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
Date of Report (Date of earliest event reported):
May 5, 1999 (August 26, 1998)
Digital Courier Technologies, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-20771 87-0461856
- --------------------------------------------------------------------------------
(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification No.)
136 Heber Avenue, Suite 204, P.O. Box 8000, Park City, Utah 84060
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (435) 655-3617
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events
- ---------------------
On August 26, 1998, Digital Courier Technologies, Inc. filed a Proxy Statement
for a Special Meeting of Stockholders to be held on September 16, 1998 ("the
proxy statement"). The following attached pro forma financial statements amend
those filed with the proxy statement:
Financial Statement Description Original Page Number in Proxy Statement
- ------------------------------- ---------------------------------------
Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of March 31, 1998 11
Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended
June 30, 1997 12
Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the nine months
ended March 31, 1998 13
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Data 14
Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended
June 30, 1997 54
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Data Description of the
Transactions 56 - 57
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1997 as originally presented on page 53 of the proxy statement is deleted in its
entirety. Additionally, the Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the six months as originally presented on page 55 of the proxy
statement has been deleted in its entirety.
<PAGE>
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.
DIGITAL COURIER TECHNOLOGIES,
INC.
Dated: May 5, 1999 By:/s/ Mitchell Edwards
--------------------------
Mitchell Edwards
Chief Financial Officer
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
RELATING TO
PROPOSAL NUMBER 1 - AUTHORIZATION OF ISSUANCE OF 4,659,080 SHARES OF COMMON
STOCK IN CONNECTION WITH THE ACQUISITION OF
DIGITAL COURIER INTERNATIONAL, INC. BY THE COMPANY
AND
PROPOSAL NUMBER 4 - RATIFICATION OF REPURCHASE OF SHARES
The following unaudited pro forma condensed consolidated financial data
is based upon the historical consolidated financial statements of DataMark
Holding, Inc. and subsidiaries ("DataMark") as adjusted to give effect to the
issuance of common stock in connection with the acquistion of Digital Courier
International, Inc. by the Company (see Proposal No. 1) and the repurchase of
1,800,000 shares of common stock for $1,500,000 (see Proposal No. 4) and
(Proposal No. 1) as if the transactions had occurred on March 31, 1998, for
purposes of the unaudited pro forma condensed consolidated balance sheet and
July 1, 1996 for purposes of the unaudited pro forma condensed consolidated
statements of operations for the year ended June 30, 1997 and for the nine
months ended March 31, 1998.
The pro forma adjustments are based upon information set out in this
document and its attachments and information from the Company's books and
records that management of the Company believes are reasonable and accurate. The
unaudited pro forma condensed consolidated balance sheet as of March 31, 1998
and the unaudited pro forma condensed consolidated statements of operations for
the year ended June 30, 1997 and the nine months ended March 31, 1998, are not
necessarily indicative of the results of operations of DataMark, or its
financial position, had the sale actually occurred on March 31, 1998 or July 1,
1996. The unaudited pro forma results of operations of DataMark for the nine
months ended March 31, 1998 are not necessarily indicative of the results of
operations that may be generated for the entire fiscal 1998 year. The unaudited
pro forma adjustments are described in the accompanying notes to unaudited pro
forma condensed consolidated financial data.
This unaudited pro forma condensed consolidated financial data should
be read in conjunction with the consolidated financial statements of DataMark
and the related notes thereto included in the Company's Annual Report on Form
10-K as of and for the fiscal year ended June 30, 1997 and included in the
Company's Quarterly Report on Form 10-Q for the nine months ended March 31,
1998.
