SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Commission File
earliest event reported): Number:
DECEMBER 2, 1999 1-10210
eGLOBE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3486421
(State or other jurisdiction of (IRS Employer Identification
incorporation) Number)
1250 24th Street, NW, Suite 725
Washington, D.C. 20037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(202) 822-8981
(Former name or former address, if changed since last report)
NA
<PAGE>
eGLOBE, INC.
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EXPLANATORY NOTE
Pursuant to Items 7(a)(4) and 7(b)(2) of the Securities and Exchange
Commission's (the "Commission") General Instructions for Form 8-K, eGlobe, Inc.
(the "Company") formerly Executive TeleCard, Ltd., hereby amends Items 7(a) and
7(b) of its Current Report on Form 8-K, filed with the Commission on December
17, 1999 to file financial statements and pro forma financial information for
the Company reflecting the acquisition of Coast International, Inc. ("Coast"),
which was effective December 2, 1999.
The Company has included a brief description of the Company's acquisition of
Coast along with the pro forma information for the Company. On September 20,
1999, the Company, acting through a newly formed subsidiary, acquired control of
Oasis Reservations Services, Inc. ("ORS") from its sole stockholder, Outsourced
Automated Services and Integrated Solutions, Inc. ("Oasis"). Effective August 1,
1999, the Company assumed operational control of Highpoint International
Telecom, Inc. and certain assets and operations of Highpoint Carrier Services
and Vitacom, Inc, (collectively "Highpoint"). On October 14, 1999, substantially
all the operating assets of Highpoint were transferred to iGlobe, Inc.
("iGlobe"), at which time the Company acquired all of the issued and outstanding
common stock of iGlobe. Connectsoft Communications Corporation and Connectsoft
Holding Corp. ("Connectsoft") were acquired on June 17, 1999, by the Company's
new subsidiary Vogo Networks, LLC ("Vogo"). Telekey, Inc. and Subsidiary and
Travelers Services, Inc. ("Telekey") were acquired on February 12, 1999. UCI
Tele Networks, Ltd. ("UCI") was acquired on December 31, 1998 and IDX
International Inc. and Subsidiaries ("IDX") were acquired on December 2, 1998.
The iGlobe acquisition was previously reported on 8-K/A filed on December 28,
1999. The ORS acquisition was previously reported on Form 8-K/A filed December
6, 1999 and amended on December 10, 1999. The Connectsoft acquisition was
previously reported on Form 8-K/A filed on August 31, 1999. The Telekey, UCI and
IDX acquisitions were previously reported on Form 8-K/A filed on April 30, 1999.
In June 1999, the stockholders approved the increase in the convertibility of
the preferred stock issued to the IDX stockholders and in July 1999, the terms
of the IDX purchase agreement were renegotiated. The effects of the above two
transactions related to the IDX acquisition were previously reported on Form
8-K/A filed on August 31, 1999.
In September 1999, the Company obtained appraisals of the assets of IDX, UCI and
Telekey and reclassified certain acquired goodwill to other identifiable assets.
In August 1999, the Company issued 30 shares of Series K Cumulative Convertible
Preferred Stock ("Series K Preferred") valued at $3.0 million in exchange for
the one share of Series G Cumulative Convertible Preferred Stock ("Series G
Preferred") held by the Seller of Connectsoft. The effects of these two
transactions were previously reported on Form 8-K/A filed on December 6, 1999
and amended on December 10, 1999.
In December 1999, the Company and the IDX stockholders renegotiated the value of
preferred stock and warrants consideration paid to the IDX stockholders pursuant
to the July 1999 renegotiation. The effects of this transaction are reflected in
the unaudited pro forma condensed consolidated financial statements contained
elsewhere herein.
2
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eGLOBE, INC.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
ITEM 7(A). FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Filed herewith as part of this report are the following financial
statements: Coast International, Inc., (i) Report of Independent
Certified Public Accountants, (ii) Balance Sheet as of September
30, 1999, (iii) Statement of Income for the nine months ended
September 30, 1999, (iv) Statement of Stockholders' Deficit for
the nine months ended September 30, 1999, (v) Statement of Cash
Flows for the nine months ended September 30, 1999, (vi) Summary
of Accounting Policies and (vii) Notes to the Financial
Statements.
ITEM 7. (B). PRO FORMA FINANCIAL INFORMATION
Filed herewith as part of this report are the Company's Unaudited
Pro Forma Condensed Consolidated Balance Sheet as of September
30, 1999, Unaudited Pro Forma Condensed Consolidated Statements
of Operations for the twelve months ended December 31, 1998 and
for the nine months ended September 30, 1999 and the notes
thereto.
ITEM 7(C). EXHIBITS
2.1 Agreement and Plan of Merger dated as of November 29, 1999
by and among eGlobe, Inc., eGlobe Merger Sub No. 5, Inc.,
Coast International, Inc. and the Stockholders of Coast
International, Inc. is incorporated by reference to the 8-K
filed on December 17, 1999.
4.1 Certificate of Designation, Rights, Preferences and
Restrictions of 10% Series D Cumulative Convertible
Preferred Stock, is incorporated by reference to the 8-K
filed on December 17, 1999.
49.1 Press Release dated December 1, 1999, regarding the Merger
Agreement and the transactions contemplated thereby is
incorporated by reference to the 8-K filed on December 17,
1999.
3
<PAGE>
eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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The Coast acquisition and the terms of the December 1999 renegotiation of
the IDX purchase agreement are included in the following Unaudited Pro
Forma Condensed Consolidated Financial Statements. This pro forma
presentation has been prepared utilizing historical financial statements
and notes thereto, certain of which are included herein as well as pro
forma adjustments as described in the Notes to Pro Forma Condensed
Consolidated Financial Statements. The pro forma financial data does not
purport to be indicative of the results which actually would have been
obtained had the acquisitions been effected on the dates indicated or the
results which may be obtained in the future. In addition, the following
Unaudited Pro Forma Condensed Consolidated Financial Statements give the
effect of the acquisitions by the Company of ORS, iGlobe, Connectsoft,
Telekey, IDX and UCI, and the June 1999 stockholder approval of the
increase of the number of shares of common stock issuable upon conversion
of the preferred stock issued to the IDX stockholders and the terms of the
IDX purchase agreement as renegotiated in July 1999, the reclassification
of acquired goodwill to other identifiable intangibles and the exchange of
Series K Preferred for Series G Preferred, as previously described and
reported on Forms 8-K/A filed on April 30, 1999, on August 31, 1999, on
December 6, 1999 as amended December 10, 1999, and on December 28, 1999.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of September
30, 1999 assumes the acquisition of Coast was consummated on such date. The
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1998 includes the operating results of the Company,
IDX, Telekey, Connectsoft, iGlobe, ORS, and Coast assuming the acquisitions
occurred January 1, 1998. Also, the subsequent increase in the preferred
conversion factor for preferred shares originally issued to IDX
stockholders, the renegotiations of the terms of the IDX purchase
agreement, the reclassification of acquired goodwill to other identifiable
intangibles and the Series K Preferred Stock exchanged for Series G
Preferred Stock were assumed to have occurred on January 1, 1998. The
historical results of the Company include the results of IDX for the period
from December 2, 1998, the effective date of the acquisition, to December
31, 1998. UCI was acquired on December 31, 1998 and had minimal operations
which have not been reflected in the Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the year ended December 31, 1998.
