UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 

FORM 8-K/A
CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934 

Date of Report (Date of Earliest Event Reported): February 24, 2004

Moscow CableCom Corp.
(Exact Name of Registrant as Specified in Charter)

Delaware

0-1460

06-0659863

(State or Other Jurisdiction of Incorporation)

(Commission File Number)

(IRS Employer Identification No.)

 

 

 

405 Park Avenue, Suite 1203
New York, New York

 


10022

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

 

 

(212) 826-8942

 

 

(Registrant's telephone number,
 including area code)

 

 

 

Moscow CableCom Corp. (the "Company") filed a Form 8-K on February 27, 2004 with regard to the acquisition of 100% of the equity of ZAO COMCOR-TV ("CCTV") and ABC Moscow Broadband Communication Limited ("MBC") without the financial information required by Item 7 of Form 8-K.  Accordingly, the Company is filing this Form 8-K/A to include that financial information.

Prior to February 24, 2004, the Company had a 25% equity interest in MBC and had invested $3.5 million into CCTV pursuant to agreements entered into which led to the Company's acquisition of CCTV.

Item 7.  Financial Statements, Pro forma Financial Information and Exhibits

(a)      Financial Statements of Businesses Acquired.

The balance sheets of MBC and of CCTV as of December 31, 2002 and 2001, and each of their related statements of income, stockholders' equity and cash flow for each of the three years in the period ended December 31, 2002 are incorporated herein by reference from the Company's Form 10-K for the year ended February 28, 2003 which was filed on May 29, 2003 (Commission File No. 0-01460).

The following presents the unaudited interim financial statements for each of MBC and CCTV as of and for the three and nine months ended September 30, 2003:

1


ABC Moscow Broadband Communication Limited
Condensed Balance Sheets
(in thousands, except share data)
 

September 30, 2003
(unaudited)

December 31, 2002

Assets

 

 

Current assets

 

 

   Cash and cash equivalents

$                       304 

$                        557 

 

 

          Total current assets

                      304 

557 

 

 

   Investment in COMCOR-TV

6,316 

8,036 

   Notes and accounts receivable from COMCOR-TV

828 

819 

   Investment in Institute for Automated Systems

48 

48 

 

 

          Total assets

$                    7,496 

$                    9,460 

 

 

Liabilities and Shareholders' Equity

 

 

   Accounts payable

$                           2 

$                         30 

   Accrued expenses

38 

22 

 

 

          Total liabilities

40 

52 

 

 

Commitments and contingencies

 

 

 

 

Shareholders' equity

 

 

   Common stock, Series A, 1 Cyprus Pound (US $2.20) par value; 1,000 shares authorized, issued and outstanding


2 


2 

   Common stock, Series B, $1,000 par value; 19,000 shares authorized, issued and outstanding


19,000 


19,000 

   Additional paid-in capital

1,409 

1,409 

   Accumulated deficit

(12,955)

(11,003)

 

 

          Total shareholders' equity

7,456 

9,408 

 

 

           Total liabilities and shareholders' equity

$                    7,496 

$                    9,460 

The accompanying notes are an integral part of these condensed financial statements.

2

ABC Moscow Broadband Communication Limited
Condensed Statements of Operations
For the Nine Months Ended September 30, 2003 and 2002
(in thousands)
(unaudited)

Nine Months Ended
 

2003

2002
 

 

 

Interest income

$              13 

 $             63 

 

  

Expenses

 

  

  Salaries

212 

 198 

   Legal and consulting

18 

 178 

  Travel and other

15 

 27 

Total operating expenses

245 

 403 

 

  

Net loss before equity in losses of unconsolidated subsidiary

(232)

 (340)

 

  

Equity in losses of COMCOR-TV

(1,720)

 (1,707)

 

  

Net loss

$        (1,952)

 $       (2,047)

 

 

 The accompanying notes are an integral part of these condensed financial statements.

3

 

ABC Moscow Broadband Communication Limited
Condensed Statements of Cash Flows
For the Nine Months Ended September 30, 2003 and 2002
(In thousands)

  Nine Months Ended
September 30, 2003		   Nine Months Ended
September 30, 2002
       
Cash flows from operating activities      
  Net loss $                  (1,952)   $                  (2,047)
  Equity in losses of ComCor-TV 1,720    1,707 
  Change in prepaid expenses and other current assets (9)   7 
  Change in accounts payable and accrued liabilities (12)   (91)
       
      Net cash used in operating activities (253)   (424)
       
Cash flow from investing activities      
  Purchase of investment in ComCor-TV -    (5,000)
  Notes receivable from ComCor-TV -    2,160 
       
     Net cash used in investing activities -    (2,840)
       
Net (decrease) increase in cash (253)   (3,264)
       
Cash at beginning of period 557    4,344 
       
Cash at end of period $                    304    $                 1,080 

 The accompanying notes are in integral part of these condensed financial statements.

