<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 12, 1998
-----------------
TOUCH TONE AMERICA, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 000-27834 33-0424087
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1771 E. Flamingo Road, Building B, Suite 200, Las Vegas, NV 89119
- -------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (702) 792-2500
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The Registrant hereby amends Item 7 of its Form 8-K Report for January 15,
1998 as follows:
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
The audited financial statements of Orix Global Communications,
Inc. for the year ended May 31, 1997 and unaudited financial statements for
the five months ended on October 31, 1996 and 1997.
(b) Pro Forma Financial Information
Proforma financial information of the Registrant for the year ended
May 31, 1997 and the period ended October 31, 1997 after giving effect to the
Acquisition of Orix Global Communications, Inc.
2
<PAGE>
ORIX GLOBAL COMMUNICATIONS, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD FROM
JUNE 26, 1996 (INCEPTION)
TO MAY 31, 1997
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . .F-2
BALANCE SHEETS - May 31, 1997 and October 31, 1997 (unaudited) . . . . . . .F-3
STATEMENTS OF OPERATIONS - For the Period from June 26, 1996 (inception)
to May 31, 1997 and For the Five Months Ended
October 31, 1996 and 1997 (unaudited). . . . . . . . . . . . . . .F-4
STATEMENT OF STOCKHOLDERS' EQUITY - For the Period from June 26, 1996
(inception) to May 31, 1997 and For the Five Months Ended
October 31, 1997 (unaudited). . . . . . . . . . . . . . . . . . . .F-5
STATEMENTS OF CASH FLOW - For the Period from June 26, 1996 (inception)
to May 31, 1997 and For the Five Months Ended
October 31, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . F-6
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . F-7
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Board of Directors
ORIX Global Communications, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of ORIX Global Communications,
Inc. as of May 31, 1997, and the related statement of operations, stockholders'
equity, and cash flows for the period from June 26, 1996 (inception) to May 31,
1997. 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 ORIX Global Communications,
Inc. as of May 31, 1997, and the results of its operations and its cash flows
for the period from June 26, 1996 (inception) to May 31, 1997, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, as of May 31, 1997 the Company has negative working
capital of $266,441, and has suffered significant losses from operations that
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 3. The financial statements do not include any adjustments relating to the
recoverability and classification of reported asset amounts or the amounts and
classification of liabilities that might result from the outcome of this
uncertainty.
HEIN + ASSOCIATES LLP
Certified Public Accountants
Orange, California
November 10, 1997
F-2
<PAGE>
ORIX GLOBAL COMMUNICATIONS, INC.
BALANCE SHEETS
MAY 31, OCTOBER 31,
---------- -----------
1997 1997
---------- -----------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 2,317 $ 2,583
Accounts receivable 38,167 80,294
Loan receivable from related party 47,200 33,700
Equipment held for resale 17,767 -
Other receivables - 40,706
---------- ---------
Total current assets 105,451 157,283
PROPERTY AND EQUIPMENT, net 498,687 759,428
DEPOSITS 13,499 13,499
---------- ---------
TOTAL ASSETS $ 617,637 $ 930,210
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 295,864 $ 878,693
Accrued liabilities 76,028 -
Deferred revenues - 25,000
---------- ---------
Total current liabilities 371,892 903,693
COMMITMENTS (Note 7) - -
STOCKHOLDERS' EQUITY:
Common stock, no par value, 2,500 shares authorized,
1,200 shares issued and outstanding 479,330 529,330
Accumulated deficit (233,585) (502,813)
---------- ---------
Total stockholders' equity 245,745 26,517
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 617,637 $ 930,210
---------- ---------
---------- ---------
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
ORIX GLOBAL COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE FIVE MONTHS ENDED
FROM JUNE 26, OCTOBER 31,
1996 (INCEPTION) -----------------------------
TO MAY 31, 1997 1996 1997
--------------- ----------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
REVENUES $ 882,702 $ - $ 1,844,918
--------------- ----------- -------------
OPERATING EXPENSES:
Cost of services 547,273 - 1,221,376
Selling, general and administrative
expenses 389,632 - 742,023
Bad debt expense related to related party
receivable 176,138 - 150,747
--------------- ----------- -------------
Total operating expenses 1,113,043 - 2,114,146
