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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) December 22, 2000
Modem Media, Inc.
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
Delaware 0-21935 06-1464807
<CAPTION>
(State or other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation)
</TABLE>
230 East Avenue, Norwalk, Connecticut 06855
(Address of Principal Executive Officers) (Zip Code)
(203) 299-7000
(Registrant's telephone number, including area code)
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This Form 8-K/A amends the Form 8-K filing made on December 22, 2000
Item 2. Acquisition or Disposition of Assets
On December 22, 2000, Modem Media, Inc. sold 8,332,000 shares of preferred
stock of CentrPort, Inc. owned by Modem Media to a venture capital group
including Thomas Weisel Capital Partners, Venture Strategy Partners, Trident
Capital, Wheatley Partners and Draper Richards (the "Investor Group") for an
aggregate purchase price of $5 million in cash, of which $2.5 million was paid
to Modem Media at closing, and the remainder of which is payable to Modem
Media, subject to certain conditions, on December 21, 2001. Concurrently with
this sale, CentrPort issued 36,660,800 shares of preferred stock to the
Investor Group for an aggregate purchase price of $22 million in cash, of which
$16.5 million was paid to CentrPort at closing and the remainder is payable to
CentrPort, subject to certain conditions, on December 21, 2001. As a result of
these transactions, Modem Media's ownership in CentrPort was reduced from
approximately 60% to approximately 15.2% of the equity of CentrPort, below the
level required to consolidate CentrPort's financial results with those of Modem
Media.
In connection with these transactions, Modem Media received warrants to
purchase additional common stock representing 391,604 shares of CentrPort for
an exercise price of $.600096 per share. In addition, Modem Media can earn
warrants to purchase additional common stock representing up to 2,349,624
shares of CentrPort for an exercise price ranging between $.750120 and $.900144
per share, if certain performance targets are achieved by Modem Media. Modem
Media will not, however, be obligated to provide funding to CentrPort or
purchase additional debt or equity securities of CentrPort.
The transaction documents provide that CentrPort will be Modem Media's
preferred vendor for the type of products provided by CentrPort and require
Modem Media to resell $5 million of CentrPort's products and services during
2001. If Modem Media does not meet its commitment, it must pay such difference
to CentrPort in cash or CentrPort stock, at Modem Media's election. If certain
resale targets are met, the Investor Group will be required to pay an
additional $0.7 million to Modem Media on March 31, 2002. The Investor Group
will not be required to make any payment on December 21, 2001 under certain
circumstances if Modem Media undergoes certain changes in control prior to such
date.
Immediately prior to the closing of the transactions described above on
December 22, 2000, CentrPort, Inc., which was previously organized as a limited
liability company, was reorganized as a Delaware corporation.
Item 5. Other Events
On December 22, 2000, Modem Media filed a Form 8-K with the Securities
Exchange Commission announcing the completion of a series of transactions that
provide funds to the Company and its former subsidiary, CentrPort, which
resulted in a reduction in the Company's equity ownership in CentrPort, Inc.
Concurrently, a press release issued by the Company was attached as an
exhibit to that Form 8-K, disclosing the CentrPort transaction and commenting
on the Company's fourth quarter revenue information and the financial outlook
for 2001.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
Unaudited Pro Forma Condensed Consolidated Financial Statements as of
and for the nine months ended September 30, 2000 and for the year ended
December 31, 1999
2
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MODEM MEDIA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Introduction
The following unaudited pro forma condensed consolidated financial
statements are presented to give effect to certain transactions completed by
Modem Media, Inc. ("Modem Media") that provided for the financing of, and sale
of a portion of its ownership in, CentrPort, Inc. ("CentrPort"), formerly a
majority-owned subsidiary. A venture capital group, consisting of Thomas
Weisel Capital Partners, Venture Strategy Partners, Trident Capital, Draper
Richards and Wheatley Partners (hereinafter collectively referred to as the
"Investor Group"), purchased a portion of Modem Media's ownership in CentrPort
in exchange for (a) $2.5 million in cash, (b) a $2.5 million note due one year
from the date of purchase, subject to certain conditions, and (c) a warrant to
purchase 391,604 shares of CentrPort common stock. Concurrently with such
purchase, the Investor Group agreed to invest up to $22.0 million directly
into CentrPort in exchange for newly issued preferred stock, of which $16.5
million was paid at closing and the remainder is payable to CentrPort one year
from the closing date, subject to certain conditions. In addition, Modem Media
purchased common stock of CentrPort from certain minority shareholders in
exchange for approximately $1.9 million (315,858 shares) of Modem Media common
stock. The purchase by the Investor Group of a portion of Modem Media's
ownership in CentrPort, the investment by the Investor Group directly into
CentrPort, and the purchase by Modem Media of CentrPort common stock from
certain minority shareholders, are hereinafter collectively referred to as the
"Transactions". As a result of the Transactions, Modem Media's ownership in
CentrPort was reduced to approximately 15.2%. Modem Media will account for
CentrPort under the cost method of accounting from the date of the
Transactions.
