<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K - A/ONE
CURRENT REPORT
Pursuant to Section 10 or 15(d) of the
Securities Exchange Act of 1934
OCTOBER 31, 1995
------------------------------------------------
Date of Report (date of earliest event reported)
NETWORK LONG DISTANCE, INC.
----------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-23172 72-1122018
- ----------------- ----------- -------------------
(State or Other (Commission (IRS Employer Iden-
Jurisdiction of File Number) tification Number)
Incorporation)
525 FLORIDA STREET
BATON ROUGE, LOUISIANA 70801
-------------------------------------------
(Address of Principal Executive Offices
Including Zip Code)
(504) 343-3125
-----------------------------
(Registrant's telephone number,
including area code)
Page 1 of 22.
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statement of Value Tel, Inc.
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<PAGE>
VALUE TEL, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993 AND PERIOD
FROM JULY 17, 1992 (Date of inception) through DECEMBER 31, 1992
-3-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
VALUE TEL, INC.
Naperville, Illinois
We have audited the accompanying balance sheets of VALUE TEL, INC., as of
December 31, 1994 and 1993, and the related statements of operations, changes in
stockholders' equity (deficit) and cash flows for the years ended December 31,
1994 and 1993 and the period from July 17, 1992 (date of inception) through
December 31, 1992. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VALUE TEL, INC. as of December
31, 1994 and 1993, and the results of its operations and its cash flows for the
years ended December 31, 1994 and 1993 and the period from July 17, 1992 (date
of inception) through December 31, 1992, in conformity with generally accepted
accounting principles.
Schultz, Chezand, Jesser L.L.P.
Chicago, Illinois
December 11, 1995
-4-
<PAGE>
VALUE TEL, INC.
BALANCE SHEETS
(Data with respect to September 30, 1995 are unaudited)
<TABLE>
<CAPTION>
December 31,
---------------------------- September 30,
1994 1993 1995
---------------------------- -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash $ 434,821 $ 12,099 $ 289,990
Accounts receivable, net of allowance
for bad debts 483,080 150,518 1,992,129
Receivable from stockholder 34,430 - 90,930
------------ ----------- ------------
Total current assets 952,331 162,617 2,373,049
Property and equipment, net 41,212 - 76,394
Other assets 27,536 27,536 42,003
------------ ----------- ------------
$ 1,021,079 $ 190,153 $ 2,491,446
------------ ----------- ------------
------------ ----------- ------------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses $ 790,494 $ 84,562 $ 1,792,658
Excise and other transaction taxes payable 370,000 30,000 1,080,000
Payable to stockholders 140,374 75,146 168,374
------------ ----------- ------------
Total current liabilities 1,300,868 189,708 3,041,032
------------ ----------- ------------
Stockholders' equity (deficit)
Common stock, $0.10 par value;
authorized 5,000 shares, issued and
outstanding 1,000 shares in 1994,
1,250 shares in 1995 100 - 125
Common stock, no par value;
authorized 100,000 shares, issued and
outstanding 1,000 shares - 1,000 -
Additional paid-in capital 926 - 75,901
Accumulated deficit ( 280,815) ( 555) ( 625,612)
------------ ----------- ------------
Total stockholders' equity (deficit) ( 279,789) 445 ( 549,586)
------------ ----------- ------------
$ 1,021,079 $ 190,153 $ 2,491,446
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-5-
<PAGE>
VALUE TEL, INC.
