SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
June 27, 1996
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Date of Report (date of earliest event reported)
DATALINK SYSTEMS CORPORATION
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Exact name of Registrant as Specified in its Charter
Nevada 33-21508 35-3574355
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State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
17420 High Street, Los Gatos, California 95032
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Address of Principal Executive Offices, Including Zip Code
(408) 354-5604
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Registrant's Telephone Number, Including Area Code
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The following
financial statements for DSC Datalink Systems Corporation are filed herewith:
Page(s)
Independent Auditors' Report F-1
Balance Sheets as of December 31, 1995 and 1994 F-2
Statements of Operations for the Years ended
December 31, 1995 and 1994 and for the Period
from June 15, 1993 (date of inception) to
December 31, 1995 F-3
Statements of Shareholders' Deficit for the
Period from June 15, 1993 (date of inception)
to December 31, 1995 F-4
Statements of Cash Flows for the Years ended
December 31, 1995 and 1994 and for the Period
from June 15, 1993 (date of inception) to
December 31, 1995 F-5
Notes to Financial Statements F-6 to F-9
(c) EXHIBITS.
Exhibit 10 Agreement Concerning the Exchange of Common Stock
Between Datalink Systems Corporation and Datalink
Communications Corporation*
_______________
* Previously filed
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
DSC Datalink Systems Corporation:
We have audited the accompanying balance sheets of DSC Datalink Systems
Corporation (a company in the development stage) as of December 31, 1995 and
1994, and the related statements of operations, shareholders' deficit and cash
flows for the years ended December 31, 1995 and 1994 and for the period from
June 15, 1993 (date of inception) to December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards of the United States. 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 estimatesmade by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DSC Datalink Systems
Corporation (a company in the development stage) as of December 31, 1995 and
1994, and the results of its operations and its cash flows for the years ended
December 31, 1995 and 1994, and for the period from June 15, 1993 (date of
inception) to December 31, 1995, in conformity with generally accepted
accounting principles of the United States.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
San Jose, California
September 6, 1996
F-1
DSC DATALINK SYSTEMS CORPORATION
(a company in the development stage)
BALANCE SHEETS, December 31, 1995 and 1994
(all dollar amounts in Canadian dollars)
----
ASSETS 1995 1994
Current assets:
Cash and cash equivalents $ 22,244 $ 43,994
Other receivables 11,726 2,985
Prepaid expenses 9,843 2,500
Total current assets 43,813 49,479
Property and equipment, net 66,893 11,760
Total assets $ 110,706 $ 61,239
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities $ 63,432 $ 20,697
Payable to related parties 30,000 235,700
Deferred revenue 100,000
Total liabilities 193,432 256,397
Commitments (Note 6).
SHAREHOLDERS' DEFICIT
Class A common stock, no par value:
Authorized: 25,000,000 shares in
1995 and 1994;
Issued and outstanding: 5,280,000
shares in 1995 and 100 shares
in 1994 720,290 1
Deficit accumulated during the
development stage (803,016) (195,159)
Total shareholders' deficit (82,726) (195,158)
Total liabilities and
shareholders' deficit $ 110,706 $ 61,239
The accompanying notes are an integral part of these financial statements.
F-2
DSC DATALINK SYSTEMS CORPORATION
(a company in the development stage)
STATEMENTS OF OPERATIONS
(all dollar amounts in Canadian dollars)
----
Period from
June 15, 1993
(date of
inception) to
Year Ended December 31, December 31,
1995 1994 1995
Operating expenses:
Research and development $ 222,365 $ 80,217 $ 346,424
Sales and Marketing 221,261 18,539 255,081
General and administrative 170,529 37,027 213,209
Loss from operations 614,155 135,783 814,714
Other income 6,298 5,400 11,698
Net loss $(607,857) $(130,383) $(803,016)
The accompanying notes are an integral part of these financial statements.
F-3
DSC DATALINK SYSTEMS CORPORATION
(a company in the development stage)
STATEMENTS OF SHAREHOLDERS' DEFICIT
for the period from June 15, 1993
(date of inception) to December 31, 1995
(all dollar amounts in Canadian dollars)
----
Deficit
Accumulated Total
Class A During the Share-
Common Stock Development holders'
Shares Amount Stage Deficit
Issuance of common stock at
$0.0001 per share to
founders for cash 100 $ 1 $ 1
Net loss $ (64,776) (64,776)
Balances, December 31, 1993 100 1 (64,776) (64,775)
Net loss (130,383) (130,383)
Balances, December 31, 1994 100 1 (195,159) (195,158)
Issuance of common stock for
cash 940,000 360,000 360,000
Issuance of common stock in
exchange for note payable 900,000 225,000 225,000
Issuance of common stock in
exchange for related party
services rendered 3,439,900 135,289 135,289
Net loss (607,857) (607,857)
Balances, December 31, 1995 5,280,000 $ 720,290 $(803,016) $ (82,726)
The accompanying notes are an integral part of these financial statements.
