SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest eventreported):
February 1, 2000
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DIGITAL LAVA INC.
(Exact name of registrant as specified in its charter)
Delaware 1-14831 95-4584080
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
13160 Mindanao Way, Suite 350
Marina del Rey, CA 90292
(Address of Principal Executive Offices) (Zip Code)
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(310) 577-0200
(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report.)
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Item 5. Other Events
Digital Lava today announced its results for the period ending December 31,
1999 and that it is restating its unaudited financial statements for the second
and third quarters of 1999.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release dated February 1, 2000.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
DIGITAL LAVA INC.
Date: February 1, 2000 By: /s/ Danny Gampe
--------------------------------
Name: Danny Gampe
Title: Chief Financial Officer
and Vice President, Finance
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
February 1, 2000
FOR MORE INFORMATION
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Danny Gampe Mihir Shah Ed McNally Marjorie Ornston
Chief Financial Officer General Information Investor Contact Media Contact
(310) 577-0200 x335 (310) 442-0599 (310) 442-0599 (310) 442-0599
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DIGITAL LAVA REPORTS YEAR END RESULTS AND RECORD FOURTH QUARTER REVENUES
190% Quarterly Revenue Growth; 224% Sequential Increase
LOS ANGELES, CA, February 1, 2000 -- Digital Lava Inc. (AMEX: DGV), a leading
communications Application Services Provider (ASP) offering business-to-business
applications using streaming media, today announced record setting revenues for
the period ending December 31, 1999. Fourth quarter revenues grew 190% over the
prior year's fourth quarter revenues and increased 224% from the restated third
quarter of 1999. Higher demand for its proprietary publishing services from new
and repeat customers, such as Cisco Systems, drove results for the period.
Digital Lava Chief Executive Officer, Bob Greene, stated, "We are extremely
pleased to deliver our best quarter ever as reflected by our record revenues. By
demonstrating sequential quarter-to-quarter revenue growth since the second
quarter of 1999, the market has validated our products and services. Top line
revenue performance was strong, and we continue to deliver gross margins in
excess of 70%. We aggressively achieved our goal of doubling our direct sales
force sooner than projected, and market positioning is on track with the launch
of our new website the first week of February. Our team did a great job in
delivering the year."
Greene continued, "Clearly, our publishing services and solutions business model
is working. Our clients are very pleased with our proprietary publishing tools
due to our support of an open platform that incorporates media players from both
Microsoft Media Technologies and Real Networks. In addition, our fast turnaround
time allows us to respond to the needs of customers."
Looking forward, Greene said he expects continued growth, fueled by expanded
demand for the Company's proprietary publishing services, support of open
platforms and the introduction of new products. Greene clarified that Digital
Lava continues to develop new and unique solutions designed to enhance Digital
Lava's position in the business-to-business streaming market. "We
###
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plan on announcing new products this quarter that will enable individuals to
produce and personalize streaming media content right from their desktops. These
new software products will integrate seamlessly into existing desktop
applications and provide users with several delivery options. This should
provide new sources of revenue and drive demand for our more robust publishing
solutions. This strategy will continue the advancement of on-demand
communications utilizing streaming technology."
Commenting on industry trends Greene stated," This is the year for streaming
media technology to become front and center in the communications market not
only at a consumer level but, more importantly, in key business-to-business
environments. Within the streaming media industry, the on-demand communications
and eLearning market sectors are still in their infancy and poised for
accelerated growth. Both individuals and businesses are becoming more educated
about the benefits of streaming media and the vast potential for its uses. As
these trends continue, Digital Lava is positioned to provide companies and
individuals with the ability to communicate more effectively and efficiently
with employees, customers, partners and associates around the globe."
During the past year, Digital Lava was a two-time winner of MultiMediaCom's Best
New Streaming/Broadcasting Service award and also won its People's Choice Award
- - Real World Solutions.
Financial Results
For the fourth quarter ended December 31, 1999, revenues were $916,241 versus
$315,986 in the fourth quarter of 1998. The reported net loss was $1,950,230, or
$.42 per basic and diluted share, as compared to a net loss of $469,321, or
$3.57 per basic and diluted share, for the same quarter last year.
For the year ended December 31, 1999, the company reported revenues of
$1,488,044, compared to revenues of $1,463,618 for the same period a year
earlier. The company reported a net loss of $10,086,353, or $2.72 per basic and
diluted share, versus a net loss of $3,730,541, or $28.36 per basic and diluted
share, for the comparable period a year ago. The loss for the year included a
one-time extraordinary charge of $3,672,656 related to the repayment of certain
indebtedness during the first quarter following the company's initial public
offering. Excluding this one time charge, the net loss would have been
$6,413,697, or $1.79 per basic and diluted share, versus $3,730,541, or $28.36
per basic and diluted share, in the comparable prior year period.
