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): Commission File Number:
August 31, 2000 000-2791
ELECTRIC CITY CORP.
(Exact name of small business issuer as specified in its charter)
DELAWARE 36-4197337
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1280 Landmeier Road, Elk Grove Village, Illinois 60007-2410
(Address of principal executive offices)
(847) 437-1666
(Issuer's telephone number)
------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
This filing amends the previously filed Form 8-K, dated September 14, 2000
(the "8-K"), of Electric City Corp. ("Electric City"), and relates to the
acquisition (the "Acquisition") by Electric City Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Electric City ("Merger
Subsidiary."), of all of the outstanding shares of capital stock of
Switchboard Apparatus, Inc., an Illinois sub-S corporation ("Switchboard").
As stated in the 8-K, pro forma financial information would
be filed by amendment at a later date.
ELECTRIC CITY CORP.
FORM 8-K/A
INDEX
ITEM 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Switchboard Apparatus,
Inc. for the year ended December 31, 1999 and
Independent Auditors Report........................................................3
(b) Financial Statements of Switchboard Apparatus,
Inc. for the year ended December 31, 1998 and
Independent Auditors Report........................................................12
(c) Financial Statements of business acquired..........................................21
(d) Unaudited Pro Forma Consolidated Financial
Statements of Electric City, Merger Subsidiary and
Switchboard........................................................................26
Signatures.........................................................................30
2
(a) Financial Statements of Switchboard Apparatus, Inc. for the year ended
December 31, 1999 and Independent Auditors Report
INDEPENDENT AUDITORS' REPORT
Switchboard Apparatus, Inc.
Broadview, Illinois
We have audited the accompanying balance sheet of Switchboard Apparatus, Inc. as
of December 31, 1999, and the related statements of income and accumulated
deficit and cash flows for the year 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 audit.
We conducted our audit 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 audit provides 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 Switchboard Apparatus, Inc. at
December 31, 1999, and the results of its operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
- --------------------
Chicago, Illinois
January 15, 2001
3
SWITCHBOARD APPARATUS, INC.
BALANCE SHEET
===================================================================================================================
DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------------------
ASSETS (Note 2)
CURRENT ASSETS
Cash $ 347,048
Accounts receivable, less allowance for doubtful accounts of $20,000 620,644
Inventories 319,212
- -------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,286,904
- -------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization (Note 1) 453,519
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS 10,156
- -------------------------------------------------------------------------------------------------------------------
$ 1,750,579
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit (Note 2) $ 272,200
Current maturities of long-term debt (Note 3) 58,054
Accounts payable 732,371
Accrued expenses 52,942
Shareholder distribution payable 17,500
- -------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,133,067
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, less current maturities (Note 3) 449,628
- -------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, no par - 100,000 shares authorized, 12,500 issued and outstanding 173,000
Accumulated deficit (5,116)
- -------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 167,884
- -------------------------------------------------------------------------------------------------------------------
$ 1,750,579
===================================================================================================================
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
4
SWITCHBOARD APPARATUS, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
==================================================================================================================
YEAR ENDED DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------------
NET SALES $ 3,584,056
COST OF SALES 2,685,710
- ------------------------------------------------------------------------------------------------------------------
Gross profit 898,346
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES 816,920
- ------------------------------------------------------------------------------------------------------------------
Operating income 81,426
INTEREST EXPENSE 49,885
- ------------------------------------------------------------------------------------------------------------------
NET INCOME $ 31,541
==================================================================================================================
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
5
SWITCHBOARD APPARATUS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
===================================================================================================================
YEAR ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------------------
Total
Common Accumulated Stockholders'
Stock Deficit Equity
- -------------------------------------------------------------------------------------------------------------------
BALANCE, at January 1, 1999 $ 210,000 $ (36,657) $ 173,343
Net income - 31,541 31,541
Distributions (37,000) - (37,000)
- -------------------------------------------------------------------------------------------------------------------
BALANCE, at December 31, 1999 $ 173,000 $ (5,116) $ 167,884
===================================================================================================================
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
6
SWITCHBOARD APPARATUS, INC.
