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 13, 1996
------------------------
Tel-Save Holdings, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-26728 23-2827736
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
6805 Route 202, New Hope, PA 18938
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 215-862-1500
---------------------------
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
1. Financial statements of American Business Alliance, Inc. as
of and for the period ended December 13, 1996 unaudited).
2. Financial statements of American Business Alliance, Inc. as
of and for the year ended December 31, 1995
(b) Unaudited Pro forma consolidated financial information
1. Unaudited Pro forma condensed consolidated financial
statements as of December 31, 1996 and for the years ended
December 31, 1995 and 1996.
<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 hereunto duly authorized.
Tel-Save Holdings, Inc.
(Registrant)
Date: February 28, 1997 By: /s/ Joseph A. Schenk
-----------------------------
Joseph A. Schenk
Chief Financial Officer
Treasurer and Director
<PAGE>
AMERICAN BUSINESS ALLIANCE, INC.
BALANCE SHEET
December 13, 1996
(Unaudited)
(In thousands)
- --------------------------------------------------------------------------------
ASSETS:
CURRENT:
Cash and cash equivalents $ 291
Accounts receivable, net of $50 allowance 515
Prepaid expenses and other current assets 10
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 816
Furniture and equipment 72
- --------------------------------------------------------------------------------
TOTAL ASSETS $ 888
================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 430
Other current liabilities 14,360
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 14,790
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock 1
Accumulated deficit (13,903)
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (13,902)
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 888
================================================================================
See accompanying notes to consolidated financial statements
F-1
<PAGE>
AMERICAN BUSINESS ALLIANCE, INC.
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
January 1, 1996 to December 13, 1996
(Unaudited)
(In thousands)
- --------------------------------------------------------------------------------
Sales $ 3,029
Cost of sales 13,556
- --------------------------------------------------------------------------------
Gross loss (10,527)
Selling, general and administrative expenses 2,796
- --------------------------------------------------------------------------------
Operating loss (13,323)
Other income, net 9
- --------------------------------------------------------------------------------
Net loss (13,314)
Accumulated deficit, beginning of year (589)
- --------------------------------------------------------------------------------
Accumulated deficit, end of year $(13,903)
================================================================================
See accompanying notes to consolidated financial statements
F-2
<PAGE>
AMERICAN BUSINESS ALLIANCE, INC.
STATEMENT OF CASH FLOWS
January 1, 1996 to December 13, 1996
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net (loss) ($ 13,314)
Adjustment to reconcile net (loss) to net cash used in
operating activities:
Depreciation 18
(Increase) in accounts receivables, net (403)
Decrease in commissions receivable 62
(Increase) in prepaid expenses and other current assets (1)
(Increase) in deposits (1)
Increase in accounts payable 256
Increase in accrued expenses and other current liabilities 13,287
- --------------------------------------------------------------------------------------------
Net cash used in operating activities (96)
- --------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of office furniture and equipment - Cash used
in investing activities (44)
- --------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in loan payable 433
(Decrease) in customer advance (80)
Increase due to stockholders 72
- --------------------------------------------------------------------------------------------
Net cash provided by financing activities 425
- --------------------------------------------------------------------------------------------
Net increase in cash 285
Cash - Beginning 6
- --------------------------------------------------------------------------------------------
Cash - Ending $ 291
============================================================================================
See accompanying notes to consolidated financial statements
</TABLE>
F-3
<PAGE>
AMERICAN BUSINESS ALLIANCE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 13, 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Business
American Business Alliance, Inc. is a Pennsylvania-based FCC-licensed
switchless reseller of telecommunications services. It provides long
distance services, mostly to small-to-medium sized businesses located
throughout the United States.
b. Use of Estimates
The presentation 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.
c. Basis of Presentation
The financial statements and related notes thereto as of December 13,
1996 and for the period then ended are presented as unaudited but in
the opinion of management include all adjustments necessary to present
fairly the information set forth therein. These adjustments consist
solely of normal recurring accruals. These interim financial
statements should be read in conjunction with the audited financial
statements for the year ended December 31, 1995. The interim results
are not necessarily indicative of the results for any future periods.
F-4
<PAGE>
Fishbein & Company, P.C.