Restatement of Prior Results
Additionally, the company announced that it is restating its unaudited financial
statements for the second and third quarters of 1999. The restatements resulted
from year-end audit adjustments requiring the company to defer recognition of
$101,462 of revenue previously recognized in the second and third quarters of
1999 until the first quarter of 2000, and the reversal of $56,250 of revenue
previously recognized in the third quarter of 1999. The company previously had
recognized these revenue amounts in the second and third quarters of 1999 based
on its assessment at such time that recognition was appropriate under accounting
policies relating to recognizing revenues for sales of software and related
services. In addition, the company is
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restating investment income resulting in a reduction of investment income of
$32,470 and $20,638 for the second and third quarters of 1999, respectively. The
net effect of these adjustments will be to restate the company's second quarter
revenues from $195,419 to $111,956 and net loss from $1,210,229, or $.26 per
basic and diluted share, to $1,326,162 or $.29 per basic and diluted share, and
third quarter revenues from $357,217 to $282,968 and net loss from $1,834,133,
or $.40 per basic and diluted share to $1,900,770 or $.41 per basic and diluted
share. The company expects to file amended Forms 10Q for the second and third
quarters of 1999 with the Securities and Exchange Commission as soon as
practical.
Financial Position
At December 31, 1999, Digital Lava had cash and short-term investments of
$3,664,318 shareholders' equity of $5,301,522 and no debt.
About Digital Lava
Digital Lava is a communications Application Services Provider (ASP) with robust
support services that utilizes streaming media. Our business-to-business
technology offers solutions to Fortune 1000 companies for use in corporate
communications, sales, marketing and training applications ensuring that the
context and the integrity of the content endures. Digital Lava's solutions are
rich mixed media software applications that seamlessly link digital video and
audio content with a variety of other formats such as text, graphics, animation
and web links. These solutions provide end- users with a fully integrated and
interactive experience on their computer desktops delivered via the Internet,
intranet, extranet, DVD, CD-ROM or any combination. Digital Lava's partners and
clients include Microsoft, InterVu, RealNetworks, Cisco Systems, Dell Computers,
Hewlett Packard, KPMG, Prudential Insurance, Lotus Development Corporation
,Shell Chemical and Zurich-American Insurance . Digital Lava is headquartered in
Marina del Rey, California. For additional information, please visit Digital
Lava's Web site at http://www.digitallava.com or call 1-888-222-LAVA.
Additionally, investors will have the opportunity to listen to today's Digital
Lava conference call, and view their slide presentation, at 11:00 a.m. Eastern
Standard Time over the Internet through Vcall at http://www.vcall.com. To listen
to the live call, please go to the website at least fifteen minutes early to
register, download, and install any necessary audio software. For those who
cannot listen to the live broadcast, a replay will be available shortly after
the call.
Forward-Looking Statements
This press release contains forward-looking statements concerning the business
and products of the Company. Actual results may differ from those projected or
implied by such forward-looking statements depending on a number of risks and
uncertainties, including, but not limited to the following: our ability to
develop and ship new products on a timely basis, market acceptance of our
products, demand for streaming products generally, and our
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ability to maintain our existing customer base and obtain new customers. Other
risks inherent in the business of the Company are described in Securities and
Exchange Commission filings, including the Company prospectus on Form SB-2. The
Company undertakes no obligation to revise or update any forward-looking
statements to reflect events or circumstances after the date of this release.
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DIGITAL LAVA INC.
COMPARATIVE INCOME STATEMENT
(UNAUDITED)
Three Months Ended December 31,
1999 1998
----------- -----------
Revenue $916,241 $315,986
Cost of revenue 255,346 44,439
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Gross profit 660,895 271,547
Operating expense
Selling, general & administrative 2,473,961 330,178
Research and development 357,211 108,576
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Total operating expense 2,831,172 438,754
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Loss from operations (2,170,277) (167,207)
Other income/(expense) 220,047 (302,114)
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Net loss ($1,950,230) ($469,321)
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Basic and diluted net loss per share ($.42) ($3.57)
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Basic and diluted weighted average
common shares outstanding 4,636,887 131,524
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DIGITAL LAVA INC.
