<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 1998
------------------
BROADCAST.COM INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 000-24591 75-2600532
- --------------------------- ---------- -------------------
State or Other Jurisdiction Commission (IRS Employer
of Incorporation File Number Identification No.)
2914 Taylor Street
Dallas, Texas 75226
- ---------------------------------------- ----------------------
(Address of Principal Executive Offices) Zip Code
Registrant's telephone number, including area code: (214) 748-6660
-------------------------
Not Applicable.
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
This 8-K/A filing amends an 8-K filed on December 15, 1998. Item 7 is
hereby amended to state as follows:
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
(A) The following financial statements of the business acquired are
filed herewith:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(i) Report of Independent Accountants 1
(ii) Balance Sheets at December 31, 1996 and 1997 and at
September 30, 1998 (unaudited) 2
(iii) Statements of Operations for the period from March 1, 1996
(Inception) to December 31, 1996, for the year ended
December 31, 1997 and the nine months ended September 30,
1997 (unaudited) and September 30, 1998 (unaudited) 3
(iv) Statements of Stockholders' Deficit for the period from
March 1, 1996 (Inception) to December 31, 1996, for the
year ended December 31, 1997 and the nine months ended
September 30, 1998 (unaudited) 4
(v) Statements of Cash Flows for the period from March 1, 1996
(Inception) to December 31, 1996, for the year ended
December 31, 1997 and the nine months ended September 30,
1997 (unaudited) and September 30, 1998 (unaudited) 5
(vi) Notes to Financial Statements 6
</TABLE>
(B) Pro Forma financial statements (unaudited)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(i) Pro Forma Balance Sheet at December 31, 1996 P-1
(ii) Pro Forma Balance Sheet at December 31, 1997 P-2
(iii) Pro Forma Balance Sheet at September 30, 1998 P-3
(iv) Pro Forma Statements of Operations for the year ended
December 31, 1996 P-4
(v) Pro Forma Statements of Operations the year ended December
31, 1997 P-5
(vi) Pro Forma Statements of Operations for the nine months
ended September 30, 1997 P-6
(vii) Pro Forma Statements of Operations for the nine months
ended September 30, 1998 P-7
(viii) Notes to Pro Forma Financial Statements P-8
</TABLE>
(C) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of November 16, 1998,
by and among broadcast.com inc., SN Acquisition, Inc. and Simple
Network Communications, Inc.
23.1 Consent of PricewaterhouseCoopers LLP
99.1 Press Release dated December 1, 1998
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
broadcast.com inc.
In our opinion, the accompanying balance sheets and the related statements of
operations and stockholders' deficit and of cash flows present fairly, in all
material respects, the financial position of Simple Network Communications, Inc.
at December 31, 1996 and 1997, and the results of its operations and its cash
flows for the period from March 1, 1996 (Inception) to December 31, 1996 and for
the year ended December 31, 1997 in conformity with generally accepted
accounting principles. 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 audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The accompanying balance sheet of Simple Network Communications, Inc. as of
September 30, 1998, and the related statements of operations and stockholders'
deficit and of cash flows for the nine month periods ended September 30, 1997
and 1998 were not audited by us and, accordingly, we do not express an opinion
on them.
