UNITED STATES
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
January 10, 1997
-----------------------------------------------
Date of Report (Date of earliest event reported)
SA TELECOMMUNICATIONS, INC.
-----------------------------------------------------
Exact Name of Registrant as Specified in its Charter)
Delaware 0-18048 75-2258519
- ---------------- ----------- -----------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
1600 Promenade Center, 15th Floor
Richardson, TX 75080
- --------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(972) 690-5888
---------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
----------------------------
(Former Name or Former Address, If Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 10, 1997 (the "Closing Date"), SA
Telecommunications, Inc., a Delaware corporation (the "Company")
purchased all of the issued and outstanding capital stock (the
"Addtel Stock") of AddTel Communications, Inc., a California
corporation ("Addtel"), pursuant to the terms of the Stock Purchase
Agreement by and among the Company, Addtel, Charles Tony Lonstein,
Aviram Lonstein, Daniel G. Lonstein and David R. Lonstein, the
shareholders of Addtel. Addtel is a switchless reseller of long
distance services based in Glendale, California. The Company
intends to continue to provide long distance services through
Addtel in addition to its other existing operating
telecommunications subsidiaries.
The aggregate purchase price paid for the Addtel Stock (the
"Initial Purchase Price") was $9.5 million, subject to a potential
downward adjustment (the "Adjustment") to be computed not later
than June 9, 1997. The Initial Purchase Price included aggregate
consideration of $2 million contractually allocated to
Nonsolicitation Agreements of the Addtel shareholders, of which an
aggregate of $500,000 cash was paid on the Closing Date and $1.5
million was held in escrow by the Company for satisfaction of the
Adjustment and any indemnity claims of the Company; however, the
shareholders of Addtel are jointly and severally liable to satisfy
any such liabilities beyond the amount held in escrow. The $7.5
million remainder of the Initial Purchase Price was paid in cash on
the Closing Date. The Adjustment equals the amount by which (1)
total liabilities of Addtel on the Closing Date minus $1,175,747.33
exceeds (2) the sum of (a) cash and certain cash equivalents on the
Closing Date and (b) net billed accounts receivable and properly
accrued but unbilled accounts receivable of Addtel as of the
Closing Date which are subsequently collected within 120 days of
the Closing Date. The terms of the Stock Purchase Agreement were
determined by arms length negotiation among the parties.
In order to fund the portion of the Initial Purchase Price
paid at closing, the Company used the remaining proceeds of the
Company's 10% Convertible Notes issued in August 1996.
Addtel's wholesale revenue produces a substantially lower
gross profit margin than its retail revenue. The Company is
evaluating methods of enhancing its margin on this wholesale
revenue while protecting the interests of its wholesale clientele.
The dollar amount of the Company's consolidated gross margin is
expected to increase as a result of the acquisition; however, gross
margin as a percentage of revenue will be adversely affected by the
blending of Addtel's lower margin wholesale revenue into the
Company's total revenue base.
Prior to the consummation of the transactions contemplated by
the Stock Purchase Agreement, no material relationship existed
between the Company, any officer, director or affiliate of the
Company or any associate of any such officer or director and Addtel
or the shareholders of Addtel. After the acquisition, the
shareholders will hold the following positions with Addtel: Aviram
Lonstein as President, Daniel G. Lonstein and David R. Lonstein as
Vice Presidents and Charles Tony Lonstein as an employee.
ITEM 5. OTHER EVENTS.
On January 9, 1996, the Company completed a Line of Credit
arrangement with Greyrock Business Credit, a division of
NationsCredit Commercial Corporation ("Greyrock"). The line of
credit has a maximum availability of $10 million, with borrowings
based on 80% of eligible accounts receivable and inventory, other
than receivables arising from telecommunications services
2
<PAGE>
rendered to customers which are billed to the customers by a
regional Bell operating company, a Bell operating company, a local
exchange company, a credit card company, or a provider of local
telephone services. The borrowings are secured by all of the assets
of the Company and its subsidiaries and the stock of the Company's
subsidiaries. The line of credit matures December 31, 1997 and
automatically renews for successive additional one year terms
unless either party elects to terminate by giving written notice to
the other not less than 60 days prior to the next maturity date.
