8-K/A 1 envizion8ka.txt 8-K/A 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): March 19, 2001 e.NVIZION COMMUNICATIONS GROUP LTD. ----------------------------------- (Exact name of registrant as specified in its charter) Colorado 0-15992 84-1031311 -------- ------- ---------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1000 Sibley Centre, 25 Franklin Street, Rochester, New York 14604 ----------------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (716) 262-2485 OTC America, Inc. ----------------- (Former name or former address, if changed since last report) This amendment to the Current Report on Form 8-K dated March 19, 2001 relates to the acquisition of E-ZnetIncorporated by e.NVIZION COMMUNICATIONS LTD., a subsidiary of e.NVIZION COMMUNICAIONS GROUP LTD., which acquisition was completed effective March 19, 2001. The sole purpose of this amendment is to file the audited financial statements of E-Znet Incorporated for the fiscal years ended December 31, 1999 and 2000 and the pro forma financial statements of e.NVIZION COMMUNICAIONS GROUP LTD. for the fiscal years ended June 30, 1999 and 2000 which give effect to the acquisition. Item 7. Financial Statements and Exhibits. (a) Financial information of business acquired. The audited financial statements of E-Znet Incorporated for the fiscal years ended December 31, 1999 and 2000 are filed herewith and appear beginning at page F-1. (b) Pro forma financial information. The pro forma financial statements of e.NVIZION COMMUNICAIONS GROUP LTD. for the fiscal years ended June 30, 1999 and 2000 which give effect to the acquisition of E-Znet Incorporated are filed herewith and appear beginning at page F-13. (c) Exhibits. 10.1 Stock Purchase Agreement by and between e.NVIZION COMMUNICATIONS LTD. and the Shareholders of E-Znet Incorporated (filed as Exhibit 10.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on April 21, 2001, and incorporated herein by reference). SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: June 25, 2001 e.NVIZION COMMUNICATIONS GROUP LTD. By: /s/ Randy Phillips -------------------------------------- Randy Phillips, Chairman of the Board and Chief Executive Officer Bonadio & Co., Inc. CorporateCrossings 171 Sully's Trail Pittsford, NY 14534-4557 INDEPENDENT AUDITORS' REPORT ---------------------------- March 2, 2001 To the Stockholders of E-Znet Incorporated: We have audited the accompanying balance sheets of E-Znet Incorporated as of December 31, 2000 and 1999, and the related statements of operations, stockholders' investment, 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 U.S. 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 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 E-Znet 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 U.S. generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in Exhibit I is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Bonadio & Co., Inc. ----------------------- Bonadio & Co., Inc. F-1

E-ZNET INCORPORATED NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (1) The Company E-Znet Incorporated (E-Znet or the Company) was incorporated in 1994 under the laws of the State of New York. The Company is a provider of wireless, dedicated, and dialup internet services, consulting services as well as web design and hosting in the Western New York area. (2) Summary of Significant Accounting Policies Cash - The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk with respect to these accounts. Property and Equipment - Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, generally ranging from three to five years. Property and equipment under capital leases are stated at the present value of minimum lease payments and are amortized using straight-line method over the lessor of the lease term or estimated useful lives of the assets. In instances when the property and equipment transfers ownership at the end of the lease term, contains a bargain purchase option, such assets are amortized over the estimated useful lives of the assets. Impairment of Long-Lived Assets - The Company evaluates the carrying value of its long-lived assets under the provisions of Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 121 requires impairment losses to be recorded for long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the assets' carrying amount. Revenue - The Company recognizes revenue from customer contracts ratably over the term of the contract. Customer payments received in advance of the contract period are recorded as unearned revenue. Advertising Costs - The Company expenses advertising costs as incurred. Advertising costs were $58,956 and $28,871 in 2000 and 1999, respectively. F-6 (2) Summary of Significant Accounting Policies Income Taxes - The Company accounts for income taxes under the provisions of SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Stock-Based Compensation - The Company accounts for stock-based