UNITED STATES
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
Date of Report (Date of earliest event reported) April 28, 2000
(February 17, 2000)
Alternate Marketing Networks, Inc.
______________________________________________________________________________
(Exact name of registration as specified in its charter)
Michigan 0-26624 38-2841197
______________________________________________________________________________
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
One Ionia, S.W., Suite 300, Grand Rapids, MI 49503
______________________________________________________________________________
(Address of principal executive offices)
Registrant's telephone number, including area code 616-235-0698
Not applicable
______________________________________________________________________________
(Former name or former address, if changed since last report)
Item 1. Not Applicable.
Item 2. Acquisition or Disposition of Assets.
1. Acquired certain assets of Total Logistics, Inc. on
February 17, 2000.
2. Assets acquired consist of furniture, fixtures and equipment, and
intellectual property rights. Furniture, fixtures and equipment
will continue to be used for logistics planning, tracking, and
transportation brokering.
3. Amount of consideration was $800,000.00 in cash and 40,816 shares
of the Company's Common Stock. Additionally, there is contingent
consideration of a maximum of $900,000 in cash if certain profit
levels are achieved at the end of a three year period.
4. The source of funds used for the cash portion of the purchase
price was cash on hand at the Company.
Item 3. Not Applicable.
Item 4. Not Applicable.
Item 5. Not Applicable.
Item 6. Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. Financial Statements of Business Acquired.
1. Total Logistics, Inc. audited financial statements for the
year ended December 31, 1999.
b. Pro Forma Financial Information.
1. Alternate Marketing Networks, Inc. and Subsidiaries
Pro Forma Condensed Combined Balance Sheet (Unaudited) as
of December 31, 1999 and Pro Forma Condensed Combined
Statement of Income (Unaudited) for the year ended
December 31, 1999.
2. Alternate Marketing Networks, Inc. and Subsidiaries Notes
to Pro Forma Condensed Combined Financial Statements
(Unaudited).
Item 8. Not Applicable.
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.
ALTERNATE MARKETING NETWORKS, INC.
Date: April 28, 2000 By /s/ Sandra J. Smith
Sandra J. Smith
Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of
Total Logistics, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, shareholder's equity and cash flows present fairly, in all material
respects, the financial position of Total Logistics, Inc.(the "Company") at
December 31, 1999, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally
accepted in the United States. 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 audit. We conducted our
audit of these statements in accordance with auditing standards generally
accepted in the United States, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Grand Rapids, Michigan
April 19, 2000
Total Logistics, Inc.
BALANCE SHEET
December 31, 1999
ASSETS
<TABLE>
<CAPTION>
Current assets:
<S> <C>
Cash $ 78,693
Accounts receivable 291,068
Loan to shareholder 150,000
Prepaid expenses 999
------------
Total current assets 520,760
Property and equipment:
Furniture, fixtures and equipment 8,165
Accumulated depreciation ( 1,401)
------------
6,764
Other assets 500
------------
$ 528,024
============
LIABILITIES
Current liabilities:
Accounts payable $ 408,874
Other liabilities 49,903
------------
Total current liabilities 458,777
Commitments and contingencies
SHAREHOLDER'S EQUITY
Common Stock-no par value, 10,000 shares
authorized, issued and outstanding 28,461
Retained earnings 40,786
------------
Total shareholder's equity 69,247
------------
$ 528,024
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Total Logistics, Inc.
STATEMENT OF INCOME
for the year ended December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Net sales $ 1,945,488
Cost of sales 909,814
-----------
Gross profit 1,035,674
Selling, general and
administrative expenses 707,577
-----------
Income from operations 328,097
Other income, net 2,133
-----------
Income before income taxes 330,230
Income tax expense 9,750
-----------
Net income $ 320,480
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Total Logistics, Inc.
