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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 10, 1999
PREFERRED NETWORKS, INC.
(Exact name of Registrant as Specified in its Charter)
GEORGIA 0-27658 58-1954892
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification)
850 Center Way, Norcross, GA 30071
(Address of principal executive offices)
(Zip Code)
(770) 582-3500
(Registrant's telephone number including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last year)
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AMENDMENT
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Not Applicable.
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial
statements of Preferred Networks, Inc. (the "Registrant") are derived from, and
should be read in conjunction with, the Registrant's Form 10-K for the period
ended December 31, 1998 and subsequent reports filed under the Securities Act of
1934 filed with the Securities and Exchange Commission. The pro forma condensed
consolidated financial statements do not purport to be indicative of the results
of operations or the financial position which would have actually been reported
had the Registrant's disposition of EPS Wireless, Inc. ("EPS") been consummated
on the dates indicated, or which may be reported in the future.
The pro forma balance sheet reflects EPS as a discontinued operation,
and assumes that the disposition occurred on September 30, 1999.
The pro forma statement of operations reflects EPS as a discontinued
operation as if the transaction had been consummated at the beginning of the
period of the statement. (i.e. January 1, 1998 for the year ended statement and
January 1, 1999 for the nine months ended statement.)
The undersigned Registrant hereby amends the following items,
financial statements, exhibits or other portions of its current report on Form
8-K, originally filed with the Securities and Exchange Commission on December
22, 1999, as set forth herein.
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PREFERRED NETWORKS, INC.
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, PRO FORMA SEPTEMBER 30,
1999 ADJUSTMENTS 1999
------------- ----------- -------------
ASSETS
<S> <C> <C> <C>
Current assets
Cash and cash equivalents .......................................... $ 3,048,055 $ 3,099,645 a $ 6,147,700
Accounts receivable, net ........................................... 3,638,173 (2,024,014) a 1,614,159
Inventory .......................................................... 2,228,285 (508,136) a 1,720,149
Prepaid expenses and other current assets .......................... 1,033,592 (194,241) a 839,351
------------ ------------ ------------
Total current assets ............................................ 9,948,105 373,254 10,321,359
Property and equipment, net .......................................... 17,428,358 (733,343) a 16,695,015
Goodwill net ......................................................... 11,117,379 (4,110,760) a 7,006,619
FCC licenses, net .................................................... 8,405,605 -- 8,405,605
Other assets, net .................................................... 875,058 -- a 875,058
------------ ------------ ------------
$ 47,774,505 $ (4,470,849) $ 43,303,656
============ ============ ============
LIABILITIES, REDEEMABLE PREFERRED STOCK,
AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ................................................... $ 4,911,412 $ (2,933,955) a $ 1,977,457
Accrued liabilities ................................................ 943,885 488,349 a 1,432,234
Accrued compensation ............................................... 222,121 34,004 a 256,125
Current portion of notes payable and capital lease obligations ..... 12,028,917 (9,545,018) a 2,483,899
------------ ------------ ------------
Total current liabilities ....................................... 18,106,335 (11,956,620) a 6,149,715
Notes payable and capital lease obligations, less current portion .... 3,623,904 (27,014) 3,596,890
Class A Redeemable Preferred Stock, no par value, $1.50 per
share redemption price; 13,500,000 shares authorized,
10,000,000 shares issued and outstanding (including $3,425,057
and $2,308,333 of undeclared dividends in 1999 and 1998,
respectively)....................................................... 17,321,699 -- 17,321,699
Class B Senior Redeemable Preferred Stock, no par value, $1.50
per share redemption price; 5,500,000 shares authorized,
5,333,336 shares issued and outstanding (including $1,943,488
and $945,161 of undeclared dividends in 1999 and 1998,
respectively)....................................................... 9,228,228 -- 9,228,228
------------ ------------ ------------
Total liabilities and Redeemable Preferred Stock ................ 48,280,166 (11,983,634) 36,296,532
Stockholders' equity
Common Stock, no par value, 100,000,000 shares authorized
in 1999 and 1998; 16,369,302 and 16,334,377 issued and
outstanding in 1999 and 1998, respectively ...................... 59,393,438 -- 59,393,438
Accretion of Redeemable Preferred Stock .......................... (1,295,707) -- (1,295,707)
Accumulated deficit ............................................... (58,603,392) 7,512,785 a (51,090,607)
------------ ------------ ------------
Total Stockholders' equity .................................... (505,661) 7,512,785 7,007,124
------------ ------------ ------------
$ 47,774,505 $ (4,470,849) $ 43,303,656
============ ============ ============
</TABLE>
See notes to condensed pro forma consolidated financial statements.