STATEMENTS OF OPERATIONS
(Data with respect to September 30, 1994 and 1995 are unaudited)
<TABLE>
<CAPTION>
Period
July 17, 1992
through Nine Months Ended
Years Ended December 31, December 31, September 30,
------------------------------------------- -----------------------------
1994 1993 1992 1995 1994
------------------------------------------- -----------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES
Sales $ 3,513,896 $ 307,685 $ - $ 7,476,407 $ 2,185,747
Less: excise and other transaction taxes ( 340,000) ( 30,000) - ( 710,000) ( 220,000)
------------ ------------ ------------ ------------ ------------
Net sales 3,173,896 277,685 - 6,766,407 1,965,747
Commission income 172,140 116,290 15,153 151,635 134,697
------------ ------------ ------------ ------------ ------------
Total Revenue 3,346,036 393,975 15,153 6,918,042 2,100,444
------------ ------------ ------------ ------------ ------------
COST OF SALES
Carrier charges 2,701,905 219,098 - 5,435,045 1,667,197
Sales commissions 326,436 107,160 11,263 554,540 220,741
------------ ------------ ------------ ------------ ------------
Total Cost of Sales 3,028,341 326,258 11,263 5,989,585 1,887,938
------------ ------------ ------------ ------------ ------------
GROSS PROFIT 317,695 67,717 3,890 928,457 212,506
------------ ------------ ------------ ------------ ------------
EXPENSES
Bad debt expense 248,698 5,000 - 407,886 128,813
Depreciation 10,304 - - 13,915 2,783
Selling, general and administrative 338,953 57,207 9,955 851,453 222,834
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 597,955 62,207 9,955 1,273,254 354,430
------------ ------------ ------------ ------------ ------------
Net Income (loss) before income taxes ( 280,260) 5,510 ( 6,065) ( 344,797) ( 141,924)
Income tax (expense) credit - deferred - ( 1,000) 1,000 - -
------------ ------------ ------------ ------------ ------------
Net income (loss) $ ( 280,260) $ 4,510 $ ( 5,065) $ ( 344,797) $ ( 141,924)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-6-
<PAGE>
VALUE TEL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(Data with respect to September 30, 1995 are unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
-------------------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial issuance of common stock 1,000 $ 1,000 $ - $ - $ 1,000
Net loss - 1992 - - - ( 5,065) ( 5,065)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1992 1,000 1,000 - ( 5,065) ( 4,065)
Net income - 1993 - - - 4,510 4,510
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1993 1,000 1,000 - ( 555) 445
Net loss - 1994 - - - (118,485) (118,485)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1994 1,000 1,000 - (119,040) (118,040)
Adjustment in connection with pooling
of interests - ( 900) 926 (161,775) (161,749)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1994, as restated 1,000 100 926 (280,815) (279,789)
Issuance of additional shares 250 25 74,975 - 75,000
Net loss - 1995 - - - (344,797) (344,797)
----------- ----------- ----------- ----------- -----------
BALANCE, September 30, 1995 1,250 $ 125 $ 75,901 $ (625,612) $ 549,586
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-7-
<PAGE>
VALUE TEL, INC.
STATEMENTS OF CASH FLOWS
(Data with respect to September 30, 1994 and 1995 are unaudited)
<TABLE>
<CAPTION>
Period
July 17, 1992
through Nine Months Ended
Years Ended December 31, December 31, September 30,
------------------------------------------ -----------------------------
1994 1993 1992 1995 1994
------------------------------------------ -----------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ ( 280,260) $ 4,510 $ ( 5,065) $ ( 344,797) $ ( 141,924)
------------ ------------ ------------ -------------- ------------
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation expense 10,304 - - 13,915 2,783
Provision for bad debts 248,698 5,000 - 407,886 128,813
Deferred tax provision (credit) - 1,000 ( 1,000) - -
Changes in assets and liabilities:
Increase in accounts receivable ( 581,260) ( 152,554) ( 2,964) (1,916,935) ( 413,546)
Increase in other assets - ( 27,536) - ( 14,467) ( 50,930)
Increase in accounts payable and
accrued expenses 705,932 81,502 3,060 1,002,164 292,755
Increase in excise and other transaction
taxes payable 340,000 30,000 - 710,000 220,000
------------ ------------ ------------ -------------- ------------
Total adjustments 723,674 ( 62,588) ( 904) 202,563 179,875
------------ ------------ ------------ -------------- ------------
Net Cash provided by (used in) Operating Activities 443,414 ( 58,078) ( 5,969) ( 142,234) 37,951
------------ ------------ ------------ -------------- ------------
INVESTING ACTIVITIES
Purchases of furniture and equipment ( 51,516) - - ( 49,097) ( 19,815)
------------ ------------ ------------ -------------- ------------
Net cash used in investing activities ( 51,516) - - ( 49,097) ( 19,815)
------------ ------------ ------------ -------------- ------------
FINANCING ACTIVITIES
Issuance of common stock 26 - 1,000 75,000 26
Increase (decrease) in payables to stockholders 65,228 69,992 5,154 28,000 44,784
(Increase) decrease in receivables from stockholders ( 34,430) - - ( 56,500) -
------------ ------------ ------------ -------------- ------------
Net cash provided by financing activities 30,824 69,992 6,154 46,500 44,810
------------ ------------ ------------ -------------- ------------
Net increase (decrease) in cash 422,722 11,914 185 ( 144,831) 62,946
Cash, beginning of year 12,099 185 - 434,821 12,099
------------ ------------ ------------ -------------- ------------
Cash, end of year $ 434,821 $ 12,099 $ 185 $ 289,990 $ 75,045
------------ ------------ ------------ -------------- ------------
------------ ------------ ------------ -------------- ------------
</TABLE>
The accompanying notes are an integral
part of these financial statements
-8-
<PAGE>
VALUE TEL, INC.