PricewaterhouseCoopers LLP
Dallas, Texas
January 19, 1999
-1-
<PAGE> 4
SIMPLE NETWORK COMMUNICATIONS, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,741 $ 3,651 $ 83,296
Prepaid expenses 1,000 27,418 46,492
------------ ------------ ------------
Total current assets 3,741 31,069 129,788
Property and equipment, net 127,540 1,258,380 1,643,740
Other assets 1,179 119,774 184,096
------------ ------------ ------------
Total assets $ 132,460 $ 1,409,223 $ 1,957,624
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 38,639 $ 469,367 $ 721,600
Accrued liabilities 10,299 68,918 101,198
Deferred revenue 57,679 272,208 384,300
Income tax payable 24,571 -- --
Loans from stockholders, current portion (Note 8) 4,909 -- --
Notes payable, current portion -- -- 143,654
Capital lease obligations, current portion -- 382,397 439,979
Line of credit -- -- 86,299
------------ ------------ ------------
Total current liabilities 136,097 1,192,890 1,877,030
------------ ------------ ------------
Loans from stockholders, net of current portion 2,266 -- --
Notes payable, net of current portion -- -- 576,996
Capital lease obligations, net of current portion -- 371,506 408,741
------------ ------------ ------------
Total liabilities 138,363 1,564,396 2,862,767
------------ ------------ ------------
Commitments and contingencies (Notes 5 and 7)
Stockholders' deficit:
Common stock, $.01 par value; 2,000, 2,062
and 2,062 shares authorized, respectively,
2,000 shares issued and outstanding 20 20 20
Additional paid-in capital 2,030 2,030 2,030
Common stock subscribed -- 45,000 45,000
Accumulated deficit (7,953) (202,223) (952,193)
------------ ------------ ------------
Total stockholders' deficit (5,903) (155,173) (905,143)
------------ ------------ ------------
Total liabilities and stockholders' deficit $ 132,460 $ 1,409,223 $ 1,957,624
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 5
SIMPLE NETWORK COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 1, 1996
(INCEPTION) YEAR ENDED NINE MONTHS ENDED
TO DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1997 1997 1998
--------------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Total revenues $ 292,469 $ 2,292,676 $ 1,504,864 $ 3,391,750
Operating expenses:
Operations 114,500 800,999 565,334 1,561,699
Sales and marketing 49,720 783,259 463,427 714,765
General and administrative 89,385 498,424 270,677 990,082
Depreciation and amortization 17,848 287,008 173,248 755,568
----------- ------------ ----------- -----------
Total operating expenses 271,453 2,369,690 1,472,686 4,022,114
----------- ------------ ----------- -----------
Net operating income (loss) 21,016 (77,014) 32,178 (630,364)
Interest and other expenses 4,138 74,004 46,921 119,606
----------- ------------ ----------- -----------
Net income (loss) before
income tax provision 16,878 (151,018) (14,743) (749,970)
----------- ------------ ----------- -----------
Provision for income taxes 24,571 43,252 25,860 --
----------- ------------ ----------- -----------
Net loss $ (7,693) $ (194,270) $ (40,603) $ (749,970)
=========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 6
SIMPLE NETWORK COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
COMMON STOCK ADDITIONAL SUBSCRIBED
--------------------- PAID-IN --------------------- ACCUMULATED
SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT TOTAL
--------- --------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, March 1, 1996 (Inception) -- $ -- $ -- -- $ -- $ -- $ --
Issuance of common stock to stockholders 2,000 20 2,030 -- -- -- 2,050
Net loss -- -- -- -- -- (7,693) (7,693)
Distributions to stockholders -- -- -- -- -- (260) (260)
--------- --------- --------- --------- --------- --------- ---------
Balances, December 31, 1996 2,000 20 2,030 -- -- (7,953) (5,903)
Common stock subscribed -- -- -- 62 45,000 -- 45,000
Net loss -- -- -- -- -- (194,270) (194,270)
--------- --------- --------- --------- --------- --------- ---------
Balances, December 31, 1997 2,000 20 2,030 62 45,000 (202,223) (155,173)
Net loss -- -- -- -- -- (749,970) (749,970)
--------- --------- --------- --------- --------- --------- ---------
Balances, September 30, 1998 (unaudited) 2,000 $ 20 $ 2,030 62 $ 45,000 $(952,193) $(905,143)
========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 7
SIMPLE NETWORK COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 1, 1996 NINE MONTHS ENDED
(INCEPTION) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ----------------------------
1996 1997 1997 1998
-------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,693) $ (194,270) $ (40,603) $ (749,970)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 17,848 287,008 173,248 755,568
Common stock compensation -- 45,000 -- --
Change in operating assets and liabilities:
Prepaid expenses (1,000) (26,418) 1,000 (19,074)
Other assets (1,209) (118,746) (66,817) (64,322)
Accounts payable 38,639 430,728 71,270 252,233
Accrued liabilities 10,299 58,619 28,200 32,280
Deferred revenue 57,679 214,529 138,988 112,092
Income tax payable 24,571 (24,571) (24,571) --
-------------- ------------ ------------ ------------
Net cash provided by operating activities 139,134 671,879 280,715 318,807
-------------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (132,448) (503,296) (139,658) (749,312)
-------------- ------------ ------------ ------------
Net cash used in investing activities (132,448) (503,296) (139,658) (749,312)
-------------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 2,050 -- -- --
Proceeds from line of credit -- -- -- 86,299
Proceeds from notes payable -- -- -- 750,000
Payments on notes payable -- -- -- (29,350)
Proceeds from stockholder loans 4,000 -- -- --
