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 Commission File Number:
earliest event reported):
SEPTEMBER 20, 1999 1-10210
EGLOBE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3486421
(State or other jurisdiction of (IRS Employer Identification
incorporation) Number)
1250 24th Street, NW, Suite 725
Washington, D.C. 20037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(202) 822-8981
(Former name or former address, if changed since last report)
NA
EGLOBE, INC.
- --------------------------------------------------------------------------------
EXPLANATORY NOTE
This report was originally filed on December 6, 1999 but, upon review of the
filed Edgar version, it appears that some data was lost in transmission. Even
though the loss was minimal, the Company has elected to refile the report so
that a complete and accurate version is available.
Pursuant to Items 7(a)(4) and 7(b)(2) of the Securities and Exchange
Commission's (the "Commission") General Instructions for Form 8-K, eGlobe, Inc.
(the "Company") formerly Executive TeleCard, Ltd., hereby amends Items 7(a) and
7(b) of its Current Report on Form 8-K, filed with the Commission on October 5,
1999 to file financial statements of Oasis Reservations Services, Inc. ("ORS"),
in which the Company, acting through a newly formed subsidiary, acquired control
of ORS on September 20, 1999 and to file pro forma financial information for the
Company reflecting such transaction.
The Company has included a brief description of the Company's acquisition of ORS
along with the pro forma information for the Company. Connectsoft Communications
Corporation and Connectsoft Holding Corp. ("Connectsoft") were acquired on June
17, 1999, by the Company's new subsidiary Vogo Networks, LLC ("Vogo"). Telekey,
Inc and Subsidiary and Travelers Services, Inc. ("Telekey") were acquired on
February 12, 1999. UCI Tele Networks, Ltd. ("UCI") was acquired on December 31,
1998 and IDX International Inc. and Subsidiaries ("IDX") was acquired on
December 2, 1998. The Connectsoft acquisition was previously reported on Form
8K/A filed on August 31, 1999. The Telekey, UCI and IDX acquisitions were
previously reported on Form 8-K/A filed on April 30, 1999. In June 1999, the
stockholders approved the increase in the convertibility of the preferred stock
issued to the IDX stockholders and in July 1999, the terms of the IDX purchase
agreement were renegotiated. The effects of the above two transactions related
to the IDX acquisition were previously reported on Form 8K/A filed on August 31,
1999.
In September 1999, the Company obtained appraisals of the assets of IDX, UCI and
Telekey and reclassified certain acquired goodwill to other identifiable assets.
In August 1999, the Company issued 30 shares of Series K Cumulative Convertible
Preferred Stock ("Series K Preferred") valued at $3.0 million in exchange for
the one share of Series G Cumulative Convertible Preferred Stock ("Series G
Preferred") held by the Seller of Connectsoft. Effective August 1, 1999, the
Company acquired iGlobe, Inc. ("iGlobe"). All of these transactions are further
described in this Form 8-K/A.
2
EGLOBE, INC.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
ITEM 7(a). FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Filed herewith as Exhibit as part of this report are the
following financial statements: Oasis Reservation
Services, Inc. (i) Independent Auditors' Report, (ii)
Balance Sheets as of May 31, 1999, and August 31, 1999
(unaudited), (iii) Statements of Operations for the year
ended May 31, 1999, and the three months ended August
31, 1999 and 1998 (unaudited), (iv) Statements of
Shareholder's Equity for the year ended May 31, 1999 and
the three months ended August 31, 1999 (unaudited), (v)
Statements of Cash Flows for the year ended May 31, 1999
and the three months ended August 31, 1999 and 1998
(unaudited), (vi) Notes to Financial Statements for the
year ended May 31, 1999 and the three months ended
August 31, 1999 and 1998 (unaudited).
ITEM 7(b). PRO FORMA FINANCIAL INFORMATION
Filed herewith as Exhibit as part of this report are the
Company's Unaudited Pro Forma Condensed Consolidated
Statements of Operations for the twelve months ended
December 31, 1998 and for the nine months ended
September 30, 1999 and the notes thereto. A pro forma
condensed consolidated balance sheet is not included in
this report as the acquisition of ORS occurred in
September 1999 and is included in the September 30, 1999
historical unaudited balance sheet of the Company as
reported on Form 10-Q filed on November 16, 1999. The
effect of the Company's stockholder approval of the
increase in the IDX preferred stock conversion terms,
the renegotiation of the terms of the original IDX
purchase agreement, the reclassification of acquired
goodwill to other identifiable assets, the exchange of
Series K Preferred for the Series G Preferred and the
acquisition of iGlobe are also included in the September
30, 1999 historical unaudited balance sheet.
ITEM 7(c). EXHIBITS
Exhibits.
2.1 Contribution Agreement by and among eGlobe, Inc.,
eGlobe/OASIS, Inc., OASIS Reservation Services, Inc.,
Outsourced Automated Services and Integrated Solutions,
Inc. and eGlobe/OASIS Reservations LLC, dated as
September 15, 1999 is incorporated by reference to the
8-K filed on October 5, 1999.
2.2 Operating Agreement of eGlobe/OASIS Reservations LLC by
and among eGlobe/OASIS, Inc. and Outsourced Automated
Services and Integrated Solutions, Inc., dated as
September 15, 1999 is incorporated by reference to the
8-K filed on October 5, 1999.
4.1 Form of Warrants to purchase Common Stock of eGlobe,
dated as of September 15, 1999 is incorporated by
reference to the 8-K filed on October 5, 1999.
10.1 Guaranty by and between eGlobe, Inc. and Outsourced
Automated Services and Integrated Solutions, Inc. is
incorporated by reference to the 8-K filed on October 5,
1999
10.2 Pledge Agreement by and between eGlobe, Inc. and
Outsourced Automated Services and Integrated Solutions,
Inc. is incorporated by reference to the 8-K filed on
October 5, 1999.
3
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services
and Integrated Solutions, Inc.
FINANCIAL STATEMENTS
Year Ended May 31, 1999 (audited) and
Three Months Ended August 31, 1999 and 1998 (unaudited)
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
FINANCIAL STATEMENTS
Year Ended May 31, 1999 (audited) and
Three Months Ended August 31, 1999 and 1998 (unaudited)
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report..................................................2
Balance Sheets................................................................3
Statements of Operations......................................................4
Statements of Shareholder's Equity............................................5
Statements of Cash Flows....................................................6-8
Notes to Financial Statements..............................................9-18
1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Oasis Reservations Services, Inc.
We have audited the accompanying balance sheet of Oasis Reservations
Services, Inc. as of May 31, 1999, and the related statements of operations,
shareholder's 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 Oasis Reservations
Services, Inc. as of May 31, 1999, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
Oasis Reservations Services, Inc. will continue as a going concern. Since the
Company does not have significant cash resources, there is substantial doubt
about the Company's ability to continue as a going concern. This matter is more
fully discussed in Note G. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
2
November 4, 1999
Miami, Florida
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
BALANCE SHEETS
August 31, 1999 May 31, 1999
--------------- ------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 2,610 $ 2,944
Accounts receivable - trade 94,629 62,715
Prepaid expenses 152,348 6,391
----------- -----------
TOTAL CURRENT ASSETS 249,587 72,050
PROPERTY AND EQUIPMENT, net 671,244 992,448
OTHER ASSETS -- 7,990
----------- -----------
TOTAL ASSETS $ 920,831 $ 1,072,488
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 115,088 $ 243,670
Accrued expenses 328,544 250,956
Deferred revenue -- 216,218
Deposit 20,000 20,000
----------- -----------
TOTAL CURRENT LIABILITIES 463,632 730,844
ALLOCATED DEFERRED INCOME TAXES 63,000 17,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY
Common Stock, $.01 par value; 1,000 shares
authorized, issued and outstanding 10 10
Additional paid-in capital 469,314 441,064
Accumulated deficit (75,125) (116,430)
----------- -----------
Total shareholder's equity 394,199 324,644
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $ 920,831 $ 1,072,488
=========== ===========
See accompanying independent auditors' report and notes to financial statements.