The borrowings bear interest at a floating rate of 2.5% above
the reference rate of Bank of America NT & SA, provided that the
interest rate is not less than 9% per annum. Interest is payable
monthly and to the extent that accrued interest does not equal
$10,000 per month, the Company is required to pay an unused line of
credit fee of such difference. The initial borrowing by the
Company under this facility aggregated $1.6 million principal
amount on January 9, 1997.
The agreements regarding the line of credit contain covenants
which, among other matters, limit the ability of the Company and
its subsidiaries to (1) merge, consolidate and acquire or sell
assets, (2) incur indebtedness outside the ordinary course of
business which would have a material adverse effect on the Company
and its subsidiaries taken as a whole or on the prospect of
repayment of the obligations under the line of credit, (3) pay
dividends other than stock dividends and certain dividends with
respect to the Company's Series A Cumulative Convertible Preferred
Stock, and (4) redeem, purchase or acquire its capital stock.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Audited Balance Sheet of AddTel Communications, Inc.
as of May 31, 1996 and the related Statements of Income
and Accumulated Deficit and Cash Flows for the year then
ended.
Unaudited Condensed Balance Sheets of AddTel Communications, Inc.
as of September 30, 1996 and 1995 and the related Unaudited
Condensed Statements of Income and Retained Earnings (Deficit)
and Cash Flows for the nine months then ended.
(b) PRO FORMA FINANCIAL INFORMATION.
Unaudited Pro Forma Combined Statement of Operations
of SA Telecommunications, Inc. and Subsidiaries for
the year ended December 31, 1995.
Unaudited Pro Forma Combined Balance Sheet of SA
Telecommuncations, Inc. and Subsidiaries as of September
30, 1996 and the related Unaudited Pro Forma Combined
Statement of Operations for the nine months then ended.
3
<PAGE>
(c) EXHIBITS.
EXHIBIT NO. DOCUMENT DESCRIPTION
2.1 Stock Purchase Agreement dated as of January
10, 1997 among SA Telecommunications, Inc.,
AddTel Communications, Inc., Charles Tony
Lonstein, Aviram Lonstein, Daniel G. Lonstein
and David R. Lonstein*
10.1 Loan and Security Agreement dated December 26,
1996 among Greyrock Business Credit and SA
Telecommunications, Inc., U.S. Communications,
Inc., Long Distance Network, Inc., and
Southwest Long Distance Network, Inc.*
10.2 Schedule to Loan and Security Agreement*
10.3 Cross-Corporate Continuing Guaranty dated
December 26, 1996 of SA Telecommunications,
Inc., U.S. Communications, Inc., Long Distance
Network, Inc., and Southwest Long Distance
Network, Inc.*
10.4 Continuing Guaranty dated December 26, 1996 of
North American Telecommunications Corporation,
Baltic States and CIS Ventures, Inc., CIS
Intelligence Information Services, Inc. and
Uniquest Communications, Inc.*
10.5 Pledge Agreement dated as of December 26, 1996
between Greyrock Business Credit and SA
Telecommunications, Inc.*
10.6 Pledge Agreement dated as of December 26, 1996
between Greyrock Business Credit and U.S.
Communications, Inc.*
10.7 Security Agreement dated December 26, 1996
among Greyrock Business Credit and North
American Telecommunications Corporation,
Baltic States and CIS Ventures, Inc., CIS
Intelligence Information Services, Inc. and
Uniquest Communications, Inc.*
23.1 Consent of Price Waterhouse LLP**
___________
* Previously filed
** Filed herewith
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
SA TELECOMMUNICATIONS, INC.