However, the recurring effect of the goodwill amortization related to the
UCI acquisition has been included in the Unaudited Pro Forma Condensed
Consolidated Statement of Operations.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the nine months ended September 30, 1999 assumes that the Telekey,
Connectsoft, iGlobe, ORS and Coast acquisitions and the subsequent increase
in the IDX purchase price related to the increase in the convertibility of
the preferred stock originally issued to the IDX stockholders, the
renegotiations of the IDX purchase agreement, the reclassification of the
acquired goodwill to other identifiable intangibles and the Series K
Preferred Stock exchanged for Series G Preferred Stock occurred at the
beginning of the periods presented. The historical results of operations of
the Company for the nine months ended September 30, 1999 include the
results of Telekey from February 1, 1999, the effective date of the
acquisition, to September 30, 1999, the results of Connectsoft from June 1,
1999, the effective date of the acquisition, to September 30, 1999, the
results of iGlobe from August 1, 1999, the date the Company assumed
operational control of Highpoint, to September 30, 1999 and the results of
ORS from September 1, 1999, the effective date of acquisition, to September
30, 1999. Coast was acquired on December 2, 1999.
4
<PAGE>
eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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The Unaudited Pro Forma Condensed Consolidated Statements of Operations are
presented for illustrative purposes only and do not purport to represent
what the Company's results of operations would have been had the
acquisitions described herein occurred on the dates indicated for any
future period or at any future date, and are therefore qualified in their
entirety by reference to and should be read in conjunction with the
historical consolidated financial statements of the Company and the
historical financial statements of Coast International, Inc. contained
elsewhere herein. Historical financial statements of IDX and Telekey were
previously filed in Form 8-K/A on April 30, 1999. Historical financial
statements of Connectsoft were previously filed in Form 8-K/A on August 31,
1999. Historical financial statements of Oasis Reservations Services, Inc.
were previously filed in Form 8-K/A in December 6, 1999 and amended on
December 10, 1999. Historical financial statements of Highpoint
International, Telecom, Inc. and Affiliates, were previously filed in Form
8-K/A on December 28, 1999.
ACQUISITION OF COAST INTERNATIONAL, INC.
On December 2, 1999, the Company acquired all the shares of common stock of
Coast International, Inc. ("Coast") for (a) 16,100 shares of 10% Series O
Cumulative Convertible Preferred Stock ("Series O Preferred Stock") valued
at $16.1 million; (b) 882,904 shares of common stock valued at
approximately $3.0 million; and (c) direct costs associated with the
acquisition of approximately $0.3 million, for a combined value of
approximately $19.4 million. The Series O Preferred Stock is convertible
into a maximum of 3,220,000 shares of common stock and has a liquidation
value of $16,100,000. Coast develops innovative Internet products and
services and through its wholly owned subsidiary, Interactive Media Works
("IMW"), has recently begun offering an interactive response system which
interfaces seamlessly with traditional voice telephone, with Voice over IP,
and with data access from the Internet and the World Wide Web.
The shares of Series O Preferred Stock are convertible, at the holder's
option, into a maximum 3,220,000 shares of common stock at any time after
the later of (a) one year after the date of issuance and (b) the date
eGlobe has received stockholder approval for such conversion and the
applicable Hart-Scott-Rodino waiting period has expired or terminated (the
"Clearance Date"), at a conversion price equal to $5.00. The shares of
Series O Preferred Stock will automatically be converted into shares of
common stock, on the earliest to occur of (i) the fifth anniversary of the
first issuance of Series O Preferred Stock, (ii) the first date as of which
the last reported sales price of the Company's common stock on Nasdaq is
$6.00 or more for any 15 consecutive trading days during any period in
which Series O Preferred Stock is outstanding, (iii) the date that 80% or
more of the Series O Preferred Stock eGlobe has issued has been converted
into common stock, or (iv) the Company completes a public offering of
equity securities with gross proceeds to the Company of at least $25
million at a price per share of $5.00. Notwithstanding the foregoing, the
Series O Preferred Stock will not be converted into the Company's common
stock prior to the Company's receipt of stockholder approval for such
conversion and the expiration or termination of the applicable
Hart-Scott-Rodino waiting period. If the events listed in the preceding
sentence occur prior to the Clearance Date, the automatic conversion will
occur on the Clearance Date. In January 2000, the Company's common stock
sales price closed at $6.00 or more for 15 consecutive trading days and,
accordingly, on the Clearance Date, the outstanding Series O Preferred
Stock will be automatically convertible into 3,220,000 shares of common
stock.
5
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eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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The final purchase price allocation will be determined when third party
appraisal and additional information becomes available. Accordingly, the
final purchase price allocation may have a material effect on the
supplemental unaudited pro forma information presented below.
The acquisition has been recorded using the purchase method of accounting
and the components of the purchase price and its preliminary allocation to
the assets and liabilities acquired are as follows:
<TABLE>
<S> <C>
Components of Purchase Price:
Series O Preferred Stock $ 16,100,000
Common Stock issued 2,980,000
Direct acquisition costs 300,000
------------
Total purchase price 19,380,000
Allocation of Purchase
Price:
Cash and cash equivalents (426,000)
Accounts receivable (2,122,000)
Other current assets (4,000)
Deposits (13,000)
Property and equipment (1,091,000)
Goodwill (19,884,000)
Current liabilities 1,373,000
Capital lease obligations, including current maturities 288,000
Notes payable - related parties 2,499,000
------------
Total $ --
============
</TABLE>
ADDITIONAL RENEGOTIATION OF TERMS TO THE IDX PURCHASE AGREEMENT
In December 1999, the Company and the IDX stockholders agreed to reduce the
preferred stock and warrants consideration paid to the IDX stockholders
pursuant to the July 1999 renegotiation by a value equivalent to the
original consideration paid by the Company for 4,500 shares of IDX. In
exchange, the IDX stockholders will not issue the original preferred stock
and warrants originally granted to certain IDX employees and other parties.
The Company agreed to issue eGlobe options to the employees and certain
others related to IDX. The options will have an exercise price of $1.20 per
share and a three year term. The options will vest 75% at March 31, 2000
and the other 25% will vest on an accelerated basis if IDX meets its earn
out or in three years if it does not. The Company also agreed to issue
150,000 shares of common stock as payment of the original consideration
allocated as purchase consideration for an acquisition of a subsidiary by
IDX.
As a result of the above renegotiation, which resulted in the reduction of
the value of the Series H Preferred Stock and warrants and the issuance of
the Company's options, the Company will record the reduction in
consideration of approximately $1.5 million to be paid to the IDX
stockholders as a negative dividend and reduce the loss attributable to
common stock in the fourth quarter of 1999.
