SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A#1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 23, 1996
Medcross, Inc.
(Exact name of registrant as specified in its charter)
Florida 0-17973 59-2291344
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3227 Bennet Street North, St. Petersburg, Florida 33713
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (813) 521-1793
(Former name or former address, if changed since last report.)
1
<PAGE>
Item 7. Financial Statements, Proforma Financial Information, and Exhibits.
Page
(a) Financial Statements of Businesses Acquired. 4
(b) Proforma Financial Information. 19
(c) Exhibits.
2(a) Stock Purchase Agreement dated February 13, 1996, by and
among Medcross, Inc., ILINK, Ltd., and Gnet Enterprises,
Inc. 1/
2(b) Escrow Agreement dated February 21, 1996, by and among
Medcross, Inc., ILINK, Ltd., and DeMartino, Finkelstein,
Rosen & Virga. 1/
2(c) Form of Promissory Note. 1/
99 Press Release dated February 23, 1996. 1/
- -----------------------
[FN]
<F1> 1/ Previously filed with the Company's current report on Form 8-K, filed
on March 11, 1996 (File No. 0-17973).
[/FN]
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDCROSS, INC.
By: /S/ Henry Y.L. Toh
Henry Y.L. Toh
President, CEO, Acting CFO
Date May 10, 1996
3
<PAGE>
Item 7. Financial Statements, Proforma Financial Information, and Exhibits.
(a) Financial Statements of Business Acquired.
ILink, Ltd.
Financial Statements
Year Ended December 31, 1995 and
the Period from Inception (August 1, 1994)
to December 31, 1994
4
<PAGE>
ILink, Ltd.
Index to Financial Statements
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . 3
Statements of Assets, Liabilities and
Partners' Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Revenues and Expenses . . . . . . . . . . . . . . . . . . 5
Statements of Partners' Deficit . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . 7
Summary of Significant Accounting Policies . . . . . . . . . . . 8 to 9
Notes to Financial Statements. . . . . . . . . . . . . . . . . . 10 to 14
5
<PAGE>
Independent Auditors' Report
ILink, Ltd.
Round Rock, Texas
We have audited the accompanying statements of assets, liabilities and partners'
deficit of ILink, Ltd. (a Utah limited partnership) as of December 31, 1995 and
1994 and the related statements of revenues and expenses, partners' deficit and
cash flows for the year ended December 31, 1995 and the period from inception
(August 1, 1994) through December 31, 1994. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ILink, Ltd. as of December 31,
1995 and 1994 and the results of its operations and its cash flows for the year
ended December 31, 1995 and the period from inception (August 1, 1994) through
December 31, 1994 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 1 to the
financial statements, the Partnership is in the development stage, has not
achieved its planned level of operations and has incurred significant losses.
These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ BDO Seidman, LLP
Austin, Texas
March 20, 1996
6
<PAGE>
<TABLE>
<CAPTION>
ILink, Ltd.
Statements of Assets, Liabilities
and Partners' Deficit
December 31, December 31,
1995 1994
------------ ------------
ASSETS
<S>
Current <C> <C>
Cash and cash equivalents $ 7,437 $ 4,974
Equipment, net of accumulated depreciation
and amortization (Note 2) 181,973 90,599
Organization Costs, net of accumulated amortization
of $4,338 and $0, respectively (Note 5) 8,677 13,015
Software License Rights, net of accumulated
amortization of $107,500 and $-0-, respectively 215,000 -
Deposits 12,335 5,622
--------- ---------
Total Assets $ 425,422 $ 114,210
========= =========
LIABILITIES AND PARTNERS' DEFICIT
Current Liabilities
Accounts payable (Note 3) $ 989,930 $ 29,769
Due to related parties (Note 7) 73,450 -
Notes payable (Note 4) 722,982 290,000
Current portion of capital lease
obligations (Note 5) 83,25 13,721
Accrued royalty fees (Note 5) 345,000 -
Accrued payroll 43,084 -
Accrued interest 17,383 1,041
--------- ---------
Total current liabilities 2,275,081 334,531
Capital Lease Obligations, less current maturities 30,156 15,624
--------- ---------
Total liabilities 2,305,237 350,155
--------- ---------
Commitments and Contingencies (Notes 1 and 5)
Partners' Deficit
Limited partner - Class A ( 378,434) ( 41,031)
Limited partner - Class B (1,485,278) ( 193,273)
General partner ( 16,103) ( 1,641)
--------- ---------
Total partners' deficit (1,879,815) ( 235,945)
--------- ---------
Total liabilities and partners' deficit $ 425,422 $ 114,210
========= =========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
ILink, Ltd.