DATE: February 6, 1997 By: /s/ J. David Darnell
--------------------
J. David Darnell
Vice President-Finance and
Chief Financial Officer
5
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT DESCRIPTION
2.1 Stock Purchase Agreement dated as of January 10,
1997 among SA Telecommunications, Inc., AddTel
Communications, Inc., Charles Tony Lonstein, Aviram
Lonstein, Daniel G. Lonstein and David R. Lonstein*
10.1 Loan and Security Agreement dated December 26, 1996
among Greyrock Business Credit and SA
Telecommunications, Inc., U.S. Communications,
Inc., Long Distance Network, Inc., and Southwest
Long Distance Network, Inc.*
10.2 Schedule to Loan and Security Agreement*
10.3 Cross-Corporate Continuing Guaranty dated December
26, 1996 of SA Telecommunications, Inc., U.S.
Communications, Inc., Long Distance Network, Inc.,
and Southwest Long Distance Network, Inc.*
10.4 Continuing Guaranty dated December 26, 1996 of
North American Telecommunications Corporation,
Baltic States and CIS Ventures, Inc., CIS
Intelligence Information Services, Inc. and
Uniquest Communications, Inc.*
10.5 Pledge Agreement dated as of December 26, 1996
between Greyrock Business Credit and SA
Telecommunications, Inc.*
10.6 Pledge Agreement dated as of December 26, 1996
between Greyrock Business Credit and U.S.
Communications, Inc.*
10.7 Security Agreement dated December 26, 1996 among
Greyrock Business Credit and North American
Telecommunications Corporation, Baltic States and
CIS Ventures, Inc., CIS Intelligence Information
Services, Inc. and Uniquest Communications, Inc.*
23.1 Consent of Price Waterhouse LLP**
___________
* Previously filed
** Filed herewith
6
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Audited Financial Statements:
AddTel Communications, Inc.
Report of Independent Accountants....................F-2
Balance Sheet as of May 31, 1996.....................F-3
Statement of Income and Accumulated Deficit
for the year ended May 31, 1996......................F-4
Statement of Cash Flows for the year
ended May 31, 1996...................................F-5
Notes to Financial Statements........................F-6
Unaudited Condensed Financial Statements:
AddTel Communications, Inc.
Unaudited Condensed Balance Sheets
as of September 30, 1996 and 1995...................F-11
Unaudited Condensed Statements of Income
and Retained Earnings (Deficit) for the
four months ended September 30, 1996 and 1995.......F-12
Unaudited Condensed Statements of Cash
Flows for the four months ended
September 30, 1996 and 1995.........................F-13
Notes to Unaudited Condensed Financial Statements...F-14
Unaudited Pro Forma Financial Information:
SA Telecommunications, Inc. and Subsidiaries
Unaudited Pro Forma Combined Statement
of Operations for the year ended
December 31, 1995...................................F-16
Notes to Unaudited Pro Forma Combined
Statement of Operations for the year ended
December 31, 1995...................................F-17
Unaudited Pro Forma Combined Balance
Sheet as of September 30, 1996......................F-19
Unaudited Pro Forma Combined Statement
of Operations for the nine months ended
September 30, 1996..................................F-20
Notes to Unaudited Pro Forma Combined Financial
Statements for nine months ended September
30, 1996............................................F-21
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
AddTel Communications, Inc.
In our opinion, the accompanying balance sheet and the related
statements of income and accumulated deficit and of cash flows
present fairly, in all material respects, the financial position of
AddTel Communications, Inc. at May 31, 1996, and the results of its
operations and its cash flows for the year in conformity with
generally accepted accounting principles. 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 of these
statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Dallas, Texas
December 18, 1996,
except as to Note 8 which
is as of January 17, 1997
F-2
<PAGE>
ADDTEL COMMUNICATIONS, INC.
