<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 10 or 15(d) of the
Securities Exchange Act of 1934
MAY 31, 1996
--------------------------------------------------
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>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Universal Network Services,
Inc. and subsidiaries:
ITEM 7(a)
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Universal Network Services, Inc.
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Universal
Network Services, Inc. and subsidiaries (the "Company") as of December 31, 1994
and 1995, and the related consolidated statements of operations, shareholders'
equity (deficit) and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Universal Network Services, Inc. and subsidiaries as of December 31, 1994 and
1995, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
The consolidated financial statements have been prepared assuming the Company
will continue as a going concern. However, the Company has incurred substantial
losses in the past two years and has a significant working capital deficit at
December 31, 1995. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management is implementing plans which
it believes will allow the Company to improve operations and cash flows, and
meet its obligations as they come due, as more fully discussed in Note 1 to the
consolidated financial statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Corbin & Wertz
Irvine, California
May 24, 1996
-2-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31, March 31,
ASSETS 1994 1995 1996
------------ ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash $ 108,300 $ 480,800 $ 29,500
Accounts receivable, net of
allowance for doubtful
accounts of $254,200, $525,000
and $600,300 (unaudited) at
December 31, 1994 and 1995 and
at March 31, 1996, respectively 453,000 1,470,300 1,811,300
Receivables from others (Note 7) 178,100 7,200 45,300
Other 18,800 17,000 97,900
---------- ---------- ----------
Total current assets 758,200 1,975,300 1,984,000
---------- ---------- -----------
Property and equipment (Notes 3
and 4):
Communications equipment 3,094,000 2,822,500 2,897,200
Furniture, fixtures and other 450,100 538,100 549,000
---------- ---------- ----------
3,544,100 3,360,600 3,446,200
Less: accumulated depreciation
and amortization (1,960,500) (2,056,300) (2,242,300)
---------- ---------- ----------
Total property and equipment 1,583,600 1,304,300 1,203,900
---------- ---------- ----------
Excess of cost over net tangible
assets acquired - Customer base
acquisition costs, net (Notes 2,
3 and 9) 1,682,900 1,405,100 1,327,700
---------- ---------- ----------
Other long-term assets 48,500 24,700 25,600
---------- ---------- ----------
$ 4,073,200 $ 4,709,400 $ 4,541,200
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Continued
-3-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' December 31, December 31, March 31,
EQUITY 1994 1995 1996
------------ ------------- -------------
(Unaudited)
<S> <C> <C> <C>
Current liabilities:
Current maturities of long-
term debt and capital lease
obligations (Notes 2, 3 and 4) $ 1,610,800 $ 2,522,100 $ 2,374,100
Accounts payable 289,500 140,200 190,100
Accrued line costs (Notes 2, 5
and 9) 1,242,200 8,277,400 8,555,000
Deferred revenues --- 847,500 1,070,700
Other accrued expenses 435,500 1,154,600 1,007,300
------------ ------------- -------------
Total current liabilities 3,578,000 12,941,800 13,197,200
------------ ------------- -------------
Long-term debt, net of current
maturities (Notes 2 and 3) 135,100 --- ---
------------ ------------- -------------
Capital lease obligations, net of
current maturities (Note 4) 44,800 170,200 129,700
------------ ------------- -------------
Deferred income tax liability
(Note 6) 1,109,400 1,109,400 1,109,400
------------ ------------- -------------
Commitments and contingencies
(Note 5)
Shareholders' deficit:
Common stock, $.001 par value,
25,000,000 shares authorized,
issued and outstanding 25,000 25,000 25,000
Additional paid-in capital 2,438,400 2,438,400 2,438,400
Accumulated deficit (2,233,700) (10,951,600) (11,334,700)
------------ ------------- -------------
229,700 (8,488,200) (8,871,300)
Less: common stock in treasury -
12,500,000 shares, at cost (1,023,800) (1,023,800) (1,023,800)
------------ ------------- -------------
Total shareholders' deficit (794,100) (9,512,000) (9,895,100)
------------ ------------- -------------
$ 4,073,200 $ 4,709,400 $ 4,541,200
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
See independent auditors' report and
accompanying notes to consolidated financial statements
-4-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
<TABLE>
Three Three
December 31, December 31, Months Ended Months Ended
1994 1995 March 31, 1995 March 31, 1996
------------ ------------ -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues (Note 2) $ 4,170,300 $ 9,307,000 $ 1,580,000 $ 3,607,700
----------- ----------- ----------- -----------
Operating expenses (Note 5):
Line costs 2,543,000 10,888,500 1,292,100 2,360,500
Selling, general and administrative 2,578,800 5,544,400 1,253,300 1,296,500
Depreciation and amortization 864,500 815,000 206,200 263,300
----------- ----------- ----------- -----------
Total operating expenses 5,986,300 17,247,900 2,751,600 3,920,300
----------- ----------- ----------- -----------
Operating loss (1,816,000) (7,940,900) (1,171,600) (312,600)
----------- ----------- ----------- -----------
Other expense:
Interest expense, net (Notes 3 and 4) 230,200 451,700 104,900 69,700