Statements of Revenues and Expenses
Period
From
Inception
For the (August 1,
Year Ended 1994) to
December December
31, 1995 31, 1994
---------- ----------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . $ 229,721 $ -
Cost of revenues . . . . . . . . . . 55,201 -
--------- ---------
Gross profit . . . . . . . . . . . . . . . 174,520 -
--------- ---------
Expenses
Advertising . . . . . . . . . . . . 366,844 77,995
Network expense . . . . . . . . . . 565,831 23,578
Salaries and wag . . . . . . . . . . 118,908 -
Software and licensing agreements . 22,500 -
General and administrative . . . . . 524,422 62,511
--------- ---------
Total expenses . . . . . . . . . . . . . . 1,598,505 164,084
--------- ---------
Operating Loss . . . . . . . . . . . . . . (1,423,985) ( 164,084)
--------- ---------
Other Expenses
Interest . . . . . . . . . . . . . . 20,661 1,041
Other . . . . . . . . . . . . . . . 1,573 -
--------- ---------
Total other expenses . . . . . . . . . . . 22,234 1,041
--------- ---------
Net Loss . . . . . . . . . . . . . . . . . $(1,446,219) $( 165,125)
========= =========
See accompanying summary of significant accounting policies
and notes to financial statements.
8
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
ILink, Ltd.
Statements of Partners' Deficit
Limited Partners General
Class A Class B Partner Total
--------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Partners' Capital, at inception
(August 1, 1994). . . . . . . $ - $ - $ - $ -
Capital contributions . . . . . 250 740 10 1,000
Distribution. . . . . . . . . . - ( 71,820) - ( 71,820)
Net loss . . . . . . . . . ( 41,281) ( 122,193) ( 1,651) (165,125)
------- --------- ------ -------
Partners' Deficit at
December 31, 1994 ( 41,031) ( 193,273) ( 1,641) (235,945)
Distributions . . . . . . . . . - ( 197,651) - (197,651)
Net loss . . . . . . . . . (337,403) (1,094,354) (14,462) (1,446,219)
------- --------- ------ ---------
Partners' Deficit at
December 31, 1995 $(378,434) $(1,485,278) $(16,103) $(1,879,815)
======= ========= ====== =========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
ILink, Ltd.
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Period
Year From Inception
Ended (August 1, 1994)
December to December
31, 1995 31, 1994
------------ ----------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss. . . . . . . . . . . . . . . . . $(1,446,219) $(165,125)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization . . . . . . 168,877 7,597
Loss on sale of equipment . . . . . . . . 1,786 -
Changes in assets and liabilities:
Organization costs. . . . . . . . . . . - ( 13,015)
Deposits. . . . . . . . . . . . . . . . ( 6,713) ( 5,622)
Accounts payable. . . . . . . . . . . . 960,161 29,769
Due to related parties. . . . . . . . . 73,450 -
Accrued royalty fees. . . . . . . . . . 322,500 -
Accrued payroll . . . . . . . . . . . . 43,084 -
Accrued interest. . . . . . . . . . . . 16,341 1,041
Software license fees payable . . . . . 22,500 -
--------- -------
Net cash provided (used) by
operating activities. . . . . . . . . . . 155,767 (145,355)
--------- -------
Cash Flows From Investing Activities:
Capital expenditures. . . . . . . . . . . ( 177,384) ( 68,851)
Proceeds from sale of equipment . . . . . 27,187 -
Software license rights . . . . . . . . . ( 322,500) -
--------- -------
Net cash used in investing activities . . . ( 472,697) ( 68,851)
--------- -------
Cash Flows From Financing Activities:
Proceeds from notes payable . . . . . . . 432,982 290,000
Capital lease obligations . . . . . . . . 107,954 -
Distributions . . . . . . . . . . . . . . ( 197,651) ( 71,820)
Capital lease payments. . . . . . . . . . ( 23,892) -
Partners' contributions . . . . . . . . . - 1,000
--------- -------
Net cash provided by financing activities . 319,393 219,180
--------- -------
Net increase in cash and cash equivalents . 2,463 4,974
Cash and cash equivalents at
beginning of period . . . . . . . . . . . 4,974 -
--------- -------
Cash and cash equivalents at end of period. $ 7,437 $ 4,974
========= =======
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
10
<PAGE>
ILink, Ltd.
