SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Amendment No. 1
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 18,
2001
EDLAM ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 000-29123 87-0644409
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
613 Chase Drive, Tyler, Texas 75771
(Address of principal executive offices)
(903) 581-2040
(Registrant's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Item 1. Changes in Control of Registrant
Item 2. Acquisition or Disposition of Assets.
On January 18, 2001, Edlam Acquisition Corporation, a Nevada
corporation ("Edlam") issued 11,000,000 shares of common stock to
Triden Telecom, Inc., a Nevada corporation ("Triden"), in
exchange for $55,151 cash. Immediately following the stock
sales, Edlam entered into a Stock Exchange Agreement
("Agreement") with Digitec Information Systems, Inc., a Texas
corporation ("Digitec"), whereby Edlam issued 1,750,000 shares of
common stock to James M. Roberts, Digitec's sole shareholder, in
exchange for Mr. Roberts' 1,000 shares of Digitec common stock.
As a negotiated element of the foregoing transactions, Edlam
redeemed from its pre-existing shareholders 500,000 shares of
common stock at a total redemption price of $45,000. Edlam also
entered into agreements to sell an additional 2,500,000 shares of
its common stock to a small group of investors at a total
purchase price of $25,000. All of the foregoing stock
transactions were effected in reliance on the exemptions from
registration under Sections 3(b) and/or 4(2) of the Securities
Act of 1933, and Rules 505 and 506 promulgated thereunder. Sales
were made only to persons Edlam believes to be sophisticated and
all investors have access to information on Edlam and its
proposed operations. No commissions were paid to any person. As
a result of the transactions Edlam is a majority owned subsidiary
of Triden, and Digitec is a wholly owned subsidiary of Edlam.
Digitec's business is in the communications industry,
including, business phone systems, cellular service and
equipment, national, regional and local paging and video
conferencing. Edlam intends to pursue the established business
of Digitec.
Following the completion of the transactions, the following
persons were elected as officers or directors of Edlam.
Name Age Positions Since
Robert S. Hardy 41 President, Chief Executive January 2001
Office and Director
James M. Roberts 52 President of Digitec and March 2001
Director
Holly V. Grant 27 Chief Financial Officer and March 2001
Director
Each of the foregoing officers are employed by Edlam under
written employment agreements that expire in January 2006.
Initial annual compensation to Robert S. Hardy is $100,000, which
increases annually by 10% over the prior year compensation level.
Annual compensation to James M. Roberts is $60,000 and to Holly
V. Grant is $25,000. Mr. Hardy received 1,750,000 shares of
common stock of Edlam as bonus for entering into the agreement,
is entitled to receive a $200,000 cash bonus in January 2002,
received an option to purchase 1,000,000 additional shares of
Edlam common stock at an exercise price of $0.01 per share that
expires in January 2006, and is entitled to receive such
additional compensation as the board of directors may determine
from time to time. Ms. Grant received 850,000 shares of common
stock of Edlam as bonus for entering into the agreement, received
an option to purchase 500,000 additional shares of Edlam common
stock at an exercise price of $0.01 per share that expires in
2
January 2006, and is entitled to receive such additional
compensation as the board of directors may determine from
time to time.
The following table sets forth as of March 30, 2001, the
number and percentage of the 18,600,000 shares of outstanding
common stock which, according to the information supplied to the
Company, were beneficially owned by (i) each person who is
currently a director and nominee director, (ii) each executive
officer, (iii) all current directors and nominee directors as a
group and (iv) each person who, to the knowledge of the Company,
is the beneficial owner of more than 5% of the outstanding common
stock. Except as otherwise indicated, the persons named in the
table have sole voting and dispositive power with respect to all
shares beneficially owned, subject to community property laws
where applicable.
Number of Percent
Name and Address Shares of Class (1)
Triden Telecom, Inc. (2) 11,000,000 59.14
613 Chase Drive
Tyler, TX 75701
Robert S. Hardy (2)(3)(4) 13,750,000 70.15
613 Chase Drive
Tyler, TX 75701
James M. Roberts (3) 1,750,000 9.80
121 Stonebriar
Sulphur Springs, TX 75482
Holly V. Grant (3)(4) 1,350,000 7.07
613 Chase Drive
Tyler, TX 75701
All officers and directors
as a Group (3 persons) 16,850,000 87.08
(1) These figures represent the percentage of ownership of the
named individuals assuming each of them alone has exercised any
options held, and percentage ownership of all officers and
directors as a group assuming all purchase rights held by such
individuals are exercised.
