SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment #1 To Current Report
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 24, 1998
CENTIGRAM COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2418021
- ------------------------------ ------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number)
0-19558
----------------------------
(Commission File Number)
91 EAST TASMAN DRIVE
SAN JOSE, CALIFORNIA 95134
(Address of principal executive offices, including zip code)
(408) 944-0250
(Registrant's telephone number, including area code)
N/A
(Former name or address, if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN REPORT
This Form 8-K/A amends Item 7 of that certain Form 8-K filed with the
Securities and Exchange Commission on June 24, 1998 (the "Original Form 8-K")
by including the financial information referred to below.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of Business Acquired.
The audited financial statements of The Telephone Connection, Inc. ("TTC")
as of and for the years ended December 31, 1997 and December 31, 1996 and
unaudited financial information as of and for the three months ended March 31,
1998 and 1997.
(b) Pro Forma Financial Information.
The accompanying Unaudited Pro Forma Combined Condensed Balance Sheet at
May 2, 1998, and the Unaudited Pro Forma Combined Condensed Statements of
Operations for the six months ending May 2, 1998, and for the twelve months
ended November 1, 1997 reflect the sale of the CPE business unit ("CPE") on
May 8, 1998 to Mitel Corporation and the purchase of substantially all of the
assets of TTC as of June 24, 1998.
The Unaudited Pro Forma Combined Condensed Balance Sheet reflects the
elimination of the assets sold and the liabilities incurred, assuming the CPE
sale transaction and the TTC asset purchase transaction had occurred on May 2,
1998.
The Unaudited Pro Forma Combined Condensed Statements of Operations
reflects the elimination of net revenue, cost of sales, and operating expenses
related to the CPE sale and also reflects the addition of operating expenses
related to the TTC asset purchase and assumes that these transactions were
completed at the beginning of each reporting period.
The unaudited pro forma financial information is not necessarily
indicative of the results or financial position that would actually have been
reported had the sale and purchase transactions underlying the pro forma
adjustments actually been consummated on such dates nor is it necessarily
indicative of future operating results or financial position.
(c) Exhibits.
The following exhibits are filed herewith:
2.1* Asset Purchase Agreement dated as of June 20, 1998 by and among
Centigram Communications Corporation, TTCI Acquisition Corp. and The Telephone
Connection, Inc.
- - - - - - - - - - - - - - -
* Previously filed.
SIGNATURE
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.
CENTIGRAM COMMUNICATIONS CORPORATION
(Registrant)
/s/ Thomas E. Brunton
Thomas E. Brunton
Senior Vice President and Chief Financial Officer
Date: September 2, 1998
REPORT OF INDEPENDENT AUDITORS
THE SHAREHOLDERS
THE TELEPHONE CONNECTION, INC.
We have audited the accompanying balance sheets of The Telephone Connection,
Inc. as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' deficit and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Telephone Connection,
Inc. at December 31, 1997 and 1996 and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Washington, D.C.
July 15, 1998
The Telephone Connection, Inc.