3
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
STATEMENTS OF OPERATIONS
For the Three Months For the Year
Ended August 31, Ended May 31,
---------------- ------------------
1999 1998 1999
---- ---- ----
(unaudited)
Net Revenues $ 1,455,198 $ 905,572 $ 4,655,785
Revenues from affiliates 275,119 -- 541,444
----------- ----------- -----------
1,730,317 905,572 5,197,229
----------- ----------- -----------
Cost of revenues:
Employee leasing costs 1,310,203 893,252 4,302,196
Telephone expenses 124,316 44,592 333,132
----------- ----------- -----------
1,434,519 937,844 4,635,328
----------- ----------- -----------
GROSS PROFIT (LOSS) 295,798 (32,272) 561,901
Selling, general and administrative
expenses 209,154 235,144 929,946
----------- ----------- -----------
INCOME (LOSS) FROM
OPERATIONS 86,644 (267,416) (368,045)
Other income (expense):
Interest income 1,297 430 4,785
Interest expense (636) -- (8,478)
Other income -- 181,308 181,308
----------- ----------- -----------
INCOME (LOSS)
BEFORE PROVISION
FOR ALLOCATED
INCOME TAXES 87,305 (85,678) (190,430)
ALLOCATED INCOME
TAX (EXPENSE)
BENEFIT (46,000) 35,000 74,000
----------- ----------- -----------
NET INCOME (LOSS) $ 41,305 $ (50,678) $ (116,430)
=========== =========== ===========
See accompanying independent auditors' report and notes to financial statements.
4
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
STATEMENTS OF SHAREHOLDER'S EQUITY
Common Stock Additional
------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
Balances -
June 1, 1998 $ -- $ -- $ -- $ --
Contribution of
net assets 2,723,618 2,723,618
Issuance of
Common stock 1,000 10 990 1,000
Contribution of
capital 1,236,969 1,236,969
Return of capital -
Pan American
Air Lines, Inc. (2,161,589) (2,161,589)
Return of capital -
Foregone income (181,308) (181,308)
Return of capital -
World Technology
Systems, Inc. (700,794) (700,794)
Return of capital -
Sun Airways (79,755) (79,755)
Return of capital -
A Bargain Airfare (397,067) (397,067)
Net loss (116,430) (116,430)
----------- ----------- ----------- ----------- -----------
Balances at
May 31, 1999 1,000 10 441,064 (116,430) 324,644
Return of capital -
A Bargain Airfare
(unaudited) (190,225) (190,225)
Contribution of capital
(unaudited) 553,835 553,835
Return of capital -
Ft. Lauderdale Call
Center (unaudited) (335,360) (335,360)
Net income (unaudited) 41,305 41,305
----------- ----------- ----------- ----------- -----------
Balances at
August 31, 1999
(unaudited) 1,000 $ 10 $ 469,314 $ (75,125) $ 394,199
=========== =========== =========== =========== ===========
See accompanying independent auditors' report and notes to financial statements
5
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
STATEMENTS OF CASH FLOWS
For the Three Months
Ended August 31, For the Year
-------------------- Ended
1999 1998 May 31, 1999
---- ---- ------------
(unaudited)
Cash flows from operating activities:
Net income (loss) $ 41,305 $ (50,678) $ (116,430)
Adjustments to reconcile net
income (loss) to net cash used
in operating activities:
Depreciation 79,676 67,446 313,314
Allocated deferred tax
expense (benefit) 46,000 (35,000) (74,000)
Changes in assets and
liabilities:
Increase in accounts
receivable (222,139) (301,085) (1,398,504)
Increase in prepaid expenses (145,957) (24,325) (4,597)
Decrease(increase) in other
assets 7,990 (6,290) (7,990)
(Decrease) increase in
accounts payable (128,582) (63,640) 142,633
(Decrease) increase in accrued
expenses 77,588 (22,134) 97,044
Increase (decrease) in deferred
revenue (216,218) (27,992) 160,668
Increase in deposit -- -- 20,000
----------- ----------- -----------
Total adjustments (501,642) (413,020) (751,432)
----------- ----------- -----------
NET CASH USED IN
OPERATING
ACTIVITIES (460,337) (463,698) (867,862)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of equipment (33,749) (75,317) (367,163)
----------- ----------- -----------
NET CASH USED IN
INVESTING
ACTIVITIES (33,749) (75,317) (367,163)
----------- ----------- -----------
6
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
STATEMENTS OF CASH FLOWS--Continued
For the Three Months
Ended August 31, For the Year
-------------------- Ended
1999 1998 May 31, 1999
---- ---- ------------
(unaudited)
Cash flows from financing activities:
Contribution of capital 493,752 554,926 1,236,969
Issuance of common stock -- 1,000 1,000
---------- ---------- ----------
NET CASH PROVIDED
BY FINANCING
ACTIVITIES 493,752 555,926 1,237,969
---------- ---------- ----------
(Decrease) increase in cash (334) 16,911 2,944
Cash: beginning of period 2,944 -- --
---------- ---------- ----------
Cash: end of period $ 2,610 $ 16,911 $ 2,944
========== ========== ==========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 636 $ -- $ 8,478
========== ========== ==========
Income taxes $ -- $ -- $ --
========== ========== ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Effective June 1, 1998, Outsourced Automated Services and Integrated Solutions,
Inc. contributed net assets of $2,723,618 to the Company as described below:
7
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
STATEMENTS OF CASH FLOWS--Continued
Accounts receivable - trade $ 2,184,724
Property and equipment 938,599
Other assets 1,794
-----------
Total assets contributed 3,125,117
-----------
Accounts payable 101,037
Accrued expenses 153,912
Deferred income 55,550
Allocated deferred income taxes 91,000
-----------
Total liabilities assumed 401,499
-----------
Net assets contributed $ 2,723,618
===========
For the year ended May 31, 1999, the Company distributed receivables with a
carrying value of approximately $3,520,513 to Outsourced Automated Services and
Integrated Solutions, Inc. in the form of capital distributions.
See accompanying independent auditors' report and notes to financial statements.
8
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company: Oasis Reservations Services, Inc. (the "Company") operates two
telephone call centers that provide reservations and information services to
customers of several commercial air lines and travel distributors.
The Company is a wholly-owned subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc. ("Oasis"), which is a wholly-owned subsidiary of
Eastern Automated Services Corporation (EASC), which is a wholly-owned
subsidiary of Eastern Air Lines, Inc., ("EAL") (Note H). EAL operated as a
debtor-in-possession under Chapter 11 of the Bankruptcy Code from March 9, 1989
until April 18, 1990, at which date the Bankruptcy Court appointed a Trustee to
replace the debtor-in-possession. On January 19, 1991, EAL ceased operations and
commenced an orderly liquidation of its assets under Chapter 11 of the
Bankruptcy Code.
On September 23, 1994, EAL and Ionosphere Clubs, Inc., a wholly-owned subsidiary
of EAL, filed a joint Chapter 11 Plan of Reorganization (the "Plan") and a
Disclosure Statement with the Bankruptcy Court. On October 25, 1994, the
Bankruptcy Court approved the Disclosure Statement. On December 22, 1994, the
proposed Plan was confirmed, and on February 6, 1995, the Plan became effective.
On the effective date a reorganized corporation, "Eastern", was established by
restating and amending the by-laws and Certificate of Incorporation of Eastern
Air Lines, Inc., a Delaware corporation.
The Company was incorporated in June of 1998 in the State of Delaware. In June
1998, Oasis contributed certain assets and liabilities to the capital of the
Company and transferred all reservation services contracts, collection rights
and obligations previously entered into by Oasis to the Company.
Unaudited Interim Financial Information: The interim financial information at
August 31, 1999 and for the three months ended August 31, 1999 and 1998 is
unaudited but includes all adjustments (consisting of normal recurring accruals)
which, in the opinion of management, are necessary for a fair presentation of
the financial position, results of operations and cash flows for the interim
periods. Results for the interim period ended August 31, 1999 are not
necessarily indicative of results for the entire year.
Property and Equipment: Property and equipment, including improvements, are
recorded at cost. The cost of maintenance and repairs is charged against results
of operations as incurred.
9
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Depreciation and amortization is charged against results of operations over the
following estimated service lives: Computer equipment, furniture, and
telecommunication equipment, five years; improvements to leased property are
amortized over the life of the lease or the life of the improvement, whichever
is shorter. For financial reporting purposes, the Company principally uses the
straight-line method of depreciation. Depreciation and amortization expense
totaled approximately $80,000 and $67,500 for the three months ended August 31,
1999 and 1998, respectively, and $313,300 for the year ended May 31, 1999.
Comprehensive Income: The Company has no components of other comprehensive
income. Accordingly, net income equals comprehensive income for all periods
presented.