(2) These figures include 11,000,000 shares held of record by
Triden Telecom. Robert S. Hardy is an officer and director of
Triden Telecom and may be deemed to have shared voting and
investment control over the shares.
(3) These persons are all of the officers and directors of
Edlam.
(4) The figure for Mr. Hardy includes an option to purchase
1,000,000 shares of common stock at an exercise price of $0.01
per share that expires in January 2006. The figure for Ms.
Grant includes an option to purchase 500,000 shares of common
stock at an exercise price of $0.01 per share that expires
in January 2006.
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements.
(a) Financial Statements. Included in this filing beginning at
page F-1 are the following reports and financial statements of
Digitec for the fiscal years ended December 31, 2000 and 1999.
Independent Auditor's Report
Balance Sheets, December 31, 2000 and 1999
Statements of Operations, for the years ended December 31,
2000 and 1999
Statement of Stockholders' Equity (Deficit) for the years
ended December 31, 2000 and 1999
Statements of Cash Flows for the years ended December 31, 2000
and 1999
(b) Pro Forma Financial Information. Included in this filing
beginning at page PF-1 is the following proforma financial
information giving effect to the acquisition of Digitec at
December 31, 2000, and the year then ended.
Proforma Condensed Combined Balance Sheet
Proforma Condensed Combined Statement of Operations
(c) Exhibits. Copies of the following documents are included as
exhibits:
SEC Ref. No. Title of Document
2.1 Stock Exchange Agreement dated January 18, *
2001 between Edlam
and Digitec
10.1 Employment Agreement with Robert S. Hardy Page E-1
dated January 18, 2001
10.2 Employment Agreement with James M. Roberts Page E-7
dated January 18, 2001
10.3 Employment Agreement with Holly V. Grant Page E-13
dated January 18, 2001
* Exhibit No. 2.1 was included in the initial filing of this
report with the Securities and Exchange Commission on February 2,
2001, and is incorporated herein by this reference.
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.
EDLAM ACQUISITION CORPORATION
Dated: April 3, 2001 By: /s/ Robert S. Hardy, President
DIGITEC INFORMATION SYSTEMS, INCORPORATED
FINANCIAL STATEMENTS
December 31, 2000 and 1999
CONTENTS
PAGE
- Independent Auditor's Report F-2
- Balance Sheets, December 31, 2000 and 1999 F-3
- Statements of Operations, for the years
ended December 31, 2000 and 1999 F-4
- Statement of Stockholders' Equity (Deficit) for the
years ended December 31, 2000 and 1999 F-5
- Statements of Cash Flows for the years
ended December 31, 2000 and 1999 F-6
- Notes to Financial Statements F-8
F-1
INDEPENDENT AUDITOR'S REPORT
Board of Directors
DIGITEC INFORMATION SYSTEMS, INCORPORATED
Sulphur Springs, Texas 75482
We have audited the accompanying balance sheets of Digitec
Information Systems, Incorporated as of December 31, 2000 and
1999 and the related statements of operations, stockholders'
equity (deficit) and cash flows for the years 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Digitec Information Systems, Incorporated as of December 31,
2000 and 1999 and the results of its operations and its cash
flows for the years then ended in conformity with generally
accepted accounting principles.
The financial statements referred to above have been prepared
assuming Digitec Information Systems, Incorporated will continue
as a going concern. As discussed in Note 2 to the financial
statements, Digitec Information Systems, Incorporated has
incurred significant losses in recent years and has current
liabilities in excess of current assets, raising substantial
doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are also described
in Note 2. The financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
PRITCHETT, SILER & HARDY, P.C.