Loss on write-off of customer base
acquisition costs (Note 2) 250,000 --- --- ---
Write-off of receivables from
affiliates (Note 8) 1,088,700 305,300 --- ---
Miscellaneous --- --- --- ---
----------- ----------- ----------- -----------
Total other expense 1,568,900 757,000 104,900 69,700
----------- ----------- ----------- -----------
Loss before income taxes (3,384,900) (8,697,900) (1,276,500) (382,300)
Income tax provision (Note 6) 8,000 20,000 800 800
----------- ----------- ----------- -----------
Net loss $(3,392,900) $(8,717,900) $(1,277,300) $ (383,100)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See independent auditors' report and
accompanying notes to consolidated financial statements
-5-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1994 and 1995 and
For The Three Months Ended March 31, 1996
<TABLE>
Retained
Common Stock Treasury Stock Earnings Total
---------------- -------------------- Paid-in (Accumulated Shareholders'
Shares Amount Shares Amount Capital Deficit) Equity (Deficit)
------ ------ ------ ------ ------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
January 1, 1994 25,000,000 $ 25,000 (12,500,000) $ (991,000) $2,438,400 $ 1,159,200 $ 2,631,600
Adjustment to
repurchase of
common stock --- --- --- (32,800) --- --- (32,800)
Net loss --- --- --- --- --- (3,392,900) (3,392,900)
---------- ------- ---------- ---------- --------- ----------- ----------
Balances,
December 31, 1994 25,000,000 25,000 (12,500,000) (1,023,800) 2,438,400 (2,233,700) (794,100)
Net loss --- --- --- --- --- (8,717,900) (8,717,900)
---------- ------- ---------- ---------- --------- ----------- ----------
Balances,
December 31, 1995 25,000,000 25,000 (12,500,000) (1,023,800) 2,438,400 (10,951,600) (9,512,000)
Net loss --- --- --- --- --- (383,100) (383,100)
---------- ------- ---------- ---------- --------- ----------- ----------
Balances,
March 31, 1996
(Unaudited) 25,000,000 $ 25,000 (12,500,000) $(1,023,800) $2,438,400 $(11,334,700) $(9,895,100)
---------- ------- ---------- ---------- --------- ----------- ----------
---------- ------- ---------- ---------- --------- ----------- ----------
</TABLE>
See independent auditors' report and
accompanying notes to consolidated financial statements
-6-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
<TABLE>
Three Three
December 31, December 31, Months Ended Months Ended
1994 1995 March 31, 1995 March 31, 1996
------------ ------------ -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,392,900) $ (8,717,900) $ (1,277,300) $ (383,100)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Write-off of investment (Note 2) 250,000 --- --- ---
Write-off of receivables from affiliates 1,088,700 305,300 --- ---
Loss (gain) on sale of property and equipment (2,400) 1,300 --- ---
Debt restructuring costs and non-cash interest
(Note 5) 64,100 179,200 --- ---
Depreciation and amortization 864,500 814,900 206,200 263,300
Provision for doubtful accounts 327,400 489,100 156,600 75,000
Changes in operating assets and liabilities:
Accounts receivable (313,700) (1,506,400) (436,800) (416,000)
Other current assets 13,900 1,800 7,200 ---
Accounts payable (32,200) (149,300) 170,400 49,900
Accrued line costs 444,100 8,268,300 996,400 277,600
Deferred revenues --- 847,500 --- 223,200
Other accrued expenses 73,400 746,000 39,100 (147,300)
---------- ---------- ---------- ----------
Net cash provided by (used in) operating activities (615,100) 1,279,800 (138,200) (57,400)
---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (284,400) (79,100) --- (85,600)
Sales of customer acquisition costs and property
and equipment 5,800 --- --- ---
Purchase of customer acquisition costs (Note 2) (657,900) --- --- ---
Other long-term assets 31,400 23,800 7,200 (900)
Net change in receivables from others 559,400 170,900 93,100 (38,100)
Increase in receivables from shareholders and
affiliates (486,900) (305,300) (27,000) (80,900)
---------- ---------- ---------- ----------
Net cash provided by (used in) investing
activities (832,600) (189,700) 73,300 (205,500)
---------- ---------- ---------- ----------
</TABLE>
Continued
-7-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
<TABLE>
Three Three
December 31, December 31, Months Ended Months Ended
1994 1995 March 31, 1996 March 31, 1996
------------ ------------ -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Adjustment to repurchase of common stock (32,800) --- --- ---
Proceeds from issuance of long-term debt 166,500 --- --- ---
Principal payments on long-term debt (491,500) (634,500) --- ---
Principal payments on capital lease
obligations (189,900) (83,100) (9,200) (188,400)
---------- ---------- ---------- ----------
Net cash used in financing activities (547,700) (717,600) (9,200) (188,400)
---------- ---------- ---------- ----------
Net change in cash (1,995,400) 372,500 (74,100) (451,300)
Cash, beginning of period 2,103,700 108,300 (108,300) 480,800
---------- ---------- ---------- ----------
Cash, end of period $ 108,300 $ 480,800 $ 34,200 $ 29,500
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 176,700 $ 245,200 $ 66,900 $ 69,400
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Cash paid for income taxes $ --- $ --- $ --- $ ---
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Supplemental schedule of noncash investing and financing activities:
During the years ended December 31, 1994 and 1995, $920,600 and $180,000,
respectively, of property and equipment was acquired through the issuance of
capital lease obligations.