Summary of Significant Accounting Policies
Organization
Ilink, Ltd. (the "Partnership") is a Utah limited partnership formed in 1994.
The Partnership develops Internet related software technology and provides
full, direct Internet access to individuals, professionals and businesses that
enable information exchange and commerce over the Internet and private Internet
Protocol networks. Revenues are derived from customers located in Houston,
Dallas, San Antonio and Austin, Texas and New Orleans, Louisiana.
Partnership Interests
At December 31
1995 1994
------ ------
General Partner . . . . . . . . . . . . . . . . . 1.00% 1%
Limited Partner, Class A . . . . . . . . . . . . . 23.33% 24%
Limited Partner, Class B . . . . . . . . . . . . . 75.67% 75%
A limited partner - class A interest has the same rights and privileges as a
limited partner - class B interest except that a limited partner - class A
interest shall also have certain non-dilution, guaranteed payment, consent, and
voting rights, as specified in the Partnership Agreement not shared by limited
partner - class B interests.
Under the terms of the partnership agreement profits, losses and distributions
are allocated as follows:
Profits
Profits are allocated first to the partners in proportion to, and to the extent
of, the aggregate net losses previously allocated to the partners and secondly,
to the partners in proportion to their percentage interests.
Losses
Losses are allocated first to the partners in proportion to, and to the extent
of, the aggregate net profits previously allocated to the partners and secondly,
to the Partners in proportion to their capital accounts.
However, no allocation of net losses shall be made to a limited partner to the
extent such allocation would result in a deficit at the end of any fiscal year
unless the limited partners are not obligated to restore such deficits.
11
<PAGE>
ILink, Ltd.
Summary of Significant Accounting Policies
Distributions
Distributions are allocated first to all the partners in proportion to their
percentage interests until the aggregate amount distributed for all periods
equals (i) the aggregate net profits allocated to the partners less the
aggregate net losses allocated to the partners for all periods; multiplied by
(ii) the highest combined federal and state marginal income tax rate for
individuals or corporations, whichever is higher, on the date of the
distribution; second, to the limited partners in proportion to, and to the
extent of, their capital contributions to the partnership less any amounts
distributed to the limited partners; third, to the general partner in proportion
to, and to the extent of, its capital contributions to the partnership less any
amounts distributed to the general partner; and thereafter, to all the partners
in proportion to their percentage interests.
Cash Equivalents
Cash equivalents consist primarily of funds invested in short-term interest-
bearing accounts. The Partnership considers all highly liquid investments
purchased with maturities of three months or less to be cash equivalents.
Equipment and Depreciation and Amortization
Equipment is stated at cost, net of accumulated depreciation. For financial
statement purposes, depreciation is computed using the straight-line method
over the estimated useful lives of the related assets.
Leased property under capital leases is stated at the present value of the
future minimum lease payments. Leased assets are amortized over the terms of
the leases, not in excess of their estimated useful lives.
Maintenance and repairs are charged to expense as incurred. The cost of
betterments and renewals are capitalized. Gains or losses upon disposal of
assets are recognized in the period during which the transaction occurs.
Research and Development
Statement of Financial Accounting Standard No. 86 "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed", requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Partnership's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Partnership between completion of the
working model and the point at which the product is ready for general release
have been insignificant. Accordingly, all research and development costs have
been expensed.