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31, December 31,
(In thousands) 1998 1997 1996
- ----------------------------------------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $26 $107 $31
Accounts receivable ....................... 3 4 313
Inventory.................................. 125 125 243
Prepaid expenses........................... 4 22 18
----------- ----------- -----------
Total current assets................... 158 258 605
Loan acquisition costs, net................... 2 3 6
Property, equipment, and leasehold
improvements, net of accumulated
depreciation and amortization of $767,
$699 and $768, respectively................ 640 704 597
Patents, net of accumulated amortization
of $110, $106 and $88, respectively........ 234 238 257
Security Deposits............................. 2 2 1
----------- ----------- -----------
$1,036 $1,205 $1,466
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses...... $9 $18 $135
Other liabilities.......................... 30 39 14
Loan payable - stockholders................ 2,775 2,850 --
Line of credit............................. -- -- 514
Deferred revenue - current................. 158 234 614
----------- ----------- -----------
Total current liabilities............... 2,972 3,141 1,277
Deferred revenue -long-term................ -- 6 192
Stockholders' deficit:
Common stock: $0.01 par value, 10,000
shares authorized; 802 shares issued and
outstanding and additional paid-in capital 2,715 2,715 2,715
Retained deficit........................... (4,651) (4,657) (2,718)
----------- ----------- -----------
Total stockholders' deficit............. (1,936) (1,942) (3)
----------- ----------- -----------
$1,036 $1,205 $1,466
=========== =========== ===========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
The Telephone Connection, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended Year Ended Year Ended
March 31, March 31, December December
(In thousands) 1998 1997 31, 1997 31, 1996
- ----------------------------------------------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenue
Sales of base units, service nodes and
port expansion modules.................... $ -- $359 $359 $2,684
Costs of goods sold......................... (8) (133) (179) (1,169)
----------- ----------- ----------- -----------
Gross profit.................................. (8) 226 180 1,515
Software support ............................. 268 57 244 238
Hardware warranty and maintenance ............ 384 134 529 239
Other income ................................. 9 30 62 75
Interest income .............................. 2 1 4 5
----------- ----------- ----------- -----------
655 448 1,019 2,072
General and administrative expenses........... (649) (663) (2,958) (2,438)
----------- ----------- ----------- -----------
Income (loss) before income taxes............. 6 (215) (1,939) (366)
Income taxes.................................. -- -- -- --
----------- ----------- ----------- -----------
Net income (loss)............................. $6 ($215) ($1,939) ($366)
=========== =========== =========== ===========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
The Telephone Connection, Inc.
Statements of Stockholders' Deficit
<TABLE>
<CAPTION>
Common Total
Stock and Common
Additional Stock
Paid-in Retained Stockholders'
(In thousands) Capital Deficit Deficit
- ----------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1, 1996 ................... $2,715 ($2,352) $363
Net loss...................................... -- (366) (366)
----------- ----------- -----------
Balance at December 31, 1996 2,715 (2,718) (3)
Net loss...................................... -- (1,939) (1,939)
----------- ----------- -----------
Balance at December 31, 1997 $2,715 ($4,657) ($1,942)
Net income.................................... -- 6 6
----------- ----------- -----------
Balance at March 31, 1998 (Unaudited)........ $2,715 ($4,651) ($1,936)
=========== =========== ===========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
The Telephone Connection, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended Year Ended Year Ended
March 31, March 31, December December
(In thousands) 1998 1997 31, 1997 31, 1996
- ----------------------------------------------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operations....................
Net income (loss)........................... $6 ($215) ($1,939) ($366)
Depreciation and amortization............... 69 30 330 240
Accounts receivable......................... -- (49) 309 40
Inventory................................... -- 118 118 116
Prepaid expenses............................ 18 14 (4) (15)
Security deposits........................... -- -- -- 3
Accounts payable and accrued expenses....... (9) (98) (117) (79)
Other liabilities........................... (9) (11) 25 (75)
Deferred revenue............................ (82) (67) (566) 327
----------- ----------- ----------- -----------
(7) (278) (1,844) 191
Cash flows from financing: .................
Loan acquisition costs...................... 1 -- (4) (10)
Proceeds from loan payable - stockholder.... (75) -- 2,850 --
Advance(repayments) of line of credit....... -- 275 (514) 314
----------- ----------- ----------- -----------
(74) 275 2,332 304
Cash flows for investing:...................
Additions to property, equipment, and
leasehold improvements..................... -- (67) (412) (546)
Additions to patents........................ -- -- -- (31)
----------- ----------- ----------- -----------
-- (67) (412) (577)
Net change and equivalents:................. (81) (70) 76 (82)
Cash and cash equivalents, beginning
of period................................. 107 31 31 113
----------- ----------- ----------- -----------
Cash and cash equivalents, end of period.... $26 ($39) $107 $31
=========== =========== =========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest...................... $82 $20 $136 $73
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
The Telephone Connection, Inc.
