UNITED STATES
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 earliest event reported): January 3, 2006
FTS GROUP, INC.
---------------
(Exact name of registrant as specified in its charter)
Nevada 000-24829 84-1416864
--------------------------- --------------- ---------------
(State or other jurisdiction (Commission File (IRS Employer of
incorporation) Number) Identification No.)
7610 West Hillsborough Ave., Tampa, Florida 33615
------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(813) 868-3600
-----------------------------
(Registrant's telephone number)
Check the appropriate box below if the Form 8-K/A filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
On January 3, 2006 we acquired See World Satellites, Inc., a Pennsylvania
corporation. We paid $500,000 at the closing of the transaction on January 3,
2006. We agreed to pay an additional $500,000 when all material contracts held
by See World were executed, amended or modified to acknowledge our acquisition
of See World and/or to make us a party to each agreement such that we had full
benefit of the agreements. The material agreements, such as the contract with
Echo Star, have been executed and became effective as of September 1, 2006. As
of September 28, 2006, we have paid Mr. Miller the second $500,000 payment as
required by our agreements.
At closing, we issued to Mr. Miller a two year secured promissory note in the
sum of $3,500,000. The Note does not pay interest. As of September 28, 2006, we
have paid $500,000 pursuant to the terms of the Note as follows: $250,000 was
paid to Mr. Miller in April 2006 and $250,000 was paid to Mr. Miller in July
2006. We are scheduled to make 6 more quarterly payments of $250,000 to Mr.
Miller as follows: $250,000 in October 2006, $1,250,000 in January 2007,
$250,000 in April 2007, $250,000 in July 2007, $250,000 in October 2007 and
$750,000 in January 2008. The Note is secured against the assets of See World.
The total purchase price amounted to $5,500,000. Pursuant to the Agreement,
which became effective January 3, 2006, See World became our subsidiary.
The net assets of See World Satellites, Inc. per the audited financial
statements included herewith were $841,102. Contract stipulations were in place
for certain net assets to be retained by seller upon completion of the audit.
Cash of $635,002 and accounts receivable of $85,758, less liabilities of
$201,962 for a net amount of $518,798 were to be retained by the seller Mr.
Richard Miller. These items were left in the business for working capital
purposes and a short term note to Mr. Miller of $518,798 is reflected in these
financial statements.
In March 2006, we issued Mr. Miller 1,000,000 shares of our Series B Convertible
preferred stock after the 2004 and 2005 audited financial statements of See
World Satellites, Inc. were completed.
The description of the transaction contained herein is qualified in its entirety
by reference to the Promissory Note dated January 3, 2006, the Stock Purchase
Agreement between the Company and Richard E. Miller dated January 3, 2006 and
the Stock Escrow Agreement among the Company, Richard E. Miller and Lambert &
Martineau dated January 3, 2006. Each of these documents is filed as an Exhibit
to the Form 8-K filed on January 9, 2006 and incorporated herein by reference.
a. Historical Financial Statements of Business Acquired (See World Satellites,
Inc.) for 2005 and 2004.
b. Proforma Financial Information
1. Proforma Consolidated Balance Sheet - December 31, 2005
2. Proforma Consolidated Statement of Operations - Year ended December 31, 2005
3. Proforma Consolidated Statement of Operations - Year ended December 31, 2004
4. Notes to Unaudited Proforma Consolidated Financial Statements
SEE WORLD SATELLITES, INC.
INDEX
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FINANCIAL STATEMENTS:
BALANCE SHEETS - DECEMBER 31, 2005 AND 2004
STATEMENTS OF OPERATIONS -YEARS ENDED DECEMBER 31, 2005 AND 2004
Statements of Stockholder's Equity - Years ended December 31, 2005 and 2004
STATEMENTS OF CASH FLOWS - YEARS ENDED DECEMBER 31, 2005 AND 2004
Notes to audited Financial Statements
PROFORMA FINANCIAL INFORMATION:
PROFORMA CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2005
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS - YEAR ENDED DECEMBER 31, 2005
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS - YEAR ENDED DECEMBER 31, 2004
