SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) :
June 19, 1995
SHARED TECHNOLOGIES INC.
DELAWARE 0-17366 87-0424558
--------- ------- ----------
(State or other (Commission (I.R.S.
jurisdiction of File Number) Employer
incorporation) Identification
No.)
100 Great Meadow Road, Suite 104
Wethersfield, CT. 06109
--------------------------------- ----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code
(203-258-2400)
Total number of sequentially numbered paged in this
filing, including exhibits hereto: 22
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
On June 19, 1995, Shared Technologies Cellular Inc., ("STC" or
the "Company"),completed its acquisition of the outstanding
capital stock of Cellular Hotline, Inc. (``Hotline'') for
$617,000. The $617,000 was comprised of $367,000 in cash, paid
at closing, and the issuance of 50,000 shares of the Companys'
Common Stock, $.01 par value (``Shares''). Part of the cash that
was paid at closing was used to repay debt that STC agreed to
assume at closing. The Company used a portion of the proceeds
from its April 21, 1995 Public Offering for the cash portion of
this purchase. At the discretion of the former Hotline
stockholders, STC is required to repurchase all of the Shares for
$5.00 per share, at any time during the period commencing three
months and ending six months after June 19, 1995. STC has the
right to repurchase all or a part of the Shares for $6.00 per
share during the same period. Additionally, at closing, STC
issued Options to purchase 50,000 additional shares of the
Companys' Common Stock, $.01 par value, excercisable at $7.50 per
share for three years. The agreement provides for additional
payments based upon attaining certain levels of activation
revenues, as defined, over a one year period.
The former stockholders of Hotline are as follows:
1. S. Robert Pye
2. James Green
3. Triad Capital Partners, Inc.
4. The North Fork Group
Item 7. Financial Statements and Exhibits. Page
----------------------------------
(a) Financial statements of business acquired.
(i) Audited balance sheets of Cellular Hotline,Inc.as of
December 31, 1994 and 1993 and the related audited statements of
operations and stockholders' deficit, and cash flows for the
years ended December 31,1994 and 1993, including the notes
thereto. 5
(ii)Unaudited balance sheets of Cellular Hotline,
Inc as of April 30, 1995 and April 30, 1994 and the related
unaudited statements of operations, and cash flows for the
periods ended April 30,1995 and April 30, 1994, including the
notes thereto. 16
(b) Pro Forma financial information.
--------------------------------
(i)Pro forma consolidated statement of operations for the
year ended December 31, 1994. 20
(ii)Pro forma consolidated statement of operations for the
six months ended June 30, 1995. 21
(iii)Notes to Pro forma consolidated statements of
operations. 22
(c) Exhibits.
----------
Exhibit No. Description
----------- -------------
10.1 Stock Purchase Agreement dated
June 19, 1995. Incorporated by
reference from Exhibit 10.1 of the
Company's Form 8-K for June 19, 1995
filed on June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Shared Technologies Inc.
By: /s/ Vincent DiVincenzo
-------------------------
Vincent DiVincenzo
Senior Vice President-Finance
and Administration, Treasurer,
Chief Financial Officer
Date: January 30, 1996
CELLULAR HOTLINE, INC.
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1994 AND 1993
CONTENTS
Independent Auditors' Report
Financial Statements
Balance Sheets
Statements of Operations
Statements of Stockholders' Deficit
Statements of Cash Flows
Notes to Financial Statements
INDEPENDENT AUDITORS' REPORT
Board of Directors
Cellular Hotline, Inc.
We have audited the accompanying balance sheets of Cellular
Hotline, Inc. as of December 31, 1994 and 1993, and the related
statements of operations and stockholders' deficit, and cash
flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our 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 Cellular Hotline, Inc. as of December 31, 1994 and 1993, and
the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting
principles.
Rothstein, Kass & Company, P.C.