Notes to Financial Statements
ORGANIZATION
The Telephone Connection, Inc. ("TTC") is a supplier of computer hardware
and proprietary software to the telecommunications industry. TTC's sources of
revenue include sales of hardware and software, royalty fees for the use of
its software and software support and hardware warranty and maintenance
services. One customer accounted for more than 94 percent and 96 percent of
revenue in 1997 and 1996, respectively.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition Revenue is recognized for license fees and royalty
fees when earned. Revenue is recognized for sales of hardware and software
when installed by TTC personnel. A portion of the sales price for the
hardware and software is allocated to one year of software support and two
years of hardware warranty and maintenance that is included with each sale.
Revenue is recognized for support and warranty and maintenance services over
the respective terms of service. In October 1997, Statement of Position
("SOP") 97-2, Software Revenue Recognition, was issued. SOP 97-2 is effective
for fiscal years beginning after December 15, 1997 and clarifies rules of
revenue recognition related to customer acceptance, upgrades and post-contract
customer support. SOP 97-2 is not expected to have a material impact on the
Company's results of operations.
Software Development Costs No software development costs have been
capitalized to date. Under TTC's current practices of developing new products
and enhancements, the technological feasibility of the underlying software is
not established until substantially all related production development is
complete and the product is released for production.
Patents All legal costs incurred to acquire both domestic and
international patents have been capitalized and are being amortized on the
straight-line basis over the estimated useful life of 17 years. Legal costs
to maintain and enforce existing patents are deducted currently.
Inventory Inventory consists primarily of hardware parts that have not
yet been installed at customer locations and is stated at the lower of cost or
market. Cost is determined by the specific identification method.
Deferred Revenue TTC reflects the unearned portion of the percentage
of the sales price for its service nodes and port expansion modules allocable
to its services-$100 per port for one year's software support and $400 per
port for two years' hardware warranty and maintenance- as deferred revenue on
the accompanying balance sheets. The current portion of deferred revenue is
that portion of revenue that will be recognized over the next twelve months.
Research and Development Research and development costs consist of
payroll expenditures incurred during the course of planned research and
investigation aimed at developing new products or processes. The Company
expenses all research and development costs as they are incurred. Research
and development costs of $870,000 and $700,000 were incurred during 1997 and
1996, respectively, and are included in general and administrative expenses.
Income Taxes No provision is made for federal or state income taxes as
TTC has elected to be taxed under Subchapter S of the Internal Revenue Code,
whereby each stockholder reports on their individual income tax return their
share of TTC's taxable income.
Property, Equipment and Leasehold Improvements Property and equipment
are recorded at cost and are depreciated using a straight-line method over the
estimated useful lives of the assets, ranging from five to seven years. The
leasehold improvements are recorded at cost and are amortized using a
straight-line method over the term of the lease.
Benefit Plans The Company has established a 401(k) plan for the benefit
of substantially all of its employees. At the discretion of the Board of
Directors, the Company can elect to make a contribution to the plan. The
Company did not make any contributions to the 401(k) plan in either 1997 or
1996.
Use of Estimates The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
As of December 31, 1997, property, equipment, and leasehold improvements
are comprised of the following:
<TABLE>
<CAPTION>
Accumulated
Depreciation/
(In thousands) Cost Amortization Net
- ----------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Furniture.................................... $75 $42 $33
Computer equipment........................... 1,179 597 582
Leasehold improvements....................... 149 60 89
----------- ----------- -----------
$1,403 $699 $704
=========== =========== ===========
</TABLE>
Depreciation and amortization expense in 1997 and 1996 was $330,000 and
$240,000, respectively
DEBT
Loan Payable - Stockholders In 1997, TTC entered into a loan agreement
with its principal stockholder in the total amount of $2,850,000. The funds
have been borrowed by the stockholder from NationsBank. The NationsBank loans
mature September 1, 1998 and bear interest at 0.25% over prime. In connection
with the sale of TTC subsequent to year-end (see Subsequent Event note), the
loan was repaid.