STATEMENT OF CASH FLOWS
====================================================================================================================
YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 31,541
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 91,968
Changes in assets and liabilities
Increase in accounts receivable (113,478)
Increase in inventories (65,495)
Decrease in prepaid expenses 44,281
Decrease in other assets 721
Increase in accounts payable 203,898
Decrease in accrued expenses (4,693)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 188,743
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures (75,949)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from line of credit 2,200
Payments on long-term debt (282,087)
Proceeds from long-term debt 521,500
Distributions to stockholders (19,500)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 222,113
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 334,907
CASH, at beginning of year 12,141
- --------------------------------------------------------------------------------------------------------------------
CASH, at end of year $ 347,048
====================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the year $ 49,885
NONCASH FINANCING AND INVESTING ACTIVITIES
At December 31, 1999, approximately $218,000 related to the purchase of
equipment is included in accounts payable.
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
7
SWITCHBOARD APPARATUS, INC.
SUMMARY OF ACCOUNTING POLICIES
====================================================================================================================
NATURE OF BUSINESS Switchboard Apparatus, Inc. (the "Company"), located in Broadview,
Illinois, manufactures electrical panel boards and equipment primarily
for commercial application. The Company's principal customers are located
in the metropolitan Chicagoland area.
INVENTORIES Inventories, primarily raw materials, are valued at the lower of cost or
market. Cost is determined on a first-in, first-out basis.
PROPERTY AND EQUIPMENT; Machinery and equipment and office equipment are stated at cost and
DEPRECIATION AND depreciated over their estimated useful lives (typically 5 or 7 years)
AMORTIZATION primarily on the declining balance method. Leasehold improvements are
amortized on a straight-line method over the lesser of the improvements'
useful life or the lease term.
REVENUE RECOGNITION Revenue is recognized upon transfer of ownership. Service revenue is
recognized at the time the related services are provided.
INCOME TAXES The Company has elected "S" corporation status and, accordingly, is not a
tax-paying entity for federal income tax purposes. Its stockholders have
consented to include the losses or income of the Company on their
individual federal tax returns. However, the Company is a tax-paying
entity for Illinois replacement tax purposes.
ADVERTISING COSTS Advertising costs amounting to $12,000 for the year ended December 31,
1999 are expensed in the period in which they are incurred.
ESTIMATES Financial statements prepared by management in conformity with generally
accepted accounting principles include estimated amounts and certain
disclosures based on assumptions about future events. Accordingly, actual
results could differ from those estimates.
8
SWITCHBOARD APPARATUS, INC.
NOTES TO FINANCIAL STATEMENTS
====================================================================================================================
1 . PROPERTY AND Major classes of property and equipment consist of the following:
EQUIPMENT
DECEMBER 31, 1999
-------------------------------------------------------------------------
Machinery and equipment $ 793,910
Office equipment 28,362
Leasehold improvements 21,490
-------------------------------------------------------------------------
843,762
Less accumulated depreciation and
amortization (390,243)
--------------------------------------------------------------------------
Net property and equipment $ 453,519
==========================================================================
2. LINE OF CREDIT The Company has a $400,000 line of credit with a bank. This line of
credit is due upon demand and bears interest at the prime rate plus
one-half percent (9% at December 31, 1999). There were $272,200 of
borrowings under this line of credit at December 31, 1999.
Borrowings under this line-of-credit agreement are secured by
substantially all of the Company's assets and are guaranteed by a
shareholder of the Company.
3. LONG-TERM DEBT The Company has a bank term loan of $507,682 at December 31, 1999. This
loan bears interest at 8.4% and is payable in monthly principal and
interest payments of $8,265 with the balance due in September 2004. This
debt is secured by substantially all of the Company's assets and is
guaranteed by a shareholder of the Company.
9
SWITCHBOARD APPARATUS, INC.
NOTES TO FINANCIAL STATEMENTS
====================================================================================================================
Following is a schedule of maturities on long-term debt for each of the
next five years:
YEAR ENDING DECEMBER 31, Amount
------------------------------------------------------------------------
2000 $ 58,054
2001 63,320
2002 68,921
2003 75,034
2004 242,353
-------------------------------------------------------------------------
Total $ 507,682
=========================================================================
4. LEASE COMMITMENTS The Company leases its manufacturing facility from a partnership related
through common ownership. The lease expires in April 2004. Total rent
expense for this facility amounted to $104,000 for the year ended
December 31, 1999. The Company also leases automobiles for certain
employees.