F-4
DSC DATALINK SYSTEMS CORPORATION
(a company in the development stage)
STATEMENTS OF CASH FLOWS
(all dollar amounts in Canadian dollars)
---- Period From
June 15,
1993 (date of
Year Ended inception) to
December 31, December 31,
1995 1994 1995
Cash flows from operating activities:
Net loss $(607,857) $(130,383) $(803,016)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 13,274 2,025 15,299
Common stock issued for services 135,289 135,289
Changes in operating assets and
liabilities:
Other receivables (8,741) (1,706) (11,726)
Prepaid expenses (7,343) (2,500) (9,843)
Accounts payable and accrued
liabilities 42,735 16,624 63,432
Deferred revenue 100,000 100,000
Net cash used in operating
activities (332,643) (115,940) (510,565)
Cash flows from investing activities:
Purchase of property and equipment (68,407) (13,785) (82,192)
Net cash used in investing
activities (68,407) (13,785) (82,192)
Cash flows from financing activities:
Proceeds from issuance of
common stock 360,000 360,001
Proceeds from issuance of
notes payable 19,300 120,700 255,000
Net cash provided by financing
activities 379,300 120,700 615,001
Net increase (decrease) in
cash and cash equivalents (21,750) (9,025) 22,244
Cash and cash equivalents, beginning
of period 43,994 53,019 -
Cash and cash equivalents, end
of period $ 22,244 $ 43,994 $ 22,244
Supplemental schedule of noncash in-
vesting and financing activities:
Issuance of common stock for
notes payable $ 225,000 $ 225,000
The accompanying notes are an integral part of these financial statements.
F-5
DSC DATALINK SYSTEMS CORPORATION
(a company in the development stage)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in Canadian dollars)
----
1. FORMATION AND BUSINESS OF THE COMPANY:
DSC Datalink Systems Corporation, (the Company) was incorporated on June 15,
1993 in Vancouver, British Columbia, Canada to develop wireless information
services. Through December 31, 1995, the Company has devoted substantially
all of its efforts to develop its product, raise capital and recruit
personnel.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
The financial statements of the Company have been prepared in accordance with
United States generally accepted accounting principles. All amounts herein
are shown in Canadian dollars.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is provided using the declining method over the
estimated useful lives of the assets, generally two to five years.
INVESTMENT TAX CREDIT:
The Company records Canadian investment tax credits (ITC's) arising from
research and development expenditures at the time the claim is approved which
is normally in the year subsequent to the year of the claim.
RESEARCH AND DEVELOPMENT EXPENDITURES:
Research and development costs are charged to operations as incurred.
INCOME TAXES:
The Company accounts for income taxes using the liability method. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
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 disclosures of
F-6
DSC DATALINK SYSTEMS CORPORATION
(a company in the development stage)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in Canadian dollars)
----
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
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.
3. PROPERTY AND EQUIPMENT:
Property and equipment comprise:
December 31,
1995 1994
Computer and office equipment $ 69,048 $ 12,899
Furniture and fixtures 9,924 886
Leasehold improvements 3,220
82,192 13,785
Less accumulated depreciation
and amortization 15,299 2,025
$ 66,893 $ 11,760
4. RELATED PARTY TRANSACTIONS:
The amounts payable to related parties are non-interest bearing and are due on
demand.
During the years ended December 31, 1995 and 1994, the Company was charged by
certain shareholder companies for work performed in the amounts of $135,289
and $54,673, respectively. Total charges incurred for the period from June
15, 1993 (date of incorporation) to December 31, 1995 amounted to $189,962.
In fiscal year 1995, services in the amount of $135,289 were exchanged for
3,439,900 of the Company's Class A shares.
5. DEFERRED REVENUE:
During 1995, the Company entered into, but did not finalize, a licensing
agreement with a Canadian company. In connection with this agreement, the
Company received an advance payment of $100,000. Under the terms of the
agreement, the licensee would receive the exclusive rights to provide certain
services to the Company.
6. COMMITMENTS:
The Company leases its facilities and certain office equipment under a
noncancelable operating lease that expires on August 31, 2000. The Company is
responsible for certain taxes, maintenance costs and insurance under the
lease.