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION
Value Tel, Inc. ("VTI") is primarily engaged in the business of reselling
discounted long distance telecommunication services.
On July 17, 1992, Discount Network Services, Inc. ("DNSI") was incorporated
in the state of Illinois with 100,000 shares of common stock authorized at
no par value and 1,000 shares issued and outstanding, valued at $1,000. The
company functioned as an agent to long distance telecommunication carriers
selling minutes at a discount to small businesses and received commissions
on initial sales and on usage on an ongoing basis. In mid-1993 DNSI began
its own billing on its sales and recruited other agents to sell minutes on
behalf of DNSI. The company still engages in both of these activities.
On April 30, 1994, Value Tel, Inc. ("Old ValueTel") was incorporated in the
state of Delaware as an S Corporation. Old ValueTel also sold long distance
minutes at a discount and outsourced the billing process to an unrelated
company. One thousand shares were authorized at a par value of $0.10 each
with 260 shares issued and outstanding.
On April 21, 1995, DNSI merged with Old ValueTel. DNSI's separate corporate
existence was terminated and the DNSI shareholders were issued .74 shares of
VTI for each share of DNSI. The business combination was accounted for as a
pooling of interests. The accompanying financial statements for 1995 are
based on the assumption that the companies were combined for the full year,
and financial statements for 1994 have been restated to reflect the
combination.
(2) SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE
Accounts receivable balances are reflected net of allowances for bad debts
of $253,698 and $5,000 as of December 31, 1994 and 1993 and $661,584 as of
September 30, 1995.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost net of accumulated depreciation.
Depreciation is provided using accelerated methods over their estimated
useful lives. Accumulated depreciation was $10,304 and $0 as of December
31, 1994 and 1993, respectively, and $24,219 at September 30, 1995.
REVENUE RECOGNITION
Sales revenue is recorded at the time of customer usage.
-9-
<PAGE>
VALUE TEL, INC.
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
VTI accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109 which requires the recognition of
deferred tax assets and liabilities at tax rates expected to be in effect
when these balances reverse. Future tax benefits attributed to temporary
differences are recognized currently to the extent that realization of such
benefits are more likely than not.
(3) RECEIVABLE/PAYABLES TO STOCKHOLDERS
Receivable from and payables to stockholders are due on demand and bear no
interest.
(4) EXCISE AND OTHER TRANSACTION TAX LIABILITIES
Customers of VTI are charged certain excise, sales and use taxes by various
federal, state and municipal taxing authorities based on telephone line
usage. These fees are required to be collected by VTI and remitted along
with report filings to the respective authorities. To date, no fees have
been remitted to any taxing authority and no reports have been filed.
Management fully intends to comply with all financial and reporting
obligations and is in the process of compiling analyses by tax type and
taxing authority.
At December 31, 1994 and 1993, the estimated liabilities for unremitted
excise and other transaction taxes (including estimated penalties and
interest) was $370,000 and $30,000, respectively. There were no sales
subject to these taxes for the period ended December 31, 1992.
(5) INCOME TAXES
VTI, post merger, is recognized for tax purposes as an S Corporation,
accordingly, taxable income and losses flow directly to the stockholders and
VTI has no federal income tax obligations.
For the periods prior to the merger, Old ValueTel also had S Corporation
status.
DNSI operated as a C Corporation and, as such, was subject to federal income
taxes at the corporate level. At December 31, 1994, DNSI had a net
operating loss carryforward of approximately $120,000 and gross deferred tax
assets of $35,300. VTI has established a full valuation allowance against
these carryforward benefits as management believes it is not likely that any
of the NOL carryforwards will be utilized prior to the effective date of the
merger, which is coincident with conversion to S Corporation status.
