UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 28, 2006
Host America Corporation |
| (Exact name of registrant as specified in its charter) |
Colorado | | 0-16196 | | 06-1168423 |
(State or other jurisdiction of incorporation) | | Commission File Number | | IRS Employer Identification Number |
| |
Two Broadway Hamden, Connecticut | | 06518 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant's telephone number, including area code: (203) 248-4100 |
Not Applicable |
| (Former name or former address if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-14(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 8 - Other Events
Item 8.01 Other Events
This Report discloses the restatement of our 2004 financial results, as referenced in our recently filed 2005 Annual Report on Form 10-K filed September 14, 2006.
2004 Restatement
On May 2, 2006, Host was notified of the resignation of its independent registered public accounting firm, J.H. Cohn LLP, effective that date. No report of J.H. Cohn LLP on the financial statements of the Company for the fiscal year ended June 30, 2004 contained an adverse opinion or a disclaimer of opinion or was qualified or modified as to uncertainty, audit scope, or accounting principles. J.H. Cohn LLP, at the time of resignation, had not yet released a report or opinion regarding the Company’s financial statements for the fiscal year ended June 30, 2005. Further, J.H. Cohn LLP advised that its report on the 2004 consolidated financial statements of the Company dated September 7, 2004 may no longer be relied upon.
As a result of this, the Company’s 2004 financial statements have been re-audited, which resulted in a restatement, whereby the Company’s net loss increased by $7,941,576, assets decreased by $5,962,964 and stockholders’ equity decreased by $7,033,818.
The re-audit resulted in corrections of errors and changes in previous accounting estimates. The major adjustments to the previously issued financial statements are i) the allocation and valuation of the purchase price of the acquisitions transacted in fiscal 2005 and in fiscal 2004, ii) with respect to the Laurus transaction and the reclassification of the warrant liability pursuant to EITF No. 00-19, iii) with respect to the 2004 preferred stock dividend beneficial conversion adjustment, and iv) with respect to the re-audit of fiscal 2004 resulting from the resignation of our prior independent public accounting firm.
The impact of the adjustments are summarized below. The foregoing adjustments do not affect the fiscal 2003 financial statements. The following tables reconcile the previously reported amounts to the restated 2004 amounts, which summarize the restatement amounts and the reclassification of discontinued operations of SelectForce.
HOST AMERICA CORPORATION RESTATED CONSOLIDATED BALANCE SHEET JUNE 30, 2004 |
| | | As Previously Reported June 30, 2004 | | Discontinued Operations Reclassifications | | Restatement Adjustment June 30, 2004 | | As Restated June 30, 2004 | |
ASSETS | | | | | | | | | |
| CURRENT ASSETS | | | | | | | | | | | | | |
Cash | | $ | 3,891,201 | | $ | (124,143 | ) | $ | 108,854 | | $ | 3,875,912 | |
Restricted Cash | | | - | | | - | | | 2,370,000 | | | 2,370,000 | |
Accounts receivable, net of allowance for doubtful accounts of $23,000 | | | 2,902,835 | | | (243,048 | ) | | 49,290 | | | 2,709,077 | |
Inventories | | | 1,055,865 | | | - | | | (357,929 | ) | | 697,936 | |
Note receivable - related party | | | 125,000 | | | - | | | (125,000 | ) | | - | |
Prepaid expenses and other current assets | | | 178,257 | | | (660 | ) | | (51,498 | ) | | 126,099 | |
Assets of discontinued operation held for disposition | | | - | | | 1,814,355 | | | (491,555 | ) | | 1,322,800 | |
Total current assets | | | 8,153,158 | | | 1,446,504 | | | 1,502,162 | | | 11,101,824 | |