Payments on stockholder loans (9,735) (7,175) (7,175) --
Dividends paid to stockholder (260) -- -- --
Payments on capital lease obligations -- (160,498) (108,517) (296,799)
-------------- ------------ ------------ ------------
Net cash provided by (used in) financing
activities (3,945) (167,673) (115,692) 510,150
-------------- ------------ ------------ ------------
Net increase in cash and cash equivalents 2,741 910 25,365 79,645
Cash and cash equivalents at beginning of period -- 2,741 2,741 3,651
-------------- ------------ ------------ ------------
Cash and cash equivalents at end of period $ 2,741 $ 3,651 $ 28,106 $ 83,296
============== ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during year for:
Income taxes $ -- $ 82,294
============== ============
Interest $ 4,138 $ 73,924
============== ============
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING
AND INVESTING ACTIVITIES:
Property, plant and equipment contributed by stockholder $ 12,910 $ --
============== ============
Capital lease acquisitions $ -- $ 914,104
============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 8
SIMPLE NETWORK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Simple Network Communications, Inc. (the "Company"), incorporated on
March 1, 1996, is a provider of inexpensive web-site hosting services to
the Internet community. The Company's facilities, located in San Diego,
California, host web-sites for customers located both domestically and
internationally.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and short-term investments with
original maturities of three months or less when purchased.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
which are 2 years for computer and equipment, and 5 years for furniture
and fixtures. Repairs and maintenance are charged to expense as incurred.
The Company is the lessee of computer and computer peripheral equipment
under capital leases with effective interest rates ranging from 12.2% to
75.9%. The assets and liabilities under capital leases are recorded at
the lower of the present value of the minimum lease payments or the fair
value of the asset. Except for capital leases which transfer title to the
Company or contain bargain purchase options, assets held under capital
leases are amortized over their lease terms. Assets held under capital
leases which transfer title to the Company or contain bargain purchase
options are amortized over their estimated productive lives.
REVENUE RECOGNITION
The Company recognizes revenue as services are rendered. Services paid in
advance are recorded as deferred revenue.
INCOME TAXES
The Company presents income taxes pursuant to Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("FAS 109").
FAS 109 uses an asset and liability approach to account for income taxes,
wherein deferred taxes are provided for book and tax basis differences
for assets and liabilities. In the event differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities result in deferred tax assets, an evaluation of the
probability of being able to realize the future benefits indicated by
such assets is required. A valuation allowance is provided for a portion
or all of the deferred tax assets when there is sufficient uncertainty
regarding the Company's ability to recognize the benefits of the assets
in future years.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents and accrued liabilities
approximate fair value because of the short-term nature of these
financial instruments. The carrying amounts of capital lease obligations
approximate their fair values based on interest rates currently available
to the Company for borrowings with similar terms and maturities.
-6-
<PAGE> 9
SIMPLE NETWORK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ADVERTISING COSTS
Advertising costs are expensed as incurred. Total advertising expense was
approximately $45,062 and $616,191 for the period from March 1, 1996
(Inception) to December 31, 1996, and for the year ended December 31,
1997, respectively.
USE OF 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 disclosure 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 estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("FAS 133"),
was issued and is effective for fiscal years beginning after June 15,
1999. FAS 133 requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
The Company believes that adoption of the standard will not have a
material impact on the Company's consolidated results of operations or
financial position.
In June 1997, the Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("FAS 130"), was issued. FAS 130
establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. Reclassification of financial
statements for earlier periods provided for comparative purposes is
required upon adoption. FAS 130 is effective for fiscal years beginning
after December 15, 1997. The Company believes that the adoption of the
standard will not have a material impact on the Company's consolidated
results of operations or financial position.
In June 1997, Statement of Financial Accounting Standards No. 131,
Disclosure About Segments of an Enterprise and Related Information ("FAS
131"), was issued. FAS 131 establishes standards for the way that public
business enterprises report selected information about operating segments
in annual financial statements and requires those enterprises report
selected information about operating segments in interim financial
reports issued to stockholders. FAS 131 is effective for financial
statements for periods beginning after December 15, 1997. The Company
believes that the adoption of the standard will not have a material
impact on the Company's consolidated results of operations or financial
position.