Deferred income tax provisions and credits for 1993 and 1992 were based on
applicable statutory tax rates and bear the customary relationship to net
income or loss.
-10-
<PAGE>
VALUE TEL, INC.
NOTES TO FINANCIAL STATEMENTS
(6) LEASE COMMITMENT
VTI has a lease obligation for office space which expires on October 31,
1996. Following is a schedule of future minimum rental payments:
<TABLE>
<CAPTION>
December 31, Amount
------------ ------
<S> <C>
1995 $ 35,310
1996 29,425
------
Total $ 64,735
------
------
</TABLE>
(7) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
VTI had no cash payments for interest or income taxes in any periods
comprehended by these financial statements.
(8) UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine months ended September 30, 1995 are not necessarily indicative of
the results expected for the year ended December 31, 1995.
(9) CONCENTRATIONS OF CREDIT RISK
Trade receivables subject VTI to a concentration of credit risk with its
customers. In management's opinion, the risk is minimal due to VTI's large
and diverse customer base and their geographic dispersion. Credit is
extended on an evaluation of the customer's financial condition and
collateral is not generally required.
-11-
<PAGE>
VALUE TEL, INC.
NOTES TO FINANCIAL STATEMENTS
(10) SEPARATE AND COMBINED RESULTS OF OPERATIONS
Following is the summary of financial information for separate companies for
the period January 1, 1994 through December 31, 1994 and January 1, 1995
through April 21, 1995, date of merger.
<TABLE>
<CAPTION>
1994
---- Combined
Summarized Assets Old ValueTel DNSI Total
and Liabilities
- -------------------------------------- -------------- ------------- -------------
<S> <C> <C> <C>
Cash $ 1,552 $ 433,269 $ 434,821
Accounts receivable - 483,080 483,080
Other assets 6,573 96,605 103,178
Current liabilities ( 29,500) (1,130,994) (1,160,494)
Payables to stockholders (140,374) - ( 140,374)
--------- ----------- -----------
$ (161,749) $( 118,040) $( 279,789)
--------- ----------- -----------
--------- ----------- -----------
Summarized Results
of Operations
- --------------------------------------
Total revenue $ 20,390 $ 3,325,646 $ 3,346,036
--------- ----------- -----------
--------- ----------- -----------
Net loss $ (161,775) $( 118,485) $( 280,260)
--------- ----------- -----------
--------- ----------- -----------
1995
----
Summarized Assets
and Liabilities
- --------------------------------------
Cash $ 13,094 $ 378,749 $ 391,843
Accounts receivable 336,051 685,615 1,021,666
Other assets 4,500 167,127 171,627
Current liabilities (368,166) (1,486,679) (1,854,845)
Payables to stockholders (167,900) - ( 167,900)
--------- ----------- -----------
$ (182,421) $( 255,188) $( 437,609)
--------- ----------- -----------
--------- ----------- -----------
Summarized Results
of Operations
- --------------------------------------
Total revenue $ 587,349 $ 1,926,673 $ 2,714,022
--------- ----------- -----------
--------- ----------- -----------
Net loss $ ( 41,096) $( 97,107) $( 138,203)
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
-12-
<PAGE>
VALUE TEL, INC.
NOTES TO FINANCIAL STATEMENTS
(11) SUBSEQUENT EVENT - SALE OF ASSETS
On October 31, 1995, VTI entered into an Asset Purchase Agreement with
Network Long Distance, Inc. ("NLD"), a publicly traded company whose stock
is listed over-the-counter, to sell substantially all customer accounts
including customer lists, mailing lists, files, accounts receivables and
contracts related to such customers, and all equipment used by or for the
benefit of such customers. The purchase price is based on the sum of 1) a
multiple of monthly revenue, subject to certain adjustments pursuant to the
agreement, and 2) accounts receivable balances at October 31, 1995 to be
transferred to NLD which meet certain criteria.
VTI, in consideration for transferring the specified assets, will receive
approximately 890,000 restricted shares of NLD voting common stock, which
had a last-trade price of $10 per share on closing date. The actual amount
may be adjusted at the conclusion of the "Customer Evaluation Period". The
disposition of the stock is restricted for a two-year period. In addition,
NLD will assume and honor liabilities of VTI totaling $1,359,000.