At December 31, 1995, future minimum facility lease payments are as follows:
1996 $ 45,680 1998 $ 50,080 2000 $ 31,520
1997 47,880 1999 $ 52,280
F-7
DSC DATALINK SYSTEMS CORPORATION
(a company in the development stage)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in Canadian dollars)
----
6. COMMITMENTS, continued:
Rent expense for the period from June 15, 1993 (date of inception) to December
31, 1995 was $28,593, and for the years ended December 31, 1995, and 1994 were
$25,251 and $3,342, respectively.
7. SHAREHOLDERS' EQUITY:
COMMON STOCK:
The Company is authorized to issue shares of common stock, of which 25,000,000
has been designated Class A common stock. Holders of common stock are
entitled to dividends as and when declared by the Board of Directors. The
holder of each share of common stock is entitled to one vote.
8. INCOME TAXES:
At December 31, 1995, the significant components of the net deferred tax asset
of $238,000 comprised the Company net operating loss carryforwards. At
December 31, 1995, the Company had Canadian federal and provincial net
operating loss carryforwards of approximately $600,000, available to offset
future regular taxable income. The Company's Canadian federal and provincial
net operating loss carryforwards expire between 2000 and 2002, if not used
before such time to offset future taxable income or tax liabilities.
In accordance with United States generally accepted accounting principles, a
valuation allowance must be established for a deferred tax asset if it is
uncertain that a tax benefit may be realized from the asset in the future.
The Company has established a valuation allowance to the extent of its
deferred tax assets since it is not certain that a benefit can be realized in
the future due to the Company's operating losses.
9. SUBSEQUENT EVENTS:
Effective January 16, 1996, shareholders of the Company exchanged 100% of
their shares for 100% of the shares in Datalink Systems Corporation
(Datalink), a U.S. corporation. As a result, DSC Datalink Systems Corporation
became a wholly owned subsidiary company of Datalink Systems Corporation.
On June 27, 1996, Lord Abbott, Inc. (Abbott), a United States publicly traded
corporation, completed the acquisition of 100% of the outstanding common stock
of Datalink. Abbott issued a total of 16,465,316 shares of its common stock
(approximately 99% of the shares now outstanding) to shareholders of Datalink
at closing. Abbott, prior to the exchange of common stock with Datalink, had
no operations and no business activities. For accounting purposes, the
acquisition has been treated as a recapitalization of Datalink with Datalink
as the acquiror (reverse acquisition).
Effective August 21, 1996, Datalink completed a transaction with a Canadian
corporation (the Buyer) selling the Company's technology for cash and a note.
At closing, Datalink received $1,500,000, an additional payment of $1,500,00
is
F-8
DSC DATALINK SYSTEMS CORPORATION
(a company in the development stage)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in Canadian dollars)
----
9. SUBSEQUENT EVENTS, continued:
due November 1996, and a note for $36,730,000. The note is due December 31,
2006 and bears interest at 8% per annum. The note is collateralized by the
technology.
Datalink and the Buyer entered into a "Management and Marketing Agreement"
dated August 21, 1996 (the Agreement). The Agreement expires August 31, 2001,
and may be extended for two additional two year terms. The extension of the
term will be automatic and Datalink or the Buyer during any extension can
terminate the agreement with 90 days notice to the other party. The
significant terms of the agreement are as follows:
Datalink will receive an annual fee of 10% of "Direct Cost Marketing,
Distributing and Selling" technology related services, as defined in the
Agreement, Datalink receives an exclusive worldwide right to use, modify and
sublicense the source code for the technology, including application software,
intellectual property and documentation, Datalink has first right of refusal
in the event the Buyer desires to transfer all or part of the application
software, The Buyer will receive, commencing January 1, 1997, an annual
"owners fee" of $1,500,000, the owners fee to be applied as follows: pay
accrued interest and the excess, if any; a) 60% of the remaining fee applied
to the note balance, and b) 40% of the remaining fee paid in cash to the Buyer
until the note is paid in full, Buyer will receive the "net revenue less
owners fee payable," as defined in the Agreement, related to the technology
sold to be applied as follows: a) 60% of the net revenue applied to the note
balance, and b) 40% of the net revenue paid in cash to the Buyer until the
note is paid in full, and After the note is paid, the "net revenue," as
defined in the agreement, related to the technology sold to be applied as
follows: 40% of the net revenue paid in cash to the Buyer.
The cash received by Datalink will be accounted for under the provisions of
the "Emerging Issues Task Force, 88-18: Sales of Future Revenues." It is
expected that the owners fees and net revenue allocated to the buyer will not
be sufficient to service the note receivable principle and interest payments
due Datalink and as such the note will not be recorded. The note is expected
to have no financial statement impact.
F-9
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.
DATALINK SYSTEMS CORPORATION
Date: September 10, 1996
By /s/ Anthony N. LaPine
Anthony N. LaPine, President and
Chief Executive Officer (Principal
Executive and Financial Officer)