The unaudited pro forma condensed consolidated balance sheet of Modem Media
as of September 30, 2000 presents the pro forma financial position of Modem
Media assuming that the Transactions had occurred on September 30, 2000. The
unaudited pro forma condensed consolidated statements of operations of Modem
Media for the nine months ended September 30, 2000 and the year ended December
31, 1999 present the pro forma results of operations of Modem Media assuming
that the Transactions had occurred on January 1, 1999. The unaudited pro forma
condensed consolidated financial statements are presented for informational
purposes only and do not purport to be indicative of the results that would
have actually occurred had the Transactions taken place on the dates indicated
or that may be obtained in the future. The unaudited pro forma condensed
consolidated financial statements have been derived from, and should be read
in conjunction with, the historical consolidated financial statements of Modem
Media, including the notes thereto. Those financial statements are included in
Modem Media's Quarterly Report on Form 10-Q for the quarter ended September
30, 2000 and its Annual Report on Form 10-K for the year ended December 31,
1999.
3
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MODEM MEDIA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2000
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
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<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...... $ 26,444,000 $ 2,500,000 (b) $ 28,943,000
(1,000)(a)
Short-term investments......... 143,000 143,000
Accounts receivable, net....... 27,220,000 (550,000)(a) 26,670,000
Unbilled revenues.............. 6,613,000 6,613,000
Deferred income taxes.......... 1,423,000 1,423,000
Note receivable................ -- 2,358,000 (b) 2,358,000
Prepaid expenses and other
current assets................ 5,309,000 (88,000)(a) 5,221,000
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Total current assets......... 67,152,000 71,371,000
Noncurrent assets:
Property and equipment, net.... 21,925,000 (1,634,000)(a) 20,291,000
Goodwill, net.................. 108,799,000 108,799,000
Deferred income taxes.......... 4,296,000 4,296,000
Other assets................... 6,367,000 783,000 (a) 7,461,000
(2,478,000)(b)
925,000 (c)
1,864,000 (d)
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Total noncurrent assets...... 141,387,000 140,847,000
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Total assets................. $ 208,539,000 $ 212,218,000
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable............... $ 6,141,000 (97,000)(a) $ 6,044,000
Pre-billed media............... 7,134,000 7,134,000
Advance billings............... 4,760,000 4,760,000
Deferred revenues.............. 5,137,000 5,137,000
Due to related party........... -- 22,000 (a) 22,000
Deferred gain on sale.......... -- 2,380,000 (b) 2,380,000
Accrued expenses and other
current liabilities........... 21,074,000 (1,197,000)(a) 19,877,000
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Total current liabilities.... 44,246,000 45,354,000
Other liabilities.............. 2,345,000 (119,000)(a) 2,226,000
Stockholders' equity:
Preferred stock, $.001 par
value, 5,000,000 shares
authorized, none issued and
outstanding................... -- --
Common stock, $.001 par value,
145,000,000 shares authorized,
25,061,309 issued............. 25,000 25,000
Paid-in capital................ 185,325,000 (99,000)(a) 188,015,000
925,000 (c)
1,864,000 (d)
Accumulated deficit............ (21,121,000) (21,121,000)
Treasury stock, 197,849 shares
of common stock, at cost...... (1,191,000) (1,191,000)
Accumulated other comprehensive
income........................ (1,090,000) (1,090,000)
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Total stockholders' equity... 161,948,000 164,638,000
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Total liabilities and
stockholders' equity........ $ 208,539,000 $ 212,218,000
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</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
4
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MODEM MEDIA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2000
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
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<S> <C> <C> <C>
Revenues....................... $ 99,150,000 $ (856,000)(e) $ 98,294,000
Cost of revenues............... 51,338,000 (2,797,000)(e) 48,541,000
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Gross profit................... 47,812,000 49,753,000
Operating expenses:
Sales and marketing.......... 4,486,000 (616,000)(e) 3,870,000
General and administrative... 42,591,000 (1,510,000)(e) 41,081,000
Write-off of offering-related
costs....................... 722,000 722,000
Amortization of goodwill..... 11,274,000 11,274,000
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Total operating expenses... 59,073,000 56,947,000
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Operating loss................. (11,261,000) (7,194,000)
Interest income, net........... 1,408,000 2,000 (e) 1,642,000
232,000 (f)
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Loss before income taxes....... (9,853,000) (5,552,000)
Provision for income taxes..... 2,664,000 1,785,000 (g) 4,449,000
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Net loss....................... $(12,517,000) $(10,001,000)
============ ============
Net loss per share:
Basic........................ $ (0.52) $ (0.41)