STATEMENT OF SHAREHOLDER'S EQUITY
for the year ended December 31, 1999
<TABLE>
<CAPTION>
Total
Proprietor's Common Retained Shareholder's
Capital Stock Earnings Equity
------------ -------- ----------- -------------
Balance, January 1,
<S> <C> <C> <C> <C>
1999 $18,461 $ 18,461
Reclassification ($18,461) $ 18,461
Issuance of common
stock 10,000 10,000
Net income $ 320,480 320,480
Distribution to
shareholder ( 279,694) ( 279,694)
---------- --------- --------- ---------
Balances, December 31,
1999 - $ 28,461 $ 40,786 $ 69,247
=========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Total Logistics, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended December 31, 1999
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net income $ 320,480
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,401
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable ( 273,914)
Prepaid and other assets ( 1,499)
(Decrease) increase in:
Accounts payable 405,571
Accrued liabilities 49,903
------------
Net cash provided by
operating activities 501,942
------------
Cash flows from investing activities:
Purchases of property and equipment ( 8,165)
------------
Net cash used in
investing activities ( 8,165)
------------
Cash flows from financing activities:
Issuance of common stock 10,000
Cash distribution to shareholder ( 279,694)
Loan to shareholder ( 150,000)
------------
Net cash used in
financing activities ( 419,694)
------------
Net increase in cash 74,083
Cash, beginning of year 4,610
------------
Cash, end of year $ 78,693
============
Supplemental Disclosure of Cash Flow
Information:
Interest paid $ 373
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Total Logistics, Inc.
NOTES TO FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies:
The following is a summary of significant accounting policies followed in
the preparation of the financial statements.
Business
Total Logistics, Inc. ("The Company") is a logistics consulting and
transportation brokering company that provides its services throughout the
United States. The Company was operated as a sole proprietorship until
February 10, 1999, when the Company was incorporated and issued common stock.
Revenue Recognition
Revenues for transportation logistics are recognized at the time that the
load is shipped.
During the year ended December 31, 1999, the Company had one customer
which accounted for approximately 50 percent of the Company's revenues and
another which accounted for approximately 34 percent of the Company's
revenues.
Property and Equipment
Property and equipment are recorded at cost. Upon sale or retirement,
the cost and related accumulated depreciation are eliminated from the
respective accounts and the resulting gain or loss is included in operations.
Maintenance and repairs which do not improve or extend the lives of the
respective assets are charged to expense as incurred.
Depreciation is computed over the estimated useful lives of the assets
using the straight-line method:
Computer equipment 3 years
Furniture and fixtures 5 to 7 years
Income taxes
Prior to February 10, 1999 the Company was operated as a sole
proprietorship whereby the activities were reported as a schedule on the
owner's individual federal income tax return. Subsequent to February 10,
1999, the Company has elected to file as an S Corporation, whereby income or
loss is included in the federal income tax return of the shareholder. The
Company did not make any federal income tax payments in 1999.
Estimates
The preparation of these 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 year.
Actual results could differ from those estimates.
Total Logistics, Inc.
NOTES TO FINANCIAL STATEMENTS, Continued
B. Retirement Plan:
The Company has a retirement plan consisting of a Defined Contribution
Money Purchase Pension Plan and a Defined Contribution Profit-Sharing Plan.
During 1999, the Company contributed $1,500 to the Defined Contribution Money
Purchase Pension Plan and $6,000 to the Defined Contribution Profit-Sharing
Plan.
C. Financing:
The Company has a bank line of credit agreement, providing for borrowings
not to exceed $50,000. The agreement, which expires June 10, 2000, bears
interest payable monthly at two percent over the bank's prime rate (8.5% at
December 31, 1999). The agreement is collateralized with a personal guarantee
from the Company's shareholder. There were no outstanding borrowings at
December 31, 1999.
D. Leases:
The Company leases a certain office facility in its operations. Future
minimum rental payments required under leases that have initial or remaining
terms in excess of one year at December 31, 1999 are as follows:
Year
2000 $ 7,800
---------
$ 7,800
=========
Rental expense for the facility for the year ended December 31, 1999 was
approximately $8,540.
