<PAGE>
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) October 24, 1996
MICROLEAGUE MULTIMEDIA, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Pennsylvania 1-11743 23-2563090
------------ ------------------------ ---------------------
(State or other juris- (Commission File Number) (IRS Employer Identi-
diction of incorporation) fication No.)
750 Dawson Drive, Newark, Delaware 19713
- ---------------------------------- ----------
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code 302-368-9990
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
No Exhibit Index appears herein.
<PAGE>
Items 7(a) and (b) of MicroLeague Multimedia, Inc.'s (the "Registrant")
Current Report on Form 8-K, dated October 24, 1996 (the "Report") are hereby
amended and restated in their entirety as follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
MICRO SPORTS, INC. FINANCIAL STATEMENTS
Report of Independent Accountant...................................... 3
Micro Sports, Inc. Balance Sheets, September 30, 1996 (unaudited),
June 30, 1996 and June 30, 1995..................................... 4
Micro Sports, Inc. Statements of Operations, Nine Months Ended
September 30, 1996 and September 30, 1995 (unaudited),
Years Ended June 30, 1996 and June 30, 1995......................... 5
Micro Sports, Inc. Statements of Cash Flows, Nine Months Ended
September 30, 1996 and September 30, 1995 (unaudited),
Years Ended June 30, 1996 and June 30, 1995......................... 6
Notes to Micro Sports, Inc. Financial Statements...................... 7
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<PAGE>
Report of Independent Accountant
To the Shareholders of
Micro Sports, Inc.
I have audited the accompanying balance sheets of Micro Sports, Inc. for the
years ended June 30, 1996 and 1995, and the related statements of operations and
cash flows. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position, operations and cash flows of Micro
Sports, Inc. for the years ended June 30, 1996 and 1995, in conformity with
generally accepted accounting principles.
JOSEPH S. GERBINO, CPA
Union, NJ 07083
November 18, 1996
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<PAGE>
MICRO SPORTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1996
(unaudited) June 30, 1996 June 30, 1995
------------------ ------------- -------------
<S> <C> <C> <C>
ASSETS:
CURRENT ASSETS
Cash and Cash Equivalents........................ $ 960 $ 5,787 $ 66,313
Prepaid and Other Current Assets................. -- 1,493 760
----------- ----------- -----------
Total Current Assets................................ 960 7,280 67,073
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment.................... 289,342 293,248 200,880
Less: Accumulated Depreciation.................. (117,378) (117,964) (64,827)
----------- ----------- -----------
Net Property, Plant and Equipment................... 171,378 175,241 136,053
----------- ----------- -----------
OTHER ASSETS
Software......................................... 17,942 12,460 5,119
Licenses......................................... 2,670,665 2,670,665 2,670,665
Deposits......................................... 4,550 4,550 --
Less: Accumulated Amortization.................. (540,404) (539,898) (268,560)
----------- ----------- -----------
Total Other Assets 2,152,752 2,147,777 2,407,224
----------- ----------- -----------
TOTAL ASSETS $ 2,325,090 $ 2,330,298 $ 2,610,350
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable................................. 93,642 77,166 251,482
Unearned or Deferred Income - IBM Royalty........ 746,642 534,331 234,331
Accrued Expenses and Other Current Liabilities... 221,950 37,576 25,016
----------- ----------- -----------
Total Current Liabilities........................... 1,062,234 649,073 510,829
----------- ----------- -----------
LONG-TERM LIABILITIES
Long-Term Debt................................... 20,618 22,126 23,321
----------- ----------- -----------
Total Long-Term Liabilities......................... 20,618 22,126 23,321
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock..................................... 10,000 10,000 10,000
Additional Paid In Capital....................... 5,430,130 5,430,130 4,843,783
Retained Earnings................................ (4,197,892) (3,781,031) (2,777,583)
----------- ----------- -----------
Total Stockholders' Equity.......................... 1,242,238 1,659,099 2,076,200
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY............................. $ 2,325,090 $ 2,330,298 $ 2,610,350
=========== =========== ===========
</TABLE>