March 9, 2001
Salt Lake City, Utah
F-2
DIGITEC INFORMATION SYSTEMS, INCORPORATED
BALANCE SHEETS
ASSETS
December 31,
___________________________
2000 1999
___________ ___________
CURRENT ASSETS:
Cash in bank $ 4,908 $ 21,568
Accounts receivable, net of allowance of
$37,504 and $79,676, respectively 62,298 80,833
Income tax refund receivable - 23,219
Inventory 25,084 26,650
___________ ___________
Total Current Assets 92,290 152,270
PROPERTY AND EQUIPMENT, net 49,096 63,084
___________ ___________
$ 141,386 $ $215,354
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31,
___________________________
2000 1999
___________ ___________
CURRENT LIABILITIES:
Accounts payable $ 149,449 $ 104,630
Accrued liabilities 48,405 47,460
Current portion of notes payable 176,430 131,075
Current portion of notes payable -
related party 37,978 -
Current portion of capital lease 2,891 2,238
___________ ___________
Total Current Liabilities 415,153 285,402
___________ ___________
LONG-TERM OBLIGATIONS:
Capital lease, less current portion 7,605 10,106
Notes payable - related party, less
current portion - 37,978
Notes payable, less current portion 7,123 9,371
___________ ___________
Total Long Term Obligations 14,728 57,455
___________ ___________
Total Liabilities 429,881 342,857
___________ ___________
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $1.00 par value,
100,000 shares authorized, 1,000
shares issued and outstanding 1,000 1,000
Capital in excess of par value 1,500 1,500
Retained Earnings (deficit) (290,995) (130,003)
___________ ___________
Total Stockholders' Equity (Deficit) (288,495) (127,503)
___________ ___________
$ 141,386 $ 215,354
___________ ___________
The accompanying notes are an integral part of these financial statements.
F-3
DIGITEC INFORMATION SYSTEMS, INCORPORATED
STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
___________________________
2000 1999
___________ ___________
SALES, net of returns and discounts $ 890,952 $1,021,047
COST OF GOODS SOLD 759,970 815,538
___________ ___________
Gross profit 130,982 205,509
___________ ___________
OPERATING EXPENSES:
General and administrative expenses 216,631 359,062
Selling expense 46,658 45,755
___________ ___________
Total Operating Expenses 263,289 404,817
___________ ___________
LOSS FROM OPERATIONS (132,307) (199,308)
___________ ___________
OTHER INCOME (EXPENSE):
Interest (expense) (27,958) (26,229)
Gain (Loss) on sale of fixed assets (727) 1,424
___________ ___________
Total Other Income (Expense) (28,685) (24,805)
___________ ___________
LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (160,992) (224,113)
CURRENT TAX EXPENSE (BENEFIT) - (23,219)
DEFERRED TAX EXPENSE - -
___________ ___________
NET LOSS $(160,992) $(200,894)
___________ ___________
The accompanying notes are an integral part of these financial statements.
F-4
DIGITEC INFORMATION SYSTEMS, INCORPORATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Common Stock Additional Retained
________________________ Paid-in Earnings
Shares Amount Capital (Deficit)
_____________________________________________________
BALANCE, December 31, 1998 1,000 $ 1,000 $ 1,500 $70,891
Net loss for the year ended December 31, 1999 - - - (200,894)
__________ __________ _________ __________
BALANCE, December 31, 1999 1,000 1,000 1,500 (130,003)
Net loss for the year ended December 31, 2000 - - - (160,992)
__________ __________ _________ __________
BALANCE, December 31, 2000 1,000 $ 1,000 $ 1,500 $(290,995)
__________ __________ _________ ___________
The accompanying notes are an integral part of this financial statement.
F-5
DIGITEC INFORMATION SYSTEMS, INCORPORATED
STATEMENTS OF CASH FLOWS
Net Increase (Decrease) in Cash
For the Years Ended
December 31,
_____________________________
2000 1999
_____________ ____________
Cash Flows from Operating Activities:
Net loss $(160,992) $(200,894)
_____________ ___________
Adjustments to reconcile net income
to net cash used by operations:
Depreciation and amortization 15,323 16,360
(Gain) Loss on sale of fixed assets 727 (1,424)
Non-cash expense - -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 18,535 21,630
(Increase) decrease in inventory 1,566 7,534
Increase (decrease) in accounts payable 44,820 60,962
Increase (decrease) in accrued expenses 945 39,281
Increase (decrease) in accrued income taxes 23,219 (23,219)
_____________ ____________
Total Adjustments 105,135 121,124
_____________ ____________
Net Cash (Used) by Operating Activities (55,857) (79,770)
_____________ ____________
Cash Flows from Investing Activities:
Purchase of property and equipment (2,912) (20,737)
Proceeds from sale of assets 850 -
Payments on Notes receivable - 1,537
_____________ ____________
Net Cash (Used) by Investing Activities (2,062) (19,200)
_____________ ____________
Cash Flows from Financing Activities:
Proceeds from notes payable 52,525 69,774
Proceeds from related party notes payable - 37,978
Payments on notes payable (9,418) (3,014)
Payments on capital leases (1,848) (1,030)
_____________ ____________
Net Cash Provided by Financing Activities 41,259 103,708
_____________ ____________
Net Increase (Decrease) in Cash (16,660) 4,738
Cash at Beginning of Period 21,568 16,830
_____________ ____________
Cash at End of Period $ 4,908 $ 21,568
_____________ ____________
[Continued]
F-6
DIGITEC INFORMATION SYSTEMS, INCORPORATED
STATEMENTS OF CASH FLOWS
[Continued]
Increase (Decrease) in Cash
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 25,047 $ 21,759
Income taxes $ - $ -
Supplemental Disclosure of Non-Cash Investing and Financing
Activities:
For the year ended December 31, 2000:
None
For the year ended December 31, 1999:
The Company purchased a vehicle for a total of $11,940 through
issuance of notes payable.
