SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
June 3, 1999
(Date of report)
VIANET TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
NEVADA 033-55254-19 87-0434285
(State of Incorporation) (Commission File Number) (IRS Employer ID)
</TABLE>
83 Mercer Street
New York, New York 10012
(Address of Principal Executive Offices)
(212) 219-7680
(Registrant's Telephone Number)
ITEM 7.
Exhibits:
A) Vianet Technologies, Inc. Audited Financial Statements as of December
31, 1998
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
Vianet Technologies, Inc.
(Registrant)
/s/ Peter Leighton
- -----------------------------------
By: Peter Leighton
President & CEO
<PAGE>
EXHIBIT A
Vianet Technologies, Inc. Audited Financial Statements
as of December 31, 1998
Vianet Technologies, Inc.
Balance Sheet
December 31, 1998
<TABLE>
Assets Notes
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 13,856
Investment in marketable equity securities 2 669,268
---------
Total current assets 683,268
Loans due from Develcon Electronics Limited 4 1,506,800
Accrued interest receivable 4 65,375
---------
Technology license, at cost less accumulated amortization of $22,500 7 427,500
---------
$ 2,682,799
=====================
Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable and accruals 251,384
Convertible demand notes payable 9 $ 2,909,272
Payable to Dire to of the Company 1,000
---------
Total current liabilities 3,161,656
Stockholders' deficiency:
Series A convertible preferred shares - par vale $0.01 per share,
1,000,000 shares authorized: issued and outstanding - 250,000 shares 6 1,000,000
Common stock - par value $0.01 per share, 3,000,000 shares authorized,
issued and outstanding - 350,000 shares
5 3,500
Accumulated deficit (491,857)
---------
511,643
Less subscriptions receivable (990,500)
---------
Total stockholders' deficiency (478,857)
---------
$ 2,682,799
=====================
</TABLE>
The accompany notes are an integral part of these financial statements
<PAGE>
Vianet Technologies, Inc.
Statement of Operations
For the period from March 20, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Notes
Operating expenses:
<S> <C> <C>
Selling, general and administrative 2 $ 557,276
---------
Total operating expenses 557,276
---------
Net loss from operations (557,276)
Interest income 66,341
---------
Net loss before income taxes $ (490,935)
Income taxes 8 (922)
---------
Net loss $ (491,857)
======================
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
Vianet Technologies, Inc.
Statement of Cash Flows
For the period from March 20, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Cash flows from operating activities:
Net loss for period ...................................................................................... $(491,857)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of technology license .............................................................. 22,500
Unrealized loss from foreign currency transactions .............................................. 73,200
Issue of stock for operating expense ............................................................ 2,500
Change in operating assets and liabilities:
Accrued interest receivable ..................................................................... (65,375)
Accrued payable and accruals .................................................................... 251,384
---------
Net cash used in operating activities .................................................................... (207,648)
Cash flows from investing activities:
Loans to Develcon Electronics Limited ........................................................... (225,000)
Purchase of SPS Technology License .............................................................. (450,000)
---------
Net cash used in investing activities: ................................................................... (675,000)
Cash flows from financing activities:
Proceeds from issuance of common stock .......................................................... 1,500
Proceeds from issuance of convertible preferred shares .......................................... 10,000
Proceeds of convertible demand notes payable .................................................... 885,004
---------
Net cash provided by financing activities ................................................................ 896,504
---------
Net increase in cash and cash equivalents ................................................................ $ 13,856
Cash and cash equivalents at March 20, 1998 (inception) .................................................. $ --
---------
Cash and cash equivalents at December 31, 1998 ........................................................... $ 13,856
=========
Non cash activities are as follows:
Non cash financing activities:
Issuance of convertible demand notes payable in return for marketable equity securities $ 669,268
---------
Issuance of convertible demand notes payable in return for loan receivable from Develcon $1,355,000
==========
The accompany notes are an integral part of these financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS:
For the Period from March 20, 1998 (inception) to December 31, 1998
1. Description and Line of Business
Vianet Technologies, Inc. (the "Company") was incorporated in the State of
Delaware, U.S. on March 20, 1998 initially to acquire Develcon Electronics
Limited. ("Develcon") and a license to utilize SPS Technology ("SPS") developed
by NewCom Technologies, Inc.
Develcon is publicly traded on the Toronto Stock Exchange (symbol DLC) and
is a global provider of enterprise network solutions and LAN/WAN connectivity.
Develcon designs high quality products and implements innovative services based
on a wide range of flexible and modular communications platforms. Develcon
products integrate diverse LAN, legacy and voice applications using technologies
such as frame relay, ISDN, PPP and packet switching.