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<PAGE>
MICRO SPORTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended For the Years Ended June 30,
September 30, 1996 September 30, 1995
(unaudited) (unaudited) 1996 1995
----------- ----------- ------ -----
<S> <C> <C> <C> <C>
NET SALES......................... $ 91,494 $ 173,051 $ 110,801 $260,749
COST OF SALES..................... -- 18,481 -- 186,343
---------- ----------- ----------- -----------
GROSS PROFITS..................... 91,494 154,570 110,801 74,406
OPERATING EXPENSES
General & Administrative....... 987,586 1,168,679 1,147,537 1,670,742
---------- ----------- ----------- -----------
Total Operating Expenses.......... 987,586 1,168,679 1,147,537 1,670,742
---------- ----------- ----------- -----------
Income (Loss) from Operations..... (896,092) (1,014,109) (1,036,736) (1,596,336)
Interest Expense............... 3,768 2,674 7,016 3,574
Other Income................... 9,356 (25,367) (40,304) (25,367)
---------- ----------- ----------- -----------
NET INCOME, (LOSS)................ ($909,216) ($991,416) ($1,003,448) ($1,574,543)
========== =========== =========== ===========
</TABLE>
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<PAGE>
MICRO SPORTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended For the Years Ended June 30,
September 30, 1996 September 30, 1995
(unaudited) (unaudited) 1996 1995
----------- ----------- -------- ------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income, (Loss).......................... ($909,216) ($991,416) ($1,003,448) ($1,574,543)
Adjustments to Reconcile Net Loss to Net Cash
in Operating Activities:
Depreciation and Amortization............... 249,981 293,380 324,518 313,133
Changes in Operating Assets and Liabilities:...
Decrease in Accounts Receivable............. -- 178,418
Decrease in Inventories..................... 107,081 -- 84,140
(Increase) in Other Current Assets.......... (733) (760)
(Increase) in Other Assets.................. (10,307) (1,006,087) (11,891) (1,071,576)
Increase, (Decrease) in Accounts Payable.... 12,371 (150,525) (174,316) 45,181
Increase in Deferred Income................. 297,792 234,331 300,000 234,331
Increase in Accrued Liabilities............. 140,082 (6,205) 12,560 6,964
------------ ------------ ------------ ------------
Net Cash (Used in) Operating Activities........ (219,297) (1,519,441) (553,310) (1,784,712)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition (Purchase) of Property, Plant
and Equipment............................. 56,270 (160,389) (92,368) (131,882)
------------ ------------ ------------ ------------
Net Cash (Used in) Investing Activities........ 56,270 (160,389) (92,368) (131,882)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings on Long-Term Debt................ -- 108,674 11,753 30,080
Payments on Long-Term Debt.................. (85,480) (17,719) (12,948) (6,759)
Proceeds from Sale of Common Stock.......... 200,000 1,619,854 586,347 1,956,140
------------ ------------ ------------ ------------
Net Cash Provided by Financing
Activities.................................. 114,520 1,710,809 585,152 1,979,461
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($48,507) 30,979 ($ 60,526) $ 62,867
CASH AND CASH EQUIVALENTS,
beginning of period $49,467 15,586 $ 66,313 $ 3,446
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
end of period $ 960 46,565 $ 5,787 $ 66,313
============ =========== ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash Paid During the Period For:
Interest $ 4,412 $ 2,683 $ 7,016 $ 3,574
Income Taxes $ 2,052 $ 779 $ 2,052 $ 779
</TABLE>
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<PAGE>
MICRO SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 and 1995
Note 1 - BASIS OF PRESENTATION
MICRO SPORTS, INC. (the "Company") is primarily engaged in the
development and distribution of sports game simulation and other
software sold throughout the United States.
The financial statements are presented to reflect the acquisition by
Microleague Multimedia, Inc. as of October 24, 1996. Had the Company
not been acquired, there would have been substantial doubt about the
Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS
For the purposes of reporting cash flows, cash and cash equivalents
include cash on hand and cash in banks.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and is depreciated
using the straight-line method over the asset's estimated useful life.
Major additions to property, plant and equipment are capitalized at
cost. Expenditures for repairs and maintenance are charged to expense
as incurred.