Future minimum rentals to be paid by the Company as of December 31, 1999
are as follows:
Related Unrelated
YEAR ENDING DECEMBER 31, Party Party Total
-------------------------------------------------------------------------
2000 $ 111,000 $ 35,000 $ 146,000
2001 111,000 24,000 135,000
2002 117,000 4,000 121,000
2003 120,000 - 120,000
2004 40,000 - 40,000
-------------------------------------------------------------------------
Total $ 499,000 $ 63,000 $ 562,000
=========================================================================
10
SWITCHBOARD APPARATUS, INC.
NOTES TO FINANCIAL STATEMENTS
====================================================================================================================
The Company subleases a portion of the facility to a third party. Total
rental income for the subleased facility was $35,420 in 1999. As of
December 31, 1999, future minimum rental payments to be received for 2000
are $12,650. The sublease terminated in June 2000.
5. SUBSEQUENT EVENT On August 31, 2000, the Company was acquired by Electric City Corporation
for 551,226 shares of Electric City Corporation's common stock valued at
$1,941,750.
11
(a) Financial Statements of Switchboard Apparatus, Inc. for the year ended
December 31, 1998 and Independent Auditors Report
SWITCHBOARD APPARATUS, INC.
(AN S CORPORATION)
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
12
SWITCHBOARD APPARATUS, INC.
(AN S CORPORATION)
C O N T E N T S
Independent Auditors' Report................................................................Page 1
Balance Sheet..........................................................................Exhibit I
Statement of Income (Loss).............................................................Exhibit II
Statement of Changes in Retained Earnings (Deficit)....................................Exhibit III
Statement of Cash Flows................................................................Exhibit IV
Notes to Financial Statements.....................................................................
13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Switchboard Apparatus, Inc.
We have audited the accompanying balance sheet of Switchboard
Apparatus, Inc. (an S Corporation) as of December 31, 1998, and the related
statement of income (loss), statement of changes in retained earnings (deficit),
and the statement of cash flows for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first
paragraph present fairly, in all material respects, the financial position of
Switchboard Apparatus, Inc., and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ John R. Waters & Company
- ----------------------------
John R. Waters & Company
Chicago, Illinois
March 17, 1999
14
Exhibit I
SWITCHBOARD APPARATUS, INC.
(AN S CORPORATION)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
CURRENT ASSETS:
Cash $ 12,141
Accounts receivable, trade (Net of
allowance for doubtful accounts of $10,000) 507,166
Inventory 253,717
Prepaid expenses and advances 44,281
----------
TOTAL CURRENT ASSETS 817,305
----------
PROPERTY AND EQUIPMENT:
Machinery and equipment 515,490
Drafting equipment 6,190
Office equipment 21,604
Furniture 6,260
----------
549,544
Less accumulated depreciation 298,275
----------
NET PROPERTY AND EQUIPMENT 251,269
----------
OTHER ASSETS:
Goodwill, patents, other (Net of
accumulated amortization) 5,237
Deposits 5,640
----------
TOTAL OTHER ASSETS 10,877
----------
TOTAL ASSETS $1,079,451
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - Bank $ 270,000
Current portion of long-term debt 84,429
Accounts payable 310,204
Accrued expenses 57,435
State replacement tax payable 200
----------
TOTAL CURRENT LIABILITIES 722,268
----------
LONG-TERM DEBT 183,840
----------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 100,000 shares
authorized, 12,500 issued and outstanding 210,000
Retained earnings (deficit) (Exhibit II) (36,657)
----------
TOTAL STOCKHOLDERS' EQUITY 173,343
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,079,451
==========
The accompanying notes are an integral part of this statement.
15
Exhibit II
SWITCHBOARD APPARATUS, INC.
(AN S CORPORATION)
STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1998
NET SALES $2,364,570
COST OF SALES 1,917,842
----------
GROSS PROFIT 446,728
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 466,511
----------
INCOME (LOSS) FROM OPERATIONS (19,783)
----------
OTHER INCOME (EXPENSE):
Interest expense (41,468)
Other income, including gain on sale of
equipment totaling $5,054, and rental
income of $29,700) 28,183
----------
NET OTHER INCOME (EXPENSE) (13,285)
----------
NET INCOME (LOSS) $ (33,068)
==========
The accompanying notes are an integral part of this statement.
16
Exhibit III
SWITCHBOARD APPARATUS, INC.