NOTES TO UNAUDITED PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
R. E. Bassie & Co.
Certified Public Accountants
6671 Southwest Freeway, Suite 550
Houston, Texas 77074-2220
Tel: (713) 272-8500
E-Mail: Rebassie@aol.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
See World Satellites, Inc.:
We have audited the accompanying balance sheets of See World Satellites, Inc. as
of December 31, 2005 and 2004, and related statements of operations,
stockholder's equity, and cash flows for each of the years in the two-year
period ended December 31, 2005. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant 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 See World Satellites, Inc. as
of December 31, 2005 and 2004, and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 2005, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ R.E Bassie & Co.
Houston, Texas
December 5, 2006
SEE WORLD SATELLITES, INC.
Balance sheet 2005 and 2004
Assets 2005 2004
-------------- --------------
Current assets:
Cash and cash equivalents $ 635,002 $ 501,771
Accounts receivable 85,758 127,628
Receivable from shareholder - 61,111
Prepaid expenses 41,306 29,163
Inventory 144,544 39,588
-------------- --------------
Total current assets 906,610 759,261
-------------- --------------
Property and equipment 357,721 353,024
Less accumulated depreciation and amortization 221,267 178,213
-------------- --------------
Net property and equipment 136,454 174,811
-------------- --------------
Total assets $ 1,043,064 $ 934,072
============== ==============
Liabilities and Stockholder's Equity
- ------------------------------------
Liabilities:
Accounts payable and accrued expenses $ 96,662 $ 400,313
Accrued salaries and related liabilities 84,653 35,834
Current installments of long-term debt 16,561 21,068
-------------- --------------
Total current liabilities 197,876 457,215
Long-term debt, less current installments 4,086 20,647
-------------- --------------
Total liabilities 201,962 477,862
-------------- --------------
Stockholder's equity:
Common stock, $0.10 par value. Authorized 10,000
shares: 10,000 shares issued and outstanding 1,000 1,000
Retained earnings 840,102 455,210
-------------- --------------
Total stockholder's equity 841,102 456,210
Commitments and contingencies
-------------- --------------
Total liabilities and stockholder's equity $ 1,043,064 $ 934,072
============== ==============
<FN>
See accompanying notes to financial statements.
SEE WORLD SATELLITES,INC.
Statements of Operations
Years ended December 31, 2005 and 2004
2005 2004
-------------- --------------
Sales revenue $ 5,038,676 $ 4,248,285
-------------- --------------
Cost and expenses:
Cost of sales 803,106 1,131,003
Selling, general and administrative 3,305,280 2,708,031
Loss on disposal of assets 17,794 15,485
-------------- --------------
Total cost and expenses 4,126,180 3,854,519
-------------- --------------
Operating income before other income(expenses) 912,496 393,766
-------------- --------------
Other income (expenses):
Interest income 13,805 2,783
Interest expense (4,825) (7,354)
Other income 605 682
-------------- --------------
Total other income (expenses) 9,585 (3,889)
-------------- --------------
Net earnings from continuing operations $ 922,081 $ 389,877
============== ==============
Net earnings per common share - basic and diluted:
Net earnings applicable to common shareholder $ 92.21 $ 38.99
============== ==============
Weighted average common shares - basic and diluted 10,000 10,000
============== ==============
<FN>
See accompanying notes to financial statements.
SEE WORLD SATELLITES, INC.
Statements of Stockholder's Equity
Years ended December 31, 2005 and 2004
Additional Total
Common Stock paid in Retained stockholder's
---------------
shares amount capital earnings equity
------ ------- ------- -------- --------
Balance, December 31, 2003 10,000 $1,000 $ - $538,013 $539,013
Net earnings - - - 389,877 389,877
Owner's withdrawals - - - (472,680) (472,680)
------ ------- ------- -------- --------
Balance, December 31, 2004 10,000 1,000 - 455,210 456,210
Net earnings - - - 922,081 922,081
Owner's withdrawals - - - (537,189) (537,189)
------ ------- ------- -------- --------
Balance, December 31, 2005 10,000 $ 1,000 $ - $840,102 $841,102
====== ======= ======= ======== ========
<FN>
See accompanying notes to financial statements.
