<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) August 12, 1997
-------------------------------
TELECOMM INDUSTRIES CORP.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-4410 34-1765902
- ------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
9310 Progress Parkway, Mentor, Ohio 44060
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(440) 639-0090
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index at Sequential Page __ of ____
<PAGE> 2
Telecomm Industries Corp.
Form 8-K
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
On August 14, 1997, the Registrant filed a Form 10-QSB which
reported in Item 2 the acquisition of Unitel, Inc. In Item 6 of the Form 10-QSB
the Registrant stated that the financial statements of the business acquired and
pro forma financial information showing the effect of the acquisition would be
filed within 60 days of the filing of the Form 10-QSB. This Form 8-K is filed
for the purpose of filing such financial statements.
UNITEL, INC.
Financial Statements
December 31, 1996 and 1995
<PAGE> 3
UNITEL, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
- ------------------------------------------------------------------------------------
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Statement of income and retained earnings 2
Balance sheet 3
Statement of cash flows 4
Notes to financial statements 5
</TABLE>
<PAGE> 4
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Unitel, Inc.
Indianapolis, Indiana
We have audited the accompanying balance sheet of Unitel, Inc. as of
December 31, 1996 and 1995, and the related statements of income and
retained earnings (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 Unitel, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Geo. S. Olive & Co. LLC
Indianapolis, Indiana
October 3, 1997
<PAGE> 5
UNITEL, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995
- -------------------------------------------------------------------------------
Revenue
<S> <C> <C>
Equipment $ 7,061,330 $ 4,056,528
Commissions 1,771,033 1,662,622
Service 1,562,942 1,107,371
Other 104,350 169,432
------------ -----------
10,499,655 6,995,953
------------ -----------
Cost of Goods Sold
Equipment 6,631,118 3,190,992
Commissions 36,433 18,172
Service 887,393 425,223
Other 188,353 51,242
------------ -----------
7,743,297 3,685,629
------------ -----------
Gross Profit 2,756,358 3,310,324
Selling, General and Administrative Expenses 4,016,341 3,137,859
------------ -----------
Operating Income (Loss) (1,259,983) 172,465
------------ -----------
Other Income (Expense)
Interest expense (82,621) (15,174)
Gain (loss) on disposal of assets 3,259 (5,936)
Interest income 16,898
Other income 109,021 14,477
------------ -----------
46,557 (6,633)
------------ -----------
NET INCOME (LOSS) (1,213,426) 165,832
Retained Earnings--Beginning of Year 992,605 969,151
Distributions Paid (83,043) (142,378)
------------ -----------
Retained Earnings (Deficit)--End of Year $ (303,864) $ 992,605
============ ===========
</TABLE>
See notes to financial statements.
(2)
<PAGE> 6
UNITEL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 34,068
Accounts receivable--trade (less allowance of $58,518 and $18,939) 1,897,927 $ 867,410
Inventories 769,733 335,256
Receivables--related companies 219,448 206,709
Employee advances 24,645 20,521
Prepaid expenses 32,090 28,080
-------------------------
Total current assets 2,977,911 1,457,976
PROPERTY AND EQUIPMENT 624,890 602,621
OTHER ASSETS 117,700 21,362
-------------------------
$ 3,720,501 $2,081,959
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Line of credit--bank $ 1,200,000 $ 120,000
Current maturities of long-term debt 344,795 80,000
Accounts payable--trade 1,969,472 301,344
Accrued payroll and related taxes 306,483 118,016
Bank overdraft 137,671
Unearned revenue 60,376 1,697
Other accrued expenses 72,180 8,626
Accounts payable--related companies 35,543
-------------------------
Total current liabilities 3,988,849 767,354
-------------------------
LONG-TERM DEBT 33,516 320,000
-------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no-par value
Authorized--1,000 shares
Issued and outstanding--500 shares 2,000 2,000
Retained earnings (deficit) (303,864) 992,605
-------------------------
(301,864) 994,605
-------------------------
$ 3,720,501 $2,081,959
=========================
</TABLE>
See notes to financial statements.