SPS is a technology developed to exploit the convergence of
telecommunications and data transmission methods. The Company plans to integrate
the SPS technology into Develcon's product lines and to develop other
adaptations to further expand the product capabilities of Develcon.
2. Significant Accounting Policies
(a) Foreign Currency Transactions
Gains and losses from foreign currency transactions are included in
selling, general and administrative expenses in the period in which they occur.
For the period from March 20, 1998 (inception) to December 31, 1998, the Company
experienced $3,906 in realized foreign exchange transaction gains and $73,200 in
unrealized foreign exchange transaction losses.
(b) Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No.107, Disclosures
About Fair Value of Financial Instruments, requires disclosure of the fair value
of certain financial instruments for which it is practicable to estimate fair
value. For purposes of the disclosure requirements, the fair value of a
financial instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced sale or
liquidation. The carrying values of cash, marketable securities and accounts
payable are reasonable estimates of their fair value due to the short-term
maturity of underlying financial instruments. The carrying value of the
convertible demand notes payable are reasonable estimates of their fair value
since they were convertible into the Company's common stock at a price
equivalent to the conversion rights of the Company's Series A convertible
preferred shares.
<PAGE>
(c) Income Taxes
The Company accounts for income taxes under the asset and liability method
as required by SFAS No. 109, Accounting for Income Taxes. Under this method,
deferred tax assets and liabilities are determined based on the differences
between the financial reporting and income tax bases of assets and liabilities
and are measured using the enacted tax rates and laws expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash held in banks and time deposits
having original maturities of three months or less.
(e) Technology License
The technology license consists of purchased technology, amortized by the
straight-line method over a period of five years, the initial term of the
license agreement.
(f) Investment in Marketable Equity Securities
The Company accounts for its investments in equity securities that have
readily determinable fair values under the provisions of SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Marketable
equity securities consist of shares of common stock and are stated at market
value. Management has identified the Company's marketable equity securities as
trading securities and, accordingly, unrealized gains and losses on such
securities are recorded in the statement of operations.
Subsequent to December 31, 1998, on various dates, the Company sold 65,000
shares of the approximately 83,000 shares it held at December 31, 1998 at an
average price in excess of its carrying value per share.
(g) 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 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.
<PAGE>
(h) Stock Option Plan
The Company accounted for stock options issued to employees in accordance
with SFAS No. 123, Accounting for Stock-Based Compensation, which permits
entities to continue to apply the provisions of Accounting Principles Board
("APB") Opinion No. 25 and provide pro forma net income disclosures for employee
stock option grants as if the fair value based method, as defined in SFAS No.
123, had been applied. The Company has elected to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure required by SFAS No. 123.
(i) Comprehensive Income
The Company reports and presents comprehensive income and its components in
accordance with SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130.
requires only additional disclosures in the financial statements; it does not
affect the Company's financial position or results of operations. For the period
from March 20, 1998 (inception) to December 31, 1998, there were no items of
other comprehensive income.
3. Merger Agreement with Radar Resources, Inc.
On March 16, 1999 the Company entered into a Merger Agreement with Radar
Resources, Inc. ("Radar"), a Nevada corporation, under the terms of which the
Company and Radar merged through an exchange of shares (the "Merger"). Subject
to the terms and conditions of this Merger Agreement, on March 23, 1999, Radar
issued to the shareholders of the Company, four shares of fully paid and
nonassessable shares of Radar common stock, $.001 par value ("Radar Common
Stock") per share, in exchange for each share of the Company's outstanding
common stock. The existing common shareholders of the Company received 1.4
million shares of common stock of the Merged Company in exchange for the 350,000
shares then outstanding. All shares of the Company's Series A Convertible
Preferred Stock issued and outstanding immediately prior to the Merger were
deemed to have been converted into an aggregate of 250,000 shares of the
Company's common stock and the Series A Convertible Preferred shareholders
received 1 million shares of common stock of the Merged Company. Further, the
holders of the company's convertible demand notes received 2,729,242 shares of
common stock of the Merged Company.
Radar was a public company subject to reporting obligations under Section
15(d) of the Securities Exchange Act of 1933, as amended, had not previously
been engaged in any business activity and had no assets or liabilities. Radar's
authorized capital was 100,000,000 shares of par value $0.001 per share, of
which 1,000,000 shares were issued and outstanding at the date of the Merger.
After completion of the Merger and the issuance of shares in accordance with in
the Merger Agreement, the Company was merged with Radar so that Radar was the
surviving company. Radar had approximately 6.1 million shares outstanding after
the transactions described above. As a result of the Merger, the former
shareholders of the Company hold approximately 84% of the outstanding common
shares of the Merged Company. As a result, the Company is considered to be the
accounting acquirer in a reverse acquisition accounted for as a purchase and its
financial statements will become the historical financial statements of the
combined company.