BALANCE SHEET
MAY 31, 1996
(in thousands, except share information)
- -----------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,103
Trade accounts receivable, less allowance for
doubtful accounts of $540 3,646
Notes receivable from shareholders 310
Deferred income taxes 54
Certificate of deposit 19
---------
Total current assets 5,132
Property and equipment, net 365
Other assets 5
---------
Total assets $ 5,502
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 91
Accrued telecommunications expenses 4,344
Accrued taxes not based on income 278
Other accrued expenses 339
Income taxes payable 56
Current maturities of long-term notes payable,
net of unamortized discounts 15
---------
Total current liabilities 5,123
Long-term notes payable, net of unamortized discounts 292
Deferred income taxes 87
---------
Total liabilities 5,502
---------
Commitments and contingencies (Note 7)
Shareholders' equity:
Common stock, $.50 par value; 200,000 shares
authorized, 125,000 shares issued and outstanding 63
Discount on issued common stock (56)
Accumulated deficit (7)
---------
Total shareholders' equity -
---------
Total liabilities and shareholders' equity $ 5,502
=========
The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
ADDTEL COMMUNICATIONS, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
YEAR ENDED MAY 31, 1996
(in thousands)
- -----------------------------------------------------------------
Telecommunications revenues $ 16,449
Cost of revenues 11,849
---------
Gross profit 4,600
Operating expenses:
General and administrative 3,213
Compensation expense to shareholders 435
Depreciation and amortization 231
---------
Total operating expenses 3,879
---------
Income from operations 721
Other income (expense):
Interest income from shareholders 22
Other interest income 4
Interest expense (84)
---------
Total other income (expense) (58)
---------
Income before income taxes 663
Income tax expense 297
---------
Net income 366
Accumulated deficit, beginning of year (373)
---------
Accumulated deficit, end of year $ (7)
=========
The accompanying notes are an integral
part of these financial statements.
F-4
<PAGE>
ADDTEL COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED MAY 31, 1996
(in thousands)
- -----------------------------------------------------------------
Cash flows from operating activities:
Net income $ 366
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 231
Provision for bad debts 603
Deferred income taxes 241
Other 14
Changes in operating assets and liabilities:
Trade accounts receivable (2,046)
Accounts payable (30)
Accrued telecommunications expenses 1,833
Accrued taxes not based on income 128
Other accrued expenses 84
Income taxes payable 56
---------
Net cash provided by operating activities 1,480
---------
Cash flows from investing activities:
Purchases of property and equipment (64)
---------
Net cash used in investing activities (64)
---------
Cash flows from financing activities:
Repayments of line of credit (461)
Repayments of long-term notes payable (45)
---------
Net cash used in financing activities (506)
---------
Net increase in cash 910
Cash and cash equivalents at beginning of year 193
---------
Cash and cash equivalents at end of year $ 1,103
=========
Supplemental cash flow information:
Cash paid for interest $ 84
=========
The accompanying notes are an integral
part of these financial statements.
F-5
<PAGE>
ADDTEL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
AddTel Communications, Inc. (the "Company") is a switchless
reseller of long-distance telecommunications services provided
through the networks and switching facilities of other
carriers. The Company, based in Glendale, California, markets
these services primarily to small and medium sized businesses
principally through independent agents. While most customers
and agents are located in California, the Company also has
customers and agents located in several other states.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL INSTRUMENTS
The fair market value of financial instruments is determined
by reference to various market data and other valuation
techniques as appropriate. The Company believes that the fair
values of long-term notes payable is approximately $683
thousand (face value of the notes payable before discounting
as further discussed in Note 4). The Company believes that
the fair values of all other financial instruments approximate
their recorded values.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and investments
with purchased original maturities of three months or less.
The Company had approximately $872 thousand in cash and cash
equivalents in excess of FDIC insured limits at May 31, 1996.
The Company has not experienced any losses on its cash and
cash equivalents.
BUSINESS AND CREDIT CONCENTRATIONS
In the normal course of business, the Company extends
unsecured credit to its customers. Management has provided an
allowance for doubtful accounts to provide for amounts which
may eventually become uncollectible and to provide for any
disputed charges. No customers individually accounted for
more than 10% of revenues in 1996.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation for
financial statement purposes is provided on an accelerated
basis over the estimated useful lives of five years.
Maintenance and repairs are expensed as incurred while
replacements and betterments are capitalized.
REVENUE RECOGNITION
The Company recognizes revenue as services are performed based
on customer usage, net of an estimate for uncollectible
revenue. The Company sells its services to its customers
primarily on a measured time basis.