(3)
<PAGE> 7
UNITEL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(1,213,426) $ 165,832
Adjustments to reconcile net income (loss) to net
cash used by operating activities
Depreciation and amortization 149,608 72,969
Provision for doubtful accounts 143,357 61,352
Net (gain) loss on sale of equipment (3,259) 5,936
Changes in assets and liabilities
Accounts receivable--trade (1,173,874) (144,806)
Inventories (434,477) (173,516)
Receivables--related companies (12,739) (183,424)
Other current assets (8,134) (7,434)
Accounts payable--trade 1,668,128 166,796
Accrued expenses and other current liabilities 310,700 20,144
Accounts payable--related companies 35,543
------------------------
Net cash used by operating activities (538,573) (16,151)
------------------------
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 11,460 5,000
Purchases of property and equipment (180,078) (485,554)
Receipts from investment in sales-type lease 1,854
Other assets (96,338) (9,816)
------------------------
Net cash used by investing activities (264,956) (488,516)
------------------------
FINANCING ACTIVITIES
Net increase in line of credit--bank 1,080,000 120,000
Proceeds from long-term debt 80,411 400,000
Reduction of long-term debt (102,100) (12,814)
Distribution to stockholders (83,043) (142,378)
Bank overdraft (137,671) 137,671
------------------------
Net cash provided by financing activities 837,597 502,479
------------------------
INCREASE (DECREASE) IN CASH 34,068 (2,188)
CASH, BEGINNING OF YEAR 2,188
------------------------
CASH, END OF YEAR $ 34,068 $ 0
========================
SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid for interest $ 82,621 $ 15,174
</TABLE>
See notes to financial statements.
(4)
<PAGE> 8
UNITEL, INC.
NOTES TO FINANCIAL STATEMENTS
> NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Unitel, Inc. markets voice and data communication equipment and services
throughout the states of Indiana and Kentucky. Regional sales offices are
located in Indianapolis, Schererville, Muncie, Bloomington, Lafayette and
Clarksville, Indiana and Owensboro, Kentucky.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method. Inventories are primarily comprised of
finished goods available for resale and service supplies.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed using the
straight-line method over useful lives ranging from 5 to 10 years. When assets
are retired or otherwise disposed of, the costs and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in income for the period. The cost of maintenance and repairs is
charged to income as incurred; significant renewals and improvements are
capitalized.
BAD DEBTS
The Company uses the reserve method of accounting for bad debts on receivables.
REVENUE AND COST RECOGNITION
Profits from contracts are generally recognized by applying percentages of
completion for each year to the total estimated profits for the respective
contracts. The percentages of completion are determined by relating the actual
costs of work performed to date to the current estimated total costs of the
respective contracts. When the estimate on a contract indicates a loss, the
Company's policy is to record the entire loss. The cumulative effect of
revisions in estimates of total costs or revenue during the course of the work
is reflected in the accounting period in which the facts that caused the
revision first become known. An amount equal to the costs attributable to
unapproved change orders and claims is included in the total estimated revenue
when realization is probable. Profit from claims is recorded in the year such
claims are resolved. Because of the inherent uncertainties in estimating costs
and revenues, it is at least reasonably possible that the estimates used could
change in the near term. Revenue from equipment sales and service is recognized
upon completion of the related installation project for projects requiring
relatively short periods for completion.
Revenue from commissions is recognized when a customer enters into a contract
for which the Company is acting as an agent and no other substantial performance
of service is required by the Company.
(5)
<PAGE> 9
UNITEL, INC.
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
Federal income taxes have not been provided because the stockholders elected to
be treated as an S Corporation for income tax purposes as provided in Section
1362(a) of the Internal Revenue Code. As such, the corporate income or loss and
credits are passed to the stockholders and combined with their personal income
and deductions to determine taxable income on their individual tax returns. At
December 31, 1996 and 1995, the Company had temporary differences relating to
depreciation and cash to accrual accounting methods, for which deferred taxes
would have to be provided in the financial statements if the election were
revoked.
RECLASSIFICATIONS
Certain amounts presented in prior year financial statements have been
reclassified to conform to the current year's presentation.
>SALE OF OPERATIONS
On August 12, 1997, the Company sold substantially all of its assets to Telecomm
Industries Corp. ("Telecomm"). The Company received 2,000,000 shares of Telecomm
common stock and a $1,000,000 convertible promissory note from Telecomm. The
convertible promissory note bears interest at 5% payable quarterly and the
principal is due June, 2002. The Company may convert any part of the principal
balance due under the note, in increments of $100,000, into common stock of
Telecomm, at the conversion rate of $2 per share. Telecomm also assumed the
Company's bank loan of approximately $1,300,000 and accounts payable of up to
$1,200,000, and as a condition of the sale, Telecomm paid the Company's bank
loan in full subsequent to its assumption.
>PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Furniture and equipment $524,794 $377,463
Cable plant 321,619 321,619
Leasehold improvements 46,465 33,115
Vehicles 45,536 34,891
-----------------------------
Total cost 938,414 767,088
Accumulated depreciation and amortization (313,524) (164,467)
=============================
$624,890 $602,621
=============================
</TABLE>
(6)
<PAGE> 10
UNITEL, INC.
NOTES TO FINANCIAL STATEMENTS
>LONG-TERM DEBT AND LINE OF CREDIT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Note payable--bank, 3/4% above bank's prime rate, payable in monthly payments of
$6,667 plus interest, note was assumed and paid by Telecomm
$320,000 $400,000
Term note--employee, noninterest bearing, payable in monthly payments of $1,991,
subject to certain performance goals, final payment due March, 1999
51,779
Term note--bank, 9.25%, payable in monthly payments of $281 including interest,
final payment due February, 1999, collateralized by vehicle purchased
6,532
----------------------------------
378,311 400,000
Current maturities (344,795)
----------------------------------
$ 33,516 $320,000
==================================
</TABLE>
The Company had $1,250,000 and $600,000 lines of credit available at December
31, 1996 and 1995, respectively. Borrowings against the lines were $1,200,000
and $120,000 at December 31, 1996 and 1995. The interest rates on the lines
varied with the bank's prime rate plus .25% - 1%. Available borrowings against
the lines were limited to a percentage of eligible accounts receivable and
inventories of the Company. The note payable--bank and the lines of credit were
governed by the same credit agreement and were secured by substantially all of
the assets of the Company and a guarantee by the Company's stockholders. The
credit agreement was subject to certain covenants which required minimum net
worth and a debt-to-net worth ratio which were not met at December 31, 1996. In
conjunction with the sale of assets to Telecomm subsequent to December 31, 1996,
the outstanding lines of credit and note payable--bank obligations were assumed
and paid by Telecomm.
The future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
- --------------------------------------------------------------------------------
<C> <C>
1997 $344,795
1998 27,051
1999 6,465
==================
$378,311
==================
</TABLE>
(7)
<PAGE> 11
UNITEL, INC.
NOTES TO FINANCIAL STATEMENTS
>LEASES
The Company has several operating leases, for vehicles and office space, which
expire over the next five years. In addition, the Company leases its main office
from a related company which expires in 19 years. These leases were assumed by
Telecomm in connection with its purchase of the Company's assets subsequent to
year end. Rental expense for these leases was $322,335 and $189,522 for the
years ended December 31, 1996 and 1995.
Future minimum lease payments under all operating leases as of December 31, 1996
are:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
- ----------------------------------------------------------------------------
<S> <C>
1997 $ 310,574
1998 233,509
1999 185,654
2000 160,104
2001 154,504
Thereafter 2,257,560
-----------------
Total minimum lease payments $3,301,905
=================
</TABLE>
>EMPLOYEE BENEFITS
The Company maintains a 401(k) defined contribution plan for the benefit of
substantially all of its employees, which allows for both employee and Company
contributions. The Company contribution consists of a matching contribution of
25 percent of employee contributions up to 4 percent of eligible employee
compensation. The Company contribution to the plan was $14,781 and $12,347 for
1996 and 1995.
>RELATED PARTY TRANSACTIONS
In September, 1995, Unistate, LLC, a related company, purchased real estate
which includes the Company's main office. The total purchase price was
$2,100,000 and was financed by a first mortgage of $1,612,000 and a second
mortgage of $170,000. In addition, the Company advanced Unistate, LLC an
additional $254,260 to finance the acquisition of the property. Both of the
mortgages are guaranteed by the stockholders of the Company and the second
mortgage is guaranteed by the Company. The second mortgage had a principal
balance due of approximately $132,479 and $161,000 at December 31, 1996 and
1995, respectively. As a condition of the first mortgage, the Company entered
into an operating lease for a portion of this real estate through the year 2015,
requiring $150,500 in annual lease payments.