--------------- ----------- -------------
LOSS FROM OPERATIONS (230,341) - (269,228)
INTEREST EXPENSE 3,244 - -
--------------- ----------- -------------
NET LOSS $ (233,585) $ - $ (269,228)
--------------- ----------- -------------
--------------- ----------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
ORIX GLOBAL COMMUNICATIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 26, 1996 (INCEPTION) TO MAY 31, 1997 AND
FOR THE FIVE MONTHS ENDED OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------------ ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Common stock issued 1,000 $ 100 $ - $ 100
Issuance of stock for fixed assets contributed at historical
cost 200 429,230 - 429,230
Compensation contributed - 50,000 - 50,000
Net loss - - (233,585) (233,585)
--------- ---------- ----------- ------------
BALANCE, May 31, 1997 1,200 479,330 (233,585) 245,745
Compensation contributed (unaudited) - 50,000 - 50,000
Net loss (unaudited) - - (269,228) (269,228)
--------- ---------- ----------- ------------
BALANCE, October 31, 1997 (unaudited) 1,200 $ 529,330 $ (502,813) $ 26,517
--------- ---------- ----------- ------------
--------- ---------- ----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
ORIX GLOBAL COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE FIVE MONTHS ENDED
FROM JUNE 26, OCTOBER 31,
1996 (INCEPTION) -----------------------------
TO MAY 31, 1997 1996 1997
--------------- ----------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (233,585) $ - $ (269,228)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 26,284 - 60,699
Compensation contributed 50,000 - 50,000
Write-off of related party receivable 233,125 - 150,747
Changes in operating assets and
liabilities:
Accounts receivable (38,167) - (42,127)
Due from related party (233,125) - (150,747)
Equipment held for resale (17,767) - 17,767
Other receivables - - (40,706)
Deposits (13,499) - -
Accounts payable 295,864 - 582,829
Accrued liabilities 76,028 - (76,028)
Deferred revenue - - 25,000
------------ ---------- -------------
Net adjustments 378,743 - 577,434
------------ ---------- -------------
Net cash provided by operating activities 145,158 - 308,206
------------ ---------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to related party (47,200) - 13,500
Purchase of property and equipment (95,741) - (321,440)
------------ ---------- -------------
Net cash used in investing activities (142,941) - (307,940)
------------ ---------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 100 - -
------------ ---------- -------------
Net cash provided by financing activities 100 - -
------------ ---------- -------------
NET INCREASE IN CASH 2,317 - 266
CASH AND CASH EQUIVALENTS, beginning of
period - - 2,317
------------ ---------- -------------
CASH AND CASH EQUIVALENTS, end of
period $ 2,317 $ - $ 2,583
------------ ---------- -------------
------------ ---------- -------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for:
Interest $ 3,244 $ - $ -
------------ ---------- -------------
------------ ---------- -------------
Income taxes $ - $ - $ -
------------ ---------- -------------
------------ ---------- -------------
Non-cash investing and financing
transactions:
Issuance of 200 shares of common
stock in exchange for equipment and furniture $ 429,230 $ - $ -
------------ ---------- -------------
------------ ---------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-6
<PAGE>
ORIX GLOBAL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO MAY 31, 1997 IS UNAUDITED)
1. THE COMPANY:
ORIX Global Communications, Inc. (the Company) was incorporated in the
state of Nevada on June 26, 1996. The Company operates in the
telecommunication industry where they provide line services for the
transmitting of voice and data communications to Mexico and other parts of
the world. The corporate offices are located in Las Vegas, Nevada.
2. SIGNIFICANT ACCOUNTING POLICIES:
STATEMENT OF CASH FLOWS - For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and circumstances
indicate that the cost of assets or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is
required, the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow is required.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation of equipment and furniture is calculated using the
straight-line method over the estimated useful lives (ranging from 5 to 7
years) of the respective assets. The cost of normal maintenance and
repairs is charged to operating expense as incurred. Material expenditures
which increase the life of an asset are capitalized and depreciated over
the estimated remaining useful life of the asset. The cost of fixed assets
sold, or otherwise disposed of, and the related accumulated depreciation is
removed from the accounts, and any gains or losses are reflected in current
operations.