Allocated Income Taxes: The Company files a consolidated income tax return with
its ultimate Parent EAL. Income taxes are provided for as if the Company were a
separate taxpayer.
Allocated deferred income taxes are recorded based on the future tax effects of
the difference between the tax and financial reporting bases of the Company's
assets and liabilities. In estimating future tax consequences, expected future
events are considered except for potential income tax law or rate changes.
Deferred Revenue: In accordance with certain reservation service contracts,
customers are required to pay the Company for reservation services in advance
based on forecasted amounts. These advance payments are recorded by the Company
as deferred revenue, which is subsequently recognized as revenue when the
related services are performed.
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, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.
10
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
Cash and Cash Equivalents: For purposes of the cash flow statement, cash
equivalents includes time deposits, certificates of deposit and all highly
liquid debt investments with original maturities of three months or less.
NOTE B--PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
August 31, 1999 May 31, 1999
--------------- ------------
Computer and telecommunications
equipment $ 764,136 $ 1,035,850
Furniture and equipment 116,822 137,452
Leasehold improvements 90,804 96,500
Other 35,960 35,960
------------- -----------
1,007,722 1,305,762
Less: accumulated depreciation
and amortization (336,478) (313,314)
------------- -----------
$ 671,244 $ 992,448
============= ===========
NOTE C--MAJOR CUSTOMERS
For the three months ended August 31, 1999 and 1998, the Company had three and
four customers which accounted for 79% and 91% of the Company's total revenue
for the respective periods then ended. For the three months ended August 31,
1999, revenues from affiliated companies totaled approximately 16% of the
Company's total revenues.
For the year ended May 31, 1999, the Company had four customers which accounted
for 81% of the Company's total revenue. Revenue from affiliated companies
totaled approximately 10% of the Company's total revenue.
11
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
NOTE D--COMMITMENTS AND CONTINGENCIES
Leases: The Company occupied office space related to a call center which was
provided by EAL on a rent-free basis. The Company vacated this office space as
of August 1, 1999. The Company entered into a lease for similar space that
commenced August 1, 1999 and expires on July 31, 2004. The lease provides for
monthly lease payments of approximately $17,000 in the initial year, which
escalate to approximately $22,500 per month in the final year.
NOTE D--COMMITMENTS AND CONTINGENCIES--Continued
As of August 31, 1999, the Company has prepaid rent in the amount of
approximately $111,000.
In June 1998, the Company assumed a former customer's rights and interest in two
lease agreements related to a call center location in Dania, Florida (the "Fort
Lauderdale call center"). These leases expire on September 30, 2000 and May 31,
2001 and require monthly payments amounting to $1,500 and $9,500, respectively.
The leases provide for, among other things, annual cost of living increases
amounting to 4% of the annual Base Rental, as defined, commencing with the
second year of the lease agreements (Note H).
In addition, the Company has various operating lease agreements primarily
involving office copiers. These leases are non-cancelable and expire at various
dates through 2003.
Rent expense under all operating leases charged to operations totaled $28,595
and $34,813 for the three months ended August 31, 1999 and 1998, respectively,
and $139,993 for the year ended May 31, 1999.
Minimum lease commitments under all non-cancelable operating leases for each of
the twelve month periods subsequent to May 31, 1999 and thereafter are as
follows:
2000 $ 152,033
2001 220,225
2002 237,069
2003 251,545
2004 266,697
Thereafter 44,917
-----------------
$ 1,172,486
=================
12
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
The Company leases its employees from a professional employment organization,
which also performs the Company's human resource and payroll functions. Total
employment lease expense incurred by the Company related to this contract
amounted to approximately $1,310,200 and $893,300 for the three month period
ended August 31, 1999 and 1998, respectively, and $4,302,000 for the year ended
May 31, 1999.
NOTE D--COMMITMENTS AND CONTINGENCIES--Continued
Reservation Services Contracts: The Company has entered into reservation
services contracts with its customers which provide for, among other things,
assigning agents to handle reservation call volume. These contracts have initial
terms ranging from three months to one year. Either party can terminate the
contracts after the initial term, subject to certain conditions contained in the
contracts.
Cash Concentration: The Company maintains its cash balances at a bank located in
Florida. Each bank account balance is insured by the Federal Deposit Insurance
Corporation up to $100,000. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risks
on cash and cash equivalents.
NOTE E--RELATED PARTY TRANSACTIONS
Included in net assets contributed to the capital of the Company at June 1,
1998, was a receivable relating to reservations operations from a former
customer of Oasis that had ceased operations and declared bankruptcy. The
collection of this receivable balance, amounting to approximately $2,162,000,
was guaranteed by EAL as part of a Guaranty Agreement entered into by Oasis and
EAL. In July 1998, the Company demanded payment of the receivable balance from
EAL. EAL satisfied its obligations to the Company under the Guaranty Agreement
by requiring Oasis to effect a capital distribution of the receivable balance
from the Company to Oasis.
13
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
In August 1998, EAL owed the Company approximately $181,000 pursuant to the
Company's rights under an agreement between Oasis and EAL whereby EAL had
guaranteed any and all income foregone by Oasis as a result of Oasis agreeing to
provide reservations services to a certain customer. This amount is included in
other income in the accompanying statement of operations for the year ended May
31, 1999 and the three months ended August 31, 1998. EAL satisfied its
obligations to the Company relating to this receivable by requiring Oasis to
effect a capital distribution of this receivable balance from the Company to
Oasis.
NOTE E--RELATED PARTY TRANSACTIONS--Continued
During the year ended May 31, 1999, the Company provided reservations services
pursuant to reservations contracts with certain customers amounting to
approximately $700,000, $79,755 and $397,067 for which no payments have been
received by the Company. The payment for services provided under these
reservations contracts was guaranteed by EAL. During the year ended May 31,
1999, the Company demanded payment on these receivable balances from EAL. EAL
satisfied its obligations to the Company by requiring Oasis to effect capital
distributions of these receivable balances from the Company to Oasis.
The Company provides reservation call services for A Bargain Airfare, a
wholly-owned subsidiary of EAL. Revenues from this affiliate for the three
months ended August 31, 1999 and for the year ended May 31, 1999 totaled
$275,119 and $541,444, respectively.
Oasis provides certain management and accounting services to the Company. For
the three months ended August 31, 1999 and 1998, management and accounting
services fees charged to the Company amounted to approximately $25,000 and
$44,000, respectively, For the year ended May 31, 1999, these charges amounted
to approximately $158,000.
14
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
For the period from June 1, 1998 (Inception) to May 31, 1999, EAL provided the
Company with certain executive office space with an estimated fair value
amounting to approximately $214,000. No liability or expense related to this
executive office space has been recorded in the accompanying financial
statements.
For the year ended May 31, 1999, EAL and/or Oasis paid for all insurance
coverage maintained by the Company. The total cost of this insurance coverage
was approximately $82,000. No liability or expense relating to this insurance
coverage has been recorded in the accompanying financial statements.
NOTE F--ALLOCATED INCOME TAXES
The components of allocated income tax (expense) benefit are as follows:
Three Months Year Ended
Ended August 31, May 31,
------------------- -----------
1999 1998 1999
---- ---- ----
Current:
Federal $ - $ - $ -
State - - -
----------- ----------- -----------
- - -
----------- ----------- -----------
Deferred:
Federal (39,000) 30,000 63,000
State (7,000) 5,000 11,000
----------- ----------- -----------
(46,000) 35,000 74,000
----------- ----------- -----------
Total $ (46,000) $ 35,000 $ 74,000
=========== =========== ===========
15
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
Deferred tax assets (liabilities) are comprised of the following:
August 31, 1999 May 31, 1999
---------------- ------------
Net operating loss
carryforward $ 33,000 $ 87,000
--------- ---------
Deferred tax assets 33,000 87,000
--------- ---------
Depreciation (96,000) (104,000)
--------- ---------
Deferred tax liabilities (96,000) (104,000)
--------- ---------
Net deferred tax
liabilities $ (63,000) $ (17,000)
========== =========
NOTE F--ALLOCATED INCOME TAXES--Continued
The provision for income taxes differs from the amount computed by applying the
Federal Statutory rate as follows:
Three Months Year Ended
Ended August 31, May 31,
---------------- ----------
1999 1998 1999
---- ---- ----
U.S. Federal Statutory
rate applied to pretax
loss $ 30,000 $ (30,000) $ (65,000)
State taxes 5,000 (5,000) (11,000)
Depreciation 11,000 - 2,000
----------- ---------- ----------
$ 46,000 $ (35,000) $ (74,000)
=========== ========== ==========
16
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
As of May 31, 1999, the Company has a net operating loss carryforward for income
tax purposes of approximately $87,000 which expires in 2019.