compensation arrangements in accordance with SFAS No. 123, Accounting for Stock-Based Compensation, which permits entities to recognize as expense, over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows entities to continue to apply the provision of APB Opinion No. 25 and provide pro forma net earnings (loss) disclosures for employee stock option grants as if the fair value-based-method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provision SFAS No. 123. Fair Value of Financial Instruments - The carrying amounts of financial instruments including cash, accounts receivable, accounts payable and accrued expenses approximate fair value. The carrying amount of long-term debt approximates fair value based on current rates of interest available to the Company for loans of similar maturities. New Accounting Pronouncements - In September 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and for hedging activities. SAFS No. 133 is effective for all fiscal quarters of fiscal years beginning after September 15, 2000 as FASB deferred the effective date of the statement. The Company does not expect the implementation of this standard to have a material effect on the Company's financial statements. In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an interpretation of APB Opinion No. 25" (FIN 44). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The application of FIN 44 did not have a material effect on the Company's financial position or results of operations. F-7 (2) Summary of Significant Accounting Policies (Continued) Estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (3) Investment The Company has a $50,000 investment for a 5% Common stock interest in a closely-held company, Campus Global Net, Inc. The investment does not have a readily determinable fair value and therefore in 1998 the Company established a reserve against this investment equal to its cost. (4) Related Party The Company has a demand note payable to a related party. The balance due on this note was $2,500 and $10,000 at December 31, 2000 and 1999, respectively. This note earns interest at 9%. (5) Long-Term Debt and Financing Arrangements Long-Term Debt - Long-term debt consists of the following at December 31: 2000 1999 ---- ---- Note payable to a bank due in equal monthly installments of $1,129, including interest at the bank's prime rate plus 1.75%, maturing in 2003 This note is collateralized by accounts receivable and other property of the Company and is guaranteed by the U.S. Small Business Administration and certain officers of the Company. $ 42,242 $ 55,156 Less: Current portion (13,704) (12,914) -------- -------- $ 28,538 $ 42,242 ======== ======== Maturities of long-term debt were as follows at December 31, 2000: 2001.......................................... $ 13,704 2002.......................................... 13,704 2003.......................................... 14,834 -------- $ 42,242 ======== F-8 (5) Long-Term Debt and Financing Arrangements (Continued) The Company may borrow up to $32,285 under a line-of-credit agreement, renewable on an annual basis. Amounts borrowed bear interest at the bank's prime rate plus 1.75%. Amounts borrowed under this agreement are collateralized by accounts receivables and other property of the Company, and are guaranteed by the U.S. Small Business Administration and certain officers of the Company. The Company entered into several three year leases on equipment for $82,912 and $120,017 in fiscal 2000 and 1999, respectively. The lease transfers title of these assets to the Company at the end of the lease term. Accordingly, it is being accounted for as a capital lease. (6) Obligations Under Capital Leases The Company leases equipment under various capital lease agreements expiring through July, 2003. The interest rates on the capitalized leases range from 11.95% to 17%. Future minimum lease payments under these agreements as of December 31, 2000 for the remaining lease terms and in the aggregate are as follows: 2001........................................ $ 115,385 2002........................................ 49,594 2003........................................ 12,537 --------- 177,516 Less: Interest (18,302) --------- 159,214 Less: Current portion (115,385) --------- $ 43,829 ======== The Company has $578,002 and $471,196 of property and equipment held under capital lease arrangements at December 31, 2000 and December 31, 1999, respectively. Accumulated amortization of $319,051 and $195,884 related to these leases has been recognized at December 31, 2000 and December 31, 1999, respectively. Amortization of the assets recorded under capital lease obligations is included in depreciation in the accompanying financial statements. (7) Income Taxes Income taxes are provided in accordance with generally accepted accounting principles which requires an asset and liability approach to financial accounting and reporting for income taxes. This