E. Other Income, net:
Other income, net consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Rental income $ 2,506
Interest expense ( 373)
-----------
$ 2,133
===========
</TABLE>
F. Related Party Transactions:
During the year ended December 31, 1999 the Company had transactions with
a company in which the shareholder of the Company has a twenty-five percent
ownership interest. Payments were made to this related party during 1999 for
transportation brokering services for approximately $770,000 and payments were
received for services provided during 1999 for approximately $15,000.
Total Logistics, Inc.
NOTES TO FINANCIAL STATEMENTS, Continued
G. Subsequent Events:
In February 2000, the Company sold fixed assets and operations to
Alternate Marketing Networks, Inc. for a purchase price of approximately
$900,000 consisting of $800,000 cash and 40,816 shares of the buyer's common
stock. The purchase agreement provides for contingent consideration of a
maximum of $900,000 cash if certain cumulative profit levels are achieved over
a three year period.
ALTERNATE MARKETING NETWORKS, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma consolidated financial statements give effect
to the purchase by Alternate Marketing Networks, Inc. (the "Company") of Total
Logistics, Inc. ("TLI"). Pro forma adjustments related to the pro forma
consolidated balance sheet have been determined assuming the combination was
consummated on December 31, 1999. The pro forma consolidated balance sheet
combines the Company's consolidated balance sheet as of December 31, 1999 with
TLI's balance sheet as of December 31, 1999. The pro forma consolidated
statement of income combines the companies' respective statement of income as
if the combination had occurred on January 1, 1999. The pro forma consolidated
statement of income is not necessarily indicative of operating results that
would have been achieved had the combination been consummated as of the
beginning of the period presented and should not be construed as representative
of future operations. These pro forma consolidated financial statements should
be read in conjunction with the historical consolidated financial statements
and the related notes thereto of Alternate Marketing Networks, Inc., which are
included in the Company's Annual Report on Form 10-KSB, and the historical
financial statements and the related notes thereto of TLI included herein.
Alternate Marketing Networks, Inc. and Subsidiaries
Pro Forma Financial Statements
For the year ended December 31, 1999
<TABLE>
<CAPTION>
Balance Sheet
Alternate Total Adjustments Combined
Marketing Networks Logistics Total
Assets
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $1,180,472 $78,693 $(78,693) $380,472
(800,000)
Accounts receivable 4,479,290 291,068 (291,068) 4,479,290
Loans to shareholder 150,000 (150,000) 0
Prepaid expenses 584,038 999 (999) 584,038
_________ _______ _________ ________
Total current assets 6,243,800 520,760 (1,320,760) 5,443,800
Note receivable 13,974 13,974
Property and equipment, net 208,077 6,764 (6,764) 212,577
4,500
Computer software, net 150,300 150,300
Other noncurrent assets 500 (500) 0
Intangible assets, net 971,446 946,800 1,918,246
_________ _______ _________ ________
Total Assets $7,587,597 $528,024 $(376,724) $7,738,897
========= ======== ========= ========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $1,366,347 $408,874 $(408,874) $1,366,347
Accrued liabilities 545,383 49,903 (49,903) 596,683
51,300
Deferred revenue 264,342 264,342
_________ _______ _________ ________
Total current liabilities 2,176,072 458,777 (407,477) 2,227,372
Shareholders Equity
Common stock 10,393,561 28,461 (28,461) 10,493,561
100,000
Accumulated losses (1,291,039) (1,291,039)
(through 9/30/93) _________ _______ _________ _________
Total Common Stock 9,102,522 28,461 71,539 9,202,522
Retained earnings 40,786 (40,786) 0
Accumulated losses (3,690,997) (3,690,997)
(since 10/1/93) _________ _______ _________ _________
Total Shareholders Equity 5,411,525 69,247 30,753 5,511,525
_________ _______ _________ _________
Total Liabilities and $7,587,597 $528,024 $(376,724) $7,738,897
Shareholders Equity ========= ======== ========= =========
</TABLE>
Alternate Marketing Networks, Inc. and Subsidiaries
Pro Forma Financial Statements
For the year ended December 31, 1999
<TABLE>
<CAPTION>
Statement of Income Alternate Total Adjustments Combined
Marketing Networks Logistics Total
<S> <C> <C> <C> <C>
Net sales $28,576,334 $1,945,488 $30,521,822