NOTE G--CAPITAL RESOURCES
Per the requirements of the Securities and Exchange Commission for businesses
acquired, although the Company has been funded to date by EAL, the Company's
financial statements are presented on a standalone, going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company's ability to generate sufficient
revenues and ultimately achieve profitable operations as a standalone entity is
uncertain, since the financial statements assume no funding by EAL or by eGlobe
(Note H). Ultimately, the Company's ability to continue as a going concern is
dependent upon its ability to demonstrate sustained commercial viability of its
service and to obtain sufficient working capital, both of which are uncertain at
this time.
NOTE G--CAPITAL RESOURCES--Continued
The Company's management believes that eGlobe will provide the Company with
financial and operational support which, together with existing cash and
anticipated cash flows from operations, should enable the Company to continue
operations. However, the financial statements assume no additional funding by
eGlobe. In the absence of such financing, since the Company does not have
significant cash resources, there is substantial doubt about the Company's
ability to continue as a going concern on a standalone basis. The financial
statements do not include any adjustments to reflect the possible future effects
related to the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible inability of the
Company to continue as a going concern.
17
OASIS RESERVATIONS SERVICES, INC.
A Wholly-Owned Subsidiary of Outsourced Automated Services and
Integrated Solutions, Inc.
NOTES TO FINANCIAL STATEMENTS--Continued
(Information as of August 31, 1999 and for the three months ended
August 31, 1999 and 1998 is unaudited)
NOTE H--SUBSEQUENT EVENTS
On September 15, 1999, eGlobe, a publicly-traded telecommunications and related
services corporation ("eGlobe") acting through a newly formed subsidiary,
acquired control of the Company from Oasis. eGlobe and Oasis formed eGlobe/Oasis
Reservations LLC, a limited liability company ("LLC"), which is responsible for
conducting the business operations of the Company. eGlobe manages and controls
the LLC. The LLC was funded by contributions effected by the members under a
Contribution Agreement ("Contribution Agreement"). Oasis contributed all the
shares of the Company's stock as its contribution to the LLC. eGlobe contributed
1.5 million shares of its common stock and warrants to purchase additional
shares of its common stock to the LLC.
According to the Operating Agreement, the net profits and net losses of the LLC
will be allocated 90% to eGlobe and 10% to Oasis. Proceeds from the sales of the
Company's stock or its assets will be allocated 100% to Oasis until Oasis has
received distributions of at least $9 million and then 90% to Oasis and 10% to
eGlobe. Pursuant to the LLC's Operating Agreement, the LLC is an interim step to
full ownership of the Company by eGlobe. Once eGlobe has either raised $10
million in new capital or generated three consecutive months of positive cash
flow and registered the shares issued in this transaction, the LLC will be
dissolved and the Company will become a wholly-owned subsidiary of eGlobe. Under
these circumstances, Oasis would receive the shares of common stock and warrants
contributed to the LLC by eGlobe. Additionally, even if these conditions are not
fulfilled, Oasis has the right to redeem its interest in the LLC at any time in
exchange for the shares of common stock and the warrants issued to the LLC by
eGlobe.
In connection with the purchase and installation of equipment and leasehold
improvements at the Company's new facility in Miami, Florida, on September 15,
1999, Oasis agreed to loan the Company $451,400. Interest will accrue on the
unpaid principal balance at the rate of 7% per annum. The loan is required to be
repaid in six equal quarterly principal installments of $75,233 beginning
November 30, 1999 with a maturity date of January 31, 2001. eGlobe has
guaranteed the Company's obligations under this loan and granted Oasis a
security interest in eGlobe's ownership interest in the LLC. As of November 4,
1999, the outstanding principal and accrued interest totaled approximately
$451,400 and $4,000, respectively.
On July 15, 1999, the Company made a capital distribution having an approximate
net book value of $335,000, to Oasis consisting of all assets, liquidations,
rights and obligations of its Fort Lauderdale call center.
18
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following unaudited pro forma condensed consolidated statements of
operations give effect to the acquisitions by the Company of Connectsoft,
Telekey, IDX and UCI, and the June 1999 stockholder approval of the increase of
the number of shares of common stock issuable upon conversion of the preferred
stock issued to the IDX stockholders and the terms of the IDX purchase agreement
as renegotiated in July 1999, as previously described and reported on Forms
8-K/A filed on April 30, 1999 and on August 31, 1999. In addition, the ORS
acquisition, the reclassification of acquired goodwill to other identifiable
intangibles and the exchange of Series K Preferred for Series G Preferred are
also included in the following unaudited pro forma condensed consolidated
statements of operations. The historical results of operations of iGlobe have
not been included in the Unaudited Pro Forma Condensed Consolidated Statements
of Operations as it is not practicable for the Company to include such
information due to the recent conclusion of the acquisition. The pro forma
financial information related to the acquisition of iGlobe will be filed in a
Form 8K/A no later than December 28, 1999. This pro forma presentation has been
prepared utilizing historical financial statements and notes thereto, certain of
which are included herein as well as pro forma adjustments as described in the
Notes to Pro Forma Condensed Consolidated Financial Statements. The pro forma
financial data does not purport to be indicative of the results which actually
would have been obtained had the acquisitions been effected on the dates
indicated or the results which may be obtained in the future.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1998 includes the operating results of the Company, IDX,
Telekey, Connectsoft and ORS assuming the acquisitions occurred January 1, 1998.
Also, the subsequent increase in the preferred conversion factor for preferred
shares originally issued to IDX stockholders, the renegotiation of the terms of
the IDX purchase agreement, the reclassification of acquired goodwill to other
identifiable intangibles and the Series K Preferred Stock exchanged for Series G
Preferred Stock were assumed to have occurred on January 1, 1998. The historical
results of the Company include the results of IDX for the period from December
2, 1998, the effective date of the acquisition, to December 31, 1998. UCI was
acquired on December 31, 1998 and had minimal operations which have not been
reflected in the Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1998. However, the recurring effect
of the goodwill amortization related to the UCI acquisition has been included in
the Unaudited Pro Forma Condensed Consolidated Statement of Operations.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
nine months ended September 30, 1999 assumes that the Telekey, Connectsoft, and
ORS acquisitions and the subsequent increase in the IDX purchase price related
to the increase in the convertibility of the preferred stock originally issued
to the IDX stockholders, the renegotiation of the IDX purchase agreement, the
reclassification of the acquired goodwill to other identifiable intangibles and
the Series K Preferred Stock exchanged for Series G Preferred Stock occurred at
the beginning of the periods presented. The historical results of operations of
the Company for the nine months ended September 30, 1999 include the results of
Telekey from February 1, 1999, the effective date of the acquisition, to
September 30, 1999, the results of Connectsoft from June 1, 1999, the effective
date of the acquisition, to September 30, 1999, and the results of ORS from
September 1, 1999, the effective date of acquisition, to September 30, 1999.
19
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The unaudited pro forma condensed consolidated statements of operations are
presented for illustrative purposes only and do not purport to represent what
the Company's results of operations would have been had the acquisitions
described herein occurred on the dates indicated for any future period or at any
future date, and are therefore qualified in their entirety by reference to and
should be read in conjunction with the historical consolidated financial
statements of the Company and the historical financial statements of ORS,
contained elsewhere herein. Historical financial statements of IDX and Telekey
were previously filed in Form 8-K/A on April 30, 1999. Historical financial
statements of Connectsoft were previously filed in Form 8K/A on August 31, 1999.
ACQUISITION OF IGLOBE, INC.
Effective August 1, 1999, the Company acquired all the common shares of iGlobe,
a wholly owned subsidiary of Highpoint Telecommunications, Inc. ("Highpoint").