requires deferred income taxes be provided to reflect the impact of "temporary differences" between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by current tax laws and regulations. F-9 (7) Income Taxes (Continued) Provision for income taxes consists of the following at December 31: Current $ (3,000) $ (7,425) Deferred (16,000) 4,000 -------- -------- $ 19,000 $ (3,425) ======== ======== The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities were as follows at December 31: 2000 1999 ---- ---- Deferred tax asset: Allowance for doubtful accounts $12,000 $12,000 Accrued expenses -- 16,000 ------- ------- $12,000 $28,000 ======= ======= The provision for income taxes for the years ended December 31, 2000 and 1999 differs from the "expected" tax provision (computed by applying the U.S. Federal corporate income tax rate of 34% to the income before income taxes) as follows: 2000 1999 ---- ---- Computed "expected" tax provision $(12,300) $ (320) New York State, net of federal tax benefit (1,900) (60) Permanent differences (2,000) (2,535) Other (2,800) (510) -------- -------- $(19,000) $ (3,425) ======== ======== (8) Stockholders' Investment The Company has a non-qualified employee Stock Option Plan and at December 31, 1998 has reserved 250,000 shares of common stock for issuance under the plan. The exercise price for options granted under the Plan is determined at the time options are granted at an amount at least equal to the then estimated fair value of the stock. Options are exercisable as determined for each option granted, generally on a pro rata basis over five to ten year periods. Vesting may accelerate based on performance measures. All options expire no later than ten years from the date of grant. F-10 (8) Stockholders' Investment (Continued) Changes in the status of the stock option plan for the years ended December 31 are summarized as follows: Weighted Weighted Average Average Exercise Exercise 2000 Price 1999 Price ---- ----- ---- ----- Outstanding at beginning of year 123,500 $ 2.50 123,500 $ 2.50 Granted 37,000 2.50 - - Forfeited (29,500) 2.50 - - ------- ------ ------- ------ Outstanding at end of year 131,000 $ 2.50 123,500 $ 2.50 ======= ====== ======= ====== Options exercisable at end of year 83,600 $ 2.50 92,600 $ 2.50 ======== ====== ======= ====== The Company accounts for its stock-based compensation plans under APB Opinion 25, under which no compensation expense has been recognized because all employee stock options have been granted with the exercise price equal to the fair value of the Company's common stock on the date of grant. During the phase-in period of SFAS No. 123, pro forma disclosures may not be indicative of future amounts until the new rules are applied to all awards. For SFAS No. 123 purposes, the fair value of each employee option grant has been estimated as of the date of grant using the following weighted average assumptions: risk-free interest rate of 6.5%, expected term of five years, no dividends and no volatility. Using these assumptions, the fair value of the employee stock options granted in 2000 would have been $24,986. Pro forma stock based compensation costs resulted in pro forma net loss of $6,300 and $2,484 in 2000 and 1999, respectively. Other Options - The Company has issued other options to purchase 325,000 shares at $2.50 per share to certain officers and shareholders for common shares contributed to the Company in 1996. (9) Retirement Plan The Company sponsors a 401(k) profit sharing plan (the Plan) covering all employees with at least one year of service who are age 21 or older. Under terms of the plan, the Company contributes 100% of participant's deferrals not to exceed 3% of the participant's compensation. Total Company contributions were $16,258 and $13,501 during the years ended December 31, 2000 and 1999, respectively. (10) Rents The Company rents office space on a month-to-month basis. Rent expense incurred by the Company was approximately $91,500 and $68,900 for the year ended December 31, 2000 and 1999, respectively. (11) Subsequent Event Subsequent to year-end, the Company's owners have entered into an agreement whereby they will sell their ownership in the Company in exchange for cash and the Preferred Stock of the acquiring company. As of the date of this report this transaction has not yet closed. F-11 EXHIBIT 1 E-ZNET INCORPORATED GENERAL AND ADMINISTRATIVE EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 ---- ---- Payroll and payroll taxes $ 913,794 $ 906,503 Depreciation and amortization 175,128 168,000 Rent 91,499 68,868 Legal and professional fees 67,947 118,499 Insurance 60,255 49,524 Advertising 58,956 28,871 Bank and credit card charges 40,630 33,822 Office supplies 39,172 39,372 Utilities 17,195 6,511 Employee benefits - 401(k) match 16,258 13,501 Parking 15,694 12,945 Meals and entertainment 8,159 11,161 Customer refunds 6,394 11,824 Travel 4,466 5,805 Dues and