-7-
<PAGE> 10
SIMPLE NETWORK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INTERIM INFORMATION
The foregoing unaudited consolidated financial statements as of September
30, 1998, and for the nine months ended September 30, 1997 and 1998
reflect all adjustments (all of which are of a normal recurring nature)
which are, in the opinion of management, necessary for a fair
presentation of the results of the interim periods. The results for
interim periods are not necessarily indicative of results to be expected
for the year.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Equipment held under capital leases $ -- $ 914,104
Computer equipment 143,851 638,919
Furniture, fixtures and leasehold improvements 1,506 10,031
----------- -----------
145,357 1,563,054
Less accumulated depreciation (17,817) (304,674)
----------- -----------
$ 127,540 $ 1,258,380
=========== ===========
</TABLE>
Depreciation expense for 1997 includes $156,533 of amortization expense
on equipment held under capital leases.
3. CAPITAL LEASE OBLIGATIONS
Future annual minimum lease payments required under capital leases are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1998 $496,137
1999 337,944
2000 91,758
2001 27,774
--------
953,613
Less amount representing interest 199,710
--------
Present value of net minimum lease payments 753,903
Less current portion 382,397
--------
$371,506
========
</TABLE>
-8-
<PAGE> 11
SIMPLE NETWORK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Purchases of equipment and maintenance contracts of $155,426 were
refinanced as capital leases during 1998, and are included in capital
lease obligations at December 31, 1997.
All capital leases were paid off in 1998 (see Note 9).
4. INCOME TAXES
The provision for income taxes charged to operations for the period from
March 1, 1996 (Inception) to December 31, 1996 and for the year end
December 31, 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Current:
Federal $18,271 $34,540
State 6,300 8,712
------- -------
$24,571 $43,252
======= =======
</TABLE>
The Company's tax return reports taxable income and current taxes due,
primarily because the tax return reflects all revenue, including revenue
deferred for financial statement purposes, as income when collected.
Deferred taxes are provided for those items reported in different periods
for income tax and financial reporting purposes. The Company's net
deferred tax asset has been fully reserved because of uncertainty
regarding the Company's ability to recognize the benefit of the asset in
future years. The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
-------- ---------
<S> <C> <C>
Deferred tax assets:
Accrued expenses not yet deductible for tax purposes $ 23,151 $ 117,819
State tax expense 2,142 2,962
-------- ---------
Gross deferred tax assets 25,293 120,781
Deferred tax liabilities:
Depreciation and amortization 9,243 4,192
-------- ---------
Net deferred tax assets 16,050 116,589
Valuation allowance (16,050) (116,589)
-------- ---------
Deferred tax balance $ -- $ --
======== =========
</TABLE>
-9-
<PAGE> 12
SIMPLE NETWORK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The provision for income taxes is different than the amount computed
using the applicable statutory federal income tax rate with the
difference for each year summarized below:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Federal tax provision (benefit) at statutory rate 34% (34)%
Permanent differences 9 2
State taxes, net of federal benefit 8 (6)
Adjustment due to increase in valuation allowance 95 67
------ ------
Provision for income taxes 146% 29%
------ ------
</TABLE>
5. OPERATING LEASES
The Company leases its office facilities under a noncancellable operating
lease expiring March 31, 1998. Total rent expense for the years ended
December 31, 1996 and 1997 is $2,892 and $82,007, respectively.
On December 16, 1997, the Company entered into an 84-month noncancellable
operating lease for new office facilities beginning March 15, 1998. The
facilities lease includes a 5-year renewal option. The lease provides a
tenant improvement allowance of $30 per usable square foot (approximately
$409,000). The monthly lease payments have increases over the lease term.
The monthly lease payment is $20,208 during the first two years,
increasing to $27,786 for the seventh year of the lease.
Minimum future commitments under this lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1998 $ 194,059
1999 242,499
2000 256,392
2001 284,847
2002 308,101
Thereafter 747,705
----------
$2,033,603
==========
</TABLE>
6. COMMON STOCK SUBSCRIBED
On November 17, 1997, the Company entered into an agreement with an
employee to grant 61.85567 shares of common stock as compensation. The
Company recorded related compensation expense during 1997 in the amount
of $45,000. At December 31, 1997, these shares are classified as common
stock subscribed in the Company's balance sheet. In November 1998, the
shares were issued.