| | | | | | | | | | | | | | |
| EQUIPMENT AND IMPROVEMENTS, net | | | 1,106,863 | | | (10,592 | ) | | (147,734 | ) | | 948,537 | |
| | | | | | | | | | | | | | |
| OTHER ASSETS | | | | | | | | | | | | | |
Other | | | 179,947 | | | (2,994 | ) | | (43,500 | ) | | 133,453 | |
Cash - restricted | | | 4,000,000 | | | - | | | (2,370,000 | ) | | 1,630,000 | |
Deferred financing costs, net | | | 1,895,110 | | | - | | | (17,731 | ) | | 1,877,379 | |
Intangible assets, net | | | 1,038,279 | | | (130,956 | ) | | (907,323 | ) | | - | |
Goodwill, net | | | 5,280,800 | | | (1,301,962 | ) | | (3,978,838 | ) | | - | |
| | | | 12,394,136 | | | (1,435,912 | ) | | (7,317,392 | ) | | 3,640,832 | |
| Total Assets | | $ | 21,654,157 | | $ | - | | $ | (5,962,964 | ) | $ | 15,691,193 | |
| | | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | | | | | | |
Current portion of long-term debt | | $ | 1,136,849 | | $ | - | | $ | (25,806 | ) | $ | 1,111,043 | |
Accounts payable | | | 2,436,869 | | | (95,251 | ) | | 156,660 | | | 2,498,278 | |
Accrued expenses | | | 681,370 | | | (16,240 | ) | | (40 | ) | | 665,090 | |
Liabilities of discontinued operation to be settled | | | - | | | 111,491 | | | - | | | 111,491 | |
Total current liabilities | | | 4,255,088 | | | - | | | 130,814 | | | 4,385,902 | |
| | | | | | | | | | | | | | |
| LONG-TERM LIABILITIES | | | | | | | | | | | | | |
Long-term debt, less current portion | | | 5,523,836 | | | - | | | (570,397 | ) | | 4,953,439 | |
Subordinated debt | | | 2,928,390 | | | - | | | (493,702 | ) | | 2,434,688 | |
Warrant Liability | | | - | | | - | | | 2,004,139 | | | 2,004,139 | |
| | | | 8,452,226 | | | - | | | 940,049 | | | 9,392,266 | |
Total liabilities | | | 12,707,314 | | | - | | | 1,070,854 | | | 13,778,168 | |
| | | | | | | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | | | | | | |
Preferred stock, $.001 par value, 2,000,000 shares authorized | | | - | | | - | | | - | | | - | |
Preferred stock, Series B, $.001 par value, 266,667 shares issued and outstanding | | | 267 | | | - | | | - | | | 267 | |
Common stock, $.001 par value, 80,000,000 shares authorized; 4,056,991 issued and outstanding | | | 4,118 | | | - | | | (61 | ) | | 4,057 | |
Additional paid-in capital | | | 20,149,518 | | | - | | | 774,485 | | | 20,924,003 | |
Accumulated deficit | | | (11,207,060 | ) | | - | | | (7,808,242 | ) | | (19,015,302 | ) |
Total stockholders' equity | | | 8,946,843 | | | - | | | (7,033,818 | ) | | 1,913,025 | |
| Total Liabilities and Stockholders’ Equity | | $ | 21,654,157 | | $ | - | | $ | (5,962,964 | ) | $ | 15,691,193 | |
HOST AMERICA CORPORATION RESTATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2004 |
| | | | | | | | | | |
| | | As Previously Reported June 30, 2004 | | Discontinued Operations Reclassifications | | Restatement Adjustment June 30, 2004 | | As Restated June 30, 2004 | |
| | | | | | | | | | |
| NET REVENUES | | $ | 26,827,497 | | $ | (1,892,190 | ) | $ | - | | $ | 24,935,307 | |
| | | | | | | | | | | | | | |
| OPERATING COSTS AND EXPENSES: | | | | | | | | | | | | | |
Cost of revenues | | | 22,509,072 | | | (1,328,786 | ) | | 349,434 | | | 21,529,720 | |
Selling, general and administrative expenses | | | 4,765,723 | | | (355,521 | ) | | 151,441 | | | 4,561,643 | |
Acquired in process research and development costs | | | 3,431,381 | | | - | | | (3,431,381 | ) | | - | |
Depreciation and amortization | | | 393,505 | | | (33,417 | ) | | 147,734 | | | 507,822 | |
Research and development costs | | | 101,880 | | | - | | | - | | | 101,880 | |
Goodwill impairment charges | | | - | | | - | | | 8,658,719 | | | 8,658,719 | |
Intangible impairment charges | | | - | | | - | | | 907,323 | | | 907,323 | |
| | | | 31,201,561 | | | (1,717,724 | ) | | 6,783,270 | | | 36,267,107 | |
| | | | | | | | | | | | | | |
Loss from operations | | | (4,374,064 | ) | | (174,466 | ) | | (6,783,270 | ) | | (11,331,800 | ) |