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PREFERRED NETWORKS, INC.
CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------
PRO FORMA
CONSOLIDATED ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
Network services ................................................ $ 9,878,145 $ -- $ 9,878,145
Product sales ................................................... 7,406,638 (4,211,422) a 3,195,216
Other services .................................................. 11,769,808 (11,611,050) a 158,758
------------ ------------ ------------
Total revenues ......................................... 29,054,591 (15,822,472) 13,232,119
Costs of revenues
Network services ................................................ 6,309,007 -- 6,309,007
Product sales ................................................... 6,383,482 (3,317,382) a 3,066,100
Other services .................................................. 9,888,638 (9,878,445) a 10,193
------------ ------------ ------------
Total costs of revenues ................................ 22,581,127 (13,195,827) 9,385,300
------------ ------------ ------------
Gross margin ......................................................... 6,473,464 (2,626,645) 3,846,819
Selling, general and administrative expenses ......................... 8,633,964 (2,226,010) a 6,407,954
Depreciation and amortization ........................................ 4,281,696 (511,147) a 3,770,549
------------ ------------ ------------
Operating loss ......................................... (6,442,196) 110,512 (6,331,684)
Interest expense ..................................................... (1,433,376) 764,088 (669,288)
Interest income ...................................................... 77,372 150,000 a,b 227,372
Gain/(loss) on asset disposal ........................................ (62,206) -- (62,206)
------------ ------------ ------------
Income from continuing operations before income taxes
and cumulative effect of change in accounting principle ............ (7,860,406) 1,024,600 (6,835,806)
Income tax benefit ................................................... 400,000 -- 400,000
------------ ------------ ------------
Net loss from continuing operations before cumulative
effect of change in accounting principle ........................... (7,460,406) 1,024,600 (6,435,806)
Discontinued operations:
Net income (loss) from discontinued operations,
net of income tax ............................................. (72,884) -- (72,884)
Gain on sale of PTS, net of income tax .......................... 836,428 -- 836,428
------------ ------------ ------------
Net income from discontinued operations ......................... 763,544 -- 763,544
Cumulative effect of change in accounting principle .................. (1,832,398) -- (1,832,398)
------------ ------------ ------------
Net loss .................................................... (8,529,260) 1,024,600 (7,504,660)
============ ============ ============
Accretion of Redeemable Preferred Stock .............................. (466,919) -- (466,919)
Redeemable Preferred Stock dividend requirements ..................... (2,115,051) -- (2,115,051)
------------ ------------ ------------
Net loss attributable to Common Stock .................. $(11,111,230) $ 1,024,600 $(10,086,630)
============ ============ ============
Net income (loss) per share of Common Stock from:
Continuing operations before cumulative effect
of change in accounting principle ....................... $ (.61) $ .06 $ (.55)
Discontinued operations, net of income tax .................. $ .04 $ -- $ .04
Cumulative effect of change in
accounting principle .................................... $ (.11) $ -- $ (.11)
Net loss per share of Common Stock ................................... $ (.68) $ -- $ (.62)
Weighted average number of common shares used in
calculating net loss per share of Common Stock .................... 16,337,940 16,337,940 16,337,940
Pro forma net loss assuming accounting principle is
applied retroactively ............................................. (6,696,862) $ 1,024,600 (5,672,262)
Pro forma net loss attributable to Common Stock
assuming change in accounting principle is applied
retroactively .................................................... $ (9,278,832) $ 1,024,600 $ (8,254,232)
Pro forma net loss per share ......................................... $ (.57) $ .06 $ (.51)
</TABLE>
See notes to condensed pro forma consolidated financial statements.