<PAGE>
As part of the transaction, Radar changed its name to Vianet Technologies,
Inc. (OTC: VNTK).
4. Proposed Acquisition of Develcon
On February 12, 1999 the Company entered into an Arrangement Agreement (the
"Arrangement") to acquire all the outstanding shares of Develcon. The
Arrangement requires approval of the Supreme Court of British Columbia, the
Securityholders and Debentureholders of Develcon. Develcon, as noted in its most
recent audited financial statements as of and for the year ended August 31,
1998, has incurred significant losses, has a working capital deficiency, and is
unable to pay its suppliers within normal trade terms. The Company had a cash
deficiency and its existing line of credit is required to be repaid by May 31,
1999. Develcon is also in violation of certain covenants with respect to its
long-term debt.
The following information is summarized from Develcon's financial
statements as of and for the years ended August 31, 1998 and 1997:
1998 1997
(thousands of Canadian Dollars)
<S> <C> <C>
Total Assets $13,147 15,545
Total Liabilities 13,348 11,055
Working Capital (Deficiency) (4,349) 5,042
Shareholders' Equity (Deficiency) (201) 4,490
Net Loss (4,773) (12,460)
</TABLE>
Develcon's working capital shortages have led to a continued deterioration
in its financial condition and have prevented it from delivering product orders.
The Arrangement provides for Develcon shareholders to receive one share of
common stock of the Company for every 30.75 shares of Develcon. The Arrangement
also provides that the Develcon convertible notes payable will be converted into
5.9963 Develcon shares for each $1.00 principal amount of notes payable and that
interest which has been accrued on the convertible notes payable but not paid
shall be forgiven. These shares will also convert into Vianet shares in the
ratio of one share of the Company for every 30.75 shares of Develcon.
Prior to closing, the Arrangement may be terminated by either the Company
or Develcon. However, should Develcon terminate the Arrangement to accept a
competing offer, the Company would be entitled to a payment of C$1,000,000 in
addition to all outstanding amounts owed to the Company by Develcon.
<PAGE>
Loans to Develcon (the "Loans") at December 31, 1998 are comprised of:
<TABLE>
<CAPTION>
Convertible notes payable, due on demand,
<S> <C>
With interest at Royal Bank of Canada
Prime rate plus 2% $ 530,000
Convertible notes payable of C$1,500,000,
Due on April 30, 1999, with interest at
10% per annum 976,800
----------
$ 1,506,800
----------
</TABLE>
The loans are secured by substantially all of Develcon's assets.
Subsequent to the period-end, the Company advanced a further C$1,500,000 to
Develcon as part of the Arrangement agreement described above.
In the event that the Arrangement agreement is completed as anticipated,
the loans will be converted into common shares of Develcon contemporaneously
with the Develcon becoming a wholly owned subsidiary of the Company. For the
period from March 20, 1998 (inception) to December 31, 1998 the Company recorded
accrued interest income of $65,375 in relation to these loans. Under the terms
of the Arrangement agreement, upon completion of the acquisition, accrued
interest will be forgiven and, together with the outstanding loan balance, will
constitute a portion of the purchase price of Develcon. On May 11, 1999,
Develcon held it's Annual and Special Meeting of Shareholders, at which time the
Securityholders and Debentureholders approved the Arrangement. The Arrangement
is expected to become effective on May 18, 1999.
The acquisition shall be accounted for as a purchase, and is subject to
certain conditions and representations. The purchase price of Develcon will be
determined by the number of shares issued by the Company to effect the
acquisition using a value of $1 per share, the value of the Company's common
stock at the date the Arrangement was entered into, and the amount of loans
provided to Develcon.
5. Common stock
As of December 31, 1998 the authorized common stock of the Company consists
of 3,000,000 shares, of which 350,000 shares are currently issued and
outstanding. Of the issued and outstanding shares, 300,000 were fully paid at
December 31, 1998. Such shares were sold for $0.01 and as of December 31, 1998,
a $500 subscription receivable is outstanding. On March 23, 1999, in connection
with the Merger Agreement with Radar Resources, Inc. (see Note 10), such shares
were exchanged for 1.4 million shares of the Merged Company.
6. Series A Convertible Preferred Stock
As of December 31, 1998 the authorized Series A convertible preferred stock
of the Company consisted of 1,000,000 shares, of which 250,000 shares were
issued and outstanding at December 31, 1998. The Series A preferred stock was
convertible into common stock at a rate of one for one. Such shares were issued
at $4.00 per share. Of the issued and outstanding shares, 2,500 were fully paid
at December 31, 1998. The remaining subscription receivable outstanding,
$990,000 was paid subsequent to December 31, 1998.
