it's true...
GOODWILL
Goodwill from acquisitions represents the excess of purchase price paid over the value of net assets acquired.
The Company does not amortize goodwill resulting from acquisitions after June 30, 2001, but it is the Company's
policy to assess periodically the carrying amount of its goodwill and purchased intangible assets to determine if
there has been an impairment to their carrying value. Based on the inability to generate positive cash flows in
Inter-Tel.NET since its acquisition, the Company recorded a charge of $7,984,806 to write-off the carrying value
of the goodwill related to that acquisition. See Note B.
NOTE B: ACQUISITIONS
INTER-TEL.NET
On July 24, 2001, the Company purchased 83% of Inter-Tel.NET, Inc. ("ITN") from Inter-Tel, Inc. in a stock
purchase transaction. ITN is a facilities-based provider of U.S. originated international long-distance voice and data
terminations services. The efficiency of its managed VoIP network, its least cost routing structure and bandwidth
capacity allow CSC to offer competitive prices to carrier and reseller customers for international termination.
NOTE D: NOTES PAYABLE
INTER-TEL, INC.
The Company has a note payable in the amount of $4,950,000 to Inter-Tel, Inc. as consideration for the purchase of an
83% interest in Inter-Tel.NET from Inter-Tel, Inc. Inter-Tel, Inc. owned 17% of CSC until the transaction with
Vianet (see Note B) at which time Inter-Tel, Inc. took stock of the combined entity. The note is collateralized in
part by stock and other marketable securities and 100% of the net assets of Inter-Tel.NET. The note was originally
due and payable with a principal payment of $250,000 due sixty (60) days from July 24, 2001 but later modified to
provide for a later payment date for the initial payment; then interest only due and payable from October 16, 2001
through July 15, 2002; then monthly principal and interest payments based on 1% of collected monthly revenues from
July 16, 2002 to October 15, 2002 and based on 2% of collected monthly revenues from October 16, 2002 until paid
in full. The note is due and payable on December 31, 2007, or earlier in the event of default or a "change of control"
of the purchased entity. The interest rate for the note is 6% per annum.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding ownership of the Company's Common Stock as of April 7, 2002, by (i) each person known by the Company to beneficially own more than five percent (5%) of Vianet's outstanding shares of common stock, (ii) each director of the Company, and (iii) all directors and executive officers of the Company as a group.
NAME AND ADDRESS OF SHARES OF PERCENT OF
BENEFICIAL OWNER TITLE COMMON STOCK CLASS
-------------------------------------------------------------------------------------------------------------
Jeremy T.G. Posner* Chairman, Secretary and Director (a) 8,175,469 1.43%
Gregory A. Somers* President and Director 156,003,929 27.33%
Peter Ianace* Chief Executive Officer and Director (b) 4,636,293 0.81%
Victor E. Goetz - Senior Vice President, Chief Financial 28,682,337 5.03%
1266 West Paces Ferry Officer, Chief Compliance Officer,
Rd, #179, Atlanta, GA 30327 Assistant Secretary & Director
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NAME AND ADDRESS OF SHARES OF PERCENT OF
BENEFICIAL OWNER TITLE COMMON STOCK CLASS
-------------------------------------------------------------------------------------------------------------
Robert Logan* Senior Vice President and Chief (c) 221,791 0.04%
Operating Officer
Brian Berger* Chief Technology Officer & Vice (d) 105,045 0.02%
President of Engineering
Robert Thompson* Vice President, Sales (e) 30,000 0.01%
Stephen M. Wagner* Director 17,489,230 3.06%
All officers, directors and 215,344,094 37.52%
key executives (8 Persons)
Inter-Tel Inc 59,463,381 10.42%
120 N 44TH ST, Suite 200,
Phoenix, AZ 85034-1822
tel. 602-302-8900
Dennis D. Somers 30,081,475 5.27%
4785 240th Ave., Webb, Iowa
51366
Mike Moehle 28,682,337 5.03%
3909 River Pl Blvd Austin TX
78730
Seneca Capital L.P. - 527 (f) 59,667,560 10.35%
Madison Avenue, 11th Floor,
New York, NY 10022
* c/o Vianet Technologies, Inc. - 6509 Windcrest Drive, Suite 160, Plano,
TX 75024
(a) Includes (i) 13,627 shares of common stock, (ii) 250,000 shares of common stock underlying options exercisable at $.10 per share, all of which are currently exercisable, (iii) warrants to purchase 32,520 shares of common stock, exercisable at $5.00 per share, all of which are currently exercisable (iv) 7,846,558 shares of common stock owned indirectly through Xelix Capital Limited, an entity controlled by Mr. Posner, and (v) 32,764 shares of common stock owned indirectly through Eastbrook Systems, an entity controlled by Mr. Posner.
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(b) Includes (i) 1,769,626 shares of common stock, (ii) 166,667 shares of common stock underlying options all of which are currently exercisable, (iii) 350,000 shares of common stock and warrants to purchase an additional 350,000 shares of common stock, all of which are currently exercisable, underlying convertible notes, and (iv) 2,000,000 shares of common stock underlying warrants owned by Espre, Inc., an entity controlled by Mr. Ianace, all of which are currently exercisable. Excludes 833,333 shares of common stock underlying options, which are not currently vested or exercisable.
(c) Includes (i) 196,791 shares of common stock and (ii) 25,000 shares of common stock underlying options, all of which are currently exercisable. Excludes 475,000 shares of common stock underlying options, which are not currently vested or exercisable.
(d) Includes (i) 45,045 shares of common stock and (ii) 60,000 shares of common stock underlying options, all of which are currently exercisable. Excludes 445,000 shares of common stock underlying options, which are not currently vested or exercisable.
(e) Includes 30,000 shares of common stock. Excludes 200,000 shares of common stock underlying options, none of which are currently vested or exercisable.
(f) Includes (i) 18,555,916 shares of common stock and (ii) 1,950,971 shares of common stock underlying warrants owned by Seneca Capital L.P., all of which are currently exercisable. In addition, includes (iii) 35,440,216 shares of common stock and (iv) 3,720,457 shares of common stock underlying warrants owned by Seneca Capital International, Ltd., all of which are currently exercisable.
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