-13-
<PAGE>
(b) Pro Forma Financial Information.
PRO FORMA COMBINING FINANCIAL STATEMENTS
The following unaudited Pro Forma Combining Balance Sheet as of September 30,
1995 and unaudited Pro Forma Combining Income Statements for the six months
ended September 30, 1995 and 1994, and for the years ended March 31, 1995 and
1994, illustrate the effect of the Asset Purchase Agreement (the "Purchase") as
if the Purchase had occurred for balance sheet purposes as of September 30,
1995, and for income statement purposes at the beginning of the earliest period
presented.
Pursuant to the terms of the Purchase, Network Long Distance ("Network")
acquired substantially all of the assets of Value Tel Inc. ("Value Tel"), which
included the customer base as of October 31, 1995, and the related receivables,
for 879,055 shares of restricted common stock, cancellation of accounts
receivable of $607,595 and assumption of $839,794 in liabilities. Of the shares
issued, 10,000 will be held in escrow for one year subject to the discovery of
the existence of previously undisclosed liabilities. 6,500 of the shares issued
will also be held in escrow subject to a possible adjustment in the purchase
price based on the value of customer billings at the end of a six-month period.
In connection with the Purchase, Value Tel and certain of its officers and
directors executed five year non-competition agreements with Network. Value Tel
also signed an agreement with Network to provide billing and customer services
to the customers purchased by Network for a period of six months.
Network reports results on a March 31 fiscal year-end; Value Tel reports results
on a December 31 year-end. For purposes of the unaudited Pro Forma Combining
Income Statements for the years ended March 31, 1995 and 1994, the Value Tel
amounts represent Value Tel's historical results of operations for the years
ended December 31, 1994 and 1993, respectively.
These Pro Forma Combining Financial Statements should be read in conjunction
with the historical financial statements of Network which are incorporated by
reference herein and the historical financial statements of Value Tel which are
located elsewhere herein.
The Pro Forma Combining Financial Statements are presented for comparative
purposes only and are not intended to be indicative of actual results had the
transactions occurred as of the dates indicated above nor do they purport to
indicate results which may be attained in the future.
-14-
<PAGE>
PRO FORMA COMBINING BALANCE SHEET (1)
AS OF SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Network Value Tel Pro Forma Pro Forma
Historical Historical Adjustments Combined
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Current assets $5,932,724 $2,373,049 ($607,595) (2) $7,317,259
(380,919) (3)
Property and equipment, net 2,368,806 76,394 (76,394) (3) 2,368,806
Intangibles, net 2,662,523 - 7,972,990 (4) 10,635,513
Other assets 360,250 42,003 (42,003) (3) 360,250
----------- ---------- ----------- -----------
Total assets $11,324,303 $2,491,446 $6,866,079 $20,681,828
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Current liabilities $4,035,220 $3,041,032 ($607,595) (2) $4,875,014
(1,593,643) (3)
Deferred Tax Liability 49,538 - - 49,538
Stockholders' equity:
Series A preferred stock - - - -
Common stock 300 125 (125) (5) 386
86 (6)
Additional paid-in capital 6,578,990 75,901 (75,901) (5) 15,096,635
8,517,645 (6)
Retained earnings 660,255 (625,612) 625,612 (5) 660,255
----------- ---------- ----------- -----------
Total stockholders' equity 7,239,545 (549,586) 9,067,317 15,757,276
----------- ---------- ----------- -----------
Total liabilities and
stockholders' equity $11,324,303 $2,491,446 $6,866,079 $20,681,828
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
-15-
<PAGE>
PRO FORMA COMBINING INCOME STATEMENT (1)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Network Value Pro Forma Pro Forma
Historical Tel Adjustments Combined
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $14,224,260 $4,612,028 $(1,716,259) (7) $17,120,029
Operating expenses: (9)
Telecommunications costs 10,997,430 3,993,057 (1,716,259) (7) 13,274,228
Selling, general and administrative 2,748,373 839,559 - 3,587,932
Depreciation and amortization 357,073 9,277 (9,277) (3) 727,186
370,113 (8)
----------- ---------- ----------- -----------
Total 14,102,876 4,841,893 (1,355,423) 17,589,346
----------- ---------- ----------- -----------
Operating income 121,384 (229,865) (360,836) (469,317)