AMERICAN BUSINESS ALLIANCE, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
AMERICAN BUSINESS ALLIANCE, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995
TABLE OF CONTENTS
-----------------
PAGE
----
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of operations 3
Statements of stockholders' equity deficiency 4
Statements of cash flows 5
Notes to financial statements 6 - 8
<PAGE>
Fishbein & Company, P.C. Elkins Park Square -- Suite 200
8060 Old York Road
Elkins Park, PA 19027-1455
215-635-3100
Fax: 215-635-5788
July 3, 1996
Stockholders and Directors
American Business Alliance, Inc.
Havertown, Pennsylvania
INDEPENDENT AUPITOR'S REPORT
----------------------------
We have audited the accompanying balance sheets of AMERICAN BUSINESS
ALLIANCE, INC. (An S Corporation) as of December 31, 1995 and 1994, and the
related statements of operations, stockholders' equity deficiency 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 audits 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 American Business
Alliance, Inc. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
<PAGE>
Page 2
AMERICAN BUSINESS ALLIANCE, INC.
--------------------------------
BALANCE SHEETS
--------------
ASSETS
------
December 31,
------------
1995 1994
---- ----
CURRENT ASSETS
Cash $ 5,572 $ 221,795
Accounts receivable - Net of allowance for
doubtful accounts of $20,000 - 1995 and
$10,000 - 1994 112,168 5,265
Commissions receivable 62,111 43,883
Prepaid expenses and other current assets 5,595 7,101
----- -----
Total current assets 185,446 278,044
OFFICE FURNITURE AND EQUIPMENT - Net of accumulated
depreciation of $32,658 - 1995 and $4,313 - 1994 44,834 59,238
DEPOSITS 3,424 4,991
----- -----
$ 233,704 $ 342,273
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIENCY
-----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 153,775 $ 178,804
Accrued expenses and other current liabilities 68,605 34,274
Loan payable 250,287 92,777
Customer advance 80,000 300,000
Due to stockholders 270,244 340,883
------- -------
Total current liabilities 822,911 946,738
------------------------- ------- -------
COMMITMENT (Note 5)
STOCKHOLDERS' EQUITY DEFICIENCY
Common stock - No par value
Authorized, issued and outstanding 1,000 shares 1,000 1,000
Deficit ( 590,207) ( 605,465)
---------- - --------
( 589,207) ( 604,465)
---------- - --------
$ 233,704 $ 342,273
========= ==========
See notes to financial statements.
<PAGE>
Page 3
AMERICAN BUSSINESS ALLIANCE, INC.
--------------------------------
STATEMENTS OF OPERATIONS
------------------------
Year Ended December 31,
-----------------------
1995 1994
---- ----
REVENUES
Telecommunications commissions $ 989,287 $ 347,722
Delivery charges 125,198 343,093
Other 3,284 l3,322
----- -----
1,117,769 704,137
DIRECT EXPENSES 68,450 323,289
------ -------
GROSS PROFIT 1,049,319 380,848
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,709,738 693,574
--------- -------
LOSS FROM OPERATIONS ( 660,419) ( 312,726)
GAIN ON SALE OF CUSTOMER BASE - Net of related
expenses of $114,323 675,677
-------- ------- --------
NET INCOME (LOSS) $ 15,758 ($312,726)
========== =========
See notes to financial statements.
<PAGE>
Page 4
AMERICAN BUSINESS ALLIANCE, INC.
--------------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY DEFICIENCY
---------------------------------------------
YEARS ENDED DECEMBER 31, 1995 AND 1994
--------------------------------------
Common
Stock Deficit Total
----- ------- -----
BALANCE - JANUARY 1, 1994 $ 1,000 ($ 292,739) ($ 291,739)
Net loss ( 312,726) ( 312,726)
---------- ---------- ----------
BALANCE - DECEMBER 31, 1994 1,000 ( 605,465) ( 604,465)
Net income 15,258 15,258
---------- ---------- ----------
BALANCE - DECEMBER 31, 1995 $ 1,000 ($ 590,207) ($ 589,207)
======== ========== ==========
See notes to financial statements.
<PAGE>
Page 5
AMERICAN BUSINESS ALLIANCE, INC.