F-6
<PAGE>
ADDTEL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Deferred income taxes are
calculated utilizing an asset and liability approach whereby
deferred taxes are provided for tax effects of basis
differences for assets and liabilities arising from differing
treatments for financial and income tax reporting purposes
3. PROPERTY AND EQUIPMENT
Property and equipment at May 31, 1996 consisted of the
following (in thousands):
Telecommunications equipment $ 467
Computer equipment 217
Software 61
Furniture and fixtures 19
Office equipment 27
Leasehold improvements 9
--------
800
Less accumulated depreciation and amortization (435)
--------
$ 365
========
4. LONG-TERM NOTES PAYABLE
Long-term notes payable at May 31, 1996 consisted
of the following (in thousands):
Notes payable ("New Notes") to independent
investors, net of unamortized discounts,
due in monthly installments aggregating
$10 thousand, including interest at 12% per
annum (effective rate of 39.2% per annum),
maturing in November, 2005 $ 296
Notes payable to independent investors, due
in monthly installments aggregating $1 thousand,
including interest at 10% per annum, maturing
in January, 1997 11
-------
307
Less current maturities (15)
-------
Long-term portion $ 292
=======
F-7
<PAGE>
ADDTEL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------
During the year ended May 31, 1996, the Company experienced
certain cash flow constraints resulting in the default of
certain long-term debt obligations incurred in previous years.
These obligations were of a contingent nature with repayment
based on a percentage of the Company's monthly revenues. As
a result of the fiscal 1996 default, the obligation was
restructured into a fixed payment arrangement (New Notes) with
a face value greater than the existing book value. As a
result of this transaction, the Company recorded a discount on
debt in accordance with Statement of Financial Accounting
Standard No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring." The discount is being amortized
to interest expense over the life of the New Notes and
effectively increases the annual yield to 39.2%. At May 31,
1996, the New Notes had a face value of $672 thousand versus
a discounted book value of $296 thousand.
Annual maturities of long-term notes payable outstanding at
May 31, 1996 are as follows (in thousands):
YEARS ENDED MAY 31,
--------------------
1997 $ 15
1998 5
1999 8
2000 12
2001 17
Thereafter 250
--------
$ 307
========
5. INCOME TAXES
Income tax provision for the year ended May 31, 1996 was
comprised of the following (in thousands):
Current:
Federal $ 11
State 45
-------
Total current 56
=======
Deferred:
Federal $ 226
State 15
-------
Total deferred 241
-------
Total provision for income taxes $ 297
=======
The Company utilized all of its federal and state net
operating loss carryforwards, aggregating $827 thousand and
$403 thousand, respectively, during the year ended May 31,
1996.
F-8
<PAGE>
ADDTEL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------
The effective tax rate on earnings before income tax provision
was different than the federal statutory tax rate. The
following summary reconciles the federal statutory tax rate
with the actual effective rate:
Federal income tax expense 35.0%
State taxes, net of federal expense 9.0%
Disallowed meals and entertainment 0.5%
Other 0.3%
-----
44.8%
=====
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The significant components of
the Company's net deferred tax assets and liabilities at May
31, 1996 were comprised of the following (in thousands):
Deferred tax assets:
Accruals and reserves $ 224
Other, net 9
-------
Total gross deferred tax assets 233
-------
Deferred tax liabilities:
Change in accounting method $ (119)
Depreciation (86)
Pending adjustments to tax returns
previously filed (61)
-------
Total gross deferred tax liabilities (266)
-------
Net deferred tax liabilities $ (33)
=======
6. RELATED PARTY TRANSACTIONS
The Company had notes receivable from its shareholders
aggregating $310 thousand at May 31, 1996. The notes
receivable accrue interest at a rate of 7% per annum and
mature on demand.
7. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions
arising in the ordinary course of business. Management
believes it is unlikely that the final outcome of any of the
claims or proceedings to which the Company is a party would
have a materially adverse effect on the Company's financial
position or results of operations.
F-9
<PAGE>
ADDTEL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------
The Company leases certain office facilities and equipment
under noncancelable operating leases expiring through fiscal
1999. Minimum annual rentals under these leases are as
follows (in thousands):
YEARS ENDING MAY 31,
--------------------
1997 $ 101
1998 18
1999 7
--------
$ 126
========
Total rent expense incurred during the year ended May 31, 1996
was $88 thousand.