| | | | | | | | | | | | | | |
| OTHER INCOME (EXPENSE) | | | | | | | | | | | | | |
Fair value loss on warrant | | | - | | | - | | | (552,103 | ) | | (552,103 | ) |
Other income (expense) | | | 10,235 | | | 16,092 | | | - | | | 26,327 | |
Amortization of deferred financing costs | | | (39,994 | ) | | - | | | (18,654 | ) | | (58,648 | ) |
Amortization of debt discount | | | (107,991 | ) | | - | | | (61,670 | ) | | (169,661 | ) |
Interest expense | | | (371,503 | ) | | - | | | (4,324 | ) | | (375,827 | ) |
| | | | (509,253 | ) | | 16,092 | | | (636,751 | ) | | (1,129,912 | ) |
| | | | | | | | | | | | | | |
Loss from continuing operations before provision for income taxes | | | (4,883,317 | ) | | (158,374 | ) | | (7,420,021 | ) | | (12,461,712 | ) |
Provision for income taxes | | | (36,000 | ) | | 11,000 | | | (30,000 | ) | | (55,000 | ) |
Loss from continuing operations | | | (4,919,317 | ) | | (147,374 | ) | | (7,450,021 | ) | | (12,516,712 | ) |
| | | | | | | | | | | | | | |
Income from discontinued operations | | | - | | | 147,374 | | | - | | | 147,374 | |
Impairment charge of discontinued operations | | | - | | | - | | | (491,555 | ) | | (491,555 | ) |
Income (loss) from discontinued operations | | | - | | | 147,374 | | | (491,555 | ) | | (344,181 | ) |
Net loss | | | (4,919,317 | ) | | - | | | (7,941,576 | ) | | (12,860,893 | ) |
Preferred stock dividends, including charges for beneficial conversion | | | (562,134 | ) | | - | | | 133,334 | | | (428,800 | ) |
| | | | | | | | | | | | | | |
Loss applicable to common stockholders | | $ | (5,481,451 | ) | $ | - | | $ | (7,808,242 | ) | $ | (13,289,693 | ) |
| | | | | | | | | | | | | | |
Loss per share - basic and diluted: | | | | | | | | | | | | | |
Loss from continuing operations | | $ | (1.58 | ) | $ | - | | | | | $ | (3.47 | ) |
Income (loss) from discontinued operations | | | - | | | - | | | | | | (0.09 | ) |
Net loss per share | | $ | (1.58 | ) | $ | - | | | | | $ | (3.56 | ) |
| | | | | | | | | | | | | | |
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | | | 3,471,749 | | | - | | | 253,972 | | | 3,725,721 | |
HOST AMERICA CORPORATION RESTATED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2004 |
| | | As Previously Reported June 30, 2004 | | Discontinued Operations Reclassifications | | Restatement Adjustment June 30, 2004 | | As Restated June 30, 2004 | |
| | | | | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | | | | |
Net loss | | $ | (4,919,317 | ) | $ | - | | $ | (7,941,576 | ) | $ | (12,860,893 | ) |
(Income)/Loss from discontinued operations | | | - | | | 147,374 | | | (491,555 | ) | | (344,181 | ) |
Loss from continuing operations | | | (4,919,317 | ) | | (147,374 | ) | | (7,450,021 | ) | | (12,516,712 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | | | | | | | | | | | | |
Depreciation and amortization | | | 393,505 | | | (33,417 | ) | | 147,734 | | | 507,822 | |
Impairment charge | | | - | | | - | | | 9,566,042 | | | 9,566,042 | |
Write off acquired in process research and development costs | | | 3,431,381 | | | - | | | (3,431,381 | ) | | - | |
Bad debt expenses and write off of note receivable - related party | | | 4,000 | | | - | | | 129,744 | | | 133,744 | |
Change due to revaluation of warrant liability | | | - | | | - | | | 552,103 | | | 552,103 | |
Amortization of debt discount | | | 107,991 | | | - | | | 61,670 | | | 169,661 | |
Non-Cash compensation | | | 37,096 | | | - | | | - | | | 37,096 | |
Amortization of deferred financing costs | | | 39,994 | | | - | | | 18,654 | | | 58,648 | |
Loss on disposal of property and equipment | | | 3,199 | | | - | | | - | | | 3,199 | |
Inventory Obsolescence | | | - | | | - | | | 358,080 | | | 358,080 | |
Deferred tax expense | | | - | | | - | | | 30,000 | | | 30,000 | |
Changes in operating assets and liabilities: | | | | | | | | | | | | | |