 

4


ABC Moscow Broadband Communication Limited
Notes to Condensed Financial Statements
September 30, 2003
(Unaudited)

Note 1 - Accounting Policies

The accompanying unaudited interim financial statements and related notes should be read in conjunction with the audited financial statements of ABC Moscow Broadband Communication Limited ("MBC") and related notes as contained in the Annual Report on Form 10-K of Moscow CableCom Corp. (formerly known as Andersen Group, Inc.) ("MOCC") for the fiscal year ended February 28, 2003.  The interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of such statements.

In February 2004, MOCC acquired all the outstanding shares of MBC's stock that it had not previously owned as part of its acquisition of 100% of the equity of ZAO COMCOR-TV ("CCTV").

Note 2 - Investment in CCTV

Since April 2000, MBC has recorded its 50% equity interest in CCTV's results of operations because of its shared ownership and voting arrangements with Moscow Telecommunications Corporation ("COMCOR").  During the period of time in which MOCC had agreements to acquire COMCOR's ownership interest in CCTV, various contributions to CCTV's capital were made by COMCOR, MBC and MOCC.  MBC continued its 50% equity interest as a result of the continuation of shared voting arrangements.

During the three and nine months ended September 30, 2003, MBC recorded $574,000 and $1,720,000 as its equity interest in CCTV's losses.  CCTV's unaudited condensed financial statements are included in this filing.

During the three and nine months ended September 30, 2003, MBC recognized $3,000 and $9,000, respectively of interest income from a $550,000 note receivable from CCTV which carries interest at LIBOR +1%.

5

Closed Joint Stock Company "ComCor-TV"
Consolidated Condensed Balance Sheets
(In thousands of US Dollars, except per share information)

September 30, 2003
(unaudited)

December 31, 2002

ASSETS

 

 

 

 

Current assets

 

 

Cash and cash equivalents

$                     1,144 

$                          91 

Trade accounts receivable

106 

60 

Inventories

3,003 

3,768 

Prepaid expenses

490 

605 

Taxes recoverable

1,290 

1,154 

Other current assets

509 

336 

Total current assets

6,542 

6,014 

 

 

Non-current assets

 

 

Property, plant and equipment, net

14,583 

13,374 

Advances for network construction and design

914 

915 

Intangible assets, net

7,112 

7,916 

Investment in Institute for Automated Systems

6,040 

6,291 

Total non-current assets

28,649 

28,496 

Total assets

$                  35,191 

$                   34,510 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

Current liabilities

 

 

Trade accounts payables

$                       269 

$                        299 

Accounts payable to a related party

1,849 

1,343 

Loan from related party

561 

552 

Accrued expenses

641 

610 

Other current liabilities

637 

320 

Total current liabilities

3,957 

3,124 

 Deferred tax liability

1,606 

1,816 

Total liabilities

5,563 

4,940 

 Commitments and contingent liabilities

 

 

Minority interest

26 

28 

Shareholders' equity

 

 

Preferred stock

3 

3 

Ordinary shares

42 

40 

Additional paid-in capital

45,805 

45,307 

Accumulated deficit

(16,248)

(12,808)
Total shareholders' equity

29,602 

29,542 

 

 

Total liabilities and shareholders' equity

$                  35,191 

$                  34,510 

The accompanying notes are an integral part of these condensed financial statements.

6


Closed Joint Stock Company "ComCor-TV"
Consolidated Condensed Statement of Operations
Nine Months Ended September 30, 2003 and September 30, 2002
(In thousands of US Dollars)
(Unaudited)

Nine Months Ended September 30, 2003

  

Nine Months Ended September 30, 2002

Revenues

 

  

 

Subscription fees

$                     1,781 

  

$                        930 

Connection fees and equipment sales and other

628 

  

378 

 

  

 

Total revenue

2,409 

  

1,308 

Cost of revenue

 

  

 

Cost of CATV and Internet from related party

839 

  

571 

Equipment and connection costs

312 

  

358 

Depreciation and amortization of intangibles

1,389 

  

938 

Other

960 

  

802 

 

  

 

Total cost of revenue

3,500 

  

2,669 

 

  

 

Gross margin

(1,091)

  

(1,361)

Operating expenses

 

  

 

Wages, salaries, benefits and payroll taxes

1,130 

  

1,130 

Depreciation of property, plant and equipment

253 

  

262 

General and administrative

855 

  

733 

 

  

 

Total operating expenses

2,238 

  

2,125 

 

  

 

Loss from operations

(3,329)

  

(3,486)

Equity in losses of unconsolidated subsidiary

(251)

  

(44)

Other expense, net

(69)

  

(75)

 

  

 

Loss before income taxes

(3,649)

  

(3,605)

Income tax benefit

209 

  

193 

 

  

 

Net loss

$                     (3,440)

  

$                     (3,412)

The accompanying notes are an integral part of these condensed financial statements.