Line of Credit In 1996, TTC entered into a line of credit agreement with
NationsBank in the amount of $2,000,000. The line of credit matured on
October 1, 1997, with an interest rate of 0.25% over prime. At December 31,
1996, the outstanding balance was $514,000. The line of credit was repaid in
1997.
COMMITMENTS AND CONTINGENCIES
Operating Leases TTC has entered into operating lease agreements for its
office space and certain equipment. The office space lease commenced on June
21, 1996 and provides for payments of $12,620 per month, adjusted annually for
increases in the Consumer Price Index, for 60 months. The lease provides for
an option to terminate the lease after the 36th month for a lump sum payment
of $49,054. Two of TTC's principal stockholders have provided a limited
guarantee to the landlord.
The following is a summary of the future minimum lease payments as of
December 31, 1997 (in thousands):
1998..................... $164
1999..................... 160
2000..................... 160
2001..................... 66
-----------
$550
===========
Rental expense in 1997 and 1996 was $142,000 and $106,000, respectively.
INCENTIVE STOCK PLAN
TTC has adopted an Incentive Stock Option Plan whereby key employees of TTC
receive options to purchase the common stock of TTC over a ten-year period for
a purchase price equal to the fair market value of the stock at the time the
options were granted. All options are subject to a four-year vesting
schedule. As of December 31, 1997 and 1996, there were options for 279 and
236 shares outstanding, respectively, and options for 300 shares authorized.
TTC has adopted SFAS No. 123, Accounting for Stock-Based Compensation.
Under the Company's method of adopting SFAS No. 123, it has elected to follow
APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations in accounting for its plans. Accordingly, no compensation
expense has been recognized for its stock option plans because stock options
are generated with an exercise price equal to the fair value of the stock on
the grant date. Had compensation cost for TTC's stock option plans been
determined based upon the fair value of the options at the grant date for
awards under these plans consistent with the methodology prescribed under SFAS
No. 123, TTC's 1997 and 1996 net loss would not have been materially affected.
SUBSEQUENT EVENT
On June 24, 1998, the Company sold substantially all of its assets to
Centigram Communications Corporation in an all-cash transaction for
approximately $11.2 million. In connection with this sale, the loan payable
to stockholders was repaid and all stock options became 100% vested.
IMPACT OF YEAR 2000 (UNAUDITED)
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's products or computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than 2000. This could
result in system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The Company
has evaluated its computer systems and believes that they are Year 2000
compliant, and that there will be no material impact on the Company's results
of operations, capital spending or business operations.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS (continued)
(b) Pro Forma Financial Information.
SALE OF CPE BUSINESS UNIT
The accompanying Unaudited Pro Forma Combined Condensed Balance Sheet
at May 2, 1998, and the Unaudited Pro Forma Combined Condensed Statements of
Operations reflect the sale of the CPE business unit ("CPE") of Centigram
Communications Corporation ("Centigram", "The Company") on May 8, 1998 to
Mitel Corporation, ("Buyer"). The Company received cash of approximately
$26.8 million in this transaction.
The Unaudited Pro Forma Combined Condensed Balance Sheet reflects the
elimination of the assets sold and the liabilities incurred, assuming the sale
transaction had occurred on May 2, 1998. The Unaudited Pro Forma Combined
Condensed Statements of Operations reflect the elimination of net revenue,
cost of sales, and operating expenses related to the CPE business unit and
assumes that the sale transaction was completed at the beginning of the
relevant reporting period.