-10-
<PAGE> 13
SIMPLE NETWORK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. COMMITMENTS
The Company has entered into contracts to purchase internet bandwidth
which expire through August 2000. The contracts have an aggregate cost
of $977,000.
Subsequent to year end, the Company entered into additional contracts to
purchase internet bandwidth which expire at various dates through 2003.
The contracts have an aggregate cost of $1,727,172.
8. RELATED PARTY TRANSACTIONS
During 1996, two stockholders contributed cash and various equipment to
the Company which in turn issued notes payable for $16,910 with a term of
36 months at 18%. These notes were paid in full by the Company during
1997.
During 1996, a relative of an employee of the Company rented a
condominium to the Company for work use for a term of one year at a
monthly amount of $1,000.
During 1997, the Company entered into a capital lease for computer
equipment with a relative of an employee for a term of one year at a
monthly amount of $4,174. The lease was paid in full during 1997.
9. SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company committed to leasehold
improvements in excess of its tenant improvement allowance of
approximately $400,000 (Note 5).
Subsequent to December 31, 1997, the Company entered into several capital
lease agreements totaling $413,254 to finance the purchase of equipment
and maintenance contracts.
During March 1998, the Company signed a note payable with a bank in the
amount of $500,000 payable in 84 monthly installments of $8,562. Interest
is at prime plus 2.50%. Proceeds of the note will be used to pay for
leasehold improvements and for working capital. The Company has pledged
various equipment as collateral, as well as assignment of life insurance
on two of the stockholders and second trust deeds on the personal real
estate of the same two stockholders. The loan is also guaranteed by the
two stockholders.
During June 1998, the Company signed a note payable in the amount of
$250,000, payable in 60 monthly installments of $5,250. Interest is at
12%. The loan is personally guaranteed by two of the stockholders.
On November 30, 1998, broadcast.com inc., a Delaware corporation
("broadcast.com") acquired all of the outstanding capital stock of the
Company pursuant to an Agreement and Plan of Reorganization, dated as of
November 16, 1998 (the "Merger Agreement"), by and among broadcast.com,
SN Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary
of broadcast.com ("MergerCo"), and the Company. In accordance with the
terms of the Merger Agreement, MergerCo merged with and into the Company,
with the Company as the surviving corporation (the "Merger"). In the
Merger, all of the outstanding shares of common stock of the Company were
exchanged for 410,809 shares of broadcast.com common stock. The Merger
will be accounted for as a pooling of interests.
Under the terms of the Merger Agreement and the related Escrow Agreement
dated November 30, 1998, a total of 20,540 shares of broadcast.com common
stock will be held in escrow for the purpose of indemnifying
broadcast.com against certain liabilities of the Company. Such escrow
will terminate on March 31, 1999.
During December 1998, the Company paid off all notes payable and capital
leases through funding provided by broadcast.com.
-11-
<PAGE> 14
broadcast.com inc.
PRO FORMA FINANCIAL STATEMENTS
(unaudited)
The following unaudited Pro Forma Balance Sheets at December 31, 1996 and 1997
and at September 30, 1998 and the Statements of Operations for the years ended
December 31, 1996 and 1997 and the nine months ended September 30, 1997 and 1998
(Pro Forma Statements) have been prepared as if the Acquisition of Simple
Networks Communications, Inc. (Simple Net) by broadcast.com inc. (the Company)
(Acquisition) had occurred at March 1, 1996 (Inception). The Acquisition has
been accounted for as a pooling of interests under the provisions of Accounting
Principles Board Opinion No. 16, "Business Combinations".
The Pro Forma Statements of Operations for the year ended December 31, 1996 and
1997 and the nine months ended September 30, 1997 and 1998 are based upon the
historical financial statements of the Company for the years ended December 31,
1996 and 1997 and the nine months ended September 30, 1997 and 1998 and the
historical financial statements of Simple Net for the period from March 1, 1996
(Inception) to December 31, 1996, the year ended December 31, 1997 and the nine
months ended September 30, 1997 and 1998.
The Pro Forma Statements presented herein are not necessarily indicative of the
Company's results of operations that might have occurred had such transaction
been completed at Inception or as of the date specified, or indicative of
the Company's consolidated financial position or results of operations for any
future date or period.
