangements. The amount paid was based
upon the FDIC's valuation of the collateral pledged by the Company
under the loan agreements. As a result of the settlement, the
Company recorded a gain of $2,700,000 in 1992. The Company did not
record any interest expense on these obligations during 1992 due to
the anticipated settlement. Had interest been accrued, the gain on
restructuring and interest expense would have each increased by
approximately $440,000. In connection with settling his guarantee
of these obligations, the Company's president entered into a non-
interest bearing promissory note for $675,000 due in 1997 with the
FDIC and pledged 100,000 shares of his common stock and his options
to purchase 25,000 shares of common stock of the Company as
collateral.
F-14<PAGE>
As of December 31, 1993, scheduled payments of principal on long-
term debt and capital lease obligations were:
Capital Lease
Long-Term Debt Obligations
- - - - - - - - - - - - - - -
1994 $1,677,062 $339,655
1995 960,102 133,583
1996 144,506 95,465
1997 150,904 69,372
1998 157,813 61,866
Thereafter 56,459 46,645
---------- --------
$3,146,846 746,586
==========
Less: Amount representing interest 174,125
--------
Present value of future payments,
including current portion of $264,814 $572,461
========
Information with respect to short-term notes payable to banks and
other lending institutions and weighted average interest rates is
as follows:
1993 1992 1991
------- ------- -------
At year end:
Short-term loans outstanding $- $ - $ 750,000
Weighted average interest rate - - 11.50%
During the year:
Maximum loans outstanding - $6,130,317 $5,706,999
Average loans outstanding - 5,542,874 5,441,741
Weighted average interest rate - 7.0% 11.38%
Preferred Stock and Stockholders' Equity:8.
On August 28, 1992, the Board of Directors approved a one-for-four
reverse stock split of common stock and the par value of common
stock was increased from $.001 to $.004 per share. Applicable
number of common share and per common share information herein have
been retroactively restated to reflect the effect of the reverse
split.
In September 1992, the Company completed a private placement to
certain investors of 1,250,000 shares of its common stock at $5 per
share. The Company received $5,780,000, net of underwriters'
commissions of $470,000 and including subscriptions totalling
$162,980 collected subsequent to December 31, 1992. A commission
of $446,750 was paid to a firm, one of whose principals is a
director and stockholder of the Company (see Note 13).
The Company is authorized to issue 10,000,000 shares of preferred
stock, issuable from time to time in one or more series with such
rights, preferences, privileges and restrictions as determined by
the directors.
F-15<PAGE>
As of December 31, 1991, 2,000,000 shares and 1,000,000 shares were
designated as Series A Preferred Stock and Series B Preferred
Stock, respectively. Both series were entitled to a liquidation
value of $4 per share, dividends of $.48 per share per annum
payable quarterly in arrears and were non-voting. These shares
were convertible into common stock, at the holder's option, on a
one share of common stock for four shares of preferred stock basis,
at any time, subject to certain anti-dilution protection for the
stockholders. At the Company's option, the Series B Preferred
Stock was redeemable, in whole or in part, at any time after June
30, 1993, at $6 per share plus all accrued dividends. The Series A
Preferred Stock included this same provision and a mandatory
redemption feature, effective in 1998, allowing the holder to
redeem such shares at $4 per share plus all accrued dividends.
In May 1991, the Company completed a private placement to certain
investors of shares of its preferred stock at $4 per share. The
Company sold 110,000 shares of Series A Preferred Stock and 914,750
shares of Series B Preferred Stock. In connection with the sale of
Series B Preferred Stock, 27,250 shares were issued in lieu of cash
commissions to a firm, one of whose officers is a director and
stockholder of the Company. A cash commission of $175,000 was also
paid to a firm, one of whose principals is a director and
stockholder of the Company, in connection with the Series B
Preferred Stock sale. The Company received $3,815,000 in net
proceeds from the sales of these preferred shares.
In connection with the 1992 restructuring (see Note 4), all Series
A and B Preferred Stock, including $327,920 of accrued dividends,
was converted into Series C Preferred Stock. At that time, Series
A and Series B Preferred Stock were eliminated. Series C Preferred
Stock is entitled to a liquidation value of $4 per share and
dividends of $.32 per share per annum payable quarterly in arrears,
and the shares are non-voting. These shares are convertible into
common stock, at the holder's option, on a one share of common
stock for two shares of Series C Preferred Stock basis, at any
time, subject to certain anti-dilution protection for the Preferred
Stockholders. At the Company's option, the Series C Preferred
Stock is redeemable, in whole or in part, at any time after June
30, 1993, at $6 per share plus all accrued dividends.
In December 1993, the Company commenced a private placement to
certain investors of units consisting of one share of Series D
Preferred Stock and one warrant to purchase one share of common
stock. As of December 31, 1993, no warrants had been exercised.