PURCHASE OF TTC
The accompanying Unaudited Pro Forma Combined Condensed Balance Sheet
at May 2, 1998 and the Pro Forma Combined Condensed Statements of Operations
for the six months ended May 2, 1998 and the twelve months ended November 1,
1997, reflect the purchase of substantially all of the assets of The Telephone
Connection, Inc. ("TTC") on June 24, 1998 for cash of approximately $11.6
million, including transaction expenses.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet reflects
Centigram as of May 2, 1998, with the acquired assets of TTC as if the
purchase transaction had occurred on that date. The Unaudited Combined
Condensed Statement of Operations for the six months ended May 2, 1998, gives
effect to the combination of Centigram and TTC by combining the results of
operations of Centigram for the six months ended May 2, 1998 with the results
of operations of TTC for the six months ended March 31, 1998. The Unaudited
Combined Condensed Statement of Operations for the year ended November 1,
1997, gives effect to the combination of Centigram and TTC by combining the
results of operations of Centigram for the year ended November 1, 1997 with
the results of operations of TTC for the year ended September 30, 1997.
The unaudited pro forma financial information is not necessarily
indicative of the results of operations or financial position that would
actually have been reported had the sale transaction and the purchase
transactions underlying the pro forma adjustments actually been consummated on
such dates nor is it necessarily indicative of future operating results or
financial position.
Centigram Communications Corporation
Pro Forma Combined Condensed Balance Sheet (Unaudited)
May 2, 1998
<TABLE>
<CAPTION>
Centigram Less: Plus: Total As
(In thousands) Consolidated CPE TTC Adjusted
- ----------------------------------------------- ------------ ------------ ------------ ------------
(a) (b) (c) (d)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments............ $46,390 $26,849 ($11,151) $62,088
Trade receivables,net ..................... 18,031 (3,778) -- 14,253
Inventories................................ 8,399 (2,900) -- 5,499
Other current assets....................... 1,543 (74) 7 1,476
------------ ------------ ------------ ------------
Total current assets................... 74,363 20,097 (11,144) 83,316
Property and equipment, net................... 10,178 (3,027) 588 7,739
Intangible assets, net........................ 1,332 (382) 2,563 3,513
Deposits and other assets..................... 2,523 (63) -- 2,460
------------ ------------ ------------ ------------
$88,396 $16,625 ($7,993) $97,028
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................ $6,555 $393 $ -- $6,948
Accrued compensation........................ 4,060 (192) -- 3,868
Accrued income taxes........................ -- 1,100 -- 1,100
Accrued expenses, warranty and
other liabilities.......................... 6,424 1,756 407 8,587
------------ ------------ ------------ ------------
Total current liabilities................ 17,039 3,057 407 20,503
Commitment and contingencies
Stockholders' equity
Common stock and capital in excess
of par value............................. 90,826 -- -- 90,826
Treasury stock, at cost..................... (2,333) -- -- (2,333)
Accumulated deficit......................... (17,292) 13,568 (8,400) (12,124)
Other....................................... 156 -- -- 156
------------ ------------ ------------ ------------
Total stockholders' equity............... 71,357 13,568 (8,400) 76,525
------------ ------------ ------------ ------------
$88,396 $16,625 ($7,993) $97,028
============ ============ ============ ============
</TABLE>
See Pro Forma notes.
Centigram Communications Corporation
Pro Forma Combined Condensed Statements of Operations (Unaudited)
Six Months Ended May 2, 1998
<TABLE>
<CAPTION>
Centigram Less: Plus: Total As
(In thousands) Consolidated CPE TTC Adjusted
- ----------------------------------------------- ------------ ------------ ------------ ------------
(a) (b) (c) (d)
<S> <C> <C> <C> <C>
Net revenue................................... $39,360 $11,376 $824 $28,808
Cost and expenses:
Costs of goods sold......................... 19,224 5,272 475 14,427
Research and development.................... 10,087 1,738 1,028 9,377
Selling, general and administrative......... 21,822 4,046 327 18,103
------------ ------------ ------------ ------------
51,133 11,056 1,830 41,907
------------ ------------ ------------ ------------
Operating income (loss)....................... (11,773) 320 (1,006) (13,099)
Other income and expense, net................. 1,329 -- 27 1,356
------------ ------------ ------------ ------------
Income (loss) before income taxes............. (10,444) 320 (979) (11,743)
Provision for income taxes.................... 140 -- -- 140
------------ ------------ ------------ ------------
Net income (loss)............................. ($10,584) $320 ($979) ($11,883)
============ ============ ============ ============
Basic (loss) per share........................ ($1.51) ($1.70)
============ ============
Diluted (loss) per share...................... ($1.51) ($1.70)
============ ============
Shares used in computing basic and diluted
net loss per share.......................... 7,006 7,006
============ ============
</TABLE>
See Pro Forma notes.