During 1995, $1,233,100 of accrued line costs were converted into a term note
payable to a vendor (see Note 3).
See independent auditors' report and
accompanying notes to consolidated financial statements
-8-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
THE COMPANY
Universal Network Services, Inc. (a Nevada Corporation) and subsidiaries (the
"Company"), a wholly-owned subsidiary of Uni-Net, Inc., is an interexchange
carrier that provides telecommunications services to both residential and
business customers throughout the United States and in certain foreign
countries.
BASIS OF PRESENTATION
The consolidated financial statements have been presented on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. Certain conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The Company has incurred substantial losses in the past two years and has a
significant working capital deficit at December 31, 1995. The Company's
continuation as a going concern is dependent on its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to obtain
additional financing as may be required, and ultimately to attain profitable
operations. The Company has entered into a definitive agreement to sell part of
its long-distance customer base and related accounts receivable (see Note 9),
plans to restructure its capital lease obligations, plans to increase its
revenues by rebuilding its long-distance customer base, and plans to expand its
operations through new telecommunications products. The consolidated financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the three months ended March 31, 1995
and 1996 and the related notes thereto are unaudited, but include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of the financial position at March
31, 1996, and the results of operations and cash flows for the three months
ended March 31, 1995 and 1996. Results for the interim period are not
necessarily indicative of the results to be expected for the fiscal year ended
December 31, 1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period.
Actual results could materially differ from those estimates.
Continued
-9-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION,
CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has financial instruments whereby the fair market value of the
financial instruments could be different than that recorded on a historical
basis on the accompanying consolidated balance sheets. The Company's financial
instruments consist of its cash, accounts receivable, accounts payable and long-
term debt. The carrying amounts of the Company's financial instruments
generally approximate their fair values at December 31, 1995 and 1994.
CONCENTRATIONS OF CREDIT RISK
The Company, at times, has cash held with financial institutions in excess of
amounts insured by federal agencies.
The Company's accounts receivable is comprised of numerous small amounts due
from customers for whom the Company is providing telecommunications services.
The Company extends credit to both residential and business customers throughout
the United States and in certain foreign countries. The Company establishes an
allowance for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends and other available information. The
Company does not obtain collateral to secure its accounts receivable.
Due to the nature of the Company's business, there are no customers who
accounted for 10% or more of revenues during the years ended December 31, 1994
or 1995 or for the three months ended March 31, 1995 (unaudited) and 1996
(unaudited) or 10% of accounts receivable at December 31, 1994 or 1995 or at
March 31, 1996 (unaudited), respectively.
One vendor accounted for 89%, 90%, 89% (unaudited) and 90% (unaudited) of total
line costs for the years ended December 31, 1994 and 1995 and for the three
months ended March 31, 1995 and 1996, respectively.
The same vendor accounted for 69%, 94% and 96% (unaudited) of total accrued line
costs as of December 31, 1994 and 1995 and at March 31, 1996, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets as
follows:
Communications equipment 2 to 10 years
Furniture, fixtures and other 3 to 5 years
Amortization is provided on leasehold improvements over the lesser of the term
of the lease or the estimated useful lives of the related assets. Maintenance
and repairs are expensed as incurred. Replacements and betterments are
capitalized. The cost and related accumulated depreciation of assets sold or
retired are removed from the accounts, and any resulting gain or loss is
reflected in results of operations. Depreciation expense was $590,300,
$537,000, $150,000 (unaudited) and $186,000 (unaudited) for the years ended
December 31, 1994 and 1995, and for the three months ended March 31, 1995 and
1996, respectively.
Continued
-10-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION,
CONTINUED
The Company's communications equipment is highly specialized. Should there be a
decline in demand for the Company's services, the carrying value of the
communications equipment may not be recovered from future operations.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "ACCOUNTING FOR INCOME TAXES." Under the asset
and liability method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the consolidated financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.
EXCESS OF COST OVER NET TANGIBLE ASSETS ACQUIRED
Customer base acquisition costs are incurred as a result of business
combinations and are recorded based upon the estimated value of the customer
bases acquired (see Note 2). These costs are being amortized using the
straight-line method over 7 years. As of December 31, 1994 and 1995 and at
March 31, 1996, these costs were net of accumulated amortization of $315,900,
$593,800 and $671,200 (unaudited), respectively. The Company assesses the
recoverability of the customer base acquisition costs by determining whether the
amortization of the customer base acquisition costs balance over its remaining
life can be recovered through projected undiscounted future cash flows. The
amount of impairment if any, is measured based on projected undiscounted future
cash flows and charged to operations in the period in which the impairment is
determined by management. Amortization expense for the years ended December 31,
1994 and 1995 and for the three months ended March 31, 1995 and 1996 was
$274,200, $277,800, $56,200 (unaudited) and $77,400 (unaudited), respectively.
Certain of the customer bases are collateral for long-term debt and accrued line
costs (see Notes 3 and 9).
RECOGNITION OF REVENUE
Customer long distance calls are routed over long distance telephone lines
provided by others and through switching centers owned or leased by the Company.