(AN S CORPORATION)
STATEMENT OF CHANGES IN RETAINED EARNINGS (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1998
RETAINED EARNINGS, JANUARY 1, 1998,
as previously reported $ 26,411
Prior period adjustments (30,000)
--------
RETAINED EARNINGS (DEFICIT), JANUARY 1, 1998,
as restated (3,589)
Net income (loss) for the year (Exhibit II) (33,068)
--------
RETAINED EARNINGS (DEFICIT), DECEMBER 31, 1998 (Exhibit I) $(36,657)
========
The accompanying notes are an integral part of this statement.
17
EXHIBIT IV
SWITCHBOARD APPARATUS, INC.
(AN S CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
CASH PROVIDED BY (APPLIED TO) OPERATING ACTIVITIES:
Net income (loss) $ (33,068)
Items which did not affect cash:
Depreciation and amortization expense 108,371
Changes in operating assets and liabilities:
Accounts receivable (249,893)
Inventory (83,393)
Prepaid expenses (15,263)
Accounts payable 195,606
Accrued expenses 9,466
State replacement tax (328)
Customer deposits (5,589)
---------
Net cash (applied to) operating activities (74,091)
---------
CASH (APPLIED TO) INVESTING ACTIVITIES:
Purchase of property and equipment (1,045)
---------
CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES:
Proceeds from note payable, bank (Net) 120,000
Payment of long-term debt (63,643)
---------
Net cash provided by financing activities 56,357
---------
(DECREASE) IN CASH (18,779)
CASH, BEGINNING OF YEAR 30,920
---------
CASH, END OF YEAR $ 12,141
---------
SUPPLEMENTARY INFORMATION:
Interest paid $ 41,780
=========
The accompanying notes are an integral part of this statement.
18
SWITCHBOARD APPARATUS, INC.
(AN S CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The Company manufactures electrical panel boards and equipment
primarily for commercial application.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Deferred expenses represent the estimated value of services
contributed by certain stockholders during the developmental stage of
operations. Deferred expenses are being amortized over forty months using the
straight-line method.
Property and equipment are stated at cost and are being depreciated
over their estimated economic useful lives of five years using the modified
accelerated cost recovery system.
Goodwill represents the excess cost over fair value of assets
purchased from Switchboard Apparatus Company. Goodwill is being amortized over
the estimated period benefits are received of fifteen years.
Patents are stated at cost. No amortization expense has been provided
for in the accompanying financial statements.
NOTE 2 - NOTE PAYABLE, BANK
The Company has a bank line-of-credit in the amount of $300,000.
Interest is due monthly at the bank's prime interest rate. The note is secured
by all business assets and is guaranteed by certain stockholders. The
line-of-credit expires June 1, 1999. The outstanding balance on the
line-of-credit aggregated $250,000 in 1998.
NOTE 3 - LONG-TERM DEBT
The following is a summary of long-term debt at December 31, 1998:
Note payable, bank, due in monthly installments
of $5,100 including interest at 8.15%, secured
by accounts receivable. $250,000
Note payable, bank, due in monthly installments
of $2,272 including interest at 8.65%, secured by
certain equipment. 18,269
--------
268,269
Less current portion 84,429
--------
Total Long-Term Debt $183,840
========
19
SWITCHBOARD APPARATUS, INC.
(AN S CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 3 - LONG-TERM DEBT, Continued
A summary of future minimum principal payments follows:
1999 $ 84,429
2000 74,841
2001 66,867
2002 42,132
--------
Total $268,269
========
NOTE 4 - INCOME TAXES
The Company, with the consent of its stockholders, elected to be taxed
as an S corporation under the provisions of the Internal Revenue Code. Under
this provision, the stockholders will be taxed on the Company's taxable income
in lieu of the corporate income tax. Therefore, no provision or liability for
federal or state income taxes is reflected in the financial statements. However,
the Company remains liable for state replacement tax which has been provided for
in the accompanying financial statements.
NOTE 5 - OPERATING LEASES/SUBLEASES
The Company rents its manufacturing facility on an annual basis from a
partnership related through common ownership. The term of this lease requires
monthly payments of $7,500. Total rent expense for this facility aggregated
$90,000 in 1998.
The Company subleases a portion of the facility to a third party.
Total rental income for the subleased facility aggregated $29,700 in 1998.
