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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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): October 4, 2000
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ACTIVE LINK COMMUNICATIONS, INC.
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(Exact Name of Registrant as Specified in Charter)
Commission file number: 0-30220
Colorado 84-0917382
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
7388 South Revere Parkway, Suite 1000, Englewood, Colorado 80112
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(Address of principal executive offices) (Zip Code)
(303) 721-8200
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Registrant's telephone number, including area code
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This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by
Active Link Communications, Inc. on October 18, 2000 solely to add the financial
statements of the business acquired as required by Item 7(a) and the pro forma
financial information as required by Item 7(b).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The required financial statements of the business acquired are set forth
below.
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INDEPENDENT AUDITOR'S REPORT
Stockholders and Board of Directors
Application Consultants, Inc.
Denver, Colorado
We have audited the accompanying balance sheet of Application Consultants, Inc.
as of September 30, 2000, and the related statements of operations,
stockholders' equity 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 Application Consultants, Inc.
as of September 30, 2000, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
November 27, 2000
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APPLICATION CONSULTANTS, INC.
BALANCE SHEET
September 30,
2000
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ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 107,592
Accounts receivable, net of allowance for doubtful accounts of $34,224 1,236,623
Inventories 32,057
Prepaid expenses and other 99,305
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Total current assets 1,475,577
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $203,149 46,213
DEPOSITS 4,388
DEFERRED TAX ASSET 21,500
GOODWILL, net of accumulated amortization of $34,044 646,832
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TOTAL ASSETS $2,194,510
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Bank line of credit $ 349,600
Current portion of notes payable 7,114
Current portion of capital lease obligations 4,642
Accounts payable 502,119
Accrued payroll 207,500
Billings in excess of costs and estimated earnings 28,915
Deferred tax liability 32,000
Deferred revenues 26,945
Other current liabilities 338,242
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Total current liabilities 1,497,077
NOTES PAYABLE, net of current portion 4,811
CAPITAL LEASE OBLIGATIONS 21,747
COMMITMENTS (Note 6)
STOCKHOLDERS' EQUITY:
Preferred stock, 1,000,000 shares authorized, no shares outstanding --
Common stock, $.01 par value; 5,000,000 shares authorized, 1,000,000 shares 10,000
issued and outstanding, respectively
Additional paid-in capital 592,640
Retained earnings 68,235
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Total stockholders' equity 670,875
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,194,510
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SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
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APPLICATION CONSULTANTS, INC.
STATEMENT OF OPERATIONS
September 30,
2000
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NET REVENUES $ 5,439,444
Cost of sales 3,801,580
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GROSS PROFIT 1,637,864
OPERATING EXPENSES:
Salaries and related expenses 1,211,250
Selling, general and administrative - other 699,216
Depreciation and amortization 73,194
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Total expenses 1,983,660
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OPERATING LOSS (345,796)
INTEREST EXPENSE (18,119)
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LOSS BEFORE INCOME TAXES BENEFIT (363,915)
DEFERRED INCOME TAX BENEFIT 141,634
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NET LOSS $ (222,281)
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SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
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APPLICANT CONSULTANTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 2000
COMMON STOCK ADDITIONAL RETAINED
--------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- --------- ---------- --------- ---------
BALANCES, October 1, 1999 1,000,000 10,000 $ 592,640 $ 290,516 $ 893,156
Net loss -- -- -- (222,281) (222,281)
--------- --------- --------- --------- ---------
BALANCES, September 30, 2000 1,000,000 $ 10,000 $ 592,640 $ 68,235 $ 670,875
========= ========= ========= ========= =========
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
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APPLICATION CONSULTANTS, INC.