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
<CAPTION>
Historical
Historical Digital Pro Forma
DataMark Courier Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 6,946,635 $ 13,936 $ (1,500,000) (a) $ 5,460,571
Trade accounts receivable, net 1,449 56,219 -- 57,668
Inventory 10,291 -- -- 10,291
Other current assets 516,302 3,500 -- 519,802
------------ ------------ ------------ ------------
Total current assets 7,474,677 73,655 (1,500,000) 6,048,332
------------ ------------ ------------ ------------
PROPERTY AND EQUIPMENT:
Computer and office equipment 5,992,855 137,404 -- 6,130,259
Furniture, fixtures and leasehold
improvements 737,965 -- -- 737,965
------------ ------------ ------------ ------------
6,730,820 137,404 -- 6,868,224
Less accumulated depreciation
and amortization (1,603,457) (11,490) -- (1,614,947)
------------ ------------ ------------ ------------
Net property and equipment 5,127,363 125,914 -- 5,253,277
------------ ------------ ------------ ------------
INVESTMENT 750,000 -- -- 750,000
------------ ------------ ------------ ------------
OTHER ASSETS 1,317,439 20,500 10,379,106 (b) 11,717,045
------------ ------------ ------------ ------------
Total assets $ 14,669,479 $ 220,069 $ 8,879,106 $ 23,768,654
============ ============ ============ ============
CURRENT LIABILITIES:
Accounts payable $ 166,493 $ 235,314 $ -- $ 401,807
Current portion of capital lease
obligation 960,777 -- -- 960,777
Accrued liabilities 471,361 61,523 -- 532,884
Other current liabilities 33,000 -- -- 33,000
------------ ------------ ------------ ------------
Total current liabilities 1,631,631 296,837 -- 1,928,468
------------ ------------ ------------ ------------
CAPITAL LEASE OBLIGATION, net of current
portion 1,359,877 -- -- 1,359,877
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 883 934 (934) (b) --
-- -- 466 (c) 1,349
Treasury stock -- -- (1,500,000) (a) (1,500,000)
Additional paid-in capital 23,231,651 1,042,925 (1,042,925) (b) --
-- -- 14,026,872 (c) 37,258,523
Stock subscription receivable -- (25,000) -- (25,000)
Accumulated deficit (11,554,563) (1,095,627) 1,095,627 (b) --
-- -- (3,700,000) (c) (15,254,563)
------------ ------------ ------------ ------------
Total stockholders' equity 11,677,971 (76,768) 8,879,106 20,480,309
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 14,669,479 $ 220,069 $ 8,879,106 $ 23,768,654
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial data.
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1997
<CAPTION>
Historical
Historical Digital Pro Forma
DataMark Courier Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 8,812 $ -- $ -- -- $ 8,812
COST OF SALES 492 -- -- -- 492
------------ ------------ ------------ ------------
Gross margin 8,320 -- -- -- 8,320
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Research and development 4,364,252 627 3,700,000 (c) 8,064,879
General and administrative 1,400,916 -- 2,075,821 (d) 3,476,737
Selling 1,897,664 -- -- -- 1,897,664
------------ ------------ ------------ ------------
Total operating expenses 7,662,832 627 5,775,821 -- 13,439,280
------------ ------------ ------------ ------------
OPERATING LOSS (7,654,512) (627) (5,775,821) -- (13,430,960)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest and other income 496,365 -- -- -- 496,365
Interest expense (704) -- -- -- (704)
------------ ------------ ------------ ------------
Other income, net 495,661 -- -- -- 495,661
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS $ (7,158,851) $ (627) $ (5,775,821) -- $(12,935,299)
============ ============ ============ ============
LOSS FROM CONTINUING OPERATIONS
PER COMMON SHARE (Basic and Diluted): $ (0.86) -- -- -- $ (1.16)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Basic and diluted) 8,309,467 -- 2,859,080 (e) 11,168,547
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial data.
