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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
------------------------
AMENDMENT NO. 1
CURRENT REPORT
------------------------
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 1, 1999 (March 16, 1999)
------------------------------------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OR JURISDICTION OF INCORPORATION)
33-90344 23-2498715
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(COMMISSION FILE NUMBER) (IRS EMPLOYER
IDENTIFICATION NO.)
1341 North Delaware Avenue, Philadelphia, PA 19125
-----------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(215) 425-8682
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(REGISTRANT'S TELEPHONE NUMBER)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
In a Form 8-K filed on March 26, 1999, Clariti Telecommunications
International, Ltd. (the "Company") disclosed in Item 2 that it had acquired
all of the outstanding stock of MediaTel Global Communications, Ltd.
("MediaTel"). The financial statements and pro forma financial information
required to be included in such Form 8-K was not included therein and is
included in this Form 8-K/A pursuant to Item 7(a)(4) of such form.
PAGE
----
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Report of Independent Accountants F-1
Combined Balance Sheet of MediaTel as of
June 30, 1998 F-2
Combined Statement of Operations and Comprehensive Loss
of MediaTel for the year ended June 30, 1998 F-3
Combined Statement of Stockholder's Deficit for
MediaTel for the year ended June 30, 1998 F-4
Combined Statement of Cash Flows for MediaTel
for the year ended June 30, 1998 F-5
Notes to Financial Statements F-6
(b) PRO FORMA FINANCIAL INFORMATION F-12
Unaudited Pro Forma Combined Statement of Operations
for the year ended June 30, 1998 F-13
Unaudited Pro Forma Combined Statement of Operations
for the nine months ended March 31, 1999 F-14
Notes to Unaudited Pro Forma Combined Financial Statements F-15
(c) EXHIBITS
None
2
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 thereunto duly authorized.
CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD.
(Registrant)
By: s/James M. Boyd, Jr.
--------------------
James M. Boyd, Jr.
Vice President of Finance and
Chief Accounting Officer
Date: June 1, 1999
3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of MediaTel Global Communications, Ltd.
In our opinion, the accompanying combined balance sheet and related combined
Statements of operations and comprehensive loss, of stockholders' deficit and
of cash flows present fairly, in all material respects, the financial position
of MediaTel Global Communications, Ltd. and its subsidiaries at June 30, 1998,
and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles in the
United States of America. 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 audit of these
statements in accordance with generally accepted auditing standards in the
United Kingdom, which are substantially the same as generally accepted auditing
standards 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.
s/ PricewaterhouseCoopers
- -------------------------
PricewaterhouseCoopers
May 24, 1999
London, England
F-1
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
COMBINED BALANCE SHEET
JUNE 30, 1998
(Dollars in thousands)
1998
--------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 399
Trade accounts receivable (net of $42 allowance) 691
Other receivables 150
Prepaid expenses 27
Due from related parties 3,190
--------
Total current assets 4,457
PROPERTY AND EQUIPMENT, NET 308
--------
TOTAL ASSETS $ 4,765
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Trade accounts payable $ 1,601
Accrued expenses and other current
liabilities 1,727
Deferred revenue 138
Due to related parties 3,329
--------
TOTAL LIABILITIES 6,795
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, 2 shares issued and outstanding -
Accumulated deficit ( 2,030)
--------
TOTAL STOCKHOLDERS' DEFICIT ( 2,030)
--------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 4,765
========
The accompanying notes are an integral part of these combined financial
statements.