EQUIPMENT HELD FOR RESALE - Equipment held for resale is carried at the
lower of cost or market and represents equipment purchased by the Company
for resale to its customers.
INCOME TAXES - The Company accounts for income taxes under the liability
method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between
the financial statements and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse.
REVENUE RECOGNITION - Revenues are recognized upon use of lines by
customers. The line usage is monitored and the customers are billed
according to the minutes used. A contract is entered into establishing the
price to be charged for the minutes used.
STOCK BASED COMPENSATION - In October 1995, the Financial Accounting
Standards Board issued a new statement titled "Accounting for Stock-Based
Compensation" (FAS 123) which the Company adopted upon incorporation. FAS
123 encourages, but does not require, companies to recognize compensation
expense
F-7
<PAGE>
for grants of stock, stock options, and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. The Company has elected not to adopt the fair value accounting
prescribed by FAS 123 for employees, and will be subject only to the
disclosure requirements prescribed by FAS 123.
USE OF ESTIMATES - The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates.
The Company's financial statements are based upon a number of significant
estimates, including the allowance for doubtful accounts, technological
obsolescence of inventories and fixed assets, the estimated useful lives
selected for property and equipment and the realizability of deferred tax
assets. Due to the uncertainties inherent in the estimation process, it is
at least reasonably possible that these estimates will be further revised
in the near term and such revisions could be material.
CONCENTRATIONS OF CREDIT RISK - Credit Risk represents the accounting loss
that would be recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit risk
(whether on or off balance sheet) that arise from financial instruments
exist for groups of customers or groups of counterparties when they have
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly effected by changes in economic
characteristics that would cause their ability to meet contractual
obligations to be similarly effected by changes in economic or other
conditions. In accordance with FAS Statement No. 105, DISCLOSURE OF
INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND
FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK, the credit risk
amounts shown, in Note 9, do not take into account the value of any
collateral or security.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values for
financial instruments under FAS Statement No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, are determined at discrete points in time
based on relevant market information. These estimates involve
uncertainties and cannot be determined with precision. The estimated fair
values of the Company's financial instruments, which includes all cash,
accounts receivables, and accounts payable, approximates the carrying value
in the financial statements at May 31, 1997.
IMPACT OF RECENTLY ISSUED STANDARDS - The FASB has issued Statement of
Financial Accounting Standards 128, "Earnings per Share" and Statement of
Financial Accounting Standards 129 "Disclosure of Information About an
Entity's Capital Structure." Statement 128 provides a different method of
calculating earnings per share than is currently used in accordance with
Accounting Principles Board Opinion 15 "Earnings per Share." Statement 128
provides for the calculation of "basic" and "diluted" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing
income available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted reflects the potential
dilution of securities that could share in the earnings of an entity,
similar to fully diluted earnings per share. Statement 129 establishes
standards for disclosing information about an entity's capital structure.
Statements 128 and 129 are effective for financial statements issued
F-8
<PAGE>
for periods ending after December 15, 1997. Their implementation is not
expected to have a material effect on the financial statements.
Additionally, the FASB has issued Statement of Financial Accounting
Standards 130, "Reporting Comprehensive Income" and Statement of Financial
Accounting Standards 131 "Disclosures About Segments of an Enterprise and
Related Information." Statement 130 establishes standards for reporting
and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to
owners. Among other disclosures, Statement 130 requires that all items
that are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement
that displays such information with the same prominence as other financial
statements. Statement 131 supersedes Statement of Financial Accounting
Standards 14 "Financial Reporting for Segments of a Business Enterprise."
Statement 131 establishes standards on the way that public companies report
financial information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. Statement 131 defines operating
segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
Statements 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any,
the standards may have on the future financial statement disclosures.
Results of operations and financial position, however, will be unaffected
by implementation of these standards.
INTERIM FINANCIAL INFORMATION - The October 31, 1996 and 1997 financial
statements have been prepared by the Company without audit. In the opinion
of management, the accompanying unaudited financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary for a
fair presentation of the Company's financial position as of October 31,
1997 and the results of its operations and cash flows for the five months
periods ended October 31, 1996 and 1997. The results of operations for the
five month periods ended October 31, 1996 and 1997 are not necessarily
indicative of those that will be obtained for the entire fiscal year.