STATEMENT OF CASH FLOWS
September 30,
2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(222,281)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 73,194
Deferred tax benefit (141,634)
Changes in allowance for doubtful accounts 20,486
Change in operating assets and liabilities:
Accounts receivable (526,423)
Inventories (5,339)
Prepaid expenses and other (81,957)
Accounts payable 315,963
Accrued payroll 16,647
Billings in excess of costs and estimated earnings 28,915
Deferred revenues (45,549)
Other current liabilities 315,218
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Net cash used by operating activities (252,760)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (10,128)
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CASH FLOWS FROM FINANCING ACTIVITY
Payments on capital lease obligations (8,491)
Borrowings from bank line of credit 369,600
Payments on bank line of credit (70,000)
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Net cash provided by financing activities 291,109
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INCREASE IN CASH AND CASH EQUIVALENTS 28,221
CASH AND CASH EQUIVALENTS, at beginning of year 79,371
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CASH AND CASH EQUIVALENTS, at end of year $ 107,592
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SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for:
Interest $ 13,032
=========
Income taxes $ --
=========
Non-cash financing activities:
Equipment financed through capital lease $ 28,499
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SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
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APPLICATION CONSULTANTS, INC.
NOTES TO FINANCIAL
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Organization - Application Consultants, Inc. (the Company) was formed
in the State of Colorado on May 1, 1992. Effective on October 1, 1999,
the Company merged with Metrowest Communications, LLC (Metrowest). The
Company plans, designs, installs, and maintains video, voice and data
networks and provides related training services. Metrowest's primary
operations are the sale and installation of data, voice and video
cabling for network systems. Application Consultants, Inc. and
Metrowest provide advanced technology solutions and services to large
and small corporations as well as government agencies, colleges,
primary and secondary schools.
Cash and Cash Equivalents - For purpose of the statements of cash
flows, the Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Property and Equipment - Property and equipment are stated at cost.
Depreciation of property and equipment is calculated using the
straight-line method over the estimated useful lives (ranging from 3 to
5 years) of the respective assets. The cost of normal maintenance and
repairs is charged to operating expenses as incurred. Material
expenditures which increase the life of an asset are capitalized and
depreciated over the estimated remaining useful life of the asset. The
cost of properties sold, or otherwise disposed of, and the related
accumulated depreciation or amortization are removed from the accounts,
and any gain or losses are reflected in current operations.
Impairment of Long-Lived Assets - In the event that facts and
circumstances indicated that the cost of assets or other assets may be
impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows
associated with the assets would be compared to the asset's carrying
amount to determine if a write-down to market value or discounted cash
flow value is required.
Inventories - Inventories are stated at the lower of cost (determined
on a first-in, first-out basis) or market, and include the cost of
product utilized in the Company's contract operations.
Income Taxes - The Company accounts for income taxes under the
liability method which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based
on the difference between the financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
Income Recognition - The Company follows the percentage of completion
method of accounting for all significant long-term contracts. The
percentage of completion method of reporting income from contracts
takes into account direct labor hours, the costs, estimated earnings,
and revenue to date on contracts not yet completed.
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APPLICATION CONSULTANTS, INC.
NOTES TO FINANCIAL
The amount of revenue recognized is the portion of the total contract
price that the direct labor hours incurred to date bears to the
anticipated final total direct labor hours. Contract costs includes all
labor and benefits, materials unique to or installed in the project,
and subcontract costs. General and administrative costs are charged to
expense as incurred.
At the time a loss on a contract becomes known, the entire amount of
the estimated ultimate loss is recognized in the financial statements.
Costs and estimated earnings on contracts in progress in excess of
billings is classified as a current asset. Amounts billed in excess of
costs and estimated earnings are classified as a current liability.
Income related to direct sales of equipment and parts is recognized
upon shipment.
Financial Instruments, Major Customers and Vendors, and Other
Concentrations of Credit Risk - Credit risk represents the accounting
loss that would be recognized at the reporting date if counterparties
failed completely to perform as contracted. Concentrations of credit
risk (whether on or off balance sheet) that arise from financial
instruments exist for groups of customers or counterparties when they
have similar economic characteristic that would cause their ability to
meet contractual obligations to be similarly effected by changes in
economic or other conditions.
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and cash
equivalents. At September 30, 2000, the Company maintained cash
balances with a commercial bank which were approximately $7,592 in
excess of FDIC limits.