The Company purchased software through entering into a capital
lease totaling 13,374.
The accompanying notes are an integral part of these financial statements.
F-7
DIGITEC INFORMATION SYSTEMS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was organized under the laws of the
State of Texas on March 26, 1990 as Digitec Information
Systems, Incorporated. The Company is in the business of
marketing telecommunication services and equipment including
business phone systems, pager and cellular phones.
Inventory - Inventory is carried at the lower of cost or
market, as determined on the first-in, first-out (FIFO)
method.
Property and Equipment - Property and equipment are stated at
cost. Expenditures for major renewals and betterments that
extend the useful lives of property and equipment are
capitalized, upon being placed in service. Expenditures for
maintenance and repairs are charged to expense as incurred.
Depreciation of equipment is computed for financial statement
purposes on a straight-line basis over the estimated useful
lives of the assets, which range from three to fifteen years.
Leasehold improvements are amortized over the lease period or
the estimated useful life of the improvements.
Income Taxes - The Company accounts for income taxes in
accordance with FASB Statement No. 109, "Accounting for Income
Taxes (see Note 10)
Cash and Cash Equivalents - For the purpose of the financial
statements, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less
to be cash equivalents.
Recently Enacted Accounting Standards - Statement of Financial
Accounting Standards (SFAS) No. 136, "Transfers of Assets to a
not for profit organization or charitable trust that raises or
holds contributions for others", SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - deferral of
the effective date of FASB Statement No. 133 (an amendment of
FASB Statement No. 133.),", SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities
- and Amendment of SFAS No. 133", SFAS No. 139, "Recission of
SFAS No. 53 and Amendment to SFAS No 63, 89 and 21", and SFAS
No. 140, "Accounting to Transfer and Servicing of Financial
Assets and Extinguishment of Liabilities", were recently
issued SFAS No. 136, 137, 138, 139 and 140 have no current
applicability to the Company or their effect on the financial
statements would not have been significant.
Revenue Recognition - The Company recognizes revenue at the
time of delivery of the product or completion of the services
to be provided.
Advertising Costs - Costs incurred in connection with
advertising and promotion of the Company's products are
expensed as incurred. Advertising costs amounted to $46,658
and $45,755 for the years ended December 31, 2000 and 1999.
Accounting Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual
results could differ from those estimated.
F-8
DIGITEC INFORMATION SYSTEMS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going
concern. However, the Company has incurred significant losses
in recent years and has current liabilities in excess of
current assets. These factors raise substantial doubt about
the ability of the Company to continue as a going concern. In
this regard, management has entered into an acquisition
agreement with Edlam acquisition Corporation (See Note 12) and
is proposing to raise additional capital through the sale of
securities. There is no assurance that the Company will be
successful in achieving profitable operations. The financial
statements do not include any adjustments that might result
from the outcome of these uncertainties.
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable consists of trade receivables arising in
the normal course of business as follows at December 31, 2000
and 1999:
2000 1999
____________ ___________
Trade accounts receivable $99,802 $160,509
Less: allowance for doubtful accounts (37,504) (79,676)
____________ ___________
$62,298 $ 80,833
____________ ___________
All of the Company's accounts receivable are pledged as
collateral in connection with the Company's notes payable.
