SECURITIES AND EXGHANGE COMMISSION
Washington, DC 20549
----------------------------
CURRENT REPORT
ON
FORM 8-K/A
PURSUANT TO SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------------------
Date of Report (date of earliest event reported): November 3, 1997
----------------------------
THINK NEW IDEAS, INC.
(Exact name of registrant as specified in its charter)
----------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 000-21775 95-4578104
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
</TABLE>
45 West 36th Street, 12th Floor, New York, New York 10018
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 629-6800
----------------------------
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not Applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective as of November 3, 1997, THINK New Ideas, Inc. (the "Company")
acquired all of the issued and outstanding shares of capital stock of BBG New
Media, Inc. ("BBG"), a Massachusetts corporation engaged in the business of
producing new media and interactive business solutions via the Internet,
Intranet, online computer presentations, CD-rom and kiosks, pursuant to the
terms of the Agreement and Plan of Merger, dated November 3, 1997 (is
"Agreement"). A copy of the Agreement has been included as Exhibit 2.01 and
is incorporated herein by reference.
In exchange for the Company's acquisition of all of the capital stock
of BBG, the Company: (a) issued an aggregate of 303,334 shares of the Company's
common stock, par value $.0001 per share (the "Common Stock"); (b) paid $175,000
in cash to the former stockholders of BBG at the closing; and (c) repaid an
aggregate of approximately $548,000 in outstanding debt of BBG. The Company has
agreed to issue additional shares of Common Stock based upon BBG's sales over a
two year period and has agreed to repay over time (twelve months) an additional
$150,000 in outstanding debt of BBG. The amount and nature of the consideration
paid in connection with the transactions reported herein were the result of
arm's length negotiation between the parties. No material relationships between
the Company and BBG or any of the Company's or BBG's affiliates, any directors
or officers of the Company or BBG or any associate of any such director or
officer existed prior to the occurrence or consummation of the transactions
reported herein.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not Applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
Not Applicable.
ITEM 5. OTHER EVENTS
Not Applicable.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
Not Applicable.
2
<PAGE>
ITEM.7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) Financial Statements.
The following financial statements and pro forma financial information
concerning the Company are being provided in accordance with the instructions to
this item within the requisite sixty (60) day period from the date of the
Company's Form 8-K previously filed on November 18, 1997.
(a) Financial statements of BBG New Media, Inc., the business acquired,
prepared pursuant to Rule 310(c) of Regulation S-B:
<TABLE>
Page
--------------
<S> <C> <C>
Independent Auditors' Report 5
Balance Sheet as of December 31, 1996 6
Statement of Income for the year ended December 31, 1996 7
Statement of Stockholders' Equity for the year ended December 31, 1996 8
Statement of Cash Flows for the year ended December 31, 1996 9
Notes to Financial Statements 10
Unaudited Condensed Balance Sheet as of September 30, 1997 14
Unaudited Condensed Statements of income for the nine months ended
September 30, 1997 and 1996 15
Unaudited Condensed Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996 16
Notes to Condensed Financial Statements 17
3
<PAGE>
(b) Pro forma financial information required pursuant to Rule 310(d) of
Regulation S-B:
Page
--------------
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 20
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the three months ended September 30, 1997 21
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended June 30, 1997 22
Notes to Pro Forma Consolidated Financial Information 23
</TABLE>
(c) Exhibits.
*Exhibit 2.01 Agreement and Plan of Merger, dated as of November 3,
1997, by and among THINK New Ideas, Inc., BBG New Media, Inc., Daniel
McCartney and Joseph Nicholson.
Exhibit 2.02 Letter Agreement, dated as of November 3, 1997, by and
between BBG New Media, Inc. and THINK New Ideas, Inc.
* denotes previously filed.
Item 8. CHANGE IN FISCAL YEAR
Not Applicable.
4
<PAGE>
Independent Auditors' Report
----------------------------
The Stockholders
BBG New Media:
We have audited the accompanying balance sheet of BBG New Media as of December
31, 1996, and the related statements of income, stockholders' equity, and cash
flows for the year 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 audit.