--------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Increase (Decrease) in Cash
Year Ended December 31,
-----------------------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 15,258 ($ 312,776)
Adjustments to reconcile net income (loss) to net
cash used in operating activities
Depreciation 28,345 4,098
(Increase) decrease in accounts receivable ( 106,903) 52,810
Increase in commissions receivable ( 18,228) ( 29,063)
(Increase) decrease in prepaid expenses and
other current assets 1,506 ( 817)
(Increase) decrease in deposits 1,567 ( 3,591)
Increase (decrease) in accounts payable ( 25,029) 98,281
Increase in accrued expenses and other current
liabilities 34,331 23,283
------ ------
Net cash used in operating activities ( 69,153) ( 167,725)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of office furniture and equipment - Cash
used in investing activities ( 13,941) ( 60,682)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in loan payable 157,510 ( 92,777)
Increase (decrease) in customer advance ( 220,000) 300,000
Increase (decrease) in due to stockholders ( 70,639) 47,805
---------- ---------
Net cash provided by (used in) financing
activities ( 133,129) 440,582
---------- ---------
NET INCREASE (DECREASE) IN CASH ( 216,223) 212,175
CASH BEGINNING 22l,795 9,620
---------- ---------
CASH ENDING $ 5,572 $ 221,795
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 4,214 $ 344
See notes to financial statements.
<PAGE>
Page 6
AMERICAN BUSINESS ALLIANCE, INC.
--------------------------------
NOTES TO FINANCIAL STATEMEMTS
-----------------------------
DECEMBER 31, 1995
-----------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Business
American Business Alliance, Inc. is a Pennsylvania-based FCC-licensed
switchless reseller of telecommunications services. It provides long
distance services, mostly to small-to-medium sized businesses located
throughout the United States.
b. Use of Estimates
The presentation 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.
c. Cash
The Company places its temporary cash investments with high credit
quality financial institutions. At times such investments may be in
excess of the FDIC insurance limit of $100,000.
d. Office Furniture and Equipment and Depreciation
Office furniture and equipment is stated at cost. Depreciation is
provided using the declining balance method over the estimated useful
lives of the assets. Expenditures for additions, renewals and
betterments are capitalized; expenditures for maintenance and repairs
are charged to expense as incurred. Upon retirement or disposal of
assets, the cost and accumulated depreciation are eliminated from the
accounts and the resulting gain or loss is credited or charged to
operations.
e. Income Taxes
The Company has elected to be an S Corporation under the provisions
of the Internal Revenue Code and the Pennsylvania S Corporation
Statute. As a result, income and losses of the Company are passed
through to its stockholders for federal and state income tax
purposes.
<PAGE>
Page 7
AMERICAN BUSINESS ALLIANCE, INC.
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995
-----------------
2. LOAN PAYABLE
Under the terms of a commission advance agreement, the service provider
makes advances to the Company based on an estimate of future commissions.
The advances bear interest at prime plus 2% (an effective rate of 10.25%
at December 31, 1995). Loan payments are due based on commissions received
on each new account. If commissions received are not adequate to repay the
loan within seven months, any remaining balance is due.
3. DUE TO STOCKHOLDERS
The balances are due on demand and are noninterest-bearing.
4. SALE OF CUSTOMER BASE
During the year ended December 31, 1995, the Company sold a portion of its
customer base, but will continue to act as an agent for the purchaser and
receive commissions for services performed.
5. LEASE COMMITMENT AND RENT EXPENSE
The Company leases its facilities under a noncancelable operating lease
expiring in September, 1998. The following is a schedule of future minimum
rental payments required under this lease:
Year Ending December 31,
------------------------
1996 $ 20,130
1997 21,137
1998 14,553
---- ------
$ 55,820
========
Rent expense under all operating leases aggregated $38,146 and $20,147 for
the years ended December 31, 1995 and 1994, respectively.
<PAGE>
Page 8
AMERICAN BUSINESS ALLIANCE, INC.
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995
-----------------
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of estimated
fair value of all financial instruments for which it is practicable to
estimate fair value.
The carrying amount of cash approximates its fair value because of its
short maturity.
The carrying amount of the loan payable approximates its fair value
because the interest rate on this obligation floats with market rates,
It was not deemed practicable to estimate the fair value of the amounts
due to stockholders since these financial instruments are not readily
marketable.
<PAGE>
TEL-SAVE HOLDINGS, INC. AND
AMERICAN BUSINESS ALLIANCE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On December 13, 1996, American Business Alliance, Inc. ("ABA"), which
is an independent long distance and marketing company that pursuant to a
Partition Agreement ("Partition Agreement") with Tel-Save Holdings, Inc.