F-2
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
YEAR ENDED JUNE 30, 1998
(Dollars in thousands)
1998
--------
REVENUE $ 5,665
COST OF REVENUE 6,548
--------
GROSS LOSS ( 883)
Sales and marketing 376
General and administrative 771
--------
NET LOSS ( 2,030)
COMPREHENSIVE LOSS $( 2,030)
========
NET LOSS PER SHARE - BASIC AND DILUTED $( 1,015)
========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
YEAR ENDED JUNE 30, 1998
(Dollars in thousands)
COMMON STOCK
---------------
NUMBER ACCUMU-
OF LATED
SHARES AMOUNT DEFICIT TOTAL
------ ------ -------- ---------
BALANCES, JULY 1, 1997 - $ - $ - $ -
Issuance of common stock 2 - - -
Net loss - - ( 2,030) ( 2,030)
------ ---- -------- --------
BALANCES, JUNE 30, 1998 2 $ - $( 2,030) $( 2,030)
====== ==== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30, 1998
(Dollars in thousands)
1998
--------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $( 2,030)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 17
Changes in operating assets and liabilities
which increase (decrease) cash:
Trade accounts receivable ( 691)
Other receivables ( 150)
Prepaid expenses ( 27)
Trade accounts payable 1,601
Accrued expenses and other current
liabilities 1,727
Deferred revenue 138
--------
Net cash provided by operating activities 585
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment ( 325)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Amounts payable to related parties 3,329
Amounts receivable from related parties ( 3,190)
--------
Net cash provided by financing activities 139
--------
INCREASE IN CASH AND CASH EQUIVALENTS 399
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -
--------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 399
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest $ -
Cash paid for income taxes $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
June 30, 1998
(Dollars in thousands)
NOTE 1 - THE COMPANY
- --------------------
MediaTel Global Communications Limited ("MediaTel" or the "Company") is
incorporated in the United Kingdom and, at the date of the acquisition by
Clariti Telecommunications International, Inc. ("Clariti") (See Note 8), owned
100% of the common stock of the MediaTel Group of companies listed below
(collectively, the "Group"). The Group sells airtime to independent public
call office ("PCO") retailers in the UK and to commercial and domestic
customers through direct supply and prepaid telephone cards.
The MediaTel Group of companies was not wholly owned by the Company in the
period to June 30, 1998. The accompanying combined financial statements have
been prepared to present the financial position and results of operations of
the group acquired by Clariti as if the group had been wholly owned throughout
the period.
The Group is comprised of:
MediaTel Global Communications Limited
Fastlink Global Communications Limited
Fastlink Residential Services Limited
Fastlink Telecommunications (UK) Limited
Unicom UK Limited
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Basis of Presentation
- ---------------------
The accompanying combined financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles and include the accounts of the MediaTel Group companies. All
significant intercompany accounts and transactions have been eliminated.
Accounting 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, liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements, as
well as reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents consist of investments with original maturity dates
of 90 days or less, and are generally non interest bearing.
F-6
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
June 30, 1998
(Dollars in thousands)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
- ---------------------------------------------------
Accounts Receivable
- -------------------
Accounts receivable are composed of amounts due from agents and customers for
products sold or to be supplied, net of an allowance for doubtful accounts.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost. Depreciation is generally computed
using the straight-line method over the estimated useful lives of the related
assets, ranging from 2 to 5 years. Expenditures for new property and equipment
or replacement property and equipment are capitalized while expenditures for
maintenance and repairs are charged against earnings as incurred.
Advertising Expenses
- --------------------
Advertising expenses are expensed as incurred. Advertising expense was $5 for
the year ended June 30, 1998.
Revenue Recognition and Deferred Revenue
- ----------------------------------------
The Group's revenue is generated principally through sales of airtime to
independent PCO's and prepaid telephone cards.
The Group sells airtime to independently owned and operated PCO's on a prepaid
metered basis. Revenues from PCO's are recognized as services are provided.
Payments received in advance of services provided are treated as deferred
revenue until the services are used.
The Group sold telephone cards only as agents for the carriers. Therefore, the
Group's income from this operation was as commission. Accordingly this revenue
is recognized on the sale of cards.
Income Taxes
- ------------
The Company records its provision for income taxes on the liability method.
Deferred tax assets and liabilities represent the expected future tax
consequences of the differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. The
effects of changes in tax rates on deferred tax assets and liabilities are
recognized in the period of such change.
F-7
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
June 30, 1998
(Dollars in thousands)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
- ---------------------------------------------------
Earnings per Share
- ------------------
In February 1997, Statement of Financial Accounting Standards ("SFAS") No. 128,
Earnings per Share, was issued. SFAS No. 128 simplifies the existing
computational guidelines and revises the disclosure requirements. SFAS No. 128
requires presentation of "basic" earnings per share (which excludes dilution as
a result of unexercised stock options and convertible subordinated debentures)
and "diluted" earnings per share. Basic and diluted loss per share has been
computed by dividing the net loss by the weighted average common stock
outstanding during the period.