As of December 31, 1993, the Company had sold 453,158 units for net
proceeds of $1,741,133 after deducting expenses of $411,549.
Series D Preferred Stock is entitled to dividends of 5% per annum
payable quarterly and may be redeemed for $7 per share plus all
accrued dividends at the option of the Company. The shares are
non-voting and are convertible into shares of the Company's common
stock on a one-for-one basis at the holder's option. The shares
rank senior to all shares of the Company's common stock and junior
to Series C Preferred Stock. The common stock purchase warrants
are exercisable at a per share price of $5.75. In connection with
the offering, the investment banking firm received 15,600 warrants
exercisable to purchase shares of the Company's common stock at an
exercise price of $5.75 per share. The Company has the right to
require the holder to exercise the warrant or have the warrant
expire in the event that the Company's common stock trades at or
above $8.50 per share.
F-16<PAGE>
As of December 31, 1993, stock purchase warrants issued to the
underwriter for the 1988 and 1990 public offerings, exercisable to
purchase 30,000 and 62,500 shares, respectively, of the Company's
common stock at an exercise price equal to $25.20 and $32.16,
respectively, were outstanding.
The following table summarizes the number of common shares reserved
for issuance as of December 31, 1993. There were no preferred
shares reserved for issuance as of December 31, 1993.
Common Stock
- - - - - - - -
Common stock warrants 570,716
Stock option plans 467,694
Preferred stock 947,123
---------
1,985,533
=========
9. Stock Option Plans:
The Company has non-qualified stock option plans which provide for
the grant of common stock options to officers, directors, employees
and certain advisors and consultants to the Company at the
discretion of the Board of Directors. All options granted are
exercisable at a minimum price equal to the fair market value of
the Company's stock at the date of grant, as determined by the
Board of Directors, and are exercisable in accordance with vesting
schedules set individually by the Company's president. As of
December 31, 1993, 750,000 shares of common stock are reserved for
options, including options exercised to date. The activity in the
plans was as follows:
Exercise Price
Per Share
- - - - - - - - - - - - - - -
Number of Weighted
Options Range Average
- - - - - - - - - - - - - -
Balance outstanding, Jan. 1, 1991 388,187 $ 1.72-24.50 $3.80
Granted 19,750 8.00-11.00 9.12
Expired (3,125) 11.00-24.50 14.12
Exercised (36,625) 1.72- 5.72 2.72
------- ------------ ------
Balance outstanding, Dec. 31, 1991 368,187 1.72-24.50 4.08
Granted 61,375 5.00 5.00
Expired (21,583) 2.84-24.50 17.09
Exercised (53,938) 1.72- 2.84 2.06
------- ------------ ------
Balance outstanding, Dec. 31, 1992 354,041 1.72-12.00 3.77
Granted 173,500 4.00- 5.50 5.32
Expired (28,780) 2.84-12.00 10.19
Exercised (35,000) 1.72- 2.84 2.36
------- ------------ ------
Balance outstanding, Dec. 31, 1993 463,761 $ 1.72-11.00 $4.06
======= ============ ======
F-17<PAGE>
Terms of the options granted range from five to ten years. Of the
options outstanding, options for 290,261 shares were exercisable as
of December 31, 1993.
10. Retirement and Savings Plan:
On March 3, 1989, the Company adopted the Shared Technologies Inc.
Savings and Retirement Plan (the Plan). The Plan covers
substantially all of the employees of the Company. The Plan is
intended to comply with section 401(k) of the Internal Revenue
Code, and the Company is applying for a determination of this
status. Participants in the Plan may elect to make contributions
on their behalf up to a maximum of 10% of their compensation. For
each participant with one year of service, the Company will make a
matching contribution of one-half of the participant's before and
after tax contributions up to 5% of the participant's compensation.
Matching contributions may be made in the form of the Company's
common stock. Participants vest in the matching contributions at
the rate of 33% per year. For the years ended December 31, 1993,
1992 and 1991, the Company's expense related to the matching
contribution was approximately $116,000, $51,000 and $73,000,
respectively.
In November 1992, the Financial Accounting Standards Board issued a
standard on accounting for postemployment benefits which requires
that the expected cost of these benefits be charged to expense
during the years that employees render service. The Company does
not offer any such postemployment benefits to its employees;
therefore, this accounting standard will have no effect on the
Company's results of operations or financial position.