6
<PAGE>
eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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<TABLE>
<CAPTION>
EGLOBE COAST
AS OF OF 9/30/99 AS OF 9/30/99 ADJUSTMENTS PRO FORMA
(NOTE A) (NOTE A)
------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 2,562,000 $ 426,000 $ -- $ 2,988,000
Accounts receivable, net 8,894,000 2,122,000 -- 11,016,000
Other current assets 1,683,000 4,000 -- 1,687,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 13,139,000 2,552,000 -- 15,691,000
- ---------------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET 23,783,000 1,091,000 -- 24,874,000
GOODWILL, NET 8,808,000 -- 19,884,000 28,692,000
OTHER INTANGIBLE ASSETS, NET 22,031,000 -- -- 22,031,000
OTHER ASSETS 2,428,000 13,000 -- 2,441,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 70,189,000 $ 3,656,000 $ 19,884,000 $ 93,729,000
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTEREST IN LLC AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,473,000 $ 519,000 $ -- $ 9,992,000
Accrued expenses 9,035,000 582,000 300,000 9,917,000
Notes payable and line of credit principally
related to acquisitions 2,118,000 -- -- 2,118,000
Notes payable and current maturities of long-
term debt 4,040,000 2,591,000 -- 6,631,000
Other current liabilities 3,659,000 272,000 -- 3,931,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 28,325,000 3,964,000 300,000 32,589,000
- ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 14,459,000 196,000 -- 14,655,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 42,784,000 4,160,000 300,000 47,244,000
MINORITY INTEREST IN LLC 2,329,000 -- -- 2,329,000
STOCKHOLDERS' EQUITY
Preferred stock 2,000 -- -- 2,000
Common stock 21,000 412,000 (411,000) 22,000
Additional paid-in capital 70,859,000 -- 19,079,000 89,938,000
Stock to be issued 13,912,000 -- -- 13,912,000
Accumulated deficit (59,926,000) (916,000) 916,000 (59,926,000)
Accumulated other comprehensive income 208,000 -- -- 208,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 25,076,000 (504,000) 19,584,000 44,156,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, MINORITY INTEREST IN LLC
AND STOCKHOLDERS' EQUITY $ 70,189,000 $ 3,656,000 $ 19,884,000 $ 93,729,000
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the unaudited pro forma condensed consolidated financial statements
7
<PAGE>
eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1998
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<TABLE>
<CAPTION>
EGLOBE ORS
TWELVE MONTHS IDX TELEKEY CONNECTSOFT TWELVE MONTHS
ENDED 12/31/98 ELEVEN MONTHS TWELVE MONTHS TWELVE MONTHS ENDED 12/31/98
(NOTE B (2)) ENDED 11/30/98 ENDED 12/31/98 ENDED 12/31/98 (NOTE B (2))
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE $ 30,030,000 $ 2,795,000 $ 4,705,000 $ 288,000 $ 5,094,000
COST OF REVENUE 16,806,000 3,176,000 1,294,000 248,000 3,657,000
- ----------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) 13,224,000 (381,000) 3,411,000 40,000 1,437,000
- ----------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and
administrative 18,070,000 3,011,000 2,811,000 2,473,000 834,000
Research and development -- -- -- 2,057,000 --
Depreciation and
amortization 3,070,000 510,000 192,000 231,000 302,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 21,140,000 3,521,000 3,003,000 4,761,000 1,136,000
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (7,916,000) (3,902,000) 408,000 (4,721,000) 301,000
- ----------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Other income (expense), net (1,981,000) 358,000 (61,000) (377,000) 227,000
Proxy related litigation expenses (3,647,000) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (5,628,000) 358,000 (61,000) (377,000) 227,000
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY
INTEREST IN (INCOME) LOSS OF
SUBSIDIARIES AND TAXES ON
INCOME (13,544,000) (3,544,000) 347,000 (5,098,000) 528,000
MINORITY INTEREST IN (INCOME)
LOSS OF SUBSIDIARIES -- -- (59,000) -- --
TAXES ON INCOME 1,500,000 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (15,044,000) (3,544,000) 288,000 (5,098,000) 528,000
PREFERRED STOCK DIVIDENDS -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCK $(15,044,000) $ (3,544,000) $ 288,000 $ (5,098,000) $ 528,000
- ----------------------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTES B,
(11) AND (12))
Basic and diluted $ (0.85) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES
(NOTES B, (11) AND (12))
Basic and diluted 17,736,654 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the unaudited pro forma condensed consolidated financial statements
8
<PAGE>
eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1998
(CONTINUED)
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<TABLE>
<CAPTION>
IGLOBE COAST
TWELVE MONTHS TWELVE MONTHS ADJUSTMENTS
ENDED 12/31/98 ENDED 12/31/98 (NOTE B) PRO FORMA
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE $ 2,703,000 $ 18,904,000 $ (121,000)(3) $ 64,398,000
COST OF REVENUE 2,079,000 9,516,000 (65,000)(4) 36,711,000
- --------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) 624,000 9,388,000 (56,000) 27,687,000
- --------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and administrative 780,000 8,972,000 310,000(5) 37,261,000
Research and development -- -- -- 2,057,000
Depreciation and amortization 862,000 497,000 11,139,000(6) 16,803,000
- --------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 1,642,000 9,469,000 11,449,000 56,121,000
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (1,018,000) (81,000) (11,505,000) (28,434,000)
- --------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Other income (expense), net -- (271,000) (749,000)(7) (2,854,000)
Proxy related litigation expenses -- -- -- (3,647,000)
- --------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) -- (271,000) (749,000) (6,501,000)
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY
INTEREST IN (INCOME) LOSS OF
SUBSIDIARIES AND TAXES ON INCOME (1,018,000) (352,000) (12,254,000) (34,935,000)
MINORITY INTEREST IN (INCOME) LOSS OF
SUBSIDIARIES -- -- 95,000(8) 36,000
TAXES ON INCOME -- -- 21,000(9) 1,521,000
- --------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (1,018,000) (352,000) (12,180,000) (36,420,000)
PREFERRED STOCK DIVIDENDS -- -- 9,206,000(10) 9,206,000
- --------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCK $ (1,018,000) $ (352,000) $(21,386,000) $(45,626,000)
- --------------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTES B, (11) AND
(12))
Basic and diluted -- -- -- $ (2.42)
- --------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES (NOTES B,
(11) AND (12))
Basic and diluted -- -- 1,087,000(11) 18,823,654
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the unaudited pro forma condensed consolidated financial statements
9
<PAGE>
eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
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<TABLE>
<CAPTION>
EGLOBE TELEKEY CONNECTSOFT ORS
NINE MONTHS ONE MONTH ENDED FIVE MONTHS EIGHT MONTHS
ENDED 9/30/99 1/31/99 ENDED 5/31/99 ENDED 8/31/99
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE $ 28,136,000 $ 190,000 $ 73,000 $ 4,055,000
COST OF REVENUE 27,442,000 59,000 65,000 3,746,000
- -------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) 694,000 131,000 8,000 309,000
- -------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and administrative 18,393,000 141,000 436,000 253,000
Research and development -- -- 1,092,000 --
Depreciation and amortization 7,846,000 16,000 129,000 160,000
- -------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 26,239,000 157,000 1,657,000 413,000
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (25,545,000) (26,000) (1,649,000) (104,000)
OTHER INCOME (EXPENSE) (5,814,000) (6,000) (162,000) (4,000)
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY INTEREST IN
LOSS OF SUBSIDIARY (31,359,000) (32,000) (1,811,000) (108,000)
MINORITY INTEREST IN LOSS OF SUBSIDIARY -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (31,359,000) (32,000) (1,811,000) (108,000)
PREFERRED STOCK DIVIDENDS 10,783,000 -- -- --
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCK $(42,142,000) $ (32,000) $ (1,811,000) $ (108,000)
- -------------------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTE C(20) AND (21))
Basic and diluted $ (2.18) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES (NOTE C(20) AND (21))
Basic and diluted 19,374,944 -- -- --
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the unaudited pro forma condensed consolidated financial statements
10
<PAGE>
eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IGLOBE COAST
SEVEN MONTHS NINE MONTHS ADJUSTMENTS
ENDED 7/31/99 ENDED 9/30/9 (NOTE C) PRO FORMA
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE $ 5,067,000 $ 10,371,000 $ (214,000)(13) $ 47,678,000
COST OF REVENUE 5,220,000 4,574,000 (214,000)(14) 40,892,000
- ----------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (153,000) 5,797,000 -- 6,786,000
- ----------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and
Administrative 4,794,000 4,900,000 208,000(15) 29,125,000
Research and development -- -- -- 1,092,000
Depreciation and amortization 1,411,000 375,000 3,921,000(16) 13,858,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 6,205,000 5,275,000 4,129,000 44,075,000
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (6,358,000) 522,000 (4,129,000) (37,289,000)
OTHER INCOME (EXPENSE) (182,000) (207,000) 190,000(17) (6,185,000)
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY
INTEREST IN LOSS OF SUBSIDIARY (6,540,000) 315,000 (3,939,000) (43,474,000)
MINORITY INTEREST IN LOSS OF
SUBSIDIARY -- -- 38,000(18) 38,000
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (6,540,000) 315,000 (3,901,000) (43,436,000)
PREFERRED STOCK DIVIDENDS -- -- (3,248,000)(19) 7,535,000
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCK $ (6,540,000) $ 315,000 $ (653,000) $(50,971,000)
- ----------------------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTES C(20) AND (21))
Basic and diluted -- -- -- $ (2.52)
- ----------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES (NOTES C(20) AND (21))
Basic and diluted -- -- 883,000 20,257,944
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the unaudited pro forma condensed consolidated financial statements
11
<PAGE>
eGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 30, 1999
The following pro forma adjustment to the condensed consolidated balance sheet
is as if the acquisition of Coast had occurred on September 30, 1999.