12
<PAGE>
ILink, Ltd.
Summary of Significant Accounting Policies
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
The income or loss of the Partnership is reported in the income tax returns of
the partners.
Revenue Recognition
The Partnership obtains revenue from Internet access and web page hosting
service fees charged to customers. These fees are billed on the 20th of each
month for the next thirty days. Accordingly, at month end a portion of the fees
are recorded as deferred revenue for the hosting of Web pages.
Organization Costs
During the period ending December 31, 1994, the Partnership deferred
organizational costs totaling $13,015. Organization costs are amortized using
the straight-line method over three years.
Software License Rights
Software license rights are stated at cost, net of accumulated amortization.
For financial statement purposes, amortization is computed based on the greater
of straight-line or units issued.
Note 1 - Going Concern
The Partnership's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Business has
not achieved its planned level of operations or realized significant revenues
and has incurred significant losses.
Subsequent to year end, the parent company of I-Link Worldwide, Inc., successor
to ILink, Ltd. as described in Note 6, issued $1,000,000 principal amount of 10%
convertible promissory notes due the earlier of August 31, 1996 or the closing
of the offering described below. A portion of the notes are convertible into a
maximum of 350,000 shares of the parent company's common stock. The proceeds
from the notes were used to fund I-Link's
13
<PAGE>
ILink, Ltd.
Summary of Significant Accounting Policies
operations. The Business's continued existence is dependent upon its ability
to obtain additional financing. Management plans to obtain additional debt or
equity financing or funding from its parent company (see Note 6) that should
enable the business to meet its obligations. If additional funding cannot be
obtained, the business would renegotiate existing lending arrangements and
reduce its expenditures of administration, promotion and product development to
preserve cash liquidity.
Note 2 - Equipment
Equipment and their related useful lives, were as follows:
<TABLE>
<CAPTION>
Useful At December At December
Lives 31, 1995 31, 1994
----------- -----------
<S> <C> <C>
Computer software . . . . . . . . . . . . 3 $ 16,818 $ -
Computer and office equipment . . . . . . 5 95,952 68,851
life of
Equipment under capital lease . . . . . lease 131,413 29,345
------- ------
Total . . . . . . . . . . . . . . . . 244,183 98,196
------- ------
Less accumulated depreciation and amortization 62,210 7,597
------- ------
Net equipment . . . . . . . . . . . . . . $ 181,973 $ 90,599
======= ======
</TABLE>
Depreciation expense for the year ended December 31, 1995 and for the period
from inception (August 1, 1994) to December 31, 1994 was $57,039 and $7,597,
respectively.
Note 3 - Forgiveness of Debt
Subsequent to year end, the Company negotiated reduced debt settlements with
several vendors. The vendors were paid and the debt was extinguished in full
on February 28, 1996. Payment was made in the amount of $150,828 in exchange
for debt forgiveness of $96,844.
14
<PAGE>
ILink, Ltd.
Notes to Financial Statements
Note 4 - Notes Payable
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Short-term debt at December 31 was as follows:
Secured promissory note, payable to the Class A limited
partner originally due December 31, 1994. Upon
default at January 1, 1995, interest began to accrue
at an annual rate of 12%. At December 31, 1995 the
note became due upon demand. The note is secured by
certain fixed assets of the Partnership and certain
fixed assets of a Class B limited partner. . . . . . . $ 390,000 $ 290,000
Unsecured promissory note, payable to six Class B limited
partners bearing a simple interest rate of 10% and
maturing May 1, 1996 or upon the sale of $1,000,000
in ILink shares. . . . . . . . . . . . . . . . . . . . 79,500 -
Secured promissory note, payable to a Class B limited
partner upon the receipt of $2,400,000 of equity.