The estimated fair values for financial instruments are determined at
discrete points in time based on relevant market information. These
estimates involve uncertainties and cannot be determined with
precision. The carrying amounts of cash, receivables, notes
receivables, accounts payable, and accrued liabilities approximate fair
value as a result of the short-term maturities. The fair value of notes
payable and capital leases approximates their carrying value as
generally their interest rates reflect the Company's current effective
borrowing rate or the notes are not material.
Comprehensive Income (loss) - In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income (Loss). SFAS No. 130,
which is effective for fiscal years beginning after December 15, 1997,
defines comprehensive income (loss) as all changes in shareholders'
equity exclusive of transactions with owners, such as capital
investments. Comprehensive income (loss) includes net income or loss,
changes in certain assets and liabilities that are reported directly in
equity such as translation adjustments in foreign subsidiaries, and
certain changes in minimum pension liabilities. The Company's
comprehensive loss was equal to its net loss for the year ended
September 30, 2000.
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APPLICATION CONSULTANTS, INC.
NOTES TO FINANCIAL
New Pronouncement - SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, was issued in June 1998. This statement
establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. This statement is effective for the Company's financial
statements for the year ended June 30, 2001 and the adoption of this
standard is not expected to have a material effect on the Company's
financial statements.
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
The following information is applicable to uncompleted contracts as of
September 30, 2000:
September 30,
2000
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Costs incurred on uncompleted contracts $ 583,359
Estimated earnings 243,522
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826,881
Less billings to date (855,796)
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Costs and estimated earnings in excess of billings on uncompleted contracts $ 28,915
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3. PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost and are compromised of the
following at September 30, 2000:
September 30,
2000
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Furniture, fixtures and computer equipment $ 158,582
Plant equipment 44,218
Other 46,562
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249,362
Less accumulated depreciation (203,149)
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$ 46,213
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Depreciation expense related to property and equipment for the year
ended September 30, 2000 was $39,150.
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APPLICATION CONSULTANTS, INC.
NOTES TO FINANCIAL
4. BORROWING ARRANGEMENTS:
The Company's borrowing arrangements at September 30, 2000 consists of
the following:
Bank Line of Credit:
Note payable evidencing a $350,000 line-of-credit
agreement; maturity date May 31, 2001; interest at
Norwest's prime rate plus 2%; interest only
payable monthly; collateralized by the Company's $ 349,600
assets and the personal guarantees of the Company's ==========
owners.
Long-Term Debt:
Note payable; due December 31, 2001; interest at a
rate of 3.90% per annum; payable in monthly
installments of $323, including interest; $ 5,340
collateralized by a vehicle.
Note payable; due May 6, 2002; interest at a rate
of 8.49% per annum; payable in monthly installments
of $338, including interest; collateralized by a
vehicle. 6,585
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11,925
Less Current Maturities (7,114)
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Long-Term Portion (due in fiscal 2002) $ 4,811
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5. CAPITAL LEASE
The Company leases equipment under capital lease. At September 30,
2000, scheduled future minimum payments under capital leases with
initial or remaining terms of one year or more are as follows:
Year ended September 30:
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2001 $ 7,727
2002 7,727
2003 7,727
2004 7,727
2005 3,865
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Total minimum lease payments 34,773
Less interest (8,384)
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Present value of net minimum lease payments 26,389
Less current portion (4,642)
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Non-current portion $ 21,747
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APPLICATION CONSULTANTS, INC.
NOTES TO FINANCIAL
The following is a summary of property and equipment under capital
lease at September 30:
2000
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Equipment $ 28,499
Accumulated amortization (3,324)
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$ 25,175
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Amortization of assets held under capital leases is included with
depreciation expense.
6. COMMITMENTS:
The Company rents office space and equipment under various lease
agreements. The future minimum rental commitments of the Company for
office space and equipment as of September 30, 2000, are as follows:
Years Ending
December 31, Amount
------------ ----------
2001 $ 96,343
2002 72,211
2003 17,593
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$ 186,147
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Rent expense for office and warehouse space and equipment was $126,576
for the year ended September 30, 2000.