We conducted our audit in accordance with 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
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 BBG New Media at December 31,
1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
March 31, 1997
5
<PAGE>
BBG NEW MEDIA
Balance Sheet
December 31, 1996
Assets(note 3)
------
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash $ 35,128
Accounts receivable, less allowance for doubtful accounts of $10,000 785,247
Prepaid expenses 22,451
-------------
Total current assets 842,826
Deposits 36,100
Property and equipment, net (note 2) 558,608
-------------
Total assets $ 1,437,534
=============
Liabilities and Stockholders' Equity
----------------------------------------------------------------------------------
Current liabilities:
Current installments of capital lease obligation (note 5) $ 6,859
Current installments of long-term debt (note 3) 65,000
Line of credit (note 4) 183,072
Accounts payable 229,859
Accrued expenses 182,915
-------------
Total current liabilities 667,705
Long-term liabilities:
Capital lease obligation, excluding current installments (note 5) 32,964
Long-term debt, excluding current installments (note 3) 157,084
Long-term portion of line of credit (note 4) 142,791
-------------
Total liabilities 1,000,544
Commitments (note 5)
Stockholders' equity:
Common stock, no par value. Authorized 3,000 shares; issued
and outstanding 2,400 shares 50,000
Retained earnings 386,990
-------------
Total stockholders' equity 436,990
Total liabilities and stockholders' equity $ 1,437,534
=============
</TABLE>
6
<PAGE>
BBG NEW MEDIA
Statement of Income
Year Ended December 31, 1996
Revenues $ 3,988,686
Cost of revenues 2,152,854
Gross profit 1,835,832
Operating expenses:
Sales and marketing 626,298
General and administrative 968,575
Operating income from continuing operations 240,959
Other income (expense):
Interest income 118
Interest expense (36,633)
Loss on disposal of equipment (5,992)
-------------
Income from continuing operations 198,452
Income from discontinued operations (note 6) 204,635
-------------
Net income $ 403,087
=============
See accompanying notes to financial statements.
7
<PAGE>
BBG NEW MEDIA
Statement of Stockholders' Equity
Year Ended December 31, 1996
Total
Common Retained Stockholders'
Stock Earnings Equity
Balances, December 31, 1995 $ 50,000 332,613 382,613
Net income - 403,087 403,087
Dividends - (348,710) (348,710)
-------- ---------- -----------
Balances, December 31, 1996 $ 50,000 386,990 436,990
======== ========== ===========
See accompanying notes to financial statements.
8
<PAGE>
BBG NEW MEDIA
Statement of Cash Flows
Year Ended December 31, 1996
Cash flows from operating activities:
Net income $ 403,087
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 131,647
Loss on disposal of equipment 5,992
Noncash dividend (42,710)
Changes in operating assets and liabilities:
Accounts receivable, net (87,760)
Prepaid expenses (13,664)
Deposits (20,700)
Accounts payable (94,811)
Accrued expenses (78,045)
------------
Net cash provided by operating activities 203,036
------------
Cash flows from investing activities:
Additions to property and equipment (292,017)
Proceeds from sale of equipment 3,500
------------
Net cash used in investing activities (288,517)
------------
Cash flows from financing activities:
Payments on capital lease obligations (2,701)
Net proceeds from line of credit 239,863
Principal payments on long-term debt (151,832)
Proceeds from long-term debt 260,000
Dividends (306,000)
------------
Net cash provided by financing activities 39,330
------------
Net decrease in cash (46,151)
Cash, beginning of year 81,279
Cash, end of year $ 35,128
===========
Supplemental disclosures of cash flow information:
Cash paid during year for interest $ 36,633
===========
Non-cash investing and financing activities:
Equipment purchased under capital lease obligations $ 39,000
===========
Noncash dividend (note 6) $ 42,710
===========
See accompanying notes to financial statements.
9
<PAGE>
BBG NEW MEDIA
Notes to Financial Statements
December 31, 1996
(1) Summary of Significant Accounting Policies
(a) Description of Business
BBG New Media (BBG or the Company), a Massachusetts corporation,
formerly Boston Business Graphics, Inc., delivers new media
interactive business solutions via the internet, intranet, on-line
computer presentations, CD-Rom, and kiosks. BBG also provides the
latest digital output technology to produce slides, overheads, color
prints and scans. Additionally, for several months in 1996, BBG sold
computer equipment and related supplies (see note 6).