8. SUBSEQUENT EVENTS
Effective October 31, 1996, the Company forgave all
outstanding notes and accrued interest receivable from its
shareholders aggregating $320 thousand.
Effective November 1, 1996, 100% of the common stock of the
Company was acquired by SA Telecommunications, Inc. The
financial statements of the Company do not reflect any
adjustments arising from this transaction.
On January 10, 1997, the Company retired all of its long-term
notes payable and accrued but unpaid interest thereon for $773
thousand in cash. In connection with the retirement, the
Company recorded an extraordinary loss on the extinguishment
of debt of $485 thousand, which resulted from the unamortized
discount from the face value of the notes and early retirement
penalties.
F-10
<PAGE>
ADDTEL COMMUNICATIONS, INC.
UNAUDITED CONDENSED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30,
1996 1995
--------- -------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,741 $ 17
Trade accounts and notes receivable, less allowance
for doubtful accounts of $ 646 and $ 570, respectively 5,387 2,350
Other current assets 59 359
-------- --------
Total current assets 8,187 2,726
Property and equipment, net 333 490
Other assets 9 2
-------- --------
Total assets $ 8,529 $ 3,218
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 7,977 $ 2,905
Notes payable and current maturities of long-term notes 15 215
-------- --------
Total current liabilities 7,992 3,120
Long-term notes payable, less current maturities 281 336
Deferred income taxes 185 72
Stockholders' equity (deficit) 71 (310)
-------- --------
Total liabilities and stockholders' equity $ 8,529 $ 3,218
======== ========
</TABLE>
See notes to unaudited condensed financial statements.
F-11
<PAGE>
ADDTEL COMMUNICATIONS, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT)
(In Thousands)
For the four months
ended September 30,
-------------------
1996 1995
------- -------
Telecommunications revenues $ 9,795 $ 4,327
Cost of revenues 8,264 2,990
------- -------
Gross profit 1,531 1,337
Operating expenses 1,398 1,228
------- -------
Operating income 133 109
Other (expenses) (5) (8)
Income taxes 57 45
------- -------
Net income 71 56
Accumulated deficit,
beginning of period (7) (373)
------- -------
Retained earnings (deficit),
end of period $ 64 $ (317)
======= =======
See notes to unaudited condensed financial statements.
F-12
<PAGE>
ADDTEL COMMUNICATIONS, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
For the four months
ended September 30,
-------------------
1996 1995
------ -----
Cash flows from operating activities:
Net income $ 71 $ 56
Depreciation and amortization 25 23
Net change in working capital and other 1,546 (4)
------ -----
Net cash flows from operating activities 1,642 75
Net cash flows from investing activities 7 11
Net cash flows (used in) financing activities (11) (262)
------ -----
Net increase (decrease) in cash 1,638 (176)
Cash and cash equivalents at beginning of period 1,103 193
------ -----
Cash and cash equivalents at end of period $2,741 $ 17
====== =====
See notes to unaudited condensed financial statements.
F-13
<PAGE>
ADDTEL COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
These unaudited condensed financial statements at September
30, 1996 and 1995 and for the four months then ended were
derived from the books and records of the Company, but do not
include all disclosures required by generally accepted
accounting principles. In the opinion of management, these
unaudited condensed financial statements reflect all
adjustments of a normal recurring nature necessary for a fair
presentation of the financial condition and results of
operations for interim periods. These results of operations
are not necessarily indicative of the results which ultimately
will be reported for the full year ended May 30, 1997.
NOTE B - SUBSEQUENT EVENTS
Effective October 31, 1996, the Company forgave all outstanding
notes and accrued interest receivable from its shareholders
aggregating $320 thousand.
Effective November 1, 1996, 100% of the common stock of the
Company was acquired by SA Telecommunications, Inc. The
financial statements of the Company do not reflect any
adjustments arising from this transaction.