7

Closed Joint Stock Company "ComCor-TV"
Consolidated Condensed Statement of Cash Flows
Nine Months Ended September 30, 2003 and September 30, 2002
(In thousands of US Dollars)
(Unaudited)
 

  Nine Months Ended September 30,
  2003 2002
Cash flows from operating activities:    
Net loss $            (3,440) $              (3,412)
Equity in losses of unconsolidated subsidiary 251  44 
Deferred tax (benefit)/provision (210) (193)
Depreciation and amortization 1,642  1,200 
Changes in working capital assets and liabilities:    
Decrease/(increase) in inventories 765  (517)
Decrease/(increase) in other current assets (240) (802)
Increase in accounts payable and accrued liabilities 831 920 
     
Net cash used by operating activities (401) (2,760)
     
Cash flows from investing activities    
Acquisition of property and equipment (2,046) (536)
Net cash used by investing activities (2,046) (536)
     
Cash flows from financing activities:    
Capital contributions 3,500  5,000 
Loan repayments -  (2,610)
     
Net cash provided by financing activities 3,500  2,390 
     
Net increase/(decrease) in cash and cash equivalents 1,053  (906)
     
Cash and cash equivalents at beginning of period 91  1,188 
     
Cash and cash equivalents at end of period $       1,144  $                282 

The accompanying notes are an integral part of these condensed financial statements.

8

Closed Joint Stock Company "ComCor-TV"
Consolidated Condensed Statement of Shareholders' Equity
Nine Months Ended September 30, 2003 and September 30, 2002
(In thousands of US Dollars)
(Unaudited)

 
Preferred Stock
Capital Stock		 Additional
paid in capital
Accumulated deficit		 Total shareholder's (deficit)/equity
Balance at December  31, 2001 $   - $ 34 $19,941 $  (7,950) $12,025 
           
Capital contributions 3 6 22,366 -  22,375 
Net loss - - - (3,412) (3,412)
           
Balance at September 30, 2002 $  3 $ 40 $42,307 $(11,362) $30,988 
           
Balance at December 31, 2002 $  3 $ 40 $42,307 $(12,808) $29,542 
           
Capital contributions - 2 3,498 -  3,500 
Net loss - - - (3,440) 3,440 
           
Balance at September 30, 2003 $  3 $ 42 $45,805 $(16,248) $29,602 

The accompanying notes are an integral part of these condensed financial statements.

9

Closed Joint Stock Company "COMCOR-TV"
Notes to Condensed Financial Statements
As of and for the interim periods ended September 30, 2003
(unaudited)

Note 1 - Nature of Operations and Basis of Presentation

Closed Joint Stock Company COMCOR-TV ("CCTV") is a company engaged in the provision of cable television services and high speed Internet access in Moscow, Russia under licenses for cable television broadcasting and data transmission services that are valid for up to 1,500,000 subscribers.   At September 30, 2003, CCTV had installed service capacity for up to 145,043 homes in Moscow.

At September 30, 2003, CCTV was owned by Joint Stock Company Moscow Telecommunications Corporation ("COMCOR"), ABC Moscow Broadband Communication Limited and Moscow CableCom Corp. (then known as Andersen Group, Inc.) ("MOCC").  In February 2004, MOCC acquired the equity of CCTV owned by COMCOR and it also acquired all the shares of MBC which it did not previously own to effect an acquisition of 100% of CCTV.  Prior to the acquisition, MOCC had a direct interest in CCTV from a $3.5 million investment made in May 2003 pursuant to the agreements leading to the acquisition, and indirectly through a 25% equity interest in MBC, which in turn had an approximately 50% equity interest in CCTV.

Note 2 - Related Party Transactions

CCTV receives signal delivery services and data network services from COMCOR.  In addition, CCTV paid COMCOR for Internet traffic up until March 2004.  During the three and nine months ended September 30, 2003, $257,000 and $844,000 of such expenses, respectively were charged to the income statement.  At September 30, 2003, the amount payable to COMCOR was approximately $1,833,000.

During the three and nine months ended September 30, 2003, CCTV accrued $3,000 and $9,000, respectively, of interest expense to MBC relating to a $550,000 loan which carries interest at LIBOR + 1%.

Note 3 - Investment in Institute for Automated Systems

At September 30, 2003, CCTV had a 41.7% equity interest in the Institute for Automated Systems (IAS).  CCTV adjusts the carrying value of this investment to reflect its equity interest in IAS's results of operations.  For the three and nine months ended September 30, 2003, CCTV recorded $167,000 and $251,000, respectively, as its equity in the losses of IAS.