<PAGE>
Centigram Communications Corporation
Pro Forma Combined Condensed Statements of Operations (Unaudited)
Twelve Months Ended November 1, 1997
<TABLE>
<CAPTION>
Centigram Less: Plus: Total As
(In thousands) Consolidated CPE TTC Adjusted
- ----------------------------------------------- ------------ ------------ ------------ ------------
(a) (b) (c) (d)
<S> <C> <C> <C> <C>
Net revenue................................... $108,836 $39,179 $1,132 $70,789
Cost and expenses:
Costs of goods sold......................... 45,661 16,814 988 29,835
Research and development.................... 21,260 2,400 2,165 21,025
Selling, general and
administrative........................... 45,611 9,431 685 36,865
Other expenses.............................. 3,263 -- -- 3,263
------------ ------------ ------------ ------------
115,795 28,645 3,838 90,988
------------ ------------ ------------ ------------
Operating income (loss)....................... (6,959) 10,534 (2,706) (20,199)
Other income and expense, net................. 6,114 -- 66 6,180
------------ ------------ ------------ ------------
Income (loss) before income taxes............. (845) 10,534 (2,640) (14,019)
Provision for income taxes.................... 833 -- -- 833
------------ ------------ ------------ ------------
Net income (loss)............................. ($1,678) $10,534 ($2,640) ($14,852)
============ ============ ============ ============
Basic (loss) per share........................ ($0.24) ($2.14)
============ ============
Diluted (loss) per share...................... ($0.24) ($2.14)
============ ============
Shares used in computing basic and diluted
net loss per share.......................... 6,943 6,943
============ ============
</TABLE>
See Pro Forma notes.
<PAGE>
Centigram Communications Corporation
Notes to Pro Forma Combined Condensed Financial Statements (Unaudited)
(a) Represents historical Centigram Communications Corporation
("Centigram") condensed consolidated financial statements.
(b) For the combined condensed balance sheet this represents the CPE
business unit sold to Mitel and cash consideration received therefrom as if
the transaction had occurred on May 2, 1998. Accounts payable and accrued
expenses include estimated transaction costs of approximately $500,000. For
the combined condensed statements of operations this represents the sold CPE
business unit, exclusive of the gain realized on the sale.
(c) For the combined condensed balance sheet this represents the purchase
of substantially all of the assets of TTC for a purchase price of $11,558,000
consisting of $11,151,000 in cash and estimated acquisition expenses of
$407,000. The allocation of the purchase price based on the fair value of net
assets acquired, as determined by independent valuation professionals, is as
follows (in thousands) :
Current assets acquired.................... $7
Property and equipment..................... 588
Intangibles, primarily developed
technology and goodwill................. 2,563
Acquired in-process research & 8,400
development............................ ------------
$11,558
============
The pro forma balance sheet was adjusted to write-off the purchased
in-process research and development to retained earnings. Since this amount
was a non-recurring charge, this amount has not been included as a pro forma
adjustment to the pro forma combined condensed statements.
For the combined condensed statements of operations this represents the
results of operations of TTC for the periods as reported, with pro forma
adjustments as follows: to reflect the amortization of purchased intangibles
on a straight-line basis over 36 months, to reflect the amortization of
goodwill over 84 months, and to reflect the depreciation of fixed assets over
30-34 months.
(d) Represents the historical Centigram combined condensed balance sheet
and statements of operations, plus the purchase of substantially all of the
assets of TTC, less the sold CPE business unit, net of the cash consideration
in each transaction and as adjusted with the pro forma entries as described
above.