Recently established by Highpoint, iGlobe has created an infrastructure
supplying Internet Protocol ("IP") services particularly voice over IP,
throughout Latin America. In July 1999, the Company and Highpoint agreed that
the Company would manage the business of iGlobe and would take responsibility
for the ongoing financial condition of iGlobe from August 1, 1999, pursuant to a
Transition Services and Management Agreement ("TSA"). Pursuant to this
agreement, Highpoint advanced working capital through the closing date to iGlobe
for which the Company has issued a note payable of $1.2 million. The acquisition
closed October 14, 1999. The purchase price consisted of (i) one share of 20%
Series M Convertible Preferred Stock ("Series M Preferred") valued at $9.6
million, (ii) direct acquisition costs of approximately $0.3 million; and (iii)
Highpoint was given a non-voting beneficial 20% interest of the equity interest
subscribed or held by the Company in a yet-to-be-completed joint venture
currently known as IP Solutions B.V.
The one share of Series M Preferred, par value $.001, has a liquidation value of
$9.0 million and carries an annual cumulative dividend of 20% which will accrue
and be payable annually or at conversion in cash or shares of eGlobe common
stock, at the option of the Company. The premium of $600,000 will be amortized
as a reduction in preferred dividends over the one year period from the issuance
date. The Series M Preferred is convertible, at the option of the holder, one
year after the issue date at a conversion price of $2.385. Each share of Series
M Preferred shall automatically be converted into shares of common stock, based
on the then-effective conversion rate, on the earliest to occur of (i) the first
date as of which the last reported sales price of the common stock is $5.00 or
more for any 10 consecutive trading days during any period in which the Series M
Preferred is outstanding, (ii) the date that is seven years after the issue
date, or (iii) the date upon which the Company closes a public offering of
equity securities of the Company at a price of at least $4.00 per share and with
gross proceeds of at least $20.0 million.
The acquisition has been accounted for using the purchase method of accounting.
The September 30, 1999 historical unaudited interim financial statements of the
Company reflect the preliminary allocation of the purchase price. This initial
preliminary purchase price allocation is based on preliminary appraisals and
resulted in acquired goodwill of $0.4 million and acquired intangibles of $4.6
million relating to a customer base, licenses and operating agreements, a
business sales agreement, and an assembled workforce. The goodwill is being
amortized on a straight-line basis over seven years and the acquired intangibles
are being amortized on a straight-line basis over the
20
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
estimated useful lives of three years. The Company will determine the final
purchase price allocation based on completion of management's review and final
appraisals of iGlobe's assets.
The acquisition has been recorded using the purchase method of accounting and
the components of the purchase price and its preliminary allocation to the
assets and liabilities acquired are as follows:
Components of Purchase Price:
Stock to be issued $ 9,643,000
Direct acquisition costs 300,000
-----------
Total purchase price 9,943,000
Allocation of purchase price:
Deposits (900,000)
Property and equipment (5,577,000)
Intangibles (4,590,000)
Goodwill (376,000)
Current liabilities 107,000
Notes Payable 1,393,000
------------
Total $ --
------------
ACQUISITION OF OASIS RESERVATION SERVICES, INC.
In September 1999, the Company, acting through a newly formed subsidiary,
acquired control of ORS from its sole stockholder, Outsourced Automated Services
and Integrated Solutions, Inc. ("Oasis"). The Company and Oasis formed
eGlobe/Oasis Reservations LLC, a limited liability company ("LLC"), which is
responsible for conducting the business operations of ORS. The Company manages
and controls the LLC and receives 90% of the profits and losses from ORS'
business. The LLC was funded by contributions effected by the members under a
Contribution Agreement ("Contribution Agreement"). Oasis contributed all the
outstanding shares of ORS valued at approximately $2.3 million as its
contribution to the LLC. The Company contributed 1.5 million shares of its
common stock valued at $3.0 million on the date of issuance and warrants to
purchase additional shares of its common stock to the LLC. The warrants are
exercisable for the shares of common stock as discussed below:
(a) shares equal to the difference between $3.0 million and the value
of the Company's 1.5 million share contribution on the date that
the shares of common stock (including the shares underlying the
warrants) contributed to the LLC are registered with the SEC if
the value of the 1.5 million shares on that date is less than $3.0
million;
21
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(b) shares equal to $100,000 of the Company's common stock for each
30-day period beyond 90 days following the date of contribution
that the shares of the Company's common stock (including the
shares underlying the warrants) contributed to the LLC remain
unregistered;
(c) shares equal to up to $2.0 million of the Company's common stock,
subject to adjustment based upon ORS achieving certain revenue and
EBITDA targets during the measurement period of August 1, 1999 to
January 31, 2000: provided however, that Oasis may select a
different period if: (i) ORS obtains a new customer contract at
any time between the closing date and March 31, 2000 and (ii) the
Company enters into a new contract with a specific customer at any
time between the closing date and March 31, 2000. If either of
these events occur, then Oasis may select as the measurement
period, in its discretion, any of the following; (x) the period
from August 1, 1999 to January 31, 2000, (y) the period from
September 1, 1999 to February 29, 2000 or (z) the period from
October 1, 1999 to March 31, 2000;
(d) additional shares based upon (1) ORS achieving certain revenue and
EBIDTA targets, and (2) the Company's share price at the date of
registration of the shares for this transaction. Under certain
circumstances, these shares may be equal to the greater of (A) 50%
of the incremental revenue for the Second Measurement Period (as
defined in the agreements) over $9.0 million or (B) four times the
incremental Adjusted EBITDA (as defined in the agreements) for the
Second Measurement Period (as defined in the agreements) over $1.0
million provided, however, that such number of shares shall not
exceed the greater of; (i) 1,000,000 shares of the Company's
common stock or (ii) that the number of shares of the Company's
common stock determined by dividing $8.0 million by the Second
Measurement Period Date Market Value (as defined in the
agreements); and provided further, that if the basis for issuance
of such shares is incremental revenue over $9.0 million then
EBITDA for the Second Measurement Period must be at least $1.0
million for the revenue between $9.0 million and $12.0 million or
at least $1.5 million for revenue above $12.0 million. In
addition, the LLC may receive 0.5 million shares of the Company's
common stock if the revenue for the second Measurement Period is
equal to or greater than $37.0 million and the Adjusted EBITDA for
the Second Measurement Period is equal to or greater than $5.0
million.
According to the Operating Agreement, the net profits and net losses of the LLC
will be allocated 90% to the Company and 10% to Oasis. Proceeds from the sale of
the ORS stock or its assets will be allocated 100% to Oasis until Oasis has
received distributions of at least $9.0 million and then 90% to Oasis and 10% to
the Company. Pursuant to the LLC's Operating Agreement, the LLC is an interim
step to full ownership of ORS by the Company. Once the Company has either raised
$10 million in new capital or generated three consecutive months of positive
cash flow and registered the shares issued in this transaction, the LLC will be
dissolved and ORS will become a wholly owned subsidiary of the Company. Under
these circumstances, Oasis would receive the shares of common stock and warrants
contributed to the LLC by the Company. Additionally, even if these conditions
are not fulfilled, Oasis has the right to redeem its interest in the LLC at any
time in exchange for the shares of common stock and the warrants issued to the
LLC by eGlobe.
22
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
This acquisition has been accounted for using the purchase method of accounting.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations reflect
the preliminary allocation of the purchase price based on preliminary appraisals
of ORS' assets. The Company has not completed the review of the purchase price
allocation and will determine the final allocation based on final appraisals and
resolution of the contingencies discussed earlier.
As the Company controls the operations of the LLC, the LLC has been included in
the Unaudited Pro Forma Condensed Consolidated Statements of Operations with
Oasis' interest in the LLC recorded as a Minority Interest in the LLC.
In connection with the purchase and installation of equipment and leasehold
improvements at ORS' new facility in Miami, Florida, Oasis agreed to loan ORS up
to $451,400. The loan is required to be repaid in six equal quarterly principal
installments beginning November 30, 1999. The Company guaranteed ORS'
obligations under this loan and granted Oasis a security interest in its
ownership interest in the LLC. As of September 30, 1999, there was no amount
outstanding under this commitment.
23
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The acquisition has been recorded using the purchase method of accounting and
the components of the purchase price and its preliminary allocation to the
assets and liabilities acquired are as follows:
Components of Purchase Price:
Common stock valued at $3.0 million; however, eliminated in
consolidation as LLC owns the stock --
-----------
Total purchase price
--
Allocation of purchase price:
Cash (3,000)
Accounts receivables (483,000)
Other current assets (192,000)
Property and equipment (671,000)
Intangibles (1,580,000)
Accounts payable 52,000
Current liabilities 158,000
Deferred revenue 389,000
Minority Interest in LLC 2,330,000
------------
Total $
============
RECLASSIFICATION OF ACQUIRED GOODWILL TO OTHER IDENTIFIABLE INTANGIBLES
In the third quarter 1999, the Company obtained final appraisals of IDX's, UCI's
and Telekey's assets from independent appraisers. These appraisals resulted in
reclassification from goodwill to other identifiable intangibles as follows:
(1) The IDX appraisal resulted in a gross reclassification of approximately
$6.5 million of IDX acquired goodwill to other identifiable intangibles.