Cost of sales 21,707,261 909,814 22,617,075
__________ _________ __________ __________
Gross profit 6,869,073 1,035,674 - 7,904,747
Selling, general 5,860,692 707,577 47,340 a 6,583,609
and admin expenses (500)b
(31,500)c
__________ _________ __________ __________
Income from operations 1,008,381 328,097 (15,340) 1,321,138
Other income, net 40,794 2,133 42,927
__________ _________ __________ __________
Income before income taxes 1,049,175 330,230 (15,340) 1,364,065
Income tax expense 1,404 9,750 11,154
__________ _________ __________ __________
Net income $1,047,771 $320,480 $(15,340) $1,352,911
========== ========= ========== ==========
Basic earnings per share $0.27 $32.05 $0.34
========== ========= ==========
Diluted earnings per share $0.27 $32.05 $0.34
========== ========= ==========
Basic weighted average shares
outstanding 3,910,162 10,000 3,950,978
========== ========= =========
Diluted weighted average shares
outstanding 3,934,586 10,000 3,975,402
========== ========= =========
</TABLE>
ALTERNATE MARKETING NETWORKS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. General
The pro forma consolidated balance sheet reflects the purchase by Alternate
Marketing Networks, Inc. (the "Company") on February 17, 2000 of certain fixed
assets, valued at $4,500 and operations of Total Logistics, Inc. ("TLI"), a
logistics planning and transportation brokering company for $800,000 cash and
40,816 shares of the Company's common stock. The purchase agreement provides
for contingent consideration of a maximum of $900,000 cash if certain profit
levels are achieved at the end of a three year period. The total purchase price
for the transaction was $951,300, including $51,300 in direct acquisition
costs. The excess of the purchase price over the fair value of fixed assets
acquired has been allocated to goodwill.
2. Computation of Earnings Per Share
Basic income per share is determined by dividing the net income by the weighted
average number of shares of common stock outstanding. Diluted income per share
is determined by dividing the net income by the weighted average number of
shares of common stock outstanding while giving effect to all dilutive
potential common shares. Shares of common stock issued in the acquisition of
TLI were assumed to have been issued on January 1, 1999.
3. Pro Forma Combined Financial Data Compared to Historical Data
Pro forma adjustments related to the pro forma consolidated balance sheet have
been determined assuming the combination was consummated at December 31, 1999.
The cost of TLI was allocated to the fair market value of identifiable assets
acquired, and the excess was recorded as goodwill. The Company acquired only
fixed assets with a fair value of $4,500. As such, pro forma adjustments to
the balance sheet eliminate all assets, liabilities and equity accounts from
the historical balance sheet of TLI, except the fair value of fixed assets
acquired. Pro forma adjustments to the balance sheet reflect the related
increase in fixed assets and intangible assets and the issuance of cash and
common stock by the Company in connection with the purchase of TLI.
Pro forma adjustments related to the pro forma combined statement of income are
determined assuming the combination was consummated at the beginning of 1999.
The pro forma combined results of operations vary from the combined historical
results of the Company and TLI and are due to the following:
(a)Amortization expense reflects the amortization of goodwill which would
have resulted had the combination occurred at the beginning of 1999. Goodwill
has been amortized over a period of twenty years.
(b)Depreciation expense reflects the depreciation of assets acquired,
determined as if the combination had taken place at the beginning of the
period.
(c)Pro forma adjustments to selling, general and administrative expenses
reflect actions pursuant to the asset purchase agreement, including the
addition of costs resulting from a related consulting agreement, the related
reduction in executive salaries and administrative expenses arising from such
consulting agreement and the termination of previous contractual arrangements.
4. Income Taxes
The difference between the statutory tax rate and the effective tax rate of the
pro forma combined statement of income is due to the utilization of net
operating loss carryforwards which had previously been fully reserved based on
management's assessment of the realizability of deferred tax assets in future
periods.