SELECTED BALANCE SHEET DATA
December 31, December 31,
1999 1998
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Cash and equivalents $708,031 $30,893
Short-term investments $2,956,287 --
Total Current Assets $4,981,803 $1,140,313
Fixed assets, net $1,204,578 $59,647
Total Assets $6,910,298 $1,216,925
Total Current Liabilities $1,442,394 $7,297,445
Total Stockholders' Equity/ (Deficit) $5,301,522 ($6,080,520)
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DIGITAL LAVA INC.
COMPARATIVE INCOME STATEMENT
Twelve Months Ended December 30,
1999 1998
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Revenue $1,488,044 $1,463,618
Cost of revenue 385,575 288,778
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Gross profit 1,102,469 1,174,840
Operating expense
Selling, general & administrative 6,611,126 3,103,418
Research and development 1,005,634 442,718
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Total operating expense 7,616,760 3,546,136
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Loss from operations (6,514,291) (2,371,296)
Other income/(expense) 100,594 (1,359,245)
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Loss before extraordinary item (6,413,697) (3,730,541)
Extraordinary loss on extinguishment of debt (3,672,656) 0
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Net Loss ($10,086,353) ($3,730,541)
============ ============
Net Loss Available to Common Stockholders ($10,746,366) ($3,730,541)
============ ============
Basic and diluted net loss per share ($2.72) ($28.36)
============ ============
Basic and diluted weighted average
common shares outstanding 3,950,935 131,524
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DIGITAL LAVA INC.
INCOME STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
As reported As restated As reported As restated
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $195,419 $111,956 $372,298 $288,835
Cost of revenue 13,857 13,857 54,327 54,327
----------- ----------- ----------- -----------
Gross profit 181,562 98,099 317,971 234,508
Operating Expense
Selling, general & administrative 1,321,172 1,321,172 2,382,219 2,382,219
Research and development 221,104 221,104 355,567 355,567
----------- ----------- ----------- -----------
Total operating expense 1,542,276 1,542,276 2,737,786 2,737,786
----------- ----------- ----------- -----------
Loss from operations (1,360,714) (1,444,177) (2,419,815) (2,503,278)
Other income/(expense) 150,485 118,015 (26,949) (59,419)
----------- ----------- ----------- -----------
Loss before extraordinary item (1,210,229) (1,326,162) (2,446,764) (2,562,697)
Extraordinary loss on
extinguishment of debt -- -- (3,672,656) (3,672,656)
----------- ----------- ----------- -----------
Net Loss (1,210,229) (1,326,162) (6,119,420) (6,235,353)
=========== =========== =========== ===========
Net Loss Available to
common stockholders ($1,210,229) ($1,326,162) ($6,779,433) ($6,895,366)
=========== =========== =========== ===========
Basic and diluted net loss per share $(.26) $(.29) $(2.08) $(2.11)
=========== =========== =========== ===========
Basic and diluted weighted average 4,634,387 4,634,387 3,263,223 3,263,223
common shares outstanding
</TABLE>
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DIGITAL LAVA INC.
INCOME STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
As reported As restated As reported As restated
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $357,217 $282,968 $729,515 $571,803
Cost of revenue 104,152 75,902 158,479 130,229
----------- ----------- ----------- -----------
Gross profit 253,065 207,066 571,036 441,574
Operating Expense
Selling, general & administrative 1,754,946 1,754,946 4,137,165 4,137,165
Research and development 292,856 292,856 648,423 648,423
----------- ----------- ----------- -----------
Total operating expense 2,047,802 2,047,802 4,785,588 4,785,588
----------- ----------- ----------- -----------
Loss from operations (1,794,737) (1,840,736) (4,214,552) (4,344,014)
Other income/(expense) (39,396) (60,034) (66,345) (119,453)
----------- ----------- ----------- -----------
Loss before extraordinary item (1,834,133) (1,900,770) (4,280,897) (4,463,467)
Extraordinary loss on
extinguishment of debt -- -- (3,672,656) (3,672,656)
----------- ----------- ----------- -----------
Net Loss (1,834,133) (1,900,770) (7,953,553) (8,136,123)
=========== =========== =========== ===========
Net Loss Available to
common stockholders ($1,834,133) ($1,900,770) ($8,613,566) ($8,796,136)
=========== =========== =========== ===========
Basic and diluted net loss per share $(.40) $(.41) $(2.31) $(2.36)
=========== =========== =========== ===========
Basic and diluted weighted average 4,636,887 4,636,887 3,722,284 3,722,284
common shares outstanding
</TABLE>