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Nine Months Ended March 31, 1998
<CAPTION>
Historical Historical Proforma
DataMark Digital Courier Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 405,158 $ 96,895 $ -- -- $ 502,053
COST OF SALES 323,201 39,432 -- -- 362,633
------------ ------------ ------------ ------------
Gross margin 81,957 57,463 -- -- 139,420
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Research and development 1,301,285 540,112 -- -- 1,841,397
General and administrative 2,885,042 611,351 1,556,866 (f) 5,053,259
Selling 1,167,222 -- -- -- 1,167,222
------------ ------------ ------------ ------------
Total operating expenses 5,353,549 1,151,463 1,556,866 -- 8,061,878
------------ ------------ ------------ ------------
OPERATING LOSS (5,271,592) (1,094,000) (1,556,866) -- (7,922,458)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest and other income 115,823 -- -- -- 115,823
Interest expense (108,746) -- -- -- (108,746)
------------ ------------ ------------ ------------
Other income, net 7,077 -- -- -- 7,077
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (5,264,515) (1,094,000) (1,556,866) -- (7,915,381)
INCOME TAX PROVISION -- (1,000) -- -- (1,000)
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS $ (5,264,515) $ (1,095,000) $ (1,556,866) -- $ (7,916,381)
============ ============ ============ ============
LOSS FROM CONTINUING OPERATIONS
PER COMMON SHARE (Basic and Diluted) $ (0.61) -- -- -- $ (0.69)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: 8,660,717 -- 2,859,080 (e) 11,519,797
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial data.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
DESCRIPTION OF THE TRANSACTIONS
- -------------------------------
These accompanying financial statements assume that the Company
acquired all of Digital Courier's Common Stock in exchange for 4,659,080 shares
of common stock as described in proposal no. 1 and the Company repurchased
1,800,000 shares of common stock for $1,500,000 as described in proposal no. 4.
(1) BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated balance
sheet has been prepared assuming that the repurchase of common stock (proposal
no. 4) and the acquisition of Digital Courier (proposal no. 1) occurred on March
31, 1998. The unaudited pro forma condensed consolidated statements of
operations have been prepared assuming that these transactions had occurred on
July 1, 1996, the first day of the Company's most recent fiscal year.
(2) PRO FORMA ADJUSTMENTS
(a) Adjustment to record the repurchase of (1,800,000) shares of common
stock from Chad Evans for $1,500,000 in cash.
(b) Adjustment to eliminate equity of Digital Courier International, Inc.
(c) Adjustment to record the issuance of 4,659,080 shares of common stock
to acquire Digital Courier and to record the allocation of the
purchase price as follows:
Estimated fair value of common
shares issued $ 14,027,338
Add: Liabilities assumed 296,837
Less: Tangible assets acquired (245,069)
------------
Excess purchase price 14,079,106
Less: Acquired in process research
and development 3,700,000
------------
Goodwill $ 10,379,106
============
Upon consummation of the Digital Courier acquisition, the Company
immediately expensed $3.7 million representing purchased
in-process technology that had not yet reached technological
feasibility and has no alternative future use. The in-process
projects were focused on the continued development and evolution
of internet e-commerce solutions including: netClearing and two
virtual store projects (videos and books). The nature of these
projects is to provide full service credit card clearing and
merchant banking services over the Internet for businesses and
financial institutions and to market software to help customers
develop virtual stores on the Internet. When completed the
projects will enable the creation of any "virtual store" through a
simplified interface.
As of the date of acquisition, Digital Courier had invested $1.3
million in the in-process projects identified above. The
developmental projects at the time of the acquisition were not
technologically feasible and had no alternative future use. This
conclusion was attributable to the fact that Digital Courier had
not completed a working model that had been tested and proven to
work at performance levels which were expected to be commercially
viable, and that the technologies constituting the projects had no
alternative use other than their intended use.
<PAGE>
Development of the acquired in-process technology into
commercially viable products and services required efforts
principally related to the completion of all planning, designing,
coding, prototyping, scalability verification, and testing
activities necessary to establish that the proposed technologies
would meet their design specifications, including functional,
technical, and economic performance requirements. Management
estimates that approximately $4.0 million will be required over
the next 12 -18 months to develop the aforementioned products to
commercial viability.