SEE WORLD SATELLITES,INC.
Statements of Cash Flows
Years ended December 31, 2005 and 2004
2005 2004
-------------- --------------
Cash flows from operating activities:
Net earnings $ 922,081 $ 389,877
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 74,966 63,973
Loss on disposal of equipment 17,794 15,485
(Increase) decrease in operating assets:
Accounts receivable 41,870 (29,963)
Inventory (104,956) (1,608)
Prepaid expenses (12,143) (11,017)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (303,651) 238,956
Accrued salaries and related liabilities 48,819 15,139
-------------- --------------
Net cash provided by operating activities 684,780 680,842
-------------- --------------
Cash flows from investing activities
Capital expenditure for equipment (54,403) (69,527)
Receivable from shareholder 61,111 -
-------------- --------------
Net cash provided by (used in) investing activities 6,708 (69,527)
-------------- --------------
Cash flows from financing activities:
Principal payments on long-term debt (21,068) (37,363)
Shareholder's withdrawals (537,189) (472,680)
-------------- --------------
Net cash used in financing activities (558,257) (510,043)
-------------- --------------
Net increase in cash and cash equivalents 133,231 101,272
Cash and cash equivalents at beginning of year 501,771 400,499
-------------- --------------
Cash and cash equivalents at end of year $ 635,002 $ 501,771
============== ==============
<FN>
See accompanying notes to financial statements.
See World Satellites, Inc. Notes to audited financial statements
(1) Summary of Significant Accounting Policies
ORGANIZATION, OWNERSHIP AND BUSINESS
See World Satellites, Inc. (the "Company") was incorporated under the laws of
the State of Pennsylvania in 1998. The Company's primary services include the
installation of television satellite disk systems as an independent contractor
for DISH Network Services Corporation and as an authorized retailer for
marketing, promotion and solicitation of orders for programming with EchoStar
Satellite L.L.C., an affiliate of DISH Network Services Corporation.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid investment instruments purchased with original maturities of three months
or less to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable consist primarily of trade receivables, net of a valuation
allowance for doubtful accounts.
INVENTORY
Inventory consists of various components of satellite disks, mainly receivers
and is stated at the lower of cost, or market on a first-in, first-out basis.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are recorded at cost less accumulated depreciation. Upon
retirement or sale, the cost of the assets disposed of and the related
accumulated depreciation are removed from the accounts, with any resultant gain
or loss being recognized as a component of operating income. Depreciation is
computed over the estimated useful lives of the assets (3-5 years) using the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes. Maintenance and repairs are charged to operations as
incurred.
REVENUE RECOGNITION
The Company recognizes revenue when the installation of the products is complete
or upon completion of services provided.
ADVERTISING COSTS
The cost of advertising is expensed as incurred.
INCOME TAXES
The Company has elected to be treated as an S corporation for federal income
tax purposes. Accordingly, the earnings and losses of the Company are included
in the personal income tax return of the stockholder, who is taxed depending on
his personal tax strategies.
MANAGEMENT'S ESTIMATES AND ASSUMPTIONS
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, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses. Actual results could differ from these
estimates.
STOCK-BASED COMPENSATION
The Company has chosen to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related Interpretations and
to elect the disclosure option of SFAS No. 123, "Accounting for Stock-Based
Compensation." Accordingly, compensation cost for stock options issued to
employees is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee must pay to
acquire the stock. No stock was issued during the years ended December 31, 2005
and 2004.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of its financial instruments using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the Company estimates of fair value are
not necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumption and/or
estimation methodologies may have a material effect on the estimated fair value
amounts. The interest rates payable by the Company on its notes payable
approximate market rates. The Company believes that the fair value of its
financial instruments comprising accounts receivable, notes receivable, accounts
payable, and notes payable approximate their carrying amounts.