These other identifiable intangibles consist of assembled and trained
workforce, partnership network and non-compete agreements and are being
amortized on a straight-line basis from one to four years. Goodwill is
being amortized on a straight-line basis over seven years. The final
purchase price allocation is still subject to the resolution of certain
contingent purchase price elements. Goodwill may materially increase when
these contingencies are resolved.
(2) The UCI appraisal resulted in a gross reclassification of approximately
$0.6 million of UCI's acquired goodwill to other identifiable intangibles.
The other identifiable intangible relates to the value of certain contracts
and is being amortized on a straight-line basis over two years. Goodwill is
being amortized on a straight-line basis over seven years. The preliminary
purchase price will be finalized pending resolution of certain purchase
price contingencies.
24
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(3) The Telekey appraisal resulted in a gross reclassification of approximately
$3.0 million of Telekey's acquired goodwill to other identifiable
intangibles. The other identifiable intangibles consist of assembled and
trained workforce, distribution network and internally developed software
and are being amortized on a straight-line basis from three to seven years.
Goodwill is being amortized on a straight-line basis over seven years. The
final purchase price allocation has not been finalized pending resolution
of contingent purchase price elements. Goodwill associated with the Telekey
acquisition may materially increase when these contingencies are resolved.
The effect of these reclassifications from goodwill to other identifiable
intangibles has been included in the Unaudited Pro Forma Condensed Consolidated
Statements of Operations.
EXCHANGE OF SERIES K PREFERRED STOCK FOR SERIES G PREFERRED STOCK
In August 1999, the Company issued 30 shares of Series K Preferred Stock valued
at $3.0 million in exchange for the one share of its Series G Preferred held by
the seller of ConnectSoft.
The Series K Preferred carries an annual dividend of 5% which is payable
quarterly, beginning December 31, 2000. The shares of Series K Preferred are
convertible, at the holder's option, into shares of the Company's common stock
at any time at a conversion price equal to $1.56. The shares of Series K
Preferred are also convertible into the Company's common stock at a lower price
upon a change of control (as defined) if the market price of the Company's
common stock on the date immediately preceding the change of control is less
than the conversion price. The shares of Series K Preferred will automatically
be converted into the Company's common stock, on the earliest to occur of (i)
the first date as of which the last reported sales price of the Company's common
stock on Nasdaq is $5.00 or more for any 20 consecutive trading days during any
period in which Series K Preferred is outstanding, (ii) the date that 80% or
more of the Series K Preferred the Company has issued has been converted into
the Company's common stock, or (iii) the Company completes a public offering of
equity securities at a price of at least $3.00 per share and with gross proceeds
to the Company of at least $20.0 million.
The carrying value of the Series G Preferred exceeded the fair value of the
Series K Preferred because of accrued dividends that were not paid pursuant to
the exchange. The excess of $36,411 reduced the loss attributable to common
stock in the third quarter historical unaudited financial statements.
25
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
EGLOBE ORS
TWELVE MONTHS IDX TELEKEY CONNECTSOFT TWELVE MONTHS
ENDED 12/31/98 ELEVEN MONTHS TWELVE MONTHS TWELVE MONTHS ENDED 12/31/98
(NOTE A) (1) ENDED 11/30/98 ENDED 12/31/98 ENDED 12/31/98 (NOTE A)(1)
------------------------------------------------------------------------------------------
REVENUE $30,030,000 $2,795,000 $4,705,000 $288,000 $ 5,094,000
COST OF REVENUE 16,806,000 3,176,000 1,294,000 248,000 3,657,000
- ---------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) 13,224,000 (381,000) 3,411,000 40,000 1,437,000
- ---------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and administrative 18,070,000 3,011,000 2,811,000 2,473,000 834,000
Research and development - - - 2,057,000 -
Depreciation and amortization 3,070,000 510,000 192,000 231,000 302,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 21,140,000 3,521,000 3,003,000 4,761,000 1,136,000
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (7,916,000) (3,902,000) 408,000 (4,721,000) 301,000
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Other income (expense) (1,981,000) 358,000 (61,000) (377,000) 227,000
Proxy related litigation expense (3,647,000) - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (5,628,000) 358,000 (61,000) (377,000) 227,000
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES ON INCOME (13,544,000) (3,544,000) 347,000 (5,098,000) 528,000
MINORITY INTERESTS IN (INCOME) LOSS
OF SUBSIDIARIES - - (59,000) - -
INCOME TAX EXPENSE 1,500,000 - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (15,044,000) (3,544,000) 288,000 (5,098,000) 528,000
PREFERRED STOCK DIVIDENDS - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCK $(15,044,000) $(3,544,000) $288,000 $(5,098,000) $ 528,000
- ---------------------------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTES A, (10)
AND (11))
Basic and diluted $ (0.85) - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
See notes to the pro forma condensed consolidated financial statements
26
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1998
(CONTINUED)
- --------------------------------------------------------------------------------
ADJUSTMENTS PRO FORMA
(NOTE A)
-------- ----------
REVENUE $ (121,000)(2) $ 42,791,000
COST OF REVENUE (65,000)(3) 25,116,000
- --------------------------------------------------------------------------------
Gross profit (loss) (56,000) 17,675,000
- --------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and administrative 230,000 (4) 27,429,000
Research and development -- 2,057,000
Depreciation and amortization 7,368,000 (5) 11,673,000
- --------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 7,598,000 41,159,000
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (7,654,000) (23,484,000)
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Other income (expense) (749,000)(6) (2,583,000)
Proxy related litigation expense -- (3,647,000)
- --------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (749,000) (6,230,000)
- --------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES ON INCOME (8,403,000) (29,714,000)
MINORITY INTERESTS IN (INCOME) LOSS OF
SUBSIDIARIES 95,000 (7) 36,000
INCOME TAX EXPENSE 21,000 (8) 1,521,000
- --------------------------------------------------------------------------------
NET INCOME (LOSS) (8,329,000) (31,199,000)
- --------------------------------------------------------------------------------
PREFERRED STOCK DIVIDENDS 6,562,000 (9) 6,562,000
- --------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCK $(14,891,000) $(37,761,000)
- --------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTES A, (10)
AND (11))
Basic and diluted -- $ (2.10)
- --------------------------------------------------------------------------------
See notes to the pro forma condensed consolidated financial statements
27
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
EGLOBE TELEKEY CONNECTSOFT ORS
NINE MONTHS ONE MONTH ENDED FIVE MONTHS EIGHT MONTHS
ENDED 9/30/99 1/31/99 ENDED 5/31/99 ENDED 8/31/99
------------- ------- ------------- -------------
REVENUE $28,136,000 $ 190,000 $73,000 $ 4,055,000
COST OF REVENUE 27,442,000 59,000 65,000 3,746,000
- --------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 694,000 131,000 8,000 309,000
- --------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and administrative 18,393,000 141,000 436,000 253,000
Research and development - - 1,092,000 -
Depreciation and amortization 7,846,000 16,000 129,000 160,000
- --------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 26,239,000 157,000 1,657,000 413,000
- --------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (25,545,000) (26,000) (1,649,000) (104,000)
OTHER INCOME (EXPENSE) (5,814,000) (6,000) (162,000) (4,000)
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES ON INCOME (31,359,000) (32,000) (1,811,000) (108,000)
- --------------------------------------------------------------------------------------------------------------------
MINORITY INTEREST IN (INCOME) LOSS
OF SUBSIDIARY - - - -
- --------------------------------------------------------------------------------------------------------------------
NET LOSS (31,359,000) (32,000) (1,811,000) (108,000)
PREFERRED STOCK DIVIDENDS 10,783,000 - - -
- --------------------------------------------------------------------------------------------------------------------
NET LOSS ATTRIBUTABLE TO COMMON
STOCK $(42,142,000) $(32,000) $(1,811,000) $ (108,000)
- --------------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTE B(17))
Basic and diluted $(2.18) - - -
- ----------------------------------------------------------------------------------------------------------------------
See notes to the pro forma condensed consolidated financial statements
28
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(CONTINUED)
- --------------------------------------------------------------------------------
ADJUSTMENTS PRO FORMA
(NOTE B)
-------- ----------
REVENUE $ -- $ 32,454,000
COST OF REVENUE -- 31,312,000
- --------------------------------------------------------------------------------
GROSS PROFIT -- 1,142,000
- --------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and
administrative 148,000 (12) 19,371,000
Research and development 1,092,000
Depreciation and amortization 1,249,000 (13) 9,400,000
- --------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 1,397,000 29,863,000
- --------------------------------------------------------------------------------
LOSS FROM OPERATIONS (1,397,000) (28,721,000)
OTHER INCOME (EXPENSE) 190,000 (14) (5,796,000)
- --------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES ON INCOME (1,207,000) (34,517,000)
MINORITY INTEREST (INCOME)
LOSS OF SUBSIDIARY 38,000 (16) 38,000
- --------------------------------------------------------------------------------
NET LOSS (1,169,000) (34,479,000)
PREFERRED STOCK DIVIDENDS (5,805,000)(15) 4,978,000
- --------------------------------------------------------------------------------
NET LOSS ATTRIBUTABLE TO
COMMON STOCK $ 4,636,000 $(39,457,000)
- --------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTE B(17))
Basic and diluted -- $ (2.04)
- --------------------------------------------------------------------------------
See notes to the pro forma condensed consolidated financial statements
29
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(1) Effective with the period ended December 31, 1998, the Company changed from
a March 31 to a December 31 fiscal year end. As a result, the following
table is required to reflect twelve months of operations.