NOTE 4 - INVENTORY
The following is a summary of inventory recorded at the lower
of cost or market, less a reserve for obsolescence at December
31, 2000 and 1999:
2000 1999
____________ ___________
Finished Goods $40,084 $ 41,650
Less: reserve for obsolescence (15,000) (15,000)
____________ ___________
$25,084 $ 26,650
____________ ___________
The Company's inventory is pledged as collateral in connection
with the Company's notes payable.
F-9
DIGITEC INFORMATION SYSTEMS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment less
accumulated depreciation as of December 31, 2000 and 1999:
2000 1999
____________ ___________
Furniture $40,160 $ 39,034
Vehicles 29,818 34,549
Equipment 13,225 13,225
Leasehold improvements 16,004 14,218
____________ ___________
99,207 101,026
Less: accumulated depreciation (50,111) (37,942)
____________ ___________
$49,096 $ 63,084
____________ ___________
Depreciation and amortization expense for the years ended
December 31, 2000 and 1999 amounted to $15,323 and $16,360,
respectively.
The Company's property and equipment is pledged as collateral
in connection the Company's notes payable.
NOTE 6 - LEASE PAYABLE
Operating Leases - The Company leases its office and
production facility under an operating lease expiring in
January 2009 from an entity owned by the sole shareholder of
the Company.
The future minimum lease payments for non-cancelable operating
leases having remaining terms in excess of one year as of
December 31, 2000 are as follows:
Year ending December 31 Lease Payments
2001 33,000
2002 33,000
2003 33,000
2004 33,000
Thereafter 134,750
______________
Total Minimum Lease Payments $ 266,750
______________
Lease expense charged to operations was $37,156, and 26,252
for the years ended December 31, 2000 and 1999.
NOTE 7 - CAPITAL LEASES
Capital Leases - The Company is the lessee of software under a
capital lease expiring in 2004. The assets and liabilities
under the capital lease were recorded at the lower of the
present value of the minimum lease payments or the fair value
of the assets at the time of purchase. The asset is amortized
over three years. Amortization expense of $4,458 and $1,858
for the assets under the capital lease has been included in
depreciation expense for 2000 and 1999.
F-10
DIGITEC INFORMATION SYSTEMS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - CAPITAL LEASES [Continued]
Equipment at December 31, 2000 and 1999 under capital lease
obligations are as follows:
2000 1999
________________________
Software $ 13,274 $ 13,374
Less: Accumulated amortization (4,458) (1,858)
________________________
$ 8,816 $ 11,516
________________________
Total future minimum lease payments, executory costs and
current portion of capital lease obligations are as follows
for the years ended December 31:
Year ending December 31, Lease Payments
2001 4,082
2002 3,499
2003 3,499
2004 1,749
__________
Total future minimum lease payments $12,829
Less: amounts representing interest
and executory costs (2,333)
__________
Present value of the future minimum
lease payments 10,496
Less: Lease current portion (2,891)
__________
Capital lease obligations-long term $ 7,605
__________
NOTE 8 - RELATED PARTY TRANSACTIONS
At December 31, 2000 and 1999, the Company is indebted to
related parties for the following notes payable and advances
payable:
2000 1999
_______________________
11% unsecured note payable due to the
sole shareholder of the Company,
due January 15, 2001 $ 37,978 $ 37,798
_______________________
Total long-term obligations 37,978 37,798
Less: current maturities 37,978 -
_______________________
Long-term obligations,
excluding current portions $ - $ 37,798
_______________________
During the years ended December 31, 2000 and 1999, the Company
recorded interest expenses of $4,178 and $4,040 on related
party notes payable. During the years ended December 31, 2000
and 1999 the Company paid $3,692 and $0 in related party
interest.
Included in accounts payable at December 31, 1999, was $1,748
owed to an entity owned by the President of the Company.