Revenue is recorded on long distance telecommunications sales based upon
customer usage. Revenues on prepaid calling cards are deferred until customer
usage.
NOTE 2 - BUSINESS COMBINATIONS AND CUSTOMER BASE ACQUISITIONS
Between 1990 and 1993, Universal Network Services, Inc. or its subsidiaries
completed a series of acquisitions of other long distance companies offering
services similar to those offered by the Company. Such acquisitions were
accomplished through the purchase of assets of the acquired entities for cash,
assumption of liabilities, issuances of notes or a combination thereof. All of
the acquisitions were accounted for using the purchase method and the excess, if
any, of the purchase price over the fair value of the net tangible assets
acquired was allocated to customer acquisition costs (see Note 1).
During 1994, the Company acquired two customer bases for cash of $407,900.
Continued
-11-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 2 - BUSINESS COMBINATIONS AND CUSTOMER BASE ACQUISITIONS, CONTINUED
During 1994, the Company acquired 50% of the outstanding shares of common stock
of Call and Save Communications (CAS), an unrelated entity, for $250,000 in
cash. However, as of December 31, 1994, due to the precarious financial
condition of CAS, the Company determined that its investment had been impaired,
and accordingly, wrote-off such investment.
NOTE 3 - LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1995 and March 31, 1996 consists of the
following:
<TABLE>
<CAPTION>
December 31, December 31, March 31,
1994 1995 1996
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Non-interest bearing note payable
to an unrelated entity, issued in
connection with an acquisition
(see Note 2) and payable on
demand. $ 67,900 $ 67,900 $ 67,900
Notes payable to a bank, bearing
interest at rates ranging from 8%
to 10.3% per annum, collateralized
by certain furniture, equipment
and automobiles, payable in
monthly installments of principal
and interest through December 1996. 163,400 135,100 135,100
Note payable to a vendor, bearing
interest at 12% per annum,
collateralized by certain customer
bases, payable in monthly
installments of principal and
interest through June 1996. --- 653,800 653,800
---------- ---------- ----------
231,300 856,800 856,800
Less current maturities (96,200) (856,800) (856,800)
---------- ---------- ----------
$ 135,100 $ --- $ ---
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Continued
-12-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 4 - CAPITAL LEASE OBLIGATIONS
Assets under capital leases are capitalized using interest rates appropriate at
the inception of each lease. Assets under capital leases as of December 31,
1994 and 1995 and as of March 31, 1996 are as follows:
<TABLE>
December 31, December 31, March 31,
1994 1995 1996
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Communication equipment $ 2,843,300 $ 2,542,400 $ 2,542,400
Furniture, fixtures and other 80,700 125,300 125,300
---------- ---------- ----------
2,924,000 2,667,700 2,667,700
Accumulated amortization (1,389,600) (1,923,100) (2,089,400)
---------- ---------- ----------
$ 1,534,400 $ 744,600 $ 578,300
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Future annual minimum lease obligations for assets under capital leases as of
December 31, 1995 are as follows:
Years ending
December 31,
------------
1996 $ 1,967,000
1997 81,100
1998 75,900
1999 59,600
2000 8,200
----------
Total minimum lease obligations 2,191,800
Less interest (356,300)
----------
Present value of minimum lease obligations 1,835,500
Less current maturities (1,665,300)
----------
Long-term obligations $ 170,200
-----------
-----------
See Note 5 for information related to capital lease restructuring and default.
Continued
-13-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 5 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
An affiliate of the Company (See Note 8) leases its headquarters under an
operating lease. As of December 31, 1995, rent allocated to the Company by its
affiliate amounts to approximately $7,800 per month and is included in
management fees. In addition, the Company has entered into various lease
agreements which expire through 1998. The minimum lease payments required under
these leases, excluding the aforementioned monthly lease payment due to an
affiliate, are as follows:
Years ending
December 31,
------------
1996 $ 67,400
1997 64,200
1998 4,400
----------
$ 136,000
----------
----------
Rent expense under these leases amounted to $92,400, $196,800, $51,300
(unaudited) and $44,700 (unaudited) in 1994 and 1995 and for the three months
ended March 31, 1995 and 1996, respectively.
CAPITAL LEASE AGREEMENTS
As of December, 1994, the Company was delinquent on scheduled payments under the
terms of certain of its capital lease agreements. During 1995, these lease
agreements were restructured to modify the original payment terms. In
connection with this restructuring, the Company incurred $179,200 in refinancing
charges and additional interest costs. The balance outstanding under these
particular capital lease obligations as of December 31, 1994 and 1995 and at
March 31, 1996 totaled $1,390,700, $1,503,800 and $1,518,800 (unaudited),
respectively.
As of December 31, 1995, the Company is in default of the payment terms of the
restructuring agreement. Management anticipates that the payment terms of these
leases will be restructured again in the near future. The lessor can foreclose
on the related equipment in the event the default is not cured.