Comtech, Inc., a related company, acts as a leasing company for customers of the
Company. In addition, Comtech leases certain operating assets to the Company.
(8)
<PAGE> 12
UNITEL, INC.
NOTES TO FINANCIAL STATEMENTS
Balance sheet and income statement items to and from related parties are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Receivable--Unistate, LLC $219,448 $187,759
Receivable--Comtech, Inc. 18,950
Liabilities
Payable--Comtech, Inc. 35,543
Revenue
Sale of equipment--Comtech, Inc. 17,452 50,055
Expenses
Lease expense--Unistate, LLC 161,245 26,200
Lease expense--Comtech, Inc. 59,183 38,606
</TABLE>
>COMMITMENT AND CONTINGENCIES
The Company is subject to claims and lawsuits which arise primarily in the
ordinary course of business. It is the opinion of management and legal counsel
that the disposition or ultimate resolution of such claims and lawsuits will not
have a material adverse effect on the financial position of the Company.
>CONCENTRATION OF REVENUE
The Company is a sales representative for Ameritech, Inc. in the State of
Indiana. Commissions from Ameritech, Inc. accounted for 10% and 22% of total
revenues in 1996 and 1995. The Company has receivables due from Ameritech of
$219,474 and $254,834 at December 31, 1996 and 1995.
(9)
<PAGE> 13
The unaudited pro forma consolidated balance sheet and statement of
operations of Telecomm Industries, Inc. (the "Company") as of and for the six
months ended June 30, 1997, include the historical operations of the Company and
give effect to the Unitel, Inc. acquisition as if it occurred as of January 1,
1997. The unaudited pro forma consolidated balance sheet and statement of
operations as of and for the year ended December 31, 1996 include the historical
accounts of the Company and give effect to the acquisition of Unitel, Inc. as
if it occurred as of January 1, 1996. The unaudited pro forma consolidated
financial information has been prepared by the Company's management. The
information is not designed to represent and does not represent what the
Company's results of operations actually would have been had the aforementioned
transaction been completed as of the beginning of the period indicated, or to
project the Company's results of operations for any future period. The pro forma
adjustments are based on available information and certain assumptions that the
Company currently believes are reasonable in the circumstances.
<PAGE> 14
Telecomm Industries Corp.
Unaudited Pro Forma Consolidated Balance Sheet
June 30,1997
<TABLE>
<CAPTION>
Telecomm Unitel Pro Forma
Industries Inc. Pro Forma Telecomm
Corp adjustments and
Unitel
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets;
Cash and cash equivalents $ 661,653 $ 27,263 $ 688,916
Notes receivable - current portion 0 0 0
Accounts receivable -trade 1,325,393 852,718 2,178,111
Accounts receivable -related companies 174,227 174,227
Inventories 545,645 794,244 1,339,889
Prepaid income taxes 55,465 55,465
Prepaid expenses 30,058 51,662 81,720
Employee advances 313,751 15,398 329,149
--------------------------------------------------------------------
Total current assets 2,931,965 1,915,512 0 4,847,477
--------------------------------------------------------------------
Property and equipment.net 791,308 769,817 1,561,125
Other assets
Accounts receivable, less current portion 1,214,757 335,548 1,550,305
Other 0
Intangibles - net 1,113,861 1,000 (3) 1,702,352 2,817,213
--------------------------------------------------------------------
Total assets $ 6,051,891 $ 3,021,877 $ 1,702,352 $10,776,120
====================================================================
Current liabilities;
Line of credit 156,920 1,000,000 1,156,920
Current portion of long-term debt 295,563 0 295,563
Accounts payable trade 13,587 1,167,777 1,181,364
Accrued payroll and related expenses 122,282 138,279 260,561
Unearned revenues 9,473 9,473
Customer advances 0 253,787 253,787
Other accrued expenses 22,712 124,913 147,625
Deferred income taxes 106,321 0 106,321
Accrued commissions and contractor fees 361,249 0 361,249
Accounts payable- related companies 0 0
Income taxes payable 72,103 0 72,103
Accrued bonus 317,000 0 317,000
--------------------------------------------------------------------
Total current liabilities 1,467,737 2,694,229 0 4,161,966
--------------------------------------------------------------------
Long-term liabilities;
Long-term debt, less current portion 763,619 325,348 1,088,967
Deferred income taxes 591,472 0 591,472
--------------------------------------------------------------------
Total liabilities 2,822,828 3,019,577 0 5,842,405
--------------------------------------------------------------------
Stockholders' equity
Common stock 102,008 2,000 (2) 18,000 122,008
Additional paid in capital 2,548,640 0 (2) 1,684,652 4,233,292
Receivables from stockholders (42,960) (42,960)
Retained earnings 621,375 300 (2) (300) 621,375
--------------------------------------------------------------------
Total stockholders' equity 3,229,063 2,300 1,702,352 4,933,715
--------------------------------------------------------------------
--------------------------------------------------------------------
Total liabilities and stockholders' equity $ 6,051,891 $ 3,021,877 $ 1,702,352 $10,776,120
====================================================================
</TABLE>
See notes to unaudited condensed pro forma balance sheet
<PAGE> 15
Telecomm Industries Corp.