Roseland, New Jersey
August 8, 1995
<TABLE>
<CAPTION>
BALANCE SHEETS
<S> <C> <C>
December 31, 1994 1993
------------- ------ -------
ASSETS
Current assets
Cash $ 10,525 $ 3,089
Accounts receivable 138,785 118,029
Carrier commissions receivable, less
allowance for unearned income of $60,368 in
1994 and $126,201 in 1993 610,378 1,276,037
License fees receivable 28,950 300,000
Other current assets 23,720 9,079
-------- --------
Total current assets 812,358 1,706,234
Furniture, software and equipment, less
accumulated depreciation and amortization of
$249,046 in 1994 and $216,229 in 1993 50,461 64,602
Other assets 8,344 8,344
------ -------
$871,163 $1,779,180
========= ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 133,360 $ 58,378
Accrued expenses and other current 72,776 46,626
liabilities
Carrier commissions payable 656,354 1,453,300
Notes payable 253,757 253,757
--------- --------
Total current liabilities 1,116,247 1,812,061
---------- ----------
Commitments
Stockholders' deficit
Common stock, $1 par value, authorized
30,000 shares,
issued and outstanding 1,940 shares 1,940 1,940
Capital in excess of par value 186,900 186,900
Accumulated deficit (433,924) (221,721)
--------- ---------
Total stockholders' deficit (245,084) (32,881)
---------- ---------
$871,163 $1,779,180
========== ==========
See accompanying notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
<S> <C> <C>
Years Ended December 31, 1994 1993
-------- -----
Revenues $ 3,294,957 $ 2,473,518
Cost of revenues 2,525,712 1,483,438
Gross profit 769,245 990,080
Expenses
Payroll 495,012 468,962
Selling 46,620 37,590
General and administrative 418,648 318,426
Total expenses 960,280 824,978
Income (loss) from operations (191,035) 165,102
Interest expense 21,168 26,827
Net income (loss) $ (212,203) $ 138,275
See accompanying notes to financial statements.
</TABLE>
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Years Ended December 31, 1994 and 1993
<S> <C> <C> <C> <C>
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
Balances, January 1, 1993 1,940 $ 1,940 $186,900 $(359,996)
Net income
138,275
------- ------- ---------- -------
Balances, December 31, 1993 1,940 1,940 186,900 (221,721)
Net loss (212,203)
------- ------- ---------- ----------
Balances, December 31, 1994 1,940 $ 1,940 $186,900 $(433,924)
====== ======= ========= ==========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
<S> <C> <C>
Years Ended December 31 1994 1993
------- -------
Cash flows from operating activities $ (212,203) $ 138,275
----------- ----------
Net income (loss)
Adjustment to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 32,817 47,293
Changes in operating assets and
liabilities:
Increase in accounts receivable (20,756) (3,460)
Decrease (increase) in carrier
commissions
receivable 665,659 (8,927)
Decrease (increase) in license fee 271,050 (62,480)
receivable
Increase in other current assets (14,641) (897)
Increase in other assets (5,675)
Increase (decrease) in accounts payable 74,982 (52,994)
Increase (decrease) in accrued expenses
and other current liabilities 26,150 (57,488)
Decrease in carrier commissions payable (796,946) (54,395)
---------- ---------
Total adjustments 238,315 (199,023)
---------- ---------
Net cash provided by (used in) operating 26,112 (60,748)
activities --------- ----------
Cash flows from investing activities,
payments for furniture, software and
equipment (18,676) (11,020)
---------- ---------
Net increase (decrease) in cash 7,436 (71,768)
Cash, beginning of year 3,089 74,857
-------- --------
Cash, end of year $10,525 $3,089
========== ==========
See accompanying notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1 Business Summary Cellular Hotline, Inc. (the Company)
provides nationwide cellular phone
activation services and designs software for
the retail cellular phone industry for sale,
or license to third parties.
2 Summary of
significant
accounting policies Revenue Recognition
Revenues are recognized as services are
performed. Revenues relating to license
fees are recognized once all material
services or conditions relating to the sale
of a license have been substantially
performed.
Capitalized Software Development Costs
Costs of producing product masters,
including significant product enhancements
incurred subsequent to establishing
technological feasibility in the process of
software production are capitalized
according to the principles set forth in
Statement No. 86 of the Financial Accounting
Standards Board. Costs incurred prior to
the establishment of technological
feasibility are charged to research, product
development, and support expenses. All
costs incurred have been charged to
operations, since any costs incurred
subsequent to reaching technological
feasibility were insignificant.
