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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
April 9, 1999
Date of Report (Date of earliest event reported)
MEMBERWORKS INCORPORATED
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(Exact name of registrant as specified in its charter)
DELAWARE 0-21527 06-1276882
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(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
9 West Broad Street
Stamford, Connecticut 06902
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(Address of principal executive offices) (Zip Code)
(203) 324-7635
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(Registrant's telephone number,
including area code)
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MEMBERWORKS INCORPORATED
INDEX TO FORM 8-K
ITEM 5. OTHER EVENTS AND EXHIBITS.
On April 9, 1999, pursuant to an Agreement and Plan of Reorganization dated as
of April 9, 1999, MemberWorks Incorporated, (the "Registrant"), a Delaware
Corporation, consummated a merger (the "Quota-Phone Merger") whereby QP
Acquisition Corp., a New York corporation and wholly-owned subsidiary of
MemberWorks, was merged with and into Quota-Phone, Inc., a New York corporation
( "Quota-Phone"), with Quota-Phone surviving the merger as a wholly owned
subsidiary of the Registrant. Quota-Phone is a privately held wholesale provider
of discount shopping services and "no-expiration" coupon programs to a range of
financial services and network marketing companies.
In the Quota-Phone Merger, which has been accounted for as a purchase for
financial accounting and reporting purposes, 100 shares of common stock, no par
value, of Quota-Phone ("Quota-Phone Stock") issued and outstanding immediately
prior to the effective time of the Quota-Phone Merger (the "Quota-Phone
Effective Time") were exchanged for (i) $7,750,000 in cash; and (ii) 41,666
shares of common stock of the Registrant (having an aggregate market value on
the date of issuance of approximately $1,500,000).
The consideration received by holders of Quota-Phone Stock in the Quota-Phone
Merger and the other material terms of the Quota-Phone Agreement and related
transaction documents were determined by arms-length negotiations between the
Registrant and Quota-Phone.
Exhibits.
The following exhibits are included as part of this report:
99.1 Press release of Registrant, dated April 12, 1999.
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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.
MEMBERWORKS INCORPORATED
(Registrant)
Date: April 27, 1999 By: /s/ Gary A. Johnson
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Gary A. Johnson, President and
Chief Executive Officer
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EXHIBIT 99.1
FOR FURTHER INFORMATION CONTACT
James B. Duffy
Senior Vice President and Chief Financial Officer
MemberWorks Incorporated
9 West Broad Street
Stamford, CT 06902
(203) 324-7635
FOR IMMEDIATE RELEASE
MEMBERWORKS ACQUIRES QUOTA-PHONE
Acquisition Expands MemberWorks Wholesale Product Offering
STAMFORD, Connecticut, April 12, 1999 - MemberWorks Incorporated (Nasdaq: MBRS),
a leading provider of innovative membership programs, announced today that it
has acquired Quota-Phone, Inc., a privately-held wholesale provider of
nationwide discount shopping services.
Quota-Phone, Inc. adds a broad portfolio of wholesale consumer products and
services and a nationwide membership base of over three million members to
MemberWorks. In addition, Quota-Phone brings established relationships with
financial institutions and affinity groups, among others, to MemberWorks growing
roster of client partners. The acquisition will expand MemberWorks current
wholesale and MemberLink offerings.
"Quota-Phone fits perfectly with our strategy of delivering high-value
membership-based direct marketing solutions," said Gary Johnson, President and
CEO of MemberWorks. "Quota-Phone broadens our product reach and provides a
cost-effective means of delivering a wide variety of products and services.
Their 17-year history of offering successful marketing solutions is a strong
addition to the MemberWorks family."
Barry Lewisohn, President of Quota-Phone, Inc. added, "I believe that
Quota-Phone's synergy with MemberWorks and the ability to tap into their
well-developed infrastructure will allow Quota-Phone to significantly expand its
client and customer base as well as add to our already broad product line."
MemberWorks paid $9.25 million in cash and MemberWorks stock for all of the
equity of Quota-Phone. The transaction will be accounted for as a purchase.
Quota-Phone, located in White Plains, New York, will operate as an independent,
wholly owned subsidiary of MemberWorks.
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MemberWorks reported on October 8, 1998, that the SEC staff's review of its
revenue recognition practices was completed in connection with the reporting of
its operations for fiscal 1998 and the SEC staff had not objected to the
Company's decision to presently continue to follow the revenue recognition
practices consistently followed since its initial public offering in 1996. As
the Company reported in its Annual Report for 1998, the SEC issued a press
release on September 28, 1998 stating that the "SEC will formulate and augment
new and existing accounting rules and interpretations covering revenue
recognition, restructuring reserves, materiality, and disclosure;" for all
publicly-traded companies. Until such time as the SEC staff issues such
interpretative guidelines, it is unclear what, if any, impact such
interpretative guidance will have on the Company's current accounting practices.
However, the potential changes in accounting practice being considered by the
SEC staff could have a material impact on the manner in which the Company
recognizes revenue. Any such changes would have no effect on reported cash flow
or the economic value of the Company's memberships.
Certain matters discussed in the news release are forward-looking statements, as
defined in the Private Securities Litigation Reform Act of 1995. These
statements include statements regarding intent, belief or current expectations
of the Company and its management. You are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties that may cause the Company's actual results
to differ materially from the results discussed in the forward-looking
statements. Among the factors that could cause actual results to differ
materially from those indicated by such forward-looking statements are:
uncertainty as to new and existing accounting rules and interpretations;
uncertainty as to the Company's future profitability; the Company's ability to
develop and implement operational and financial systems to manage rapidly
growing operations; competition in the Company's existing and potential future
lines of business; the Company's ability to integrate and operate successfully
acquired businesses and the risks associated with such businesses; the Company's
ability to obtain financing on acceptable terms to finance the Company's growth
strategy and for the Company to operate within the limitation imposed by
financial arrangements; uncertainty as to the future profitability of acquired
businesses; the ability of the Company and its vendors to complete the necessary
actions to achieve a Year 2000 conversion for its computer systems and
applications; and other factors. Other factors and assumptions not identified
above were also involved in the derivation of these forward-looking statements,
and the failure of such other assumptions to be realized as well as other
factors may also cause actual results to differ materially from those projected.
The Company assumes no obligation to update these forward-looking statements to
reflect actual results, changes in assumptions or changes in other factors
affecting such forward-looking statements.
Headquartered in Stamford, Connecticut, MemberWorks Incorporated is a leading
provider of innovative membership programs. MemberWorks offers its programs to
increasingly sophisticated consumers seeking economy, efficiency and convenience
in their purchase of products and services. As of March 31, 1999, there were
approximately five million members enrolled in the Company's programs.
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