NINE MONTHS THREE MONTHS TWELVE MONTHS
ENDED 12/31/98 ENDED 3/31/98 ENDED 12/31/98
-------------------------------------------------
Revenue $ 22,491,000 $ 7,539,000 $ 30,030,000
Cost of revenue 12,619,000 4,187,000 16,806,000
- --------------------------------------------------------------------------------------------------------
Gross profit 9,872,000 3,352,000 13,224,000
Costs and expenses:
Selling, general and administrative 13,555,000 4,515,000 18,070,000
Depreciation and amortization 2,256,000 814,000 3,070,000
- --------------------------------------------------------------------------------------------------------
Total costs and expenses 15,811,000 5,329,000 21,140,000
- --------------------------------------------------------------------------------------------------------
Loss from operations (5,939,000) (1,977,000) (7,916,000)
- --------------------------------------------------------------------------------------------------------
Other income (expenses):
Other expense (1,031,000) (950,000) (1,981,000)
Proxy related litigation expense (120,000) (3,527,000) (3,647,000)
- --------------------------------------------------------------------------------------------------------
Total other expenses (1,151,000) (4,477,000) (5,628,000)
- --------------------------------------------------------------------------------------------------------
Loss before taxes on income (7,090,000) (6,454,000) (13,544,000)
Income tax expense -- 1,500,000 1,500,000
- --------------------------------------------------------------------------------------------------------
Net loss $ (7,090,000) $ (7,954,000) $(15,044,000)
- --------------------------------------------------------------------------------------------------------
UCI was acquired on December 31, 1998 and had minimal operations which have not
been reflected in the Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1998. However, the recurring effect of the
goodwill amortization related to the UCI acquisition has been included in the
Unaudited Pro Forma Condensed Consolidated Statement of Operations.
ORS' statement of operations for the year ended December 31, 1998 consists of
the statement of operations for the period June 1, 1998 (date of inception)
through December 31, 1998 plus the revenue and costs associated with the ORS
line of business for the period January 1, 1998 through May 31, 1998 to reflect
the period when ORS was part of Oasis.
30
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (CONT)
The following pro forma adjustments to the condensed consolidated statement of
operations are as if the acquisitions had been completed at the beginning of the
periods presented and are not indicative of what would have occurred had the
acquisitions actually been made as of such date. IDX was acquired on December 2,
1998; therefore, the results of operations of IDX for the month of December 1998
are included in the historical results of the Company for the twelve months
ended December 31, 1998.
(2) Adjustments to revenue:
Elimination of IDX billings to the Company $ (41,000)
Adjustment to revenue to give effect to IDX's purchase of a subsidiary in April, 1998
and its sale of another subsidiary in November, 1998 as if the purchase and (80,000)
sale had been completed at the beginning of the period presented ---------------
$ (121,000)
===============
(3) Adjustments to cost of revenue:
Elimination of IDX billings to the Company $ (41,000)
Adjustment to cost of revenue to give effect to IDX's
purchase of a subsidiary in April, 1998 and its sale
of another subsidiary in November, 1998 as if the purchase
and sale had been completed at the beginning of the period presented (24,000)
---------------
$ (65,000)
===============
(4) Adjustments to selling, general and administrative expenses:
Adjustment for the incremental increase in DX and Telekey management compensation $ 78,000
Adjustment for incremental increase in Connectsoft management compensation 173,000
Adjustment for deferred compensation related to Telekey purchase 232,000
Adjustment to give effect to IDX's purchase of a subsidiary in April, 1998 and its sale of
another subsidiary in November, 1998 as if the purchase and sale had been
completed at the beginning of the period presented (423,000)
Adjustment for various general and administrative services provided by Oasis to ORS
not reflected in ORS' statement of operations 170,000
---------------
$ 230,000
===============
(5) Adjustments to depreciation and amortization expenses:
Amortization for eleven months of identifiable intangibles acquired in the IDX purchase
which was effective December 2, 1998 (1-4 year straight-line amortization) $ 2,640,000
Amortization for eleven months of original cost in excess of net
assets acquired for the IDX purchase which was effective December 2, 1998
(7 year straight-line amortization) 778,000
Amortization of costs in excess of net assets related to stockholder approval in June 1999
of increase in conversion feature for the IDX purchase (7 year straight-line
amortization) 165,000
Amortization of identifiable intangibles acquired in the UCI purchase which was effective
December 31, 1998 (2 year straight-line amortization) 327,000
Amortization of costs in excess of net assets acquired in the UCI purchase which
was effective December 31, 1998 (7 year straight-line amortization) 68,000
Amortization of identifiable intangibles acquired in the Telekey purchase, (3-7 year
straight-line amortization) 570,000
Amortization of costs in excess of net assets acquired for the Telekey
purchase (7 year straight-line amortization) 300,000
Amortization of intangibles acquired in the Connectsoft purchase (3-5 year
straight-line amortization) 1,870,000
Amortization of costs in excess of net assets acquired in the Connectsoft
purchase (7 year straight-line amortization) 142,000
Amortization of identifiable intangibles acquired in the ORS purchase (3-5 year
straight-line amortization)
508,000
---------------
$ 7,368,000
==============
31
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(CON'T)
(6) Adjustment to other income (expenses):
Adjustment to give effect to IDX's purchase of a subsidiary in
April, 1998 and its sale of another subsidiary in November,
1998 as if the purchase and sale had been completed at the beginning
of the period presented $ (411,000)
Interest on $0.5 million UCI note @8% originally due 6/99 (20,000)
Interest on $0.5 million UCI note @8% due 5/2000 (40,000)
Interest on $1.0 million IDX note @7.75% due 2/99 (19,000)
Additional interest recorded for value of 50,000 warrants issued in
connection with the UCI purchase (43,000)
Interest on $0.5 million note payable to seller of Connectsoft (40,000)
Interest on $0.451 million Oasis note @ 8% due in six quarterly
installments (26,000)
Less other income related to guaranteed
reimbursement by Oasis' parent to ORS (181,000)
-----------------
(780,000)
Less interest expense recorded by the Company in the historical
results of operations for the twelve months ended December 31, 1998 31,000
-----------------
$ (749,000)
=================
(7) Adjustments to minority interests in (income) loss of subsidiaries:
To reverse the minority interest in income of Telekey, because in connection
with the acquisition of Telekey by the Company, the 20% minority interest in
Telekey, L.L.C. was acquired by Telekey. $ 59,000
To record 10% minority interest in LLC's (income) loss owned by Oasis. 36,000
-------------------
$ 95,000
===================
(8) To reflect state income taxes (Telekey was previously an S-corporation) at 6% as
Georgia does not allow for a consolidated filing. The Telekey federal taxable
income can be offset with the Company's current period losses. $ 21,000
=================
32
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(9) To reflect the preferred stock dividends associated with these transactions:
Annual dividend on Series K Preferred Stock $ 150,000
Annual dividend on Series I Preferred 320,000
Dividend to IDX stockholders related to renegotiation of purchase agreement 6,092,000
------------
$ 6,562,000
============
(10) Adjustment to the basic weighted average number of shares outstanding
of 17,736,654 as if the acquisitions and IDX renegotiation had been
completed at the beginning of the period presented:
Issuance of common stock in payment of $0.4 million IDX note 141,000
Issuance of common stock in UCI purchase 63,000
------------
204,000
============
(11) Convertible preferred stock and convertible notes were not included in
diluted earnings (loss) per share due to the Company recording a loss
for the period presented. The following table reflects the shares of
common stock that would have been issuable upon conversion:
Series H Preferred Stock 3,750,000
Series I Preferred Stock, including payment of accrued dividend 1,440,000
Convertible $1.0 million IDX note payable, including interest (Converted in 1999) 474,000
Series F Preferred Stock 1,515,000
Series K Preferred Stock 1,923,000
------------
9,102,000
============
33
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999
The following pro forma adjustments to the condensed consolidated
statement of operations are as if the acquisitions had been completed at
the beginning of the fiscal period presented and are not indicative of
what would have occurred had the acquisitions actually been made as of
such date. iGlobe was acquired in August 1999, Oasis was acquired in
September 1999, Connectsoft was acquired in June 1999 and Telekey was
acquired in February 1999; therefore, the results of operations of ORS
for the month of September 1999, the results of operations of
Connectsoft for June through September 1999 and the results of
operations of Telekey for February through June 1999 are included in the
historical results of the Company for the nine months ended September
30, 1999. The results of operations of iGlobe for January through July
1999 are not included in the pro forma adjustments due to recent
conclusion of the acquisition.