PAYABLE TO PRIMARY VENDOR
The Company is currently in default of its minimum time usage requirements under
its reseller agreement and is significantly past due in its payments owed to its
primary vendor. Accrued line costs of $7,759,000 and $8,247,000 (unaudited) as
of December 31, 1995 and March 31, 1996 were owed to this vendor. The Company
is currently in discussions with this vendor to cure the default. The
discussions include the paydown of a portion of its accrued line costs and a
change in the minimum time usage requirements (see Note 9). Certain of the
Company's customer bases secure the accrued line costs. To the extent that the
Company and the vendor cannot come to terms, the vendor has the right to
foreclose on certain of the Company's customer bases and can cancel its reseller
contract with the Company. The Company's future revenues would be adversely
affected if the Company and the vendor can not reach an agreement.
Continued
-14-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 5 - COMMITMENTS AND CONTINGENCIES, CONTINUED
LITIGATION
The Company is involved in various legal and regulatory proceedings which are
incidental to its business and the long distance industry. In the opinion of
management, the ultimate outcome of such proceedings will not have a material
adverse effect on the consolidated financial statements of the Company.
NOTE 6 - INCOME TAXES
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at December 31, 1994 and 1995 and
March 31, 1996 are presented below:
<TABLE>
December 31, December 31, March 31,
1994 1995 1996
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally
due to allowance for doubtful
accounts $ 102,000 $ 211,000 $ 241,000
Amortization of customer
acquisition costs, principally
due to differences in
amortization 72,000 130,000 146,600
Compensated absences and other
accrued expenses, principally
due to accrual for financial
reporting purposes 15,700 22,100 22,100
Net operating loss carryforwards 1,928,300 5,036,300 5,178,400
---------- ---------- ----------
Total gross deferred tax
assets 2,118,000 5,399,400 5,588,100
Less valuation allowance (1,251,500) (4,472,700) (4,651,300)
---------- ---------- ----------
Total net deferred tax assets 866,500 926,700 936,800
Deferred tax liabilities:
Plant and equipment, principally
due to differences in
depreciation and capitalized
interest (240,800) (301,000) (311,100)
Gain on sale of assets recognized
for financial statement purposes
but deferred for tax purposes (1,735,100) (1,735,100) (1,735,100)
---------- ---------- ----------
Total gross deferred tax
liabilities (1,975,900) (2,036,100) (2,046,200)
---------- ---------- ----------
Net deferred tax liability $ (1,109,400) $ (1,109,400) $ (1,109,400)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Continued
-15-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 6 - INCOME TAXES, CONTINUED
Income tax expense for the years ended December 31, 1994 and 1995 and for the
three months ended March 31, 1995 and 1996 consists of current state income
taxes of $8,000, $20,000, $800 (unaudited) and $800 (unaudited), respectively.
Income tax expense for the years ended December 31, 1994 and 1995 differs from
the amounts computed by applying the U.S. Federal income tax rate of 34 percent
to loss before income taxes as a result of the following:
<TABLE>
Year Ended Year Ended Three Three
December 31, December 31, Months Ended Months Ended
1994 1995 March 31, 1995 March 31, 1996
------------ ------------ -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Computed "expected" tax expense
(benefit) $ (1,150,900) $ (2,957,300) $ (434,000) $ (130,000)
Increase (reduction) in income
taxes resulting from:
Change in the beginning-of-the-
year balance of the valuation
allowance for deferred tax assets
allocated to income tax expense 1,150,900 2,957,300 434,000 130,000
State and local income taxes, net
of federal income tax benefit 8,000 20,000 800 800
---------- ---------- ---------- ----------
$ 8,000 $ 20,000 $ 800 $ 800
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
As of December 31, 1995, the Company has net operating loss carryforwards for
Federal and state purposes of approximately $13,400,000 and $7,600,000,
respectively, which expire in varying amounts annually through 2010.
Management believes it is more likely than not that the existing deductible
temporary differences will reverse during periods in which the Company generates
future net taxable earnings or through implementation of tax planning strategies
to utilize such deductible temporary differences. However, there can be no
assurance that the Company will generate any taxable earnings or any specific
level of continuing earnings in future years. Management believes, however,
that certain tax planning strategies could be implemented to supplement income
from operations to fully realize recorded tax benefits.
NOTE 7 - RECEIVABLES FROM OTHERS
Receivables from others at December 31, 1994 consisted of non-interest bearing
advances to certain unrelated entities. The advances were collected in their
entirety during 1995.
Continued
-16-
<PAGE>
UNIVERSAL NETWORK SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1994 and 1995 and
For The Three-Month Periods Ended March 31, 1995 and 1996
NOTE 8 - RELATED PARTY TRANSACTIONS
During the years ended December 31, 1994 and 1995 and for the three months ended
March 31, 1995 and 1996, Uni-Net Management, Inc., a related entity, was paid
approximately $763,600, $916,600, $184,300 (unaudited) and $126,000 (unaudited),
respectively, in management fees.
During the years ended December 31, 1994 and 1995 and for the three months ended
March 31, 1995 and 1996, the Company advanced $486,900, $305,300, $27,000
(unaudited) and $80,900 (unaudited), respectively, to affiliates of the Company.
The Company wrote-off $1,088,700 and $305,300 of such receivables from
affiliates during the years ended December 31, 1994 and 1995, respectively.