Management estimates that the projects were approximately 50%
complete at the date of the acquisition given the nature of the
achievements to date. These estimates are subject to change, given
the uncertainties of the development process, and no assurance can
be given that deviations from these estimates will not occur.
The net cash flows resulting from the projects underway at Digital
Courier which were used to value the purchased research and
development, are based on management's estimates of revenues, cost
of revenues, research and development costs, selling, general, and
administrative costs, and income taxes from such projects. These
estimates are based on the assumption that the revenue projections
are based on the potential market size that the projects are
addressing, the Company's ability to gain market share in these
segments, and the life cycle of in-process technology.
Estimated total revenues from the purchased in-process projects
peak in the fiscal years 2001-2002 and then decline rapidly in the
fiscal years 2003-2004 as other new products are expected to enter
the market. There can be no assurances that these assumptions will
prove accurate, or that the Company will realize the anticipated
benefit of the acquisition. The net cash flows generated from the
in-process technology are expected to reflect earnings before
interest and taxes, of approximately 35% to 48% for the sales
generated from in-process technology.
The discount of the net cash flows to their present value is based
on the weighted average cost of capital ("WACC"). The WACC
calculation produces the average required rate of return of an
investment in an operating enterprise, based on various required
rates of return from investments in various areas of the
enterprise. The discount rates used to discount the net cash flows
from the purchased in-process technology were 45% for Digital
Courier. This discount rate reflects the uncertainty surrounding
the successful development of the purchased in-process technology,
the useful life of such technology, the profitability levels of
such technology, if any, and the uncertainty of technological
advances, all of which are unknown at this time.
As evidenced by their continued support for these projects,
management believes the Company is well positioned to successfully
complete the research and development projects. However, there is
risk associated with the completion of the projects, and there is
no steadfast assurance that each will meet with either
technological or commercial success. The substantial delay or
outright failure of these eCommerce solutions would negatively
impact the Company's financial condition. If these projects are
not successfully developed, the Company's business, operating
results, and financial condition may be negatively affected in
future periods. In addition, the value of other intangible assets
acquired may become impaired.
To date, Digital Courier results have not differed significantly
from the forecast assumptions. The Company's research and
development expenditures since the Digital Courier acquisition
have not differed materially from expectations. Revenue
contribution from the acquired technology falls within an
acceptable range of plans in its role in the Company's suite of
internet and e-commerce solutions.
(d) Adjustment to record goodwill amortization on $10,379,106 over a
five year life for 1 year: ($10,379,106 x 20% = $2,075,821).
<PAGE>
(e) Adjustment to reflect increase in weighted average common shares
outstanding for loss per share calculations as follows:
Shares issued to acquire
Digital Courier 4,659,080
Shares repurchased 1,800,000
Net increase in weighted ---------
average number of shares
outstanding 2,859,080
=========
(f) Adjustment to record goodwill amortization on $10,379,106 over a
five year life for 9 months: ($10,379,106 x 20% x 9/12 =
$1,556,866).
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
RELATED TO
PROPOSAL NUMBER 3 - RATIFICATION OF SALE OF ASSETS OF DATAMARK SYSTEMS
The following unaudited pro forma condensed consolidated financial data
is based upon the historical consolidated financial statements of DataMark
Holding, Inc. and subsidiaries ("DataMark") as adjusted to give effect to the
sale of certain net assets associated with its direct mail advertising business
(see Proposal No. 3) as if the sale (which occurred on March 5, 1998) had
occurred as of July 1, 1996 for purposes of the unaudited pro forma condensed
consolidated statement of operations for the year ended June 30, 1997.
The pro forma adjustments are based upon information set out in the
asset purchase agreement and information from the Company's books and records
that management of the Company believes are reasonable and accurate. The
unaudited pro forma condensed consolidated statement of operations for the year
ended June 30, 1997 is not necessarily indicative of the results of operations
of DataMark had the sale actually occurred on July 1, 1996. The unaudited pro
forma adjustments are described in the accompanying notes to unaudited pro forma
condensed consolidated financial data.