At September 30, 2003, CCTV's investment in IAS was recorded at $6,040,000 and its proportionate share of IAS's equity was $3,150,000.  The difference is attributable to the fair market value of the contributions to CCTV of the IAS shares, as determined by COMCOR and MBC in the negotiations of contributions to CCTV's equity to maintain parity ownership.  The following presents the summarized financial condition of IAS as of September 30, 2003 and December 31, 2002 and the results of its operations for the nine months ended September 30, 2003 (in thousands):

Balance Sheet

September 30, 2003

December 31, 2002

Current assets

$                     1,688

$                   1,151

Noncurrent assets

8,760

9,596

Total assets

$                   10,448

$                 10,747

Liabilities and Shareholders' Equity

 

 

Current liabilities

$                     1,806

$                   1,566

Noncurrent liabilities

1,087

1,082

Total liabilities

2,893

2,648

Shareholders' equity

7,555

8,099

 

 
    

$                  10,448

$                10,747
 

10




Statement of Operations

Nine Months Ended
September 30, 2003

 

Revenues

$                   4,039 

Cost of revenues

(3,067)

Operating expense

(1,449)

Loss from operating expenses

(478)

Non operations

(133)

Income tax

(17)

 

Net loss

$                     (628)
 

 

11



(b)     Pro forma Financial Information.

The accompanying unaudited pro forma consolidated condensed financial statements give effect to the acquisition by the Company of 100% of each of CCTV and MBC through the issuance of shares of the Company's Common Stock to Moscow Telecommunications Corporation ("COMCOR") and to the former stockholders of 75% of the shares of MBC which the Company had not previously owned. 

The final purchase price allocation will be calculated based on the transaction value and the fair values of CCTV's and MBC's identifiable assets and liabilities at the date of closure.  Therefore, the actual goodwill amount, as well as other balance sheet items, could differ from the preliminary unaudited condensed pro forma consolidated financial statements presented herein, which in turn could affect items in the preliminary condensed pro forma consolidated statement of operations, such as intangible asset amortization and income taxes.

The accompanying unaudited pro forma condensed consolidated balance sheet as of November 30, 2003 and accompanying unaudited pro forma condensed consolidated statements of operations for the year ended February 28, 2003 and for the nine month period ended November 30, 2003 were prepared based on the Company's interpretation of guidance issued by the United States Securities and Exchange Commission (specifically Section 11.02 of Regulation S-X).   The unaudited pro forma condensed consolidated income statements for the year ended February 28, 2003 and for the nine month period ended November 30, 2003 give effect to the acquisitions as if the transactions had occurred on March 1, 2002.  The unaudited pro forma consolidated condensed balance sheet as of November 30, 2003 gives effect to the CCTV acquisition as if the transaction had occurred on November 30, 2003.

The Company has presented these unaudited pro forma consolidated condensed financial statements for illustrative purposes only.  The unaudited pro forma consolidated condensed financial statements are not necessarily indicative of the actual results of operations or financial position that would have occurred had the acquisitions occurred on the dates indicated, nor are they necessarily indicative of future operating results or financial position.  The unaudited pro forma consolidated condensed financial statements are only a summary and should be read in conjunction with the historical consolidated financial statements and related notes of the Company, CCTV and MBC and other information included or incorporated by reference in this current report.

The estimated total purchase price of CCTV and MBC of approximately $32,226,000 million consists of approximately $27,243,000 in the Company's common stock, representing 6,470,879 shares which were issued or have been committed to be issued, the Company's $3,500,000 investment in CCTV, which was carried at cost, and the Company's $1,483,000 investment in MBC which was carried at its cost as adjusted for the Company's equity in MBC's losses.  The estimated value of the common stock  issued or committed to be issued in connection with the acquisition of CCTV and MBC was determined based on the average closing price of the Company's common stock for the four days for which there was trading during the period between May 22, 2003 and May 29, 2003 in accordance with the guidance set forth in Emerging Issues Task Force Technical Bulletin ("EITF") 99-12, "Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination" ("EITF 99-12").

12


Attachment I

 

INDEX TO PRO FORMA FINANCIAL STATEMENTS

 

Moscow CableCom Corp.
Unaudited Pro Forma Consolidated Condensed Financial Information
As of and for the Nine Months Ended November 30, 2003 and for the Year Ended February 28, 2003

Unaudited Pro Forma Consolidated Condensed Financial Statements:

Unaudited Pro Forma Consolidated Condensed Balance Sheet as of November 30, 2003

14

Unaudited Pro Forma Consolidated Condensed Statements of Operations for the Nine Months Ended November 30, 2003

15

Unaudited Pro Forma Consolidated Condensed Statements of Operations for the Year Ended February 28, 2003 

16

Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements

17

 

13


Moscow CableCom Corp.
Pro Forma Consolidated Condensed Balance Sheet
As of November 30, 2003
(In thousands, except per share data)
(Unaudited)

 

      

     

Pro Forma Adjustments

  
  

Moscow CableCom Corp.