NEW PRONOUNCEMENTS
In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 154, Accounting Changes and Error
Corrections. SFAS No. 154 replaces Accounting Principles Board Opinion No. 20,
Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Internal
Financial Statements, and changes the requirements for the accounting for and
reporting of a change in accounting principle. SFAS No. 154 requires
retrospective application of changes in accounting principle to prior periods'
financial statements, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. SFAS No. 154 is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. We will adopt SFAS No. 154 on January 1,
2006. Any impact on the Company's consolidated results of operations and
earnings per share will be dependent on the amount of any accounting changes or
corrections of errors whenever recognized.
In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 153. This statement addresses the measurement
of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29,
"Accounting for Nonmonetary Transactions," is based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged.
The guidance in that opinion; however, included certain exceptions to that
principle. This statement amends Opinion 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. This statement is effective for financial statements for fiscal
years beginning after June 15, 2005. Earlier application is permitted for
nonmonetary asset exchanges incurred during fiscal years beginning after the
date of this statement is issued. Management believes the adoption of this
statement will have no impact on the financial statements of the Company. In
December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 152, which amends FASB statement No. 66,
"Accounting for Sales of Real Estate," to reference the financial accounting and
reporting guidance for real estate time-sharing transactions that is provided in
AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing
Transactions." This statement also amends FASB Statement No. 67, "Accounting for
Costs and Initial Rental Operations of Real Estate Projects," to state that the
guidance for (a) incidental operations and (b) costs incurred to sell real
estate projects does not apply to real estate time-sharing transactions. The
accounting for those operations and costs is subject to the guidance in SOP
04-2. This statement is effective for financial statements for fiscal years
beginning after June 15, 2005. Management believes the adoption of this
statement will have no impact on the financial statements of the Company.
In November 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 151, "Inventory Costs-- an
amendment of ARB No. 43, Chapter 4." This statement amends the guidance in ARB
No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that "under some
circumstances, items such as idle facility expense, excessive spoilage, double
freight, and rehandling costs may be so abnormal as to require treatment as
current period charges." This statement requires that those items be recognized
as current-period charges regardless of whether they meet the criterion of "so
abnormal." In addition, this statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity
of the production facilities. This statement is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Management does not
believe the adoption of this statement will have any immediate material impact
on the Company.
(2) Property and Equipment
A summary of property and equipment is as follows:
2005 2004
--------- ---------
Vehicles $ 287,728 $ 289,391
Equipment 61,052 54,692
Leasehold improvements 8,941 8,941
--------- ---------
357,721 353,024
Less: Accumulated depreciation and amortization (221,267) (178,213)
--------- ---------
$ 136,454 $ 174,811
========= =========
(3) Long-term Debt
Long-term debt at December 31, 2005 and 2004 consisted of the following:
2005 2004
--------- ---------
Note payable to a bank, due in monthly installments
Of $334, including interest at 6.74%, through
November 2007, secured by vehicles. $ 6,891 $ 10,307
Note payable to a bank, due in monthly installments
of $436, including interest at 8.75%, through
December 2006, secured by vehicle. 4,990 9,566
Note payable to a finance company, due in
monthly installments of $411, including interest
at 10%, through April 2007, secured in vehicle 6,134 10,228
Note payable to a finance company, due
in monthly installments of $375, including
interest at 8.75%, through July 2006, secured
by vehicles. 2,197 6,313
Note payable to a finance company, due
in monthly installments of $429, including
interest at 8.99%, through February 2006,
secured by vehicles. 435 5,301
---------- ---------
Total long-term debt 20,647 41,715
Less current installments 16,561 21,068
---------- ---------
Long-term debt, less current installments $ 4,086 $20,647
========== =========
Principal repayment provisions of long-term debt are as follows at December 31,
2005:
2006 $ 16,561
2007 4,086
----------
Total $ 20,647
==========
(4) Advertising Costs
During the years ended December 31, 2005 and 2004, the Company incurred
advertising costs in the amount of $262,911 and $219,040, respectively.