The final purchase price allocation will be determined when third party
appraisal and additional information becomes available. Accordingly, the final
purchase price allocation may have a material effect on the supplemental
unaudited pro forma information presented below.
(1) To reflect the acquisition of Coast and the preliminary allocation of the
purchase price based on the estimated fair value of the assets acquired and
the liabilities assumed. The components of the purchase price and its
preliminary allocation to the assets and liabilities acquired are as
follows:
<TABLE>
<S> <C>
Components of Purchase Price:
Series O Preferred Stock $ 16,100,000
Common Stock issued 2,980,000
Direct acquisition costs 300,000
------------
Total purchase price 19,380,000
Allocation of Purchase Price:
Cash and cash equivalents (426,000)
Accounts receivable (2,122,000)
Other current assets (4,000)
Deposits (13,000)
Property and equipment (1,091,000)
Goodwill (19,884,000)
Current liabilities 1,373,000
Capital lease obligations, including current maturities 288,000
Notes payable - related parties 2,499,000
------------
Total $ --
============
</TABLE>
12
<PAGE>
eGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(2) Effective with the period ended December 31, 1998, the Company changed from
a March 31 to a December 31 fiscal year end. As a result, the following table is
required to reflect twelve months of operations.
<TABLE>
<CAPTION>
Nine Months Three Months Twelve Months
Ended 12/31/98 Ended 3/31/98 Ended 12/31/98
---------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 22,491,000 $ 7,539,000 $ 30,030,000
Cost of revenue 12,619,000 4,187,000 16,806,000
- -------------------------------------------------------------------------------------------------------------------
Gross profit 9,872,000 3,352,000 13,224,000
Costs and expenses:
Selling, general and administrative 13,555,000 4,515,000 18,070,000
Depreciation and amortization 2,256,000
- -------------------------------------------------------------------------------------------------------------------
Total costs and expenses 15,811,000 5,329,000 21,140,000
- -------------------------------------------------------------------------------------------------------------------
Loss from operations (5,939,000) (1,977,000) (7,916,000)
Other income (expenses)
Other income (1,031,000) (950,000) (1,981,000)
Proxy related litigation expenses (120,000) (3,527,000) (3,647,000)
- -------------------------------------------------------------------------------------------------------------------
Total other expenses (1,151,000) (4,477,000) (5,628,000)
- -------------------------------------------------------------------------------------------------------------------
Loss before taxes on income (7,090,000) (6,454,000) (13,544,000)
Taxes on income -- 1,500,000 1,500,000
- -------------------------------------------------------------------------------------------------------------------
Net loss $ (7,090,000) $ (7,954,000) $(15,044,000)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
UCI was acquired on December 31, 1998 and had minimal operations which have not
been reflected in the Pro Forma Condensed Consolidated Statement of Operations
of the year ended December 31, 1998. However, the recurring effect of the
goodwill amortization related to the UCI acquisition has een included in the
Unaudited Pro Forma Condensed Consolidated Statement of Operations.
ORS' statement of operations for the year ended December 31, 1998 consists of
the statement of operations for the period June 1, 1998 (date of inception)
through December 31, 1998 plus the revenue and costs associated with the ORS
line of business for the period January 1, 1998 through May 31, 1998 to reflect
the period when ORS was part of Oasis.
13
<PAGE>
eGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (CON'T)
The following pro forma adjustments to the Unaudited Pro Forma Condensed
Consolidated Statement of Operations are as if the acquisitions had been
completed at the beginning of the period presented and are not indicative of
what would have occurred had the acquisitions and related transactions actually
been made as of such date. IDX was acquired on December 2, 1998; therefore, the
results of operations of IDX for the month of December 1998 are included in the
historical results of the Company for the twelve months ended December 31, 1998.