Notes to unaudited pro forma condensed consolidated balance sheet-June 30, 1997
- -------------------------------------------------------------------------------
(1) Basis of presentation
The unaudited proforma condensed balance sheet has been prepared assuming
the acquisition of Unitel was consummated on January 1, 1997. The
acquisition has been accounted for as a purchase in accordance with the
provisions of Accounting Principles Board Opinion No. 16, and
accordingly, the purchase price has been allocated to the assets acquired
based on historical information available to management and preliminary
estimates of fair market value.
(2) The excess purchase price over the fair value of the net assets of Unitel
was calculated as follows:
<TABLE>
<S> <C>
Convertible long-term note payable $ 1,000,000
Common stock $ 1,000,000
Other acquisition and closing costs 30,000
-----------
$ 2,030,000
-----------
Assets as reported 3,021,877
less liabilities assumed (1,526,452)
less accounts payable (1,167,777)
plus adjustment to record property and
equipment at fair value -
-----------
327,648
-----------
-----------
Excess purchase price over fair value of assets $ 1,702,352
===========
(3) The excess purchase price over the fair value of net assets was allocated
to assets and liabilities based on historical information and preliminary
estimates of fair value. The final purchase price allocation may be
subject to refinement upon completion of a review of property and
equipment, intangibles, receivables, and certain liabilities. The excess
purchase price over the fair value of assets was allocated to non-compete
agreements and customer lists as follows:
Adjustment to record non-compete agreements $ 100,000
Adjustment to record customer lists 1,602,352
$ 1,702,352
===========
</TABLE>
<PAGE> 16
Telecomm Industries Corp
Unaudited Pro Forma Consolidated Statement of Operations
Six months ended June 30,1997
<TABLE>
<CAPTION>
Telecomm Unitel Telecomm
Industries Inc. Pro Forma and
Corp adjustments Unitel
<S> <C> <C> <C> <C>
Net revenues $ 5,742,251 $ 4,185,965 $ 9,928,216
Commissions,contractor fees, and related expenses 1,947,744 1,836,978 (2) 53,412 3,838,134
Selling, general and administrative expenses 3,263,943 1,974,370 (1) 12,500 5,250,813
------------ ------------ ------------ ------------
Operating income 530,564 374,617 (65,912) 839,269
Other income (expense):
Gain(loss) on disposal of assets - -
Interest income 2,692 - 2,692
Interest expense (65,417) (71,348) (136,765)
Other income, net - - - -
------------ ------------ ------------ ------------
(62,725) (71,348) - (134,073)
------------ ------------ ------------ ------------
Income from operations before income tax expense 467,839 303,269 (65,912) 705,196
Income tax expense (credit) 187,136 - (3) 121,308 308,444
------------ ------------ ------------ ------------
------------------------------- -------------------------------
Net income $ 280,703 $ 303,269 $ (187,220) $ 396,752
=============================== ===============================
Earnings per common and common equivalent share
------------ ------------
Net income 0.03 0.03
============ ============
Number of shares used in computing earnings per
------------ ------------
common and common equivelant share 10,200,746 12,200,746
============ ============
------------ ------------
Dividends per common share - - -
============ ============
</TABLE>
See notes to unaudited condensed pro forma statement of operations
<PAGE> 17
Telecomm Industries Corp
Unaudited Pro Forma Consolidated Statement of Operations
Three months ended June 30,1997
<TABLE>
<CAPTION>
Telecomm Unitel Telecomm
Industries Inc. Pro Forma and
Corp adjustments Unitel
<S> <C> <C> <C> <C>
Net revenues $ 3,148,192 $ 2,023,845 $ 5,172,037
Commissions,contractor fees, and related expenses 1,119,139 755,738 (2) 26,706 1,901,583
Selling, general and administrative expenses 1,729,640 1,078,960 (1) 6,250 2,814,850
------------ ------------ ------------ ------------
Operating income 299,413 189,147 (32,956) 455,604
Other income (expense):
Gain(loss) on disposal of assets - -
Interest income - - -
Interest expense (34,113) (36,119) (70,232)
Other income, net - - - -
------------ ------------ ------------ ------------
(34,113) (36,119) - (70,232)