(12) Adjustment to selling, general and administrative expenses:
Adjustment for the incremental increase in Connectsoft management
compensation $ 72,000
Adjustment for various general and administrative services provided by
Oasis to ORS not reflected in statement of operations. 76,000
-----------
$ 148,000
============
(13) Adjustments to depreciation and amortization expenses:
One month of amortization of identifiable intangibles acquired in the
Telekey purchase (3-7 year straight-line amortization) $ 47,000
One month of amortization of costs in excess of net assets acquired
for Telekey purchase (7 year straight-line amortization) 25,000
Five months of amortization of identifiable intangibles acquired in the
Connectsoft purchase (3-5 year straight-line amortization) 779,000
Five months of amortization of costs in excess of net assets acquired for
Connectsoft purchase (7 year straight-line amortization) 59,000
Eight months of amortization of identifiable intangibles acquired in the ORS
purchase (3-5 year straight-line amortization) 339,000
-----------
$ 1,249,000
===========
(14) Adjustment to other income (expenses):
Interest on $0.5 million note payable to seller of Connectsoft $ (30,000)
Interest on $0.451 million Oasis note (9,000)
Reverse interest recorded on $4.0 million IDX notes
subsequently exchanged for Series I Preferred Stock 182,000
Reverse interest recorded on $0.418 million IDX note paid by
issuance of common stock 14,000
Reverse interest recorded on $0.5 million UCI note originally due June
1999 as reflected in the December 31, 1998 pro forma adjustments 20,000
Reverse interest recorded on $1.0 million IDX note due February 1999
as reflected in the December 31, 1998 pro forma adjustments 13,000
-----------
$ 190,000
===========
34
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(15) Adjustment to preferred stock dividends:
Eight months dividend on 5% Series K Preferred (exchanged for
6% Series G Preferred Stock issued in Connectsoft acquisition) $ 100,000
Accrued dividend on Series I Preferred Stock 187,000
Less dividend to IDX stockholders related to the renegotiation of the
purchase agreement (6,092,000)
-----------
$(5,805,000)
===========
(16) Adjustment to record 10% minority interest in LLC's loss owned by Oasis $ 38,000
===========
(17) There were no adjustments to the basic weighted
average number of shares outstanding of
19,374,944. Convertible preferred stock was not
included in diluted earnings (loss) per share due
to the Company recording a loss for the period
presented. The following table reflects the shares
of common stock that would have been issuable upon
conversion:
Series H Preferred Stock 3,750,000
Series I Preferred Stock including payment of accrued dividends 1,521,000
Series F Preferred Stock 1,515,000
Series K Preferred Stock 1,923,000
---------
8,709,000
=========
35
EGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE C. CONTINGENCIES
The following adjustments to the pro forma basic net loss
per share are to reflect the following: (1) the issuance of
additional shares of Series F Preferred Stock and IDX
warrants which would have occurred if Telekey and IDX,
respectively, had met their earn-out formulas at the
beginning of the period presented; (2) the additional shares
of common stock to be issued to UCI shareholders assuming
UCI had met its earn-out provision; (3) the estimated
additional compensation expense related to the Telekey and
IDX stockholders' grant of shares under the original
agreements, including shares issuable under the original IDX
warrant; (4) the assumption that the Company's common stock
met the guaranteed trading price of $6.00 per share for IDX
related shares, $8.00 per share for UCI related shares and
$4.00 per share for the Telekey related shares and (5) the
assumption that ORS met its earn-out formulas and Oasis
exchanged its ownership in the LLC for the Company's common
stock and warrants at the beginning of the period presented.
The increase in goodwill amortization expense is the result
of the additional goodwill recorded as a result of the above
issuances amortized over 7 years using straight-line
amortization. It is assumed that the warrants related to the
IDX and ORS earn-outs are exercised at the beginning of the
period presented.
In addition, if the Company's common stock does not trade at
the guaranteed trading prices for UCI related shares and
Telekey related shares and, subject to UCI and Telekey
meeting their earn-out objectives, the Company will be
required to issue additional shares of common stock and the
estimated goodwill amortization reflected below will change.
If the Company's common stock does not trade at the
guaranteed trading price of $6.00 for IDX related shares and
upon conversion of Series H Preferred Stock, the Company may
record an additional dividend of up to $9.0 million if more
than 3,750,000 shares of common stock are issued.
The final purchase price allocations will be determined when
certain contingencies are resolved as discussed earlier and
additional information becomes available. This is not
indicative of what would have occurred had the acquisitions
actually been made as of such date.
36
EGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
PRO FORMA BASIC AND DILUTED LOSS PER SHARE:
NUMERATOR
Pro forma net loss attributable to common stock $(39,457,000) $(37,761,000)
Increase in goodwill amortization expense for
earn-out formulas (7 year straight-line
` amortization) (2,573,000) (3,431,000)
Estimated compensation adjustment related to
stock and warrants granted to IDX
employees by IDX stockholders after the
Company's purchase of IDX. 537,000 (2,460,000)
Estimated compensation adjustment related to
stock granted to Telekey employees by
Telekey stockholders after the Company's
purchase of Telekey . 574,000 (728,000)
Reversal of minority interest in (income) loss of ORS
due to Oasis's exchange of its interest in the LLC (38,000) (36,000)
------------ ------------
Adjusted pro forma net loss $(40,957,000) $(44,416,000)
------------ ------------
DENOMINATOR
Pro forma weighted average shares outstanding 19,374,944 17,940,654
Number of shares of common stock issuable
under earn-out formulas:
UCI (contingent earn-out stock) 62,500 62,500
IDX warrants 1,250,000 1,250,000
Number shares of common stock issuable to
Oasis for its ownership in LLC (assuming
exercise of warrants) 4,000,000 4,000,000
------------ ------------
Adjusted pro forma basic weighted average
shares outstanding: 24,687,444 23,253,154
------------ ------------
PER SHARE AMOUNTS
Adjusted pro forma basic and diluted loss per share $ (1.66) $ (1.91)
- -------------------------------------------------------------------------------------------------------------------------------
37
EGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The diluted loss per share in the above table does not reflect the 8,709,000
shares of common stock that would be issuable upon the conversion of the
preferred stock as discussed in Note 17. As the Company reported losses in both
periods, the effects of these transactions are anti-dilutive.
38
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed in its
behalf by the undersigned, thereunto duly authorized.
eGlobe, Inc.
(Registrant)
Date: December 6, 1999 By /S/ Anne Haas
--------------------------------
Anne Haas
Controller, Treasurer
(Principal Accounting Officer)
39