Moscow
Broadband

COMCOR -TV

COMCOR
Investment
 in CCTV

Invest-ment
in MBC

Invest-ment
in CCTV

Elimi-nation
Entries

Consoli-dating
Entries


Pro Forma Consoli-dated Totals

(Note A)

(Note A)

(Note A)

(Note B)

(Notes C and G)

(Notes D and G)

(Notes E and G)

(Notes F
 and G)

 

Cash and cash
 equivalents            

$     1,153 

                $      304 

$        1,144 

- 

- 

- 


$            -

- 

$   2,601 

Marketable securities    

3,841 

- 

- 

- 

- 

- 

- 

- 

3,841 

Accounts and other
 receivables         

202 

828 

106 

- 

- 

138

(1,104)

- 

170 

Inventories             

- 

- 

3,003 

- 

- 

- 

- 

- 

3,003 

Taxes recoverable

- 

- 

1,290 

- 

- 

- 

- 

- 

1,290 

Prepaid expenses and
 other current assets     

34 

- 

999 

- 

- 

- 

- 

- 

1,033 

Total current assets 

5,230 

1,132 

6,542 

- 

- 

138 

(1,104)

- 

11,938 

Property, plant and
  equipment, net      

3,266 

- 

14,583 

- 

- 

- 

- 

- 

17,849 

Advances for
 construction and design

- 

- 

914 

- 

- 

- 

- 

- 

914 

Prepaid pension expense

4,717 

- 

- 

- 

- 

- 

- 

- 

4,717 

Intangible assets, net

 

 

7,053

 

 

 

 

- 

7,053 

Goodwill

- 

- 

59

- 

- 

- 

- 

102

161 

Investment in Moscow
 Broadband              

1,483 

- 

- 

- 

9,473 

- 

- 

(10,956)

- 

Investment in
  COMCOR-TV       

3,500 

6,316 

 

- 

- 

17,770 

- 

(27,586)

- 

Investment in IAS  

- 

48 

6,040 

- 

- 

- 

- 

- 

6,088 

Other assets            

297 

- 

- 

- 

- 

- 

- 

- 

297 

Total assets             

$   18,493 

$   7,496 

$      35,191 


$               -

$   9,473 

$ 17,908 

$ (1,104)

$   (38,440)

$  49,017
Current maturities of  long-term debt $        598  $           -  $                -  $              -  $          -  $          -  $          -  $             -  $      598 

Accounts payable    

232 

2 

2,117 

(1,380)

- 

- 

(543)

- 

428 

Accrued liabilities    

700 

38 

1,160 

- 

- 

- 

- 

- 

1,898 

Notes payable to related
  party

- 

- 

561 

- 

- 

- 

(561)

- 

- 

Deferred revenue

- 

- 

119 

- 

- 

- 

- 

- 

119 

Deferred income taxes

538 

- 

- 

- 

- 

- 

- 

- 

538 

Total current liabilities

2,068 

40 

3,957 

(1,380)

- 

- 

(1,104)

- 

3,581 

Long-term debt, less 
 current maturities    

2,983 

- 

- 

- 

- 

- 

- 

- 

2,983 

Other liabilities       

456 

- 

26 

- 

- 

- 

- 

- 

482 

Deferred income taxes

1,551 

- 

1,604 

- 

- 

- 

- 

- 

3,155 
  

7,058 

40 

5,587 

(1,380)

- 

- 

(1,104)

- 

10,201 

Stockholders' equity

 

 

 

 

 

 

 

 

 

Cumulative convertible
 preferred Stock

3,497 

- 

3 

- 

- 

- 

- 

(3)

3,497 

Common stock       

21 

19,002 

40 

- 

22 

43 

- 

(19,042)

86 

Additional paid-in
 capital    

6,653 

1,409 

45,808 

1,380 

9,451 

17,865 

- 

(48,597)

33,969

Retained earnings    

1,264 

(12,955)

(16,247)

- 

- 

- 

- 

29,202 

1,264 

Total equity            

11,435 

7,456 

29,604 

1,380 

9,473 

17,908 

- 

(38,440)

38,816
    

$   18,493 

$   7,496 

$      35,191 

$              - 

$   9,473 

$ 17,908 

$ (1,104)

$   (38,440)

$  49,017
 

14


Moscow CableCom Corp.
Pro Forma Consolidated Condensed Statement of Operations
For the Nine Months Ended November 30, 2003
(In thousands, except per share data)
(Unaudited)
 

Moscow CableCom

Moscow
Broadband

COMCOR-TV


Eliminations

Pro Forma
Adjustments

Pro Forma
Totals
   

(Note A)

(Note A)

(Note A)

(Note E)

(Note F)

 

Sales and revenues:

 

 

 

 

 

 

Subscription fees

- 

- 

$        1,781 

- 

- 

$        1,781 

Connection fees and equipment
  sales

- 

- 

497 

- 

- 

497 

Other

- 

- 

131 

- 

- 

 131 

- 

- 

2,409

- 

- 

2,409 

Cost of sales

- 

- 

3,500

- 

- 

3,500 

 

 

 

 

 

 

Gross margin

- 

- 

(1,091)

- 

- 

(1,091)

General and administrative expenses

2,129 

245

2,238 

- 

- 

4,612

 

 

 

 

 

 

Operating loss

(2,129)

(245)

(3,329)

- 

-

(5,703)

 

 

 