<TABLE>
<S> <C>
(3) Adjustments to revenue:
Elimination of IDX billings to the Company $ (41,000)
Adjustment to revenue to give effect to IDX's purchase of a subsidiary in April 1998
and its sale of another subsidiary in November 1998 as if the purchase and sale had
been completed at the beginning of the period presented (80,000)
------------
$ (121,000)
============
(4) Adjustments to cost of revenue:
Elimination of IDX billings to the Company $ (41,000)
Adjustment to cost of revenue to give effect to IDX's purchase of a subsidiary in April,
1998 and its sale of another subsidiary in November 1998 as if the purchase and sale
had been completed at the beginning of the period presented (24,000)
------------
$ (65,000)
============
(5) Adjustments to selling, general and administrative expenses:
Adjustment for the incremental increase in IDX and Telekey management compensation $ 78,000
Adjustment for incremental increase in Connectsoft management compensation 173,000
Adjustment for the incremental increase in Coast management compensation 80,000
Adjustment for deferred compensation related to Telekey purchase 232,000
Adjustment to give effect to IDX's purchase of a subsidiary in April 1998 and its sale (423,000)
Adjustment for various general and administrative services provided by Oasis to ORS 170,000
------------
$ 310,000
============
(6) Adjustments to depreciation and amortization expenses:
Amortization for eleven months of identifiable intangibles acquired in the IDX purchase
which was effective December 2, 1998 (1-4 year straight-line amortization) $ 2,640,000
Amortization of original cost in excess of net assets (including the value related to
stockholder approval in June 1999 of the increase in conversion IDX purchase feature)
acquired for the IDX purchase which was effective December 2, 1998 (7year straight-line
amortization 943,000
Amortization of identifiable intangibles acquired in the UCI purchase which was
effective December 31, 1998 (2 year straight-line amortization) 327,000
Amortization of costs in excess of net assets acquired in the UCI purchase which was
effective December 31, 1998 (7 year straight-line amortization) 68,000
Amortization of identifiable intangibles acquired in the Telekey purchase (3-7 year
straight-line amortization) 570,000
Amortization of costs in excess of net assets acquired in the Telekey purchase (7 year
straight-line amortization) 300,000
Amortization of intangibles acquired in the Connectsoft purchase (3-5 year straight-line
amortization) 1,870,000
Amortization of costs in excess of net assets acquired in the Connectsoft purchase (7
year straight-line amortization) 142,000
Amortization of identifiable intangibles acquired in the ORS purchase (3-5 year straight-
line amortization) 508,000
Amortization of identifiable intangibles acquired in the iGlobe purchase (3 year straight-
line amortization) 880,000
Amortization of costs in excess of net assets acquired in the iGlobe purchase (7 year
straight-line amortization) 54,000
Amortization of costs in excess of net assets acquired in the Coast purchase (7 year
straight-line amortization) 2,837,000
------------
$ 11,139,000
============
</TABLE>
14
<PAGE>
eGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(CON'T)
<TABLE>
<S> <C>
(7) Adjustment to other income (expenses):
Adjustment to give effect to IDX's purchase of a subsidiary in April
1998 and its sale of another subsidiary in November 1998 as if the purchase and
sale had been completed at the beginning of the period presented $(411,000)
Interest on $0.5 million UCI note @8% originally due 6/99 (20,000)
Interest on $0.5 million UCI note @8% due 5/2000 (40,000)
Interest on $1.0 million IDX note @7.75% due 2/99 (19,000)
Additional interest recorded for value of 50,000 warrants issued in connection
with the UCI purchase (43,000)
Interest on $0.5 million note payable to seller of Connectsoft (40,000)
Interest on $0.451 million Oasis note @ 8% due in six quarterly installments (26,000)
Less other income related to guaranteed reimbursement of expenses by Oasis'
parent to ORS (181,000)
---------
(780,000)
Less interest expense recorded by the Company in the historical
results of operations for the twelve months ended December 31, 1998 31,000
---------
$(749,000)
=========
(8) Adjustments to minority interest in (income) loss of subsidiaries:
To reverse the minority interest in income of Telekey, because in connection
with the acquisition of Telekey by the Company, the 20% minority
interest in Telekey, L.L.C. was acquired by Telekey $ 59,000
To record 10% minority interest in LLC's (income) loss owned by Oasis 36,000
---------
$ 95,000
=========
(9) Adjustments to reflect taxes on income:
To reflect state income taxes (Telekey was previously an S-corporation) at 6%
as Georgia does not allow for a consolidated filing. The telekey federal
taxable income can be offset with the Company's current period losses $ 21,000
=========
</TABLE>
No tax provision has been reflected for IDX, Connectsoft or Coast as these
companies had book and tax net losses. No tax provision has been reflected for
ORS as the Company's proportionate share of the federal and state taxable income
of ORS can be offset with the Company's current period losses.
15
<PAGE>
eGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(CON'T)
<TABLE>
<S> <C>
(10) To reflect the preferred stock dividends associated with these
transactions:
Annual dividend on Series K Preferred Stock $ 150,000
Annual dividend on Series I Preferred Stock 320,000
Dividend to IDX stockholders related to July 1999 renegotiation of purchase agreement 6,092,000
Dividend reduction related to December 1999 IDX renegotiation (1,500,000)
Annual dividend on Series M Preferred Stock, net of premium amortization of $643,000 1,157,000
Dividend to iGlobe stockholders related to Series M conversion feature 1,377,000
Annual dividend on Series O Preferred Stock 1,610,000
------------
$ 9,206,000
============
(11) Adjustment to the basic weighted average number of shares outstanding of
17,736,654 shares as if the acquisitions and IDX renegotiations had been
completed at the beginning of the period presented:
Issuance of common stock in payment of $0.4 million IDX note 141,000
Issuance of common stock in UCI purchase 63,000
Issuance of common stock in Coast purchase 883,000
------------
1,087,000
(12) Convertible preferred stock and convertible notes were not included in
diluted earnings (loss) per share due to the Company recording a loss for
the period presented. The following table reflects the shares of common
stock that would have been issuable upon conversion. Subsequent to
September 30, 1999, the Series F, H and K Preferred Stocks automatically
converted into common stock
Series H Preferred Stock 3,263,000
Series I Preferred Stock, including payment of accrued dividend 1,440,000
Convertible $1.0 million IDX note payable, including interest (Converted in 1999) 474,000
Series F Preferred Stock 1,814,000
Series K Preferred Stock 1,923,000
Series M Preferred Stock 3,774,000
Series O Preferred Stock 3,220,000
------------
15,908,000
============
</TABLE>
16
<PAGE>
eGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE C. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999
The following pro forma adjustments to the condensed consolidated statement of
operations are as if the acquisitions and related transactions had been
completed at the beginning of the fiscal period presented and are not indicative
of what would have occurred had the acquisitions actually been made as of such
date. Coast was acquired in December 1999, ORS was acquired in September 1999,
iGlobe was acquired in August 1999, Connectsoft was acquired in June 1999 and
Telekey was acquired in February 1999; therefore, the results of operations of
ORS for the month of September 1999, the results of operations of iGlobe for
August through September 1999, the results of operations of Connectsoft for June
through September 1999 and the results of operations of Telekey for February
through September 1999 are included in the historical results of the Company for
the nine months ended September 30, 1999.
<TABLE>
<S> <C>
(13) Adjusted to revenue:
Elimination of iGlobe billings to the Company $(214,000)
=========
(14) Adjusted to cost of revenue:
Elimination of iGlobe billings to the Company $(214,000)
=========
(15) Adjustment to selling, general and administrative expenses:
Adjustment for the incremental increase in Connectsoft management
compensation 72,000
Adjustment for various general and administrative services provided by
Oasis to ORS not reflected in statement of operations 76,000
Adjustment for the incremental increase in Coast management compensation 60,000
---------
$ 208,000
=========
</TABLE>
17
<PAGE>
eGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE C. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (CON'T)
<TABLE>
<S> <C>
(16) Adjustments to depreciation and amortization expenses:
One month of amortization of identifiable intangibles
acquired in the Telekey purchase (3-7 year
straight-line amortization) $ 47,000
One month of amortization of costs in excess of net assets
acquired in the Telekey purchase (7 year straight-line
amortization) 25,000
Five months of amortization of identifiable intangibles
acquired in the Connectsoft purchase (3-5 year
straight-line amortization) 779,000
Five months of amortization of costs in excess of net assets
acquired in the Connectsoft purchase (7 year
straight-line amortization) 59,000
Seven months of amortization of identifiable intangibles
acquired in the iGlobe purchase (3 year straight-line
amortization 513,000
Seven months of amortization of costs in excess of net
assets acquired in the iGlobe purchase (7 year