(b) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation is provided
on the straight-line basis over the estimated useful lives of the
respective assets ranging from 3 to 7 years. A half-year of
depreciation is provided in the year of acquisition or disposition.
(d) Revenue Recognition
Revenues from graphic presentation, desk-top publishing and
multi-media presentation services are recorded upon customer
acceptance of the completed job. Revenues from sales of computer
equipment and related supplies are recognized upon shipment.
(e) Income Taxes
The Company has elected by consent of its stockholders to be taxed
under the provisions of Subchapter S of the Internal Revenue Code.
Under those provisions, no federal tax liability or expense is
incurred by the Company. Federal income taxes which may be due on any
corporate profits are the responsibility of the stockholders. Certain
states, however, do impose income excise taxes on S corporations.
State taxes were not material in 1996, and accordingly, these
financial statements do not contain a provision for income taxes.
(f) Advertising Costs
Advertising costs are expensed as incurred.
10
<PAGE>
BBG NEW MEDIA
Notes to Financial Statements
(continued)
<TABLE>
<CAPTION>
<S> <C>
(2) Property and Equipment
Property and equipment consists of the following at December 31, 1996:
Production equipment $ 714,320
Furniture and fixtures 161,209
Office equipment 114,409
Automobiles 91,692
-------------
1,081,630
Less accumulated depreciation (523,022)
Property and equipment, net $ 558,608
=============
(3) Long-Term Debt
Long-term debt at December 31, 1996 consists of the following:
Prime+1% (9.25% at December 31, 1996) term loan with bank, with
monthly principal payments of $5,417 through May 2000;
secured by all assets of the Company. $ 222,084
Less current installments 65,000
Long-term debt, excluding current installments $ 157,084
===========
</TABLE>
Maturities of long-term debt, excluding the long-term portion of the
line of credit (note 4), at December 31, 1996 for each of the next
four years, are as follows:
1997 $ 65,000
1998 65,000
1999 65,000
2000 27,084
-----------
$ 222,084
(4) Line of Credit
In July 1995, BBG secured a $100,000 line of credit with a bank to be
used for working capital and equipment purchases. Interest accrued
monthly at prime plus 1.5% per annum on outstanding borrowings. This
line of credit was paid off in May 1996.
11
<PAGE>
BBG NEW MEDIA
Notes to Financial Statements
(continued)
In September 1996, BBG secured a $200,000 working capital line of
credit and a $300,000 capital expenditures line of credit. Both lines
expire on May 31, 1997. Interest accrues monthly at prime plus 1%
(9.25% at December 31, 1996) on the working capital line and prime
plus 1% (9.25% at December 31, 1996) on the capital expenditures
line. On March 31, 1997, the outstanding balance on the capital
expenditure line of credit was transferred to a term loan to be paid
over forty-eight months requiring equal monthly payments principal of
and interest. As a result, the financial statements at December 31,
1996 reflect a portion of the capital expenditure line of credit as
long-term. Balances on the working capital line of credit and capital
expenditure line of credit at December 31, 1996 were $150,000 and
$175,863, respectively.
(5) Lease Commitments
In January 1995, the Company signed a lease with monthly rent of
$8,666 for the first year. In March 1996 and September 1996, the
Company expanded its office facilities increasing its monthly rent to
$18,391. In addition to base rent, the Company is responsible for
utilities and maintenance and any increase in real estate taxes. Base
rent is subject to annual adjustment based on the Consumer Price
Index. Rent expense for 1996 was $146,000.
In October 1996, the Company entered into a lease for telephone
equipment, with monthly rentals of $788. This lease, which expires in
2001 has been classified as capital lease.
Future minimum payments under all operating and capital leases are as
follows:
Capital Operating
Leases Leases
------- ---------
1997 $ 9,450 $ 285,680
1998 9,450 285,680
1999 9,450 11,903
2000 9,450 -
2001 5,513 -
-------- ----------
Total minimum lease payments $ 43,313 $ 583,263
=========
Less amounts representing interest 3,490
Present value of minimum lease payments 39,823
Less current installments of obligations under
capital lease 6,859
--------
Obligations under capital leases,
excluding current portion $ 32,964
=========
12
<PAGE>
BBG NEW MEDIA
Notes to Financial Statements
(Continued)
(6) Discontinued Operations
In November 1996, the Company's hardware and supplies business was
distributed to the stockholders and subsequently operated as a
separate company. The transaction was effected by a noncash dividend
of $42,710 comprised principally of computer equipment and related
supplies which had been expensed by the Company. The results of
operations of the hardware and supplies business during 1996 prior to
the distribution were:
Revenues $ 1,914,423
Cost of revenues 1,538,212
-------------
Gross profit $ 376,211
=============
Operating income $ 204,635
=============
The financial position and results of operations of the new company have
not been included in these financial statements.