11. Income Taxes:
For the year ended December 31, 1992, the Company recorded a
provision for minimum federal and state income taxes of $45,000
after the benefit of utilizing net operating loss (NOL)
carryforwards of approximately $3,000,000. The Company had no
taxable income for 1993. The Company's remaining NOL carryforward
for federal income tax return purposes is approximately
$24,600,000 as of December 31, 1993, and is available to offset
future taxable income. The net operating loss carryforward will
expire for federal income tax purposes, if unused, from 2001
through 2007. NOL's available for state income tax purposes are
less than for federal purposes and generally expire earlier than
the federal NOL's. Limitations will apply to the use of the net
operating loss carryforwards in the event certain changes in
Company ownership occur in the future.
For the year ended December 31, 1993, taxes computed at the
statutory federal rate differ from the Company's effective rate
due primarily to the availability of NOL's.
F-18<PAGE>
The components of deferred income tax assets (liabilities) as of
December 31, 1993 are as follows (in thousands):
Tax effect of net operating loss carryforwards $ 9,789
Financial reserves not yet tax deductible 130
Equipment (1,114)
-------
Deferred income tax asset 8,805
Valuation allowance (8,805)
-------
Net deferred income tax asset $ -
=======
12. Commitments and Contingencies:
Contingencies -
The Company had been the provider of telecommunications services at
the Jacob K. Javits Convention Center (the Center) in New York
City. Effective January 1, 1992, as a result of a contractual
dispute with the New York Convention Center Operating Corporation
(CCOC), the Company no longer provided services at the Center. A
claim for approximately $5,400,000 was filed against the Company by
CCOC for damages. In November 1993, the litigation with CCOC was
settled. The settlement provides for the Company's payment of
$575,000 ($25,000 cash and a $550,000 note payable), payable over
five years, with no interest. The present value of the amount to
be paid under this agreement was accrued by the Company (see Note
7).
While providing services at the Center, the Company licensed the
right to provide certain public pay telephone services at the
Center to Tel-A-Booth Communications, Ltd. (Tel-A-Booth). Tel-A-
Booth has filed a claim against the Company which seeks $10,000,000
in damages including $1,400,000 for equipment purchased for which
no amounts have been provided in the accompanying consolidated
financial statements. Management of the Company does not believe
that the outcome of this litigation will have a material impact on
the Company's results of operations or financial condition (see
Note 14).
As reflected in Note 6, the Company has obligations with regard to
certain sales and use taxes it collected. The Company believes it
has adequately accrued for such obligations and any related late
payment penalties and interest. In addition, the Company has
contingent obligations for certain other sales and use taxes which
have not been accrued. Unfavorable resolution of these matters
could make the Company liable for these taxes as well as interest
and penalties thereon.
Although management believes that the outcomes of the Tel-A-Booth
litigation and the sales and use tax matters will not have a
material adverse impact on the Company's future results of
operations or financial condition, there can be no such assurance
and the ultimate outcomes of these matters are uncertain at this
time (see Note 14).
F-19<PAGE>
Commitments -
The Company has entered into operating leases for the use of
certain office facilities and certain equipment. Rent expense
amounted to approximately $1,700,000, $1,676,000 and $1,714,000 for
the years ended December 31, 1993, 1992 and 1991, respectively. As
of December 31, 1993, aggregate approximate future minimum rental
payments under these operating leases were:
Year Amount
- - - - - - - - - - - - - - - - - - - - -
1994 $1,688,000
1995 1,346,000
1996 948,000
1997 541,000
1998 320,000
Thereafter 385,000
----------
$5,228,000
==========
Certain of the leases are subject to escalation for increases in
real estate taxes and other operating expenses. In addition,
certain leases require escalating base rents or provide for rent
abatements for a period of time. The Company is expensing the
total of these base rents on a straight-line basis over the terms
of the leases.
13. Related Party Transactions:
In 1991, approximately $104,000 was advanced to the Company's
president related to the pledge of his shares of the Company's
common stock as security for a Company obligation. The advance was
repaid in 1992.
In 1992, the Company issued 12,500 shares of common stock to a
Board of Directors member and former shareholder of BTC. The
shares were issued since the Company was unable to obtain the
release of his guarantee of certain BTC obligations in connection
with the 1992 restructuring (see Note 4). The Company has also
agreed to indemnify the individual for any future amounts incurred
by him related to his guarantee. The fair value of the shares
issued was recorded as an expense in 1992.
As of December 31, 1993 and 1992, approximately $288,000 had been
paid for life insurance premium payments made on behalf of the
Company's president. The amount was to be repaid from the proceeds
of a $2,500,000 face value life insurance policy which was owned by
the president. In January 1994, the beneficiary on the policy was
changed to the Company in order to reduce the premium payments
required by the Company. As of December 31, 1993, the amount due
to the Company related to premiums paid exceeded the cash surrender
value of the policy by $154,853. Accordingly, the President has
agreed to reimburse the Company for this amount. The receivable
and cash surrender value are reflected in other assets in the
accompanying consolidated balance sheet as of December 31, 1993.