Carrier Commissions Receivable
Carrier commissions receivable represents
amounts due from cellular carriers for
commissions on new cellular phone line
activations. The cellular commission is
earned only after the cellular telephone
user has remained on the cellular telephone
network for a specified period of time. The
Company records a provision for unearned
income equal to 9% of the gross the carrier
commissions receivable relating to the
cancellations of cellular service by the
user prior to the end of the aforementioned
vesting period. Concurrently, the Company
records a commission expense to the
retailer.
Furniture, Software and Equipment
Furniture, software and equipment is stated
at cost. The Company records depreciation
and amortization on the straight-line method
over the estimated useful lives of the
assets ranging from 5 to 7 years.
Income Taxes
The Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes", effective as
of January 1, 1993. SFAS 109 requires an
asset and liability approach to financial
reporting for income taxes. The adoption of
SFAS 109 had no cumulative effect on the
financial statements for the year ended
December 31, 1993. Deferred income tax
assets and liabilities are computed annually
for differences between financial statement
and tax bases of assets and liabilities that
will result in future taxable or deductible
amounts, based on enacted tax laws and rates
applicable to the periods in which the
differences are expected to effect taxable
income. Valuation allowances are
established, when necessary, to reduce the
deferred tax assets to the amount expected
to be realized.
3 Notes payable The following is a summary of
notes payable:
Interest Rate 1994 1993
Note payable to a
stockholder requiring
quarterly payments equal
to a certain percentage of
net cash flows, as
defined. Payments are
applied first to reduce
interest due, then to Prime Plus
reduce principal. 1% $75,000 $75,000
Note payable to a
stockholder requiring
quarterly payments equal
to a certain percentage of
net cash flows, as
defined. Payments are
applied first to reduce
interest due, then to Prime Plus
reduce principal. 1% 37,500 37,500
Convertible note payable
in quarterly payments
through March 1994 equal
to a certain percentage of
net cash flows, as
defined. Payments are
applied first to reduce
interest due, then to
reduce principal. The note
is convertible, at the
noteholder's option, to
common stock at a price of Prime Plus
$647 per share. 1% 141,257 141,257
$253,757 $253,757
========= ==========
4 Commitments The Company leases its Office under a lease
expiring in September 1996, providing for,
among other items, minimum annual rent plus
other operating expenses.
Future minimum aggregate annual rental
payments as of December 31, 1994 are as
follows:
Year ending December 31,
1995 $43,000
1996 32,000
Rent expense for the years ended 1994 and
1993 amounted to $46,287 and $45,005,
respectively.
5 Related party
transactions The Company has received loans from
stockholders including accrued interest for
the years ended 1994 and 1993 amounting to
approximately $138,500 and $129,000,
respectively. Interest expense on these
notes for the years ended 1994 and 1993 was
approximately $9,000 and $8,000,
respectively.
The Company incurred expenses for the years
ended December 31, 1994 and 1993 of
approximately $78,000 and $63,000,
respectively from an affiliate to a
stockholder of the Company.
6 Income taxes The Company has recorded a deferred income
tax asset aggregating approximately $200,000
and $110,000 for the years ended December
31, 1994 and 1993, respectively, arising
from the net operating loss carryforwards
and a valuation allowance in the same
amount, since it was more likely than not
that the Company would not realize all of
the tax benefits. At December 31, 1994, the
Company has net operating loss carryforwards
of approximately $540,000 for federal and
state income tax purposes expiring through
2009.
7 Subsequent event In June 1995, the Company's stockholders
sold all of their common stock of the
Company to Shared Technologies Cellular,
Inc. In connection with the sale, the
convertible note payable was repaid and the
remaining notes payable were contributed to
capital in excess of par value.
<TABLE>
<CAPTION>
Cellular Hotline, Inc.