straight-line amortization) 31,000
Eight months of amortization of identifiable intangibles
acquired in the ORS purchase (3-5 year straight-line
amortization) 339,000
Nine months of amortization of costs in excess of net assets acquired in
the Coast purchase (7 year straight-line amortization) 2,128,000
-----------
$ 3,921,000
===========
(17) Adjustment to other income (expenses):
Interest on $0.5 million note payable to seller of Connectsoft $ (30,000)
Interest on $0.451 million Oasis note (9,000)
Reverse interest recorded on $4.0 million IDX notes
subsequently exchanged for Series I Preferred Stock 182,000
Reverse interest recorded on $0.418 million IDX note paid by
issuance of common stock 14,000
Reverse interest recorded on $0.5 million UCI note originally due June
1999 as reflected in the December 31, 1998 pro forma adjustmens 20,000
Reverse interest recorded on $1.0 million IDX note due February 1999
as reflected in the December 31, 1998 pro forma adjustments 13,000
-----------
$ 190,000
===========
</TABLE>
18
<PAGE>
eGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE C. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (CON'T)
<TABLE>
<S> <C>
(18) Adjustment to record 10% minority interest in LLC's loss owned by Oasis $ 38,000
(19) Adjustment to preferred stock dividends:
Eight months dividend on 5% Series K Preferred (exchanged for 6% Series G
Preferred Stock issued in Connectsoft acquisition) $ 100,000
Accrued dividend on Series I Preferred Stock 187,000
Nine months dividend on 20% Series M Preferred Stock 1,350,000
Nine months dividend on 10% Series O Preferred Stock 1,207,000
Less dividend to IDX stockholders related to the July 1999 renegotiation of the
purchase agreement (6,092,000)
$ (3,248,000)
(20) Adjustment to the basic weighted average number of shares outstanding of
19,374,944 shares as if the Coast acquisition had been completed at the beginning
of the period presented 883,000
(21) Convertible preferred stock was not included in diluted (loss) per share
due to the Company recording a loss for the period presented. The following
table reflects the shares of common stock that would have been issuable
upon conversion as of September 30, 1999. Subsequent to September 30, 1999,
the Series F, H and K Preferred Stocks automatically converted into common
stock
Series F Preferred Stock 1,814,000
Series H Preferred Stock 3,263,000
Series I Preferred Stock including payment of accrued dividends 1,521,000
Series K Preferred Stock 1,923,000
Series M Preferred Stock 3,774,000
Series O Preferred Stock 3,220,000
------------
15,515,000
============
</TABLE>
19
<PAGE>
eGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE D. CONTINGENCIES
The following adjustments to the pro forma basic net loss per share
are to reflect the following: (1) the issuance of additional shares of
Series F Preferred Stock and IDX warrants which would have occurred if
Telekey and IDX, respectively, had met their earn-out formulas at the
beginning of the periods presented; (2) the additional shares of
common stock to be issued to UCI shareholders assuming UCI had met its
earn-out provision; (3) the estimated additional compensation expense
related to the Telekey stockholders' grant of shares under the
original agreements; (4) the assumption that the Company's common
stock met the guaranteed trading price of $8.00 per share for UCI
related shares and $4.00 per share for the Telekey related shares and
(5) the assumption that ORS met its earn-out formulas and Oasis
exchanged its ownership in the LLC for the Company's common stock and
warrants at the beginning of the periods presented. The increase in
goodwill amortization expense is the result of the additional goodwill
recorded as a result of the above issuances amortized over 7 years
using straight-line amortization. It is assumed that the warrants
related to the IDX and ORS earn-outs are exercised at the beginning of
the period presented. In addition, if the Company's common stock does
not trade at the guaranteed trading prices for UCI related shares, and
subject to UCI meeting its earn-out objectives, the Company will be
required to issue additional shares of common stock and the estimated
goodwill amortization reflected below will change.
The final purchase price allocations will be determined when certain
contingencies are resolved as discussed earlier and additional
information becomes available. This is not indicative of what would
have occurred had the acquisitions actually been made as of such date.
20
<PAGE>
eGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
NOTE D. CONTINGENCIES (CON'T) SEPTEMBER 30, 1999 DECEMBER 31, 1998
-------------------------------------
<S> <C> <C>
PRO FORMA BASIC AND DILUTED LOSS PER SHARE:
NUMERATOR
Pro forma net loss attributable to common stock $(50,971,000) $(45,626,000)
Increase in goodwill amortization expense for earn-out formulas
(7 year straight-line amortization) (2,469,000) (3,292,000)
Estimated compensation adjustment related to stock granted to
Telekey employees by Telekey stockholders after the Company's
purchase of Telekey 574,000 (728,000)
Reversal of minority interest in (income) loss of ORS
due to Oasis's exchange of its interest in the LLC (38,000) (36,000)
-------------------------------------
Adjustment pro forma net loss $(52,904,000) $(49,682,000)
-------------------------------------
DENOMINATOR
Pro forma weighted average shares outstanding 20,257,944 18,823,654
Number of shares of common stock issuable
UCI (contingent earn-out stock) 62,500 62,500
IDX warrants 1,088,000 1,088,000
Number of shares of common stock issuable to
Oasis for its ownership in LLC (assuming
exercise of warrants) 4,000,000 4,000,000
-------------------------------------
Adjusted pro forma basic weighted average
shares outstanding 25,408,444 23,974,154
-------------------------------------
PER SHARE AMOUNTS
Adjusted pro forma basic and diluted loss per share $ (2.08) $ (2.07)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
eGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE D. CONTINGENCIES (CON'T)
The diluted loss per share for the nine months ended September 30,
1999 and the twelve months ended December 31, 1998 in the above table
does not reflect the 15,515,000 and 15,908,000 shares of common stock
that would be issuable upon the conversion of the preferred stock as
discussed in Notes C (21) and B (12). As the Company reported losses
in both periods, the effect of these transactions are anti-dilutive.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed in its
behalf by the undersigned, thereunto duly authorized.
eGlobe, Inc.
(Registrant)
Date: February 15, 2000 By /s/ Anne Haas
------------------------------
Anne Haas
Controller, Treasurer
(Principal Accounting Officer)
23
<PAGE>
COAST INTERNATIONAL, INC.
FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<PAGE>
COAST INTERNATIONAL, INC.
FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<PAGE>
COAST INTERNATIONAL, INC.
CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
BALANCE SHEET 4 - 5
STATEMENT OF INCOME 6
STATEMENT OF STOCKHOLDERS' DEFICIT 7
STATEMENT OF CASH FLOWS 8
SUMMARY OF ACCOUNTING POLICIES 9 - 12
NOTES TO FINANCIAL STATEMENTS 13 - 18
2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Coast International, Inc.
Lenexa, Kansas
We have audited the accompanying balance sheet of Coast International, Inc. as
of September 30, 1999 and the related statements of income, stockholders'
deficit and cash flows for the nine month period 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 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 Coast International, Inc. at
September 30, 1999 and the results of its operations and its cash flows for the
nine month period then ended in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
February 3, 2000
3
<PAGE>
COAST INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
September 30, 1999
- -------------------------------------------------------------------------------
<S> <C>
ASSETS (Note 2)
CURRENT:
Cash $ 426,000
Trade accounts receivable, less allowance 2,122,000
Other current assets 4,000
- -------------------------------------------------------------------------------
Total current assets 2,552,000
- -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT (Note 1),
net of accumulated depreciation
and amortization 1,091,000
DEPOSITS 13,000
- -------------------------------------------------------------------------------
$3,656,000
- -------------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to
financial statements.
4
<PAGE>
COAST INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
September 30, 1999
- -------------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT:
Notes payable to stockholder/affiliate (Note 2) $ 2,499,000
Accounts payable 519,000
Accrued expenses 582,000
Installment obligation 272,000
Current maturities of capital lease obligations (Note 5) 92,000
- ------------------------------------------------------------------------------------
Total current liabilities 3,964,000
Capital lease obligations, less current maturities (Note 5) 196,000
- ------------------------------------------------------------------------------------
Total liabilities 4,160,000
- ------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCY (Notes 3, 4, 5 and 9)
STOCKHOLDERS' DEFICIT:
Common stock, no par value, 412,000
2,500 shares authorized,
1,846 shares issued and outstanding
Accumulated deficit (916,000)
- ------------------------------------------------------------------------------------
Total stockholders' deficit (504,000)
- ------------------------------------------------------------------------------------
$ 3,656,000
- ------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to
financial statements.