NOTE 9 - SUBSEQUENT EVENTS
On May 8, 1996, the Company entered into a definitive agreement to sell its
customer base related to a portion of its long-distance business and certain
related current accounts receivable to an unrelated publicly-held entity for
approximately $4,000,000 in cash and shares of common stock of the entity with
an approximate market value of $2,880,000 based on the closing price of the
entities common stock on the date of closing. The Company intends to use a
portion of the sales proceeds to repay accrued line costs which are
collateralized by the customer bases (See Notes 2 and 5). The net carrying
value of the customer bases at December 31, 1995 and March 31, 1996 was
$1,405,100 and $1,327,700 (unaudited), respectively. These customer bases
generated 100% and 92% of revenues for the years ended December 31, 1994 and
1995, respectively.
-17-
<PAGE>
(b) Pro forma financial information:
ITEM 7(b)
PRO FORMA COMBINING FINANCIAL STATEMENTS
The following unaudited Pro Forma Combining Balance Sheet as of March 31,
1996, and unaudited Pro Forma Combining Income Statements for the years ended
March 31, 1996 and 1995, illustrate the effect of the acquisition of a
segment of the customer base and related accounts receivable of Universal
Network Services, Inc. (UniNet) as of May 31, 1996 and the merger with Long
Distance Telecom, Inc. dba Blue Ridge Telephone (Blue Ridge) as of June 30,
1996. Network Long Distance, Inc. (the Company) acquired the UniNet customer
base and accounts receivable for cash of approximately $3,628,000 and the
issuance of approximately 244,000 shares of restricted common stock, of which
approximately 49,000 shares are held in escrow, in a transaction accounted
for as a purchase of a business. The Company exchanged approximately 337,000
shares of common stock for all of the outstanding shares of Blue Ridge in a
transaction accounted for as a pooling-of-interests. Both the UniNet and Blue
Ridge acquisitions are collectively referred to as the "Acquisitions". The
Pro Forma Combining Balance Sheet assumes that the Acquisitions occurred on
the date the balance sheet is presented. The Pro Forma Combining Income
Statements assume that the Acquisitions occurred at the beginning of the
earliest period presented.
Prior to the Acquisitions, UniNet and Blue Ridge utilized a December 31 fiscal
year end. For purposes of the Pro Forma Combining Financial Statements for the
years ended March 31, 1996 and 1995, the UniNet and Blue Ridge amounts reflect
the historical financial position for these entities as of December 31, 1995 and
the historical results of operations for these entities for the years ended
December 31, 1995 and 1994.
The Pro Forma Combining Financial Statements are presented for comparative
purposes only and are not intended to be indicative of actual results had the
transaction occurred as of the dates indicated above nor do they purport to
indicate results which may be attained in the future.
-18-
<PAGE>
PRO FORMA COMBINING BALANCE SHEET (1)
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
Network/ Network/UniNet
UniNet Blue Ridge
Network UniNet (2) Pro Forma Pro Forma Blue Ridge (6) Pro Forma Pro Forma
Historical Historical Adjustments Combined Historical Adjustments Combined
----------- ------------ ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets $ 8,707,468 $ 1,975,300 $ (1,199,255) (3) $ 9,483,513 $ 549,928 $ - $ 10,033,441
Property and equipment, 2,134,092 1,304,300 (1,304,300) (3) 2,134,092 519,023 - 2,653,115
net
Customer acquisition
costs, net 5,501,559 1,405,100 (1,405,100) (3) 7,592,264 - - 7,592,264
2,090,705 (4)
Goodwill, net 2,079,433 - 2,555,306 (4) 4,634,739 - - 4,634,739
Other intangibles,
net 1,192,010 - - 1,192,010 - - 1,192,010
Other assets 208,270 24,700 (24,700) (3) 208,270 10,670 - 218,940
----------- ------------ ------------ ------------ ---------- ------------- -----------
Total assets $19,822,832 $ 4,709,400 $ 712,656 $ 25,244,888 $1,079,621 $ - $ 26,324,509
=========== ============ ============ ============ ========== ============= ===========
Current liabilities $ 3,883,564 $ 12,941,800 $(12,941,800) (3) $ 7,511,564 $ 373,137 $ - $ 7,884,701
3,628,000 (5)
Deferred Tax Liability 58,201 1,109,400 (1,109,400) (3) 58,201 - - 58,201
Long-term debt 2,875,349 170,200 (170,200) (3) 2,875,349 216,048 - 3,091,397
Stockholders' equity:
Common stock 391 25,000 (25,000) (3) 411 728,561 (728,527)(7) 445
20 (5)
Additional paid-in
capital 12,758,616 2,438,400 (2,438,400) (3) 14,552,652 - 728,527 (7) 15,281,179
1,794,036 (5)
Retained earnings 246,711 (10,951,600) 10,951,600 (3) 246,711 (238,125) - 8,586
Treasury Stock - (1,023,800) 1,023,800 (3) - - - -
----------- ----------- ----------- ----------- --------- ---------- -----------
Total stockholders'
equity 13,005,718 (9,512,000) 11,306,056 14,799,774 490,436 - 15,290,210
----------- ----------- ----------- ----------- --------- ---------- -----------
Total liabilities and
stockholders'
equity $19,822,832 $ 4,709,400 $ 712,656 $25,244,888 $1,079,621 $ - $26,324,509
=========== ============ ============ =========== ========== =========== ===========
</TABLE>
-19-
<PAGE>
PRO FORMA COMBINING INCOME STATEMENT (1)
For the Twelve Months Ended March 31, 1996
<TABLE>