(5) Lease Agreement
The Company leases office space under a noncancellable-operating lease which
expires in December 2008. Future minimum lease payments under the operating
lease are as follows:
Year
December 31, Amount
- ------------- --------
2006 $ 30,000
2007 30,000
2008 30,000
--------
$ 90,000
========
For the years ended December 31, 2005 and 2004, the Company incurred rent
expenses in the amount of $30,153 and $31,958, respectively.
(6) Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk are
primarily accounts receivable - trade. The Company grants credit primarily to
two customers throughout the United States. Generally, the Company does not
require collateral or other security to support customer receivables. For the
year ended December 31, 2005, two customers made up 94% of total sales revenue.
The Company maintains its cash with a major domestic bank in amounts, which
exceed the insured limit of $100,000 from time to time. The terms of these
deposits are on demand to minimize risk. The Company has not incurred losses
related to these deposits.
(7) Subsequent Event
STOCK PURCHASE AND EXCHANGE AGREEMENT
Effective January 3, 2006, FTS Group, Inc. (a publicly traded company) acquired
100% of the outstanding capital stock of See World Satellites, Inc.
(8) Contingencies
The contract agreement with the Company and DISH Network Service Corporation
expired effective December 31, 2005. This contract provided the Company with
42.2% of its revenues for the year ended December 31, 2005. The Company is
currently negotiating a renewal of the contract.
SEE WORLD SATELLETES, INC.
UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS
Effective January 3, 2006, FTS Group, Inc. ("the Company") acquired 100% of the
capital stock of See World Satellites, Inc. ("See World"), for consideration,
providing for (i) $1,000,000 in cash to the shareholder of See World, (ii) a
promissory note in the amount of $3,500,000, and (iii) $1,000,000 in convertible
preferred stock of the Company. Pursuant to the Agreement, which became
effective January 3, 2006, See World will become a subsidiary of the Registrant.
The acquisition was accounted for using the purchase method of accounting.
The following unaudited proforma consolidated statements of operations for the
year ended December 31, 2005 and for the year ended December 31, 2004, assumes
the acquisition of See World had occurred on January 1, 2004 and includes the
historical unaudited consolidated statements of operations for the Registrant
for the year ended December 31, 2005 and year ended December 31, 2004, adjusted
for the proforma effects of the acquisition.
The unaudited proforma consolidated statements are not necessarily indicative of
the results of operations that would actually have occurred if the transactions
had been consummated as of January 1, 2004. These statements should be read in
conjunction with the historical financial statements and related notes thereto
of the Registrant, in its annual report on Form 10-KSB, as amended by form
10-KSB/A and See World's financial statements included herein.
FTS GROUP, INC.
Unaudited Proforma Consolidated Balance Sheet
December 31, 2005
See World
FTS Group Satellites, Proforma Proforma
Assets Inc. Inc. Adjustments Consolidated
Current assets: ------------ ------------ ------------ ------------
Cash $ 243,079 $ 635,002 $ 878,081
Restricted cash 560,000 - B (500,000) 500,000
F 440,000
Accounts receivable, net 12,201 85,758 - 97,959
Inventories 33,180 144,544 177,724
Prepaid expenses and other current asset 474,683 41,306 F (440,000) 75,989
------------ ------------ ----------- ------------
Total current assets 1,323,143 906,610 (500,000) 1,729,753
Property and equipment, net 208,210 136,454 344,664
Investment in consolidated subsidiary - - A 5,500,000 -
E (5,500,000)
Excess of cost over the net assets of businesses acquired - - C 5,177,696 5,177,696
Unamortized discount on convertible debt 380,690 - 380,690
Unamortized debt issuance costs 46,313 - 46,313
Other assets 16,139 - 16,139
------------ ------------ ------------ ------------
Total assets $ 1,974,495 $ 1,043,064 $ 4,677,696 $ 7,695,255
============ ============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses 468,185 96,662 - 564,847
Accrued salaries and related liabilities - 84,653 84,653
Short-term notes payable to related parties 80,850 - G 518,798 599,648
Net amount due to prior owner of See World - - B 500,000 500,000
Current installments of convertible debentures 1,002,496 1,002,496
Current installments of long-term note payable to related party - - B 750,000 750,000