INTANGIBLE ASSETS
Software and License Agreement is stated at cost and amortized using
the straight-line method over a period of ten years.
REVENUE RECOGNITION
Revenues are recognized when a product is shipped or a service is
performed, and when no significant obligations remain and collection is
probable. Net revenues are comprised of the total sales billed during
the period less the sales value of goods estimated to be returned,
trade discounts and customer allowances anticipated at the time of
shipment.
RESEARCH AND DEVELOPMENT
Research and development costs are included in the accompanying
statements of operations as general and administrative expenses.
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<PAGE>
SUBSEQUENT EVENTS:
The Company was acquired on October 24, 1996 by Microleague Multimedia,
Inc. located in Newark, Delaware as discussed in Note 1. The terms of
the purchase included the issuance of 308,882 shares of common stock in
exchange for the outstanding assets and liabilities of the Company.
Note 3 - LEASE COMMITMENT
The Company leases office space under a non-cancelable operating lease
expiring October 31, 1999. As of June 30, 1996, the minimum aggregate
annual rental payments under the lease are as follows:
Year Ending
June 30,
1997 $38,750
1998 $43,750
1999 $11,250
-------
Total $93,750
The lease provides for increases in real estate taxes and certain
operating expenses.
Total rent expense charged to operations for the years ended June 30,
1996 and 1995 was $34,013 and $11,016, respectively.
Note 4 - TAX BENEFIT OF NET OPERATING LOSS
An income tax benefit of approximately $1,226,000 was not recorded by
the Company for the year ended June 30, 1996. The benefit was not
recorded because there is no possibility of realizing future value from
the tax benefit due to the Company being acquired effective October 24,
1996 as discussed in Note 1.
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<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet (unaudited) at December 31,
1995 and Pro Forma Consolidated Statement of Income (unaudited) for the 12
months ended December 31, 1995 give pro forma effect to (i) the Registrant's
acquisition of Ablesoft, Inc. on September 30, 1995, and (ii) the Registrant's
acquisition of Micro Sports, Inc. ("Micro Sports") described more fully under
Item 2 of the Report, as if such transactions occurred as of December 31, 1995
for the Pro Forma Consolidated Balance Sheet and as of January 1, 1995 for the
Pro Forma Consolidated Statement of Income. Each of such acquisitions was
treated as a "purchase" for accounting purposes.
The Pro Forma Consolidated Balance Sheet is based on (i) the Registrant's
historical consolidated balance sheet as of September 30, 1996 (which reflects
the acquisition of Ablesoft on September 30, 1995), and (ii) Micro Sports'
unaudited balance sheet as of December 31, 1995.
The Pro Forma Consolidated Statement of Income for the year ended December 31,
1995 is based on (i) the Registrant's historical consolidated statement of
operations for the fiscal year ended December 31, 1995 (which reflects data for
Ablesoft for the period beginning October 1, 1995 through December 31, 1995)
and (ii) Micro Sports' unaudited statement of operations for the nine-month
period ended September 30, 1996 and the three-month period ended December 31,
1995.
The Pro Forma Consolidated Statement of Income for the nine months ended
September 30, 1996 is based on (i) the Registrant's unaudited consolidated
statement of operations for the nine months ended September 30, 1996 and (ii)
Micro Sports' unaudited statement of operations for the six months ended
June 30, 1996 and the three-months ended September 30, 1996.
The pro forma information does not purport to be indicative of the combined
results of operations or financial position that would have been reported has
these transactions taken place as of December 31, 1995 with respect to the Pro
Forma Consolidated Balance Sheet data or as of January 1, 1995 with respect to
the Pro Forma Consolidated Statement of Income data, as the case may be, or
future results of operations or financial position of the Registrant. The Pro
Forma Consolidated Financial Statements should be read in conjunction with the
Registrant's historical financial statements and related notes thereto for the
year ended December 31, 1995 included in its Prospectus dated May 23, 1996 and
the historical financial statements and notes thereto of Micro Sports for the
years ended June 30, 1995 and 1996 included in the Report under Item 7(a).