5
<PAGE>
COAST INTERNATIONAL, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Nine Months Ended September 30, 1999
- ----------------------------------------------------------------------------------
<S> <C>
NET REVENUE $10,371,000
COST OF REVENUE 4,574,000
- ---------------------------------------------------------------------------------
GROSS PROFIT 5,797,000
Selling, general and administrative expenses (Note 4) 5,275,000
- ---------------------------------------------------------------------------------
Income from operations 522,000
Interest expense (Note 2) 207,000
- ---------------------------------------------------------------------------------
NET INCOME $ 315,000
- ---------------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to
financial statements.
6
<PAGE>
COAST INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Common Stock
----------------------------
Accumulated
Nine Months Ended September 30, 1999 Shares Amount Deficit Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1999 1,846 $ 412,000 $(928,000) $(516,000)
Distributions to stockholders -- -- (303,000) (303,000)
Net income for the period -- -- 315,000 315,000
- --------------------------------------------------------------------------------------------------------------
BALANCE, September 30, 1999 1,846 $ 412,000 $(916,000) $(504,000)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to
financial statements.
7
<PAGE>
COAST INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
Nine Months Ended September 30, 1999
- -------------------------------------------------------------------------------------------------
<S> <C>
OPERATING ACTIVITIES:
Net income $ 315,000
Adjustments to reconcile net income to
Depreciation and amortization 375,000
Provision for bad debts 715,000
Changes in operating assets and liabilities:
Trade accounts receivable 413,000
Other assets (3,000)
Accounts payable (143,000)
Accrued expenses (773,000)
- ------------------------------------------------------------------------------------------------
Cash provided by operating activities 899,000
- ------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Acquisitions of property and equipment (211,000)
Proceeds from sale of fixed assets 46,000
- ------------------------------------------------------------------------------------------------
Cash used in investing activities (165,000)
- ------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net proceeds from notes payable to stockholder 100,000
Payments on notes payable to stockholder (252,000)
Principal payments on installment obligation (677,000)
Distributions to stockholders (303,000)
- ------------------------------------------------------------------------------------------------
Cash used in financing activities (1,132,000)
- ------------------------------------------------------------------------------------------------
Net decrease in cash (398,000)
CASH, beginning of period 824,000
- ------------------------------------------------------------------------------------------------
CASH, end of period $ 426,000
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to
financial statements.
8
<PAGE>
COAST INTERNATIONAL, INC.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION AND BASIS Coast International, Inc. ("Coast") is a provider
OF PRESENTATION of domestic and international long distance
telephone and internet services. Coast offers
competitive discounted calling plans which are
available to customers in the United States.
Coast is a non-facilities based inter-exchange
carrier that routes customers' calls over a
transmission network consisting primarily of
dedicated long-distance lines secured by Coast from
other carriers. One of these carriers provides the
call record information from which Coast bills
substantially all of its customer base. Management
believes other carriers could provide the same
service at comparable terms
On April 1, 1999, Coast acquired certain assets of
ISPN, Inc. ("ISPN"), an entity under common
control, for $1,000,000. ISPN is a large scale
provider of internet services to the rural and
local telephone company markets across the United
States as well as a provider of technical help-desk
services to telephone companies and other
service-oriented companies. The purchase price was
payable $200,000 at closing and $100,000 monthly
thereafter without interest through December 1999.
The deferred payments have been discounted to
reflect an effective interest rate of 10%. As of
September 30, 1999 the installment obligation
totaled $272,000, net of the remaining $5,000
discount. The net assets received have been
accounted for at the lower of ISPN's historical net
book value or estimated fair market value totaling
$284,000. The consideration paid in excess of the
historical cost of $689,000 was charged to
stockholders' equity as a deemed dividend.
On April 26, 1999, Coast acquired all of the
outstanding common stock of Interactive Media Works
("IMW"), an entity under common control, in
exchange for 646 shares of common stock of Coast.
IMW is an interactive voice response service bureau
providing 1-800 toll free and internet based
promotions, sweepstakes, contests and surveys for
large national brands and media stimulated programs
or events within the United States.
9
<PAGE>
COAST INTERNATIONAL, INC.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Prior to Coast's April 1999 acquisitions of ISPN
and IMW all three companies were under common
control through majority ownership. Accordingly,
the accompanying financial statements include the
accounts of Coast, ISPN and IMW (collectively the
"Company") for the full nine month period ended
September 30, 1999 as if the companies combined on
January 1, 1999. All material intercompany accounts
and transactions are eliminated.
Additionally, on December 2, 1999, the Company was
acquired by eGlobe, Inc. ("eGlobe") (see Note 6).
The accompanying financial statements for the nine
month period ended September 30, 1999 may not
necessarily be indicative of the results to be
expected for the year ending December 31, 1999.
USE OF The preparation of financial statements in
ESTIMATES 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 reporting period. Actual
results could differ from those estimates.
CONCENTRATIONS Financial instruments which potentially subject the
OF CREDIT RISK Company to concentrations of credit risk consist
principally of cash and trade accounts receivable.
The Company places its cash and temporary cash
investments with quality financial institutions. At
times, such investments may be in excess of
Governmental insured limits.
Concentrations of credit risk with respect to trade
accounts receivable are limited due to the wide
variety of customers and markets which comprise the
Company's customer base, as well as their
dispersion across many different geographic areas.
Generally, the Company does not require collateral
or other security to support customer receivables.
10
<PAGE>
COAST INTERNATIONAL, INC.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
PROPERTY, Property and equipment are recorded at cost.
EQUIPMENT Depreciation is calculated using , straight-line
DEPRECIATION AND and accelerated methods over the estimated useful
AMORTIZATION lives of the assets ranging from five to seven
years. Leasehold improvements are amortized over a
lease term of three years.
REVENUE Coast recognizes revenue upon completion of
RECOGNITION telephone calls by the end users. IMW and ISPN
recognize revenue as services are provided.
Allowances are provided for estimated uncollectible
accounts.
INCOME TAXES The Company, with the consent of their
stockholders, has elected under the Internal
Revenue Code to be an S-corporation. In lieu of
corporate income taxes, the stockholders are taxed
on their proportional share of the Company's
taxable income. Therefore, no provision or
liability for income taxes is included in the
financial statements.
ADVERTISING The Company expenses advertising costs as they are
incurred. Advertising expense was $114,000 for the
nine months ended September 30, 1999.
CASH EQUIVALENTS The Company considers cash and all highly liquid
investments purchased with an original maturity of
three months or less to be cash equivalents.
CASH FLOWS For the nine month period ended September 30, 1999
cash paid for interest approximated interest
expense.
LONG-LIVED Long-Lived assets are reviewed for impairment
ASSETS whenever events or changes in circumstances
indicate that the carrying amount may not be
recoverable. If the expected future cash flow from
the use of the assets and its eventual disposition
is less than the carrying amount of the assets, an
impairment loss is recognized and measured using
the asset's fair value.