A firm, one of whose principals is a director and stockholder of
the Company, served as underwriter for the September 1992 common
stock offering and assisted in the 1991 preferred stock offering.
The Company paid this firm underwriting commissions and expenses
totalling $446,750 and $175,000 in connection with the 1992 and
1991 private offerings, respectively. Additionally, the firm was
issued 27,250 shares of Series B Preferred Stock in lieu of
additional cash commissions in connection with the May 1991 private
placement (see Note 8).
F-20
14. Subsequent Events:
In May 1994, the Company entered into an agreement with a bank for
$5,000,000 in financing. The financing provides for a
$4,000,000 secured revolving credit line for expansion in the
core business, aggregate draws converted semi- annually to
three year loans with level monthly amortization and a $1,000,000
two year term loan, six month interest only, with quarterly
amortization and a balloon payment of $700,000. These loans bear
interest at the bank's prime rate plus 2% and are secured by
the Company's assets. The Company issued a warrant to the bank
for shared equal to 2.25% of the Company's outstanding common stock
on a fully diluted basis.
In March 1994, the Company signed an agreement to purchase all of
the partnership interests of Access Telecommunication Group, L.P.
(Access) for $9,000,000, subject to certain adjustments. The
agreement, as amended,provided, provides for $4,000,000 to be paid at
closing and the balance to be paid through the issuance of
$5,000,000 of notes to the partners. In May 1994, the Company
completed a sale of common stock for approximately $5,000,000 to
provide the funding for the amounts to be paid at closing.
During 1994, Discovery was completed in early 1995 for the Tel-A-
Booth Claim and revealed certain inconsistencies in plaintiff's
claims, which cast in doubt the bona fides of plaintiff's demand
for $10 million on each of its claims against the Company. Of the
$10 million in claimed damaged, all but $1.4 million represents
plaintiff's estimation of lost profits as a result of the Company's
alleged breach of contract. The remaining $1.4 million represents
the cost of the 400 telephones which plaintiff purportedly
purchased for installation at The Center pursuant to the contract
but which were ultimately not installed.
Furthermore, the Company has asserted that the pertinent contract
between plaintiff and the Company bars plaintiff's recovery of lost
profits. More specifically, the contract provides that "[n] either
party hereto shall be liable, directly or through any
indemnification provision herein, for consequential (including lost
profits) or indirect damages arising in any way out of this
Agreement" Although plaintiff has argued that the language
surrounding this clause limits its application to claims brought by
third parties and thus the clause was not intended to limit damage
claims between plaintiff and the Company, management believes this
is a further defense to the claim.
With respect to the $1.4 million damage claim, discovery has
revealed that plaintiff borrowed this entire amount from a private
lender, using the telephones to be purchased as collateral.
Subsequent to plaintiff's termination at The Center, the lender
took possession of the collateral (which was then sold) and forgave
the entire indebtedness in exchange.
Arguably, plaintiff suffered no direct damage from the alleged
breach of contract since plaintiff was restored to its initial
position following this transaction.
While any litigation contains an element of uncertainty, management
is of the opinion-based on the current status of the claim-that the
ultimate resolution of this matter should not have a material
adverse effect upon either results of operations, cash flows or
financial position of the Company.
15. Restatement of 1993 Financial Statements:
The Company has restated its 1993 consolidated financial statements
to reflect the write-off of certain startup costs of approximately
$120,000, previously capitalized, relating to certain cellular
telephone operations.
F-21<PAGE>
Income before extraordinary item:
As previously reported $410,221
As adjusted $290,174
Net income:
As previously reported $260,221
As adjusted $140,174
Net income (loss) per common share
before extraordinary item:
As previously reported $ .01
As adjusted $ (.01)
Net loss per common share:
As previously reported $ (.02)
As adjusted $ (.04)
Accumulated deficit:
As previously reported $24,128,237
As adjusted $24,248,284
F-22<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
SHARED TECHNOLOGIES INC.