Decrease (increase) in accounts receivable | | | (71,909 | ) | | 35,309 | | | (72,373 | ) | | (108,973 | ) |
Increase in inventories | | | (400,177 | ) | | - | | | (151 | ) | | (400,328 | ) |
Decrease (increase) in prepaid expenses and other | | | 176,215 | | | (6,159 | ) | | 26,173 | | | 196,229 | |
Increase in other assets | | | (133,028 | ) | | - | | | (878 | ) | | (133,906 | ) |
Increase (decrease) in accounts payable | | | 561,721 | | | (12,445 | ) | | 156,265 | | | 705,541 | |
Increase (decrease) in accrued expenses | | | (1,293,533 | ) | | 15,180 | | | (45 | ) | | 1,278,398 | |
Decrease in deferred revenue | | | (18,390 | ) | | - | | | 18,390 | | | - | |
Net cash provided by (used in) operating activities | | | (2,081,252 | ) | | (148,906 | ) | | 110,006 | | | (2,120,152 | ) |
| | | | | | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | | |
Proceeds from sale of equipment | | | 15,145 | | | - | | | - | | | 15,145 | |
Purchases of equipment and improvements | | | (275,943 | ) | | 2,806 | | | - | | | (273,137 | ) |
Payment for purchase of GlobalNet, net of cash received | | | (176,438 | ) | | - | | | 14,350 | | | (162,088 | ) |
Purchase of patents | | | (64,298 | ) | | - | | | - | | | (64,298 | ) |
Issuance of note receivable - related party | | | (125,000 | ) | | - | | | - | | | (125,000 | ) |
Increase in restricted cash | | | (4,000,000 | ) | | - | | | - | | | (4,000,000 | ) |
Net cash provided by (used in) investing activities | | | (4,626,534 | ) | | 2,806 | | | 14,350 | | | (4,609,378 | ) |
HOST AMERICA CORPORATION RESTATED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) FOR THE YEAR ENDED JUNE 30, 2004 |
| | | As Previously Reported June 30, 2004 | | Discontinued Operations Reclassifications | | Restatement Adjustment June 30, 2004 | | As Restated June 30, 2004 | |
| | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | | |
Proceeds from long-term debt and warrants | | | 8,000,000 | | | - | | | - | | | 8,000,000 | |
Proceeds from issuance of common stock, net | | | 2,562,403 | | | - | | | - | | | 2,562,403 | |
Proceeds from subordinated debt and warrants | | | 2,000,000 | | | - | | | - | | | 2,000,000 | |
Proceeds from issuance of preferred stock, net | | | 386,941 | | | - | | | - | | | 386,941 | |
Payments on demand note payable | | | (424,889 | ) | | - | | | - | | | (424,889 | ) |
Payments for deferred financing costs | | | (1,088,830 | ) | | - | | | (1,500 | ) | | (1,090,330 | ) |
Principal payments on long-term debt | | | (1,411,166 | ) | | - | | | (14,002 | ) | | (1,425,168 | ) |
Net cash provided by (used in) financing activities | | | 10,024,459 | | | - | | | (15,502 | ) | | 10,008,957 | |
| | | | | | | | | | | | | | |
Net cash provided by continuing operations | | | 3,316,673 | | | (146,100 | ) | | 108,854 | | | 3,279,427 | |
Net cash provided by discontinued operations: | | | | | | | | | | | | | |
Net cash provided by operating activities | | | - | | | 220,539 | | | - | | | 220,539 | |
Net cash used in investing activities | | | - | | | (2,806 | ) | | - | | | (2,806 | ) |
Net cash provided by financing activities | | | - | | | - | | | - | | | - | |
Total net cash provided by discontinued operations | | | - | | | 217,733 | | | - | | | 217,733 | |
| | | | | | | | | | | | | | |
| NET INCREASE IN CASH | | | 3,316,673 | | | 71,633 | | | 108,854 | | | 3,497,160 | |
| | | | | | | | | | | | | | |
| CASH, beginning of year | | | 450,385 | | | (71,633 | ) | | - | | | 378,752 | |
| | | | | | | | | | | | | | |
| CASH, end of year | | $ | 3,767,058 | | $ | - | | $ | 108,854 | | $ | 3,875,912 | |
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.
| | HOST AMERICA CORPORATION |
| | | |
| | | |
| Dated: September 29, 2006 | | By: /s/ David Murphy |
| | | David Murphy |
| | | Chief Financial Officer |
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