F-11
DIGITEC INFORMATION SYSTEMS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - NOTES PAYABLE
At December 31, 2000 and 1999, the Company is indebted for the
following notes payable:
2000 1999
_____________________
10% notes payable to a financial institution,
due on demand with monthly interest payments
of $750. Secured by property & equipment,
inventory and accounts receivable and the
personal guaranty of the president of the Company. $ 78,999 $78,999
7.95% note payable to a financial institution, to purchase
a vehicle payable in sixty monthly installments of
interest and principal of $243 beginning October 4,
1999. Secured by vehicle purchased 9,550 11,447
8.5% $50,000 note payable to a financial institution,
payable in monthly installments of interest and
principal of $1,026 with the balance due December 6,
2000. Refinanced at 10%, monthly payments of $1,370
with the balance due June 15, 2001. Secured by
property & equipment, inventory and accounts receivable
and the personal guaranty of the president of the Company. 42,478 50,000
11% add on interest note payable to an entity, with a
controlling interest in the Edlam Acquisition Corp.
(See Note 12) payable in twelve monthly installments
of interest and principal of $4,859 beginning January
15, 2001. 52,526 -
____________________
Total long-term obligations 183,553 140,446
Less: current maturities (176,430)(131,075)
____________________
Long-term obligations, excluding current portions $ 7,123 $ 9,371
____________________
During March 2001, Triden Telecom, Inc, an entity with a
controlling interest in Edlam Acquisition Corp. (See Note 12)
loaned the Company an additional $59,500 and refinanced the
existing loan with Company. The 11% add on interest loan
calls for thirty-six payments of $3,333 beginning March 15,
2001.
The estimated aggregate maturities required on long-term debt
at June 30, 2000 are as follows:
2001 $ 176,430
2002 2,432
2003 2,633
2004 2,058
2005 -
Thereafter -
____________
$ 183,553
____________
F-12
DIGITEC INFORMATION SYSTEMS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 Accounting
for Income Taxes [FASB 109]. FASB 109 requires the Company to
provide a net deferred tax asset or liability equal to the
expected future tax benefit or expense of temporary reporting
differences between book and tax accounting and any available
operating loss or tax credit carryforwards. At December 31,
2000 and 1999, the total of all deferred tax assets was
$129,174 and $70,528 and the total of the deferred tax
liabilities was $3,130 and $4,012. The amount of and ultimate
realization of the benefits from the deferred tax assets for
income tax purposes is dependent, in part, upon the tax laws
then in effect, the Company's future earnings, and other
future events, the effects of which cannot presently be
determined. Because of the uncertainty surrounding the
realization of the deferred tax assets, the Company has
established a valuation allowance of $126,044 and $66,516 as
of December 31, 2000 and 1999, which has been offset against
the deferred tax assets. The net increase in the valuation
allowance during the years ended December 31, 2000 and 1999
amounted to approximately $59,529 and $49,353, respectively.
As of December 31, 2000 and 1999, the Company has net tax
operating loss [NOL] carryforwards available to offset its
future income tax liability. The NOL carryforwards have been
used to offset deferred taxes for financial reporting
purposes. The Company has federal NOL carryforwards of
approximately $279,045 that expire in 2019 and 2020.
The components of income tax expense from continuing
operations for the years ended December 31, 2000 and 1999
consist of the following:
December 31,
_______________________
2000 1999
_______________________
Current income tax expense:
Federal $ - $(23,219)
State - -
______________________
Net current tax expense - (23,219)
______________________
Deferred tax expense (benefit)
arising from:
Excess of tax over financial
accounting depreciation $ (883) $(1,273)
Contribution carryforwards (335) (653)
Accrued interest (180) (1,495)
Reserve for bad debts 15,604 (29,480)
Net operating loss carryforwards (73,735) (16,452)
Valuation allowance 59,529 49,353
____________________
Net deferred tax expense $ - $ -
____________________
Deferred income tax expense results primarily from the
reversal of temporary timing differences between tax and
financial statement income.
F-13
DIGITEC INFORMATION SYSTEMS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - INCOME TAXES [Continued]
A reconciliation of income tax expense at the federal
statutory rate to income tax expense at the Company's
effective rate is as follows:
December 31,
______________________
2000 1999
______________________
Computed tax at the expected federal
statutory rate $(54,737) $ (76,198)
Other 38 10,350
State income taxes, net of federal income
tax benefits (4,830) (6,724)
Valuation allowance 59,529 49,353
______________________
Computed tax at the effective income
tax rates $ - $ (23,219)
______________________
The temporary differences and carryforwards gave rise to the
following deferred tax asset (liability) at December 31, 2000
and 1999:
2000 1999
________________________
Excess of tax over book accounting
depreciation (3,131) (4,012)
Accrued interest 1,674 1,495
Reserve for obsolete inventory 5,550 5,550
Reserve for doubtful accounts 13,877 29,480
Contribution carryover 4,827 4,42
NOL carryforwards 103,247 29,511
As of December 31, 2000 and 1999, the deferred taxes reflected
in the consolidated balance sheet are as follows:
2000 1999
________________________
Short term asset (liability) $ - $ -
Long term asset (liability) $ - $ -
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Employment agreement - On March 8, 2000, the Company entered
into a two year employment agreement with its controller. The
agreement provides for salaries totaling $28,000 per year.