NOTE 6 - PRIOR PERIOD ADJUSTMENTS
Retained earnings at the beginning of 1998 have been adjusted to
properly reflect adjustments to the allowance for doubtful accounts and accrued
expenses at December 31, 1997. The accrued expenses which were significantly
affected include payroll and vacation pay. Had these accruals been properly
recorded at December 31, 1997, net income for 1997 would have been decreased by
$30,000.
20
(c) Financial Statements of Business Acquired.
SWITCHBOARD APPARATUS, INC.
CONDENSED BALANCE SHEET
THE FOLLOWING UNAUDITED FINANCIAL STATEMENTS OF SWITCHBOARD APPARATUS, INC.
SHOULD BE READ IN CONJUNCTION WITH, THE HISTORICAL FINANCIAL STATEMENTS OF
SWITCHBOARD APPARATUS, INC. AND THE RELATED NOTES THERETO THAT ARE ATTACHED AS
EXHIBITS (A) AND (B).
===========================================================================
June 30,
2000
(unaudited)
- ---------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 68,779
Accounts receivable, net 721,792
Inventories 385,754
Other 3,532
- ---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,179,857
Property and equipment 888,520
Less accumulated depreciation (463,976)
- ---------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 424,544
OTHER ASSETS 512
- ---------------------------------------------------------------------------
$ 1,604,913
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit $ 352,200
Current portion of long-term debt 60,683
Accounts payable 416,583
Accrued expenses 20,000
Other current liabilities -
- ---------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 849,466
LONG-TERM DEBT, less current portion 418,590
- ---------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common Stock, no par value,
12,500 issued and outstanding 120,500
Accumulated earnings (deficit) 216,357
- ---------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 336,857
$ 1,604,913
===========================================================================
21
SWITCHBOARD APPARATUS, INC.
UNAUDITED STATEMENT OF OPERATIONS
====================================================================================
SIX MONTHS ENDED JUNE 30 2000 1999
- ------------------------------------------------------------------------------------
REVENUE $ 2,481,378 $ 1,622,179
- ------------------------------------------------------------------------------------
EXPENSES
Cost of sales 1,690,262 1,237,529
Selling, general and administrative 541,340 380,685
- ------------------------------------------------------------------------------------
Total expenses 2,231,602 1,618,214
OPERATING PROFIT 249,776 3,945
- ------------------------------------------------------------------------------------
OTHER EXPENSE
Interest income 1,613 -
Interest expense (29,916) (20,898)
- ------------------------------------------------------------------------------------
Total other expense (28,303) (20,898)
- ------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 221,473 $ (16,933)
====================================================================================
22
SWITCHBOARD APPARATUS, INC.
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
============================================================================================================
TOTAL
COMMON ACCUMULATED STOCKHOLDERS'
SIX MONTHS ENDED JUNE 30 STOCK DEFICIT EQUITY
- ------------------------------------------------------------------------------------------------------------
BALANCE, at January 1, 2000 $ 173,000 $ (5,116) $ 167,884
Net Income - 221,473 221,473
Distributions (52,500) - (52,500)
- ------------------------------------------------------------------------------------------------------------
BALANCE, at June 30, 2000 $ 120,500 $ 216,357 $ 336,857
============================================================================================================
23
SWITCHBOARD APPARATUS, INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
==================================================================================================================
SIX MONTHS ENDED JUNE 30 2000 1999
- ------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net income (loss) $ 221,473 $ (16,933)
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities
Depreciation and amortization 75,748 46,737
Changes in assets and liabilities
Decrease (increase) in accounts receivable (101,147) 146,054
Decrease (increase) in inventories (66,542) 16,727
Decrease in other assets 4,098 22,543
Decrease in accounts payable (327,270) (135,148)
Decrease in accrued expenses (36,461) (8,750)
Decrease (increase) in other liabilities (2,500) 2,500
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (232,601) 73,730
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchase of property and equipment (44,758) (5,750)
- ------------------------------------------------------------------------------------------------------------------
Cash Flows Provided by (Used in) Financing Activities
Borrowings on line of credit 80,000 -
Payments on long-term debt (28,410) (33,614)
Distributions to stockholders (52,500) -
- ------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (910) (33,614)
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (278,269) 34,366
- ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, at beginning of period 347,048 12,141
CASH AND CASH EQUIVALENTS, at end of period $ 68,779 $ 46,507
==================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the periods for interest $ 29,916 $ 39,061
24
SWITCHBOARD APPARATUS, INC.
FOOTNOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION The financial information included herein is
unaudited; however, such information
reflects all adjustments (consisting solely
of normal recurring adjustments), which, in
the opinion of management, are necessary for
a fair statement of results for the interim
periods.
The results of operations for the six-month
period ended June 30, 2000 are not
necessarily indicative of the results to be
expected for the full year.
For further information, refer to the
audited financial statements and the related
footnotes included as exhibits (a) and (b)
to this current report.
2. INCOME TAXES The Company has elected "S" corporation
status and, accordingly, is not a tax-paying
entity for federal income tax purposes. Its
stockholders have consented to include the
losses or income of the Company on their
individual federal tax returns. However, the
Company is a tax paying entity for Illinois
replacement tax purposes.
3. LINE OF CREDIT The Company has a $400,000 line of credit
with a bank. This line of credit is due upon
demand and bears interest at the prime rate
plus one-half percent (9.5% at June 20,
2000). There were $272,200 of borrowings
under this line of credit at June 30, 2000
4. LONG-TERM DEBT The Company has a bank term loan of $479,272
at June 30, 2000. This loan bears interest
at 8.4% and is payable in monthly principal
and interest payments of $8,265 with the
balance due in September 2004. The debt is
secured by substantially all of the
Company's assets and is guaranteed by a
shareholder of the Company.
25
(d) Unaudited Pro Forma Consolidated Financial Statements of Electric City,
Merger Subsidiary and Switchboard.
The following unaudited pro forma statements of operations for the eight months
ended December 31, 1999 and nine months ended September 30, 2000 of Electric
City Corp. (the "Company") gives effect to the acquisition of all of the
outstanding stock of Switchboard Apparatus, Inc. which was made as of August 31,
2000. The acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of operations of the acquired company will be included
in Electric City Corp. 's results only from the acquisition date. The unaudited
pro forma statements of operations have been prepared as if the acquisition
occurred on May 1, 1999 and are based on historical financial statements of
Electric City Corp. and Switchboard Apparatus, Inc. from May 1, 1999 through
December 31, 1999 and January 1, 2000 through September 30, 2000. The unaudited
pro forma balance sheet has not been provided as the acquisition is reflected in
the Company's September 30, 2000 balance sheet.
The purchase method of accounting has been used in preparation of the unaudited
pro forma financial statements. Under this method of accounting, the aggregate
purchase price is allocated to assets acquired based on their estimated fair
values. For purposes of the unaudited pro forma financial statements, the
purchase price has been allocated based primarily on the information furnished
by management. The final allocation of the purchase price of the assets acquired
will be determined in a reasonable time after consummation of the transaction
and will be based on a complete evaluation of the assets acquired. Accordingly,
the information presented herein may differ from the final purchase price
allocation; however, such allocation is not expected to differ materially from
the preliminary amounts.
In the opinion of the Company's management, all adjustments have been made that
are necessary to present fairly the pro forma data.
The unaudited pro forma financial statements should be read in conjunction with
the respective financial statements and related notes included elsewhere in this
report. The unaudited pro forma financial statements are presented for
illustrative purposes only and are not necessarily indicative of the results of
operations or financial position that would have been achieved had the
transaction reflected therein been consummated as of the date indicated, or of
the results of operations or financial position for any future periods or dates.