- - - - - - - - - - - - -
AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS,
- - - - - - - - - - - - - - - - - - - - - - - - - - -
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
- - - - - - - - - - - - - - - - - - - - - - - - - -
DECEMBER 31, 1993, 1992 AND 1991
- - - - - - - - - - - - - - - - -
Deductions
Balance at Amounts Amounts
Name of Debtor Beginning Additions Collected Written
of Period Off
DECEMBER 31, 1991
<S> <C> <C> <C> <C>
Anthony D. $777,235 $103,988(1) $489,531 $ -
Autorino
Edward McCormack $ - 29,059 - -
Mark M. Autorino $ 13,358 - 13,358 -
- - - - - - - - - - - - - - - - - - - - - -
$790,593 $133,047 $502,889 -
DECEMBER 31, 1992:
Anthony D. $391,692(2) $ - $103,988(1)(2) $ -
Autorino
Edward McCormack 29,059 31,547 - -
- - - - - - - - - - - - - - - - - - - - - -
$420,751 $ 31,547 $103,988 $ -
DECEMBER 31, 1993:
Anthony D. $287,704 $ - $132,851 (1)(3) $ -
Autorino
Edward McCormack $ 60,606 $ - $ - $ -
- - - - - - - - - - - - - - - - - - - - - - -
$348,310 $ - $132,851 $ -
</TABLE>
(1) See Note 13 of notes to consolidated financial statements for
information related to this amount.
(2) Does not include accrued interest of $6,910 which was collected in
1992.
(3) Cash surrender value of insurance policy returned to the Company.
F-23<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
SHARED TECHNOLOGIES INC.
- - - - - - - - - - - - -
AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS,
- - - - - - - - - - - - - - - - - - - - - - - - - - -
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
- - - - - - - - - - - - - - - - - - - - - - - - - -
DECEMBER 31, 1993, 1992 AND 1991
- - - - - - - - - - - - - - - - -
Balance
at End of Period
Name of Debtor Current Not Current
<S> <C> <C>
DECEMBER 31,
1991
Anthony D. - $391,692
Autorino
Edward McCormack - 29,059
Mark M. Autorino - -
- - - - - - - -
- $420,751
DECEMBER 31,
1992:
Anthony D. $ - $287,704
Autorino
Edward McCormack - 60,606
- - - - - - - -
$ - $348,310
DECEMBER 31,
1993:
Anthony D. $ - $154,853
Autorino
Edward McCormack $ - $ 60,606
- - - - - - - -
$ - $215,459
</TABLE>
(1) See Note 13 of notes to consolidated financial statements for
information related to this amount.
(2) Does not include accrued interest of $6,910 which was collected in
1992.
(3) Cash surrender value of insurance policy returned to the Company.
F-23a<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V
SHARED TECHNOLOGIES INC.
- - - - - - - - - - - - -
PROPERTY, PLANT AND EQUIPMENT
- - - - - - - - - - - - - - -
DECEMBER 31, 1993, 1992 and 1991
- - - - - - - - - - - - - - - -
Balance at
Beginning Additions
Classification of Period at Cost
Retirements
<S> <C> <C> <C>
Year ended December 31, 1991:
Telecommunications
equipment $12,589,994 $2,098,098 $ 114,079
Office and data processing
equipment.... 2,496,768 432,075 71,911
----------- ---------- --------
$15,086,762 $2,530,173 $185,990
=========== ========== ========
Year ended December 31, 1992:
Telecommunications
equipment .... $18,808,740 $1,574,754 $ 35,996
Office and data processing
equipment .... 2,993,021 455,809 62,748
----------- ---------- --------
$21,801,761 $2,030,563 $ 98,744
=========== ========== ========
Year ended December 31, 1993:
Telecommunications
equipment .... $20,347,498 $1,081,230 $ 533,687
Office and data processing
equipment .... 3,386,082 962,167 187,972
----------- ---------- --------
$23,733,580 $2,043,397 $ 721,659
=========== ========== ========
</TABLE>
(1) Allocation of purchase price related to the BTC acquisition (see
Note 5 of notes to consolidated financial statements).
(2) Allocation of purchase price related to Road and Show South and Road
and Show East acquisitions (see Note 5 of notes to consolidated
financial statements).
F-24<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V
SHARED TECHNOLOGIES INC.
- - - - - - - - - - - - -
PROPERTY, PLANT AND EQUIPMENT
- - - - - - - - - - - - - - -
DECEMBER 31, 1993, 1992 and 1991
- - - - - - - - - - - - - - - -
Other Changes
Increase Balance at
Classification (Decrease) End of Period
<S> <C> <C>
Year ended December 31,
1991:
Telecommunications
equipment ... $4,234,727 (1) $18,808,740
Office and data
processing equipment .. 136,089 (1) 2,993,021
---------- -----------
$4,370,816 (1) $21,801,761
========== ===========
Year ended December 31,
1992:
Telecommunications
equipment ... $ - $20,347,498
Office and data processing
equipment .. - 3,386,082
---------- -----------
$ - $23,733,580
========== ===========
Year ended December 31,
1993:
Telecommunications
equipment ... $ 403,364 (2) $21,298,405
Office and data processing
equipment .. 197,998 (2) 4,358,275
---------- -----------
$ 601,362 (2) $25,656,680
========== ===========
</TABLE>
F-24a<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI
SHARED TECHNOLOGIES INC.