13
<PAGE>
BBG NEW MEDIA
CONDENSED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30,
1997
Assets
Current assets:
Cash $ 5,933
Accounts receivable, less allowance for doubtful accounts
of $10,000
964,767
Prepaid expenses 26,092
--------------
Total current assets 996,792
Deposits 40,700
Property and equipment, net 664,791
===============
Total assets $ 1,702,283
===============
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of capital lease obligation $ 5,705
Current installments of long-term debt 107,161
Line of credit 365,263
Accounts payable 195,202
Accrued expenses 169,033
----------------
Total current liabilities 842,364
Long-term liabilities:
Capital lease obligation, excluding current installments 25,123
Long-term portion of line of credit 218,103
-----------------
Total liabilities 1,085,590
-----------------
Commitments
Stockholders' equity:
Common stock, no par value. Authorized 3,000 shares;
issued and outstanding 2,400 shares 50,000
Retained earnings 566,693
-----------------
Total stockholders' equity 616,693
-----------------
Total liabilities and stockholders' equity $ 1,702,283
=================
See accompanying notes to unaudited condensed financial statements
14
<PAGE>
BBG NEW MEDIA
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Nine months ended September 30,
------------------------------------
1997 1996
------------------ --------------
Revenues $ 3,721,804 $ 2,971,614
Cost of revenues 2,415,564 1,613,221
------------------ --------------
Gross profit 1,306,240 1,358,393
Operating expenses:
Sales and marketing 584,323 506,685
General and administrative 461,494 673,586
------------------ --------------
Operating income from continuing
operations 260,423 178,122
Interest expense 41,216 22,125
------------------ --------------
Income from continuing operations 219,207 155,997
------------------ --------------
Income from discontinued operations - 193,424
------------------ --------------
Net income $ 219,207 $ 349,421
================== ==============
See accompanying notes to unaudited condensed financial statements
15
<PAGE>
BBG NEW MEDIA
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
----------------- ----- ------------------
1997 1996
----------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 219,207 $ 349,421
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 108,000 98,585
Bad debt expense - 3,770
Changes in operating assets and liabilities:
Accounts receivable (179,520) (537,794)
Accounts payable and accrued expenses (48,539) 162,359
Other assets and liabilities (3,739) (16,628)
-------------- ---------------
Net cash provided by operating activities 95,409 59,713
-------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment (213,590) (292,660)
Deposits (4,600) (16,200)
-------------- ---------------
Net cash used by investing activities (218,190) (308,860)
-------------- ---------------
Cash flow from financing activities:
Payments on capital lease obligations (8,995) (590)
Net proceeds from lines of credit 215,263 537,872
Principal payments on bank loans (72,682) (221,582)
Payment of dividends (40,000) (241,000)
-------------- ---------------
Net cash provided by financing activities 93,586 74,700
-------------- ---------------
Net decrease in cash (29,195) (174,447)
Cash, beginning of period 35,128 81,279
============== ===============
Cash, end of period $ 5,933 $ (93,168)
============== ===============
Supplemental cash flow information:
Cash paid during period for:
Interest $ 41,216 $ 22,763
Taxes - 650
</TABLE>
See accompanying notes to unaudited condensed financial statements
16
<PAGE>
BBG NEW MEDIA
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Financial Statements
The accompanying condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and do not include all of the information and note disclosures
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, such condensed financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the Company's operations for the nine month periods
ended September 30, 1997 and 1996. The results of operations for the nine month
period ended September 30, 1997 may not be indicative of the results that may be
expected for any other period.
Note 2 - Subsequent events
DISCONTINUED OPERATIONS
In November 1996, the Company's hardware and supplies business was
distributed to the stockholders and subsequently operated as a separate company.