("Tel-Save" or the "Company") purchased or otherwise provided end -users the
long distance services provided by Tel-Save, agreed to sell, assign, convey and
transfer to Tel-Save substantially all of the assets of ABA, which consist
primarily of ABA's long distance marketing, operations and end-user servicing
systems, its third party contracts for offering long distance services, end-user
serving systems, related contracts, certain end-users and customers provisioned
by Tel-Save pursuant to the Partition Agreement (collectively, the "Customers"),
all contracts or other agreements entered into between ABA and the Customers
(the "Customer Agreements"), accounts receivable arising in connection with the
Customer Agreements; cash or cash equivalents, certain computer equipment and
software, a real property lease and certain other assets of ABA designated by
Tel-Save (collectively, the "Assets"). In consideration of ABA's agreement to
sell, assign and transfer the Assets to Tel-Save, Tel-Save paid ABA an aggregate
of $9.45 million on December 13, 1996, agreed to assume certain designated
liabilities of ABA and to release ABA from its outstanding obligations to make
payments of $10,949,000 to Tel-Save for telecommunication services or previous
advances made to ABA pursuant to the Partition Agreement.
The acquisition has been accounted for as a purchase, with the assets
acquired and liabilities assumed recorded at fair values, and the results of
ABA's operations included in the Company's consolidated financial statements
from the date of acquisition.
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effect of the acquisition on the Company's financial
position and results of operations. The condensed consolidated balance sheet as
of December 31, 1996 is based on the historical balance sheets of the Company as
of that date and ABA as of December 13, 1996 and assumes the acquisition took
place on that date. The unaudited pro forma condensed consolidated statements of
income for the years ended December 31, 1996 and 1995 assumes the acquisition
took place on at the beginning of the periods.
The unaudited pro forma condensed consolidated financial statements
have been included as required by the rules of the SEC and are provided for
comparative purposes only. The pro forma statements do not purport to be
indicative of the results which would have been obtained if the acquisitions had
been effected on the date or dates indicated or which may be obtained in the
future. The unaudited pro forma consolidated financial statements are based on
management's current estimate of the allocation of the purchase price, the
actual allocation of which may differ.
The accompanying unaudited pro forma condensed consolidated financial
statements should be read in connection with the respective historical financial
statements of the Company and those of ABA which are contained elsewhere herein.
PF-1
<PAGE>
TEL-SAVE HOLDINGS, INC. AND AMERICAN BUSINESS ALLIANCE, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1996
(Unaudited)
(In thousands, except for share data)
<TABLE>
<CAPTION>
PRO FORMA
TEL-SAVE ABA ADJUSTMENTS(1) PRO FORMA
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
CURRENT:
Cash and cash equivalents $ 8,023 $ 291 $ (291) $ 8,023
Marketable securities 149,237 -- -- 149,237
Accounts receivable 19,971 515 (515) 19,971
Advances to partitions and note
receivables 13,410 -- -- 13,410
Due from broker 867 -- -- 867
Prepaid expenses and other current assets 10,764 10 (10) 10,764
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 202,272 816 (816) 202,272
Property and equipment 30,097 72 (72) 30,097
Intangibles 20,715 -- -- 20,715
Other assets 3,924 -- -- 3,924
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 257,008 $ 888 $ (888) $ 257,008
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 25,421 $ 430 $ (430) $ 5,421
Securities sold short, at cost to purchase 867 -- -- 867
Other current liabilities -- 14,360 (14,360) --
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 26,288 14,790 (14,790) 26,288
- --------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock -- -- -- --
Common stock 311 1 (1) 311
Additional paid-in capital 210,926 -- -- 210,926
Retained earnings (deficit) 24,043 (13,903) 13,903 24,043
Treasury stock (4,560) -- -- (4,560)
- --------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 230,720 (13,902) 13,902 230,720
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 257,008 $ 888 $ (888) $ 257,008
====================================================================================================================
See accompanying notes to pro forma financial statements.