subscriptions 2,017 1,774 Bad debt expense -- 3,000 Miscellaneous 4,094 10,434 ---------- ---------- $1,521,658 $1,490,414 ========== ========== F-12 e.NVIZION COMMUNICATIONS GROUP LTD. ----------------------------------- UAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000 FOR THE YEAR ENDED JUNE 30, 1999 The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2000 and unaudited Pro Forma Consolidated Statements of Operations for the years ended June 30, 2000 and 1999 (collectively the Pro Forma Consolidated Financial Statements) give effect to the acquisition by the Company's (82.76 percent owned) subsidiary, e.NVIZION COMMUNICATIONS LTD. of 96.36 percent of the outstanding common stock of E-Znet Incorporated, n/k/a eNVIZION INTERNET SOLUTIONS GROUP LTD. On March 19, 2001, e.NVIZION COMMUNICATIONS LTD. issued 7,082,873 shares of its common stock and 1,437,946 shares of its Series A Mandatorily Redeemable Preferred Stock in exchange for 96.36 percent of the outstanding common stock of E-Znet Incorporated, a New York corporation. As e.NVIZION COMMUNICATIONS LTD.'s common and preferred stock had no readily determinable market value, the transaction was valued at the fair value of the net assets received from E-Znet Incorporated. At March 19, 2001, the fair value of the net assets of E-Znet Incorporated was $249,902. Therefore e.NVIZION COMMUNICATIONS LTD.'s 96.36 percent acquisition of those assets was valued at $240,806. The preferred stock issued in the transaction is to be 100 percent redeemed by October 31, 2001 at its stated $1.00 per share value or $1,437,946. The transaction was accounted for as a purchase in accordance with the provisions of Accounting Principles Board Opinion Number 16. The Pro Forma Consolidated Statements of Operations were prepared assuming that the acquisition described above was consummated as of the beginning of each period presented. The Pro Forma Consolidated Balance Sheet includes the pro forma purchase accounting entries for the acquisition and was prepared assuming that the transaction was consummated as of June 30, 2000. The unaudited Pro Forma Consolidated Financial Statements are based upon historical consolidated and combined financial statements of the Registrant and E-Znet Incorporated. The pro forma adjustments and the resulting pro forma consolidated financial statements have been prepared based upon available information and certain assumptions and estimates deemed appropriate by the Registrant. A final determination of required purchase accounting adjustments and the allocation of the purchase price to the assets acquired based upon their respective fair values has not yet been made for the acquisition. The Pro Forma Consolidated Balance Sheet and the Pro Forma Consolidated Statements of Operations are not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of the dates indicated, or that may be achieved in the future. Furthermore, the Pro Forma Consolidated Financial Statements do not reflect changes that may occur as the result of post-combination activities and other matters. The Pro Forma Consolidated Financial Statements and notes thereto should be read in conjunction with the accompanying historical financial statements and notes thereto of E-Znet Incorporated and the audited financial statements of the Registrant in its Annual Report on Form 10-KSB for the year ended June 30, 2000. F-13

e.NVIZION COMMUNICATIONS GROUP LTD. ----------------------------------- The following footnotes should be read in order to understand the pro forma adjustments to the unaudited pro forma condensed, consolidated statements. A. Adjustment reflects the $161,336 allocated to the value of the subsidiary's mandatorily redeemable preferred stock as part of the purchase price. B. To record minority interest in the net equity of the consolidated subsidiary. C. Adjustment to eliminate the historical equity accounts of E-Znet Incorporated, and the $81,886 effect of the Company's change in ownership of e.NVIZION COMMUNICATIONS LTD. from 100 percent to 82.76 percent as an adjustment to additional paid in capital. D. Adjustment to recognize full accretion of the beneficial conversion feature of the preferred stock, which is to be redeemed in seven and one-half months from date of issuance. Fair value of the preferred stock at date of issuance was $161,336 and the preferred stock is to be redeemed at its $1.00 per share stated value. 1,437,946 shares were issued, for a total mandatory redemption value of $1,437,946. This is offset by the minority interest's share totaling $220,088 of the $1,276,610 pro forma increase in total loss. E. To eliminate the weighted shares outstanding of E-Znet Incorporated. There is no change to the weighted shares outstanding of e.NVIZION COMMUNICATIONS GROUP LTD. as the common shares issued in the transaction were the common shares of e.NVIZION COMMUNICATIONS LTD. F-16

ENVIZION COMMUNICATIONS GROUP LTD 8-K/A