<PAGE>
In the event of any liquidation or winding up of the Company, the holders
of the Series A preferred stock were entitled to receive, prior and in
preference to the holders of common stock, the original price per share of
Series A preferred stock, plus a cumulative dividend at an annual rate of 7%,
computed from the date the Series A preferred stock was issued.
The holders of the Series A preferred stock shall vote with holders of
shares of common stock (as a single class) on all matters brought before the
stockholders and are entitled to one vote for each share of common stock into
which their share of Series A preferred stock are convertible.
On March 23, 1999, as part of the Merger Agreement with Radar Resources,
Inc. (Note 10), the Series A preferred stock was converted into common stock. As
a result, the Series A preferred shareholders received 1,000,000 shares of
common stock of the merged company since the exchange ratio specified in the
Merger Agreement was for Company common shareholders to receive four shares of
common stock of the Merged Company for each share of common stock of the
Company.
7. SPS Technology License
The Company purchased a license for the SPS technology from NewCom
Technologies, Inc. (the "Licensor") for $450,000. The license entitles the
Company to use certain intellectual property rights. This "right to use"
includes any patents associated with the SPS technology along with the current
preferred embodiment of the patent. Royalty payments of 2.5% of Net Cash
Received, as defined in the license agreement, on products manufactured and
sold, licensed or services rendered by Vianet during the term of the license are
due to the licensor. The Company may, at its option, pay a one-time royalty fee
of $2.1 million at any time during the term. If such one time payment is made,
the license shall become perpetual and no further royalties will be due under
the license.
The license provides the Company with all the source code and documentation
required to allow the Company to integrate the technology into its products. The
license provides for quarterly updates from NewCom of the hardware/firmware for
the initial five-year term of the agreement.
8. Income Taxes
The difference between the statutory federal income tax rate and the
Company's effective tax rate for the period ended December 31, 1998 is
principally due to the Company incurring net operating losses for which no tax
benefit was recorded.
For Federal income tax purposes, the Company has unused net operating loss
carryforwards of approximately $416,500 expiring through year 2018. The
availability of the net operating loss carryforwards to offset income in the
future years, if any, may be limited by the Internal Revenue Code Section 382 as
a result of certain ownership changes. The tax effects of temporary differences
that give rise to significant portions of the deferred tax assets at December
31, 1998 are as follows:
<PAGE>
<TABLE>
<CAPTION>
Deferred tax assets:
<S> <C>
Net operating loss carry forward - current period $ 166,500
Unrealized foreign exchange loss 29,500
196,000
Less valuation allowance (196,000)
---------
Deferred tax asset $ -
---------
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
projected future taxable income and tax planning strategies in making this
assessment. The valuation allowance was recorded due to the uncertainty in the
utilization of Federal net operating loss carryforwards.
9. Related Party Transactions
Fees and Expenses
The Company paid consulting fees aggregating approximately $133,000 to a
company owned by two shareholders who are also officers of the Company for
engineering and other services. The company has also incurred legal expenses of
$116,000 for work performed by a law firm that employs an officer of the
Company.
Convertible Demand Notes Payable
The Company has convertible demand notes payable of $2,909,272 to entities
controlled by two officers and directors of the Company. The convertible demand
notes were convertible into shares of common stock at a ratio of one share for
every $4 of principal amount. Of these notes, $669,268 was contributed in
exchange for marketable securities and $1,355,000 was contributed in the form of
loans receivable from Develcon. These borrowings were interest free. Subsequent
to the year-end, $200,000 was repaid to one of the lenders and additional
convertible demand notes of $30,000 were issued to two of the lenders.
On March 23, 1999, as part of the Merger Agreement with Radar Resources,
Inc. (see Note 10), the notes payable were converted into common stock of the
Merged Company. Based upon the original exchange ratio of one common share of
Company common stock for every $4 of principal amount and utilizing the exchange
rate in the Merger Agreement, convertible demand notes payable holders received
one share of common stock of the Merged Company for each $1.00 of principal
amount.
<PAGE>
10. Stock Option Plan
On April 23, 1998, the Board of Directors granted options to purchase
110,000 shares of the Company's common stock to certain officers and directors
of the Company at an exercise price of $4.00 per share. The options vest over a
three-year period and have a term of eight years. The Company did not recognize
any compensation expense relative to the options for the period ended December
31, 1998 since the option price was in excess of fair value at the date of
grant. As the Company was only recently formed and had no operations or
significant activities at the grant date, management has determined that the
fair value of the options granted was deminimus and, therefore, has not
presented the pro forma disclosures required by SFAS No. 123 as the effect on
reported net loss is immaterial.