7. STOCKHOLDER'S EQUITY:
The Company has the authority to issue 1,000,000 shares of preferred
stock. The Board of Directors has the authority to issue such preferred
stock in series and determine the rights and preferences of the shares.
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APPLICATION CONSULTANTS, INC.
NOTES TO FINANCIAL
8. INCOME TAXES:
The Company's actual effective tax rate differs from U.S. Federal
corporate income tax rate of 34% as of September 30, 2000 as follows:
Statutory rate (34.0)%
State income taxes, net of Federal income tax benefit (3.3)%
Other (1.6)%
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(38.9)%
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The components of the net deferred tax asset recognized as of September
30, 2000 are as follows:
2000
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Current deferred tax assets (liabilities):
Provision for bad debt $ 6,000
Section 481 carryforward (56,500)
Net operating loss carryforward 18,500
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Net current deferred tax liability (32,000)
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Long-term deferred tax assets (liabilities):
Net operating loss carryforward $ 21,500
========
The Company has a net operating loss carryforward of approximately
$216,000.
9. RETIREMENT PLAN:
The Company established a 401(k) retirement plan on December 28, 1994
for the benefit of its employees. Generally, all employees who have
attained age 21 and have a year of service are eligible to participate
in the plan. Company contribution, although discretionary, must meet
certain "top-heavy" rules as further defined in the plan. For the year
ended September 30, 2000, the Company made no contribution to the plan.
10. SUBSEQUENT EVENT:
Effective September 30, 2000, the Company was acquired by a subsidiary
of Active Link Communications, Inc. (ALC). The existing stockholders of
the Company received 1,750,000 shares of common stock of ALC and
warrants for the purchase of 250,000 shares of common stock of ALC as
consideration for the sale of the Company.
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(b) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The accompanying unaudited pro forma combining, condensed statements of
operations combine the operations of Active Link Communications, Inc. (Active
Link) and Application Consultants, Inc. (Apcon) for the twelve months ended
April 30, 2000 and for the five months ended September 30, 2000, as if the
acquisition had been completed at the beginning of the periods presented.
Apcon's operations have been recast to coincide with Active Link's fiscal year
end. The acquisition has been accounted for as a purchase. The pro forma
combining condensed financial information has been prepared on the basis of the
assumptions included in the notes to the pro forma combining, condensed
financial information.
The pro forma financial information is not necessarily indicative of the results
of operations or the financial position which would have been attained had the
acquisition been consummated at the beginning of the periods indicated or which
may be attained in the future. The pro forma financial information should be
read in conjunction with the historical consolidated financial statements Active
Link and Apcon, included elsewhere in this document or in prior filings with the
Securities and Exchange Commission.
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ACTIVE LINK COMMUNICATIONS, INC.
APPLICATION CONSULTANTS, INC.
PRO FORMA COMBINING CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE FIVE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS EXCEPT EARNINGS PER SHARE INFORMATION)
Historical Financial
Statements
----------------------------- Pro Forma
September 30, September 30, Consolidated
2000 2000 Pro forma Financial
Active Link Apcon Adjustments Statements
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REVENUE:
Franchise equipment sales $ 1,870 $ -- $ -- $ 1,870
Direct equipment and service sales 5,316 3,000 8,316
Other revenue 82 -- 82
------------ ------------ ------------
Total revenue 7,268 3,000 10,268
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of franchise equipment sales 1,684 -- 1,684
Cost of direct equipment and service sales 3,893 2,157 6,050
Selling, general and administrative 2,062 987 3,049
Interest 322 18 13 A 353
Depreciation and amortization 139 20 55 B 214
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8,100 3,182 11,350
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LOSS BEFORE INCOME TAXES (832) (182) (1,082)
INCOME TAX BENEFIT -- 69 69 C --
------------ ------------ ------------
NET LOSS $ (832) $ (113) $ (1,082)
============ ============ ============
LOSS PER COMMON SHARE:
Basic and diluted $ (.10) $ (.11)
============ ============
WEIGHTED AVERAGE NUMBER OF OUTSTANDING COMMON SHARES
Basic and Diluted 8,499,941 1,750,000 D 10,249,941
============ ========= ============
See notes to pro forma combining condensed consolidated financial information.