 

 

 

Investment income and other income

1,418 

13 

- 

(9)

- 

1,422 

Interest expense

(184)

- 

(9)

(9)

- 

(202)

Foreign exchange loss

- 

- 

(57)

- 

- 

(57)

Other non-operating items, net

 

 

(3)

 

 

(3)

Income before equity in losses of
  unconsolidated subsidiary and
  income taxes

(895)

(232)

(3,398)

(18)

-

(4,543)

Equity in losses of Moscow Broadband

(488)

- 

- 

488 

- 

- 

Equity in losses of COMCOR-TV

- 

(1,720)

- 

1,720 

- 

- 

Equity in losses of IAS (Note 1)

- 

- 

(251)

- 

(11)

(262)

Loss before income taxes

(1,383)

(1,952)

(3,649)

2,190 

(11)

(4,805)

Income tax (benefit)

72 

- 

(209)

- 

- 

(137)

Net loss

(1,455)

(1,952)

(3,440)

2,190 

(11)

(4,668)

Preferred dividends

(212)

- 

- 

- 

- 

(212)

(Loss) applicable to common shareholders

$     (1,667)

$       (1,952)

$       (3,440)

$         2,190 

$              (11)

$       (4,880)

Loss per Common Share - Basic and Diluted:

(0.80)      

 

 

 

 

$         (0.57)

Weighted average shares outstanding - basic and diluted  (Note H)

2,100 

2,250 

4,255 

 

 

8,605 
 

15


Moscow CableCom Corp.
Pro Forma Consolidated Condensed Statement of Operations
For the Year Ended February 28, 2003
(In thousands, except per share data)
(Unaudited)
  

Moscow CableCom

Moscow
Broadband

COMCOR-TV

Eliminations

Pro Forma
Adjustments

Pro Forma
Totals
  

(Note A)

(Note A)

(Note A)

(Note F)

(Note F)

 

Sales and revenue:

 

 

 

 

 

 

Subscription fees          

- 

- 

$        1,365 

- 

- 

$        1,365 

Connection fees and equipment sales

- 

- 

481 

- 

- 

481 

Other

- 

- 

95 

- 

- 

95 

- 

- 

1,941 

- 

- 

1,941 

Cost of sales  

-

- 

3,691 

- 

- 

3,691 

 

 

 

 

 

 

Gross margin

- 

- 

(1,750)

- 

- 

(1,750)

General and administrative
  expenses

2,531 

487 

3,210 

- 

- 

6,228 

 

 

 

 

 

 

Operating loss

(2,531)

(487)

(4,960)

- 

- 

(7,978)

 

 

 

 

 

 

Investment income and other
income

914 

68 

- 

(27)

- 

955 

Interest expense

(256)

- 

(27)

27 

- 

(256)

Foreign exchange loss

- 

- 

(56)

- 

- 

(56)

Loss before equity in losses of
 unconsolidated subsidiary and
 income taxes

(1,873)

(419)

(5,043)

- 

- 

(7,335)

Equity in losses of Moscow
  Broadband         

(712)

- 

- 

712 

- 

- 

Equity in losses of COMCOR-TV

- 

(2,429)

- 

2,429 

- 

- 

Equity in losses of IAS  (Note I)

- 

- 

(95)

- 

(139)

(234)

 

 

 

 

 

 

Loss before income taxes

(2,585)

(2,848)

(5,138)

3,141 

(139)

(7,569)

Income tax (benefit)            

(535)

- 

(283)

- 

- 

(818)

 

 

 

 

 

 

Net income from continuing operations

(2,050)

(2,848)

(4,855)

3,141 

(139)

(6,751)

Minority interest

- 

- 

(3)

- 

- 

(3)

Net loss

(446)

(2,848)

(4,858)

3,141 

(139)

(6,754)

Preferred dividends

(282)

- 

- 

- 

- 

(282)

(Loss) applicable to common shareholders

$        (728)

$      (2,848) 

$      (4,858) 

$       3,141 

$          (139)

$       (7,036)

Loss per Common Share - Basic and Diluted:

 

 

 

 

 

 

Net loss from continuing operations               

$       (1.11)

 

 

 

 

$         (0.82)

Weighted average shares outstanding - basic and diluted (Note H)          

2,097 

2,250 

4,255 

 

 

8,602 
 

16


Moscow CableCom Corp.
Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements

A)      The historical balance sheet information is as of November 30, 2003 for Moscow CableCom Corp. (the "Company"), and as of September 30, 2003 for each of ABC Moscow Broadband Communication Ltd. ("MBC") and COMCOR-TV ("CCTV").  The historical statements of operations information for the Company are for the nine months ended November 30, 2003 and the year ended February 28, 2003.  The statements of operations information for each of MBC and CCTV are for the nine months ended September 30, 2003 and the year ended December 31, 2002.  Such information has been derived from the Company's Form 10-Q for the period ended November 30, 2003, its Form 10-K for the year ended February 28, 2003 and from information provided by MBC and CCTV.