26
ELECTRIC CITY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
==================================================================================================================
SWITCHBOARD
ELECTRIC APPARATUS, PRO FORMA ADJUSTMENTS PRO FORMA
EIGHT MONTHS ENDED DECEMBER CITY CORP. INC. ------------------------------ CONSOLIDATED
31, 1999 (UNAUDITED) (UNAUDITED) DEBIT CREDIT (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
REVENUE $ 2,730,184 $ 2,425,453 $ - $ - $ 5,155,637
- --------------------------------------------------------------------------------------------------------------------
EXPENSES -
Cost of sales 2,568,070 1,809,672 - - 4,377,742
Selling, general and
administrative 3,541,012 569,767 123,830 (1) - 4,234,609
- --------------------------------------------------------------------------------------------------------------------
Total expenses 6,109,082 2,379,439 123,830 - 8,612,351
OPERATING PROFIT (LOSS) (3,378,898) 46,014 (123,830) - (3,456,714)
- --------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 130,874 - - - 130,874
Interest expense (166,979) (35,933) - - (202,912)
- --------------------------------------------------------------------------------------------------------------------
Total other income (expense) (36,105) (35,933) - - (72,038)
- --------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (3,415,003) $ 10,081 $ (123,830) $ - $ (3,528,752)
===================================================================================================================
BASIC AND DILUTED NET LOSS
PER COMMON SHARE (0.13) (0.13)
===================================================================================================================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
used in computation of basic
and diluted
net loss per share 26,638,391 27,189,617
===================================================================================================================
27
ELECTRIC CITY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
====================================================================================================================
SWITCHBOARD PRO FORMA ADJUSTMENTS
ELECTRIC APPARATUS, -------------------------------- PRO FORMA
NINE MONTHS ENDED SEPTEMBER CITY CORP. INC. CONSOLIDATED
30, 2000 (UNAUDITED)(2) (UNAUDITED)(3) DEBIT CREDIT (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
REVENUE $ 3,813,074 $ 3,387,506 $ - $ - $ 7,200,580
- --------------------------------------------------------------------------------------------------------------------
EXPENSES
Cost of sales 3,374,982 2,316,242 - - 5,691,224
Selling, general and
administrative 5,609,916 913,337 139,308 (4) - 6,662,561
Repurchase of distributor
territories &
legal settlement 1,680,394 - - - 1,680,394
- --------------------------------------------------------------------------------------------------------------------
Total expenses 10,665,292 3,229,579 139,308 - 14,034,179
OPERATING PROFIT (LOSS) (6,852,218) 157,927 (139,308) - (6,833,599)
- --------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 226,675 2,006 - - 228,681
Interest expense (189,558) (42,670) - - (232,228)
- --------------------------------------------------------------------------------------------------------------------
Total other income (expense) 37,117 (40,664) - - (3,547)
- --------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (6,815,101) $ 117,263 $ (139,308) $ - $ (6,837,146)
====================================================================================================================
BASIC AND DILUTED NET LOSS
PER COMMON SHARE (0.24) (0.24)
====================================================================================================================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
used in computation of
basic and diluted
net loss per share 28,354,221 28,905,447
====================================================================================================================
28
ELECTRIC CITY CORP.
Notes to Unaudited Pro Forma Statement of Operations
Eight Months Ended December 31, 1999 and Nine Months Ended September 30, 2000
Effective August 31, 2000, the Company acquired all of the issued and
outstanding shares of capital stock of Switchboard Apparatus, Inc.
("Switchboard") a manufacturer of electrical switchgear and distribution panels,
from Switchboard's shareholders for 551,226 shares of the Company's common stock
valued at $1,941,750, based on quoted market prices, plus the assumption of
Switchboard's liabilities, including $350,000 of payments owed to the selling
shareholders of Switchboard and $827,556 of bank debt. The purchase price was
arrived at through arms' length negotiations between Electric City and the
Sellers. The Company intends to operate Switchboard as a wholly owned
subsidiary.
The transaction was recorded under the purchase method of accounting. The total
cost of the acquisition was approximately $3,641,000, which exceeded the fair
market value of the assets acquired by approximately $1,857,000. The fair market
value of inventories and equipment approximated book value. Costs in excess of
the value of assets acquired will be amortized over a 10-year period.
The following adjustments were made to the historical condensed statement of
operations to reflect the acquisition of Switchboard Apparatus as if the
acquisition had occurred on May 1, 1999:
1. Represents the amortization of the cost in excess of the assets acquired of
$124,089, based on a 10-year amortization period.
The following adjustments were made to the historical condensed statement of
operations to reflect the acquisition of Switchboard Apparatus as if the
acquisition had occurred on January 1, 2000:
2. Represents the consolidated statement of operations of Electric City Corp.
as presented in the Company's 10-QSB dated September 30, 2000. These
consolidated results include one month's results of operations of
Switchboard Apparatus.
3. Represents the operating results of Switchboard Apparatus for the eight
month period prior to the acquisition.
4. Represents the amortization of the cost in excess of the assets acquired of
$139,600, based on a 10-year amortization period.
5. Represents the amortization of the cost in excess of the assets acquired of
$93,067, based on a 10-year amortization period.
29
SIGNATURE
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.
ELECTRIC CITY CORP.
Dated: January 30, 2001 By: /s/ Jeffrey R. Mistarz
-----------------------------------
Jeffrey R. Mistarz
Chief Financial Officer & Treasurer
(principal financial and accounting
officer)
30