Fair Value of Financial Instruments
- -----------------------------------
SFAS No. 107, Disclosures About Fair Value of Financial Instruments requires
the determination of fair value for certain of the Company's assets and
liabilities. The carrying value of cash and cash equivalents, marketable
securities, receivables, payables, deferred revenue and short term liabilities
approximates fair value due to their short maturity.
Long-Lived Assets
- -----------------
The Company periodically reviews the values assigned to long-lived assets, such
as property and equipment, to determine whether an impairment exists.
Management believes that the long-lived assets in the accompanying balance
sheets are appropriately valued.
Comprehensive Income
- --------------------
In 1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income. This
statement establishes rules for the reporting of comprehensive income and its
components. Comprehensive loss consists of net loss and foreign currency
translation adjustments and is presented in the Combined Statements of
operations and comprehensive loss. The adoption of SFAS No. 130 had no impact
on total stockholders' equity.
Segment Disclosures
- -------------------
The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for
reporting information about operating segments and related disclosures about
products and services, geographic areas and major customers.
Management regards the business operations of all the MediaTel Group companies
to be one segment.
F-8
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
June 30, 1998
(Dollars in thousands)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
- ---------------------------------------------------
Foreign Currency
- ----------------
Assets and liabilities of the Company are translated at current exchange rates,
while revenue and expenses are translated at average rates prevailing during
the year. Translation adjustments are reported as a component of stockholders'
deficit. The cumulative translation adjustment in the period was not material.
NOTE 3 - PROPERTY AND EQUIPMENT, NET
- ------------------------------------
Property and equipment consisted of the following as of June 30, 1998:
1998
------
Computer and telecom equipment $ 137
Office equipment 152
Furniture and fittings 36
-----
Total cost 325
Accumulated depreciation ( 17)
-----
$ 308
=====
Depreciation expense was approximately $17 for the year ended June 30, 1998.
Note 4 - INCOME TAXES
- ---------------------
The deferred income taxes at June 30, 1998 are as follows:
1998
--------
Assets:
Net operating loss carry-forwards $ 277
Other -
------
Total deferred tax assets 277
Liabilities:
Excess depreciation ( 6)
------
Gross deferred tax asset 271
Less valuation allowance ( 271)
------
Net deferred tax asset -
======
F-9
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
June 30, 1998
(Dollars in thousands)
Note 4 - INCOME TAXES (continued)
- ---------------------
Under SFAS No. 109, the Company has recorded a valuation allowance against the
value of deferred tax assets that are more likely than not to be unrealizable.
The valuation allowance is based on management's estimates and analysis, which
include the impact of tax laws which may limit the Company's ability to utilize
such deferred tax assets.
NOTE 5 - RELATED PARTIES
- ------------------------
During the year ended June 30, 1998, the Company received funding from certain
UK subsidiaries of its parent, primarily in the form of cost of revenue, in the
amount $3,914. All of these transactions were on arms-length commercial terms.
In addition, on the instructions of its parent company, the Company advanced
funds to various subsidiaries of its parent. The net balance arising from
trading and funding transactions owed to these companies at June 30, 1998 was
$139 (See Note 8). No interest was charged in respect of these trading and
funding balances.
NOTE 6 - EMPLOYEE BENEFIT PLANS
- -------------------------------
The Group's policy is to make contributions to individual employee pension
plans on a discretionary basis. There is no Group pension plan. There were no
Group contributions to pension plans during 1998.
The company pays for medical insurance for certain senior employees, the cost
of which is not material. The Group has no post retirement medical benefit.
NOTE 7 - COMMITMENTS
- --------------------
Telecommunications Service Agreements
- -------------------------------------
The Company has telecommunications service agreements with its service
providers. These agreements do not contain minute volume commitments.
Service Agreements
- ------------------
The Company has entered into service agreements with certain executive
personnel. The arrangements provide for the continuation of compensation (as
defined) for up to 3 years from the date of termination.