Interest (income) expense, net 40,253 - - 40,253
----------- ---------- ----------- -----------
Income before income taxes 81,131 (229,865) (360,836) (509,570)
Provision for income taxes 40,968 - (40,968) (10) -
----------- ---------- ----------- -----------
Net income (loss) $40,163 ($229,865) ($319,868) ($509,570)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Number of shares issued
and outstanding:
Primary 2,447,747 3,310,302
----------- -----------
----------- -----------
Fully Diluted 2,447,747 3,310,302
----------- -----------
----------- -----------
Earnings per share: (11)
Primary $0.02 $(0.15)
----------- -----------
----------- -----------
Fully Diluted $0.02 $(0.15)
----------- -----------
----------- -----------
</TABLE>
-16-
<PAGE>
PRO FORMA COMBINING INCOME STATEMENT (1)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Network Value Pro Forma Pro Forma
Historical Tel Adjustments Combined
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $10,696,480 $1,400,296 $(1,230,038) (7) $10,866,738
Operating expenses: (9)
Telecommunications costs 8,525,586 1,258,625 (1,230,038) (7) 8,554,173
Selling, general and administrative 1,690,539 234,431 - 1,924,970
Depreciation and amortization 145,392 1,855 (1,855) (3) 515,505
370,113 (8)
----------- ---------- ----------- -----------
Total 10,361,517 1,494,911 (861,780) 10,994,648
----------- ---------- ----------- -----------
Operating income 334,963 (94,615) (368,258) (127,910)
Interest (income) expense, net (57,797) - - (57,797)
----------- ---------- ----------- -----------
Income before income taxes 392,760 (94,615) (368,258) (70,113)
Provision for income taxes 146,654 - (141,634) (10) 5,020
----------- ---------- ----------- -----------
Net income (loss) $246,106 ($94,615) ($226,624) ($75,133)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Number of shares issued
and outstanding:
Primary 2,326,289 3,188,844
----------- -----------
----------- -----------
Fully Diluted 2,326,289 3,188,844
----------- -----------
----------- -----------
Earnings per share: (11)
Primary $0.11 $(0.02)
----------- -----------
----------- -----------
Fully Diluted $0.11 $(0.02)
----------- -----------
----------- -----------
</TABLE>
-17-
<PAGE>
PRO FORMA COMBINING INCOME STATEMENT (1)
FOR THE TWELVE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Network Value Pro Forma Pro Forma
Historical Tel Adjustments Combined
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $24,216,948 $3,346,036 $(2,850,082) (7) $24,712,902
Operating expenses: (9)
Telecommunications costs 19,477,701 3,028,341 (2,850,082) (7) 19,655,960
Selling, general and administrative 3,979,257 587,651 - 4,566,908
Depreciation and amortization 298,700 10,304 (10,304) (3) 1,038,927
740,227 (8)
----------- ---------- ----------- -----------
Total 23,755,658 3,626,296 (2,120,159) 25,261,795
----------- ---------- ----------- -----------
Operating income 461,290 (280,260) (729,923) (548,893)
Interest (income) expense, net (147,902) - - (147,902)
----------- ---------- ----------- -----------
Income before income taxes 609,192 (280,260) (729,923) (400,991)
Provision for income taxes 118,743 - (118,743) (10) -
----------- ---------- ----------- -----------
Net income (loss) $490,449 ($280,260) ($611,180) ($400,991)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Number of shares issued
and outstanding:
Primary 2,370,999 3,233,554
----------- -----------
----------- -----------
Fully Diluted 2,370,999 3,233,554
----------- -----------
----------- -----------
Earnings per share: (11)
Primary $0.21 $(0.12)
----------- -----------
----------- -----------
Fully Diluted $0.21 $(0.12)
----------- -----------
----------- -----------
</TABLE>
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<PAGE>
PRO FORMA COMBINING INCOME STATEMENT (1)
FOR THE TWELVE MONTHS ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
Network Value Pro Forma Pro Forma
Historical Tel Adjustments Combined
----------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues $10,621,705 $393,975 $(581,753) (7) $10,433,927
Operating expenses: (9)
Telecommunications costs 8,075,429 326,258 (581,753) (7) 7,819,934
Selling, general and administrative 1,951,992 62,207 - 2,014,199
Depreciation and amortization 189,923 - 740,227 (8) 930,150
----------- -------- ----------- -------------
Total 10,217,344 388,465 158,474 10,764,283
----------- -------- ----------- -------------
Operating income 404,361 5,510 (740,227) (330,356)