11
<PAGE>
COAST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. PROPERTY AND Property and equipment consisted of the following:
EQUIPMENT
<TABLE>
<CAPTION>
September 30, 1999
----------------------------------------------------------------------
<S> <C>
Office and computer equipment $3,268,000
Leasehold improvements 170,000
Furniture and equipment 71,000
Software 51,000
----------------------------------------------------------------------
3,560,000
Less accumulated
depreciation and
amortization 2,469,000
----------------------------------------------------------------------
$1,091,000
----------------------------------------------------------------------
</TABLE>
Total depreciation and amortization expense for the
nine months ended September 30, 1999 was
approximately $375,000. Office and computer
equipment with a total cost and accumulated
depreciation of $304,000 and $76,000 has been
pledged as collateral under capital lease
obligations (Note 5).
12
<PAGE>
COAST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. NOTES PAYABLE On April 1, 1999 and March 5, 1999, respectively,
TO STOCKHOLDER/ the Company entered into two new revolving line of
AFFILIATE credit agreements of $300,000 and $3,000,000 with a
stockholder and with a corporation affiliated with
a stockholder. Both agreements expire July 1, 2000,
bear interest at a bank's prime rate plus 1.5%
(9.75% at September 30, 1999) and are secured by
substantially all of the assets of the Company.
These agreements also require a monthly commitment
fee equal to 0.10% of the available line of credit
balances. For the nine month period ended September
30, 1999 total interest and fees paid to the
stockholder and the affiliate under these
agreements were approximately $112,000. In
connection with these agreements, the stockholder
and affiliate have agreed to continue to advance to
the Company, on an ongoing basis, the necessary
working capital funds required for its operations.
At September 30, 1999, $260,000 and $1,880,000 were
outstanding under these line of credit agreements.
On November 29, 1999, the stockholder line of
credit was paid in full and the Company increased
its outstanding affiliate line of credit balance to
$3,000,000. See Note 7 for discussion of these
subsequent events and Note 4 for additional related
party transactions.
In connection with the merger with IMW, the Company
assumed a note payable to a corporation affiliated
with a stockholder which bears interest at a bank's
prime rate plus 2.5% (10.75% at September 30,
1999). The note is secured by substantially all of
the assets of the Company. At September 30, 1999,
approximately $359,000 was outstanding on the note,
which was also subsequently paid in full on
November 29, 1999 (see Note 7).
13
<PAGE>
COAST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. OPERATING The Company leases office space under noncancelable
LEASES operating leases in Lenexa, Kansas, Minneapolis,
Minnesota and Overland Park, Kansas. The Overland
Park office space is being subleased to a third
party. Future minimum lease payments under the
leases and future minimum rentals receivable under
the sublease are as follows:
<TABLE>
<CAPTION>
Years Ending
September 30, 2000 2001 2002 Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum rentals $ 201,000 $ 75,000 $ 8,000 $ 284,000
Sublease
rental income (41,000) (17,000) - (58,000)
--------------------------------------------------------------------------
Total $ 160,000 $ 58,000 $ 8,000 $ 226,000
--------------------------------------------------------------------------
</TABLE>
For the nine month period ended September 30, 1999
rent expense was approximately $114,000.
4. RELATED For the nine month period ended September 30, 1999,
PARTY included in selling, general and administrative
TRANSACTIONS expenses in the accompanying statement of income
were bonuses and fees paid to the Company's three
stockholders totaling approximately $32,000.
The Company has an agreement with an employee
leasing services corporation affiliated with a
stockholder under which the Company leases
substantially all of its employees. Under the terms
of the agreement, in exchange for the services of
such employees, the Company pays the leasing
services corporation a leasing services fee equal
to the aggregate gross pay, payroll taxes, related
benefits and an appropriate portion of the costs
incurred and attributable to the employees, as
defined.
14
<PAGE>
COAST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As part of the related benefits payable under this
agreement, the Company makes matching contributions
to a long-term savings plan maintained by the
employee leasing company for eligible employees
equal to 50% of the employee's contributions up to
6% of the employee's compensation as defined.
Approximate costs incurred under the leasing
services agreement for the nine month period ended
September 30, 1999 are summarized as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
<S> <C>
Payroll, payroll taxes and related benefits $ 1,941,000
Savings plan matching contributions 44,000
Cost attributable to employees 6,000
---------------------------------------------------------------------
$ 1,991,000
---------------------------------------------------------------------
</TABLE>
5. COMMITMENTS The Company has a contract with a long-distance
telecommunications company to provide
telecommunications services for the Company's
customers. The agreement covers the pricing of
services for a term of 36 months beginning October
1, 1999. Under the terms of the agreement, the
Company has a minimum usage commitment of $125,000
per month through September 30, 2000. The minimum
usage commitment may be decreased in the second and
third year of the agreement if the cumulative usage
is achieved in the first year of the agreement.
15
<PAGE>
COAST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company is committed under a capital lease for
certain transmission equipment. This lease is for a
term of three years and bears interest at the rate
of 8.5% and is collateralized by the underlying
equipment as defined in the lease. Future minimum
lease payments are as follows:
<TABLE>
<CAPTION>
Years Ending September 30
---------------------------------------------------------------------
<S> <C>
2000 $116,000
2001 116,000
2002 97,000
---------------------------------------------------------------------
Total 329,000
Less amount representing interest 41,000
---------------------------------------------------------------------
288,000
Less current maturities 92,000
---------------------------------------------------------------------
$196,000
---------------------------------------------------------------------
</TABLE>
6. ACQUISITION OF Effective December 2, 1999, eGlobe, Inc.
COAST BY EGLOBE ("eGlobe"), through its new subsidiary,
eGlobe/Coast, Inc., acquired all the outstanding
common stock of Coast. The purchase price of $19.4
million consisted of 882,904 shares of eGlobe's
common stock and 16,100 shares of eGlobe's Series O
Convertible Preferred Stock ("Series O Preferred").
The Series O Preferred Stock is convertible into a
maximum of 3,220,000 shares of common stock and has
a liquidation value of $16.1 million.
16
<PAGE>
COAST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. SUBSEQUENT EVENTS On November 29, 1999, the Company increased its
existing line of credit with the affiliated
corporation to the maximum $3,000,000 and entered
into a note agreement with that affiliate for
$250,000. The additional funds received, totaling
$1,370,000, were used to pay down the $260,000
outstanding stockholder line of credit and the
$359,000 outstanding loan held by IMW with a
corporation affiliated with a stockholder and to
pay distributions to the existing stockholders of
the Company totaling $575,000.
8. SUPPLEMENTAL CASH Supplemental disclosure of cash flow information
FLOW INFORMATION and non-cash investing and financing activities
follow:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
-----------------------------------------------------------------------------
<S> <C>
Cash paid for interest $ 226,000
Property and equipment acquired in acquisition of ISPN in
exchange for installment obligation 284,000
Equipment obtained under a capital lease obligation 288,000
-----------------------------------------------------------------------------
</TABLE>
9. YEAR 2000 Like other companies, Coast International, Inc.
ISSUES could be adversely affected if the computer systems
(UNAUDITED) the Company, its suppliers or customers use do not
properly process and calculate date-related
information and data from the period surrounding
and including January 1, 2000. This is commonly
known as the "Year 2000" ("Y2K") issue.
Additionally, this issue could impact non-computer
systems and devices such as production equipment,
elevators, etc. While the Company's project to
assess and correct Y2K related issues regarding the
year 2000 has been completed, and the Company has
not experienced any significant Y2K related events,
interactions with other companies' systems make it
difficult to conclude there will not be future
effects. Consequently, at this time, management
cannot provide assurances that the Year 2000 issue
will not have an impact on the Company's
operations.
17