On January 10, 1997, the Company retired all of its long-term
notes payable and accrued but unpaid interest thereon for
$773 thousand in cash. In connection with the retirement,
the Company recorded an extraordinary loss on extinguishment
of debt of $485 thousand, which resulted from the unamortized
discount from the face value of the notes and early retirement
penalties.
F-14
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1995
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
The unaudited pro forma combined statement of operations for
the year ended December 31, 1995 includes the historical results
of operations of the Company and AddTel as if the acquisition
had been effected on January 1, 1995. This statement of operations
is not necessarily indicative of the results of operations that
would have been achieved had the transaction been consummated
as of the date indicated or which may be achieved in the future.
F-15
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
Year Ended December 31, 1995
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share)
<TABLE>
<CAPTION>
SA
Telecommunications, AddTel Pro Forma
Inc. and Subsidiaries Communications, Inc. Adjustments Combined
--------------------- -------------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 20,748 $ 12,726 $ $ 33,474
Cost of revenues 14,116 8,856 22,972
-------------------- ------------------- ----------- ---------
Gross profit 6,632 3,870 10,502
826 -A
Operating expenses 7,909 3,936 128 -B 12,799
-------------------- ------------------- ----------- --------
Loss from continuing operations
before other income (expense)
and extraordinary item (1,277) (66) (954) (2,297)
Other income (expense) (658) (18) (950) -C (1,626)
-------------------- ------------------- ----------- --------
Loss from continuing operations
before extraordinary item (1,935) (84) (1,904) (3,923)
Income taxes (benefit) - (38) 38 -D -
Discontinued operations (4,531) - (4,531)
-------------------- ------------------- ----------- --------
Net loss (6,466) (46) (1,942) (8,454)
Preferred dividend requirements (125) - - (125)
-------------------- ------------------- ----------- --------
Net loss applicable to common
shareholders $ (6,591) $ (46) $ (1,942) $ (8,579)
==================== =================== =========== ========
Pro forma combined loss per share
applicable to common shareholders $ (0.74)
========
Weighted average number of
common shares outstanding 11,639
========
</TABLE>
See notes to the unaudited pro forma combined statement of operations.
F-16
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
DECEMBER 31, 1995
NOTES TO UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
The following describes the assumptions used in determining the pro
forma adjustments necessary to give effect on a pro forma basis to
the transaction described above:
(A) Adjustment to amortization of intangible assets from the
AddTel acquisition.
(B) Adjustment to depreciation of property and equipment whose
values were adjusted to their fair values in conjunction with
the AddTel acquisition.
(C) Adjustment to interest expense related to obligation incurred
in connection with the acquisition totaling $9.5 million with
imputed interest at 10%.
(D) Adjustment for reversal of federal income tax benefit.
F-17
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1996
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined balance sheet as of September 30,
1996 includes the historical balance sheets of the Company and AddTel
as if the acquisition had been effected as of September 30, 1996. The
unaudited pro forma combined statement of operations for the nine
months ended September 30, 1996 includes the historical results of
operations of the Company and AddTel as if the acquisition had been
effected on January 1, 1996. These financial statements are not
necessarily indicative of the financial condition or results of
operations that would have been achieved had the transaction been
consummated as of the date indicated or which may be achieved in
the future.