NOTE 12 - SUBSEQUENT EVENTS
Acquisition - On January 18, 2001 the Company entered into a
Stock Exchange agreement with Edlam Acquisition Corporation
(Edlam), a Nevada Corporation wherein the sole shareholder of
the Company received 1,750,000 shares of Edlam for all the
issued and outstanding shares of the Company, making the
Company a wholly owned subsidiary of Edlam.
During March 2001, Triden Telecom, Inc., an entity with a
controlling interest in Edlam Acquisition Corp., loaned the
Company an additional $59,500 and refinanced an existing
$48,586 note payable with Company. The 11% add-on interest
loan calls for thirty-six payments of $3,333 beginning March
15, 2001 and has a balance of $108,086 on March 8, 2001.
F-14
DIGITEC INFORMATION SYSTEMS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - SUBSEQUENT EVENTS [Continued]
During January 2001, the Company entered into a five year
employment agreements with its President. The agreement
provides for salaries totaling $60,000 per year, the issuance
of 750,000 shares of common stock of Triden Telecom, Inc.
valued at $.02 per share as a signing bonus, and the issuance
of 500,000 stock options to purchase common stock of Triden
Telecom, Inc. at $.025 per share. The agreement also contains
a termination without cause provision that would entitle the
President to receive one half of the remaining salaries under
the agreement. The employment agreement also provides for
disability and death benefits
F-15
EDLAM ACQUISITION CORPORATION.
AND DIGITEC INFORMATION SYSTEMS INCORPORATED
PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[Unaudited]
The following unaudited proforma condensed combined balance sheet
aggregates the balance sheet of Edlam Acquisition Corporation (a
Nevada corporation) ("PARENT") as of December 31, 2000 and the
balance sheet of Digitec Information Systems Incorporated (a
Texas corporation) ("SUBSIDIARY") as of December 31, 2000,
accounting for the transaction as a purchase of SUBSIDIARY with
the issuance of shares of the PARENT for all the issued and
outstanding shares of the SUBSIDIARY and using the assumptions
described in the following notes, giving effect to the
transaction, as if the transaction had occurred as of the
beginning of the period. The transaction was not completed as of
December 31, 2000.
The following unaudited proforma condensed combined statement of
operations combine the results of operations of PARENT and
SUBSIDIARY for the year ended December 31, 2000 as if the
transaction had occurred as January 1, 2000.
The proforma condensed combined financial statements should be
read in conjunction with the separate financial statements and
related notes thereto of PARENT and SUBSIDIARY. These proforma
financial statements are not necessarily indicative of the
combined financial position, had the acquisition occurred on the
date indicated above, or the combined results of operations which
might have existed for the periods indicated or the results of
operations as they may be in the future.
PF-1
EDLAM ACQUISITION CORPORATION
AND DIGITEC INFORMATION SYSTEMS INCORPORATED
PROFORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 2000
ASSETS
[Unaudited]
Edlam Acquisition Digitec Information,
Corporation Systems Incorperated Proforma
December 31, 2000 December 31, 2000 Increase Proforma
[Parent] [Subsidiary] (Decrease) Combined
ASSETS:
[B] 55,151
[C] (45,000)
Cash $ 80 $ 4,908 [D] 25,000 $ 40,139
Accounts receivable - 62,298 - 62,298
Inventory - 25,084 - 25,084
Property and equipment, net - 49,096 - 49,096
Goodwill - - [A] 305,995 305,995
$ 80 $ 141,386 $ 341,146 $ 482,612
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES:
Accounts payable and
Accrued liabilities $ 235 $ 197,854 $ - $ 198,089
Notes payable -related party - 37,978 - 37,978
Capital Lease payable - 10,496 - 10,496
Notes payable - 183,553 - 183,553
Total Liabilities 235 429,881 - 430,116
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - - - -
[A] 1,750
[A] (1,000)
[B] 11,000
[C] (500)
Common stock 500 1,000 [D] 2,500 15,250
[A] 15,750
[A] (1,500)
[B] 44,151
Par value in excess of [C] (44,500)
Contributed capital 1,500 1,500 [D] 22,500 39,401
Retained deficit (2,155) (290,995) [A] 290,995 (2,155)
Total Stockholders'
Equity (Deficit) (155) (288,495) 341,146 52,496
$ 80 $ 141,386 $ 341,146 $ 482,612
See Notes To Unaudited Proforma Condensed Financial Statements.