This unaudited pro forma condensed consolidated financial data should
be read in conjunction with the consolidated financial statements of DataMark
and the related notes thereto, included in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1997.
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1997
<CAPTION>
Historical Pro Forma
DataMark Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES:
Direct mail marketing $ 6,448,156 $ (6,448,156) (a) $ --
Computer online marketing 350,654 -- -- 350,654
------------ ------------ ------------
Total net sales 6,798,810 (6,448,156) -- 350,654
------------ ------------ ------------
COST OF SALES:
Postage 2,419,652 (2,419,652) (a) --
Materials and printing 2,133,448 (2,133,448) (a) --
Computer online operations 436,306 -- -- 436,306
------------ ------------ ------------
Total cost of sales 4,989,406 (4,553,100) -- 436,306
------------ ------------ ------------
GROSS MARGIN (DEFICIT) 1,809,404 (1,895,056) -- (85,652)
------------ ------------ ------------
OPERATING EXPENSES:
Research and development 6,357,157 (263,716) (a) 6,093,441
General and administrative 3,026,323 (978,750) (a) 2,047,573
Selling 2,258,978 (177,272) (a) 2,081,706
------------ ------------ ------------
Total operating expenses 11,642,458 (1,419,738) -- 10,222,720
------------ ------------ ------------
LOSS FROM OPERATIONS (9,833,054) (475,318) -- (10,308,372)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest and other income 501,733 -- -- 501,733
Interest expense (9,495) 540 (a) (8,955)
------------ ------------ ------------
Other income, net 492,238 540 -- 492,778
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS $ (9,340,816) $ (474,778) -- $ (9,815,594)
============ ============ ============
LOSS FROM CONTINUING OPERATIONS PER
COMMON SHARE (Basic and Diluted): $ (1.12) -- -- $ (1.18)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,309,467 -- -- 8,309,467
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial data.
<PAGE>
DATAMARK HOLDING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
Description Of The Transaction
On March 5, 1998, DataMark Systems, Inc. ("DMS"), a wholly owned
subsidiary of DataMark Holding, Inc. (the "Company") sold its direct mail
marketing business to Focus Direct, Inc., a Texas corporation. Pursuant to an
Asset Purchase Agreement, Focus Direct, Inc. purchased all assets, properties,
rights, claims and goodwill, of every kind, character and description, tangible
and intangible, real and personal, wherever located of DMS, DataMark Printing,
Inc. ("Printing"), DataMark Lists, Inc. ("Lists") and WorldNow Online Network,
Inc. (all wholly owned subsidiaries of the Company) used in DMS's direct mail
marketing business. Focus Direct, Inc. also agreed to assume certain liabilities
of DMS, Printing, and Lists. Focus Direct, Inc. is not affiliated with the
Company.
Pursuant to the Asset Purchase Agreement, Focus Direct, Inc. agreed to
pay the Company $7,700,000 for the above described assets. Focus Direct, Inc.
paid the Company $6,900,000 in cash at closing and will pay the additional
$800,000 on or about June 30, 1999. The total purchase price is to be adjusted
for the difference between the assets acquired and liabilities assumed at
November 30, 1997 and those as of the date of closing.
The foregoing discussion is qualified in its entirety by reference to
the Asset Purchase Agreement, a copy of which was attached as Annex III and
incorporated by reference into the Proxy Statement.
(1) Basis Of Presentation
---------------------
The accompanying unaudited pro forma condensed consolidated statement
of operations has been prepared assuming that the net asset sale occurred on
July 1, 1996, the first day of the Company's most recent fiscal year, excluding
the gain on sale that would have been realized on July 1, 1996 (See Note 2(a)).
(2) Pro Forma Adjustments
---------------------
(a) Adjustment to record the total amount to be received from the sale of net
assets as follows:
Total sales price $7,700,000
Less: Payment deferred
until June 1999 800,000
----------
Net cash received
at closing 6,900,000
==========
Net gain on sale $4,302,459
==========