Interest (income) expense, net 83,041 - - 83,041
----------- -------- ----------- -------------
Income before income taxes 321,320 5,510 (740,227) (413,397)
Provision for income taxes 114,955 1,000 (115,955) (10) -
----------- -------- ----------- -------------
Net income 206,365 4,510 (624,272) (413,397)
Preferred dividend requirement 31,984 - - 31,984
----------- -------- ----------- -------------
Net income applicable to common
stockholders $174,381 $4,510 ($624,272) $445,381
----------- -------- ----------- -------------
----------- -------- ----------- -------------
Number of shares issued
and outstanding:
Primary 1,595,840 2,458,395
----------- -------------
----------- -------------
Fully Diluted 1,595,840 2,458,395
----------- -------------
----------- -------------
Earnings per share: (11)
Primary $0.11 $0.18
----------- -------------
----------- -------------
Fully Diluted $0.11 $0.18
----------- -------------
----------- -------------
</TABLE>
-19-
<PAGE>
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
1. The unaudited Pro Forma Combining Financial Statements do not give effect
to any potential cost savings and synergies that could result from the
Purchase. The pro forma data are not necessarily indicative of the
operating results or financial position that would have occurred had the
Purchase been consummated at the dates indicated, nor necessarily
indicative of future operating results or financial position.
2. This adjustment represents the forgiveness by Network of accounts
receivable due from Value Tel.
3. These adjustments represent the elimination of certain assets and
liabilities of Value Tel and the related income (expense) items that
Network will not acquire as set forth in the Agreement. The assets and
liabilities excluded include cash, property and equipment, other assets,
and other liabilities.
4. This adjustment reflects the excess of cost over net tangible assets
acquired in the Agreement. For purposes of allocating the acquisition
costs among the various assets acquired, Network has tentatively considered
the carrying value of the acquired assets to approximate their fair value,
with all of the excess of such acquisition costs being attributed to
customer base, a non-compete agreement and goodwill. It is Network's
intention, subsequent to the acquisition, to more fully evaluate the
acquired assets and, as a result, the allocation of the acquisition costs
among the tangible and intangible assets acquired may change.
5. These adjustments represent the elimination of Value Tel's equity.
6. These adjustments reflect the issuance of approximately 862,555 shares of
Network Common Stock in accordance with the Purchase. These adjustments do
not include 16,500 shares issued that are held in escrow as it is uncertain
as to whether or not Value Tel will actually receive these shares.
7. These adjustments reflect the elimination of the revenue and
telecommunications costs of the long distance traffic carried by Network on
Value Tel's behalf which was purchased by Network.
8. This adjustment represents the amortization of the excess of cost over net
tangible assets acquired in the Purchase (see Note 4). Specifically, the
customer base of $3,334,297 is amortized over 7 years, the non-compete
agreement of $845,323 is amortized over 5 years, and the goodwill of
$3,793,370 is amortized over 40 years.
9. The unaudited Pro Forma Combining Income Statements do not reflect the
costs and potential savings that will occur under the service agreement
between Network and Value Tel whereby Value Tel will provide, on Network's
behalf, billing and customer services to the customers purchased by
Network.
-20-
<PAGE>
10. This adjustment reflects the tax effect of the inclusion of the purchased
operations of Value Tel. The tax benefits were provided at the combined
Federal and state statutory rate of 39%.
11. Pro forma per share data are based on the number of Network common and
common equivalent shares that would have been outstanding had the purchase
occurred on the earliest date presented. Including the effect of the
escrowed shares would be anti-dilutive to the Pro Forma Combined Entity's
operations; therefore, these shares are not included in the fully diluted
calculation.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETWORK LONG DISTANCE, INC.
Dated: December 29, 1995 By: /s/ Marc I. Becker
------------------------------------------
Marc I. Becker,
Executive Vice President
-22-