------------ ------------ ------------ ------------
Income from operations before income tax expense 265,300 153,028 (32,956) 385,372
Income tax expense (credit) 106,120 - (3) 48,033 154,153
------------ ------------ ------------ ------------
------------------------------- -------------------------------
Net income $ 159,180 $ 153,028 $ (80,989) $ 231,219
=============================== ===============================
Earnings per common and common equivalent share
------------ ------------
Net income 0.02 0.02
============ ============
Number of shares used in computing earnings per
------------ ------------
common and common equivalent share 10,200,746 12,200,746
============ ============
------------ ------------
Dividends per common share - - -
============ ============
</TABLE>
See notes to unaudited condensed pro forma statement of operations
<PAGE> 18
Telecomm Industries Corp.
Notes to unaudited pro forma condensed statement of operations
- --------------------------------------------------------------
(1) Adjustment to recognize amortization of non-compete agreement
(2) Adjustment to recognize amortization of customer lists
(3) Adjustment to record income tax expense as if Unitel had been
treated as a C Corporation
<PAGE> 19
Telecomm Industries Corp.
Unaudited Pro Forma Consolidated Balance Sheet
December 31,1996
<TABLE>
<CAPTION>
Telecomm Unitel Pro Forma
Industries Inc. Pro Forma Telecomm
Corp adjustments and
Unitel
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 295,079 $ 34,068 $ 329,147
Notes Receivable - current portion 400,000 0 400,000
Accounts Receivable -trade 2,621,431 1,610,162 4,231,593
Accounts Receivable -related companies 219,448 219,448
Inventories 673,212 769,733 1,442,945
Prepaid income taxes 48,260 48,260
Prepaid expenses 46,855 32,090 78,945
Employee advances 139,887 24,645 164,532
-----------------------------------------------------------------
Total current assets 4,224,724 2,690,146 0 6,914,870
-----------------------------------------------------------------
Property and equipment, net 763,354 624,890 1,388,244
Other assets
Accounts receivable, less current portion 1,013,520 287,765 1,301,285
Other 117,700 117,700
Intangibles - net 732,317 0 (3) 2,331,864 3,064,181
-----------------------------------------------------------------
Total assets $ 6,733,915 $ 3,720,501 $ 2,331,864 $12,786,280
=================================================================
Current liabilities:
Line of credit 213,384 1,200,000 1,413,384
Current portion of long-term debt 236,828 344,795 581,623
Accounts payable trade 524,620 1,969,472 2,494,092
Accrued payroll and related expenses 122,719 306,483 429,202
Unearned revenues 60,376 60,376
Customer advances 48,519 0 48,519
Other accrued expenses 103,467 72,180 175,647
Deferred income taxes 106,321 0 106,321
Accrued commissions and contractor fees 455,582 0 455,582
Accounts payable- related companies 35,543 35,543
Income taxes payable 81,136 0 81,136
Accrued bonus 816,900 0 816,900
-----------------------------------------------------------------
Total current liabilities 2,709,476 3,988,849 0 6,698,325
-----------------------------------------------------------------
Long-term liabilities:
Long-term debt, less current portion 438,686 33,516 472,202
Deferred income taxes 402,913 0 402,913
-----------------------------------------------------------------
Total liabilities 3,551,075 4,022,365 0 7,573,440
-----------------------------------------------------------------
Stockholders' equity
Common stock 100,078 2,000 (2) 18,000 120,078
Additional paid in capital 2,786,621 0 (2) 2,010,000 4,796,621
Receivables from stockholders (44,531) (44,531)
Retained earnings 340,672 (303,864)(2) 303,864 340,672
-----------------------------------------------------------------
Total stockholders' equity 3,182,840 (301,864) 2,331,864 5,212,840
-----------------------------------------------------------------
-----------------------------------------------------------------
Total liabilities and stockholders' equity $ 6,733,915 $ 3,720,501 $ 2,331,864 $12,786,280
=================================================================
</TABLE>
See notes to unaudited condensed pro forma balance sheet
<PAGE> 20
Telecomm Industries Corp.