The Pro Forma Consolidated Financial Statements give effect to the issuance
of 30,889 shares of the Registrant's common stock placed in escrow in connection
with the Micro Sports acquisition (as defined under Item 2 of the Report). Such
shares will be released from escrow upon the satisfaction of certain conditions.
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<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Historical Pro Forma
Microleague MicroSports Adjustments Pro Forma
----------- ----------- ----------- ---------
ASSETS
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents.................. $ -- $ 960 $ 960
Accounts receivable, net of allowance for
returns and doubtful accounts............ 886,009 -- 886,009
Inventory, net............................. 1,541,719 -- 1,541,719
Royalty advances........................... 673,863 -- 673,863
Prepaid and other current assets........... 214,200 -- 214,200
Deferred tax assets........................ 1,158,420 -- 1,158,420
---------- ---------- ----------
Total current assets..................... 4,534,211 960 4,535,171
---------- ---------- ----------
Fixed assets, net............................... 733,786 171,378 905,164
Goodwill, net................................... 665,710 -- 675,000 1,340,710
Capitalized software costs, net................. 508,394 -- 508,394
Intangible assets, net.......................... 245,629 2,148,203 2,393,832
Other assets.................................... 240,433 4,550 244,983
---------- ---------- ---------- ----------
Total assets............................. $6,918,163 $2,325,090 $675,000 $9,918,253
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and
capital leases........................... $ 282,299 -- $ 282,299
Notes payable.............................. 268,000 -- 268,000
Accounts payable........................... 1,217,228 93,642 1,310,870
Unearned Income - IBM Royalty.............. -- 746,642 746,642
Accrued expenses........................... 322,570 221,950 544,520
Cash Overdraft............................. 51,649 51,649
---------- ---------- ---------- ----------
Total current liabilities................ 2,141,746 1,062,234 3,203,980
---------- ---------- ---------- ----------
Deferred tax liability.......................... 238,671 -- 238,671
Long-term debt and capital leases, net.......... 807,852 20,618 828,470
---------- ---------- ---------- ----------
Total liabilities........................ 3,188,264 1,082,852 4,271,721
---------- ---------- ---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.,01 par value, 10,000,000
shares authorized........................ 39,352 10,000 (6,911) (1) 42,441
Additional paid-in capital...................... 7,369,585 5,430,130 (3,515,981) (1) 9,283,734
Accumulated deficit............................. (3,643,043) (4,197,892) 4,197,892 (1) (3,364,043)
Receivables from stockholders................... (36,000) -- -- (36,000)
---------- ---------- ---------- ----------
Total stockholders' (deficiency) equity.... 3,729,894 1,242,238 675,000 5,647,632
---------- ---------- ---------- ----------
Total liabilities and stockholders' equity. $6,918,163 $2,325,090 $675,000 $9,918,253
========== ========== ========== ==========
</TABLE>
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<PAGE>
MICROLEAGUE MULTIMEDIA, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Microleague Adjustments Adjustments
Consolidated Ablesoft MicroSports for Ablesoft for MicroSports Pro Forma
------------ -------- ----------- ------------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues.......................... $ 5,010,156 $ 547,206 $ 185,437 $5,742,799
Cost of Goods sold.................... 2,374,975 156,082 18,481 2,549,538
----------- ----------- ------------- -----------
Gross profit.......................... 2,635,181 391,124 165,956 3,192,261
Operating expenses:
Selling and marketing............... 515,882 160,208 676,090
General and administrative.......... 1,771,005 376,655 1,358,673 68,091 (2) 297,500 3,871,924
----------- ----------- ------------- --------- ---------- -----------
Total operating expenses........ 2,286,887 536,863 1,358,673 68,091 297,500 4,548,014
----------- ----------- ------------- --------- ---------- -----------
Income (loss) from operations......... 348,294 (145,739) (1,191,717) (68,091) (297,500) 1,354,753
Interest expenses..................... 224,451 22,844 5,535 28,818 (4) 281,648
Other expenses (income)............... 41,054 16,295 (75,021) (17,672)
------------- ----------- ------------- --------- ---------- -----------