F-10
MEDIATEL GLOBAL COMMUNICATIONS, LTD. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
June 30, 1998
(Dollars in thousands)
NOTE 7 - COMMITMENTS (continued)
- --------------------
Leases
- ------
The company leases its principal place of business. The lease term is twelve
years from March 16, 1998. Although the Group has the right to terminate the
lease on the third and sixth year rent reviews.
The Company has no other individual significant leases.
The future minimum lease payments under the lease at June 30, 1998 are as
follows: 1999--$181, 2000--$123, 2001 -- $123.
Rent expense for operating leases was approximately $71, for the period ended
June 30, 1998.
NOTE 8 - SUBSEQUENT EVENTS
- --------------------------
In November 1998, Chadwell Hall Holdings Limited (`CHH') acquired 51% of the
parent company of MediaTel, thereby increasing its holding to 100%. CHH then
transferred the MediaTel stock directly to its own holding.
On March 16, 1999, Clariti Telecommunications International, Ltd. acquired 100%
of MediaTel stock from CHH. As part of this transaction all MediaTel Group
indebtedness with CHH and its subsidiaries was capitalized.
F-11
CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
In November 1998, Chadwell Hall Holdings, Ltd. ("CHH") acquired the 75%
majority interest in GlobalFirst Holdings, Ltd. ("GlobalFirst") and the 51%
majority interest in MediaTel Global Communications, Ltd. ("MediaTel") that had
been held by other parties. CHH entered these transactions in order to
facilitate the subsequent sales of GlobalFirst and MediaTel to Clariti
Telecommunications International, Ltd. ("Clariti") in December 1998 and March
1999, respectively. In addition, on February 3, 1999 Clariti sold all of the
outstanding capital stock of Telnet Products & Services, Ltd. ("Telnet"), a
wholly owned subsidiary of GlobalFirst back to CHH.
The following unaudited pro forma combined financial statements are based on
the historical financial statements of Clariti, GlobalFirst, MediaTel and
Telnet. Such financial statements have been adjusted to give effect to:
(1) the acquisition of GlobalFirst (including Telnet) by Clariti in a
transaction accounted for as a reverse acquisition under the purchase
method of accounting,
(2) the acquisition of MediaTel by Clariti in a transaction accounted for
under the purchase method of accounting,
(3) the sale of Telnet, and
(4) the November 1998 acquisition of the majority interests in GlobalFirst
and MediaTel by CHH.
The pro forma adjustments are based upon preliminary allocations of the
GlobalFirst and MediaTel purchase prices and upon the assumptions described in
the accompanying notes. Actual allocations of such purchase prices are likely
to be different from that reflected in these pro forma financial statements.
References in this document to data presented on a "pro forma basis" as of any
date or for any period shall have the meaning set forth above with respect to
such date or period.
The unaudited pro forma combined financial statements should be read in
conjunction with Clariti's financial statements appearing in its Form 10-QSB
filed May 24, 1999, the financial statements of GlobalFirst appearing in a Form
8-K/A filed by Clariti on February 22, 1999, and the MediaTel financial
statements appearing in this Form 8-K/A. The unaudited pro forma combined
financial statements are presented for information purposes only and are not
necessarily indicative of the results that would have been reported had such
events occurred on the dates specified, nor is it indicative of Clariti's
future results.
F-12
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
(Dollars and Shares in Thousands, Except Per Share Amounts)
Historical Historical Historical
Clariti GlobalFirst MediaTel
Telecoms. Holdings Global
Int'l Ltd. Ltd. Comms. Ltd.