These unaudited Pro Forma Statements should be read in conjunction with the
historical financial statements and notes thereto of Simple Network
Communications, Inc. included elsewhere in this document and the financial
statements of broadcast.com inc. referred to above.
<PAGE> 15
broadcast.com inc.
PRO-FORMA BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
--------------------------------------- ----------- ------------------
SIMPLE NETWORK
broadcast.com inc. COMMUNICATIONS, INC. broadcast.com inc.
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,580,286 $ 2,741 $ 4,583,027
Accounts receivable, net 406,802 -- 406,802
Prepaid expenses 65,760 1,000 66,760
Other 17,912 -- 17,912
----------- --------- -----------
Total current assets 5,070,760 3,741 5,074,501
Property and equipment, net 1,186,182 127,540 1,313,722
Other assets 1,715,000 1,179 1,716,179
Intangible assets, net 182,414 -- 182,414
----------- --------- -----------
Total assets $ 8,154,356 $ 132,460 $ 8,286,816
=========== ========= ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 91,545 $ 38,639 $ 130,184
Accrued liabilities 454,926 10,299 465,225
Deferred revenue -- 57,679 57,679
Income tax payable -- 24,571 24,571
Loan to stockholders -- 4,909 4,909
----------- --------- -----------
Total current liabilities 546,471 136,097 682,568
Loan to stockholder, net of current portion -- 2,266 2,266
----------- --------- -----------
Total liabilities 546,471 138,363 684,834
Stockholder's equity (deficit):
Common stock 57,341 20 3,965 (1) 61,326
Additional paid-in capital 10,807,309 2,030 (3,965) (1) 10,805,374
Accumulated deficit (3,256,765) (7,953) (3,264,718)
----------- --------- -----------
Total stockholder's equity (deficit) 7,607,885 (5,903) 7,601,982
----------- --------- -----------
Total liabilities and stockholder's
equity (deficit) $ 8,154,356 $ 132,460 $ 8,286,816
=========== ========= ===========
</TABLE>
P-1
<PAGE> 16
broadcast.com inc.
PRO-FORMA BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------------------------------------- ----------- ------------------
SIMPLE NETWORK
broadcast.com inc. COMMUNICATIONS, INC. broadcast.com inc.
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,337,116 $ 3,651 $ 21,340,767
Accounts receivable, net 1,976,765 -- 1,976,765
Prepaid expenses 1,032,198 27,418 1,059,616
Other 11,311 -- 11,311
------------ ----------- ------------
Total current assets 24,357,390 31,069 24,388,459
Property and equipment, net 2,812,971 1,258,380 4,071,351
Other assets 935,720 119,774 1,055,494
Intangible assets, net 126,733 -- 126,733
------------ ----------- ------------
Total assets $ 28,232,814 $ 1,409,223 $ 29,642,037
============ =========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 362,214 $ 469,367 $ 831,581
Accrued liabilities 595,242 68,918 664,160
Deferred revenue 82,420 272,208 354,628
Capital lease obligations, current portion -- 382,397 382,397
------------ ----------- ------------
Total current liabilities 1,039,876 1,192,890 2,232,766
Capital lease obligations, net of current portion -- 371,506 371,506
------------ ----------- ------------
Total liabilities 1,039,876 1,564,396 2,604,272
Stockholder's equity (deficit):
Common stock 85,763 20 3,965 (1) 89,748
Additional paid-in capital 36,838,152 2,030 (3,965) (1) 36,836,217
Common stock subscribed 45,000 45,000
Accumulated deficit (9,730,977) (202,223) (9,933,200)
------------ ----------- ------------
Total stockholder's equity (deficit) 27,192,938 (155,173) 27,037,765
------------ ----------- ------------
Total liabilities and stockholder's
equity (deficit) $ 28,232,814 $ 1,409,223 $ 29,642,037
============ =========== ============
</TABLE>
P-2
<PAGE> 17
broadcast.com inc.
PRO-FORMA BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------------------------------------- ----------- ------------------
SIMPLE NETWORK
broadcast.com inc. COMMUNICATIONS, INC. broadcast.com inc.