The transaction was effected by a noncash dividend of $42,710 comprised
principally of computer equipment and related supplies which had been expensed
by the Company. The results of operations of the hardware and supplies business
for the nine months ended September 30, 1996 prior to the distribution were:
Revenues $ 1,758,387
Cost of revenues 1,410,226
-------------
Gross profit 348,161
=============
Operating income $ 193,424
=============
The financial position and results of operations of the new company have
not been included in these financial statements.
17
<PAGE>
BBG NEW MEDIA
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 2 - Subsequent events (continued)
ACQUISITION BY THINK
Effective as of November 3, 1997, THINK New Ideas, Inc. (the "THINK"),
a Delaware corporation, acquired all of the issued and outstanding shares of
capital stock of BBG New Media, Inc. (the "Company") pursuant to the terms of
the Agreement and Plan of Merger, dated November 3, 1997 (the "Agreement").
In exchange for all of the capital stock of the Company, THINK: (a)
issued an aggregate of 303,334 shares of its common stock, par value $.0001 per
share (the "Common Stock"); and (b) paid $175,000 in cash to the former
stockholders of the Company at the closing. Additional consideration of up to
$4,550,000 is contingent upon the Company meeting certain sales targets, as
defined, during the period between November 1, 1998 and October 31, 1999. In
connection with the Agreement, THINK repaid approximately $548,000 in
outstanding debt of the Company.
18
<PAGE>
THINK NEW IDEAS, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
Effective as of November 3, 1997, THINK New Ideas, Inc. (the "Company")
acquired all of the issued and outstanding shares of capital stock of BBG New
Media, Inc. ("BBG"), a Massachusetts corporation engaged in the business of
producing new media and interactive business solutions via the Internet,
Intranet, online computer presentations, CD-rom and kiosks, pursuant to the
terms of the Agreement and Plan of Merger, dated November 3, 1997 (the
"Agreement"). A copy of the Agreement was filed on Form 8-K on November 14, 1997
and is incorporated herein by reference.
In exchange for all of the capital stock of BBG, the Company: (a)
issued an aggregate of 303,334 shares of the Company's common stock, par value
$.0001 per share (the "Common Stock"); and (b) paid $175,000 in cash to the
former stockholders of BBG at the closing. Additional consideration of up to
$4,550,000 is contingent upon BBG meeting certain sales targets, as defined,
during the period between November 1, 1998 and October 31, 1999. In connection
with the Agreement, THINK repaid approximately $548,000 in outstanding debt of
BBG.
The unaudited pro forma condensed consolidated financial statements
give effect to the acquisition by THINK New Ideas, Inc. (the "THINK") of BBG New
Media, Inc. ("BBG") using the purchased method of accounting. The pro forma
condensed consolidated balance sheet assumes that the acquisition of BBG took
place on September 30, 1997 and combines THINK's September 30, 1997 consolidated
balance sheet with BBG's September 30, 1997 Balance Sheet. The pro forma
condensed consolidated statement of operations for the three months ended
September 30, 1997 assumes that the acquisition of BBG took place as of the
beginning of the period and combines THINK's condensed consolidated statement of
operations for the three months ended September 30, 1997 with BBG's condensed
statement of operations for the three months ended September 30, 1997. The pro
forma condensed consolidated statement of operations for the year ended June 30,
1997 assumes that the acquisition of BBG took place as of the beginning of the
period and combines THINK's consolidated statement of operations for the year
ended June 30, 1997 with BBG's condensed statement of operations for the year
ended June 30, 1997.
The unaudited pro forma condensed consolidated financial information
should be read in conjunction with the historical consolidated financial
statements and the related notes thereto of THINK included in THINK's report on
10-KSB dated October 3, 1997.
The pro forma condensed consolidated financial information is unaudited
and is not necessarily indicative of the consolidated results which actually
would have occurred if the above transaction had been consummated at the
beginning of the periods presented, nor does it purport to present the future
financial position and results of operations for future periods.