- - - - - - - - - - - - - -
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
OF PROPERTY, PLANT AND EQUIPMENT
- - - - - - - - - - - - - - - - -
DECEMBER 31, 1993, 1992 AND 1991
- - - - - - - - - - - - - - - - -
Balance at
Beginning Additions
Classifications of Period at Cost Retirements
<S> <C> <C> <C>
Year ended December 31, 1991:
Telecommunication equipment $5,302,350 $2,854,662 $ 86,204
Office and data processing
equipment ... 973,789 479,986 -
- - - - - - - - - - - - - - - -
$6,276,139 $3,334,648 $ 86,204
Year ended December 31, 1992:
Telecommunications equipment $8,070,808 $1,866,483 $ 24,051
Office and data processing
equipment... 1,453,775 476,088 58,312
- - - - - - - - - - - - - - - - -
$9,524,583 $2,342,881 $ 82,363
Year ended December 31, 1993:
Telemanagement equipment $9,913,550 $1,806,483 $ 363,641
Office and data processing
equipment ... 1,871,551 666,741 349,381
- - - - - - - - - - - - - - - - -
$11,785,101 $2,473,224 $ 713,022
</TABLE>
F-25<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI
SHARED TECHNOLOGIES INC.
- - - - - - - - - - - - - -
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
OF PROPERTY, PLANT AND EQUIPMENT
- - - - - - - - - - - - - - - - -
DECEMBER 31, 1993, 1992 AND 1991
- - - - - - - - - - - - - - - - -
Other Charged Balance
Increase at End
Classifications (Decrease) of Period
<S> <C> <C>
Year ended December 31, 1991:
Telecommunication equipment ... $ - $8,070,808
Office and data processing equipment - 1,453,775
- - - -- - - - - - - -
$ - $9,254,583
Year ended December 31, 1992:
Telecommunications equipment ... $ - $9,913,550
Office and data processing equipment - 1,871,551
- - - - - - - - - - -
- $11,785,101
Year ended December 31, 1993:
Telemanagement equipment .......... $ - $11,356,392
Office and data processing equipment - 2,188,911
- - - - - - - - - - -
$ - $13,545,303
</TABLE>
F-25a<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
SHARED TECHNOLOGIES INC.
- - - - - - - - - - - - -
VALUATION AND QUALIFYING ACCOUNTS
- - - - - - - - - - - - - - - - - -
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
- - - - - - - - - - - - - - - - - - - - - - - - - - -
Balance Charged Charged Balance
at to to
Beginning Cost and Other at End
Description of Year Expenses Accounts Deduction of Year
s (1)
<S> <C> <C> <C> <C> <C>
December 31, 1991:
Allowance for
doubtful accounts
and discounts $123,000 $349,000 $ - $181,000 $291,000
December 31, 1992:
Allowance for
doubtful accounts
and discounts 291,000 96,000 - 90,000 297,000
December 31, 1993:
Allowance for
doubtful accounts
and discounts 297,000 253,000 - 240,000 310,000
</TABLE>
(1) Represents write off of uncollectible accounts, net of recoveries.
F-26<PAGE>
SCHEDULE X
SHARED TECHNOLOGIES INC.
- - - -- - - - - - - - - -
SUPPLEMENTARY INCOME STATEMENT INFORMATION
- - - - - - - - - - - - - - - - - - - - - -
Years Ended
December 31,
- - - - - - - - - - - - - -
1993 1992 1991
- - - - - - - - -
Maintenance and repairs $124,083 $386,353 $339,703
Depreciation and amortization of
intangible assets, preoperating costs,
and similar deferrals * * *
Taxes, other than payroll and income taxes:
State Sales Tax * * *
Federal Excise Tax * * *
Property Taxes * * *
Advertising costs * * *
*Indicates required item is less than 1% of total revenue.
F-27<PAGE>
Items 10, 11, 12 and 13
- -------------------------
The Company incorporates by reference in response to these items its Proxy
Statement
for its Annual Meeting of Stockholders held on June 8, 1994 (Filed with the
Securities and Exchange Commission in definitive form on May 30, 1994).
-19-<PAGE>
PART IV
Item 14.
- -------------
Exhibits, Financial Statement Schedules and Reports on Form 10-K
(a) Financial Statements
---------------------
Reports of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1993 and 1992.
Consolidated Statements of Operations for the years ended December 31, 1993,
1992 and 1991.
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1993, 1992 and 1991.
Consolidated Statements of Cash Flow for the years ended December 31, 1993,
1992 and 1991.
Notes to Consolidated Financial Statements
Financial Statements Schedules: Schedules II, V, VI, VIII and X
Reports on Form 8-K(b)
-------------------
None filed.