B)       COMCOR Investment in CCTV.

Pursuant to the agreements pursuant to which the Company has acquired the outstanding equity of CCTV previously held by ZAO Moscow Telecommunications Corporation ("COMCOR"), COMCOR will make an additional capital contribution to CCTV of approximately $1,380,000 through the settlement of liabilities in exchange for Preferred Stock of CCTV, which in turn will be immediately exchanged for 220,879 shares of the Company's Common Stock.

C)       Investment in MBC.

Effective February 24, 2004, the Company issued 150 shares of its Common Stock for each of the 15,000 shares of MBC outstanding that had not been owned by the Company. Such stock has been valued at $4.21 per share (the approximate market value of the Company's Common Stock at the time the agreements with COMCOR were reached and disclosed) for total consideration of $9,473,000. As further described in Note G, the difference between the purchase price for this additional ownership in MBC and the reported value of the Company's current ownership in MBC over MBC's net assets has been allocated to MBC's investment in CCTV and further allocated to CCTV's assets and liabilities.

D)       Investment in CCTV.

 17


E)        Elimination Entries.

Intercompany receivables, advances and loans have been eliminated as follows (in thousands):

Moscow CableCom's purchases of CCTV liabilities as discussed in Note D

$                    276

MBC's advances and loans to CCTV, including accrued interest

828

                Total

$                 1,104

F)        Consolidating Entries.

Pro Forma Balance Sheet

         The excess of the book value of the net assets acquired in the CCTV and MBC Share Acquisitions has been reflected as a write-off of the goodwill on CCTV's balance sheet which relates to its July 2000 purchase of a 51% interest in Persey, a Moscow company that provides sales and related services to CCTV in addition to its broadcasting and publishing activities, and as a write-down of CCTV's licenses which were contributed by COMCOR in April 2000, and of the related deferred income tax liability.  See note G for detailed calculations.

Pro Forma Statement of Operations

         Pro forma adjustments have been reflected in the nine-month pro forma statement of operations to show an increased equity in the losses of IAS based upon the increased ownership as a result of MBC's approximately 1.8% ownership in IAS being added to CCTV's approximately 41.7% ownership.  For the twelve month pro forma statement of operations, the pro forma equity in IAS's results have been reflected for the entire period, as compared to the five month period during which CCTV utilized equity accounting.  The increase in the ownership of IAS as a result of the inclusion of MBC's ownership of IAS has been similarly reflected.

G)            Accounting for Issuance of Stock in MBC and CCTV Share Acquisitions.

                The pro forma financial information has been prepared based on valuing the consideration to be paid by the Company using an estimated market price of $4.21 per share for the Company's Common Stock, which represents the approximate market value of the stock immediately prior to and following the time at which the agreements to acquire CCTV were signed and announced in accordance with EIFT 99-12.  The following table outlines the elements of the accounting (in thousands):

 18



 

Value of Common Stock to be issued to:

                MBC shareholders

$            9,473 

                COMCOR

17,770 

Value of investment in MBC and CCTV

4,983 

 

Total acquisition cost of CCTV/MBC

$          32,226 

 

Value of net assets acquired, and the allocation of purchase price (in thousands):

 



CCTV Book Value



MBC Book Value




Adjustments (a)




Subtotal


Acquisition Accounting Entries (b)




Pro forma Totals
  

 

 

 

 

 

 

Current assets

$       6,542 

$      1,132 

$                       - 

$     7,674 

$              - 

$        7,674 

Property, plant and
 equipment, net


14,583 


- 


- 


14,583 


- 


14,583 

Advances for construction
 and design


914 


- 


- 


914 


- 


914 

Intangible assets, net

7,053 

- 

- 

7,053 

- 

7,053 

Goodwill, net

59 

- 

- 

59 

102

161 

Investment in IAS

6,040 

48 

- 

6,088 

- 

6,088 

Current liabilities

(3,957)

(40)

1,380 

(2,617)

- 

(2,617)

Long term liabilities

(1,630)

- 

- 

(1,630)

- 

(1,630)

 

 

 

 

 

 

Net assets acquired

$     29,604 

$       1,140 

$              1,380 

$   32,124 

$          102 

$      32,226 

 

(a)     Represents liabilities of CCTV owed to COMCOR to be settled as part of the exchange of COMCOR's equity interest in CCTV for 4,220,879 shares of the Company's common stock.

(b)     Represents the write-off of $59,000 of goodwill recorded by CCTV in connection with its acquisition of Persey in 2000, and the recognition of $161,000 as the excess of purchase price for the fair value of net assets acquired.

The above pro forma presentation of the allocation of the purchase price represents the Company's best estimate at the date of this filing.  The Company has retained an independent firm to appraise the value of CCTV's assets and liabilities to assist in the final determination of the estimated fair value of the assets acquired and the liabilities assumed which, in turn, will serve as the basis for the allocation of the purchase price in accordance with SFAS 141.