19
<PAGE>
THINK NEW IDEAS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Pro forma
Adjustments
THINK BBG (Note 1) Pro forma
-------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,585,966 $ 5,933 $ (594,326) (a,b,c) $ 4,997,573
Marketable securities 250,283 - - 250,283
Accounts receivable, net 15,729,275 964,767 - 16,694,042
Unbilled receivables 4,442,434 - - 4,442,434
Prepaid expenses and other current assets 2,074,557 26,092 - 2,100,649
------------ ----------- ------------ -------------
Total current assets 28,082,515 996,792 (594,326) 28,484,981
Property and equipment, net 2,461,074 664,791 - 3,125,865
Software development costs 97,500 - - 97,500
Goodwill, net 1,199,187 - 3,908,396 (b) 5,107,583
Other assets 353,972 40,700 - 394,672
============ =========== ============ =============
Total assets $ 32,194,248 $ 1,702,283 $ 3,314,070 $ 37,210,601
============ =========== ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,117,265 $ 364,235 $ 747,998 (b) $ 6,229,498
Accrued restructuring costs 501,746 - - 501,746
Deferred revenue 11,889,139 - - 11,889,139
Income taxes payable 40,571 - - 40,571
Due to related party 1,906,513 - - 1,906,513
Current portion of obligations under capital
leases and notes payable 156,867 478,129 (346,849) (a) 288,147
----------- ----------- ------------ -------------
Total current liabilities 19,612,101 842,364 401,149 20,855,614
Obligations under capital leases 233,826 - - 233,826
Note payable to related party 515,760 - - 515,760
Other long-term liability - 243,226 (201,555) (a) 41,671
------------ ----------- ------------ -------------
Total liabilities 20,361,687 1,085,590 199,594 21,646,871
------------ ----------- ------------ -------------
Commitments and contingencies
Shareholders' equity:
Preferred stock - - -
Common stock 662 50,000 (49,970) (b) 692
Additional paid-in capital 19,447,542 - 3,731,139 (b,c) 23,178,681
(Accumulated deficit)/retained earnings (7,615,643) 566,693 (566,693) (7,615,643)
------------ ----------- ------------ -------------
Total shareholders' equity 11,832,561 616,693 3,114,476 15,563,730
------------ ----------- ------------ -------------
Total liabilities and shareholders'
equity $ 32,194,248 $ 1,702,283 $3,314,070 $37,210,601
============ =========== ============ =============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial information
20
<PAGE>
THINK NEW IDEAS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Pro forma
THINK BBG Adjustments Pro Forma
(Note 2)
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 6,956,480 $ 1,159,279 $ - $ 8,115,759
Operating expenses:
Direct salaries and related expenses 3,440,264 754,707 12,500 (c) 4,207,471
Other direct expenses 1,565,687 162,256 - 1,727,943
Selling, general and administrative 1,456,322 219,488 - 1,675,810
Depreciation and amortization 427,595 36,000 32,570 (a) 496,165
------------- ----------- ----------- --------------
Operating income/(loss) 66,612 (13,172) (45,070) 8,370
Interest income/(expense) and other, net (1,197) (14,937) - (16,134)
------------- ----------- ----------- --------------
Income/(loss) before taxes on income 65,415 (28,109) (45,070) (7,764)
Taxes on income 4,580 - - 4,580
============= =========== =========== ==============
Net income/(loss) $ 60,835 $ (28,109) $ (45,070) $ (12,344)
============= =========== =========== ==============
Primary earnings/(loss) per share $ 0.01 $ 0.00
Weighted average shares outstanding (b) 6,151,789 6,455,123
Fully diluted earnings per share $ 0.01 $ 0.00
Weighted average shares outstanding (b) 7,257,489 7,560,823
</TABLE>
See notes to unaudited pro forma condensed consolidated financial information
21
<PAGE>
THINK NEW IDEAS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Pro forma
Adjustments
THINK BBG (Note 2) Pro forma
---------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 17,436,847 $ 4,514,311 $ - $ 21,951,158
Operating expenses:
Direct salaries and related expenses 10,029,004 2,534,351 50,000 (c) 12,613,355
Other direct expenses 4,691,563 779,645 - 5,471,208
Selling, general and administrative expenses 6,842,308 854,514 - 7,696,822
Depreciation and amortization 1,619,104 139,620 130,280 (a) 1,889,004
Restructuring costs 1,732,000 - - 1,732,000
------------- ------------- ------------- --------------
Operating income/(loss) (7,477,132) 206,181 (180,280) (7,451,231)
Interest expense (134,489) (38,931) - (173,420)
Interest income 286,358 - - 286,358
------------- ------------- ------------- --------------
(Loss) income before taxes (7,325,263) 167,250 (180,280) (7,338,293)
Taxes 245,900 - - 245,900
============= ============== ============= ==============
Net income/(loss) $ (7,571,163) $ 167,250 $ (180,280) $ (7,584,193)
============= ============== ============= ==============
Net loss per share $ (1.63) $ (1.53)
Weighted average common and common equivalent
shares outstanding (b) 4,638,337 4,941,671
</TABLE>
See notes to unaudited pro forma condensed consolidated financial information
22
<PAGE>
THINK NEW IDEAS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
Note 1 - Unaudited pro forma condensed consolidated balance sheet
The following adjustments have been reflected in the unaudited pro
forma condensed combined consolidated balance sheet:
(a) To record repayment of credit line borrowings at closing.