Exhibits(c)
--------
Exhibit No. Description of Exhibit
- -------------- -----------------------
3.1 Restated Certificate of Incorporation of the Registrant.
3.2 By-laws of the Registrant, as amended.
4.1 Specimen Certificate for Common Stock, as amended to reflect
the reverse one-for-four stock split and corresponding
change in par value. Incorporated by reference from
Exhibit 4.1 of the Company's Form 10-K/A Amendment No. 1
for December 31, 1992.
4.2 Certificates of Designation for Series D Preferred Stock.
4.3 Form of Warrant Certificate associated with Series D
Preferred Stock offering.
4.4 Form of Registration Rights Agreement associated with Series
D Preferred Stock Offering.
-20-<PAGE>
10.1 Promissory Note dated June 4, 1990 in the principal
amount of $5,000,000 from Registrant to Central Bank with
Loan and Security Agreement, Pledge Agreement, Guaranty
Agreement and Collateral Assignment of Tenant Services
Agreement. Incorporated by reference from Exhibit 10.7 of
the Company's Form 10-K for December 31, 1990.
10.2 Revolving Note dated February 20, 1991 in the principal
amount of $750,000 from Registrant to Central Bank with
Letter Agreement and Commercial Revolving Loan and Security
Agreement. Incorporated by reference from Exhibit 10.4 of
the Company's Form 10-K for December 31, 1991.
10.3 Stock Purchase Agreement dated May 31, 1991 among the
Company, Boston Telecommunications Group, Inc. (d/b/a
Boston Telecommunications Company) and the stockholders of
the Company, who own all of the issued and outstanding
capital stock of the Company. Incorporated by reference
from Exhibit A of the Company's Form 8-K dated June 20,
1991.
10.4 Form of Warrant Agreement dated May 31, 1991 between the
Company and the stockholders of Boston Telecommunications
Group, Inc. (d/b/a Boston Telecommunications Company).
Incorporated by reference from Exhibit 10.6 of the
Company's Form 10-K for December 31, 1991.
10.5 Workout Agreement dated July 27, 1992 between the
Registrant and the Federal Deposit Insurance Corporation in
its capacity as receiver for Central Bank and Trust
Company. Incorporated by reference from Exhibit 10.5 of
the Company's Form 10-K/A Amendment No. 1 for December 31,
1992.
10.6 Form of Non-Bank Creditor Agreement. Incorporated by
reference from Exhibit 10.6 of the Company's Form 10-K/A
Amendment No. 1 for December 31, 1992.
10.7 Form of Assent to Plan for a Common Law Composition of all
Non-Bank Creditors of Registrant. Incorporated by
reference from Exhibit 10.7 of the Company's Form 10-K/A
Amendment No. 1 for December 31, 1992.
10.8 Asset purchase agreement by and between Road and Show East,
Inc. and Shared Technologies Cellular, Inc. Incorporated
by reference from Exhibit 10.8 of the Company's Form 10-K/A
for December 31, 1993.
10.9 Asset purchase agreement by and between Road and Show
South, Ltd. acting by Road and Show South, Inc. and Shared
Technologies Cellular, Inc. Incorporated by reference from
Exhibit 10.9 of the Company's Form 10-K/A for December 31,
1993.
11 Computation of Earnings Per Share and Weighted Average
Number of Shares Outstanding.
21 List of subsidiaries of the Registrant.
-21-<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SHARED TECHNOLOGIES INC.
------------------------
(Registrant)
By /s/ Vincent DiVincenzo
-------------------------------------------
Vincent DiVincenzo
Senior Vice President - Finance and
Administration, Treasurer, Chief
Financial Officer and Director
Date: April 12, 1995
EXHIBIT 11
Page 1 of 3
SHARED TECHNOLOGIES INC.
Computation of Earnings Per Share and
Weighted Average Number of Shares Outstanding
For the Period Ended December 31, 1991
Percentage
Shares of Year Weighted
Date Issued Issued Outstanding Average
- ----------------- ------------- ------------- --------
January 1, 1991............ 3,704,107 100.00% 3,704,107
---------
3,704,107
January 9, 1991............ 1,125 97.81 1,100
----------
3,705,232
February 15, 1991.......... 7,500 87.67 6,575
----------
3,712,732
March 4, 1991.............. 583 83.01 484
---------
3,713,315
March 12, 1991............. 750 80.82 606
---------
3,715,065
March 12, 1991............. 14,375 80.82 11,618
-----------
3,728,440
May 1, 1991................ 500 67.12 336
-----------
3,728,940
May 13, 1991............... 875 63.84 559
-----------
3,729,815
May 17, 1991............... 4,667 62.74 2,928
-----------
3,734,482
September 5, 1991.......... 6,250 32.33 2,021
------------- ---------
3,740,732 3,730,334
========== ==========
Net Income (Loss) Per Common Share:
Net Loss Applicable to Common Stock
For the Year Ended December 31, 1991 $(5,923,483)
------------ = $(1.59)
Weighted Average Number of Shares Outstanding 3,730,334
The above shares have been restated to reflect the
September 1992 one-for-four reverse stock split.<PAGE>
EXHIBIT 11
Page 2 of 3
SHARED TECHNOLOGIES INC.