The note bears an interest rate of 10% secured by
assets of ILink, intellectual property and
customer base. . . . . . . . . . . . . . . . . . . . . 200,000 -
Non-negotiable 10% convertible promissory note payable
to a limited liability company upon the earlier of
February 28, 1997 or the Partnership's receipt of
proceeds of at least $500,000 from equity or debt
financings. . . . . . . . . . . . . . . . . . . . . . 50,000 -
Miscellaneous notes payable . . . . . . . . . . . . . . . 3,482 -
------- -------
$ 722,982 $ 290,000
======= =======
</TABLE>
Note 5 - Commitments and Contingencies
License Agreements
During 1995, the Partnership entered into two separate software licensing
agreements, whereby the Partnership has committed to purchase the licenses.
The first agreement requires that the Partnership purchase 250,000 licenses for
a total of $300,000. Through December 31, 1995, the Partnership received
143,750 licenses for a total of $172,500. As of December 31, 1995 the Partner-
ship has issued approximately 10,000 licenses under this agreement. Unused
licensed rights with an approximate cost of $172,500 have been capitalized and
are included in the software license rights in the accompanying statement of
assets, liabilities and partners' deficit at December 31, 1995.
15
<PAGE>
ILink, Ltd.
Notes to Financial Statements
The realization of these software licenses rights will be dependent upon the
partnership obtaining additional funding and substantially increasing the number
of subscribers. As of March 20, 1996, the Partnership has made no payments.
The purchase commitment is as follows:
<TABLE>
<CAPTION>
Commitment Total
to Purchase Fee
----------- -----------
<S> <C> <C>
Initial order due May 10, 1995. . . . . . . . . . . $ 37,500 $ 45,000
First quarterly minimum fee due September 30, 1995. 53,125 63,750
Second quarterly minimum fee due December 31, 1995. 53,125 63,750
Third quarterly minimum fee due March 31, 1996. . . 53,125 63,750
Fourth quarterly minimum fee due June 30, 1996. . . 53,125 63,750
------- -------
$ 250,000 $ 300,000
======= =======
</TABLE>
In addition, the Partnership is required to pay an annual support fee of
$35,000. The software provider could terminate this agreement for default and
terminate the licensing rights with thirty days written notice.
The second agreement requires that the Partnership acquire $150,000 of licenses,
due in four installments of $37,500 beginning March 1, 1995. Individual license
fees range from $1 to $2 per user depending on the total number of users. This
agreement is cancelable by either party in the event of default. As of March
20, 1996, the Partnership was in default on the first three installments,
totaling $112,500. In addition, the Partnership is required to pay an annual
maintenance fee of $5,000. No licenses have been issued in conjunction with
this Agreement. Licensing rights of $150,000 have been capitalized and are
included in software license rights in the statement of assets, liabilities and
partners' deficit at December 31, 1995. Realization of these software license
rights will be dependent upon the Partnership obtaining additional funding and
substantially increasing the number of subscribers.
Subsequent to year-end, the Company has reached a verbal agreement to extend the
payment dates, however, a formal agreement has not yet been signed.
Leases
During the year ended December 31, 1995, the Partnership entered into additional
operating leases for facilities at various point of presence cities in addition
to entering into operating and non-cancelable capital leases which expire at
various dates through June 1998. The capital leases provide for fixed monthly
rentals and include bargain purchase options at lease expiration dates.
16
<PAGE>
ILink, Ltd.
Notes to Financial Statements
The following is a schedule by year of the future minimum lease payments under
capital leases together with the present value of the minimum lease payments
as of December 31, 1995 and the future minimum lease payments under operating
leases:
<TABLE>
<CAPTION>
As of
December 31, 1995
-------------------------
Capital Operating
Leases Leases
---------- ---------
<S> <C> <C>
1996 . . . . . . . . . . . . . . . . . . $ 83,252 $ 29,225
1997 . . . . . . . . . . . . . . . . . . 43,467 27,073
1998 . . . . . . . . . . . . . . . . . . 5,583 -
------- ------
132,302 $ 56,298
Less amount representing interest. . . . 18,894 ======
Present value of net minimum lease
payments . . . . . . . . . . . . . . . 113,408
Less current maturities. . . . . . . . . 83,252
-------
$ 30,156
=======
</TABLE>
Total rental expense under operating leases amounted to $57,951 and $3,825 for
the year ended December 31, 1995 and the period ended December 31, 1994,
respectively.