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ACTIVE LINK COMMUNICATIONS, INC.
APPLICATION CONSULTANTS, INC.
PRO FORMA COMBINING CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE TWELVE MONTHS ENDED APRIL 30, 2000
(IN THOUSANDS EXCEPT EARNINGS PER SHARE INFORMATION)
Historical Financial
Statements
---------------------------- Pro Forma
April 30, April 30, Consolidated
2000 2000 Pro forma Financial
Active Link Apcon Adjustments Statements
------------- ------------ ----------- ------------
REVENUE:
Franchise equipment sales $ 5,068 $ -- $ -- $ 5,068
Direct equipment and service sales 9,666 4,218 13,884
Other revenue 308 -- 308
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Total revenue 15,042 4,218 19,260
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COSTS AND EXPENSES:
Cost of franchise equipment sales 4,562 -- 4,562
Cost of direct equipment and service sales 6,704 2,647 9,351
Selling, general, administrative and other 4,475 1,627 6,102
Interest 489 4 30 A 523
Depreciation & amortization 370 48 131 B 549
----------- ----------- -----------
NET LOSS BEFORE INCOME TAXES (1,558) (108) (1,827)
INCOME TAX EXPENSE 1,045 -- 1,045
----------- ----------- -----------
NET LOSS (2,603) (108) (2,872)
DIVIDENDS ON PREFERRED STOCK PAID IN COMMON STOCK 202 -- 202
CUMULATIVE DIVIDEND ON PREFERRED STOCK 1 -- 1
----------- ----------- -----------
NET LOSS APPLICABLE TO COMMON STOCK $ (2,806) $ (108) $ (3,075)
=========== =========== ===========
LOSS PER COMMON SHARE:
Basic and Diluted $ (.39) $ (.35)
=========== ===========
WEIGHTED AVERAGE NUMBER OF OUTSTANDING COMMON SHARES
Basic and Diluted 7,153,351 1,750,000 D 8,903,351
=========== ========= ===========
See notes to pro forma combining condensed consolidated financial information.
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ACTIVE LINK COMMUNICATIONS, INC.
APPLICATION CONSULTANTS, INC.
NOTES TO PRO FORMA COMBINING CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
Effective September 30, 2000 the Company through its wholly owned subsidiary IAC
Acquisition Corporation acquired all of the stock of Apcon. The Company issued
to the former shareholders of Apcon 1,750,000 shares of its restricted common
stock, valued at $1.50 per share and issued warrants for the purchase of 250,000
shares of common stock, exercisable for three years, subject to certain market
price requirements. As a result, the warrants have been treated as contingent
consideration with no value yet assigned to these warrants. The warrants will be
valued if and when the contingency is satisfied and accordingly, goodwill will
be adjusted to reflect the value of these warrants.
(A) To record interest paid on the acquisition financing.
(B) Amortization of goodwill over a period of 20 years.
(C) To reduce the deferred tax benefit as a result of the combined entity having
a valuation allowance for the full net deferred tax asset at the beginning
and end of the period presented.
(D) Common share issued as part of the acquisition are assumed to be issued and
outstanding at the beginning of the pro forma period presented. The fully
diluted weighted average common shares outstanding and the fully diluted
loss per share are not presented, as the effect would be anti-dilutive.
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(c) Exhibits
2.1 Merger Agreement by and among IAC Acquisition Corporation,
Communications World International, Inc, Application Consultants, Inc.,
Timothy L. McClung, Darren L. Schaefer, Warren Shawn Kissman, Timothy
L. Woods and Dennis J. Johanningmeier filed as Exhibit 2.1 Form 8-K
(File No. 0-30220) is incorporated herein by reference.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Active Link Communications, Inc.
--------------------------------
(Registrant)
Date: December 15, 2000 /s/ James M. Ciccarelli
----------------- -----------------------
James M. Ciccarelli, Chief Executive Officer
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