Computation of Earnings Per Share and
Weighted Average Number of Shares Outstanding
For the Period Ended December 31, 1992
Percentage of Weighted
Date Issued Shares Issued Year Outstanding Average
- --------------- ----------------- -------------- --------
January 1, 1992............ 3,740,732 100.00% 3,740,732
---------------
3,740,732
April 8, 1992.............. 19,014 73.22 13,922
---------------
3,759,745
May 22, 1992............... 471 61.20 288
----------------
3,760,217
September, 22, 1992........ 80,000 27.60 22,077
----------------
3,840,217
September 23, 1992......... 466,250 27.32 127,391
----------------
4,306,467
September 24, 1992......... 306,750 27.05 82,973
----------------
4,613,217
September 25, 1992......... 100,000 26.78 26,776
-----------------
4,713,217
September 30, 1992......... 151,850 25.41 38,585
-----------------
4,865,067
October 1, 1992............ 1,313 25.14 330
-----------------
4,866,379
October 15, 1992........... 2,625 21.31 559
-----------------
4,869,004
November 25, 1992.......... 28,042 10.11 2,835
-----------------
4,897,046
November 30, 1992.......... 12,554 8.74 1,098
-----------------
4,909,600
December 14, 1992.......... 100,000 4.92 4,918
-----------------
4,009,600
December 31, 1992.......... 82,596 0.27 226
----------------- -----
5,092,197
Weighted Average Common Shares Outstanding 4,062,710
Net Income Per Common Share:
Net Income Applicable to Common Stock
For the Year Ended December 31, 1992 $2,389,821
----------- = $ .59
Weighted Average Number of Shares Outstanding 4,062,710
The above shares reflect the September 1992 one-for-four reverse stock split.
<PAGE>
EXHIBIT 11
Page 3 of 3
SHARED TECHNOLOGIES INC.
Computation of Earnings Per Share and
Weighted Average Number of Shares Outstanding
For the Period Ended December 31, 1993
Percentage
Shares of Year Weighted
Date Issued Issued Outstanding Average
January 1, 1993............ 5,092,197 100.00% 5,092,197
----------
5,092,197
January 15, 1993........... 5,000 96.16 4,808
----------
5,097,197
April 22, 1993............. 10,000 69.59 6,959
----------
5,107,197
June 18, 1993.............. 34,152 53.97 18,432
----------
5,141,349
September 15, 1993......... 9,467 29.59 2,801
----------
5,150,816
October 5, 1993............ 13,793 24.11 3,325
----------
5,164,609
October 29, 1993........... 20,000 17.53 3,507
----------
5,184,609
December 15, 1993.......... 5,728 4.66 267
---------- -------
5,190,337 5,132,296
Net Income Per Common Share:
Net Loss For the Period Ended December 31, 1993 $ (204,476)
----------- = $(.04)
Weighted Average Number of Shares Outstanding 5,132,296
<PAGE>
<EX-21>
EXHIBIT 21
The following table indicates the subsidiaries and partnerships owned by
the Company.
Shared Technologies Cellular, Inc.+. . . . . . . . . . .a Delaware corporation
Multi-Tenant Services, Inc.++. . . . . . . . . . . . . a Delaware corporation
SafeCall, Inc.+. . . . . . . . . . . . . . . . . . . . a Delaware corporation
Financial Place Communications Company*. . . . an Illinois general partnership
LaSalle Communications Company**. . . . . . . .an Illinois general partnership
North Pier Communications Company**. . . . . . an Illinois general partnership
Boston Telecommunications Group, Inc.+
d/b/a Boston Telecommunications Company. . . .a Massachusetts corporation
Event Cellular, Inc.***. . . . . . . . . . . . . . . . .a Delaware corporation
STI CityPlace, Inc.+***. . . . . . . . . . . . . . . . .a Delaware corporation
STI Washington, Inc.+***. . . . . . . . . . . . . . . . a Delaware corporation
- ----------------------------
+ a majority-owned subsidiary of Shared Technologies Inc.
++ a wholly-owned subsidiary of Shared Technologies Inc.
* The Company is a 99% equity owner of Financial Place Communications
Company
** The Company is a 50% joint venture partner of LaSalle Communications
Company and North Pier Communications Company
*** This entity is in the process of being dissolved.