Current installments of long-term debt - 16,561 - 16,561
------------ ------------ ------------
Total current liabilities 1,551,531 197,876 3,518,205
Convertible notes, less current installments 430,088 - 430,088
Long-term note payable to related party, less current installments - - B 2,750,000 2,750,000
Long-term debt - 4,086 - 4,086
------------ ------------ ---------- ------------
Total liabilities 1,981,619 201,962 4,518,798 6,702,379
------------ ------------ ----------- ------------
Stockholders' equity:
Preferred stock - - B 10,000 10,000
Common stock 102,099 1,000 E (1,000) 102,099
Additional paid-in capital 10,196,539 - D 840,102 11,186,539
C 5,177,696
E (5,499,000)
B 990,000
G (518,798)
Accumulated deficit (10,305,762) 840,102 D (840,102) (10,305,762)
------------ ------------ ------------ ------------
Total stockholders' equity (7,124) 841,102 158,898 992,876
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 1,974,495 $ 1,043,064 $ 4,677,696 $ 7,695,255
============ ============ ============ ============
<FN>
See accompanying notes to unaudited proforma consolidated financial statements.
FTS GROUP, INC.
Unaudited Proforma Consolidated Statement of Operations Year ended
December 31, 2005
See World
FTS Group Satellites, Proforma Proforma
Inc. Inc. Adjustments Consolidated
------------ ------------ ------------ ------------
Revenues $ 1,310,731 $ 5,038,676 $ $ 6,349,407
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales 1,110,645 803,106 1,913,751
Selling, general and administrative 1,767,563 3,305,280 5,072,843
Loss on disposition of assets - 17,794 17,794
------------ ------------ ------------ ------------
Total costs and expenses 2,878,208 4,126,180 - 7,004,388
------------ ------------ ------------ ------------
Operating income (loss) before other income(exp) (1,567,477) 912,496 - (654,981)
------------ ------------ ------------ ------------
Other income (expenses):
Interest income - 13,805 13,805
Unrealized loss on investments (7,500) - (7,500)
Interest expense (422,259) (4,825) (427,084)
Other income - 605 605
------------ ------------ ------------ ------------
Total other income (expenses) (429,759) 9,585 - (420,174)
------------ ------------ ------------ ------------
Net earnings (loss) before income taxes (1,997,236) 922,081 - (1,075,155)
Provision for income taxes - - - -
------------ ------------ ------------ ------------
Net earnings (loss) from operations $(1,997,236) $ 922,081 $ - $(1,075,155)
============ ============ ============ ============
Net loss applicable to common shareholders:
Basic $ (0.02)
============
Diluted $ (0.01)
============
Weighted average common shares:
Basic H 55,986,790
============
Diluted I 80,986,790
<FN> ============
See accompanying notes to unaudited proforma consolidated financial statements.
FTS GROUP, INC.
Unaudited Proforma Consolidated Statement of Operations Year ended
December 31, 2004
See World
FTS Group Satellites, Proforma Proforma
Inc. Inc. Adjustments Consolidated
------------ ------------ ------------ ------------
Revenues $ 712,282 $ 4,248,285 $ $ 4,960,567
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales 521,660 1,131,003 1,652,663
Selling, general and administrative 2,191,837 2,708,031 4,899,868
Impairment of long-lived assets 107,000 - 107,000
Loss on disposition of assets - 15,485 15,485
------------ ------------ ------------ ------------
Total costs and expenses 2,820,497 3,854,519 - 6,675,016
------------ ------------ ------------ ------------
Operating income (loss) before other income(exp) (2,108,215) 393,766 - (1,714,449)
------------ ------------ ------------ ------------
Other income (expenses):
Interest income - 2,783 2,783
Unrealized loss on investments (7,500) - (7,500)
Interest expense (212,638) (7,354) (219,992)
Other income - 682 682
------------ ------------ ------------ ------------
Total other income (220,138) (3,889) - (224,027)
------------ ------------ ------------ ------------
Net earnings (loss) before income taxes (2,328,353) 389,877 - (1,938,476)
============ ============ ============ ============
Provision for income taxes - - - -
------------ ------------ ------------ ------------
Net earnings (loss) from operations $(2,328,353) $ 389,877 $ - $(1,938,476)
============ ============ ============ ============
Net loss applicable to common shareholders:
Basic $ (0.07)
============
Diluted $ (0.04)
============
Weighted average common shares:
Basic H 27,459,250
============
Diluted I 52,459,250
<FN> ============
See accompanying notes to unaudited proforma consolidated financial statements.