---------- ----------- -----------
Revenue $ - $ 13,558 $ 5,665
Cost of revenue - 21,953 6,548
------- -------- --------
Gross profit (loss) - ( 8,395) ( 883)
Sales and marketing - 1,900 376
Research and development 1,321 - -
General and administrative 3,294 7,883 771
Amortization - - -
------- -------- --------
Net loss (4,615) (18,178) ( 2,030)
Other comprehensive loss:
Foreign currency translation adjs. - ( 64) -
------- -------- --------
Comprehensive loss $(4,615) $(18,242) $( 2,030)
======= ======== ========
Deduct Pro Forma
Historical Adjustments
Telnet for the
Products Acquisitions
& Svcs. And Sale Pro Forma
Ltd. (a) Combined
---------- ------------ ---------
Revenue $(12,972) $ - $ 6,251
Cost of revenue (21,541) - 6,960
-------- -------- --------
Gross profit (loss) 8,569 - ( 709)
Sales and marketing ( 1,631) - 645
Research and development - - 1,321
General and administrative ( 7,580) - 4,368
Amortization - 32,129(b) 32,129
-------- -------- --------
Net loss 17,780 (32,129) (39,172)
Other comprehensive loss:
Foreign currency translation adjs. 147 - 83
-------- -------- --------
Comprehensive loss $ 17,927 $(32,129) $(39,089)
======== ======== ========
Weighted average number of shares outstanding 108,906
Basic and diluted loss per common share $( 0.36)
========
F-13
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999
(Dollars and Shares in Thousands, Except Per Share Amounts)
Historical Historical Historical
Clariti GlobalFirst MediaTel
Telecoms. Holdings Global
Int'l Ltd. Ltd. Comms. Ltd.
---------- ----------- -----------
Revenue $ - $ 26,794 $ 17,986
Cost of revenue - 39,990 19,215
------- -------- --------
Gross profit (loss) - (13,196) ( 1,229)
Sales and marketing - 1,265 140
Research and development 1,653 - -
General and administrative 3,958 13,600 6,518
Amortization - - -
------- -------- --------
Net loss (5,611) (28,061) ( 7,887)
Other comprehensive loss:
Foreign currency translation adjs. - 132 -
------- -------- --------
Comprehensive loss $(5,611) $(27,929) $( 7,887)
======= ======== ========
Deduct Pro Forma
Historical Adjustments
Telnet for the
Products Acquisitions
& Svcs. And Sale Pro Forma
Ltd. (a) Combined
---------- ------------ ---------
Revenue $( 6,822) $ - $ 37,958
Cost of revenue ( 7,415) - 51,790
-------- -------- --------
Gross profit (loss) 593 - (13,832)
Sales and marketing ( 321) - 1,084
Research and development - - 1,653
General and administrative ( 6,711) - 17,365
Amortization - 24,097(b) 24,097
-------- -------- --------
Net loss 7,625 (24,097) (58,031)
Other comprehensive loss:
Foreign currency translation adjs. - - 132
-------- -------- --------
Comprehensive loss $ 7,625 $(24,097) $(57,899)
======== ======== ========
Weighted average number of shares outstanding 112,570
Basic and diluted loss per common share $( 0.52)
========
F-14
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------
(a) The Unaudited Pro Forma Combined Statements of Operations have been
prepared to reflect the following transactions:
- the December 1998 business combination between Clariti and GlobalFirst is
presented as a reverse acquisition in which GlobalFirst is considered the
acquiror and Clariti is considered the acquired company. Under the terms
of the transaction, Clariti acquired 100% of the capital stock of
GlobalFirst in exchange for 76,571,500 shares of Clariti common stock.
- the February 1999 sale of Telnet back to CHH in exchange for a $21
million note (the "$21 Million Note"), and
- the March 1999 acquisition of MediaTel by Clariti in exchange for
cancellation of the $21 Million Note and the issuance of a $3 million
note.
Additionally, the Unaudited Pro Forma Combined Statements of Operations
reflect the November 1998 acquisition of the majority interests in
Global First and MediaTel by CHH, for consideration which approximated $100
million and $12 million, respectively.
(b) Pro forma adjustment reflects amortization of intangible assets resulting
from the acquisitions on a straight-line basis over a useful life of five
years. Management has not yet allocated any of the excess purchase price of
the acquisitions to identifiable intangible assets such as technology,
in-process research and development, or goodwill, as final valuations of
any potential intangible assets are not currently available. Appropriate
revisions will be made when the final valuations are available. The useful
life of any individual asset so identified may differ from the five-year
amortization period reflected in these Pro Forma Combined Statements of
Operations.
F-15