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Diluted...................... $ (0.52) $ (0.41)
============ ============
Weighted-average number of
common shares outstanding:
Basic........................ 24,266,000 24,582,000 (h)
============ ============
Diluted...................... 24,266,000 24,582,000 (h)
============ ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
5
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MODEM MEDIA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
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<S> <C> <C> <C>
Revenues............................ $74,036,000 $74,036,000
Cost of revenues.................... 32,991,000 (776,000)(i) 32,215,000
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Gross profit........................ 41,045,000 41,821,000
Operating expenses:
Sales and marketing............... 1,658,000 (163,000)(i) 1,495,000
General and administrative........ 29,683,000 (233,000)(i) 29,450,000
Amortization of goodwill.......... 2,959,000 2,959,000
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Total operating expenses........ 34,300,000 33,904,000
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Operating income.................... 6,745,000 7,917,000
Interest income, net................ 1,975,000 292,000 (j) 2,267,000
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Income before income taxes.......... 8,720,000 10,184,000
Provision for income taxes.......... 5,703,000 608,000 (k) 6,311,000
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Net income.......................... $ 3,017,000 $ 3,873,000
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Net income per share:
Basic............................. $ 0.14 $ 0.18
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Diluted........................... $ 0.13 $ 0.17
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Weighted-average number of common
shares outstanding:
Basic............................. 21,563,000 21,879,000(l)
=========== ===========
Diluted........................... 22,958,000 23,274,000(l)
=========== ===========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
6
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MODEM MEDIA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet of Modem Media
as of September 30, 2000 presents the pro forma financial position of Modem
Media assuming that the Transactions had occurred on September 30, 2000. The
unaudited pro forma condensed consolidated statements of operations of Modem
Media for the nine months ended September 30, 2000 and the year ended December
31, 1999 present the pro forma results of operations of Modem Media assuming
that the Transactions had occurred on January 1, 1999.
The unaudited pro forma condensed consolidated balance sheet and statement
of operations as of and for the nine months ended September 30, 2000 have been
derived from the respective unaudited financial statements of Modem Media and
CentrPort. The unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1999 has been derived from the
audited financial statements of Modem Media, which include the results of
CentrPort.
Unaudited Pro Forma Adjustments
Descriptions of the adjustments included in the unaudited pro forma
condensed consolidated financial statements are as follows:
Balance Sheet Adjustments
(a) Represents the deconsolidation of CentrPort from Modem Media as if the
Transactions had occurred on September 30, 2000
(b) Represents the effects of Modem Media's sale of a portion of its
ownership in CentrPort to the Investor Group
(c) Represents the increase in Modem Media's investment in CentrPort as a
result of cash invested directly into CentrPort by the Investor Group
(d) Represents the purchase by Modem Media of additional interests in
CentrPort from certain minority shareholders through the issuance of
Modem Media common stock
Statement of Operations Adjustments for the Nine Months Ended September 30,
2000
(e) Represents the elimination of CentrPort's revenues and expenses during
the nine months ended September 30, 2000 as if the Transactions had
occurred on January 1, 1999
(f) Represents interest income that would have been earned by Modem Media
on the proceeds received from the Transactions as if the Transactions
had occurred on January 1, 1999
(g) Represents the income tax effects of the foregoing adjustments
(h) Represents the weighted-average number of common shares outstanding for
the period presented after giving effect to the Transactions
Statement of Operations Adjustments for the Year Ended December 31, 1999
(i) Represents the elimination of CentrPort's revenues and expenses during
the year ended December 31, 1999 as if the Transactions had occurred
on January 1, 1999
(j) Represents interest income that would have been earned by Modem Media
on the proceeds received from the Transactions as if the Transactions
had occurred on January 1, 1999
(k) Represents the income tax effects of the foregoing adjustments
(l) Represents the weighted-average number of common shares outstanding for
the period presented after giving effect to the Transactions
7
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(c) Exhibits
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<C> <S>
2.1 Stock Purchase Agreement, dated as of December 22, 2000, among CentrPort,
Inc., Modem Media, Inc. and the Investors named therein.
</TABLE>
8
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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.
Modem Media, Inc.
/s/ Sloane Levy
Name: Sloane Levy
Title: Vice President, General
Counsel and Corporate Secretary
Dated: January 5, 2001
9