Income (loss) before provision for
income taxes........................ 82,789 (184,878) (1,147,598) (96,909) (297,500) (44,096)
Benefit for income taxes.............. (16,300) -- -- (63,700)(3) (119,000)(3) (199,000)
------------ ---------- ------------- --------- ---------- -----------
Net income (loss) $ 99,089 ($184,878) ($1,147,598) ($33,209) ($178,500) ($1,445,096)
============ ========== ============= ========= ========= ===========
ProForma income data to reflect
income taxes for 1995
Income before taxes................. $ 82,789
Income tax provision................ 33,116
------------
Net income (loss)................... $ 49,673 ($184,878) ($1,147,598) ($33,209) ($178,500) ($1,494,512)
============ ========== ============= ========= ========= ===========
Net income (loss) per common share.... $ .02 $ (.46)
------------ -----------
Weighted average common shares
outstanding......................... 2,937,978 3,246,860
</TABLE>
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<PAGE>
MICROLEAGUE MULTIMEDIA, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Pro Forma
Microleague Adjustments
Consolidated MicroSports for MicroSports Pro Forma
------------ ----------- --------------- ---------
<S> <C> <C> <C> <C>
Net Revenues................................. $ 3,026,218 91,494 3,117,712
Cost of Goods sold........................... 2,128,236 -- 2,128,236
----------- --------- ---------- ----------
Gross profit................................. 897,982 91,494 989,476
Operating expenses:
Selling and marketing...................... 1,282,716 -- 1,282,716
General and administrative................. 1,789,291 987,586 223,125 (5) 3,000,002
----------- --------- ---------- ----------
Total operating expenses............... 3,072,007 987,586 223,125 4,282,718
----------- --------- ---------- ----------
Income (loss) from operations................ (2,174,025) (896,092) (223,125) (3,293,242)
Interest expenses............................ 159,785 3,768 163,553
Other expenses............................... 9,356
----------- --------- ---------- ----------
Loss before provision for income taxes ...... (2,333,810) (223,125) (2,556,935)
Benefit for income taxes, before extraordinary
items .................................... (767,328) (89,250) (856,578)
----------- ---------- ----------
Income (loss) before extraordinary items..... (1,566,482) (133,875) (1,700,357)
Extraordinary items, net of tax effect....... 204,181 204,181
----------- --------- ---------- ----------
Net (loss)............................. (1,770,663) (909,216) (133,875) (2,813,754)
Net income per common share.................. $ (0.50) $ (.73)
Weighted average common shares outstanding... 3,547,463 3,856,345
</TABLE>
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<PAGE>
Notes to Unaudited Consolidated Pro Forma Financial Information
Note 1 - To record the excess of the purchase price for the net assets
acquired under the purchase method of accounting for the Micro
Sports acquisition. The purchase price allocation for Micro Sports
is based on management's preliminary estimates of the fair value of
the assets and the liabilities assumed. The final allocation may
differ from these estimates. In addition to the assumed liabilities,
the consideration for the acquisition consists of 308,882 shares of the
Registrant's common stock valued at $2 million.
Note 2 - To record amortization expenses of $56,325 related to $751,000 of
goodwill resulting from the Ablesoft Acquisition, which is being
amortized over 10 years. Also reflects amortization of non-goodwill
intangible assets over the same respective lives.
Note 3 - To record an estimated tax provision at an assumed rate of 40% on
the consolidated results from operations.
Note 4 - To record interest expenses on debt incurred in connection with the
Ablesoft acquisition offset by a reduction of interest expenses on APBA
acquisition debt, which was converted to equity in 1996.
Note 5 - To record amortization expense of $282,500 related to goodwill and
licensing fees from the Micro Sports acquisition, which is being
amortized over 10 years. Also reflects depreciation of property, plant
and equipment over 10 years.
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<PAGE>
SIGNATURES
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.
MICROLEAGUE MULTIMEDIA, INC.
(Registrant)
Date: January 7, 1997 By:/s/ PETER R. FLANAGAN
----------------------------------
Name: Peter R. Flanagan
Title: Chief Financial Officer
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