<CAPTION>
Network/ Network/UniNet
UniNet Blue Ridge Blue Ridge
Network UniNet (8) Pro Forma Pro Forma (8) Pro Forma Pro Forma
Historical Historical Adjustments Combined Historical Adjustments Combined
------------- ----------- ------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $30,810,016 $ 9,307,000 $(3,102,302) (9) $37,014,714 $3,463,470 $ - $ 40,478,184
Operating expenses: (9)
Telecommunications costs 22,879,184 10,888,500 (3,629,464) (9) 30,138,220 1,931,507 - 32,069,727
Selling, general and
administrative 6,068,813 5,055,300 - 11,124,113 1,064,643 - 12,188,756
Provision for losses on
accounts receivable 1,019,754 489,100 (163,017) (9) 1,345,837 27,397 - 1,373,234
Depreciation and
amortization 1,096,373 815,000 (815,000) (9) 1,460,312 115,344 - 1,575,656
363,939 (10)
----------- ----------- ----------- ----------- --------- ------------ ----------
Total 31,064,124 17,247,900 (4,243,542) 44,068,482 3,138,891 - 47,207,373
----------- ----------- ----------- ----------- --------- ------------ -----------
Operating income (loss) (254,108) (7,940,900) 1,141,240 (7,053,768) 324,579 - (6,729,189)
Interest income (expense), net (188,304) (451,700) 451,700 (9) (532,964) (51,551) (584,515)
(344,660) (11)
Other income (loss) - (305,300) 305,300 (9) - 40,215 - 40,215
----------- ---------- ---------- ---------- --------- --------- ----------
Income (loss) before income
taxes (442,412) (8,697,900) 1,553,580 (7,586,732) 313,243 - (7,273,489)
Provision (benefit) for income
taxes (69,031) 20,000 (20,000) (12) (69,031) - 126,375 (13) 57,344
----------- ----------- ----------- ----------- ---------- ---------- ------------
Net income (loss) $(373,381) $(8,717,900) $ 1,573,580 $(7,517,701) $ 313,243 $(126,375) $ (7,330,833)
=========== =========== =========== =========== ========== ========== ============
Number of shares issued
and outstanding (14):
Primary 2,731,093 2,926,099 3,263,157
=========== ========== ===========
Fully Diluted 2,731,093 2,926,099 3,263,157
=========== ========== ===========
Earnings (loss) per share:
Primary $(0.14) $(2.57) $(2.25)
=========== ========== ===========
Fully Diluted $(0.14) $(2.57) $(2.25)
=========== ========== ==========
</TABLE>
-20-
<PAGE>
PRO FORMA COMBINING INCOME STATEMENT (1)
For the Twelve Months Ended March 31, 1995
<TABLE>
<CAPTION>
Network/
Network/ UniNet
UniNet Blue Ridge
Network UniNet (8) Pro Forma Pro Forma Blue Ridge (8) Pro Forma Pro Forma
Historical Historical Adjustments Combined Historical Adjustments Combined
----------- ----------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $24,216,948 $ 4,170,300 $(1,390,086) (9) $26,997,162 $2,789,916 $ - $29,787,078
Operating expenses: (9)
Telecommunications costs 19,477,701 2,543,000 (847,658) (9) 21,173,043 1,669,594 - 22,842,637
Selling, general and
administrative 3,593,043 2,251,400 - 5,844,443 888,557 - 6,733,000
Provision for losses on
accounts receivable 386,214 327,400 109,122 (9) 822,736 10,600 833,336
Depreciation and amortization 298,700 864,500 (864,500) (9) 662,639 72,988 - 735,627
363,939 (10)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Total 23,755,658 5,986,300 (1,239,097) 28,502,861 2,641,739 - 31,144,600
----------- ----------- ----------- ----------- ---------- ----------- -----------
Operating income (loss) 461,290 (1,816,000) (150,989) (1,505,699) 148,177 - (1,357,522)
Interest income (expense), net 147,902 (230,200) 230,200 (9) (196,759) (56,027) - (252,786)
(344,661)(11)
Other income (expense) - (1,338,700) 1,338,700 (9) - (30,142) - (30,142)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Income (loss) before income taxes 609,192 (3,384,900) 1,073,250 (1,702,458) 62,008 - (1,640,450)
Provision (benefit) for income
taxes 118,743 8,000 (8,000)(12) 118,743 - 28,685 (13) 147,428
----------- ----------- ----------- ----------- ---------- ----------- -----------
Net income (loss) $ 490,449 $(3,392,900) $ 1,081,250 $(1,821,201) $ 62,008 $(28,685) $(1,787,878)
----------- ----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ----------- ---------- ----------- -----------
Number of shares issued
and outstanding (14):
Primary 2,370,999 2,540,146 2,877,204
----------- ----------- -----------
----------- ----------- -----------
Fully Diluted 2,370,999 2,540,146 2,877,204
----------- ----------- -----------
----------- ----------- -----------
Earnings (loss) per share:
Primary $0.21 $ (0.72) $ (0.62)
----------- ----------- -----------
----------- ----------- -----------
Fully Diluted $0.21 $ (0.72) $ (0.62)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
-21-
<PAGE>
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
1. The adjustments to the unaudited Pro Forma Combining Financial Statements
do not give effect to direct transaction costs or any resulting
restructuring costs associated with the consummation of the Acquisitions
nor do these statements give effect to any potential costs savings and
synergies that could result from the Acquisitions. The unaudited Pro Forma
Combining Financial Statements are not necessarily indicative of the
operating results or financial position that would have occurred had the
Acquisitions been consummated at the dates indicated nor necessarily
indicative of future operating results or financial position.