Balance Sheets
April 30, 1995 and 1994
(unaudited)
<S> <C> <C>
April 30, April 30,
1995 1994
------------ -----------
ASSETS
Current assets:
Cash $19,462 $61,966
Accounts receivable 40,472 236,582
Carrier Commissions receivable, less
allowance for unearned income of $46,000
and $170,000 at April 30, 1995
and April 30, 1994, respectively 414,567 1,549,668
Other current assets 21,614 6,800
Total current assets 496,115 1,855,016
Furniture, software and equipment, less 49,274 64,261
accumulated depreciation and amortization of
$255,986 and $230,871 at April 30, 1995 and
April 30, 1994, respectively
Other assets 8,344 8,344
Total assets $553,733 $1,927,621
LIABILITIES and STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $85,948 $36,144
Accrued expenses 79,841 64,067
Carrier commissions payable 527,602 1,753,131
Total current liabilities 693,391 1,853,342
Notes payable 253,757 253,757
Stockholders' deficit
Common Stock; $1 par value, authorized 1,940 1,940
30,000 shares issued and outstanding 1,940
shares
Additional paid-in capital 186,900 186,900
Accumulated deficit (582,255) (368,318)
Total stockholders' deficit (393,415) (179,478)
Total liabilities and stockholders' deficit $553,733 $1,927,621
</TABLE>
<TABLE>
<CAPTION>
Cellular Hotline, Inc.
Statements of Operations
For the Four Months Ended
April 30, 1995 and 1994
(unaudited)
<S> <C> <C>
April 30, April 30,
1995 1994
Revenues $925,922 $1,217,831
Cost of revenues 767,490 1,011,931
Gross profit 158,432 205,900
Selling, general & administrative expenses: 298,212 343,238
Operating loss (139,780) (137,338)
Interest expense, net (8,551) (9,259)
Net loss ($148,331) ($146,597)
</TABLE>
<TABLE>
<CAPTION>
Cellular Hotline, Inc.
Statements of Cash Flows
For the Four Months Ended
April 30, 1995 and 1994
(unaudited)
<S> <C> <C>
April 30, April 30,
1995 1994
Cash Flows Provided by Operating
Activities:
Net Loss ($148,331) ($146,597)
Adjustments:
Depreciation and amortization 6,940 13,668
Change in Assets and Liabilities:
Decrease in accounts receivable 127,263 181,447
Decrease (increase) in carrier commissions 195,811 (273,631)
receivable
Decrease in other current assets 2,106 2,279
Decrease in accounts payable (47,412) (22,234)
Increase in accrued expenses 7,065 17,441
Decrease (increase) in carrier commissions (128,752) 299,831
payable
Net cash provided by operating activities 14,690 72,204
Cash Flows Used in Investing Activities:
Increase in other assets 0 0
Capital expenditures (5,753) (13,327)
Net cash used in investing activities (5,753) (13,327)
Net increase in cash 8,937 58,877
Cash, Beginning of Period 10,525 3,089
Cash, End of Period $19,462 $61,966
</TABLE>
Cellular Hotline, Inc.
Notes to Financial Statements
April 30, 1995 and 1994
(unaudited)
1. Significant Accounting Policies
-------------------------------
Organization and Basis of Presentation
--------------------------------------
Cellular Hotline, Inc. (``Hotline'') was formed August 13, 1984,
as a Missouri Corporation. Hotline provides nationwide cellular
phone activation services and designs software for the retail
cellular phone industry for sale or license to third parties.
Revenue Recognition
--------------------
Revenues are recognized as services are performed. Revenues
related to license fees are recognized once all material services
or conditions relating to the sale of a license have been
substantially performed.
Carrier Commissions Receivable
------------------------------
Carrier commissions receivable represents amounts due from
cellular carriers for commissions on new cellular phone line
activations. The cellular commission is earned only after the
cellular telephone user has remained on the cellular telephone
network for a specified period of time (vesting period). The
Company records a provision for unearned income equal to 9% of
the gross carrier commissions receivable relating to the
cancellations of cellular service by the user prior to the end of
the aforementioned vesting period. Concurrently, the Company
records a commission expense to the retailer.
Furniture, Software and Equipment
---------------------------------
Furniture, software and equipment is stated at cost. The Company
records depreciation and amortization on the straight-line method
over the estimated useful lives of the assets ranging from 5 to 7
years.
Income Taxes
-------------
The Company adopted Statement of Financial Accounting Standards
No. 109 (SFAS 109), ``Accounting for Income Taxes'' effective as
of January 1, 1993. SFAS 109 requires an asset and liability
approach to financial reporting for income taxes.
2. Notes Payable
---------------
Notes payable consist of two notes to stockholders and one note
from a major vendor of Hotline. These notes bear interest at
prime plus 1% and require quarterly payments equal to 80% of net
cash flows, as defined.