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 58,149,546 $ 83,296 $ 58,232,842
Accounts receivable, net 3,007,511 -- 3,007,511
Prepaid expenses 1,192,947 46,492 1,239,439
Other 48,040 -- 48,040
------------ ----------- ------------
Total current assets 62,398,044 129,788 62,527,832
Property and equipment, net 4,144,000 1,643,740 5,787,740
Other assets 87,536 184,096 271,632
Intangible assets, net 476,670 -- 476,670
------------ ----------- ------------
Total assets $ 67,106,250 $ 1,957,624 $ 69,063,874
============ =========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 678,443 $ 721,600 $ 1,400,043
Accrued liabilities 1,487,585 101,198 1,588,783
Deferred revenue 915,240 384,300 1,299,540
Notes payable, current portion -- 143,654 143,654
Capital lease obligations, current portion -- 439,979 439,979
Line of credit -- 86,299 86,299
------------ ----------- ------------
Total current liabilities 3,081,268 1,877,030 4,958,298
Notes payable, net of current portion -- 576,996 576,996
Capital lease obligations, net of current portion -- 408,741 408,741
------------ ----------- ------------
Total liabilities 3,081,268 2,862,767 5,944,035
Stockholder's equity (deficit):
Common stock 116,889 20 3,965 (1) 120,874
Additional paid-in capital 84,114,736 2,030 (3,965) (1) 84,112,801
Common stock subscribed -- 45,000 45,000
Accumulated deficit (20,206,643) (952,193) (21,158,836)
------------ ----------- ------------
Total stockholder's equity (deficit) 64,024,982 (905,143) 63,119,839
------------ ----------- ------------
Total liabilities and stockholder's
equity (deficit) $ 67,106,250 $ 1,957,624 $ 69,063,874
============ =========== ============
</TABLE>
P-3
<PAGE> 18
broadcast.com inc.
PRO-FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------------------- -----------------
SIMPLE NETWORK
broadcast.com inc. COMMUNICATIONS, INC. broadcast.com inc.
<S> <C> <C> <C>
Revenues:
Business Services $ 665,471 $ 292,469 $ 957,940
Advertising 1,090,629 -- 1,090,629
------------ ------------ ------------
Total revenues 1,756,100 292,469 2,048,569
Operating expenses:
Production costs 1,301,253 -- 1,301,253
Operating and development 1,506,449 114,500 1,620,949
Sales and marketing 717,547 49,720 767,267
General and administrative 751,785 89,385 841,170
Depreciation and amortization 544,003 17,848 561,851
------------ ------------ ------------
Total operating expenses 4,821,037 271,453 5,092,490
Net operating income (loss) (3,064,937) 21,016 (3,043,921)
Interest income 76,090 -- 76,090
Interest expense -- 4,138 4,138
------------ ------------ ------------
Net income (loss) before income tax provision (2,988,847) 16,878 (2,971,969)
Provision for income taxes -- 24,571 24,571
------------ ------------ ------------
Net loss $ (2,988,847) $ (7,693) $ (2,996,540)
============ ============ ============
Basic and diluted net loss per share (2) $ (0.16) $ (0.15)
============ ============
Shares used in the net loss per share calculation (2) 19,127,542 19,753,742
============ ============
</TABLE>
P-4
<PAGE> 19
broadcast.com inc.
PRO-FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------------------- ------------------
SIMPLE NETWORK
broadcast.com inc. COMMUNICATIONS, INC. broadcast.com inc.
<S> <C> <C> <C>
Revenues:
Business Services $ 3,045,269 $ 2,292,676 $ 5,337,945
Advertising 3,810,764 -- 3,810,764
------------ ------------ ------------
Total revenues 6,856,033 2,292,676 9,148,709
Operating expenses:
Production costs 2,949,641 -- 2,949,641
Operating and development 4,659,249 800,999 5,460,248
Sales and marketing 3,389,069 783,259 4,172,328
General and administrative 1,416,276 498,424 1,914,700
Depreciation and amortization 1,129,120 287,008 1,416,128
------------ ------------ ------------
Total operating expenses 13,543,355 2,369,690 15,913,045
Net operating loss (6,687,322) (77,014) (6,764,336)
Interest income 213,110 -- 213,110
Interest expense -- 74,004 74,004
------------ ------------ ------------
Net loss before income tax provision (6,474,212) (151,018) (6,625,230)
Provision for income taxes -- 43,252 43,252
------------ ------------ ------------
Net loss $ (6,474,212) $ (194,270) $ (6,668,482)
============ ============ ============
Basic and diluted net loss per share (2) $ (0.28) $ (0.28)
============ ============
Shares used in the net loss per share calculation (2) 23,359,554 24,156,524
============ ============
</TABLE>
P-5
<PAGE> 20
broadcast.com inc.