2. Represents the historical carrying value of the assets and liabilities of
UniNet as of December 31, 1995.
3. These adjustments represent the elimination of the assets and liabilities
not acquired by the Company as well as the elimination of UniNet's equity
in the net assets acquired. The Company acquired approximately $776,000 in
accounts receivable.
4. This adjustment reflects the excess of cost over net tangible assets
acquired. For purposes of allocating the acquisition costs among the
various assets acquired, the Company 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 and goodwill. It is the Company's intention 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. The
acquisition agreement calls for approximately 49,000 shares of the
Company's common stock to be held in escrow for the sellers. This stock
has not been included in the purchase price. See Note 5.
5. These adjustments represent the payment of approximately $3,628,000 in cash
obtained through the Company's credit facility and the issuance of
approximately 195,000 shares of the Company's restricted common stock
valued at approximately $1,794,000. In addition to the cash and issuance
of restricted common stock, the Company issued approximately 49,000 shares
of its common stock to be held in escrow until a specified period of time
passes while retaining a certain level of the customer base. This level is
currently being achieved; however, the customer base is not guaranteed to
remain at this level until the end of the restricted period. As the
outcome of this contingency is not determinable beyond reasonable doubt,
the stock has been excluded from the purchase price. The value of the
escrowed shares will be recorded as additional consideration upon release
of the restrictions surrounding the stock.
6. Represents the historical carrying value of the assets and liabilities of
Blue Ridge as of December 31, 1995.
-22-
<PAGE>
7. These adjustments represent the restatement of common stock and additional
paid in capital to reflect the merger of the Company with Blue Ridge. The
Company issued approximately 337,000 shares of common stock in connection
with the merger.
8. Represents the historical results of operations of the applicable entity
for the period presented. Prior to the purchase of UniNet and the merger of
Blue Ridge, each of these entities utilized a December 31 fiscal year end.
For purposes of the Pro Forma Combining Financial Statements for the years
ended March 31, 1996 and 1995, the UniNet and Blue Ridge amounts reflect
historical results of operations for these entities for the years ended
December 31, 1995 and 1994.
9. Represents the elimination of UniNet's revenue and expenses for that
portion of the business not acquired by the Company. The Company purchased
a portion of UniNet's customer base which accounts for approximately 67% of
UniNet's monthly revenues and telecommunications costs at the time of the
acquisition. For purposes of the Pro Forma Combining Financial Statements,
the Company has assumed that certain selling, general and administrative
costs are directly attributable to the customer base, and as such, are
reflected as acquired by the Company. The Company has estimated that the
same percentage of revenues and direct costs purchased is applicable for
all periods presented.
10. Represents the amortization expense of the incremental excess of cost over
net tangible assets acquired which is amortized using the straight-line
method over 7.5 and 30 years, respectively, for the excess allocated to
customer acquisition costs and goodwill.
11. This adjustment represents the interest expense on the borrowings from the
Company's credit facility to pay the cash portion of the UniNet purchase
price. The Company's incremental borrowing rate on the credit facility is
prime plus .75%. For purposes of the Pro Forma Combining Income
Statements, the Company is assuming an annual rate of 9.5% for both periods
presented.
12. This adjustment eliminates the taxes previously recorded by UniNet. For
purposes of the Pro Forma Combining Financial Statements, no additional tax
benefit will be reflected for the losses sustained by the UniNet operation.
13. At December 31, 1995 and 1994, Blue Ridge was a partnership. On June 17,
1996, prior to the Merger, Blue Ridge became a corporation by exchanging
its partnership units for shares of common stock. This adjustment reflects
the approximate income taxes that would have been paid by Blue Ridge for
the periods presented if it had been a taxable entity.
-23-
<PAGE>
14. The pro forma share data are based on the Company's historical weighted
average shares outstanding as calculated for primary and fully diluted
earnings per share with pro forma amounts being adjusted to reflect the
effect of the issuance of approximately 195,000 and 337,000 restricted
common shares in connection with the Acquisitions. Pro forma share data
excludes approximately 49,000 common shares held in escrow as part of the
UniNet acquisition because these shares are not considered as part of the
purchase price.
(c) Exhibits: Filed herewith pursuant to Reg. S-K Item 601
EXHIBIT NO. PAGE DESCRIPTION
1 4 Asset Purchase Agreement between the Registrant
and Universal Network Services, Inc., dated May 8,
1996, effective May 31, 1996.*
____________________
* Previously filed.
-24-
<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: August 2, 1996 By: /s/ MARC I. BECKER
--------------------------------
Marc I. Becker,
Executive Vice President
-25-