As of March 20, 1996, the Partnership was in default of its operating leases
with the exception of the operating leases for their points of presence.
Note 6 - Subsequent Events
On February 13, 1996, the assets and liabilities of ILink, Ltd. were transferred
to ILink Worldwide, Inc. which was wholly-owned by ILink, Ltd. On February 13,
1996, ILink, Ltd. then executed a purchase agreement with Medcross, Inc. in
which Medcross acquired all of the issued and outstanding shares of stock of
ILink Worldwide, Inc. in exchange for the issuance of an aggregate of up to
4,000,000 shares of common stock. All of the business of ILink, Ltd. is now
done through ILink Worldwide, Inc.
Pursuant to the terms of the Medcross purchase agreement, 1,400,000 shares of
common stock were issued upon the closing of the acquisition and 2,600,000
shares will be issued, placed in escrow and released over a one-year period upon
the attainment of certain business goals, including with limitation, the
increase in the number of subscribers who use ILink's services.
17
<PAGE>
ILink, Ltd.
Notes to Financial Statements
Note 7 - Related Parties
Due to related parties consisted of the following at December 31, 1995:
Expense reimbursement . . . . . . . . . . . . . . . . . . . $33,450
Fee due to partner in exchange for services provided . . . . 40,000
------
$73,450
======
As disclosed in Note 4, the Partnership has a note payable in the amount of
$390,000 due to a Class A limited partner and two notes payable totaling
$279,500 due to seven Class B limited partners.
Note 8 - Supplemental Cash Flow Information
Interest of $20,661 and $-0- was paid for the year ended December 31, 1995 and
the period from inception (August 1, 1994) through December 31, 1994,
respectively.
18
<PAGE>
Item 7. Financial Statements, Proforma Financial Information, and Exhibits.
(b) Proforma Financial Information.
Pro Forma Condensed Combined Financial Statement
(Unaudited)
Medcross, Inc.
and
I-Link Worldwide Inc.
19
<PAGE>
<TABLE>
<CAPTION>
MEDCROSS, INC. AND I-LINK WORLDWIDE INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Unaudited)
December 31, 1995
--------------------------------------------------------------
Pro Forma
I-Link Adjustment
Medcross Worldwide Increase Pro Forma
Assets Inc. Inc. (Decrease) Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Current
Cash and cash equivalents $ 79,316 $ 7,437 $ 845,000 $ 931,753
Accounts receivable 921,793 - - 921,793
Inventory 829,988 - - 829,988
Prepaid expenses 87,253 - - 87,253
--------- --------- --------- ----------
Total current assets 1,918,350 7,437 845,000 2,770,787
--------- --------- --------- ----------
Property and equipment, net 1,620,157 181,973 - 1,802,130
--------- --------- --------- ----------
Intangible assets, net 535,468 223,677 2,645,712 3,404,857
Investment in unconsolidated subsidiary 6,250 - - 6,250
Other assets 66,638 12,335 205,000 78,973
--------- --------- --------- ----------
Total assets $ 4,146,863 $ 425,422 $ 3,695,712 $ 8,267,997
========= ========= ========= ==========
Liabilities and Stockholders' Equity (Capital Deficit)
Current liabilities
Accounts payable and accrued expenses $ 615,373 $ 1,050,397 $ - $ 1,665,770
Accounts payable - related parties - 73,450 - 73,450
Advance deposits received 233,728 - - 233,728
Note payable - related party 88,000 669,500 - 757,500
Note payable - other 400,000 53,482 1,050,000 1,503,482
Current portion of long-term debt 702,447 - - 702,447
Current portion of long-term debt -
related parties 39,230 - - 39,230
Current obligations under capital lease 155,145 83,252 - 238,397
Accrued royalty fees - 345,000 - 345,000
--------- --------- --------- ----------
Total current liabilities 2,233,923 2,275,081 1,050,000 5,559,004
--------- --------- --------- ----------
Long-term debt - related parties 87,682 - - 87,682
Capital lease obligations - 30,156 - 30,156
Minority interest in consolidated
subsidiaries 370,092 - - 370,092