</TABLE>
PF-2
<PAGE>
TEL-SAVE HOLDINGS, INC. AND
AMERICAN BUSINESS ALLIANCE, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1996
(Unaudited)
(In thousands, except for per share data)
<TABLE>
<CAPTION>
PRO FORMA
TEL-SAVE ABA ADJUSTMENTS PRO FORMA
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $232,424 $ 3,029 $ (2,386)(2) $233,067
Cost of sales 200,597 13,556 (3,012)(3)(3,362)(4) 207,779
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 31,827 (10,527) 3,988 25,288
Selling, general and administrative 10,039 2,796 459(5) 13,294
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 21,788 (13,323) 3,529 11,994
Other income, net 10,585 9 (473)(6) 10,121
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes 32,373 (13,314) 3,056 22,115
Provision for income taxes 12,205 -- (3,868)(7) 8,337
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 20,168 $(13,314) $ 6,924 $ 13,778
==================================================================================================================================
Net income per share - Primary $ .35 $ .24
==================================================================================================================================
Weighted average common and
common equivalent shares outstanding - Primary 57,002 57,002
==================================================================================================================================
Net income per share - Fully
Diluted $ .35 $ .24
==================================================================================================================================
Weighted average common and
common equivalent
shares outstanding - Fully Diluted 58,027 58,027
==================================================================================================================================
See accompanying notes to pro forma financial statements.
</TABLE>
PF-3
<PAGE>
TEL-SAVE HOLDINGS, INC. AND
AMERICAN BUSINESS ALLIANCE, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (In thousands, except for per share
data) December 31,1995
<TABLE>
<CAPTION>
TEL-SAVE ABA ADJUSTMENTS PRO FORMA
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $180,102 $ 1,118 $ -- $181,220
Cost of sales 156,121 69 -- 156,190
- ----------------------------------------------------------------------------------------------------
Gross profit 23,981 1,049 -- 25,030
Selling, general and administrative 6,280 1,709 459(5) 8,448
- ----------------------------------------------------------------------------------------------------
Operating income 17,701 (660) (459) 16,582
Other income, net 331 675 (473)(6) 533
- ----------------------------------------------------------------------------------------------------
Income before provision for income taxes 18,032 15 (932) 17,115
Pro forma provision for income taxes 7,213 -- (367)(7) 6,846
- ----------------------------------------------------------------------------------------------------
Pro forma net income $ 10,819 $ 15 $ (565) $ 10,269
====================================================================================================
Net income per share $ .32 $ .31
====================================================================================================
Weighted average common and common equivalent
shares outstanding 33,606 33,606
====================================================================================================
See accompanying notes to pro forma financial statements.
</TABLE>
PF-4
<PAGE>
TEL-SAVE HOLDINGS, INC. AND
AMERICAN BUSINESS ALLIANCE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
UNAUDITED
December 31, 1995 and 1996
Note A
- ------
Since the consolidated balance sheet of Tel-Save Holdings, Inc. as of December
31, 1996 already includes the net assets of American Business Alliance, Inc.,
the pro forma adjustments to the unaudited pro forma condensed consolidated
balance sheet eliminates ABA's balance sheet.
The components of the purchase price of the net assets of ABA and the
allocation of the purchase price are as follows:
Components of Purchase Price:
Cash Payment $ 9,450
Liabilities assumed, net of cash transferred 970
Forgiveness of advances from Tel-Save 10,949
---------
21,369
Allocation of Purchase Price:
Deferred Customer Acquisition Costs (3,362)
---------
Goodwill $ 18,607
=========
PF-5
<PAGE>
TEL-SAVE HOLDINGS, INC. AND
AMERICAN BUSINESS ALLIANCE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
UNAUDITED
December 31, 1995 and 1996
Note B
- ------
The pro forma adjustments to the unaudited pro forma condensed
consolidated statements of income are as follows:
<TABLE>
<CAPTION>
December 31, December 1,
1996 1995
----------- ------------
<S> <C> <C>
(2) Adjustments to Revenues:
Elimination of intercompany revenues $2,386 -
(3) Adjustments to Cost of Sales:
Elimination of intercompany cost of sales $3,012 -
(4) Adjustment to Cost of Sales:
Prior to acquisition, ABA's policy was to
expense all marketing costs as incurred.
Tel-Save's policy is to capitalize direct
marketing costs and amortize them over a
period of six months
Capitalization of Deferred Customer
Acquisition Costs $3,362 -
(5) Adjustment to SG&A:
Amortization of goodwill $ 459 $ 459
(6) Adjustment to Other Income:
Interest at 5% on cash portion of acquisit-
ion price $ 473 $ 473
(7) To reduce tax for utilization of ABA's
current operating loss. $3,868 $ 367
</TABLE>
PF-6