Notes to unaudited pro forma condensed consolidated balance sheet - December
31, 1996
- ----------------------------------------------------------------------------
(1) Basis of presentation
The unaudited proforma condensed balance sheet has been prepared assuming
the acquisition of Unitel was consummated on January 1, 1996. The
acquisition has been accounted for as a purchase in accordance with the
provisions of Accounting Principles Board Opinion No. 16, and
accordingly, the purchase price has been allocated to the assets acquired
based on historical information available to management and preliminary
estimates of fair market value.
(2) The excess purchase price over the fair value of the net assets of Unitel
was calculated as follows:
<TABLE>
<S> <C>
Convertible long-term note payable $ 1,000,000
Common stock $ 1,000,000
Other acquisition and closing costs 30,000
-----------
$ 2,030,000
-----------
Assets as reported 3,720,501
less liabilities assumed (2,052,893)
less accounts payable (1,969,472)
plus adjustment to record property and
equipment at fair value -
-----------
(301,864)
-----------
-----------
Excess purchase price over fair value of assets $ 2,331,864
===========
(3) The excess purchase price over the fair value of net assets was allocated
to assets and liabilities based on historical information and preliminary
estimates of fair value. The final purchase price allocation may be
subject to refinement upon completion of a review of property and
equipment, intangibles, receivables, and certain liabilities. The excess
purchase price over the fair value of assets was allocated to non-compete
agreements and customer lists as follows:
Adjustment to record non-compete agreements $ 100,000
Adjustment to record customer lists 2,231,864
$ 2,331,864
===========
</TABLE>
<PAGE> 21
Telecomm Industries Corp
Unaudited Pro Forma Consolidated Statement of Operations
Year ended December 31,1996
<TABLE>
<CAPTION>
Telecomm Unitel Telecomm
Industries Inc. Pro Forma and
Corp adjustments Unitel
<S> <C> <C> <C> <C>
Net revenues $ 12,527,843 $ 10,499,655 $ 23,027,498
Commissions,contractor fees, and related expenses 4,950,318 7,743,297 (2) 155,500 12,849,115
Selling, general and administrative expenses 6,946,312 4,016,341 (1) 25,000 10,987,653
------------ ------------ ------------ ------------
Operating income 631,213 (1,259,983) (180,500) (809,270)
Other income (expense):
Gain(loss) on disposal of assets (870) 3,259 2,389
Interest income 31,658 16,898 48,556
Interest expense (63,897) (82,621) (146,518)
Other income, net 14,450 109,021 - 123,471
------------ ------------ ------------ ------------
(18,659) 46,557 - 27,898
------------ ------------ ------------ ------------
Income from operations before income tax expense 612,554 (1,213,426) (180,500) (781,372)
Income tax expense (credit) 246,235 - (3) (485,370) (239,135)
------------ ------------ ------------ ------------
------------------------------- -------------------------------
Net income $ 366,319 $ (1,213,426) $ 304,870 $ (542,237)
=============================== ===============================
Earnings per common and common equivalent share
------------ ------------
Net income 0.04 -0.05
============ ============
Number of shares used in computing earnings per
------------ ------------
common and common equivalent share 9,825,291 11,825,291
============ ============
------------ ------------
Dividends per common share - - -
============ ============
</TABLE>
See notes to unaudited condensed pro forma statement of operations
<PAGE> 22
Telecomm Industries Corp.
Notes to unaudited pro forma condensed statement of operations
- --------------------------------------------------------------
(1) Adjustment to recognize amortization of non-compete agreement
(2) Adjustment to recognize amortization of customer lists
(3) Adjustment to record income tax expense as if Unitel had been
treated as a C Corporation
<PAGE> 23
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.
TELECOMM INDUSTRIES CORP.
(Registrant)
Date: October 21, 1997 By: /s/ James M. Lowery
---------------------------------
(Signature)
James M. Lowery
President