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PREFERRED NETWORKS, INC.
CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
----------------------------------------------------
PRO FORMA
CONSOLIDATED ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
Network services .................................................. $ 13,204,172 $ -- $ 13,204,172
Product sales ..................................................... 15,255,483 (9,362,792) a 5,892,691
Other services .................................................... 6,839,196 (6,839,196) a,c --
------------ ------------ ------------
Total revenues ........................................... 35,298,851 (16,201,988) (19,096,863)
Costs of revenues
Network services .................................................. 8,537,012 -- 8,537,012
Product sales ..................................................... 13,248,038 (7,501,440) a 5,746,598
Other services .................................................... 6,489,369 (6,489,369) a,c --
------------ ------------ ------------
Total costs of revenues .................................. 28,274,419 (13,990,809) 14,283,610
------------ ------------ ------------
Gross margin ......................................................... 7,024,432 (2,211,179) 4,813,253
Selling, general and administrative expenses ......................... 13,879,266 (4,065,348) a 9,813,918
Depreciation and amortization ........................................ 6,743,031 (648,273) a 6,094,758
------------ ------------ ------------
Operating loss ........................................... (13,597,865) 2,502,442 (11,095,423)
Interest expense ..................................................... (2,043,182) 1,035,566 a,b (1,007,616)
Interest income ...................................................... 351,384 (150,000) a,b 201,384
Net loss ...................................................... $(15,289,663) $ 3,388,008 $(11,901,655)
============ ============ ============
Accretion of Redeemable Preferred Stock .............................. (583,062) -- (583,062)
Redeemable Preferred Stock dividend requirements ..................... (2,445,161) -- (2,445,161)
------------ ------------ ------------
Net loss attributable to Common Stock .................... $(18,317,886) $ 3,388,008 $(14,929,878)
============ ============ ============
Net loss per share of Common Stock ................................... $ (1.13) $ .21 $ (.92)
Weighted average number of common shares used in
calculating net loss per share of Common Stock ...................... 16,257,586 16,257,586 16,257,586
</TABLE>
Notes to condensed pro forma consolidated financial statements:
(a) Record the sale of EPS Wireless, Inc.
(b) Record the estimated interest income and interest expense on
cash and debt payment at current rates.
(c) Net of intercompany eliminations.
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PREFERRED NETWORKS, INC.
(d) Exhibits
2. Share Purchase Agreement between the Registrant and Celestica
Corporation dated December 10, 1999 (Incorporated by reference to the
same Exhibit number of the Registrant's Current Report of Form 8-K
dated December 10, 1999)
10.1 Second Agreement Concerning Amendment to Credit Agreement dated as
of December 9, 1999 by and among PNI Systems, LLC, the Registrant and
Bank of America, N.A. (Incorporated by reference to the same Exhibit
number of the Registrant's Current Report of Form 8-K dated December
10, 1999)
10.2 Agreement Concerning Amendment to Credit Agreement dated as of
December 9, 1999 by and between the Registrant and Glenayre
Electronics, Inc. (Incorporated by reference to the same Exhibit number
of the Registrant's Current Report of Form 8-K dated December 10, 1999)
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PREFERRED NETWORKS, INC.
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 thereunto duly authorized.
PREFERRED NETWORKS, INC.
Date: February 25, 2000 By: /s/ Kathryn Loev Putnam
------------------------------------
Kathryn Loev Putnam
Senior Vice President and Chief
Financial Officer
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