The Company has estimated that CCTV's reported values of its cash, accounts receivable, taxes recoverable and prepaid expenses represent the present value of amounts to be received, and CCTV's  reported values of its inventory represents the value of the estimated selling prices less the sum of the costs of disposal and a reasonable profit allowance.  The Company has further estimated that CCTV's recorded value for its property, plant and equipment represents fair value, as approximately 85% of such assets were acquired by or contributed to CCTV within one year of the balance sheet date, and accordingly, the recorded values approximate current replacement cost.  CCTV's reported values for its construction in process has been considered by the Company to approximate fair value due to the recent nature of the contracts entered into with the subcontractors who are performing the construction activities.  CCTV's reported value for its investment in IAS has been assessed by the Company as reflecting fair value based upon the values accorded this asset in the Company's negotiations with COMCOR.

 19


In the allocation of the purchase price, the Company has accorded no value to the goodwill which CCTV recorded relating to its acquisition of a 51% interest in Persey, due to the limited nature of Persey's operations and the lack of profits generated from such operations. 

CCTV's recorded value of its intangible assets represents the recorded value of CCTV's licenses to conduct its business and has not been adjusted in the accompanying pro forma financial statements. 

The recorded value of CCTV's accounts payable and accrued liabilities has been considered to approximate fair value based upon an assessment that such amounts represent the present value of the amounts to be paid.

As noted previously, all these estimates are subject to adjustment based upon the results of an independent appraisal of CCTV's assets and liabilities.

The excess of the purchase price over cost has been allocated as follows:

Goodwill associated with CCTV's acquisition of Persey in 2000

$                              (59)

Goodwill associated with CCTV

161 

               

$                             102 

H)            Pro forma weighted average shares outstanding.

Pro forma weighted average shares outstanding as a result of the proposed transactions are as follows (in thousands):

  

Nine Months
Ended November 30, 2003

Year Ended
February 28, 2003

Weighted average shares outstanding

 

 

Actual

2,100 

2,099 

Pro forma adjustments:

 

 

Issuance of shares to MBC stockholders

2,250 

2,250 

Issuance of shares to COMCOR, including shares to be issued


4,221 


4,221 

Issuance of shares to satisfy CCTV obligation

34 

34 

Total pro forma weighted average shares outstanding


8,605 


8,604 

 20


I)             Institute for Automated Systems.

On a pro forma basis, the Company will own approximately 43.5% of the outstanding stock of Institute for Automated System (IAS), a Russian telecommunications company that has a data communication network in Russia.  The following presents the summarized financial condition of IAS as of September 30, 2003, and the results of its operations for the nine months ended September 30, 2003 and the year ended December 31, 2002 (in thousands):


Balance Sheet

September 30, 2003

Current assets

$                       1,688 

Non current assets

8,761 

 

Total assets

$                     10,449 

 

Current liabilities

$                       1,806 

Non current liabilities

1,087 

 

Total liabilities

2,893 

 

Shareholders' equity

7,555 
 

$                     10,449 

 


Statement of Operations  

Nine Months Ended
September 30, 2003

Year Ended
December 31, 2002

 

 

Revenues

 $                     4,039 

$                         4,607 

Cost of revenues

(3,067)

(3,133)

Operating expenses

(1,449)

(2,139)

 

 

Loss from operations

(478)

(665)

Non operating income

(133)

144 

Income tax expense

(17)

(17)

 

 

Net loss

$                   (628)  

$                          (538)

In connection with the acquisition of CCTV, the Company entered into an agreement with COMCOR pursuant to which COMCOR will acquire an approximately 72.5% equity interest in IAS for approximately $1,900,000, which will thereby dilute the Company's interest to approximately 12.0%.  This agreement also provides for COMCOR to sell that number of shares of IAS to CCTV for a purchase price to be mutually agreed to re-establish the Company's ownership of IAS at approximately 43%.

21


(c)      Exhibits

3.1(a)                      Certificate of Amendment to Certificate of Incorporation filed October 27, 2003.*

3.1(b)                      Certificate of Amendment to Certificate of Incorporation filed November 4, 2003.*

3.1(c)                      Certificate of Amendment to Certificate of Incorporation filed February 24, 2004.*

99.1                         Press Release dated February 24, 2004.*

99.2                         Voting Agreement by and among Moskovskaya Telekommunikatsionnaya Corporatsiya, Oliver Grace. Jr. and Francis E. Baker
                                dated as of February 24, 2004.*

99.3                         Letter Agreement between the Company and Moskovskaya Telekommunikatsionnaya Corporatsiya dated February 23, 2004.*

* Incorporated by reference to the correspondingly number exhibit to the Company's current report on Form 8-K filed February 27, 2004 (Commission File 0-1460).

 


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.
 

Andersen Group, Inc.

       

(Registrant)

 

Date:  May 10, 2004

/s/ Andrew M. O'Shea

Andrew M. O'Shea

       

Chief Financial Officer

22