(b) To record the allocation of the purchase price to the net assets of BBG as
follows (in thousands):
Value of shares issued $ 3,602,091
Cash paid 175,000
Estimated transaction costs 747,998
-------------
4,525,089
BBG stockholders' equity - September 30, 1997 (616,693)
-------------
Excess of cost over fair value of net
assets acquired $ 3,908,396
=============
The actual allocation of the purchase price will depend upon the composition of
BBG's net assets on the closing date and the Company's evaluation of the fair
value of such net assets as of such date. Consequently, the ultimate allocation
of purchase price could differ from that presented above.
(c) To record the automatic vesting and exercising, in connection with the
Agreement, of BBG stock options held by BBG employees in the amount of
$129,078.
Note 2 - Unaudited Condensed Consolidated Statement of Operations for the three
months ended September 30,1997 and year ended June 30, 1997
The following adjustments have been reflected in the unaudited pro forma
condensed combined consolidated statement of operations:
(a) To record amortization of goodwill over an estimated life of 30 years.
(b) Weighted average shares outstanding have been adjusted to reflect as
outstanding for the periods presented, 303,334 shares of THINK common
stock issued in connection with the acquisition.
23
<PAGE>
(c) To reflect the increase in salary provided to officers of BBG in accordance
with their employment contracts which were created as a result the
Agreement.
24
<PAGE>
SIGNATURES
Pursuant to the Agreements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THINK NEW IDEAS, INC.
(Registrant)
Date: January 16, 1998 By: /s/ Melvin Epstein
------------------
Melvin Epstein, Chief Financial Officer
EXHIBIT 2.02
<PAGE>
November 3, 1997
THINK New Ideas, Inc.
45 West 36th Street, 12th Floor
New York, NY 10018
Attn: Ronald E. Bloom, President
Dear Gentlemen:
Reference is made to a certain Agreement and Plan of Merger dated as of November
3, 1997 by and among THINK New Ideas, Inc., BBG New Media, Inc. (the "Company")
and Daniel McCartney and Joseph Nicholson, as sole stockholders of the Company
(the "Merger Agreement").
Pursuant to Section 1.2 of the Merger Agreement, it is hereby agreed by the
parties that Base Sales, as used therein, shall consist of revenues of the
Company derived from its interactive media services, traditional digital imaging
services and courier services for the period from July 1, 1996 through June 30,
1997.
Revenue shall be defined as follows: Amounts receivable from clients, exclusive
of sales related taxes, in respect of advertising placed, production work and
fees. Revenue in respect of advertising placed is recognized on firm commitment
of media time. Revenue in respect of production work is recognized on the basis
of percentage of completion of the work based on estimate of time to complete.
Revenue in respect of fees is recognized over the period of the related client
assignment.
It is further agreed by the parties that Base Sales for such period are
$4,540,000 for purposes of this letter Agreement and the Merger Agreement.
Sincerely,
BBG New Media, Inc.
By: /s/ Daniel McCartney
-------------------------------------------
Daniel McCartney, Stockholder
/s/ Joseph Nicholson
-------------------------------------------
Joseph Nicholson, Stockholder
Acknowledged & Agreed:
THINK New Ideas, Inc.
By: /s/ Ronald Bloom
--------------------------