F-18
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
September 30, 1996
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(In Thousands)
<TABLE>
<CAPTION>
SA
Telecommunications, AddTel Pro Forma
Inc. and Subsidiaries Communications, Inc. Adjustments Combined
--------------------- -------------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,691 $ 2,741 $ $ 15,432
Accounts and notes
receivables, net 6,773 5,387 12,160
Other current assets 1,146 59 (40) -A 1,165
--------------------- -------------------- ----------- --------
Total current assets 20,610 8,187 (40) 28,757
Property and equipment, net 7,422 333 435 -A 8,190
Excess of cost over net
assets acquired, net 17,721 - 8,849 -A 26,570
Other assets 2,490 9 2,499
--------------------- -------------------- ----------- --------
Total assets $ 48,243 $ 8,529 $ 9,244 $66,016
===================== ==================== =========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 1,476 $ 128 $ $ 1,604
Accrued telecommunications
expenses 1,821 7,249 9,070
Other accrued expenses 3,408 600 4,008
Acquisition obligation - - 9,500 -A 9,500
Short-term notes payable 44 - 44
Current maturities of long-
term obligations 529 15 544
--------------------- --------------------- ----------- --------
Total current liablities 7,278 7,992 9,500 24,770
Long-term obligations, less current
maturities 28,585 281 28,866
Deferred income taxes - 185 (185) -A -
Series A redeemable preferred stock 1,310 - 1,310
Stockholders' equity:
Common stock 2 7 (7) -A 2
Additional paid-in capital 26,479 - 26,479
Retained deficit (11,557) 64 (64) -A (11,557)
Treasury stock (3,854) - (3,854)
--------------------- --------------------- ----------- -------
Total shareholders' equity 11,070 71 (71) 11,070
--------------------- --------------------- ----------- -------
Total liabilities and
shareholders' equity $ 48,243 $ 8,529 $ 9,244 $66,016
===================== ===================== =========== =======
</TABLE>
See notes to unaudited pro forma combined financial statements.
F-19
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
Nine Months Ended September 30, 1996
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share)
<TABLE>
<CAPTION>
SA
Telecommunications, AddTel Pro Forma
Inc. and Subsidiaries Communications, Inc. Adjustments Combined
--------------------- -------------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 22,200 $ 18,065 $ $ 40,265
Cost of revenue 13,059 14,523 27,582
--------------------- -------------------- ----------- ---------
Gross profit 9,141 3,542 12,683
Operating expenses 9,015 3,169 603 -B 12,907
120 -C
--------------------- -------------------- ----------- ---------
Income from continuing operations
before other income (expense)
and extraordinary item 126 373 (723) (224)
Other income (expense) (1,306) (46) (504) -D (1,856)
--------------------- -------------------- ----------- ---------
Income (loss) from continuing
operations before
extraordinary item (1,180) 327 (1,227) (2,080)
Income taxes - 146 (146) -E -
Extraordinary item 1,817 - 1,817
--------------------- -------------------- ----------- ---------
Net income (loss) 637 181 (1,081) (263)
Preferred dividend requirements (198) - (198)
--------------------- -------------------- ----------- ---------
Net income (loss) applicable to
common shareholders $ 439 $ 181 $ (1,081) $ (461)
===================== ==================== =========== =========
Pro forma combined loss per share
applicable to common shareholders $ (0.03)
=========
Weighted average number of
common shares outstanding 16,118
=========
</TABLE>
See notes to unaudited pro forma combined financial statements.
F-20
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1996
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following describes the assumptions used in determining the pro
forma adjustments necessary to give effect on a pro forma basis to
the transaction described above:
(A) Adjustment to reflect the borrowings and obligations necessary
to consummate the acquisition and make the necessary purchase
accounting and elimination entries.
(B) Adjustment to amortization of intangible assets from the
AddTel acquisition.
(C) Adjustment to depreciation of property and equipment whose
values were adjusted to their fair values in conjunction with
the AddTel acquisition.
(D) Adjustment to interest expense related to obligation incurred
in connection with the acquisition totaling $9.5 million with
imputed interest at 10%.
(E) Adjustment for utilization of parent company losses to offset
federal income taxes.
F-21
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 dated February 21, 1992 (No.
33-45911), December 3, 1992 (No. 33-55308), January 27, 1993 (No.
33-57712), June 10, 1993 (No. 33-64102), September 22, 1993 (No.
33-69196), March 7, 1996 (No. 333-01549) and March 7, 1996 (No.
333-01547) and in the Registration Statement on Form S-3 dated
January 3, 1996 (No. 33-64271) and in the Registration Statement on
Form S-2 dated January 24, 1997 (No. 333-17547) of SA
Telecommunications, Inc. of our report on the financial statements
of AddTel Communications, Inc. dated December 18, 1996, except
as to Note 8 which is as of January 17, 1997, appearing elsewhere
in this Form 8-K/A.
PRICE WATERHOUSE LLP
/s/ Price Waterhouse LLP
Dallas, Texas
February 6, 1997