3. Related Party Transactions
----------------------------
Hotline has received loans from shareholders and a major vendor.
In addition, Hotline incurred fulfillment fees to an affiliated
company of a major shareholder. Fulfillment fees are expenses
for storing, handling and shipping of cellular phones held on
behalf of customers.
4.Commitments
--------------
Hotline leases its office under a lease expiring September 1996,
providing for, among other items, minimum annual rent plus other
operating expenses.
<TABLE>
<CAPTION>
Shared Technologies Inc.
Pro-Forma Consolidated Statement of Operations
For the Year Ended December 31, 1994
<S> <C> <C> <C> <C>
Shared Cellular
Technologies Hotline Pro-forma Pro-forma
Inc. Inc. Adjustments Consolidated
Revenues $45,366,511 $3,294,957 $48,661,468
Cost of revenues 26,171,865 2,525,712 28,697,577
Gross profit 19,194,646 769,245 0 19,963,891
Selling,general & 16,971,416 960,280 (8,311) 17,923,385
administrative
expenses
Operating income 2,223,230 (191,035) 8,311 2,040,506
(loss)
Interest expense, (487,245) (21,168) 27,969 (480,444)
net
Income (loss) 1,735,985 (212,203) 36,280 1,560,062
before income tax
credit
Income tax credit 550,000 - - 550,000
Net Income (loss) 2,285,985 (212,203) 36,280 2,110,062
Preferred stock (478,159) - - (478,159)
dividends
Net income (loss) $1,807,826 ($212,203) $36,280 $1,631,903
applicable to
common stock
Income (loss) per $0.27 $0.24
common share
Weighted average 6,792,277 6,792,277
shares outstanding
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Pro-Forma Consolidated Statement of Operations
For the Year Ended June 30, 1995
<S> <C> <C> <C> <C>
Shared Cellular
Technologies Hotline Pro-forma Pro-forma
Inc. Inc. Adjustments Consolidated
Revenues $27,709,769 $925,922 $28,635,691
Cost of revenues 16,908,745 767,490 17,676,235
Gross profit 10,801,024 158,432 0 10,959,456
Selling,general & 10,124,083 298,212 9,397 10,431,692
administrative
expenses
Operating income 676,941 (139,780) (9,397) 527,764
(loss)
Gain on sale of 1,374,544 - - 1,374,544
subsidiary stock
Interest expense, (169,320) (8,551) 8,700 (169,171)
net
Net Income (loss) 1,882,165 (148,331) (697) 1,733,137
Preferred stock (198,895) - - (198,895)
dividends
Net income (loss) $1,683,270 ($148,331) ($697) $1,534,242
applicable to
common stock
Income (loss) per $0.19 $0.17
common share
Weighted average 8,772,147 8,772,147
shares outstanding
</TABLE>
Shared Technologies Inc
Notes to Pro Forma Consolidated Statements of Operations
for the Year Ended December 31, 1994
and Six Months Ended June 30, 1995
(unaudited)
The pro forma consolidated statements of operations represents
the operating results for Shared Technologies Cellular, Inc. and
Cellular Hotline, Inc. referred to herein as Hotline, for the
year ended December 31, 1994 and the six months ended June 30,
1995.
The pro forma consolidated statements of operations assume that
the acquisition occurred at the beginning of the respective
periods. The pro forma adjustments are for amortization expense
related to goodwill associated with this acquisition and to
decrease depreciation and amortization expenses related to the
adjustment in the carrying value of furniture, software and
equipment acquired. The amount of the goodwill is approximately
$780,000 and is being amortized over a 20 year period taking 1/2
year in the first year. The carrying value of the furniture,
software and equipment is approximately $50,000 and is being
depreciated and amortized over a 5 year period taking / year in
the first year. In addition, the pro forma consolidated
statements of operations include an adjustment to reduce interest
expense for amounts owed to the former stockholders that was
forgiven upon the acquisition of Hotline and the repayment of the
remaining notes payable at closing. The amount of the interest
expense was $28,000 for the year ended December 31, 1994 and
$9,000 for the six months ended June 30, 1995.
The weighted average shares outstanding for the year ended
December 31, 1994 and the six months ended June 30, 1995 reflects
the 50,000 shares of common stock issued as part of the purchase
price.