PRO-FORMA STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------------------- -----------------
SIMPLE NETWORK
broadcast.com inc. COMMUNICATIONS, INC. broadcast.com inc.
<S> <C> <C> <C>
Revenues:
Business Services $ 2,142,317 $ 1,504,864 $ 3,647,181
Advertising 2,318,106 -- 2,318,106
------------ ------------ ------------
Total revenues 4,460,423 1,504,864 5,965,287
Operating expenses:
Production costs 2,056,868 -- 2,056,868
Operating and development 3,062,650 565,334 3,627,984
Sales and marketing 2,206,476 463,427 2,669,903
General and administrative 990,553 270,677 1,261,230
Depreciation and amortization 715,093 173,248 888,341
------------ ------------ ------------
Total operating expenses 9,031,640 1,472,686 10,504,326
Net operating income (loss) (4,571,217) 32,178 (4,539,039)
Interest income 161,303 -- 161,303
Interest expense -- 46,921 46,921
------------ ------------ ------------
Net loss before income tax provision (4,409,914) (14,743) (4,424,657)
Provision for income taxes -- 25,860 25,860
------------ ------------ ------------
Net loss $ (4,409,914) $ (40,603) $ (4,450,517)
============ ============ ============
Basic and diluted net loss per share (2) $ (0.19) $ (0.19)
============ ============
Shares used in the net loss per share calculation (2) 23,190,726 23,987,696
============ ============
</TABLE>
P-6
<PAGE> 21
broadcast.com inc.
PRO-FORMA STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------ ------------------
SIMPLE NETWORK
broadcast.com inc. COMMUNICATIONS, INC. broadcast.com inc.
<S> <C> <C> <C>
Revenues:
Business Services $ 5,777,405 $ 3,391,750 $ 9,169,155
Advertising 5,604,899 -- 5,604,899
------------ ------------ ------------
Total revenues 11,382,304 3,391,750 14,774,054
Operating expenses:
Production costs 3,194,195 -- 3,194,195
Operating and development 8,881,134 1,561,699 10,442,833
Sales and marketing 7,291,721 714,765 8,006,486
General and administrative 2,172,415 990,082 3,162,497
Depreciation and amortization 1,537,225 755,568 2,292,793
------------ ------------ ------------
Total operating expenses 23,076,690 4,022,114 27,098,804
Net operating loss (11,694,386) (630,364) (12,324,750)
Interest income 1,218,720 -- 1,218,720
Interest expense -- 119,606 119,606
------------ ------------ ------------
Net loss before income tax provision (10,475,666) (749,970) (11,225,636)
Provision for income taxes -- -- --
------------ ------------ ------------
Net loss $(10,475,666) $ (749,970) $(11,225,636)
============ ============ ============
Basic and diluted net loss per share (2) $ (0.35) $ (0.36)
============ ============
Shares used in the net loss per share calculation (2) 30,071,024 30,867,994
============ ============
</TABLE>
P-7
<PAGE> 22
broadcast.com inc.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
The following adjustments were recorded in the pro forma statements:
(1) To record the exchange of Simple Network Communications, Inc. common stock
for broadcast.com inc. common stock at a ratio of 199 to 1. The acquisition was
accounted for as a pooling of interests.
(2) Effective February 11, 1999, the Company effected a two-for-one split of its
Common stock to all shareholders of record at February 1, 1999. The shares used
in the net loss per share calculation have been retroactively restated for all
periods presented.
P-8
<PAGE> 23
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.
BROADCAST.COM INC.
(Registrant)
By: /s/ JACK RIGGS
---------------------------------
Name: Jack Riggs
Title: Chief Financial Officer
Dated: February 16, 1999
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of
November 16, 1998, by and among broadcast.com inc., SN
Acquisition, Inc. and Simple Network Communications, Inc.
23.1 Consent of PricewaterhouseCoopers LLP
99.1 Press Release dated December 1, 1998
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in broadcast.com inc.'s
Registration Statement on Form S-8 of our report dated January 19, 1999,
relating to the financial statements of Simple Network Communications, Inc.,
which appears in this Form 8-K/A of broadcast.com inc.
PricewaterhouseCoopers LLP
Dallas, Texas
February 12, 1999