Stockholders' Equity (Capital Deficit)
Preferred stock 2,075,000 - ( 400,000) 1,675,000
Common stock 12,622 1 16,651 29,274
Additional paid-in capital 3,428,854 - 3,183,348 6,612,202
Deficit (4,061,310) (1,879,816) ( 154,287) ( 6,095,413)
--------- --------- --------- ----------
Total stockholders' equity
(capital deficit) 1,455,166 (1,879,815) 2,645,712 2,221,063
Total liabilities and stockholders' --------- --------- --------- ----------
equity (capital deficit) $ 4,146,863 $ 425,422 $ 3,695,712 $ 8,267,997
========= ========= ========= ==========
See note to unaudited pro forma condensed combined financial statements.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
MEDCROSS, INC. AND I-LINK WORLDWIDE, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(Unaudited)
For the Year Ended
December 31, 1995
-------------------------------------------------------------
Pro Forma
I-Link Adjustment
Medcross Worldwide Increase Pro Forma
Inc. Inc. (Decrease) Combined
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net operating revenue $ 3,122,953 $ 229,721 $ - $ 3,352,674
--------- --------- --------- ---------
Expenses:
Cost of sales 154,481 55,201 - 209,682
Salaries and benefits 1,123,340 118,908 185,000 1,427,248
Repairs and maintenance 309,255 - - 309,255
Network expense - 565,831 - 565,831
Provision for doubtful accounts 365,093 - - 365,093
Advertising - 366,844 - 366,844
Depreciation and amortization 465,020 54,613 3,119,633 3,639,266
Other operating expenses 1,199,519 492,309 - 1,691,828
--------- --------- --------- ---------
Operating loss ( 493,755) (1,423,985) (3,304,633) (5,222,373)
--------- --------- --------- ---------
Interest expense ( 160,423) ( 20,661) - ( 181,084)
Interest income 10,717 - - 10,717
Gain on sale of interest in
unconsolidated subsidiary 20,500 - - 20,500
Other income (expense) 58,612 ( 1,573) - 57,039
--------- --------- --------- ---------
Loss before minority interest in
net income of consolidated
subsidiaries ( 564,349) (1,446,219) (3,304,633) (5,315,201)
Minority interest in net income of
consolidated subsidiaries 12,440 - - 12,440
--------- --------- --------- ---------
Net loss $( 551,909) $(1,446,219) $(3,304,633) $(5,302,761)
========= ========= ========= =========
Net loss per share $( .08) $( .64)
========= =========
Weighted average common shares
outstanding 6,866,926 1,400,000 8,266,926
========= ========= =========
See note to unaudited pro forma condensed combined financial statements.
</TABLE>
21
<PAGE>
MEDCROSS, INC. AND I-LINK WORLDWIDE, INC.
NOTES TO THE PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Basis of Preparation
The unaudited pro forma condensed combined balance sheet as a December 31, 1995
and the unaudited pro forma condensed combined statements of operation for the
year ended December 31, 1995 give effect to the acquisition of 100% of the
outstanding common stock of I-Link Worldwide, Inc. by Medcross, Inc. (the
"Company") as if the acquisition, accounted for as a purpose, had occurred on
the balance sheet date with respect to the balance sheet and at the beginning
of 1995, with respect to the statements of operations. During 1996, the assets
and liabilities of ILINK, Ltd. ("ILINK"), were transferred to I-Link Worldwide,
Inc. at their historical basis. I-Link Worldwide, Inc. had no activity prior to
this transaction.
The pro forma financial statements have been prepared based upon the financial
statements of the Company and ILINK as of and for the year ended December 31,
1995. These pro forma financial statements may not be indicative of the results
that actually would have occurred if the combination had been in effect on the
dates indicated or which may be obtained in the future. The pro forma
adjustments are based upon certain estimates which may change as additional
infromation becomes available. The pro forma financial statements should be
read in conjunction with the audited financial statements of the Company and
ILINK.