PF-2
EDLAM ACQUISITION CORPORATION
AND DIGITEC INFORMATION SYSTEMS INCORPORATED
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
[Unaudited]
Edlam Acquisition Digitec Information,
Corporation Systems Incorperated
For the Year For the Year
Ended December Ended December Proforma
31, 2000 31, 2000 Increase Proforma
[Parent] [Subsidiary] (Decrease) Combined
REVENUE $ - $ 890,952 $ - $ 890,952
COST OF GOODS SOLD - 759,970 - 759,970
Gross profit - 130,982 - 130,982
EXPENSES:
Selling Expenses - 46,658 - 46,658
General and administrative 1,605 216,631 - 218,236
Total expenses 1,605 263,289 - 264,894
(LOSS) FROM OPERATIONS (1,605) (132,307) - (133,912)
OTHER (EXPENSE) - (28,685) - (28,685)
(LOSS) FROM OPERATIONS
BEFORE PROVISION FOR TAXES (1,605) 160,992 - (162,597)
PROVISION FOR INCOME TAXES - - - -
NET (LOSS) $ (1,605) $ (160,992) $ - $ (162,597)
BASIC NET (LOSS) PER COMMON SHARE $ (.01)
See Notes To Unaudited Proforma Condensed Financial Statements.
PF-3
EDLAM ACQUISITION CORPORATION
AND DIGITEC INFORMATION SYSTEMS INCORPORATED
NOTES TO PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[Unaudited]
NOTE 1 - EDLAM ACQUISITION CORPORATION
Edlam Acquisition Corporation ["PARENT"] was organized under
the laws of the State of Nevada on December 23, 1999. The
Company has not commenced planned principal operations and
is considered a development stage company as defined by SFAS
No. 7. The Company is seeking potential business ventures.
NOTE 2 - DIGITEC INFORMATION SYSTEMS INCORPORATED
Digitec Information Systems Incorporated ["SUBSIDIARY"], a
Texas corporation, was incorporated on March 26, 1990 . The
Company is in the business of marketing telecommunication
services and equipment, in Northeastern Texas, including
business phone systems, pager and cellular phones.
NOTE 3 - PROFORMA ADJUSTMENTS
During January 2001, PARENT entered in a stock purchase
agreement to acquire 100% of SUBSIDIARY through the issuance
of 1,750,000 shares of restricted common stock in a
transaction wherein SUBSIDIARY became a wholly owned
subsidiary of PARENT. Concurrent with the acquisition of
the SUBSIDIARY, PARENT issued 11,000,000 shares of common
stock to Triden Telecom, Inc. (a Nevada Corporation) for
$55,151. Effective control of the PARENT was passed to
Triden Telecom, Inc.
Proforma adjustments on the attached financial statements
include the following:
[A]To record the Purchase of SUBSIDIARY by PARENT through
the issuance of 1,750,000 of common stock valued at $.01
per share including the elimination of equity accounts
of subsidiary in consolidation and the recording of
goodwill.
[B]To reflect the sale of 11,000,000 shares of common stock
to Triden Telecom, Inc., a Nevada corporation
("Triden"), in exchange for $55,151
[C]To reflect the re-purchase of 500,000 shares of PARENT'S
common stock from its former shareholders at a total
redemption price of $45,000.
[D]To reflect the sale of 2,500,000 shares of the parents
common stock to a small group of investors at a total
purchase price of $25,000.
NOTE 4 - PROFORMA (LOSS) PER SHARE
The proforma (loss) per share is computed based on
(15,250,000) the number of shares outstanding, after
adjustment for shares issued in the acquisition and the
limited offering, as though all shares issued in the
acquisition and limited offering had been outstanding from
the beginning of the periods presented.
PF-4