NOTES TO UNAUDITED PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The unaudited Proforma Consolidated Statement of Operations for the year ended
December 31, 2005, includes the audited historical results of operations for FTS
Group, Inc. and See World Satellites, Inc. ("See World") for the year ended
December 31, 2005, adjusted for the proforma effects of the acquisition assuming
the acquisition occurred on January 1, 2004.
The unaudited Proforma Consolidated Statement of Operations for the year ended
December 31, 2004, includes the audited historical results of operations of the
Company and See World, and adjusted for the proforma effects of the acquisition
assuming the acquisition occurred on January 1, 2004.
The unaudited Proforma Balance Sheet at December 31, 2005, includes the audited
balance sheets of the Company and See World as of December 31, 2005, assuming
the acquisition occurred on December 31, 2005, adjusted for the proforma effects
of the acquisition.
The capital accounts of the Company have been adjusted as of December 31, 2005
to report the effects of the acquisition, assuming the acquisition occurred on
December 31, 2005. The following proforma adjustments are necessary to record
the acquisition:
A. To record on the books of the parent company (FTS Group, Inc.) the investment
in See World.
B. To record on the books of the parent company the disbursement of cash
($500,000), the establishment on long-term note payable to related party (prior
owner of See World) ($3,500,000), issuance of $1,000,000 of convertible
preferred stock, and recording of a current liability for the remaining cash
payment of $500,000.
C. To record goodwill on the books of See World for the excess of the purchase
price over the net assets of the business acquired (See World).
D. To record on the books of See World the transfer of ending retained earnings
at December 31, 2005 to additional paid-in capital.
E. To record, for consolidation purposes, the elimination of the investment on
consolidated subsidiary and related capital accounts of See World.
F. To record the receipt of the remaining cash from the borrower in the first
week in January 2006.
G. To reduce additional paid in capital and record short-term advance from Mr.
Miller for adjustment to the net assets per audited financial statements. Per
contract stipulations, certain assets were to be retained by seller, however,
were left in the business for working capital purposes.
H. Basic number of shares outstanding represents the weighted average number of
common shares outstanding for the years ended December 31, 2005 and 2004.
I. Diluted number of shares outstanding represents the weighted average number
of common shares outstanding for the years ended December 31, 2005 and 2004,
plus 25,000,000 shares each year to account for the conversion of the Series B
Convertible Preferred Stock issued to the prior owner of See World.
(b) Exhibits
EXHIBIT
NUMBER DESCRIPTION
10.1 Promissory Note between the Company and Richard E. Miller dated January 3,
2006 (included as Exhibit 10.1 to the Form 8-K filed on January 9, 2006 and
incorporated herein by reference).
10.2 Stock Purchase Agreement between the Company and Richard E. Miller dated
January 3, 2006 (included as Exhibit 10.2 to the Form 8-K filed on January
9, 2006 and incorporated herein by reference).
10.3 Stock Escrow Agreement among the Company, Richard E. Miller and Lambert &
Martineau dated January 3, 2006 (included as Exhibit 10.3 to the Form 8-K
filed on January 9, 2006 and incorporated herein by reference).
SIGNATURE
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.
FTS GROUP, INC.
-----------------
REGISTRANT
Date: December 5, 2006 By: /s/ Scott Gallagher
-----------------------
Scott Gallagher
Chief Executive Officer