NOTE 2 - Pro Forma Adjustments
<TABLE>
<CAPTION>
A. The following pro forma adjustment reflects the purchase of all of the
outstanding common stock of I-Link Worldwide, Inc. by the Company in
return for the issuance of 1,400,000 shares of common stock of the Company
to the stockholder of I-Link Worldwide, Inc.
<S> <C>
Common stock (1,400,000 shares
issued at $.007 par with a
current market value of $2.00
per share) . . . . . . . . . . . . . . . . . . . . . $ 9,800
Additional paid-in capital . . . . . . . . . . . . . . 2,790,200
---------
Purchase price . . . . . . . . . . . . . . . . . . . . 2,800,000
Transaction costs . . . . . . . . . . . . . . . . . . . 116,000
---------
Total Acquistion Costs . . . . . . . . . . . . . . . . 2,916,000
Carrying amount of net liabilities acquired . . . . . . 1,879,815
---------
Excess (allocated to intangible assets) . . . . . . . . $ 4,795,815
=========
</TABLE>
The excess purchase price was allocated as follows:
<TABLE>
<CAPTION>
Amount Amortization Period
---------- ----------------------------------------
<S> <C> <S>
Subscriber list $ 323,100 12 months beginning on acquisition date
Purchased Research & Development 2,034,103 Immediated write-off
Patents 913,751 Period to be determined upon approval of
patents
Goodwill 1,524,861 24 months beginning on acquisition date
---------
$4,795,815
=========
</TABLE>
The allocation of the excess purchase price is a preliminary estimate
and is subject to adjustment pursuant to the availability of additional
information.
22
<PAGE>
MEDCROSS, INC. AND I-LINK WORLDWIDE INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
Under the terms of the stock purchase agreement, a further 1,600,000
shares of common stock of the Company will be released to the stockholders
of I-Link Worldwide, Inc. at such time as the Company receives gross
proceeds greater than or equal to $4,000,000 from the issuance of deby or
equity securities through one or more private or public offerings prior
to December 31, 1996. A further 1,000,000 shares of common stock of the
Company will be released at such time as the monthly revenue from the
ILINK business exceeds $1,000,000 or the number of subscribers serviced
by the business exceeds 100,000 one year from the date of receipt of the
above mentioned financing. At the time that these criteria are met,
additional adjustments will be recorded based upon the value of the shares
issued.
<TABLE>
<CAPTION>
B. The following pro forma adjustments are reflected in the pro forma
condensed combined statements of operations:
Year Ended
December 31
1995
<S> <C>
Additional compensation expense arising
from executive employment arrangements
entered into by I-Link Worldwide, Inc.
in January 1996. . . . . . . . . . . . . . . $ 185,000
Additional amortization of intangibles
of ILINK after purchase price allocation
and acquistion costs . . . . . . . . . . . . 3,119,633
---------
$3,654,244
$ 3,304,633
=========
</TABLE>
Intangible assets consist of unpatented technological know-how used in the
provision of a broad range of Internet services. The Company's
intangibles consist of costs related to the acquisition of ILINK. These
assets are amortized over periods ranging from 1 to 24 months for purposes
of this pro form presentation.
<TABLE>
<CAPTION>
C. The following pro form adjustments reflect the issuance of the $1,050,000
10% convertible promissory notes. The Notes are due and payable on the
earlier of August 31, 1996 or the closing of a debt or equity offering.
December 31
1995
<S> <C>
Cash . . . . . . . . . . . . . . . . . . . . . $ 845,000
Other Assets . . . . . . . . . . . . . . . . . 205,000
Notes payable. . . . . . . . . . . . . . . . . (1,050,000)
</TABLE>
<TABLE>
<CAPTION>
D. The following pro forma adjustment reflects the conversion of 40,000
shares of Class A Preferred Stock of the Company with a par value of $10
per share into 978,891 shares of common stock of the Company with a par
value of $.007 per share.
December 31
1995
<S> <C>
Class A Preferred Stock. . . . . . . . . . . . . $(400,000)
Common stock . . . . . . . . . . . . . . . . . . 6,852
Additional paid-in capital . . . . . . . . . . . 393,148
23
<PAGE>
</TABLE>