3. BASIS OF PRESENTATION:
The financial statements have been prepared on a going concern basis, which
contemplates, among other things, the realization of assets and the
satisfaction of liabilities in the normal course of business. However,
there is substantial doubt about the Company's ability to continue as a
going concern because
F-9
<PAGE>
of the magnitude of its loss for the period ended May 31, 1997. The
Company's continued existence is dependent upon its ability to complete its
merger with Touch Tone America, Inc., as described in Note 10, to raise
substantial capital, to generate revenues and to significantly improve
operations.
Management is taking several actions to mitigate the above factors,
including the attempt to complete the Touch Tone America, Inc. merger, the
negotiation for and completion of a private placement of equity securities,
and to increase revenues.
Accordingly, the financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts
or the amount and classification of liabilities or any other adjustment
that might be necessary should the Company be unable to continue as a going
concern.
4. LOAN RECEIVABLE:
The Company has a loan receivable from a related party which is owned by
90% of the stockholders of ORIX. The amounts were used to help establish
credit with the related party's largest vendor. Subsequent to year-end
approximately $13,500 has been repaid.
5. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
MAY 31, 1997 OCTOBER 31, 1997
------------ ----------------
(unaudited)
Electronic equipment $ 171,631 $ 442,362
Computer hardware 150,650 165,874
Computer software 130,152 158,232
Office equipment and furniture 72,538 79,943
----------- -------------
Total property and equipment 524,971 846,411
Less accumulated depreciation (26,284) (86,983)
----------- -------------
Property and equipment, net $ 498,687 $ 759,428
----------- -------------
----------- -------------
Depreciation expense for property and equipment charged to operations for
the periods ended May 31, 1997 and October 31, 1997 was $26,284 and
$60,699, respectively.
6. INCOME TAXES:
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
F-10
<PAGE>
MAY 31, 1997
------------
Deferred tax assets (liabilities):
Current
Deferred revenue $ 3,222
Net operating loss carryforwards 87,507
Other 272
-----------
Total current 91,001
Long-term
Depreciation (10,725)
-----------
Total gross deferred tax assets 80,276
Less valuation allowance 80,276
-----------
Net deferred tax assets $ -
-----------
-----------
The Company had net operating loss carryforwards of approximately $202,095
at May 31, 1997. The net operating carryforwards expire beginning in 2012.
7. COMMITMENTS:
The Company leases its facilities from a related party under a
month-to-month operating lease. Rent expense amounted to $58,870 for the
period ended May 31, 1997 and was based on the percentage of actual space
used. The Company leases a vehicle under a non-cancelable operating leases
which expires June, 2000. Rent expense for this lease amounted to $2,567
for the period ended May 31, 1997. The future annual minimum payments
under the non-cancelable leases are as follows:
YEAR ENDED MAY 31,
----------------------------
1998 $ 15,402
1999 15,402
2000 1,283
----------
Minimum lease payments $ 32,087
----------
----------
8. RELATED PARTY:
During the period ended May 31, 1997, the Company paid expenses for and
received funds from an entity owned by a shareholder and president of the
Company. A receivable totaling approximately $233,000 at May 31, 1997 was
written-off as uncollectible at year-end. Common expenses of the Companies
are allocated based upon actual usage.
F-11
<PAGE>
9. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK, MAJOR CUSTOMERS AND OTHER RISKS
AND UNCERTAINTIES:
During the period ended May 31, 1997, the Company had sales to its largest
customer in the amount of $815,516 (92% of revenue). Accounts receivable
from this customer totaled $38,167 as of May 31, 1997. The Company
operates primarily in one industry: telecommunications. Financial
instruments that subject the Company to credit risk consist primarily of
accounts receivable.
10. SUBSEQUENT EVENTS:
On August 11, 1997, the Company entered into an Agreement and Plan of
Reorganization with Touch Tone America, Inc., a California Corporation,
("Touch Tone"). Such agreement was subsequently amended on November 7,
1997. Touch Tone is to acquire all of the issued and outstanding shares of
the Company in exchange for Touch Tone common stock which will represent
approximately sixty-five percent of the resulting common stock of Touch
Tone after the merger on a fully diluted basis.
F-12
<PAGE>
TOUCH TONE AMERICA, INC.
PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information is presented to reflect the
purchase by Touch Tone America, Inc. ("TTA") of ORIX Global Communications, Inc.
("ORIX"). The purchase arises from an August 11, 1997 Agreement and Plan of
Reorganization between the entities which was subsequently amended on November
7, 1997 and December 18, 1997. The transaction was consummated on
December 31, 1997, however, it is subject to approval by TTA shareholders.
For accounting purposes, the transaction will be accounted for as a reverse
acquisition, whereby ORIX will acquire TTA. Due to the limited operations of
TTA, no goodwill will be recognized as a result of the transaction. For
accounting purposes, the TTA tangible assets and liabilities will be recorded at
historical cost, which represents in management's opinion their fair market
value. Additionally, the historical financial information of TTA does not take
into account any adjustments that may be required as a result of TTA's wholly
owned subsidiary, GetNet International, Inc. ("GetNet") Chapter 11 Bankruptcy
filing on December 18, 1997.
The accompanying pro forma financial information includes:
1. A Pro Forma Balance Sheet as of October 31, 1997, prepared as if the
transaction occurred as of that date.
2. A Pro Forma Statement of Operations for the year ended May 31, 1997,
prepared as if the transaction occurred on June 1, 1996.
3. A Pro Forma Statement of Operations for the five months ended October
31, 1997, prepared as if the transaction occurred on June 1, 1996.
The pro forma financial information was derived from the audited financial
statements of TTA and ORIX as of May 31, 1997 and for the year then ended, as
well as the October 31, 1997 unaudited financial statements of TTA and ORIX for
the five months then ended.
The assumptions used in preparing the pro forma adjustments are described in the
footnotes to the pro forma financial statements. However, due to the
uncertainties inherent in the assumption process, it is at least reasonably
possible that the assumptions might require further revision and that such
revision could be material.
The pro forma financial information should be read in conjunction with the
historical financial statements of TTA and ORIX which were used to prepare the
pro forma financial information.
The pro forma financial information presented is not necessarily indicative of
that which would have been attained had the transaction actually occurred at an
earlier date nor do they present results to be obtained in the future.
-1-
<PAGE>
TOUCH TONE AMERICA, INC.
PRO FORMA BALANCE SHEET
OCTOBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
ORIX GLOBAL
TOUCH TONE COMMUNICATIONS, PRO FORMA PRO FORMA
AMERICA, INC. INC. ADJUSTMENTS COMBINED
-------------- --------------- -------------- --------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash $ - $ 3,000 $ 2,500,000 $ 2,503,000
Trade receivables, net 70,000 80,000 - 150,000
Loan receivable - 34,000 - 34,000
Prepaid expenses 26,000 - - 26,000
Other receivables - 41,000 (a) (37,000) 4,000
-------------- --------------- -------------- --------------
Total current assets 96,000 158,000 2,463,000 2,717,000
-------------- --------------- -------------- --------------
PROPERTY AND EQUIPMENT, net 878,000 759,000 - 1,637,000
OTHER ASSETS:
Intangibles, net 501,000 - (b) (501,000) -
Deposits 78,000 13,000 - 91,000
-------------- --------------- -------------- --------------
TOTAL ASSETS $ 1,553,000 $ 930,000 $ 1,962,000 $ 4,445,000
-------------- --------------- -------------- --------------
-------------- --------------- -------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 965,000 $ 879,000 $ - $ 1,844,000
Accrued liabilities 483,000 - - 483,000
Deferred revenues 58,000 25,000 - 83,000
Current portion of capital lease
obligations 59,000 - - 59,000
Due to ORIX 37,000 - (a) (37,000) -
Other liabilities 285,000 - - 285,000
-------------- --------------- -------------- --------------
Total current liabilities 1,887,000 904,000 (37,000) 2,754,000
-------------- --------------- -------------- --------------
8% CONVERTIBLE DEBENTURE (d) 2,500,000 2,500,000
CAPITAL LEASE OBLIGATIONS 47,000 - - 47,000
-------------- - -------------- -------------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock - - - -
Common stock 8,437,000 529,000 - 8,966,000
Accumulated deficit (8,818,000) (503,000) (501,000) (9,822,000)
-------------- --------------- -------------- --------------
Total stockholders' equity
(deficit) (381,000) 26,000 (501,000) (856,000)
-------------- --------------- -------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 1,553,000 $ 930,000 $ 1,962,000 $ 4,445,00
-------------- --------------- -------------- --------------
-------------- --------------- -------------- --------------
</TABLE>
-2-
<PAGE>
TOUCH TONE AMERICA, INC.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
ORIX GLOBAL
TOUCH TONE COMMUNICATIONS, PRO FORMA PRO FORMA
AMERICA, INC. INC. ADJUSTMENTS COMBINED
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 1,992,000 $ 883,000 $ - $ 2,875,000
------------- --------------- ------------- ---------------
OPERATING EXPENSES:
Cost of services 1,990,000 547,000 - 2,537,000
Selling, general and
administrative 2,605,000 364,000 - 2,969,000
Amortization,
depreciation and 580,000 26,000 (c) (168,000) 438,000
impairment
Severance 334,000 - - 334,000
Other 375,000 176,000 - 551,000
------------- --------------- ------------- ---------------
5,884,000 1,113,000 (168,000) 6,829,000
------------- --------------- ------------- ---------------
LOSS FROM OPERATIONS (3,892,000) (230,000) 168,000 (3,954,000)
------------- --------------- ------------- ---------------
OTHER EXPENSES:
Interest expense 84,000 3,000 - 87,000
Absorbed merger and
acquisition costs 381,000 - - 381,000
------------- --------------- ------------- ---------------
465,000 3,000 - 468,000
------------- --------------- ------------- ---------------
NET LOSS $ (4,357,000) $ (233,000) $ 168,000 $ (4,422,000)
------------- --------------- ------------- ---------------
------------- --------------- ------------- ---------------
NET LOSS PER SHARE $ (0.12)
---------------
---------------
WEIGHTED AVERAGE SHARES OUTSTANDING (e) 37,056,099
---------------
---------------
</TABLE>
-3-
<PAGE>
TOUCH TONE AMERICA, INC.
PRO FORMA STATEMENT OF OPERATIONS
FIVE MONTHS ENDED OCTOBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
ORIX GLOBAL
TOUCH TONE COMMUNICATIONS, PRO FORMA PRO FORMA
AMERICA, INC. INC. ADJUSTMENTS COMBINED
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 611,000 $ 1,845,000 $ - $ 2,456,000
------------- --------------- ------------- ---------------
OPERATING EXPENSES:
Cost of services 845,000 1,221,000 - 2,066,000
Selling, general and
administrative 792,000 660,000 - 1,452,000
Amortization, depreciation and
impairment 155,000 82,000 (c) (70,000) 167,000
Write off of related party
receivable - 151,000 - 151,000
------------- --------------- ------------- ---------------
1,792,000 2,114,000 (70,000) 3,836,000
------------- --------------- ------------- ---------------
LOSS FROM OPERATIONS (1,181,000) (269,000) 70,000 (1,380,000)
------------- --------------- ------------- ---------------
OTHER INCOME (EXPENSES):
Interest income and other 81,000 - - 81,000
Interest (expense) (9,000) - - (9,000)
------------- --------------- ------------- ---------------
72,000 - - 72,000
------------- --------------- ------------- ---------------
NET LOSS $ (1,109,000) $ (269,000) $ 70,000 $ (1,308,000)
------------- --------------- ------------- ---------------
------------- --------------- ------------- ---------------
NET LOSS PER SHARE $ (0.03)
---------------
---------------
WEIGHTED AVERAGE SHARES OUTSTANDING (e) 37,820,980
---------------
---------------
</TABLE>
-4-
<PAGE>
TOUCH TONE AMERICA, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(a) To eliminate intercompany advances.
(b) To reflect the reverse acquisition of TTA by ORIX and reflect only the
tangible assets and liabilities of TTA at historical cost.
(c) To remove amortization of GetNet goodwill.
(d) To reflect the issuance of a $2,500,000 convertible debenture for cash in
conjunction with the closing of the TTA/ORIX merger.
(e) To reflect the issuance of 33,732,980 shares of common stock to acquire
ORIX.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 30, 1998 TOUCH TONE AMERICA, INC.
By: /s/ Kerry Rogers
----------------------------------
Kerry Rogers,
President & Chief Executive Officer
